-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EAtH6NNTqJuVG/Tgyz+g9JuSg7ngy9AZzftqgIjyNymibs8Ttrl8mMNBUgq1Fb8X ACW025cyw40DQpkHlt3Tyw== 0000903893-97-000840.txt : 19970603 0000903893-97-000840.hdr.sgml : 19970603 ACCESSION NUMBER: 0000903893-97-000840 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19970602 SROS: NONE GROUP MEMBERS: CAHILL EDWARD L GROUP MEMBERS: CAHILL, WARNOCK & CO., LLC GROUP MEMBERS: CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. GROUP MEMBERS: CAHILL, WARNOCK STRATEGIC PARTNERS, L.P. GROUP MEMBERS: DAVID L. WARNOCK GROUP MEMBERS: STRATEGIC ASSOCIATES, L.P. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ANICOM INC CENTRAL INDEX KEY: 0000935802 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRICAL APPARATUS & EQUIPMENT, WIRING SUPPLIES [5063] IRS NUMBER: 363885212 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-48291 FILM NUMBER: 97618218 BUSINESS ADDRESS: STREET 1: 6133 N RIVER RD STREET 2: STE 410 CITY: ROSEMONT STATE: IL ZIP: 60018 BUSINESS PHONE: 8475188700 MAIL ADDRESS: STREET 1: 6133 N RIVER RD STREET 2: SUITE 410 CITY: ROSEMONT STATE: IL ZIP: 60018 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CAHILL EDWARD L CENTRAL INDEX KEY: 0001025665 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: A STREET 2: 10 NORTH CALVERT ST STE 735 CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4102441300 MAIL ADDRESS: STREET 1: 10 NORTH CALVERT ST STREET 2: SUITE 735 CITY: BALTIMORE STATE: MD ZIP: 21202 SC 13D 1 SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ___________)* Anicom, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $.001 par value - -------------------------------------------------------------------------------- (Title of Class of Securities) 035250-10-9 - -------------------------------------------------------------------------------- (CUSIP Number) Thomas P. Olivier, Esq., c/o Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High Street, Boston, MA 02110 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) May 23, 1997 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|. NOTE: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. - -------------------- *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - ----------------------------------------- CUSIP NO. 035250-10-9 - ----------------------------------------- - --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Edward L. Cahill SSN: ###-##-#### - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) |_| (b) |X| - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) AF - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_| PURSUANT TO ITEMS 2(d) or 2(e) - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - --------- ---------------------------------------------------------------------- - --------------------------- -------- ------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF SHARES -------- ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 927,537 -------- ------------------------------------------- -------- ------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON WITH -------- ------------------------------------------- -------- ------------------------------------------- 10 SHARED DISPOSITIVE POWER 927,537 - --------------------------- -------- ------------------------------------------- - --------- ---------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 927,537 - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [_] - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.5% - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) IN - --------- ---------------------------------------------------------------------- SCHEDULE 13D - ----------------------------------------- CUSIP NO. 035250-10-9 - ----------------------------------------- - --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON David L. Warnock SSN: ###-##-#### - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) |_| (b) |X| - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) AF - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_| PURSUANT TO ITEMS 2(d) or 2(e) - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - --------- ---------------------------------------------------------------------- - --------------------------- -------- ------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF SHARES -------- ------------------------------------------- -------- ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 927,537 -------- ------------------------------------------- -------- ------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON WITH -------- ------------------------------------------- -------- ------------------------------------------- 10 SHARED DISPOSITIVE POWER 927,537 - --------------------------- -------- ------------------------------------------- - --------- ---------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 927,537 - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [_] - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.5% - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) IN - --------- ---------------------------------------------------------------------- SCHEDULE 13D - ----------------------------------------- CUSIP NO. 035250-10-9 - ----------------------------------------- - --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Cahill, Warnock Strategic Partners, L.P. IRSN: 52-1970604 - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) |_| (b) |X| - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) AF - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_| PURSUANT TO ITEMS 2(d) or 2(e) - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware Limited Partnership - --------- ---------------------------------------------------------------------- - --------------------------- -------- ------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF SHARES -------- ------------------------------------------- -------- ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 927,537 -------- ------------------------------------------- -------- ------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON WITH -------- ------------------------------------------- -------- ------------------------------------------- 10 SHARED DISPOSITIVE POWER 927,537 - --------------------------- -------- ------------------------------------------- - --------- ---------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 927,537 - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN [_] SHARES (See Instructions) - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.5% - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) PN - --------- ---------------------------------------------------------------------- SCHEDULE 13D - ----------------------------------------- CUSIP NO. 035250-10-9 - ----------------------------------------- - --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Cahill, Warnock Strategic Partners Fund, L.P. IRSN: 52-1970619 - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) |X| (b) |_| - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) WC - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_| PURSUANT TO ITEMS 2(d) or 2(e) - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware Limited Partnership - --------- ---------------------------------------------------------------------- - --------------------------- -------- ------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF SHARES -------- ------------------------------------------- -------- ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 927,537 -------- ------------------------------------------- -------- ------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON WITH -------- ------------------------------------------- -------- ------------------------------------------- 10 SHARED DISPOSITIVE POWER 927,537 - --------------------------- -------- ------------------------------------------- - --------- ---------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 927,537 - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN [_] SHARES (See Instructions) - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.5% - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) PN - --------- ---------------------------------------------------------------------- SCHEDULE 13D - ----------------------------------------- CUSIP NO. 035250-10-9 - ----------------------------------------- - --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Cahill, Warnock & Company, LLC IRSN: 52-1931617 - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) |_| (b) |X| - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) AF - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_| PURSUANT TO ITEMS 2(d) or 2(e) - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Maryland Limited Liability Company - --------- ---------------------------------------------------------------------- - --------------------------- -------- ------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF SHARES -------- ------------------------------------------- -------- ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 927,537 -------- ------------------------------------------- -------- ------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON WITH -------- ------------------------------------------- -------- ------------------------------------------- 10 SHARED DISPOSITIVE POWER 927,537 - --------------------------- -------- ------------------------------------------- - --------- ---------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 927,537 - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN [_] SHARES (See Instructions) - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.5% - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) OO - --------- ---------------------------------------------------------------------- SCHEDULE 13D - ----------------------------------------- CUSIP NO. 035250-10-9 - ----------------------------------------- - --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Strategic Associates, L.P. IRSN: 52-1991689 - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) |X| (b) |_| - --------- - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) WC - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_| PURSUANT TO ITEMS 2(d) or 2(e) - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware Limited Partnership - --------- ---------------------------------------------------------------------- - --------------------------- -------- ------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF SHARES -------- ------------------------------------------- -------- ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 927,537 -------- ------------------------------------------- -------- ------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON WITH -------- ------------------------------------------- -------- ------------------------------------------- 10 SHARED DISPOSITIVE POWER 927,537 - --------------------------- -------- ------------------------------------------- - --------- ---------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 927,537 - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN [_] SHARES (See Instructions) - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.5% - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) PN - --------- ---------------------------------------------------------------------- ITEM 1. SECURITY AND ISSUER: This statement relates to Common Stock, $.001 par value per share (the "Shares"), of Anicom, Inc., a Delaware corporation (the "Issuer"). The address of the Issuer's principal executive offices is 6133 N. River Road, Suite 1000, Rosemont, IL 60018-5171. ITEM 2. IDENTITY AND BACKGROUND: This statement is being filed by (i) Cahill, Warnock Strategic Partners Fund, L.P. ("Strategic Partners Fund"), (ii) Cahill, Warnock Strategic Partners, L.P. ("Strategic Partners"), the sole general partner of Strategic Partners Fund, (iii) Strategic Associates, L.P. ("Strategic Associates"), (iv) Cahill, Warnock & Company, LLC ("Cahill, Warnock & Co."), the sole general partner of Strategic Associates, (v) Edward L. Cahill ("Cahill"), a general partner of Strategic Partners and a member of Cahill, Warnock & Co., and (vi) David L. Warnock ("Warnock"), a general partner of Strategic Partners and a member of Cahill, Warnock & Co. Strategic Partners Fund, Strategic Partners, Strategic Associates, Cahill, Warnock & Co., Cahill and Warnock are sometimes referred to collectively herein as the "Reporting Persons." The address of the principal business and principal office of Strategic Partners Fund, Strategic Partners, Strategic Associates and Cahill, Warnock & Co. is 1 South Street, Suite 2150, Baltimore, MD 21202. The business address of Cahill and Warnock is 1 South Street, Suite 2150, Baltimore, MD 21202. The state of organization for Strategic Partners Fund, Strategic Partners and Strategic Associates is Delaware. The state of organization for Cahill, Warnock & Co. is Maryland. Both Cahill and Warnock are citizens of the United States of America. The principal business of Strategic Partners Fund and Strategic Associates is to make private equity investments in micro-cap public companies seeking capital for expansion or undergoing a restructuring of ownership. The principal business of Strategic Partners is to act as the sole general partner of Strategic Partners Fund. The principal business of Cahill, Warnock & Co. is to act as the sole general partner of Strategic Associates and Camden Partners, L.P. ("Camden Partners") and to manage the activities of Strategic Partners Fund, Strategic Associates and Camden Partners. The principal occupations of Cahill and Warnock are their activities on behalf of Strategic Partners Fund, Strategic Partners, Strategic Associates, Cahill, Warnock & Co. and Camden Partners. The principal business of Camden Partners is to make passive investments in public companies. The principal office of Camden Partners is 1 South Street, Suite 2150, Baltimore, MD 21202. During the five years prior to the date hereof, none of the Reporting Persons has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding ending in a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding a violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION: On May 23, 1997 Strategic Partners Fund acquired 7,580 shares of Series A Convertible Preferred Stock of the Issuer for a total purchase price of $7,580,000.00. The preferred stock acquired by Strategic Partners Fund is currently convertible into 878,841 shares of the Issuer's Common Stock. The working capital of Strategic Partners Fund was the source of funds for this purchase. No part of the purchase price was or will be represented by funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding, trading or voting the preferred stock. On May 23, 1997 Strategic Associates acquired 420 shares of Series A Convertible Preferred Stock of the Issuer for a total purchase price of $420,000.00. The preferred stock acquired by Strategic Associates is currently convertible into 48,696 shares of the Issuer's Common Stock. The working capital of Strategic Associates was the source of funds for this purchase. No part of the purchase price was or will be represented by funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding, trading or voting the preferred stock. ITEM 4. PURPOSE OF TRANSACTION: Strategic Partners Fund and Strategic Associates acquired the Issuer's securities for investment purposes. Depending on market conditions, their continuing evaluation of the business and prospects of the Issuer and other factors, Strategic Partners Fund and Strategic Associates may dispose of or acquire additional securities of the Issuer. None of the Reporting Persons has any present plans which relate to or would result in: (a) The acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer; (b) An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries; (c) A sale or transfer of a material amount of assets of the Issuer or of any of its subsidiaries; (d) Any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) Any material change in the present capitalization or dividend policy of the Issuer; (f) Any other material change in the Issuer's business or corporate structure; (g) Changes in the Issuer's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person; (h) Causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) A class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) Any action similar to any of those enumerated above. ITEM 5. INTEREST IN THE SECURITIES OF THE ISSUER: (a) Strategic Partners Fund is the record owner of 7,580 shares of Series A Convertible Preferred Stock of the Issuer (the "Fund Preferred Stock"). The Fund Preferred Stock is currently convertible into 878,841 shares of the Issuer's Common Stock (the "Fund Conversion Shares"). Strategic Associates is the record owner of 420 shares of Series A Convertible Preferred Stock of the Issuer (the "Associates Preferred Stock"). The Associates Preferred Stock is currently convertible into 48,696 shares of the Issuer's Common Stock (the "Associates Conversion Shares"). Because of their relationship as affiliated entities, both Strategic Partners Fund and Strategic Associates may be deemed to own beneficially the Fund Conversion Shares and the Associates Conversion Shares. As general partners of Strategic Partners Fund and Strategic Associates, respectively, Strategic Partners and Cahill, Warnock & Co. may be deemed to own beneficially the Fund Conversion Shares and the Associates Conversion Shares. As the individual general partners of Strategic Partners and as the members of Cahill, Warnock & Co., both Cahill and Warnock may be deemed to own beneficially the Fund Conversion Shares and the Associates Conversion Shares. Strategic Partners Fund disclaims beneficial ownership of the Associates Conversion Shares. Strategic Associates disclaims beneficial ownership of the Fund Conversion Shares. Strategic Partners, Cahill, Warnock & Co., Cahill and Warnock each disclaim beneficial ownership of the Fund Conversion Shares and the Associates Conversion Shares. Each of the Reporting Persons may be deemed to own beneficially 5.5% of the Issuer's Common Stock, which percentage is calculated based upon (i) 15,912,999 shares of Common Stock reported outstanding by the Issuer on May 23, 1997, and (ii) the number of shares of Common Stock (927,537) issuable upon conversion of the Fund Preferred Stock and Associates Preferred Stock. In Amendment No. 1 to the Limited Partnership Agreement of Strategic Partners Fund, dated July 26, 1996 (attached hereto as Exhibit 2), Strategic Partners and the limited partners of Strategic Partners Fund agreed that any securities of a particular issuer that are acquired by both Strategic Partners Fund and Strategic Associates shall be sold or otherwise disposed of at substantially the same time, on substantially the same terms and in amounts proportionate to the size of each of their investments. As a consequence, Strategic Associates and Strategic Partners Fund may be deemed to be members of a group pursuant to Rule 13d-5(b)(1) of the Securities Exchange Act of 1934. Strategic Partners, Cahill, Warnock & Co., Cahill and Warnock each disclaim membership in the aforementioned group. (b) Number of Shares as to which each such person has (i) Sole power to vote or direct the vote: 0 shares for each Reporting Person; (ii) Shared power to vote or direct the vote: 927,537 shares for each Reporting Person; (iii) Sole power to dispose or to direct the disposition: 0 shares for each Reporting Person; (iv) Shared power to dispose or to direct the disposition: 927,537 shares for each Reporting Person. (c) Except as set forth above, none of the Reporting Persons has effected any transaction in the Shares during the last 60 days. (d) No other person is known to have the right to receive or the power to direct the receipt of dividends from, or any proceeds from the sale of, the Shares beneficially owned by any of the Reporting Persons. