SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission File Number 0-25364
ANICOM, INC.
(Name of registrant as specified in its charter)
Delaware 36-3885212
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6133 North River Road, Suite 1000, Rosemont, Illinois 60018-5171
(Address of principal executive offices) (Zip Code)
(847) 518-8700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
The number of shares outstanding of the registrant's Common Stock, par value
$.001 per share as of May 12, 2000 was 25,171,261.
<PAGE>
PART I. -- FINANCIAL INFORMATION
Item 1. Financial Statements
ANICOM, INC.
Condensed Consolidated Balance Sheet
(In thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December
2000 31,
(Unaudited) 1999
--------- ---------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents ............................... $ 1,982 $ 1,928
Accounts receivable, less allowance for doubtful
accounts of $2,783 and $2,703, respectively ........... 123,953 113,729
Inventory, primarily finished goods ..................... 106,085 105,488
Other current assets .................................... 20,586 22,917
--------- ---------
Total current assets .............................. 252,606 244,062
Property and equipment, net ................................ 10,985 11,005
Goodwill, net of accumulated amortization of $8,234 and
$7,376, respectively .................................... 126,843 127,701
Other assets ............................................... 929 929
--------- ---------
Total assets ...................................... $ 391,363 $ 383,697
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................ $ 82,611 $ 66,485
Accrued expenses, acquisition and other liabilities ..... 9,000 8,598
Long-term debt, current portion ......................... 191 195
--------- ---------
Total current liabilities ......................... 91,802 75,278
Long-term debt, net of current portion ..................... 116,122 125,359
Other liabilities .......................................... 5,851 6,211
--------- ---------
Total liabilities ................................. 213,775 206,848
--------- ---------
Commitments and contingencies
Convertible redeemable preferred stock, series B,
par value $.01 per share,
liquidation value $1,000 per share; 20 shares
authorized, issued and outstanding ..................... 20,000 20,000
--------- ---------
Stockholders' equity:
Common stock, par value $.001 per share;
100,000 shares authorized, 25,171
and 24,796 shares issued and
outstanding, respectively ............................. 17 17
Preferred stock, series C, par value $.01 per share;
50 shares authorized; no shares issued and outstanding -- --
Preferred stock, undesignated, par value $.01 per share;
903 shares authorized; no shares issued and outstanding -- --
Treasury stock, 425 and 344 shares, respectively ........ (1,971) (1,560)
Additional paid-in capital .............................. 156,096 155,900
Retained earnings ....................................... 1,079 177
Other comprehensive income .............................. 2,367 2,315
--------- ---------
Total stockholders' equity ........................ 157,588 156,849
--------- ---------
Total liabilities and stockholders' equity ........ $ 391,363 $ 383,697
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
<PAGE>
ANICOM, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
For the Three Months Ended
March 31,
(Unaudited)
------------------------------------
2000 1999
Net sales $145,523 $137,242
Cost of sales 115,189 106,762
-------- --------
Gross profit 30,334 30,480
-------- --------
Operating expenses:
Selling 13,416 12,223
General and administrative 12,733 11,630
-------- --------
Total operating expenses 26,149 23,853
-------- --------
Income from operations 4,185 6,627
Interest expense, net 2,503 1,478
-------- --------
Income before income taxes 1,682 5,149
Income tax provision 632 2,026
-------- --------
Net income 1,050 3,123
Less: dividend on preferred stock
150 148
-------- --------
Net income available to common stockholders $ 900 $ 2,975
======== ========
Earnings per common share:
Basic $ 0.04 $ 0.12
======== ========
Diluted $ 0.04 $ 0.12
======== ========
Weighted average common shares outstanding:
Basic 25,104 25,097
======== ========
Diluted 26,912 27,095
======== ========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
<PAGE>
ANICOM, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands, except per share data)
For the Three Months Ended
March 31,
(Unaudited)
-----------------------
2000 1999
Cash flows from operating activities:
Net income $ 900 $ 2,975
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,618 1,423
Treasury Stock (411) --
Provision for doubtful accounts 444 446
Increase (decrease) in cash attributable to
changes in assets and liabilities:
Accounts receivable (10,667) (23,191)
Inventory (596) 6,146
Other assets 2,382 (1,028)
Accounts payable 16,126 9,927
Accrued expenses 108 (1,899)
-------- --------
Net cash provided by (used in) operating
activities 9,904 (5,201)
-------- --------
Cash flows from investing activities:
Purchase of property and equipment (805) (362)
Other -- 642
-------- --------
Net cash provided by (used in) investing
activities (805) 280
-------- --------
Cash flows from financing activities:
Payment of long-term debt and assumed bank debt (40,191) (19,507)
Proceeds from long-term debt 30,950 24,900
Other 196 --
-------- --------
Net cash provided by (used in) financing
activities (9,045) 5,393
-------- --------
Net increase in cash and cash equivalents 54 472
Cash and cash equivalents, beginning of period 1,928 2,589
-------- --------
Cash and cash equivalents, end of period $ 1,982 $ 3,061
======== ========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
<PAGE>
Anicom, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying condensed consolidated unaudited financial statements
of Anicom, Inc. (the "Company" or "Anicom") do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The financial information
included herein is unaudited, but in the opinion of management,
reflects all normal recurring adjustments necessary for a fair
presentation of the results for the interim periods. Reported interim
results of operations are based, in part, on estimates that may be
subject to year-end adjustment. The interim results of operations and
cash flows are not necessarily indicative of such results and cash
flows for the entire year.
These financial statements should be read in conjunction with the
Company's audited consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1999.
2. Nature of Business
Anicom 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.
3. Restructuring and Other One-Time Charges
During the third quarter of 1999, Anicom's management and Board of
Directors approved a companywide restructuring plan, which includes
accelerating the implementation of eight distribution centers. As part
of the restructuring, Anicom has consolidated its 75 North American
locations into 61 facilities, downsized 12 other locations and reduced
its workforce of approximately 1,200 by about 10 percent (cumulatively
referred to as the "Plan").
In connection with exiting or downsizing locations, Anicom is in the
process of actively seeking to sublease or negotiate buyouts where
practicable. In some instances the length of the remaining term,
unfavorable market conditions or location or Anicom's inability to
negotiate a sublease or buyout under mutually agreeable terms may
result in the facility remaining idle until the expiration of the
lease. Remaining lease terms range from April 2000 to January 2007.
Reductions in workforce principally impacted warehouse and
administrative employees. Notice of workforce reductions was given on
September 30, 1999. No portion of the severance accrual was paid as of
that date.
<PAGE>
3. Restructuring and Other One-Time Charges (continued)
A summary of the restructuring costs recognized under the Plan, which
are included in accrued expenses, is provided below:
Lease & Leasehold
Improvement
Abandonment Severance Total
Balance December 31, 1999 $ 4,993 $ 1,232 $ 6,225
Expenditures (473) (461) (934)
-----------------------------------
Balance March 31, 2000 $ 4,520 $ 771 $ 5,291
===================================
4. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share for the three months ended March 31, 2000 and 1999:
2000 1999
-------- --------
Numerator:
Net income $ 1,050 $ 3,123
Less: dividend on preferred stock (150) (148)
-------- --------
Net income available to common stockholders $ 900 $ 2,975
======== ========
Denominator:
Denominator for basic earnings per share -
weighted average common
shares outstanding 25,104 25,097
Plus:
Effect of assumed conversion of convertible
preferred stock 1,404 1,404
Effect of employee stock options and warrants 404 594
-------- --------
26,912 27,095
======== ========
Basic earnings per share $ 0.04 $ 0.12
======== ========
Diluted earnings per share $ 0.04 $ 0.12
======== ========
<PAGE>
5. Comprehensive Income
The following table sets forth comprehensive income for the three
months ended March 31, 2000 and 1999:
For the Three Months
Ended March 31,
--------------------
2000 1999
Net income $1,050 $3,123
Foreign currency translation adjustment 52 676
------ ------
Total comprehensive income $1,102 $3,799
====== ======
6. Stockholder Rights Plan
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") were distributed to stockholders of record
as of April 5, 1999, at the rate of one Right for each outstanding
share of the Company's common stock. Generally, the Rights will not be
triggered 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 shares 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.
In October 1999, Anicom's Board of Directors approved a request made
during September 1999 by The State of Wisconsin Investment Board
permitting it to acquire up to 20% of the Company's outstanding Common
Stock without triggering the Company's Rights Plan.