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER: In Amendment No. 1 to the Limited Partnership Agreement of Strategic Partners Fund, dated July 26, 1996 (attached hereto as Exhibit 2), Strategic Partners and the limited partners of Strategic Partners Fund agreed that any securities of a particular issuer that are acquired by both Strategic Partners Fund and Strategic Associates shall be sold or otherwise disposed of at substantially the same time, on substantially the same terms and in amounts proportionate to the size of each of their investments. Strategic Partners Fund and Strategic Associates acquired their respective shares of Series A Convertible Preferred Stock of Anicom, Inc. pursuant to a Series A Convertible Preferred Stock Purchase Agreement dated as of May 23, 1997 (attached hereto as Exhibit 3) by and between the Issuer and Cahill, Warnock Strategic Partners Fund, L.P., Strategic Associates, L.P., Fleming US Discovery Fund III, L.P., Fleming US Discovery Offshore Fund III, L.P., Peter H. Huizenga Testamentary Trust, Peter H. Huizenga, Heidi A. Huizenga, Betsy Huizenga Trust, Greta Huizenga Trust, Peter Huizenga Jr. Trust, Timothy Dean Huizenga Trust, Summer Hill Partners, L.P., Summer Hill R.T. Enterprises Limited Partnership, Garfam Investors, L.L.C., S. James Perlow, Earl Perlow, Mark Perlow, KA Trading, KA Management, CEW Partners, Trust Investments, Inc., The Lincoln Fund, L.P., The Lincoln Fund Tax Advantage, L.P., and The Gordon Fund, L.P. (collectively, the "Purchasers"). By virtue of the Series A Convertible Preferred Stock Purchase Agreement, the Purchasers acquired, in the aggregate, 27,000 shares of Series A Convertible Preferred Stock, par value $.01, for $1,000.00 per share, which shares are currently convertible, in the aggregate, into 3,130,435 shares of the Issuer's Common Stock. The terms of conversion are more fully set forth in Section 4 of the Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of Anicom, Inc. dated as of May 23, 1997 (attached hereto as Exhibit 4) which is incorporated herein by reference. A Stockholders' Agreement dated as of May 23, 1997 (attached hereto as Exhibit 5), was entered into by the Issuer, Scott C. Anixter ("Anixter") and each of the Purchasers. The Stockholders' Agreement provides that in the event Anixter receives a bona fide written offer to purchase 20% or more of the Issuer's Common Stock beneficially owned by him, then each of the individual Purchasers shall have the right to sell a proportionate number of their shares of the Issuer's Common Stock then convertible from each Purchaser's Series A Convertible Preferred Stock of Anicom, Inc. These "Tag-Along" rights are more fully set forth in Section 1 of the Stockholders' Agreement which is incorporated herein by reference. The Series A Preferred Stockholders have the option of participating, on a pro rata basis, in any future issuance by the Issuer of privately placed preferred and/or common stock, and the Series A Preferred Stockholders have one vote per share of common stock into which each share of Series A Preferred Stock is convertible. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS: Exhibit 1 - Agreement regarding filing of joint Schedule 13D. Exhibit 2 - Amendment No. 1 to the Limited Partnership Agreement of Strategic Partners Fund. Exhibit 3 - Series A Convertible Preferred Stock Purchase Agreement Exhibit 4 - Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of Anicom, Inc. Exhibit 5 - Stockholders' Agreement. SCHEDULE 13D SIGNATURE After reasonable inquiry and to the best of our knowledge and belief, we certify that the information set forth in this statement is true, complete and correct. Dated: June 2, 1997 /s/ Edward L.Cahill ---------------------------------------- Edward L. Cahill /s/ David L. Warnock ---------------------------------------- David L. Warnock CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: Cahill, Warnock Strategic Partners, L.P., its Sole General Partner By: /s/ Edward L. Cahill ------------------------------------- Edward L. Cahill, General Partner By: /s/ David L. Warnock ------------------------------------- David L. Warnock, General Partner CAHILL, WARNOCK STRATEGIC PARTNERS, L.P. By: /s/ Edward L. Cahill ------------------------------------- Edward L. Cahill, General Partner By: /s/ David L. Warnock ------------------------------------- David L. Warnock, General Partner STRATEGIC ASSOCIATES, L.P. By: Cahill, Warnock & Co., LLC, its ------------------------------------- sole General Partner By: /s/ Edward L. Cahill ------------------------------------- Edward L. Cahill, Member By: /s/ David L. Warnock ------------------------------------- David L. Warnock, Member CAHILL, WARNOCK & CO., LLC By: /s/ Edward L. Cahill ------------------------------------- Edward L. Cahill, Member By: /s/ David L. Warnock ------------------------------------- David L. Warnock, Member EX-99.1 2 AGREEMENT RE: FILING OF JOINT SCHEDULE 13D Exhibit 1 --------- AGREEMENT Pursuant to Rule 13d-1(f)(1) under the Securities Exchange Act of 1934, the undersigned hereby agree that only one statement containing the information required by Schedule 13D need be filed with respect to the ownership by each of the undersigned of shares of stock of Anicom, Inc. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. Executed this 2nd day of June, 1997. /s/ Edward L. Cahill ---------------------------------------- Edward L. Cahill /s/ David L. Warnock ---------------------------------------- David L. Warnock CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: Cahill, Warnock Strategic Partners, L.P., its Sole General Partner By: /s/ Edward L. Cahill ------------------------------------ Edward L. Cahill, General Partner By: /s/ David L. Warnock ------------------------------------ David L. Warnock, General Partner CAHILL, WARNOCK STRATEGIC PARTNERS, L.P. By: /s/ Edward L. Cahill ------------------------------------ Edward L. Cahill, General Partner By: /s/ David L. Warnock ------------------------------------ David L. Warnock, General Partner STRATEGIC ASSOCIATES, L.P. By: Cahill, Warnock & Co., LLC, its sole General Partner By: /s/ Edward L. Cahill --------------------------------- Edward L. Cahill, Member By: /s/ David L. Warnock --------------------------------- David L. Warnock, Member CAHILL, WARNOCK & CO., LLC By: /s/ Edward L. Cahill --------------------------------- Edward L. Cahill, Member By: /s/ David L. Warnock --------------------------------- David L. Warnock, Member EX-99.2 3 AMEND. NO. 1 TO LIMITED PARTNERSHIP AGREEMENT Exhibit 2 --------- AMENDMENT NO. 1 TO LIMITED PARTNERSHIP AGREEMENT OF CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. AMENDMENT NO. 1 dated as of the 26th day of July, 1996, by and among Cahill, Warnock Strategic Partners, L.P., a Delaware limited partnership, as general partner (the "General Partner") of Cahill, Warnock Strategic Partners Fund, L.P., a Delaware limited partnership (the "Partnership"), and the Limited Partners of the Partnership listed on Schedule A to the Limited Partnership Agreement of the Partnership, dated as of April 11, 1996 (the "Partnership Agreement"), at least 66 2/3% in interest of whom have executed a counterpart signature page to this Amendment No. 1: WHEREAS, immediately prior to the admission on the date hereof of additional Limited Partners to the Partnership pursuant to Section 8(c) of the Partnership Agreement, the parties hereto desire to amend the Partnership Agreement and approve Amendment No. 1 to the Management Agreement, the form of which Management Agreement is attached to the Partnership Agreement as Schedule B. NOW, THEREFORE, the parties hereto, in consideration of the premises and the agreements herein contained and intending to be legally bound hereby, agree as follows: 1. Section 4(k)(2) of the Partnership Agreement is amended by deleting the second sentence thereof in its entirety and substituting the following: "Notwithstanding Section 4(e)(1) to the contrary, the Principals may organize, after the date of this Agreement, other investment funds and client investment vehicles for the benefit of employees, associates and advisors of the General Partner and the Principals and for investors who may be strategically important to the Partnership, specifically for the purpose of co-investing with the Partnership; provided that the aggregate amount of capital committed to such other investment funds and client investment vehicles does not exceed $7 million; and provided, further, that any such investment funds or client investment vehicles which are managed by the General Partner or the Principals shall sell or otherwise dispose of each such co-investment at substantially the same time and on substantially the same terms as the Partnership in amounts proportionate to the relative size of the investments made by such investment funds and client investment vehicles and the Partnership." 2. Section 7(a) of the Partnership Agreement is amended by deleting the first sentence thereof in its entirety and substituting the following: "The Partnership shall have a Valuation Committee which shall consist of at least three (3) but not more than five (5) members, none of whom shall be an officer, director, member or employee of the General Partner, the Management Company or any affiliate thereof, and none of whom shall be related to any Principal." 3. Section 8(a) of the Partnership Agreement is amended by adding the following text at the end thereof: "Each notice for an Additional Capital Contribution from the General Partner shall include a general description of the purposes and uses for which the Additional Capital Contribution is being called including, for example, the payment of Partnership expenses (including the Management Fee) and the purchase of Portfolio Company Securities; provided that the General Partner shall not be required to identify the purposes and uses of 100% of any Additional Capital Contribution or be required to identify the name of any particular Portfolio Company or proposed Portfolio Company. After the fourth anniversary of the last admittance of any additional Limited Partners pursuant to Section 8(c) hereof, the General Partner shall not make any further calls for Additional Capital Contributions for the purpose of investing in the Securities of any entity that was not a Portfolio Company (including as a Portfolio Company for such purpose, any predecessor of such entity) on such anniversary date, except with the approval of the Valuation Committee. After the fifth anniversary of the last admittance of any additional Limited Partners pursuant to Section 8(c) hereof, the General Partner shall not make any further calls for Additional Capital Contributions for the purpose of investing in the Securities of any entity that was a Portfolio Company (including as a Portfolio Company for such purpose, any predecessor of such entity) on such anniversary date, except with the approval of the Valuation Committee." 4. Section 11(b) of the Partnership Agreement is amended by adding the following subsection (8) at the end thereof: "(8) An amount equal to 50% of all distributions made to the General Partner, other than (A) Tax Distributions plus (B) distributions the General Partner would have received if it had made its Capital Contributions as a Limited Partner and did not hold an interest as a General Partner (excluding any Tax Distributions on account thereof which are included in (A)), shall be used by the General Partner immediately upon distribution thereof to prepay any promissory notes contributed by the General Partner to the Partnership." 5. Section 16 of the Partnership Agreement is amended by adding the following text at the end thereof: "No Principal will voluntarily assign, pledge, mortgage, hypothecate, sell or otherwise dispose of or encumber (a "Disposition") all or any part of his interest in the allocations made to the General Partner of "20% of such additional Net Realized Gain" pursuant to Section 10(b)(1)(A)(iv) (the "20% carried interest"), except for (a) Dispositions to members of his immediate family or trusts for the benefit of such general partner or members of his immediate family (and, in the case of any Dispositions to such family members or such trusts, the transferee shall thereafter be subject, as to further transfers, to the same restrictions on transfer as were applicable to the transferor), (b) Dispositions to other persons who are associated with or employed by the General Partner, the -2- Principals or the Management Company, and (c) Dispositions to another Principal; provided, that, the Dispositions of all Principals pursuant to clauses (a) and (b) shall not exceed in the aggregate 45% of their aggregate interests in the 20% carried interest." 6. Section 19(c) of the Partnership Agreement is amended by adding the following text at the end thereof: "The General Partner shall transmit to each Partner within sixty (60) days after the close of each fiscal year, a report describing any fees and other remuneration which, pursuant to Section 4(b) of the Management Agreement, reduced the Management Fee payable in such fiscal year. Such description will be organized by the type of such fees and other remuneration (e.g., director's fees and consulting fees) and the dollar amount attributable to each such category." 7. Pursuant to Section 7 of the Management Agreement, the Limited Partners hereby consent to Amendment No. 1 to the Management Agreement dated the date hereof, which amends Section 4(b) of the Management Agreement by adding the following text at the end thereof: "If in any year such reductions exceed the Management Fee otherwise payable, the excess amount of such reductions shall be carried forward on a year-by-year basis." IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 as of the day and year first above written. GENERAL PARTNER CAHILL, WARNOCK STRATEGIC PARTNERS, L.P. By: /s/ Edward L. Cahill ------------------------------------ Edward L. Cahill, General Partner By: /s/ David L. Warnock ------------------------------------ David L. Warnock, General Partner -3- AMENDMENT NO. 1 TO LIMITED PARTNERSHIP AGREEMENT OF CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. LIMITED PARTNER SIGNATURE PAGE The undersigned Limited Partner hereby executes Amendment No. 1 to Limited Partnership Agreement of Cahill, Warnock Strategic Partners Fund, L.P. and hereby authorizes this signature page to be attached to a counterpart of such document executed by the General Partner of Cahill, Warnock Strategic Partners Fund, L.P. Please type or print exact name of Limited Partner * _______________________________ Please sign here By_____________________________ Please type or print exact name of signer _______________________________ Please type or print title of signer Title__________________________ * Signature pages of the limited partners will be provided upon request. -4- EX-99.3 4 SERIES A CONVT. PREFERRED STOCK PURCHASE AGRMT. Exhibit 3 --------- EXECUTION COPY - -------------------------------------------------------------------------------- SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT DATED MAY 20, 1997 BY AND AMONG ANICOM, INC. AND EACH OF THE PURCHASERS LISTED ON EXHIBIT A - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE SECTION 1 Definitions................................................................................... 1 1.1 Defined Terms................................................................................. 1 SECTION 2 Authorization and Sale of Convertible Preferred Stock......................................... 4 2.1 Authorization of Convertible Preferred Stock.................................................. 4 2.2 Sale and Purchase of Convertible Preferred Stock.............................................. 4 2.3 Use of Proceeds............................................................................... 4 SECTION 3 Closing Date; Delivery........................................................................ 5 3.1 Closing Date.................................................................................. 5 3.2 Delivery...................................................................................... 5 SECTION 4 Representations and Warranties of the Company................................................. 5 4.1 Organization, Good Standing and Qualification................................................. 5 4.2 Capitalization................................................................................ 6 4.3 Subsidiaries.................................................................................. 6 4.4 Partnerships.................................................................................. 7 4.5 Authorization................................................................................. 7 4.6 Consents...................................................................................... 7 4.7 Absence of Litigation......................................................................... 7 4.8 Insurance..................................................................................... 7 4.9 Patents and Trademarks........................................................................ 7 i 4.10 Compliance with Other Instruments and Legal Requirements...................................... 8 4.11 Material Agreements; Action................................................................... 8 4.12 Disclosure.................................................................................... 9 4.13 Brokers' Fees................................................................................. 9 4.14 Registration Rights........................................................................... 9 4.15 Real Property................................................................................. 9 4.16 Tangible Personal Property.................................................................... 10 4.17 Environmental Matters......................................................................... 10 4.18 Company SEC Reports and Financial Statements.................................................. 11 4.19 Changes....................................................................................... 12 4.20 Employee Benefit Plans........................................................................ 13 4.21 Taxes......................................................................................... 15 4.22 Minute Books.................................................................................. 15 4.23 Labor and Employment Matters.................................................................. 16 SECTION 5 Representations, Warranties and Covenants of the Purchasers................................... 16 5.1 Accredited Investor; Experience; Risk......................................................... 16 5.2 Investment.................................................................................... 17 5.3 Authorization................................................................................. 17 5.4 Consents...................................................................................... 17 5.5 Brokers' Fees................................................................................. 17 5.6 Plan Assets................................................................................... 17 5.7 Restrictive Legends........................................................................... 17 SECTION 6 Conditions to Closing of Purchasers........................................................... 18 6.1 Representations and Warranties Correct........................................................ 18 6.2 Covenants..................................................................................... 18 6.3 Opinion of Company's Counsel.................................................................. 18 6.4 No Material Adverse Change.................................................................... 18 6.5 Certificate of Designation.................................................................... 18 6.6 State Securities Laws......................................................................... 19 6.7 Issuance of Shares............................................................................ 19 6.8 Certificates.................................................................................. 19 6.9 Organizational Documents...................................................................... 19 6.10 Stockholders' Agreement....................................................................... 19 SECTION 7 Conditions to Closing of the Company.......................................................... 19 7.1 Representations............................................................................... 19 7.2 Covenants..................................................................................... 19 7.3 Purchase Price................................................................................ 19 7.4 Certificate................................................................................... 19 7.5 Stockholders' Agreement....................................................................... 20 SECTION 8 Covenants of the Company...................................................................... 20 8.1 Information................................................................................... 20 8.2 Preemptive Rights............................................................................. 21 8.3 Shelf Registration............................................................................ 22 8.4 Delay and Holdback of Registration............................................................ 26 8.5 Negative Covenants............................................................................ 26 SECTION 9 Miscellaneous................................................................................. 27 ii 9.1 Amendment; Waiver............................................................................. 27 9.2 Notices....................................................................................... 27 9.3 Survival of Representations, Warranties and Covenants......................................... 28 9.4 Severability.................................................................................. 28 9.5 Successors and Assigns........................................................................ 28 9.6 Entire Agreement.............................................................................. 28 9.7 Choice of Law................................................................................. 28 9.8 Counterparts.................................................................................. 28 9.9 Costs and Expenses............................................................................ 29 9.10 Indemnification............................................................................... 29 9.11 No Third-Party Beneficiaries.................................................................. 30
iii ANICOM, INC. SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated May 20, 1997 (this "Agreement"), by and between ANICOM, INC., a Delaware corporation (the "Company") and each purchaser set forth on Exhibit A hereto (each a "Purchaser" and collectively, the "Purchasers"). WHEREAS, the Company has issued and outstanding the shares of capital stock described in Section 4.2 hereof and the Company has reserved for issuance additional shares of capital stock upon the exercise of the outstanding convertible securities identified in Section 4.2; WHEREAS, the Company proposes to issue and sell, and the Purchasers wish to purchase, shares of the Company's Series A Convertible Preferred Stock, par value $.01 per share (the "Convertible Preferred Stock") on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, the parties hereto agree as follows: Definitions ----------- Defined Terms. The following terms are defined as follows: "Affiliate" means, with respect to any Person, (i) any Person in which such Person holds direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or other voting interests representing at least 10% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 10% of the outstanding equity securities or equity interests in a Person and (ii) any brother, sister, parent, child or spouse of such Person or any Person described in clause (i). "Benefit Arrangement" means any benefit arrangement, obligation, custom, or practice, to provide benefits, other than salary, as compensation for services rendered, other than any obligation, arrangement, custom or practice that is an Employee Benefit Plan, including, without limitation, employment or change of control agreements, severance agreements, executive compensation arrangements, incentive programs or arrangements, sick leave, vacation pay, severance pay policies, plant closing benefits, salary continuation for disability, consulting, or other compensation arrangements, workers' compensation, retirement, deferred compensation, bonus, stock option or purchase, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs and employee discounts, in each case with respect to any present or former employees, directors, or agents. "Code" means the Internal Revenue Code of 1986 (or any successor thereto), as amended from time to time. "Company Benefit Arrangement" means any Benefit Arrangement sponsored or maintained by the Company or its Subsidiaries or with respect to which the Company or a Subsidiary has or will have any liability (whether actual, contingent, direct or indirect) as of the Closing Date, in each case with respect to any present or former directors, employees, or agents of the Company or the Subsidiaries. "Company Plan" means, as of the Closing Date, any Employee Benefit Plan for which the Company or any Subsidiary has or will have any liability (whether actual, contingent, direct or indirect). "Company's Knowledge" or derivations thereof shall mean knowledge of the executive officers of the Company, including without limitation, Alan B. Anixter, Scott C. Anixter, Donald C. Welchko, Carl E. Putnam, Robert L. Swanson, Robert Brzustewicz, Sr., Glen M. Nast and Lee Smela. "Effectiveness Period" means the period commencing on the Closing Date and ending on the second (2nd) anniversary of the Closing Date. "Employee Benefit Plan" means any Employee Benefit Plan within the meaning of Section 3(3) of ERISA. "Environmental Law" means any foreign, federal, state or local statute, regulation, ordinance or rule of common law as now or hereafter in effect in any way relating to the protection of the environment including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. ss.ss. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App. ss.ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss.ss. 6901 et seq.), the Clean Water Act (33 U.S.C. ss.ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss.ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss.ss. 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss.ss. 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C. ss.ss. 651 et seq.) and the regulations promulgated pursuant thereto. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any Person that is or was at any time treated as a single employer with the Company under Section 414 of the Code or Section 4001 of ERISA. "Hazardous Material" means any substance, material or waste that is regulated by the United States, the foreign jurisdictions in which the Company or its Subsidiaries conducts business, or any state or local governmental authority including, without limitation, petroleum and its by-products, asbestos, and any material or substance that is defined as a "hazardous waste," "hazardous substance," "hazardous material," "restricted hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant," "toxic waste" or "toxic substance" under any provision of Environmental Law. "Lien" means any lien, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, transfer restriction under any shareholder or similar agreement, encumbrance or any other restriction or limitation whatsoever. "Multiemployer Plan" means any Employee Benefit Plan described in Section 3(37) of ERISA. "New Securities" means shares of Common Stock of the Company and any securities or other rights convertible or exchangeable into or exercisable for shares of Common Stock; provided, however, "New Securities" does not include (i) Common Stock issued or issuable upon conversion of the Convertible Preferred Stock issued to Purchasers; (ii) securities issued by the Company as part of any public offering pursuant to an effective registration statement under the Securities Act; (iii) equity securities issued in connection with any stock split, stock dividend or recapitalization of the Company; (iv) equity securities issued to management, directors or employees of the Company pursuant to plans and options to purchase equity securities issued in accordance with such plans approved by the Board; or (v) securities issued in connection with any merger, acquisition or other business combination by the Company. "Permits" means any approvals, authorizations, consents, licenses, permits or certificates. "Permitted Exceptions" means (i) all defects, exceptions, restrictions, easements, rights of way and encumbrances disclosed in policies of title insurance that have been made available to the Purchasers; (ii) statutory Liens for current taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings, provided an appropriate reserve is established therefor; (iii) mechanics', carriers', workers', repairers' and similar Liens arising or incurred in the ordinary course of business that are -2- not material to the business, operations and financial condition of the property so encumbered or the Company or its Subsidiaries; (iv) zoning, entitlement and other land use and environmental regulations by any governmental body, provided that such regulations have not been violated; and (v) such other imperfections in title, charges, easements, restrictions and encumbrances that do not materially detract from the value of or materially interfere with the present use of any Company Property (as hereinafter defined) subject thereto or affected thereby. "Person" means an individual, partnership, limited liability company, corporation, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Qualified Plan" means any Employee Benefit Plan that meets or is intended to meet the requirements of Section 401(a) of the Code. "Registrable Securities" means, (i) shares of Common Stock or other securities issued or issuable upon exercise of the Convertible Preferred Stock; (ii) shares issued in connection with the exercise of the Preemptive Rights as set forth in Section 8.2; and (iii) any other shares of Common Stock or securities issued in respect of such shares (because of stock splits, stock dividends, reclassifications, recapitalization, mergers, consolidation, share exchange or similar events). "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal or leaching into the indoor or outdoor environment, or into or out of any property; "Remedial Action" means all actions to (x) clean up, remove, treat or in any other way address any Hazardous Material; (y) prevent the Release of any Hazardous Material so it does not endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; or (z) perform pre-remedial studies and investigations or post-remedial monitoring and care. "Subsidiaries" means each corporation in which the Company owns or controls, directly or indirectly, capital stock or other equity interests representing at least 50% of the outstanding voting stock or other equity interests. "Welfare Plan" means any Employee Benefit Plan described in Section 3(1) of ERISA. Authorization and Sale of Convertible Preferred Stock ----------------------------------------------------- Authorization of Convertible Preferred Stock. At Closing, the Company will have authorized the issuance and sale to Purchasers of 27,000 shares of Convertible Preferred Stock, having the rights, preferences, privileges and restrictions set forth in the Certificate of Designation attached to this Agreement as Exhibit B hereto (the "Certificate of Designation"). Sale and Purchase of Convertible Preferred Stock. In reliance on the representations and warranties of the Company contained herein and subject to the terms and conditions hereof, each Purchaser agrees to purchase from the Company, severally, and the Company agrees to sell to each Purchaser that number of shares of Convertible Preferred Stock set forth next to its name on Exhibit A hereto, for the purchase price of $1,000 per share. Use of Proceeds. The Company agrees to use the full proceeds from the sale of the Convertible Preferred Stock to pay acquisition costs, fees and expenses and other transaction costs and for working capital purposes. Closing Date; Delivery ---------------------- -3- Closing Date. The closing of the purchase and sale of the Convertible Preferred Stock hereunder (the "Closing") shall be held at the offices of Katten Muchin & Zavis, 525 W. Monroe, Suite 1600, Chicago, Illinois 60661 on May 23, 1997, or on such other date or at such other place as Purchasers and the Company shall mutually agree (the date of the Closing being referred to herein as the "Closing Date"); provided that Fleming US Discovery Fund III, L.P., and Fleming US Discovery Offshore Fund III, L.P. (the "Fleming Funds") will close on or about June 4, 1997, or on such other date as the Fleming Funds and the Company shall mutually agree. Delivery. At the Closing, the Company shall deliver to each Purchaser a certificate or certificates evidencing the shares of Convertible Preferred Stock being purchased by it registered in such Purchaser's name against delivery to the Company of payment in an amount equal to the full purchase price of the shares of Convertible Preferred Stock being purchased by such Purchaser by certified check or wire transfer to an account designated by the Company. Representations and Warranties of the Company --------------------------------------------- The Company hereby represents and warrants to, and agrees with, Purchasers as follows: Organization, Good Standing and Qualification. Each of the Company and its Subsidiaries (i) is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to carry on its business, (iii) is duly qualified to transact business and is in good standing in all jurisdictions where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not, and reasonably could not be expected to, have a material adverse effect on the business, operations, assets, financial condition, results of operations or business prospects of the Company and its Subsidiaries (a "Material Adverse Effect"). The Company has the corporate power and authority and is in possession of all material franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders to (i) own, lease and operate its properties and to carry on its business as now being conducted and (ii) execute and deliver this Agreement and the documents and instruments contemplated hereby and to consummate the transactions contemplated hereby. Capitalization. --------------- The authorized capital stock of the Company consists of 30,000,000 shares of common stock, par value $.001 per share ("Common Stock") of which 15,912,999 shares are issued and outstanding, and 1,000,000 shares of preferred stock, par value $.01 per share ("Preferred Stock"), of which 27,000 shares are Convertible Preferred Stock authorized for issuance hereunder. Other than the Convertible Preferred Stock issued pursuant to this Agreement, there are no other shares of Preferred Stock outstanding. The Company has reserved for issuance 3,130,435 shares of Common Stock upon conversion of the authorized shares of Convertible Preferred Stock. Except as listed on Schedule 4.2 and other than obligations arising under any Company Plan also identified on Schedule 4.2, there are no outstanding securities of the Company convertible into or evidencing the right to purchase or subscribe for any shares of capital stock of the Company, there are no outstanding or authorized options, warrants, calls, subscriptions, rights, commitments or any other agreements of any character obligating the Company to issue any shares of its capital stock or any securities convertible into or evidencing the right to purchase or subscribe for any shares of such stock, and there are no agreements or understandings with respect to the voting, sale, transfer or registration of any shares of capital stock of the Company. No outstanding options, warrants or other securities exercisable for or convertible into shares of capital stock of the Company require anti-dilution adjustments by reason of the consummation of the transactions contemplated hereby. The issued and outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable. The shares of Convertible Preferred Stock to be issued pursuant to this Agreement, upon delivery to Purchaser of certificates therefor against payment in accordance with the terms of this Agreement, and the shares of Common Stock issuable upon conversion of such Convertible Preferred Stock of the -4- Company when issued upon conversion of such Convertible Preferred Stock in accordance with the Certificate of Designation, (i) will be validly issued, fully paid and nonassessable, (ii) will be free and clear of all Liens (excluding those of Purchasers) and (iii) assuming that the representations of Purchasers in Section 5 hereof are true and correct, will be issued in compliance with all applicable federal and state securities laws. Subsidiaries. Schedule 4.3 sets forth a complete and accurate list of all Subsidiaries of the Company, showing (as to each such Subsidiary) the date of its incorporation and the jurisdiction of its incorporation. The Company is the sole stockholder of each Subsidiary. The outstanding shares of capital stock of each Subsidiary are validly issued, fully paid and nonassessable and all such shares represented as being owned by the Company are owned by it, free and clear of all Liens, other than Liens held by Harris Trust and Savings Bank, the Company's senior lender. There are no outstanding securities of any Subsidiary convertible into or evidencing the right to purchase or subscribe for any shares of capital stock of any Subsidiary, there are no outstanding or authorized options, warrants, calls, subscriptions, rights, commitments or any other agreements of any character obligating any Subsidiary to issue any shares of its capital stock or any securities convertible into or evidencing the right to purchase or subscribe for any shares of such stock, and there are no agreements or understandings with respect to the voting, sale, transfer or registration of any shares of capital stock of any Subsidiary. Partnerships. The Company is not a party to, and does not hold, any equity interests in any partnership or limited partnership of any kind. Authorization. The Company has all requisite corporate power and authority to execute and deliver this Agreement and each agreement, document or instrument adopted, entered into or delivered in connection herewith (the "Transaction Documents") and to perform its obligations hereunder and thereunder. The execution, delivery and performance of the Agreement and the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate, including stockholder, action on the part of the Company. Each Transaction Document has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except to the extent that rights to indemnification and contribution under this Agreement and may be limited by federal or state securities laws or public policy relating thereto. Consents. Except as set forth in Schedule 4.6, other than filing the Certificate of Designation with the Delaware Secretary of State contemporaneously herewith, no material consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, or local governmental authority or other Person on the part of the Company is required in connection