<PAGE>
7. Recent Accounting Developments
In December 1999, the SEC issued Staff Accounting Bulletin Number ("SAB
No.") 101, "Revenue Recognition in Financial Statements," which
provides additional guidance in applying generally accepted accounting
principles for revenue recognition. The Company is currently evaluating
the applicability and therefore, the impact, if any, that SAB No. 101
may have on its current revenue recognition policies. Although the
Company has not yet determined whether SAB No.101 will require any
changes in its revenue recognition practices, management expects that
any such changes would be accounted for prospectively as a cumulative
effect of a change in accounting policy as permitted by the SAB No.
101. The SEC requires implementation of any changes resulting from SAB
No. 101 (as amended by SAB 101A) to be reflected in the Company's
second quarter 2000 financial statements. Implementation of changes
resulting from SAB No. 101 could impact results of operations in the
second and third quarters of 2000. However, management does not expect
that any changes in its accounting policies as a result of SAB No. 101
will have a material impact on its 2000 operating results and
management believes that any such change will have no impact on the
Company's previously reported financial position or cash flows.
<PAGE>
Item 2. 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:
For the Three
Months Ended
March 31,
----------------------
2000 1999
Income Statement Data:
Net sales 100.0% 100.0%
Cost of goods sold 79.1 77.8
------ ------
Gross profit 20.9 22.2
------ ------
Operating expenses:
Selling expenses 9.2 8.9
General and administrative expenses 8.8 8.5
------ ------
Income from operations 2.9 4.8
Interest expense, net (1.7) (1.1)
------ ------
Income before income taxes 1.2 3.8
Income tax provision 0.5 1.5
------ ------
Net income 0.7 2.3
Less: Dividend on preferred stock (0.1) (0.1)
------ ------
Net income available to common shareholders 0.6% 2.2%
====== ======
__________________
Note: Percentages may not sum due to rounding.
<PAGE>
Results of Operations for the Three Months Ended March 31, 2000
Compared to the Three Months Ended March 31, 1999
Net sales for the quarter ended March 31, 2000 increased to a record
$145.5 million, a 6.0% increase over net sales of $137.2 million in the first
quarter of 1999. This increase is primarily attributable to internal growth,
which has led to new customers, new products, increased market share, expanded
market penetration and increased volume with existing customers.
Gross profit for the three months ended March 31, 2000 decreased by
$0.2 million to $30.3 million versus $30.5 million for the three months ended
March 31, 1999. This decrease resulted from the Company's Canadian operations
(which traditionally operate at lower gross profit levels) occupying a greater
proportion of the total revenue for the quarter, plus revenue from the
arrangement with Metricom, which is at lower than normal gross profit levels. As
a percentage of net sales, gross profit was 20.9% and 22.2% for the three months
ended March 31, 2000 and 1999, respectively.
Selling expenses as a percentage of net sales increased slightly to
9.2% for the three months ended March 31, 2000 from 8.9% for the three months
ended March 31, 1999. Selling expenses increased by $1.2 million for the three
months ended March 31, 2000 compared to the same period in 1999. This increase
relates to variable expenses associated with the higher sales volume.
<PAGE>
General and administrative expenses increased from $11.6 million for
the three months ended March 31, 1999 to $12.7 million for the three months
ended March 31, 2000. These expenses as a percentage of net sales increased to
8.8% for the three months ended March 31, 2000 from 8.5% for the same period in
1999. This increase is principally the result of costs incurred in the
continuation of implementing the Platinum Distribution System.
For the three months ended March 31, 2000 interest expense increased to
$2.5 million compared to $1.5 million for the same period in 1999, principally
reflecting increased borrowings under the Company's credit facility to fund the
sales growth experienced during the first quarter of 2000.
The provision for income taxes decreased to $0.6 million for the three
months ended March 31, 2000 from $2.0 million for the same period in 1999. The
decrease is a result of the decrease in income before income taxes. For the
three months ended March 31, 2000 the provision for income taxes, as a
percentage of income before income taxes, decreased to 37.6% from 39.3% for the
same period in 1999.
Net income for the three months ended March 31, 2000 was $1.1 million
as compared to $3.1 million for the same period in 1999. For the three months
ended March 31, 2000 basic and diluted earnings per common share were $0.04
compared to $0.12 for the same period in 1999.
Liquidity and Capital Resources
Management believes that cash flows from operations and borrowings
available under the Multicurrency Credit Agreement (the "Facility"), entered
into in December 1999 with its then current bank group and other lenders, 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 operations or the Facility
discussed above. 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.
The Facility resulted in a 25% increase in available borrowings to $150
million from the $120 million available under its previous revolving credit
facility (the "Prior Facility"). 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 certain of the
Company's financial ratios, as defined. The Facility expires in July 2001 with
extensions available at the option of the Company and the lenders through July
2003. The Facility contains certain financial covenants, including minimum
tangible net worth and EBITDA, interest coverage, leverage and debt to earnings
ratios. As of March 31, 2000, the Company did not comply with the interest
coverage ratio and the leverage coverage ratio covenants and obtained a waiver
of compliance for those covenants dated May 12, 2000. The Facility is secured by
the Company's receivables and inventory, with eligible advance rates of 85% and
60%, respectively. Prior to the closing of the Facility, Anicom obtained a
waiver of compliance under the Prior Facility dated September 30, 1999.
As of March 31, 2000, Anicom had working capital of approximately
$160.8 million as compared to $168.8 million as of December 31, 1999. At March
31, 2000, amounts outstanding under the Facility were approximately $115.9
million.
During the three months ended March 31, 2000, operating activities
provided $9.9 million of cash compared to using $5.2 million during the same
period in 1999. This was primarily caused by an increase in accounts payable of
$16.1 million being offset by an increase in receivables of $10.7 million for
the first quarter of 2000. For the period ended March 31, 1999 accounts payable
and accrued liabilities increased by $8.0 million, accounts receivable increased
by $23.2 million, and inventories decreased by $6.1 million.
<PAGE>
During the three months ended March 31, 2000 cash flows from investing
activities used $0.8 million compared to providing approximately $0.3 million
during the same period in 1999. This increase is a result of a favorable
purchase price adjustment from a previous acquisition the Company recorded in
1999.
During the three months ended March 31, 2000 cash flows from financing
activities used approximately $9.0 million compared to generating $5.4 million
for the same period in 1999. The decrease related to a reduction of
approximately $9.2 million (7.3%) in borrowings under the Facility in the first
quarter of 2000 compared to an increase of approximately $6.1 million (7.2%) for
the first quarter of 1999.
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 the first quarter of 2000.
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.
<PAGE>
Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995
In compliance with the Safe Harbor Provision of the Private Securities
Litigation Reform Act of 1995, the Company notes the statements contained in
this quarterly report that are not historical facts may be forward-looking
statements that are subject to a variety of risks and uncertainties more fully
described in Anicom's filings with the Securities and Exchange Commission
including, without limitation, those described herein and under the caption
"Factors That Could Affect Our Operations" in Anicom's Annual Report on Form
10-K for the year ended December 31, 1999. Whenever possible, the Company has
identified these forward looking statements by words such as "believe," "feel,"
"anticipate," "expect" and similar expressions used in this quarterly report as
they relate to Anicom or its management. Anicom wishes to caution readers of
this quarterly report that these risks and uncertainties could cause Anicom's
actual results in 2000 and beyond to differ materially from those expressed in
any forward-looking statements made by, or on behalf of, Anicom. 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, to
maintain sufficient inventory to meet customer demand, the effects of any
changes in accounting practices, 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.
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
The Company's Facility is priced on a floating rate basis at either a
spread over LIBOR or under the credit facility agent's Domestic Rate which is
tied to the U.S. Prime Rate. The rate used is subject to selection by the
Company based on the terms of the Facility. Accordingly, any movement in LIBOR
or the Domestic Rate will impact the Company's interest expense. The outstanding
balance under the Facility at March 31, 2000 was $115.9 million. Based on this
balance, a hypothetical 10% increase in LIBOR would result in an increase in
annual interest expense of approximately $0.9 million. The Company has not
historically used interest rate swaps, caps or other derivative financial
instruments for the purpose of hedging fluctuations in interest rates on its
floating rate debt. Consequently, increases in interest rates could have a
material adverse effect on the Company's future results.