with the valid execution and delivery by the Company of the Transaction Documents to which it is a party, or the consummation by the Company of the transactions contemplated by the Transaction Documents to which it is a party. Absence of Litigation. There are no claims, actions, suits, proceedings or investigations pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries, or any properties or rights of the Company or its Subsidiaries, before any court, arbitrator or administrative, governmental or regulatory authority or body, domestic or foreign, that could reasonably be expected to have a Material Adverse Effect. Insurance. The Company and it Subsidiaries maintain adequate insurance with respect to their respective businesses and are in compliance with all material requirements and provisions thereof. Patents and Trademarks. The Company and its Subsidiaries have sufficient title and ownership of (or rights under license agreements to use) all patents, trademarks, service marks, trade names, copyrights, trade secrets, proprietary rights and processes ("Intellectual Property") necessary for the conduct of their businesses in the ordinary -5- course. There are no outstanding options, licenses or agreements of any kind relating to the foregoing, nor is the Company or any of its Subsidiaries bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, proprietary rights and processes of any other Person. A list of all patents and trademarks owned by the Company or any of its Subsidiaries is set forth on Schedule 4.9(a). Except as set forth on Schedule 4.9(b), within the past five years, the Company has not received any communications alleging that the Company or any of its Subsidiaries has violated or, by conducting its business as proposed, would violate any of the patents, trademarks, service marks, trade names, copyrights, trade secrets, proprietary rights and processes of any other Person, nor is the Company aware of any such violations. Compliance with Other Instruments and Legal Requirements. --------------------------------------------------------- None of the Company or any of its Subsidiaries is in violation or default of any provisions of its certificate of incorporation, by-laws, or comparable organizational documents. None of the Company or any of its Subsidiaries is in violation or default in any material respect under any provision, instrument, judgment, order, writ, decree, contract or agreement to which it is a party or by which it is bound or of any provision of any federal, state or local statute, rule or regulation applicable to the Company or any of its Subsidiaries (including, without limitation, any law, rule or regulation relating to protection of the environment and the maintenance of safe and sanitary premises). The execution, delivery and performance of each Transaction Document and the consummation of the transactions contemplated hereby and thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement, or require any consent, waiver or approval thereunder, or constitute an event that results in the creation of any Lien upon any assets of the Company or any of its Subsidiaries. The Company and its Subsidiaries have all Permits of all governmental entities required to conduct their respective businesses as proposed to be conducted, except to the extent that the failure to have such Permits would not, and reasonably could not be expected to, have a Material Adverse Effect. Material Agreements; Action. Except as set forth on Schedule 4.11, there are no material contracts, agreements, commitments, understandings or proposed transactions, whether written or oral, to which the Company or any of its Subsidiaries is a party or by which it is bound which call for an expenditure by the Company of over $100,000 in any single year regarding: (i) any of their respective officers, directors stockholders or partners or any Affiliate thereof; (ii) the sale of any of the assets of the Company or any of its Subsidiaries other than in the ordinary course of business; (iii) covenants of the Company or any of its Subsidiaries not to compete in any line of business or with any Person in any geographical area or covenants of any other Person not to compete with the Company or any of its Subsidiaries in any line of business or in any geographical area, provided, however, that this subsection (iii) is not subject to the limitation of expenditure of over $100,000 in any single year; (iv) the acquisition by the Company or any of its Subsidiaries of any operating business or the capital stock of any other Person; (v) the borrowing of money; or (vi) the license of any Intellectual Property, other material proprietary right to or from the Company or any of its Subsidiaries. To the Company's Knowledge, all such agreements are in full force and effect and are the legal, valid and binding obligation of the Company or its Subsidiaries, enforceable against them in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). None of the Company or any of its Subsidiaries is in material default under any such agreements nor, to the Company's knowledge, is any other party to any such agreements in material default thereunder in any respect. Disclosure. Neither this Agreement nor any of the Transaction Documents nor any exhibit hereto, nor any report, certificate, or instrument furnished to Purchaser or its counsel in connection with the transactions contemplated by this Agreement, when read together, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. -6- Brokers' Fees. Except for Coopers & Lybrand Securities LLC, whose fees will be paid solely by the Company, no broker, finder, investment banker or other Person is entitled to any brokerage fee, finder's fee or other commission in connection with the transactions contemplated by this Agreement. Registration Rights. Except as set forth in Schedule 4.14, the Company has not granted or agreed to grant any registration rights, including piggyback registration rights, to any Person. Real Property. -------------- None of the Company or its Subsidiaries owns real property or interests in real property. Schedule 4.15 sets forth a complete list of all real property and interests in real property leased by the Company and its Subsidiaries (individually, a "Real Property Lease" and the real properties specified in such leases being referred to herein individually as a "Company Property" and collectively as the "Company Properties") as lessee or lessor. The Company Properties constitute all interests in real property currently used or currently held for use in connection with the business of the Company and its Subsidiaries and which are necessary for the continued operation of the business of the Company and its Subsidiaries as the business is currently conducted. The Company and its Subsidiaries have a valid and enforceable leasehold interest under each of the Real Property Leases, and none of the Company or any of its Subsidiaries has received any written notice of any default or event which, with notice or lapse of time, or both, would constitute a default by the Company or any of its Subsidiaries under any of the Real Property Leases, except to the extend such default would not, and reasonably could not be expected to, have a Material Adverse Effect. All of the Company Property, buildings, fixtures and improvements thereon owned or leased by the Company and its Subsidiaries are in good operating condition and repair (subject to normal wear and tear) except for deficiencies which do not have a Material Adverse Effect. There does not exist any actual, or to the Company's Knowledge, threatened or contemplated, condemnation or eminent domain proceedings that affect any Company Property or any part thereof, and none of the Company or any of its Subsidiaries has received any written notice of the intention of any governmental body or other Person to take or use all or any part thereof. Tangible Personal Property. --------------------------- Schedule 4.16 sets forth all leases of personal property ("Personal Property Leases") involving annual payments in excess of $150,000 relating to personal property used in the business of the Company and its Subsidiaries or to which the Company or any of its Subsidiaries is a party or by which the properties or assets of the Company or any of its Subsidiaries is bound. Each of the Company and its Subsidiaries has a valid leasehold interest under each of the Personal Property Leases under which it is a lessee, and there is no material default under any Personal Property Lease by the Company or any of its Subsidiaries, by any other party thereto, and no event has occurred which, with the lapse of time or the giving of notice or both would constitute a material default thereunder. Except as set forth on Schedule 4.16, each of the Company and its Subsidiaries has good and marketable title to all of the items of tangible personal property reflected in the balance sheets referred to in Section 4.18 (except as sold or disposed of subsequent to the date thereof in the ordinary course of business consistent with past practice), free and clear of any and all Liens other than the Permitted Exceptions. All such items of tangible personal property that, individually or in the aggregate, are material to the operation of the business of the Company and its Subsidiaries are in good condition and in a state of good maintenance and repair (ordinary wear and tear excepted) and are suitable for the purposes used. -7- All of the items of tangible personal property used by the Company and its Subsidiaries under the Personal Property Leases are in good condition and repair (ordinary wear and tear excepted) and are suitable for the purposes used except for deficiencies which do not have a Material Adverse Effect. Environmental Matters. The operations of each of the Company and its Subsidiaries are in compliance in all material respects with all applicable Environmental Laws and all Permits issued pursuant to Environmental Laws or otherwise; Each of the Company and its Subsidiaries has obtained all Permits required under all applicable Environmental Laws necessary to operate its business; Neither the Company nor any of its Subsidiaries is the subject of any outstanding written order, agreement or arrangement with any governmental authority or Person respecting (i) Environmental Laws, (ii) Remedial Action or (iii) any Release or threatened Release of a Hazardous Material; None of the Company or any of its Subsidiaries has received any written communication alleging either or both that the Company or any of its Subsidiaries may be in violation of any Environmental Law, or any Permit issued pursuant to Environmental Law, or may have any liability under any Environmental Law; None of the Company or any of its Subsidiaries has any current contingent liability in connection with any Release of any Hazardous Materials into the indoor or outdoor environment (whether on-site or off-site); There are no investigations of the business, operations, or currently or previously owned, operated or leased property of the Company or any of its Subsidiaries pending or, to the Company's Knowledge, threatened that could lead to the imposition of any liability pursuant to Environmental Law; and There is not located at any of the properties owned, leased or operated by the Company or any of its Subsidiaries any (i) underground storage tanks, (ii) asbestos-containing material or (iii) equipment containing polychlorinated biphenyls. Company SEC Reports and Financial Statements. --------------------------------------------- The Company has delivered to Purchaser true and complete copies of all periodic reports, statements and other documents that the Company has filed with the Securities and Exchange Commission (the "SEC") under the Exchange Act of 1934 (the "Exchange Act") since December 31, 1995 (collectively, the "Company SEC Reports"), each in the form (including exhibits and any amendments thereto) required to be filed with the SEC. As of their respective dates, each of the Company's SEC Reports (i) complied in all material respects with all applicable requirements of the Securities Act of 1933, as amended (the "Securities Act") and the Exchange Act, and the rules and regulations promulgated thereunder, respectively, (ii) were filed in a timely manner, and (iii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the Subsidiaries is required to file any forms, reports or other documents with the SEC. Each of the audited consolidated financial statements of the Company (including any related notes and schedules thereto) included (or incorporated by reference) in its Annual Report on Form 10-KSB for the fiscal year ended December 31, 1996, is accurate and complete and fairly presents, in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis through the periods involved (except as may be noted therein), and in conformity with the SEC's Regulation S-B, the consolidated financial position of the Company and its -8- consolidated subsidiaries as of its date and the consolidated results of operations and changes in financial position for the period then ended. Except as and to the extent set forth (or incorporated by reference) in the Company's Annual Report on Form 10-KSB for the calendar year ended December 31, 1996, neither the Company nor any of its Subsidiaries has incurred any liability or obligation of any nature whatsoever (whether due or to become due, accrued, fixed, contingent, liquidated, unliquidated or otherwise) that would be required by GAAP to be accrued on, reflected on, or reserved against it, in a consolidated balance sheet (or in the applicable notes thereto) of the Company or any of its Subsidiaries prepared in accordance with GAAP consistently applied, other than liabilities or obligations which arose in the ordinary course of business and consistent with past practices since such date and which do not or would not individually or in the aggregate have a Material Adverse Effect. Changes. Except as set forth on Schedule 4.19, since December 31, 1996, there has not been: any change in the assets, liabilities, financial condition or operating results of the Company or any of its Subsidiaries, except changes in the ordinary course of business that have not had, in the aggregate, a Material Adverse Effect; any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties, financial condition, operating results or business of the Company or any of its Subsidiaries; any waiver by the Company or any of its Subsidiaries of a valuable right or of a material debt owed to it outside of the ordinary course of business or that otherwise could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; any satisfaction or discharge of any Lien or payment of any obligation by the Company or any of its Subsidiaries that could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; any change or amendment to a contract or arrangement by which the Company or any of its Subsidiaries or any of their respective assets or properties is bound or subject that could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; other than in the ordinary course of business, any material increase in any compensation arrangement or agreement with any employee of the Company or any of its Subsidiaries receiving compensation in excess of $50,000 annually; any events or circumstances that otherwise could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; or none of the Company nor any of its Subsidiaries has (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock or equity interests, (ii) incurred any indebtedness for money borrowed in excess of $100,000, other than bank borrowings in the ordinary course of business, (iii) made any loans or advances to any Person, other than ordinary advances for travel expenses not exceeding $50,000, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights for consideration in excess of $50,000 in any one transaction or series of related transactions. Employee Benefit Plans. ----------------------- Schedule 4.20(a) contains a complete and accurate list of all Company Plans and Company Benefit Arrangements. Schedule 4.20(a) specifically identifies all Company Plans (if any) that are Qualified Plans. -9- With respect, as applicable, to Employee Benefit Plans and Benefit Arrangements and except as would not result in liability in excess of $50,000 (for purposes of this Section 4.20, a Material Adverse Effect): each Qualified Plan that is a Company Plan qualifies under Section 401(a) of the Code, and any trusts maintained pursuant thereto are exempt from federal income taxation under Section 501 of the Code; the Company and the Subsidiaries have no liability (whether actual or contingent, direct or indirect) with respect to any Employee Benefit Plan subject to Section 302 of ERISA or Section 412 of the Code or Title IV of ERISA (including any Multiemployer Plan); each Company Plan and each Company Benefit Arrangement has been maintained in accordance with its constituent documents and with all applicable provisions of the Code, ERISA and other laws, including federal and state securities laws; there are no pending claims or lawsuits by, against, or relating to any Employee Benefit Plans or Benefit Arrangements that are not Company Plans or Company Benefit Arrangements that would, if successful, result in liability of the Company, and no such claim or lawsuit (other than routine claims for benefits) has been asserted, instituted or, to the knowledge of the Company and the Subsidiaries, threatened by, against, or relating to any Company Plan or Company Benefit Arrangement, or the Company or the Subsidiaries. To the knowledge of the Company and the Subsidiary, the Company Plans and Company Benefit Arrangements are not presently under audit or examination (nor has notice been received of a potential audit or examination) by the IRS, the Department of Labor, or any other governmental agency or entity, and no matters are pending with respect to a Qualified Plan under the IRS's Voluntary Compliance Resolution program, its Closing Agreement Program, or other similar programs; no Company Plan or Company Benefit Arrangement contains any provision or is subject to any law that would prohibit the transactions contemplated by this Agreement or that would give rise to any vesting of benefits, severance, termination, or other payments or liabilities as a result of the transactions contemplated by this Agreement, and no payment under any Company Plan or Company Benefit Plan arising as a result of the transactions contemplated by this Agreement, would constitute an excess parachute payment within the meaning of Section 280G of the Code; with respect to each Company Plan, there has occurred no non-exempt "prohibited transaction" (within the meaning of Section 4975 of the Code) or transaction prohibited by Section 406 of ERISA or breach of any fiduciary duty described in Section 404 of ERISA that would, if successful, result in any liability for the Company or any Stockholder, officer, director, or employee of the Company; all material reporting, disclosure, and notice requirements of ERISA and the Code have been satisfied with respect to each Company Plan and each Company Benefit Arrangement; payment has been made of all amounts that the Company and each Subsidiary is required to pay as contributions to the Company Benefit Plans as of the last day of the most recent fiscal year of each of the plans ended before the date of this Agreement and all benefits accrued under any unfunded Company Plan or Company Benefit Arrangement will have been paid, accrued, or otherwise adequately reserved in accordance with GAAP as of the Balance Sheet Date; the Company and the Subsidiaries have no liability (whether actual, contingent, with respect to any of its assets or otherwise) with respect to any Employee Benefit Plan or Benefit Arrangement that is not a Company Benefit Arrangement or with respect to any Employee Benefit Plan sponsored or maintained (or which has been or should have been sponsored or maintained) by any ERISA Affiliate; -10- all group health plans of the Company and its ERISA Affiliates have been operated in material compliance with the requirements of Sections 4980B (and its predecessor) and 5000 of the Code; no employee or former employee of the Company or beneficiary of any such employee or former employee is, by reason of such employee's or former employee's employment, entitled to receive any welfare benefits, including, without limitation, death or medical benefits (whether or not insured) beyond retirement or other termination of employment as described in Statement of Financial Accounting Standards No. 106, other than (i) deferred compensation benefits accrued as liabilities on the Closing Statement or listed in Schedule 4.20(a) or (ii) continuation coverage mandated under Section 4980B of the Code or other applicable law. Schedule 4.20(c) hereto sets forth an accurate list, as of the date hereof, of all officers, directors, and key employees of the Company and lists all employment agreements with such officers, directors, and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus, and other compensation respectively) of each such Person as of (a) December 31, 1996 and (b) the date hereof. (d) The Company has not declared or paid any bonus compensation in contemplation of the transactions contemplated by this Agreement. Taxes. All federal, state, local and foreign tax returns, reports and statements required to be filed by the Company and its Subsidiaries have been filed with the appropriate governmental agencies in all jurisdictions in which such returns, reports and statements are required to be filed and all such returns, reports and statements are true, complete and correct in all respects. All taxes, charges and other impositions due and payable by the Company and its Subsidiaries have been paid in full on a timely basis except where contested in good faith and by appropriate proceedings if adequate reserves therefor have been established on the books and records of the Company or Subsidiary in accordance with GAAP consistently applied. The provision for taxes of each of the Company and its Subsidiaries as shown in the Company SEC Reports is sufficient for all unpaid taxes, charges and other impositions of any nature due or accrued as of the date hereof, whether or not assessed or disputed. Proper and accurate amounts have been withheld by the Company and its Subsidiaries from their respective employees for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable federal, state, local and foreign law and such withholdings have been timely paid to the respective governmental agencies. The Company has not received notice of any audit or of any proposed deficiencies from any governmental authority, and no controversy with respect to taxes of any type is pending or threatened. Except for routine filing extensions granted as a matter of right under applicable law, none of the Company or any of its Subsidiaries has executed or filed with the Internal Revenue Service or any other governmental authority any agreement or other document extending, or having the effect of extending, the period of assessment or collection of any taxes, charges or other impositions. None of the Company or any of its Subsidiaries has agreed or is required to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise. Further, none of the Company or any of its Subsidiaries has any obligation under any tax-sharing agreement. Minute Books. The minute books of the Company and each of its Subsidiaries contain a complete summary of all material actions by their respective directors and stockholders since the date of their respective incorporation and reflect all transactions referred to in such minutes accurately in all material respects. Labor and Employment Matters. With respect to employees of and service providers to the Company and the Subsidiaries: (a) the Company and the Subsidiaries are and have been in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including without limitation any such laws respecting employment discrimination, workers' compensation, family and medical leave, the Immigration Reform and Control Act, and occupational safety and health requirements, and have not and are not engaged in any unfair labor practice; (b) there is not now, nor within the past three years has there been, any unfair labor practice complaint against the Company or any Subsidiary pending or, to the Company's or any Subsidiary's knowledge, threatened before the National Labor Relations Board or any other comparable authority; (c) there is not now, nor within the past three years has there been, any labor strike, slowdown or stoppage actually pending -11- or, to the Company's or any Subsidiary's knowledge, threatened against or directly affecting the Company or any Subsidiary; (d) to the Company's or any Subsidiary's knowledge, no labor representation organization effort exists nor has there been any such activity within the past three years; (e) no grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending and, to the Company's or any Subsidiary's knowledge, no claims therefor exist or have been threatened; (f) the employees of the Company and the Subsidiaries are not and have never been represented by any labor union, and no collective bargaining agreement is binding and in force against the Company or any Subsidiary or currently being negotiated by the Company or any Subsidiary; and (g) to the Company's knowledge, all Persons classified by the Company or its Subsidiaries as independent contractors do satisfy and have satisfied the requirements of law to be so classified, and the Company and its Subsidiaries have fully and accurately reported their compensation on IRS Forms 1099 when required to do so. To the Company's knowledge, none of the employees of the Company or any of its Subsidiaries is obligated under any contract or other agreement (including licenses, covenants or commitments of any nature), or subject to any judgment, decree or order of any court or administrative agency, that materially interferes with the use of the employee's best efforts to promote the interests of the Company and its Subsidiaries or conflicts with the business as proposed to be conducted by the Company or its Subsidiaries. Representations, Warranties and Covenants of the Purchasers ----------------------------------------------------------- Each Purchaser severally hereby represents and warrants to and agrees with the Company, as to itself only, as follows: Accredited Investor; Experience; Risk. Purchaser is an accredited investor within the definition of Regulation D promulgated under the Securities Act. Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Convertible Preferred Stock pursuant to this Agreement. Investment. Purchaser is acquiring the Convertible Preferred Stock for investment purposes only, for its own account and not with a view to, or for resale in connection with, any distribution thereof in violation of applicable law. Authorization. Purchaser represents that it has all requisite power and authority to enter into and perform its obligations under the Transaction Documents to which it is a party. Assuming the due authorization, execution and delivery of the Transaction Documents by each other party thereto, each Transaction Document to which Purchaser is a party constitutes a valid and binding obligation of Purchaser, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except to the extent that rights to indemnification and contribution under this Agreement may be limited by federal or state securities laws or public policy relating thereto. Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, or local governmental authority or other Person on the part of Purchaser is required in connection with the valid execution and delivery by Purchaser of the Transaction Documents to which it is a party, or the consummation by Purchaser of the transactions contemplated by the Transaction Documents to which it is a party, except for such filings as have been made prior to the Closing. Brokers' Fees. No broker, finder, investment banker or other Person is entitled to any brokerage fee, finder's fee or other commission in connection with the transactions contemplated by this Agreement based upon arrangements made by the Purchaser. -12- Plan Assets. Purchaser is not, and no source of the funds to be used by Purchaser to acquire the Convertible Preferred Stock are, a "Plan Asset" as such phrase is defined within the U.S. Department of Labor regulations 2510.3-101. Restrictive Legends. Purchaser understands that the certificates or other instruments representing each of the shares of Convertible Preferred Stock and the shares of common stock issuable upon conversion thereof (the "Conversion Shares"), shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates) until such time as the sale of the Conversion Shares have been registered under the Securities Act as contemplated hereunder: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. If such Purchaser desires to sell or otherwise dispose of all or any part of the Convertible Preferred Stock or shares of any Conversion Shares owned by it under an exemption from registration under the Securities Act, and if requested by the Company, such Purchaser shall deliver to the Company an opinion of counsel, which may be counsel for the Company, that such exemption is available. Conditions to Closing of Purchasers ----------------------------------- Each Purchaser's obligation to purchase the Convertible Preferred Stock at the Closing is, at the option of that Purchaser, subject to the fulfillment on or prior to the Closing Date of the following conditions: Representations and Warranties Correct. The representations and warranties made by the Company in Section 4 hereof shall be true and correct when made, and shall be true and correct on the Closing Date with the same force and effect as if they had been made on and as of such date. Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Closing Date shall have been performed or complied with in all material respects. Opinion of Company's Counsel. Purchasers shall have received from Katten Muchin & Zavis, counsel to the Company, an opinion addressed to Purchasers, dated the Closing Date, in substantially the form of Exhibit C hereto. No Material Adverse Change. Since December 31, 1996, there shall not have occurred any events or circumstances that could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Certificate of Designation. The Certificate of Designation shall have been duly adopted and executed by the Company and filed with the Delaware Secretary of State. State Securities Laws. All registrations, qualifications and Permits required under applicable state securities laws, if any, shall have been obtained for the lawful execution, delivery and performance of this Agreement. -13- Issuance of Shares. The Company shall have issued at least 19,000 shares of Convertible Preferred Stock at the Closing pursuant to this Agreement. Certificates. Purchasers shall have received a certificate of the President or the Chief Financial Officer of the Company to the effect set forth in Sections 6.1, 6.2, 6.4, and 6.5. Organizational Documents. The Company shall have delivered to each Purchaser certified copies of the charter and bylaws of the Company in effect at the Closing. Stockholders' Agreement. The Company and Scott Anixter shall have executed and delivered to each Purchaser a stockholders' agreement substantially in the form of Exhibit D hereto (the "Stockholders' Agreement"). Consents. The Company shall have received the consents, or waivers thereto, set forth on Schedule 4.2. Conditions to Closing of the Company ------------------------------------ The Company's obligation to issue and sell the Convertible Stock at the Closing is, at the option of the Company, subject to the fulfillment of the following conditions: Representations. The representations and warranties made by each Purchaser in Section 5 hereof shall be true and correct when made, and shall be true and correct on the Closing Date with the same force and effect as if they had been made on and as of such date. Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by each Purchaser on or prior to the Closing Date shall have been performed or complied with in all respects. Purchase Price. Each Purchaser shall have tendered the purchase price for the Convertible Preferred Stock as set forth on Exhibit A hereto by certified check or wire transfer, subject to the later Closing scheduled for the Fleming Funds. Certificate. The Company shall have received a certificate from each Purchaser to the effect set forth in Sections 7.1 and 7.2. Stockholders' Agreement. Each Purchaser shall have executed and delivered to the Company the Stockholders' Agreement. Consents. The Company shall have obtained the consents, or waivers thereto, set forth on Schedule 4.2. Covenants of the Company ------------------------ Information. After the Closing Date and until a Purchaser (i) no longer owns any shares of Convertible Preferred Stock or (ii) requests otherwise, the Company will send each Purchaser any and all materials which it sends to the holders of its Common Stock. Additionally, commencing on May 1, 1999, in the event that a Purchaser owns any of the shares of Convertible Preferred Stock, the Company, upon written request of that Purchaser, shall deliver to that Purchaser the information specified in this Section 8.1: -14- Monthly Financial Statements. As soon as available, but in any event not later than forty-five (45) days after the end of each monthly fiscal period (other than the last monthly fiscal period of the fourth fiscal quarter of the Company), the unaudited consolidated balance sheet of the Company and its Subsidiaries as at the end of each such period and the related unaudited consolidated statements of income and cash flows of the Company and its Subsidiaries for such period and for the elapsed period in such fiscal year, all in reasonable detail and stating in comparative form the figures as of the end of and for the comparable periods of the preceding fiscal year. All such financial statements shall be prepared in accordance with GAAP on a consistent basis throughout the periods reflected therein except as stated therein and shall be accompanied by a certificate of the Company's president or chief financial officer to such effect. Board Materials. As soon as available, all materials which the Company distributes to the members of the Board of Directors will be sent to Purchaser. Other Reports and Statements. Promptly (but in any event within ten (10) days) after any distribution to its stockholders generally, to its directors or to the financial community of an annual report, definitive proxy statement, registration statement or other similar report or communication, a copy of each such annual report, proxy statement, registration statement or other similar report or communication and promptly (but in any event within ten (10) days) after any filing by the Company with the SEC or with any national securities exchange or market system, of any publicly available annual or periodic or special report or proxy statement or registration statement, a copy of such report or statement and copies of all press releases and other statements made available generally by the Company to the public concerning material developments in the Company's business. A Purchaser who requests such information pursuant to this Section 8.1 (a "Requesting Purchaser") hereby acknowledges that it is aware of the restrictions imposed by federal and state securities laws on a person possessing material nonpublic information about a company. In this regard, a Requesting Purchaser hereby agrees that while it is in possession of material nonpublic information with respect to the Company and its subsidiaries, such Requesting Purchaser will not purchase or sell any securities of the Company, or communicate such information to any third party, in violation of any such laws. Such Requesting Purchaser also agrees that, if requested by the Company, such Requesting Purchaser will cause any of its representatives, consultants or advisors who have been or may become apprised of any material nonpublic information about the Company to give a written undertaking to the same effect to the Company. Preemptive Rights. If, after the Closing Date, the Company shall propose to issue or sell New Securities or enters into any contracts, commitments, agreements, understandings or arrangements of any kind relating to the issuance or sale of any New Securities and a Purchaser still holds twenty percent (20%) of the Convertible Preferred Stock acquired hereby by such Purchaser, then each such Purchaser shall have the right to purchase that number of New Securities at the same price and on the same terms proposed to be issued or sold by the Company so that such Purchaser would after the issuance and sale of all such New Securities, hold the same proportional interest of the then outstanding shares of Common Stock (assuming that any outstanding securities or other rights, including the Convertible Preferred Stock, convertible or exchangeable into or exercisable for Common Stock have been converted, exchanged or exercised) as was held by such Purchaser immediately prior to such issuance and sale (the "Proportionate Percentage"). The Company shall give each Purchaser written notice of its intention to issue and sell New Securities, describing the type of New Securities, the price and the general terms and conditions upon which the Company proposes to issue the same. Each Purchaser shall have twenty-five (25) days from the giving of such notice to agree to purchase all (or any part) of its Proportionate Percentage of New Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased. If Purchasers fail to exercise in full such right within twenty-five (25) days, the Company shall have one hundred twenty-five (125) days thereafter to sell the New Securities in respect of which Purchasers' rights were not exercised, at a price and upon general terms and conditions no more favorable to the buyers thereof than specified in the -15- Company's notice to Purchasers pursuant to this Section. If the Company has not sold the New Securities within such one hundred twenty-five (125) day period, the Company shall not thereafter issue or sell any New Securities, except by giving Purchasers the right to purchase their Proportionate Percentage in the manner provided above. Shelf Registration. ------------------- Within 45 days after the Closing Date, the Company shall prepare and file with the SEC a Registration Statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf Registration") registering the resale from time to time by Purchasers of all of the Registrable Securities (the "Initial Shelf Registration"). The Registration Statement for any Shelf Registration shall be on Form S-3 or another appropriate form permitting registration of such Registrable Securities for resale by Purchasers in the manner or manners designated by them. The Company shall use its best efforts to cause the Initial Shelf Registration to become effective under the Securities Act as promptly as is practicable and to keep the Initial Shelf Registration continuously effective under the Securities Act until the end of the Effectiveness Period. If the Company fails to file the Initial Shelf Registration within 45 days after the Closing Date, then, unless such a delay is attributable to any Purchaser not timely providing information reasonably requested by the Company, the dividend payable upon the Convertible Preferred Stock shall increase to 15% per annum until such Initial Shelf Registration is filed. In such instance, upon filing such Initial Shelf Registration, the dividend shall revert to 5%. Notwithstanding the foregoing, until the Initial Shelf Registration is declared effective by the Securities and Exchange Commission, no shares of Convertible Preferred