Foreign Currency Exchange Rate Risk
A portion of the Company's sales are denominated in Canadian dollars
thereby creating an exposure to foreign currency exchange rate risk which could
have a material adverse effect on the Company's financial results. The Company
has not historically used forward foreign exchange contracts or other derivative
financial instruments for the purpose of hedging fluctuations in Canadian
dollars.
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following exhibits are filed with this report:
Exhibit No.
10.14 Form of Executive Employment Agreement between Anicom
and Thomas J. Reiman.
10.15 Form of Amended and Restated Executive Employment
Agreement between Anicom and Scott C. Anixter.
10.16 Form of Amended and Restated Executive Employment
Agreement between Anicom and Carl E. Putnam.
10.17 Form of Amended and Restated Executive Employment
Agreement between Anicom and Donald C. Welchko.
27 Financial data schedule
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ANICOM, INC.
Dated: May 15, 2000 By: /S/ DONALD C. WELCHKO
---------------------
Donald C. Welchko
Senior Executive
Vice President and Chief
Financial Officer
<PAGE>
ANICOM, INC.
INDEX TO EXHIBITS
Exhibit No. Page(s)
10.14 Form of Executive Employment Agreement between Anicom
and Thomas J. Reiman.
10.15 Form of Amended and Restated Executive Employment
Agreement between Anicom and Scott C. Anixter.
10.16 Form of Amended and Restated Executive Employment
Agreement between Anicom and Carl E. Putnam.
10.17 Form of Amended and Restated Executive Employment
Agreement between Anicom and Donald C. Welchko.
27 Financial data schedule
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made as of
March 22, 2000 by and between Thomas J. Reiman ("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 has extensive knowledge and a unique understanding
of the operation of the Business.
WHEREAS, the Company desires to employ Executive as the Chairman of the
Board of Directors, all under the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and Executive agree as follows:
1. Employment of Executive. The Company hereby employs Executive as the
Company's Chairman of the Board of Directors and as the Chairman of the
Company's Executive Management Committee (collectively, the "Chairman"), and
Executive hereby accepts such employment and agrees to act as Chairman, all in
accordance with the terms and conditions of this Agreement.
2. Term of Employment. Subject to the termination provisions set forth in
Section 7 below, Executive's employment under this Agreement shall commence on
the Commencement Date and shall continue until December 31, 2002 (the
"Employment Period"), subject to the termination provisions set forth in Section
7. This Agreement may be extended at any time by mutual written agreement of the
parties.
3. Offices and Duties. Subject to Section 7, during the Employment Period,
Executive will perform such 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 a reasonable
amount of his business time and attention as is necessary to fulfill his duties
under this Agreement. During the Employment Term Executive may engage in outside
business activities, to the extent that the activities do not conflict with the
Company's interests or interfere with the performance of Executive's duties
hereunder.
4. Compensation.
------------
4.1 Base Salary. During the Employment Period, the Company
will pay Executive a base salary (i) at a rate of $175,000 per annum
during the calendar year ending December 31, 2000, pro-rated to reflect
the actual time Executive serves as Chairman, (ii) at a rate of
$200,000 per annum during the calendar year ending December 31, 2001,
and (iii) at a rate of $250,000 per annum during the calendar year
ending December 31, 2002 (the "Base Salary"), payable in accordance
with the Company's normal payroll practices for executive officers.
4.2 Bonus Payments. Executive shall be eligible to receive an
annual bonus ("Bonus Payments"), based upon Executive's and the
Company's performance and the achievement of targeted net income set by
management and approved by the Board ("Targeted Net Income"), in the
following amounts:
(a) If less than 75% of Targeted Net Income is achieved,
Executive will not receive a Bonus Payment.
(b) If 75% to 125% of Targeted Net Income is achieved,
Executive will receive a Bonus Payment of $100,000.
(c) If 125% to 150% of Targeted Net Income is achieved,
Executive will receive a Bonus Payment of $150,000.
(d) If over 150% of Targeted Net Income is achieved,
Executive will receive a Bonus Payment of $200,000.
The Targeted Net Income for the calendar year ending December 31, 2000
will be $9,180,000. The Bonus Payment for the calendar year ending
December 31, 2000 will be calculated for the full year, and then
adjusted pro-rata to reflect the portion of the year for which
Executive served as Chairman. The Targeted Net Income in subsequent
years will be set by management and approved by the Board prior to
March 1 of each year.
4.3 Stock Options. As of the Commencement Date, Executive
shall be granted options to purchase up to 50,000 shares of the
Company's common stock ("Options"). Beginning with the calendar year
ending December 31, 2001, Executive shall receive an annual grant of
Options to purchase up to 50,000 shares of the Company's common stock,
if 100% of Targeted Net Income for such calendar year has been
achieved. If over 100% of Targeted Net Income is achieved, the award of
the 50,000 Options may be adjusted upward by the Compensation
Committee, in its sole discretion. The Options granted hereunder shall
be granted by the Compensation Committee as soon as practicable after
the Company's year-end earnings release, but in no event shall Options
be granted later than 60 days after the last day of the fiscal year in
which the annual Option grant is earned. The agreement granting such
Options shall be similar in form to Option agreements for other
executives of the Company, except that Options granted hereunder shall
vest immediately and the term of the Option agreement shall be for ten
years notwithstanding anything to the contrary contained in this
Agreement or the plan pursuant to which Options are granted.
4.4 Transaction Bonus. If a Change in Control occurs after the
date of this Agreement but before the Commencement Date, the Company
(or its successor or assigns) shall pay to Executive a transaction
bonus of $100,000, payable in cash within fifteen (15) business days
following the effective date of the Change in Control. If a Change in
Control occurs after the Commencement Date but during the term of this
Agreement (the "Scheduled Term"), the Company (or its successor or
assigns) shall pay to Executive a transaction bonus of $500,000,
payable in cash within fifteen (15) business days following the
effective date of the Change in Control, regardless of whether
Executive remains employed by the Company as of such effective date or
any time prior thereto. This provision shall survive any termination of
this Agreement.
4.5 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. Upon
mutual agreement of Executive and Company, Executive may receive an
annual lump sum payment equal to the value of the Benefits in
consideration for Executive's agreement not to participate in such
plans.
4.6 Vacation. Executive shall be entitled to take such
vacation as is reasonable, provided that such vacation does not
conflict with the Company's interests or interfere with the performance
of Executive's duties hereunder, with pay.
4.7 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.
4.8 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.
4.9 Miscellaneous. The Company will provide Executive with
appropriate office space, administrative support and parking.
5. Covenant Not to Compete.
5.1 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 5 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 5 will not impair such
ability.
5.2 Non-Compete. The "Restricted Period" for purposes of this
Agreement shall commence on the Commencement Date and shall continue
until December 31, 2002; provided that, if Executive's employment with
the Company is terminated by Executive for Good Reason or by the
Company without Cause, or by Executive without Good Reason after
January 1, 2002 or upon a Change in Control, then the payments to which
Executive is entitled under Section 8.1 or 8.2, as the case may be,
shall be paid to Executive in consideration for the survival of the
Restricted Period beyond the Effective Date. Following a Change in
Control, at the end of the Restricted Period the Company may extend the
Restricted Period for up to 24 additional months by continuing to pay
Executive one-half of his most recent Base Salary. 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 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.
5.3 Non-Solicitation. Without limiting the generality of the
provisions of Section 5.2 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.
5.4 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.
5.5 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 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 permissible duration or size.
6. 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, 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.
7. Termination.
-----------
7.1 Without Cause. The Company may terminate Executive's
employment hereunder at any time, without Cause (as defined in Section
9), upon not less than ninety (90) days notice to Executive. Upon
notice of such termination from the Company, 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) choose any date within the
notice period as the Effective Date (as hereinafter defined) of
Executive's termination, provided, however, that the Company will
continue to pay Executive's Base Salary during such notice period.
7.2 For Cause. 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. 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.
7.3 By Executive. Executive may terminate his employment
hereunder at any time, with or without Good Reason (as defined in
Section 9), 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.
7.4 Death or Disability. The Employment Period will terminate
immediately upon the death or Disability of Executive.
7.5 Salary and Benefit Accruals. 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 those payments set forth in Section
8.2 below and accrued but unpaid Base Salary through the Effective
Date. 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, (ii) Bonus Payment for the year in
which such termination occurs, determined by multiplying the prior
year's Bonus Payment by a fraction equal to the number of days elapsed
in the current year through the effective date of termination (the
"Effective Date") divided by 365, and (iii) any amounts payable
pursuant to Section 8.1 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.
8. Additional Obligations Upon Termination.
---------------------------------------
8.1 Termination Without Cause. If Executive's employment with
the Company is terminated at any time during the Employment Period (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 7.5 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 the
Company shall pay to Executive or his estate, a lump
sum cash payment, in an amount equal to the
Termination Payment;
(b) for the remainder of the Scheduled Term, 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;
(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.
8.2 Termination by Executive.
(a) If, in the absence of a Change in Control,
Executive terminates without Good Reason after January 1, 2002,
then, in consideration for the survival of the Restricted
Period beyond the Effective Date, in addition to the amounts
payable in accordance with Section 7.5 above, the Company shall
pay and provide to Executive: (i) an annual amount during the
balance of the Scheduled Term equal to one-half of Executive's
highest total compensation (consisting of Base Salary and Bonus
Payment, where the Bonus Payment is equal to the Bonus Payment
for the calendar year in which the Effective Date occurs,
calculated assuming the higher of (i) 100% net income
achievement for the full year or (ii) year-to-date net income
attainment, extended on a pro-forma basis through the end of
the calendar year); and (ii) all Benefits specified under
Section 8.1(b) above. For purposes of providing Executive
Benefits under Section 8.1(b), Benefits shall be equivalent to
those provided to Executive and his dependents immediately
prior to the Effective Date; provided that, if participation in
any one or more of such arrangements is not possible under the
terms thereof, the Company will provide substantially identical
Benefits outside of the programs and cost of this coverage
shall be paid by the Company.
(b) If, after the twelve (12) month period following
a Change in Control, Executive terminates his employment with
the Company without Good Reason, then in addition to the
amounts payable in accordance with Section 7.5 above, 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 (x) one-half of Executive's
total compensation (consisting of Base Salary and Bonus
Payment, where the Bonus Payment is equal to the Bonus Payment
for the calendar year in which the Effective Date occurs,
calculated assuming the higher of (i) 100% net income
achievement for the full year or (ii) year-to-date net income
attainment, extended on a pro-forma basis through the end of
the calendar year), multiplied by (y) the number of years
remaining in the Scheduled Term; and (ii) all Benefits
specified under Sections 8.1(b), 8.1(c) and 8.1(d) above. For
purposes of providing Executive Benefits under Section 8.1(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 will provide substantially identical Benefits outside
of the programs and cost of this coverage shall be paid by the
Company.
8.3 No Mitigation. Executive shall not be required to mitigate
damages or the amount of any payment provided for or referred to in
this Section 8 by seeking other employment or otherwise, nor shall the
amount of any payment provided for or referred to in this Section 8 be
reduced by any compensation earned by the Executive as the result of
employment by another employer after the termination of the Executive's
employment, or otherwise.
8.4 Release. As a condition to Executive's right to receive
any severance payments and Benefits made hereto in this Section 8, 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.
8.5 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. 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.
"Commencement Date" means the date of the next annual meeting of the
Company following the date of execution of this Agreement, currently scheduled
for May 17, 2000, when Executive will assume the position of Chairman.
"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)
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 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 9(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.
"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:
(b) 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 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;
(c) a reduction by the Company in Executive's rate of Base Salary
during the Employment Period;
(d) 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;
(e) 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
(f) 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.
"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.
"Termination Payment" means an amount equal to (i) two-thirds of
Executive's highest total compensation (consisting of Base Salary and Bonus
Payment) in any of the five(5) years prior to the year in which the Effective
Date occurs, multiplied by (ii) the number of years remaining in the Scheduled
Term.
10. 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.
11. Miscellaneous.
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(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 11(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 11(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.
(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 for all
reasonable expenses (including reasonable attorney's fees) actually
incurred by Executive in such action.
IN WITNESS WHEREOF, the parties have executed this Executive Employment
Agreement as of the date first above written.
ANICOM, INC.
By: /s/ Carl E. Putnam
-------------------------
Carl E. Putnam, President
EXECUTIVE:
/s/ Thomas J. Reiman
--------------------
Thomas J. Reiman
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
"Agreement") is made as of March 29, 2000 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
of the Board of Directors, pursuant to that certain Amended and Restated
Executive Employment Agreement, dated November 30, 1998, 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 a new position as Chairman Emeritus
and Director of Strategic Development, 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 hereby acknowledged, the Company and Executive agree as follows:
1. Duties and Extent of Service.
----------------------------
1.1 Duties. The Company hereby employs Executive as the
Company's Chairman of the Board of Directors ("Chairman") until May 17,
2000, and thereafter its Chairman Emeritus and Director of Strategic
Development, and Executive hereby accepts such employment and agrees to
act in such capacities, all in accordance with the terms and conditions
of this Agreement. Subject to Section 7, during the Employment Period,
Executive will perform such duties as the Board of Directors of the
Company ("Board") may prescribe from time to time, consistent with
Executive's title.
1.2 Extent of Service. It is understood that Executive's
duties shall not require his full-time attention. However, Executive
agrees that during the Employment Period, he will devote as much of his
business time and attention as is reasonably required to fulfill his
duties under this Agreement. Notwithstanding the foregoing, nothing in
this Agreement shall preclude Executive from devoting reasonable
periods of time and effort to (i) charitable, community and personal
activities, (ii) management of his personal investment assets, and
(iii) with the approval of the Board of Directors of the Company, which
approval shall not be unreasonably withheld, serving as a director or
advisor of any other business entity; provided, however, that in each
case, such activity does not interfere in any material respect with the
performance by Executive of his duties hereunder, and does not violate
Section 5 hereof.
1.3 Right to Become a Consultant. The parties to this
Agreement acknowledge and agree that, at any time during the Employment
Period, Executive may elect to become a consultant of the Company,
either directly or through an entity of which Executive is the majority
owner, rather than an employee of the Company. In connection with any
such election, Executive may transfer all of his rights under this
Agreement to any such entity which will be providing such services.
Upon any such election by Executive, all references herein to
Executive's employment will be deemed to refer to the engagement as a
consultant of Executive or the entity to which he has assigned this
Agreement and all references herein to Executive will be deemed to
refer to Executive or the entity to which he has assigned this
Agreement, except that the covenants set forth in Section 5 shall refer
to both Executive and any such entity, and the terms of Sections 4.3,
4.4 and 4.6 shall refer to Executive individually. Furthermore, if
Executive elects to become a consultant, he and the Company agree to
abide by the following terms:
(a) it is understood that Executive will not have set
hours of work, and will not be required to be at the Company
for a particular number of hours during the day or week;
(b) Executive will not be required to spend all of
his time performing services for the Company;
(c) Executive will hire, supervise and pay his own
assistants, supply them with the materials they need to do
their work, and will be responsible for their results;
(d) the parties acknowledge and agree that Executive
will be an independent contractor and that no employee of
Executive shall be deemed an employee or agent of the Company;
the Company shall exercise no supervision or control with
respect to the provision of any consulting services, except to
the extent that the Company provides specifications,
descriptions, time schedules, or goals for projects and
exercises the right to evaluate Executive's work product under
this Agreement; and
(e) Executive will pay all of his own travel and
business expenses, subject to reimbursement by the Company.
2. Term. Executive's employment under this Agreement shall commence on
April 1, 2000 and shall continue for a period of five (5) years (the "Employment
Period"), subject to the termination provisions set forth in Section 7. 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 than 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 than 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. Board Representation. As of the date hereof, Executive is a member
of Class I of the Board, the term of which runs until the 2002 annual meeting of
stockholders. During the Employment Period, the Company shall recommend
Executive for nomination by the Board for election at the 2002 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.
4. Compensation.
4.1 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. The first annual review of Executive's Base Salary shall
occur no later than August 31, 2000, and any increase in Base Salary
awarded during that annual review shall be effective July 1, 2000.
Subsequent annual reviews shall be completed within sixty (60) days
after the end of the Company's fiscal year and any increases in Base
Salary shall be effective January 1 and paid retroactive to that date.
4.2 Bonus Payments. During the Employment Period, 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. The performance criteria to be used with respect to the
calendar year ending on December 31, 2000 are attached hereto as
Exhibit A (the "2000 Matrix"). The criteria for the Bonus Payments for
which Executive shall be eligible in future years shall be on
substantially the same terms and on no less favorable economic terms
than would be received using the 2000 Matrix. Bonus payments shall be
made to Executive within sixty (60) days after the end of the Company's
fiscal year. Performance criteria for subsequent fiscal years will be
determined on or before the later of the sixtieth day after the end of
the previous fiscal year or thirty days after a reasonable proposal is
presented by management with respect thereto.