Stock shall be converted pursuant to Section 4(b) of the Certificate of Designation. If the Initial Shelf Registration or any Subsequent Shelf Registration (as defined below) ceases to be effective for any reason at any time during the Effectiveness Period (other than because all Registrable Securities shall have been sold or shall have ceased to be Registrable Securities), the Company shall use its best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within thirty days of such cessation of effectiveness amend the Shelf Registration in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional Shelf Registration covering all of the Registrable Securities (a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed, the Company shall use all reasonable efforts to cause the Subsequent Shelf Registration to become effective as promptly as is practicable after such filing and to keep such Registration Statement continuously effective until the end of the Effectiveness Period. The Company shall supplement and amend the Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration, if required by the Securities Act or the SEC, or if reasonably requested by Purchasers. From time to time, the Company shall prepare and file with the SEC a post-effective amendment to the Shelf Registration or a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or any other required document, so that such Registration Statement will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and so that, as thereafter delivered to purchasers of the Registrable Securities being sold thereunder, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provide Purchasers copies of any documents filed in such numbers as Purchasers shall reasonably request; and inform Purchasers that the Company has complied with its obligations and that the Registration Statement and related Prospectus may be used for the purpose of selling all or any of such Registrable Securities (or that, if the Company has filed a post-effective amendment to the Shelf Registration which has not yet been declared effective, the Company will notify Purchasers to that effect, will use its best efforts to secure promptly the effectiveness of such post-effective amendment and will immediately so notify Purchasers when the amendment has become effective). Registration Expenses. All fees and expenses incident to the Company's performance of or compliance with a Shelf Registration pursuant to this Agreement shall be borne by the Company whether or not any -16- Registration Statement becomes effective. Such fees and expenses shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (x) with respect to filings required to be made with the National Association of Securities Dealers, Inc. and (y) of compliance with federal securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel to Purchasers in connection with Blue Sky qualifications of the Registrable Securities under the laws of such jurisdictions as Purchaser may designate)), (ii) printing expenses, (iii) messenger, telephone and delivery expenses, (iv) reasonable fees and disbursements of counsel for the Company and counsel for Purchasers in connection with the Registration not to exceed $10,000, (v) fees and disbursements of the Company's independent certified public accountants (including the expenses of any special audit and "comfort" letters required by or incident to such performance) and (vi) Securities Act liability insurance obtained by the Company in its sole discretion. In addition, the Company shall pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange or the Nasdaq Stock Market, as the case may be, on which similar securities issued by the Company are then listed and the fees and expenses of any Person, including special experts, retained by the Company. Notwithstanding the provisions of this subsection, Purchasers shall pay all registration expenses to the extent the Company is prohibited by applicable Blue Sky laws from paying for or on behalf of Purchasers. Indemnity. ---------- In the event of the registration or qualification of any Registrable Securities pursuant to a Shelf Registration, the Company agrees to indemnify and hold harmless each Purchaser, each officer, director, employee, agent and representative of each Purchaser, each underwriter, broker or dealer, if any, of such Registrable Securities, and each other Person, if any, who controls such Purchaser, underwriter, broker or dealer within the meaning of the Securities Act, Exchange Act or any other applicable securities laws, from and against any and all losses, claims, damages or liabilities (or actions in respect thereof), joint or several, to which any of them may become subject under the Securities Act or any other applicable securities laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement (including all documents incorporated therein by reference) under which such Registrable Securities were registered or qualified under the Securities Act or any other applicable securities laws, any preliminary prospectus or final prospectus relating to such Registrable Securities, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of any rule or regulation under the Securities Act or any other applicable securities laws applicable to the Company or relating to any action or inaction required by the Company in connection with any such registration or qualification and will reimburse each Purchaser, each officer, director, employee, agent and representative of each Purchaser, each such underwriter, broker or dealer and each such controlling Person for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or omission made in such Registration Statement, such preliminary prospectus, such final prospectus or such amendment or supplement thereto or violation in reliance upon and in conformity with written information furnished to the Company by any Purchaser, or any officer, director, employee, agent or representative of any Purchaser specifically and expressly for use in the preparation thereof; and provided, further, that the Company shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the Securities Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the Prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such Prospectus so long as such Prospectus, and any amendments or supplements thereto, have been furnished to such underwriter in sufficient numbers and in a timely-manner to permit distribution thereof. -17- In the event of the registration or qualification of any Registrable Securities pursuant to a Shelf Registration, each Purchaser severally agrees to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 8.3(f)(i) above) the Company, its officers and directors and each other Person, if any, who controls the Company within the meaning of the Securities Act with respect to any untrue statement or alleged untrue statement in, or omission or alleged omission from, such registration statement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, if such statement or omission (i) arises from information provided by that Purchaser and (ii) was made in reliance upon and in conformity with written information which that Purchaser furnished to the Company through an instrument duly executed by it specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, amendment or supplement. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling Person and shall survive the transfer of such securities by that Purchaser. Notwithstanding the foregoing, no Purchaser shall be liable under this Section 8.3(f)(ii) for an amount in excess of that Purchaser's purchase price as set forth on Exhibit A. Promptly after receipt by a Person entitled to indemnification under this Section 8.3(f) (an "Indemnified Party") of notice of the commencement of any action or claim relating to any Registration Statement filed pursuant to a Shelf Registration or as to which indemnity may be sought hereunder, such Indemnified Party will, if a claim for indemnification hereunder in respect thereof is to be made against any other party hereto (an "Indemnifying Party"), give written notice to such Indemnifying Party of the commencement of such action or claim, but the omission to so notify the Indemnifying Party will not relieve the Indemnifying Party from any liability that it may have to any Indemnified Party except to the extent that the Indemnifying Party is actually prejudiced thereby. In case any such action is brought against an Indemnified Party, and it notifies an Indemnifying Party of the commencement thereof, the Indemnifying Party will be entitled (at its own expense) to participate in and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense, with counsel reasonably satisfactory to such Indemnified Party, of such action provided that the Indemnifying Party shall not settle or compromise such action, except upon the prior written consent of the Indemnified Party and, after notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense thereof, the Indemnifying Party will not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof, other than the reasonable cost of investigation; provided, however, that the assumption of such defense shall not give rise in the reasonable opinion of the Indemnified Party or its counsel to any conflict. Notwithstanding the foregoing, the Indemnified Party shall have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (A) the employment of such counsel shall have been authorized in writing by the Indemnifying Party in connection with the defense of such suit, action, claim or proceeding, (B) the Indemnifying Party shall not have employed counsel (reasonably satisfactory to the Indemnified Party) to take charge of the defense of such action, suit, claim or proceeding, or (C) such Indemnified Party shall have reasonably concluded, based upon the advice of counsel, that there may be defenses available to it that are different from or additional to those available to the Indemnifying Party which, if the Indemnifying Party and the Indemnified Party were to be represented by the same counsel, could result in a conflict of interest for such counsel or materially prejudice the prosecution of the defenses available to such Indemnified Party. If any of the events specified in clauses (A), (B) or (C) of the preceding sentence shall have occurred or shall otherwise be applicable, then the fees and expenses of one counsel or firm of counsel selected by the Indemnified Party (and reasonably acceptable to the Indemnifying Party) shall be borne by the Indemnifying Party. If, in any such case, the Indemnified Party employs separate counsel, the Indemnifying Party shall not have the right to direct the defense of such action, suit, claim or proceeding on behalf of the Indemnified Party and the Indemnified Party shall assume such defense and/or settle or compromise such action; provided, however, that an Indemnifying Party shall not be liable for the settlement or compromise of any action, suit, claim or proceeding effected without its prior written consent, which consent shall not be unreasonably withheld. Mergers, Etc. The Company shall not, directly or indirectly, enter into any merger, consolidation, or reorganization in which the Company shall not be the surviving corporation unless the proposed surviving corporation shall, prior to such merger, consolidation, or reorganization, agree in writing to assume the obligations of the Company under this Section, and for that purpose references hereunder to "Registrable Securities" shall -18- be deemed to be references to the securities that Purchasers would be entitled to receive in exchange for Registrable Securities under any such merger, consolidation, or reorganization. Delay and Holdback of Registration. ----------------------------------- (a) With regard to and notwithstanding Section 8.3, the Company may delay filing a registration statement for a period of time not to exceed thirty (30) trading days, and may withhold efforts to cause the registration statement to become effective, if the Company determines in good faith that such registration might (i) interfere with or affect the negotiation or completion of any transaction that is being contemplated by the Company (whether or not a final decision has been made to undertake such transaction) at the time the right to delay is exercised, or (ii) involve initial or continuing disclosure obligations that might not be in the best interest of the Company's stockholders. The Company may exercise its rights under this Section 8.4(a) no more than two times per calendar year. During any period (a "Tolling Period") for which the Company has exercised its rights under this Section 8.4(a), any mandatory conversion under Section 4(b) of the Certificate of Designation will be delayed until the first business day after the Tolling Period. (b) If, after a registration statement becomes effective, the Company advises Purchasers that the Company considers it appropriate for the registration statement to be amended, the Company shall use its best reasonable efforts to amend such registration statement as soon as practicable and the holders of such shares shall suspend any further sales of their registered shares until the Company advises them that the registration statement has been so amended. Negative Covenants. So long as twenty percent (20%) of the shares of Convertible Preferred Stock issued hereunder are then outstanding, without the prior written consent of holders owning a majority of the then outstanding shares of Convertible Preferred Stock, the Company shall not: Issue any shares or class or series of Preferred Stock or Common Stock which is senior to, or pari passu with, the Convertible Preferred Stock (other than the Convertible Preferred Stock issued pursuant hereto); Declare or pay any dividend on its Common Stock if any dividends are unpaid on the Convertible Preferred Stock; or Redeem for cash any other securities issued by the Company. Directly or indirectly, enter into any merger, consolidation or other reorganization in which the Company shall not be the surviving corporation, unless (i) such merger, consolidation or reorganization is completed in compliance with Section 8.3(g) of this Agreement and Section 4(d)(iv) of the Certificate of Designations, and (ii) the surviving corporation shall, prior to such merger, consolidation or reorganization, agree in writing to assume the obligations of the Company under this Agreement and the Certificate of Designations. Miscellaneous ------------- Amendment; Waiver. Neither this Agreement nor any provision hereof may be amended, modified, supplemented or waived, except by a written instrument executed by (i) the Company and (ii) Purchasers holding a majority in interest of the Convertible Preferred Stock issued and sold pursuant to this Agreement and the shares of Common Stock issuable upon conversion thereof. Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if in writing and delivered in Person, transmitted by facsimile transmission (fax) or sent by registered or certified mail (return receipt requested) or recognized overnight delivery service, postage pre-paid, addressed as follows, or to such other address has such party may notify to the other parties in writing: -19- if to the Company: Anicom, Inc. 6133 North River Road, Suite 1000 Rosemont, Illinois 60018-5171 Attn: Chief Financial Officer Facsimile No.: (847) 518-8777 with a copy to: Katten Muchin & Zavis 525 West Monroe Street, Suite 1600 Chicago, Illinois 60661-3693 Attn: Jeffrey R. Patt Facsimile No.: (312) 902-1061 if to the Purchaser: To the address listed next to each such purchaser on Exhibit A hereto. A notice or communication will be effective (i) if delivered in Person or by overnight courier, on the business day it is delivered, (ii) if transmitted by telecopier, on the business day of actual confirmed receipt by the addressee thereof, and (iii) if sent by registered or certified mail, three (3) business days after dispatch. Survival of Representations, Warranties and Covenants. All representations and warranties made in, pursuant to or in connection with this Agreement shall survive the execution and delivery of this Agreement, any investigation at any time made by or on behalf of any Purchaser, and the sale and purchase of the Convertible Preferred Stock and payment therefor for a period of two (2) years; provided, however, that the representations and warranties made in Sections 4.17 (Environmental), 4.20 (Benefits) and 4.21 (Taxes) shall survive the applicable statutory period of limitations with respect to any liabilities covered thereby. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto, including, without limitation, each transferee of all or any portion of the Convertible Preferred Stock. No party hereto may assign its rights or delegate its obligations under this Agreement without the prior written consent of the other parties hereto; provided, however, a Purchaser may assign its rights and delegate its obligations under this Agreement upon the Company's prior written consent which consent will not be unreasonably withheld. The Parties agree that, among other reasons, it will be reasonable for the Company to withhold such consent if the proposed assignee is a competitor to the Company or an Affiliate thereof. Entire Agreement. This Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and thereof and supersede and cancel all prior representations, alleged warranties, statements, negotiations, undertakings, letters, acceptances, understandings, contracts and communications, whether verbal or written, among the parties hereto and thereto or their respective agents with respect to or in connection with the subject matter hereof. -20- Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws. Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. Costs and Expenses. The Company shall pay all reasonable fees and disbursements of Purchasers' legal counsel as well as other reasonable out-of-pocket expenses incurred by Purchasers in connection with the negotiation and execution of the Transaction Documents (including amounts paid or owed to third parties), not to exceed the amounts set forth in Schedule 9.9. Indemnification. ---------------- The Company agrees to indemnify and hold harmless each Purchaser and its Affiliates, and its respective partners, co-investors, officers, directors, employees, agents, consultants, attorneys and advisers (each, a "Purchaser Indemnified Party"), from and against any and all actual losses, claims, damages, liabilities, costs and expenses (including, without limitation, environmental liabilities, costs and expenses and all reasonable fees, expenses and disbursements of counsel), joint or several (hereinafter collectively referred to as a "Loss" or "Losses"), which may be incurred by or asserted or awarded against any Purchaser Indemnified Party in connection with or in any manner arising out of or relating to any investigation, litigation or proceeding or the preparation of any defense with respect thereto, arising out of or in connection with or relating to this Agreement, the other Transaction Documents or the transactions contemplated hereby or thereby or any use made or proposal to be made with the proceeds of Purchasers' purchase of the Convertible Preferred Stock pursuant to this Agreement, whether or not such investigation, litigation or proceeding is brought by the Company, any of its Subsidiaries, shareholders or creditors, whether or not any of the transactions contemplated by this Agreement or the other Transaction Documents are consummated, except to the extent such Loss is found in a final judgment by a court of competent jurisdiction to have resulted from such Purchaser Indemnified Party's gross negligence or willful misconduct. Each Purchaser severally agrees to indemnify and hold harmless the Company and its Affiliates, and its respective officers, directors, employees, agents, consultants, attorneys and advisers (each, a "Company Indemnified Party"), from and against any and all Losses, which may be incurred by or asserted or awarded against any Company Indemnified Party in connection with or in any manner arising out of or relating to any investigation, litigation or proceeding or the preparation of any defense with respect thereto, arising out of or in connection with or relating to any breach of any representation, warranty or covenant made by such Purchaser in this Agreement. Notwithstanding the foregoing, no Purchaser shall be liable under this Section 9.10(b) for an amount in excess of that Purchaser's purchase price as set forth on Exhibit A. An indemnified party shall give written notice to the indemnifying party of any claim with respect to which it seeks indemnification within ten (10) days after the discovery by such parties of any matters giving arise to a claim for indemnification pursuant to this Section 9.10; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 9.10, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action or claim is brought against any indemnified party, the indemnifying party shall be entitled to participate in and, unless in the reasonable good faith judgment of the indemnified party a conflict of interest between such indemnified party and the indemnifying party may exist in respect of such action or claim, to assume the defense thereof, with counsel satisfactory to the indemnified party and after notice from the indemnifying party to the indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. In any event, unless and until the indemnifying party elects in writing to assume and does so assume the defense of any such -21- action or claim the indemnified party's costs and expenses arising out of the defense, settlement or compromise of any such action or claim shall be Losses subject to indemnification hereunder. If the indemnifying party elects to defend any such action or claim, then the indemnified party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense. The indemnifying party shall not be liable for any settlement of any action or claim effected without its written consent. Anything in this Section 9.10 to the contrary notwithstanding, the indemnifying party shall not, without the indemnified party's prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof that imposes any future obligation on the indemnified party or that does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the indemnified party, a release from all liability in respect of such claim. No Third-Party Beneficiaries. Nothing in this Agreement will confer any third party beneficiary or other rights upon any Person (specifically including any employees of the Company and its Subsidiaries) or entity that is not a party to this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -22- CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE IN WITNESS WHEREOF, the Company and the Purchasers have caused this Agreement to be executed effective as of the date first above written. ANICOM, INC. By: ______________________________________ Donald C. Welchko, Chief Financial Officer PURCHASERS: CAHILL WARNOCK STRATEGIC PARTNERS FUND, L.P. By: CAHILL WARNOCK STRATEGIC PARTNERS, L.P., its general partner By: ________________________________________ David L. Warnock, a general partner STRATEGIC ASSOCIATES, L.P. By: CAHILL WARNOCK & COMPANY, L.L.C., its general partner By: ____________________________________ David L. Warnock, a managing member -23- FLEMING US DISCOVERY FUND III, L.P. By: FLEMING US DISCOVERY PARTNERS, L.P., its general partner By: FLEMING US DISCOVERY, LLC, its general partner By: ___________________________________________ Robert L. Burr, member FLEMING US DISCOVERY OFFSHORE FUND III, L.P. By: FLEMING US DISCOVERY PARTNERS, L.P., its general partner By: FLEMING US DISCOVERY, LLC, its general partner By: ___________________________________________ Robert L. Burr, member ________________________________________________________________ Peter H. Huizenga ________________________________________________________________ Heidi A. Huizenga PETER H. HUIZENGA TESTAMENTARY TRUST By: __________________________________________________________ Its: _______________________________________________________ BETSY HUIZENGA TRUST By: __________________________________________________________ Its: _______________________________________________________ GRETA HUIZENGA TRUST By: __________________________________________________________ Its: _______________________________________________________ PETER HUIZENGA JR. TRUST By: __________________________________________________________ -24- Its: _______________________________________________________ TIMOTHY DEAN HUIZENGA TRUST By: __________________________________________________________ Its: _______________________________________________________ SUMMER HILL PARTNERS, L.P. By: Summer Hill, Inc., its general partner __________________________________________________________ By: ____________________________________________________ Richard L. Roeding, President -25- SUMMER HILL R.T. ENTERPRISES LIMITED PARTNERSHIP By: Summer Hill, Inc., its general partner By: __________________________________________ Richard L. Roeding, President GARFAM INVESTORS LLC By: ________________________________________________ Thomas Mueller, Treasurer S. JAMES PERLOW ______________________________________________________ EARL PERLOW ______________________________________________________ MARK PERLOW ______________________________________________________ KA TRADING By: _________________________________________________ Irv Kessler Title: KA MANAGEMENT By: ______________________________________________ Irv Kessler Title: -26- CEW PARTNERS By: __________________________________________________ Geoffrey Colvin Title: TRUST INVESTMENTS, INC. By: __________________________________________________ M. Terence Conklin Title: THE LINCOLN FUND, L.P. By: MATLINS FINANCIAL CONSULTING, INC., its general partner By: ___________________________________________ Neal Matlins, President THE LINCOLN FUND TAX ADVANTAGE, L.P. By: MATLINS FINANCIAL CONSULTING, INC., its general partner By: ___________________________________________ Neal Matlins, President THE GORDON FUND, L.P. By: LIGHTHOUSE CAPITAL MANAGEMENT, L.L.C. By: _______________________________________________ Neal Matlins, President EXHIBIT A ---------
Number of Shares of Convertible Purchaser Address Preferred Stock Purchase Price - --------- ------- --------------- -------------- Cahill, Warnock One South Street 7,580 $7,580,000 Strategic Partners Suite 2150 Fund, L.P. Baltimore, MD 21202 Attn: David Warnock Hyonmyong Cho (Hoch) -27- with a copy to: Wilmer, Cutler & Pickering 100 Light Street Baltimore, Maryland 21202 Attn: George P. Stamas Strategic Associates, L.P. One South Street 420 420,000 Suite 2150 Baltimore, MD 21202 Attn: David Warnock Hyonmyong Cho (Hoch) with a copy to: Wilmer, Cutler & Pickering 100 Light Street Baltimore, Maryland 21202 Attn: George P. Stamas Fleming US Discovery 320 Park Avenue 6,895 6,895,000 Fund III, L.P. New York, NY 10022 Attn: Robert L. Burr Chris Jones David Edwards with a copy to: Morgan, Lewis, Bockius, LLP 101 Park Avenue New York, NY 10178 Attn: David Pollack -28- Number of Shares of Convertible Purchaser Address Preferred Stock Purchase Price - --------- ------- --------------- -------------- Fleming US Discovery 320 Park Avenue 1,105 1,105,000 Offshore Fund III, L.P. New York, NY 10022 Attn: Robert L Burr Chris Jones David Edwards with a copy to: Morgan, Lewis, Bockius, LLP 101 Park Avenue New York, NY 10178 Attn: David Pollack Peter H. Huizenga Testamentary Trust 3,000 3,000,000 Peter H. Huizenga 1,000 1,000,000 Heidi A. Huizenga 500 500,000 Betsy Huizenga Trust 125 125,000 Greta Huizenga Trust 125 125,000 Peter Huizenga Jr. Trust 125 125,000 Timothy Dean Huizenga Trust 125 125,000 in each case, c/o: Huizenga Capital 2215 York Road Management Suite 500 Oak Brook, IL 60521 Attn: Mike Wik with a copy to: Hlustik, Williams & Vander Woude 20 N. Wacker Drive Suite 2800 Chicago, IL 60606 Attn: Paul Vander Woude Summer Hill Partners, L.P. 1,000 1,000,000 Summer Hill R.T. Enterprises Limited Partnership 1,000 1,000,000 Garfam Investors, L.L.C. 200 200,000 in each case, c/o: Summer Hill, Inc. 6800 Cintas Blvd. Mason, Ohio 45040 Attn: Thomas P. Orr Rick Roeding, Jr. -29- S. James Perlow 2900 S. 25th Ave. 334 334,000 Broadview, IL 60153 Earl Perlow 2900 S. 25th Ave. 333 333,000 Broadview, IL 60153 Mark Perlow 2900 S. 25th Ave. 333 333,000 Broadview, IL 60153 KA Trading 1712 Hopkins Crossroads 825 825,000 Minneapolis, MN 55305 Attn: Andrew Redleaf Richard Field KA Management 1712 Hopkins Crossroads 425 425,000 Minneapolis, MN 55305 Attn: Andrew Redleaf Richard Field CEW Partners 45 Rockerfeller Plaza 500 500,000 New York, NY 10020 Attn: Geoffrey Colvin Trust Investments, Inc. 52 Stiles Road 500 500,000 Salem, NH 03079 Attn: M. Terence Conklin The Lincoln Fund, L.P. 4 West Old State Capitol Plaza 300 300,000 Suite 810 Springfield, IL 62701 The Lincoln Fund Tax 4 West Old State Capitol Plaza 100 100,000 Advantage, L.P. Suite 810 Springfield, IL 62701 The Gordon Fund, L.P. 4 West Old State Capitol Plaza1 50 150,000 Suite 810 Springfield, IL 62701 TOTAL 27,000 $27,000,000
-30- Exhibit B --------- Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock -31- Exhibit C --------- Company's Counsel Legal Opinion -32- EX-99.4 5 CERTIFICATE OF DESIGNATIONS Exhibit 4 CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK OF ANICOM, INC. Anicom, Inc. (the "COMPANY" or "ISSUER"), a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify that, pursuant to authority conferred upon the Board of Directors of the Company by the Certificate of Incorporation, as amended, of the Company, and pursuant to Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of the Company at a meeting duly held, adopted resolutions providing for the designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof, of Twenty-Seven Thousand (27,000) shares of Series A Convertible Preferred Stock, of the Company, as follows: RESOLVED, that the Company is authorized to issue 27,000 shares of Series A Convertible Preferred Stock, $.01 par value (the "SERIES A PREFERRED SHARES"), which shall have the following powers, designations, preferences and other special rights: Dividends and Liquidation Preference. Generally. The holders of the Series A Preferred Shares shall be entitled to receive on each share issued and outstanding, out of assets legally available for such purpose, cumulative preferential dividends which shall accrue and compound annually, commencing to accrue on the date of issuance of such Series A Preferred Share and receipt by the Company of all the full purchase price due therefor (the "ISSUANCE DATE") at the rate of: (i) 5% per annum during the first five (5) years commencing on the Issuance Date; and (ii) 15% per annum during the years commencing on the fifth anniversary of the Issuance Date, of the Liquidation Preference (as defined below); such dividends shall be cumulative, and accrue daily, whether or not earned, declared, or legally available for payment, from and after the Issuance Date up to and including the date the Series A Preferred Shares shall no longer be outstanding. Accrued dividends shall be payable, quarterly, in arrears, in cash or in shares of the Company's common stock, par value $.001 per share (the "COMMON STOCK") at the Company's option, valued at the then applicable Average Trading Price (as defined below) ending on the day prior to the date of issuance of such shares; provided that such shares have been registered under the Securities Act of 1933, as amended, and listed for trading on the principal securities exchange or trading market where the Company's Common Stock is then listed or traded (the "DIVIDEND SHARES"). The liquidation preference of the Series A Preferred Shares shall be $1,000.00 per share plus any accrued and unpaid dividends (the "LIQUIDATION PREFERENCE"). Special Dividend Adjustment. Notwithstanding Section 1(a)(i) above, the dividend payable by the Company shall be subject to adjustment pursuant to Section 8.3(a) of that certain Series A Convertible Preferred Stock Purchase Agreement dated May 21, 1997 by and among the Company and certain investors set forth therein. Voting Rights. On matters subject to voting by holders of the Common Stock, holders of Series A Preferred Shares shall vote together with the holders of Common Stock, on an as converted basis at the then applicable Conversion Ratio (as defined below) (as if such shares of Series A Preferred Shares had been fully converted immediately prior to the date on which a date of record is taken for such vote, or, if no record is taken, the date as of which the record holders of the Common Stock entitled to vote are to be determined) as one class. The Series A Preferred Shares will not be entitled to any voting rights as a separate class other than with respect to any proposed amendments to the terms and conditions of the Series A Preferred Shares that would be adverse to the holders of the Series A Preferred Shares. Redemption. At any time after the fifth (5th) anniversary of the Issuance Date, Issuer, at its option, may redeem all, but not less than all, of the then outstanding Series A Preferred Shares for an amount (the "REDEMPTION PRICE") equal to the Liquidation Preference as of the effective date of such redemption by giving notice (a "REDEMPTION NOTICE") to each holder of Series A Preferred Shares and the Company's transfer agent not less than thirty (30) days nor more than sixty (60) days prior to the date on which such shares are to be redeemed. Such Notice of Redemption at the Company's election shall indicate (A) the date that such redemption is to become effective, (B) the applicable Redemption Price, (C) where and how payment of the Redemption Price will be made, and (D) the then current Conversion Price. The Redemption Price may be paid, at Issuer's option, either in cash or shares of Common Stock valued at ninety percent (90%) of the Average Trading Price (defined below) as of the effective date of such redemption; provided, that (i) such shares have been registered under the Securities Act of 1933, as amended and listed for trading on the principal securities exchange or trading market where the Company's Common Stock is then listed or traded, and (ii) prior to giving such a Redemption Notice, if Issuer elects to redeem with Common Stock, Issuer will first obtain stockholder approval of the issuance to the extent then required by the rules and regulations of the NASD or of such other national exchange upon which Issuer's Common Stock is then traded. Notice of redemption having been given as aforesaid, dividends on the Series A Preferred Shares shall cease to accrue as of the effective date of such redemption unless the Issuer defaults in the payment of the Redemption Price. Conversion of Series A Preferred Shares. The Series A Preferred Shares shall be convertible into shares of Common Stock on the following terms and conditions: Conversion by Holder. Upon written notice to the Company by the holder thereof, each Series A Preferred Share shall be convertible at any time into a number of fully paid and nonassessable shares (calculated to the nearest whole share) of Common Stock to be determined by dividing the Liquidation Preference by the then current Conversion Price (the "CONVERSION RATIO"). Mandatory Conversion. The outstanding Series A Preferred Shares will be deemed to have been converted into shares of Common Stock at the Conversion Ratio automatically without further action required of the Issuer or holders thereof, upon the following terms and conditions: (i) If, at any time during the first twelve (12) months following the Issuance Date, the Average Trading Price of the Common Stock is at least 130% of the Conversion Price, then 33-_% of the then outstanding Series A Preferred Shares will convert into Common Stock, such conversion to be allocated among the holders thereof, on a pro rata basis based upon their respective holdings. (ii) If, at any time during the first twenty-four (24) months following the Issuance Date, the Average Trading Price of the Common Stock is equal to or exceeds the percentage of the Conversion Price set forth below, then the corresponding percentage of the then outstanding Series A Preferred Shares will convert into Common Stock, such conversion to be allocated among the holders thereof, on a pro rata basis based upon their respective holdings:
Average Trading Price as a Percentage of Percentage of Series A Preferred Shares to be Conversion Price Converted - -------------------------------------------------- ------------------------------------------------ 160% 66_% 190% 100%
(iii) If, at any time after the second anniversary of the Issuance Date, the Average Trading Price of the Common Stock is equal to or exceeds the percentage of the Conversion Price set forth below for each corresponding year following the Issuance Date, then 100% of the then outstanding Series A Preferred Shares will convert into Common Stock:
Year Average Trading Price as a Percentage of Conversion Price - --------------------------------------------- --------------------------------------------------------- 3 140% 4 150% 5 175%