4.3 Stock Options. During the Employment Period, 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 the Compensation Committee. Stock options shall
be awarded to Executive within sixty days after the end of the
Company's fiscal year or prior to the Company's annual earnings
release, whichever occurs first.
4.4 Automobile Allowance. During the Employment Period, the
Company shall provide Executive with a monthly automobile allowance of
$1,600 (the "Automobile Allowance").
4.5 Transaction Bonus. If a Change in Control occurs within
the five (5) year period commencing on the date of this Agreement (the
"Scheduled Term"), the Company (or its successor or assigns) shall pay
to Executive a transaction bonus of $1,500,000, payable in cash within
fifteen (15) business days following the effective date of the Change
in Control, regardless of whether Executive remains employed by the
Company as of such effective date or any time prior thereto. This
provision shall survive any termination of this Agreement.
4.6 Benefits. During the Employment Period, Executive will be
entitled to participate in group life and medical insurance plans,
profit-sharing and similar plans, and other "fringe benefits" which are
currently offered or may be offered in the future by the Company
(collectively, "Benefits"), a summary description of which is attached
hereto as Exhibit B, comparable to those made available by the Company
to its other senior executive employees, in accordance with the terms
of such plans. If Executive does not qualify for certain of the
Benefits upon any change in status from employee of the Company to a
consultant thereto, Executive may purchase replacement Benefits, for
which he will be reimbursed by the Company. In no event shall any of
the Benefits made available to Executive when he is engaged by the
Company as a consultant be less favorable than those now enjoyed by
Executive or be diminished in any way.
4.7 Vacation. Executive shall be entitled to take such
vacation as is reasonable, consistent with past practice, provided that
such vacation does not conflict with the Company's interests or
interfere with the performance of Executive's duties hereunder, with
pay.
4.8 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. Subsequent to an
assignment of this Agreement by Executive to a company of which he is a
majority owner (the "Assignee") pursuant to Section 1.3 above, the
Assignee will comply with and be responsible for all applicable
withholding and tax reporting obligations relating to Executive's
compensation under this Agreement.
4.9 Expenses. During the Employment Period, the Company, in
accordance with its policies and past practices, will pay or reimburse
Executive for all expenses (including legal, accounting, travel and
entertainment expenses) reasonably incurred by Executive during the
Employment Period in connection with the performance of Executive's
duties under this Agreement, so long as Executive provides the Company
reasonable documenation or evidence of the expenses for which Executive
seeks reimbursment.
5. Covenant Not to Compete.
-----------------------
5.1 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 5 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 5 will not impair such ability.
5.2 Non-Compete. The "Restricted Period" for purposes of this
Agreement shall commence on the date of this Agreement and shall
continue until the later of April 1, 2005 or the third year anniversary
of the termination of this Agreement; provided that, if Executive's
employment with the Company is terminated by Executive for Good Reason
or by the Company without Cause, or by Executive without Good Reason
after January 1, 2002 or upon a Change in Control, then the payments to
which Executive is entitled under Section 8.1 or 8.2, as the case may
be, shall be paid to Executive in consideration for the survival of the
Restricted Period beyond the Effective Date. 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").
5.3 Non-Solicitation. Without limiting the generality of the
provisions of Section 5.2 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.
5.4 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, 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.
5.5 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 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 permissible duration or size.
5.6 Investment Exception. Notwithstanding the foregoing,
nothing contained in this Section 5 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
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. 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, any Confidential Information, except to the extent reasonably necessary
to carry out Executive's duties and responsibilities to the Company or to the
extent required by law or to comply with the lawful subpoena of any
administrative or governmental body, in which case Executive shall give prompt
notice of such subpoena to Company. As used in this Section 6, "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.
7. Termination.
7.1 Without Cause. The Company may terminate Executive's
employment hereunder at any time, without Cause (as defined in Section
9), upon not less than ninety (90) days written notice to Executive.
Upon notice of such termination from the Company, 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) choose any date within the
notice period as the effective date of Executive's termination,
provided, however, that the Company will continue to pay Executive's
Base Salary during such notice period.
7.2 For Cause. 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. 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.
7.3 By Executive. Executive may terminate his employment
hereunder at any time, with or without Good Reason (as defined in
Section 9), 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, provided, however, that the Company will continue to pay
Executive's Base Salary during such notice period.
7.4 Death or Disability. The Employment Period will terminate
immediately upon the death or Disability of Executive.
7.5 Salary and Benefit Accruals. 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 those payments set forth in Section
8.2 below and accrued but unpaid Base Salary, through the Effective
Date. 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, (ii) Bonus Payment for the year in
which such termination occurs, determined by multiplying the prior
year's Bonus Payment by a fraction equal to the number of days elapsed
in the current year through the effective date of termination (the
"Effective Date") divided by 365, and (iii) any amounts payable
pursuant to Section 8.1 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.
8. Additional Obligations Upon Termination.
8.1 Termination Without Cause. If Executive's employment with
the Company is terminated at any time during the Employment Period (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 7.5 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,
the Company shall pay to Executive or his estate, a lump sum
cash payment, in an amount equal to the Termination Payment;
(b) for the remainder of the Scheduled Term,
Executive shall continue to receive from the Company the
Automobile Allowance set forth in Section 4.4 above;
(c) until such time as either Executive or his spouse
reaches the age of 65, 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;
(d) any stock options then held by Executive or his
permitted assignees shall immediately vest as of the Effective
Date; and
(e) 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.
8.2 Termination by Executive.
------------------------
(a) If, in the absence of a Change in Control,
Executive terminates without Good Reason after January 1,
2002, then, in consideration for the survival of the
Restricted Period beyond the Effective Date, in addition to
the amounts payable in accordance with Section 7.5 above, the
Company shall pay and provide to Executive: (i) an annual
amount during the balance of the Scheduled Term equal to
one-half of Executive's highest total compensation (consisting
of Base Salary and Bonus Payment) in any of the five (5) years
prior to the year in which the Effective Date occurs, payable
in accordance with the Company's normal payroll practices, and
(ii) all Benefits specified under Sections 8.1(b) and (c)
above.
(b) If, after the twelve (12) month period following
a Change in Control, Executive terminates his employment with
the Company without Good Reason, then in addition to the
amounts payable in accordance with Section 7.5 above, 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 (x) one-half of Executive's
highest total compensation (consisting of Base Salary and
Bonus Payment) in any of the five (5) years prior to the year
in which the Effective Date occurs, multiplied by (y) the
number of years remaining in the Scheduled Term, and (ii) all
Benefits specified under Sections 8.1(b), 8.1(c), 8.1(d) and
8.1(e) above.
8.3 No Mitigation. Executive shall not be required to mitigate
damages or the amount of any payment provided for or referred to in
this Section 8 by seeking other employment or otherwise, nor shall the
amount of any payment provided for or referred to in this Section 8 be
reduced by any compensation earned by the Executive as the result of
employment by another employer after the termination of the Executive's
employment, or otherwise.
8.4 Release. As a condition to Executive's right to receive
any severance payments and Benefits made hereto in this Section 8, 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 or any employment-related claims Executive may have after a
Change in Control, including but not limited to claims brought under
the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991,
the Age Discrimination in Employment Act, the Employee Retirement
Income Security Act, the Americans with Disabilities Act, any other
federal, state or local laws regarding employment discrimination or
termination of employment and the common law of any state relating to
employment contracts, wrongful discharge, defamation or any other
matter arising under common law, and (ii) Executive shall not be in
breach of any Restrictive Covenant.
8.5 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 4.5 and 8.
9. 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.
"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) 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
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 9(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.
"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 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, any
removal of Executive from, or any failure to reelect Executive to, such
position, any failure of Executive to be reelected to the Board of
Directors, or any requirement that Executive travel outside of the
Chicago metropolitan area any greater amount of time than he currently
travels on behalf of the Company;
(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.
"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.
"Termination Payment" means an amount equal to (i) two-thirds of
Executive's highest total compensation (consisting of Base Salary and Bonus
Payment) in any of the five (5) years prior to the year in which the Effective
Date occurs, multiplied by (ii) the number of years or portions thereof
remaining in the Scheduled Term.
10. Remedies. Executive acknowledges and agrees that the covenants set
forth in Sections 5 and 6 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.
11. Miscellaneous.
-------------
11.1 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 11.1. 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.
11.2 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.
11.3 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 11.8.
11.4 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, except as otherwise provided in that certain letter
agreement of even date between the Company and Executive regarding
post-employment medical benefits, a copy of which is attached hereto as
Exhibit C.
11.5 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.
11.6 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.
11.7 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.
11.8 Assignability. This Agreement may not be assigned by
either party without the prior written consent of the other party,
except that (i) 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 and (ii)
Executive may assign this Agreement in accordance with Section 1.3 of
this Agreement.
11.9 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.
11.10 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.
11.11 Legal Expenses. If Executive takes legal action to
enforce the Company's obligations under this Agreement and Executive
prevails in such action to any significant extent, the Company shall
reimburse Executive for all reasonable expenses (including reasonable
attorney's fees) actually incurred by Executive in such action.
<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
1099662v3
<PAGE>
EXHIBIT C
March 29, 2000
Scott Anixter, Chairman
Anicom, Inc.
6133 N. River Road
Suite 1000
Rosemont, Illinois 60018
Re: Post-Employment Medical Benefits
Dear Scott:
Anicom, Inc. (the "Company") is grateful to you for your many long years of
excellent and distinguished leadership. In consideration of and recognition for
these past services and your continuing contribution to the Company pursuant to
the terms of that Amended and Restated Executive Employment Agreement between
you and the Company dated as of March __, 2000 (the "Employment Agreement"), the
Company has agreed to provide to you, Penny Anixter and your dependent children
under the age of twenty-six (Penny and the children collectively referred to
herein as the "Covered Persons") post-employment medical benefits in
satisfaction of the Company's obligations under Sections 4.6 and 8.1(c) of the
Employment Agreement.
1. You and the Covered Persons will continue to be covered, with coverage
equivalent to the coverage you and the Covered Persons have as of the
date hereof, under the Company's existing group medical benefit plan
(including vision and dental benefits subject to limits then in effect
for the Company's active employees) for active employees (collectively,
the "Plan") until the date you cease to be eligible for such coverage
under the terms of the Plan. When you cease to be eligible under the
Plan, you may be eligible for health benefit continuation coverage
under the Plan pursuant to Federal law ("COBRA") under the same terms
and conditions that apply to other COBRA-eligible individuals. If so,
you agree to elect to receive such COBRA coverage. This generally would
provide you with 18 months of coverage under the Plan. The Company will
be responsible for paying any required premium for coverage.
2. Upon the date your (and the Covered Person's) coverage under the
preceding paragraph has expired, you and the Covered Persons will be
eligible for Company-provided retiree medical benefits (including
vision and dental benefits subject to limits then in effect for the
Company's active employees) (the "Benefits"), subject to the following
terms and conditions:
(i) You will receive reimbursement from the Company for physician,
hospitalization and prescription drug expenses ("Expenses")
incurred by you and the Covered Persons which are not
otherwise reimbursable or payable by another payor, including
but not limited to, another employer's group health plan,
Medicare, or first or third party insurance (such as an
automobile insurance policy). Notwithstanding the foregoing,
you will not be required to seek any other insurance or
reimbursement or otherwise take any action to mitigate the
costs to the Company of providing the Benefits set forth in
this letter.
(ii) Reimbursement by the Company of Expenses may be subject to a
calendar year deductible in an amount not to exceed $1,000,
which amount will apply to Expenses incurred by you and/or the
Covered Persons in the aggregate.
(iii) You and Penny will take all necessary steps to obtain coverage
under Medicare Parts A and B when you are first eligible for
such coverages and you will seek reimbursement on a primary
basis under such programs. You will give the Company
subrogation rights to the extent of Expenses reimbursed by the
Company in connection with an injury or accident.
(iv) The terms of this letter supersede any other obligation of the
Company with respect to post-employment medical benefits for
you and the Covered Persons.
(v) All reimbursements made will be treated by the Company as
taxable payments to you and the Covered Persons, and the
Company will report such payments on an IRS Form 1099.
Notwithstanding the foregoing, to the extent you are not
employed by the Company or otherwise fully covered by any of
the Company's health insurance programs, the Company will
provide the Benefits to you and the Covered Persons pursuant
to one or more health insurance policies to the extent such
coverage is available with respect to you and the Covered
Persons, and otherwise the Company will cooperate with you to
minimize the tax consequences to you and the Covered Persons
of the Benefits hereunder provided, however, in no event shall
the Company's reimbursements to any Covered Person exceed one
million dollars ($1,000,000) (a) prior to a Change in Control
or (b) if you are a Consultant pursuant to section 1.3 of the
Employment Agreement at the time a Change in Control occurs.
(vi) In no event shall the Benefits provided by this Agreement be
less favorable than those enjoyed by you and the Covered
Persons as of the date hereof.
3. Once you have signed the duplicate copy of this letter, this letter
will constitute an Agreement binding on the Company and any successors
or assigns of the Company, including, without limitation, any successor
corporation following any Change in Control of the Company (as defined
in the Employment Agreement).
4. In the event you desire to pursue a claim relating to this Agreement,
it shall be settled exclusively by arbitration in Chicago, Illinois by
at least two but not more than three arbitrators in accordance with the
rules of the American Arbitration Association in effect at the time of
submission of the arbitration. Judgment may be entered on he
arbitrator's award in any court having jurisdiction. If you prevail in
such arbitration to any significant extent, you will be entitled to
reimbursement of your reasonable legal costs and expenses incurred in
pursuing and enforcing your claim plus interest on all past due claims
at the prime rate of interest plus 2% as published from time to time in
the Midwest edition of The Wall Street Journal.
5. Except as otherwise set forth above, the Employment Agreement remains
in full force and effect.
6. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
If you agree to the aforementioned terms and conditions, please signify your
consent by executing the extra copy of this letter and returning it to me.
ANICOM, INC.
By: /s/ Carl E. Putnam
Carl E. Putnam, President and
Chief Executive Officer
Agreed to and accepted this __day of March, 2000:
/s/ Scott C. Anixter
Scott C. Anixter
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
"Agreement") is made as of March 29, 2000 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 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 current positions as President
and Chief Executive Officer, 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 hereby acknowledged, the Company and Executive agree as follows:
1. Employment of Executive. The Company hereby employs Executive as the
Company's President and Chief Executive Officer, and Executive hereby accepts
such employment and agrees to act as President 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 a period of five (5) years
(the "Employment Period"), subject to the termination provisions set forth in
Section 8. If, at least one hundred and eighty (180) 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 two (2) years following
the end of such Employment Period on substantially the same terms and on
economic terms not less favorable to Executive than 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 one hundred and eighty (180) 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 two (2) years
following the end of such Employment Period on substantially the same terms and
on economic terms not less favorable to Executive than 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 such duties as the Board of Directors of the Company
("Board") may prescribe from time to time, consistent with Executive's titles.
Executive agrees that during the Employment Period, he will devote substantially
all of his business time and attention to fulfilling his duties under this
Agreement. Notwithstanding the foregoing, nothing in this Agreement shall
preclude Employee from devoting reasonable periods of time and effort to (i)
charitable, community and personal activities, (ii) management of his personal
investment assets, and (iii) with the approval of the Board of Directors of the
Company, serving as a director or advisor of any other business entity;
provided, however, that in each case, such activity does not interfere in any
material respect with the performance by Employee of his duties hereunder, and
does not violate Section 6 hereof.
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 2002 annual meeting of
stockholders. During the Employment Period, the Company shall recommend
Executive for nomination by the Board for election at the 2002 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 (the "Base Salary Rate") of
$345,000 per annum, 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. The first annual review of Executive's Base Salary shall
occur no later than August 31, 2000, and any increase in Base Salary
awarded during that annual review shall be effective July 1, 2000.
Subsequent annual reviews shall be completed within sixty (60) days
after the end of the Company's fiscal year and any increases in Base
Salary shall be effective January 1 and paid retroactive to that date.
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. The performance
criteria to be used with respect to the calendar year ending on
December 31, 2000 is attached hereto as Exhibit A (the "2000 Matrix"),
and the criteria for the Bonus Payments for which Executive shall be
eligible in future years shall be on substantially the same terms and
on no less favorable economic terms than would be received using the
2000 Matrix. Bonus payments shall be made to Executive within sixty
(60) days after the end of the Company's fiscal year. Performance
criteria for subsequent fiscal years will be determined on or before
the later of the sixtieth day after the end of the previous fiscal year
or thirty days after a reasonable proposal is presented by management
with respect thereto.
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 the Compensation
Committee. Stock options shall be awarded to Executive within sixty
days after the end of the Company's fiscal year or prior to the
Company's annual earnings release, whichever occurs first.
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. If a Change in Control occurs within
the five (5) year period commencing on the date of this Agreement (the
"Scheduled Term"), the Company (or its successor or assigns) shall pay
to Executive a transaction bonus of $1,000,000, payable in cash within
fifteen (15) business days following the effective date of the Change
in Control, regardless of whether Executive remains employed by the
Company as of such effective date or any time prior thereto. This
provision shall survive any termination of this Agreement.
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" which are currently offered or may
be offered in the future by the Company (collectively, "Benefits"), a
summary description of which is attached here to as Exhibit B,
comparable to those made available by the Company to its other senior
executive employees, in accordance with the terms of such plans.
5.7 Debt Forgiveness. So long as Executive remains employed by
the Company, 20% of the original principal amount of Executive's
current indebtedness to the Company of $100,000, plus all accrued but
unpaid interest thereon will be forgiven by the Company as of April 1
of each year.
5.8 Vacation. Executive shall be entitled to take a minimum of
four (4) weeks of vacation, with pay, during each full or partial
calendar year during the Employment Period, unless Company policy
provides for more vacation. Vacation allowances shall not be
accumulated from year to year.
5.9 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.
5.10 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, so long as
Executive provides the Company reasonable documentation or evidence of
the expenses for which Executive seeks reimbursement.
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 commence on the date of this Agreement and shall
continue until the later of April 1, 2005 or the one year anniversary
of the termination of this Agreement; provided that, if Executive's
employment with the Company is terminated by Executive for Good Reason
or by the Company without Cause, or by Executive without Good Reason
after January 1, 2002 or upon a Change in Control, then the payments to
which Executive is entitled under Section 9.1 or 9.2, as the case may
be, shall continue to be paid to Executive during the Restricted Period
in consideration for the survival of the Restricted Period beyond the
Effective Date. Following a Change in Control, at the end of the
Restricted Period the Company may extend the Restricted Period for up
to 24 additional months by continuing to pay Executive one-half of his
most recent Base Salary. 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").
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.
6.6 Investment Exception. Notwithstanding the foregoing,
nothing contained in this Section 6 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
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.
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, any
Confidential Information, except to the extent reasonably necessary to carry out
Executive's duties and responsibilities to the Company or to the extent required
by law or to comply with the lawful subpoena of any administrative or
governmental body, in which case Executive shall give prompt notice of such
subpoena to 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.
8. Termination.
-----------
8.1 Without Cause. 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 written notice to Executive.
Upon notice of such termination from the Company, 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) choose any date within the
notice period as the effective date of Executive's termination,
provided, however, that the Company will continue to pay Executive's
Base Salary during such notice period.
8.2 For Cause. 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. 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.
8.3 By Executive. 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, provided, however, that the Company will continue to pay
Executive's Base Salary during such notice period.
8.4 Death or Disability. The Employment Period will terminate
immediately upon the death or Disability of Executive.
<PAGE>
8.5 Salary and Benefit Accruals. 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 those payments set forth in Section
9.2 below and accrued but unpaid Base Salary through the Effective
Date. 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, (ii) Bonus Payment for the year in
which such termination occurs, determined by multiplying the prior
year's Bonus Payment by a fraction equal to the number of days elapsed
in the current year through the effective date of termination (the
"Effective Date") divided by 365, and (iii) any amounts payable
pursuant to Section 9.1 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.
9. Additional Obligations Upon Termination.
---------------------------------------
9.1 Termination Without Cause. If Executive's employment with
the Company is terminated at any time during the Employment Period (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,
the Company shall pay to Executive or his estate, a lump sum
cash payment, in an amount equal to the Termination Payment;
(b) for the remainder of the Scheduled Term, (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 5.4
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 by Executive.
------------------------
(a) If, in the absence of a Change in Control,
Executive terminates without Good Reason after January 1,
2002, then, in consideration for the survival of the
Restricted Period beyond the Effective Date, in addition to
the amounts payable in accordance with Section 8.5 above, the
Company shall pay and provide to Executive: (i) an annual
amount during the balance of the Scheduled Term equal to
one-half of Executive's highest total compensation (consisting
of Base Salary and Bonus Payment) in any of the five (5) years
prior to the year in which the Effective Date occurs, payable
in accordance with the Company's normal payroll practices, and
(ii) all Benefits specified under Section 9.1(b) 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 Effective Date;
provided that, if participation in any one or more of such
arrangements is not possible under the terms thereof, the
Company will provide substantially identical Benefits outside
of the programs and cost of this coverage shall be paid by the
Company.
(b) If, after the twelve (12) month period following
a Change in Control, Executive terminates his employment with
the Company without Good Reason, then in addition to the
amounts payable in accordance with Section 8.5 above, 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 (x) one-half of Executive's
highest total compensation (consisting of Base Salary and
Bonus Payment) in any of the five (5) years prior to the year
in which the Effective Date occurs, multiplied by (y) the
number of years remaining in the Scheduled Term, 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 will provide substantially identical
Benefits outside of the programs and cost of this coverage
shall be paid by the Company.
9.3 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
employment by another employer after the termination of the Executive's
employment, or otherwise.
9.4 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 or any employment-related claims Executive may have after a
Change in Control, including but not limited to claims brought under
the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991,
the Age Discrimination in Employment Act, the Employee Retirement
Income Security Act, the Americans with Disabilities Act, any other
federal, state or local laws regarding employment discrimination or
termination of employment and the common law of any state relating to
employment contracts, wrongful discharge, defamation, or any other
matter arising under common law, and (ii) Executive shall not be in
breach of any Restrictive Covenant.
9.5 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.
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.
"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) 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
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.
"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, except that, prior to Change in Control, said Disability shall
not be grounds for termination of this Agreement in violation of the Americans
with Disabilities Act, Family Leave Act or any other state or federal law
governing the obligations of employers to persons having disability.
"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 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 or failure
of Executive to be reelected to the Board of Directors;
(b) a reduction by the Company in Executive's rate of Base Salary then in
effect 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.
"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.
"Termination Payment" means an amount equal to (i) two-thirds of
Executive's highest total compensation (consisting of Base Salary and Bonus
Payment) in any of the five(5) years prior to the year in which the Effective
Date occurs, multiplied by (ii) the number of years or portions thereof
remaining in the Scheduled Term.
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.
(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 to any significant extent, the Company shall
reimburse Executive for all reasonable expenses (including reasonable
attorney's fees) actually incurred by Executive in such action.
IN WITNESS WHEREOF, the parties have executed this Executive Employment
Agreement as of the date first above written.
ANICOM, INC.
By: /s/ Scott C. Anixter
--------------------
Scott C. Anixter, Chairman of the Board
EXECUTIVE:
/s/ Carl E. Putnam
--------------------
Carl E. Putnam
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
"Agreement") is made as of March 29, 2000 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 Senior
Executive Vice President and Chief Financial Officer of the Company, pursuant to
that certain Amended and Restated Executive Employment Agreement, dated November
30, 1998, 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 current positions as Senior
Executive Vice President and Chief Financial Officer, 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 hereby acknowledged, the Company and Executive agree as follows:
1. Employment of Executive. The Company hereby employs Executive as the
Company's Senior Executive Vice President and Chief Financial Officer, and
Executive hereby accepts such employment and agrees to act as Senior Executive
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 a period of five (5) years
(the "Employment Period"), subject to the termination provisions set forth in
Section 8. If, at least one hundred and eighty (180) 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 two (2) years following
the end of such Employment Period on substantially the same terms and on
economic terms not less favorable to Executive than 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 one hundred and eighty (180)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 two (2) years
following the end of such Employment Period on substantially the same terms and
on economic terms not less favorable to Executive than 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 such duties as the Board of Directors of the Company
("Board") may prescribe from time to time, consistent with Executive's titles.
Executive agrees that during the Employment Period, he will devote substantially
all of his business time and attention to fulfilling his duties under this
Agreement. Notwithstanding the foregoing, nothing in this Agreement shall
preclude Employee from devoting reasonable periods of time and effort to (i)
charitable, community and personal activities, (ii) management of his personal
investment assets, and (iii) with the approval of the Board of Directors of the
Company, serving as a director or advisor of any other business entity;
provided, however, that in each case, such activity does not interfere in any
material respect with the performance by Employee of his duties hereunder, and
does not violate Section 6 hereof.
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 2000 annual meeting of
stockholders. During the Employment Period, the Company shall 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 (the "Base Salary") at a rate of
$230,000 per annum , 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. The first annual review of Executive's Base Salary shall
occur no later than August 31, 2000, and any increase in Base Salary
awarded during that annual review shall be effective July 1, 2000.
Subsequent annual reviews shall be completed within sixty (60) days
after the end of the Company's fiscal year and any increases in Base
Salary shall be effective January 1 and paid retroactive to that date.
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. The performance
criteria to be used with respect to the calendar year ending on
December 31, 2000 is attached hereto as Exhibit A (the "2000 Matrix"),
and the criteria for the Bonus Payments for which Executive shall be
eligible in future years shall be on substantially the same terms and
on no less favorable economic terms than would be received using the
2000 Matrix. Bonus payments shall be made to Executive within sixty
(60) days after the end of the Company's fiscal year. Performance
criteria for subsequent fiscal years will be determined on or before
the later of the sixtieth day after the end of the previous fiscal year
or thirty days after a reasonable proposal is presented by management
with respect thereto.
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 the Compensation
Committee. Stock options shall be awarded to Executive within sixty
days after the end of the Company's fiscal year or prior to the
Company's annual earnings release, whichever occurs first.
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. If a Change in Control occurs within
the five (5) year period commencing on the date of this Agreement (the
"Scheduled Term"), the Company (or its successor or assigns) shall pay
to Executive a transaction bonus of $750,000, payable in cash within
fifteen (15) business days following the effective date of the Change
in Control, regardless of whether Executive remains employed by the
Company as of such effective date or any time prior thereto. This
provision shall survive any termination of this Agreement.
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" which are currently offered or may
be offered in the future by the Company (collectively, "Benefits"), a
summary description of which is attached here to as Exhibit B,
comparable to those made available by the Company to its other senior
executive employees, in accordance with the terms of such plans.
5.7 Debt Forgiveness. So long as Executive remains employed by
the Company, 20% of the original principal amount of Executive's
current indebtedness to the Company of $35,000, plus all accrued but
unpaid interest thereon will be forgiven by the Company as of April 1
of each year.
5.8 Vacation. Executive shall be entitled to take a minimum of
four (4) weeks of vacation, with pay, during each full or partial
calendar year during the Employment Period, unless Company policy
provides for more vacation. Vacation allowances shall not be
accumulated from year to year.
5.9 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.
5.10 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, so long as
Executive provides the Company reasonable documentation or evidence of
the expenses for which Executive seeks reimbursement.
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 commence on the date of this Agreement and shall continue until
the later of April 1, 2005 or the one year anniversary of the
termination of this Agreement; provided that, if Executive's employment
with the Company is terminated by Executive for Good Reason or by the
Company without Cause, or by Executive without Good Reason after
January 1, 2002 or upon a Change in Control, then the payments to which
Executive is entitled under Section 9.1 or 9.2, as the case may be,
shall continue to be paid to Executive during the Restricted Period in
consideration for the survival of the Restricted Period beyond the
Effective Date. Following a Change in Control, at the end of the
Restricted Period the Company may extend the Restricted Period for up
to 24 additional months by continuing to pay Executive one-half of his
most recent Base Salary. 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").
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.
6.6 Investment Exception. Notwithstanding the foregoing,
nothing contained in this Section 6 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
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.
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, any
Confidential Information, except to the extent reasonably necessary to carry out
Executive's duties and responsibilities to the Company or to the extent required
by law or to comply with the lawful subpoena of any administrative or
governmental body, in which case Executive shall give prompt notice of such
subpoena to 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.
8. Termination.
-----------
8.1 Without Cause. 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 written notice to Executive.
Upon notice of such termination from the Company, 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) choose any date within the
notice period as the effective date of Executive's termination,
provided, however, that the Company will continue to pay Executive's
Base Salary during such notice period.
8.2 For Cause. 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. 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.
8.3 By Executive. 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, provided, however, that the Company will continue to pay
Executive's Base Salary during such notice period.
8.4 Death or Disability. The Employment Period will terminate
immediately upon the death or Disability of Executive.
<PAGE>
8.5 Salary and Benefit Accruals. 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 those payments set forth in Section
9.2 below and accrued but unpaid Base Salary through the Effective
Date. 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, (ii) Bonus Payment for the year in
which such termination occurs, determined by multiplying the prior
year's Bonus Payment by a fraction equal to the number of days elapsed
in the current year through the effective date of termination (the
"Effective Date") divided by 365, and (iii) any amounts payable
pursuant to Section 9.1 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.
9. Additional Obligations Upon Termination.
---------------------------------------
9.1 Termination Without Cause. If Executive's employment with
the Company is terminated at any time during the Employment Period (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,
the Company shall pay to Executive or his estate, a lump sum
cash payment, in an amount equal to the Termination Payment;
(b) for the remainder of the Scheduled Term, (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 5.4
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 by Executive.
(a) If, in the absence of a Change in Control,
Executive terminates without Good Reason after January 1,
2002, then, in consideration for the survival of the
Restricted Period beyond the Effective Date, in addition to
the amounts payable in accordance with Section 8.5 above, the
Company shall pay and provide to Executive: (i) an annual
amount during the balance of the Scheduled Term equal to
one-half of Executive's highest total compensation (consisting
of Base Salary and Bonus Payment) in any of the five (5) years
prior to the year in which the Effective Date occurs, payable
in accordance with the Company's normal payroll practices, and
(ii) all Benefits specified under Section 9.1(b) 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 Effective Date;
provided that, if participation in any one or more of such
arrangements is not possible under the terms thereof, the
Company will provide substantially identical Benefits outside
of the programs and cost of this coverage shall be paid by the
Company.
(b) If, after the twelve (12) month period following
a Change in Control, Executive terminates his employment with
the Company without Good Reason, then in addition to the
amounts payable in accordance with Section 8.5 above, 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 (x) one-half of Executive's
highest total compensation (consisting of Base Salary and
Bonus Payment) in any of the five (5) years prior to the year
in which the Effective Date occurs, multiplied by (y) the
number of years remaining in the Scheduled Term, 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 will provide substantially identical
Benefits outside of the programs and cost of this coverage
shall be paid by the Company.
9.3 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
employment by another employer after the termination of the Executive's
employment, or otherwise.
9.4 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,
its successor, assigns, officers, directors and agents from any and all
claims, liabilities and obligations relating to or arising out of this
Agreement or any employment-related claims Executive may have after a
Change in Control, including but not limited to claims brought under
the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991,
the Age Discrimination in Employment Act, the Employee Retirement
Income Security Act, the Americans with Disabilities Act, any other
federal, state or local laws regarding employment discrimination or
termination of employment and the common law of any state relating to
employment contracts, wrongful discharge, defamation, or any other
matter arising under common law, and (ii) Executive shall not be in
breach of any Restrictive Covenant.
9.5 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.
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.
"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:
<PAGE>
(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) 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 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.
"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, except that, prior to Change in Control, said Disability shall
not be grounds for termination of this Agreement in violation of the Americans
with Disabilities Act, Family Medical Leave Act or any other state or federal
law governing the obligations of employers to persons having a disability.
"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 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 or failure
of Executive to be reelected to the Board of Directors;
(b) a reduction by the Company in Executive's rate of Base Salary then in
effect 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.
"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.
"Termination Payment" means an amount equal to (i) two-thirds of
Executive's highest total compensation (consisting of Base Salary and Bonus
Payment) in any of the five(5) years prior to the year in which the Effective
Date occurs, multiplied by (ii) the number of years or portions thereof
remaining in the Scheduled Term.
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.
(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 to any significant extent, the Company shall
reimburse Executive for all reasonable expenses (including reasonable
attorney's fees) actually incurred by Executive in such action.
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 of the Board
EXECUTIVE:
/s/ Donald C. Welchko
------------------------
Donald C. Welchko
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDING MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFRENCE TO SUCH FORM 10-Q.
</LEGEND>
<CIK> 0000935802
<NAME> ANICOM, INC.
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20,000
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