Notwithstanding the foregoing, no mandatory conversion shall occur unless and until the shares of Common Stock to be issued have been registered under the Securities Act of 1933, as amended, and listed for trading on the principal securities exchange or trading market where the Company's Common Stock is then listed or traded. Immediately upon the occurrence of a mandatory conversion, the Company will notify all holders of Series A Preferred Shares of the mandatory conversion. Certain Definitions. "CONVERSION PRICE" means eight dollars and sixty-two and one-half cents ($8.625); provided that, if the Average Trading Price as of the second anniversary of the Issuance Date is less than eight dollars and sixty-two and one-half cents ($8.625), then the Conversion Price shall thereafter be adjusted downward but never upward to equal the greater of the Average Trading Price or six dollars ($6.00), subject to the terms and conditions of Section 4(d). "AVERAGE TRADING PRICE" means, as of a given date, an amount equal to the arithmetic average of the last closing sale price of the Common Stock on the Nasdaq National Market (the "NASDAQ-NM") for the ten (10) day period ending one day prior to the date of determination as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if the Nasdaq-NM is not the principal trading market for such security, the last closing sale price of such security on the principal securities exchange or trading market where such security is listed or traded for the ten (10) day period ending one day prior to the date of determination as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price of such security in the over-the-counter market on the electronic bulletin board for such security for the ten (10) day period ending one day prior to the date of determination as reported by Bloomberg, or, if no closing bid price is reported for such security by Bloomberg, the last closing trade price of such security as reported by Bloomberg or, if no last closing trade price is reported for such security by Bloomberg, the average of the bid prices for the ten (10) day period ending one day prior to the date of determination of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. Adjustment to Conversion Price. In order to prevent dilution of the conversion rights granted to holders of Series A Preferred Shares hereunder, the Conversion Price will be subject to adjustment from time to time pursuant to this Section 4(d). Adjustment for Dilutive Events. If and whenever on or after the original date of issuance of the Series A Preferred Shares the Company issues or sells, or in accordance with Section 4(d)(ii) below is deemed to have issued or sold, in one transaction or a series of related transactions, any shares of Common Stock for consideration per share less than the Conversion Price in effect immediately prior to the time of such issue or sale (a "DILUTIVE EVENT"), then forthwith upon the occurrence of any such Dilutive Event the Conversion Price will be reduced so that the Conversion Price in effect immediately following the Dilutive Event will equal the quotient derived by dividing (i) the sum of (x) the product derived by multiplying the Conversion Price in effect immediately prior to such Dilutive Event times 27,000,000, plus (y) the product of (A) the Price Per Share in the Dilutive Event, times (B) three times the consideration received by the Company in such Dilutive Event, by (ii) the sum of (x) 27,000,000, plus (y) three times the consideration received by the Company in the Dilutive Event; provided that the Conversion Price will not be reduced pursuant to this sentence if the foregoing calculation results in a Conversion Price in excess of $8.15 (the "THRESHOLD PRICE"). Notwithstanding the foregoing, the issuance by the Company of any equity securities to management, directors or employees of the Company pursuant to plans and options to purchase equity securities issued in accordance with such plans approved by the Board and in effect as of the date of the first issuance of the Series A Preferred Shares shall not constitute a Dilutive Event. Common Stock Deemed Outstanding. For purposes of determining the adjusted Conversion Price pursuant to Section 4(d)(i) above the following events shall be deemed to be an issuance and sale of Common Stock by the Company: Issuance of Rights or Options. If (i) the Company in any manner grants any rights or options to subscribe for or to purchase shares of Common Stock or any securities convertible into or exchangeable for shares of Common Stock (such rights or options referred to herein as "OPTIONS" and such convertible or exchangeable stock or securities referred to herein as "CONVERTIBLE SECURITIES") and (ii) the Price Per Share of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of such Convertible Securities is less than the Conversion Price in effect immediately prior to the time of the granting of such Options, then (x) the total maximum amount of such Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum number of Convertible Securities issuable upon the exercise of such Options will be deemed to be Common Stock issued and sold by the Company, and (y) the consideration received pursuant to the Dilutive Event will equal the Price Per Share times the number of shares of Common Stock so deemed issued and sold by the Company. For purposes of this Section 4(d)(ii)(A), the "PRICE PER SHARE" will be determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Company upon exercise of all such Options, plus in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the issuance or sale of such Convertible Securities and the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options. No further adjustment of the Conversion Price will be made when Convertible Securities are actually issued upon the exercise of such Options or when Common Stock is actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities. Issuance of Convertible Securities. If (i) the Company in any manner issues or sells any Convertible Securities and (ii) the Price Per Share of shares of Common Stock issuable upon such conversion or exchange is less than the Conversion Price in effect immediately prior to the time of such issue or sale, then (x) the maximum number of shares of Common Stock issuable upon conversion or exchange of such Convertible Securities will be deemed to be Common Stock issued and sold by the Company, and (y) the consideration received pursuant to the Dilutive Event will equal the Price Per Share times the number of shares of Common Stock so deemed issued and sold by the Company. For the purposes of this Section 4(d)(ii)(B), the "Price Per Share" will be determined by dividing (i) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment of the Conversion Price will be made when Common Stock is actually issued upon the conversion or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustments to the Conversion Price had been or are to be made pursuant to Section 4(d)(ii)(A) above, no further adjustment of the Conversion Price will be made by reason of such issue or sale. Change in Option Price or Conversion Rate. If at any time there is a change in (i) the purchase price provided for in any Options, (ii) the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities, or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock, then the Conversion Price in effect at the time of such change will be readjusted to the Conversion Price which would have been in effect had those Options or Convertible Securities still outstanding at the time of such change provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time such Options or Convertible Securities were initially granted, issued or sold. Calculation of Consideration Received. If any shares of Common Stock, Option or Convertible Security are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor or the Price Per Share, as the case may be, will be deemed to be the net amount received or to be received, respectively, by the Company therefor. In case any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company or the non-cash portion of the Price Per Share, as the case may be, will be the fair value of such consideration received or to be received, respectively, by the Company; except where such consideration consists of securities, in which case the amount of consideration received or to be received, respectively, by the Company will be the Average Trading Price thereof as of the date of receipt. If any shares of Common Stock, Options or Convertible Securities are issued in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving corporation as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash and securities will be determined jointly by the Company and the holders of a majority of the outstanding Series A Preferred Shares. If such parties are unable to reach agreement within a reasonable period of time, the fair value of such consideration will be determined by an independent appraiser jointly selected by the Company and the holders of a majority of the outstanding Series A Preferred Shares. Integrated Transactions. In case any Option is issued in connection with the issuance or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Option by the parties thereto, the Option will be deemed to have been issued for a consideration of $.01. Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (ii) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or upon the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price, the Threshold Price and the amounts set forth in Section 4(c)(i) in effect immediately prior to such subdivision will be proportionately reduced, and if the Company at any time combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price, the Threshold Price and the amounts set forth in Section 4(c)(i) in effect immediately prior to such combination will be proportionately increased. Reorganization, Reclassification, Consolidation, Merger or Sale. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company's assets to another Person (as defined below) or other transaction which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to herein as "ORGANIC CHANGE." Prior to the consummation of any Organic Change, the Company will make appropriate provision to ensure that (I) each of the holders of the Series A Preferred Shares will thereafter have the right to acquire and receive in lieu of or addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such holder's Series A Preferred Shares, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such holder's Series A Preferred Shares had such Organic Change not taken place and (II) each of the holders of Series A Preferred Shares will continue to have the same rights and preferences, in any surviving entity, as those which apply to the Series A Preferred Shares pursuant to this Certificate. In any such case, the Company will make appropriate provision with respect to such holders' rights and interests to ensure that the provisions of this Section 4(d) will thereafter be applicable to the Series A Preferred Shares. The Company will not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor entity (if other than the Company) resulting from consolidation or merger or the entity purchasing such assets assumes, by written instrument, the obligation to deliver to each holder of Series A Preferred Shares such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire. "Person" shall mean an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. Notices. Immediately upon any adjustment of the Conversion Price, the Company will give written notice thereof to each holder of Series A Preferred Shares, setting forth in reasonable detail and certifying the calculation of such adjustment. The Company will give written notice to each holder of Series A Preferred Shares at least twenty (20) days prior to the date on which the Company closes its books or takes a record (I) with respect to any dividend or distribution upon the Common Stock, (II) with respect to any pro rata subscription offer to holders of Common Stock or (III) for determining rights to vote with respect to any Organic Change, dissolution or liquidation; provided that in no event shall such notice be provided to such holder prior to such information being made known to the public. The Company will also give written notice to each holder of Series A Preferred Shares at least twenty (20) days prior to the date on which any Organic Change, dissolution or liquidation will take place. The Company shall give written notice to the holders of the Series A Preferred Shares promptly after the occurrence of the automatic conversion of the Series A Preferred Shares into Common Stock as set forth in Section 4(b) hereof. Mechanics of Conversion. Subject to and in compliance with all federal and state securities laws, the conversion of Series A Preferred Shares pursuant to this Section 4 will be deemed to have been effected (and the holder thereof will be deemed to be the registered holder of the Conversion Shares), automatically if conversion is pursuant to Section 4(b), or, if converted at the option of the holder of Series A Preferred Shares pursuant to Section 4(a), by and on the date of surrender of certificates representing the Series A Preferred Shares being converted to the Company at its principal place of business, together with the Notice of Conversion attached hereto as Exhibit I. As soon as practicable, but in no event later than five (5) business days after such conversion, the Company shall cause the transfer agent to deliver to the registered holder thereof (a) a certificate representing the shares of Common Stock to which the holder is entitled as a result of such conversion, and (b) a new certificate for Series A Preferred Shares for the unconverted shares of Series A Preferred Shares, if any, represented by the surrendered certificate. The Company shall at all times reserve for issuance a sufficient number of shares of Common Stock to be issued as Conversion Shares, and upon issuance thereof, the Conversion Shares shall be fully paid and nonassessable. Record Holder. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of Series A Preferred Shares shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. Change of Control. If at any time there is a Change of Control (as defined below) of the Company, the Company shall, immediately following the occurrence of any such event, send a notice to each holder offering to repurchase the Series A Preferred Shares (or at each holder's option, any portion thereof) for an amount equal to the Liquidation Preference on the date of such repurchase. If any holder desires to accept such offer in whole or in part, such holder must advise the Company of such acceptance within thirty (30) days of the date of receiving such notice. The Company shall then repurchase the Series A Preferred Shares or portion thereof so tendered for repurchase by such holder by paying the purchase price to the holder (or any person or persons designated by such holder in such acceptance notice), in immediately available funds, within ten (10) business days of the Company's receipt of such holder's acceptance notice. If a holder tenders only a portion of such holder's Series A Preferred Shares, the holder shall deliver such certificate of Series A Preferred Shares to the Company and the Company then shall issue to the holder a new certificate of Series A Preferred Shares, representing the portion of the Series A Preferred Shares not repurchased by the Company. For purposes of this Section, "CHANGE OF CONTROL" means any event or series of events by which (i) any person or group (as defined in Rule 13d-1 of the Exchange Act) obtains a majority (by voting or otherwise) of the securities of the Company ordinarily having the right to vote in the election of directors; (ii) during any two year period commencing at any time on or after the Closing Date, individuals who at the beginning of such period constituting the Board of Directors cease for any reason to constitute a majority of the Board of Directors; (iii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company; (iv) the merger or consolidation of the Company with or into another corporation or the merger of another corporation into the Company with the effect that immediately after such transaction any beneficial owner shall have become the beneficial owner of securities of the surviving corporation of such merger or consolidation representing a majority of the combined voting power of the outstanding securities of the surviving corporation ordinarily having the right to vote in the election of directors; or (v) the adoption of a plan leading to the liquidation or dissolution of the Company. Notwithstanding the foregoing, the Company shall not be obligated to repurchase the Series A Preferred Shares pursuant to the terms of this Section 5 if such repurchase in the opinion of the Company's then current auditors, would jeopardize the "pooling" accounting treatment of the transaction giving rise to such Change of Control. Taxes. The Company shall pay any and all taxes which may be imposed upon it with respect to the issuance and delivery of Common Stock upon the conversion of the Series A Preferred Shares as herein provided. The Company shall not be required in any event to pay any transfer or other taxes by reason of the issuance of such Common Stock in names other than those in which the Series A Preferred Shares surrendered for conversion are registered on the Company's records, and no such conversion or issuance of Common Stock shall be made unless and until the person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company and its transfer agent, if any, that such tax has been paid. Liquidation, Dissolution, Winding-Up. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of the Series A Preferred Shares shall be entitled to receive in cash out of the assets of the Company, whether from capital or from earnings available for distribution to its stockholders (the "PREFERRED FUNDS"), before any amount shall be paid to the holders of any of the capital stock of the Company of any class junior in rank to the Series A Preferred Shares in respect of the preferences as to the distributions and payments on the liquidation, dissolution and winding up of the Company, an amount per Series A Preferred Share equal to the Liquidation Preference; provided that, if the Preferred Funds are insufficient to pay the full amount due to the holders of Series A Preferred Shares, then each holder of Series A Preferred Shares shall receive a percentage of the Preferred Funds equal to the full amount of Preferred Funds payable to such holder as a percentage of the full amount of Preferred Funds payable to all holders of Series A Preferred Shares. The purchase or redemption by the Company of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Company. Neither the consolidation or merger of the Company with or into any other Person, nor the sale or transfer by the Company of less than substantially all of its assets, shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Company. No holder of Series A Preferred Shares shall be entitled to receive any amounts with respect thereto upon any liquidation, dissolution or winding up of the Company other than the amounts provided for herein. Repurchases of Series A Preferred Stock by the Issuer. Neither the Issuer nor any of its subsidiaries shall repurchase any outstanding shares of Series A Preferred Stock unless the Issuer on the same terms either (i) offers to purchase all of the then outstanding shares of Series A Preferred Stock or (ii) offers to purchase shares of Series A Preferred Stock from the holders in proportion to the respective number of shares of Series A Preferred Stock held by each holder. In any such repurchase by the Issuer or any of its subsidiaries, if all shares of Series A Preferred Stock are not being repurchased, then the number of shares of Series A Preferred Stock to be repurchased shall be allocated among all shares of Series A Preferred Stock held by holders which accept the Issuer's repurchase offer so that the shares of Series A Preferred Stock are repurchased from such holders in proportion to the respective number of shares of Series A Preferred Stock held by each such holder which accepts the Issuer's offer (or in such other proportion as agreed by all such holders who accept the Issuer's offer). Shares to be Retired. Any share of Series A Preferred Stock converted, redeemed, repurchased or otherwise acquired by the Corporation shall be retired and canceled and may not be reissued. No Fractional Shares. In connection with any conversion, liquidation, redemption, or otherwise, the Company shall only issue Common Stock in denominations equal to the nearest, lower whole number; fractional shares due holders will be allocated their cash value and paid by the Company to the holder by check. Preferred Rank. All shares of Common Stock and all additional shares of preferred stock of the Company shall be of junior rank to all Series A Preferred Shares in respect to the preferences as to dividends and distributions and payments upon the liquidation, dissolution and winding up of the Company and the rights of the shares of Common Stock and of any shares of preferred stock, other than the Series A Preferred Stock shall be subject to the preferences and relative rights of the Series A Preferred Shares. Vote to Change the Terms of Series A Preferred Shares. The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the holders of not less than two-thirds (2/3) of the then outstanding Series A Preferred Shares (excluding any Series A Preferred Shares held by the Company or affiliates of the Company) shall be required for the Company to amend, alter, change or repeal any of the powers, designations, preferences and rights of the Series A Preferred Shares. Lost or Stolen Certificates. Upon receipt by the Company of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any preferred stock certificates representing the Series A Preferred Shares, and (in the case of loss, theft or destruction) of any indemnification undertaking by the holder to the Company that is reasonably satisfactory to the Company, and upon surrender and cancellation of the preferred stock certificate(s), if mutilated, the Company shall execute and deliver new preferred stock certificate(s) of like tenor and date. However, the Company shall not be obligated to re-issue such lost or stolen preferred stock certificates if holder contemporaneously requests the Company to convert such Series A Preferred Shares into Common Stock. IN WITNESS WHEREOF, the Company has caused this certificate to be signed by __________________________________, its ___________________________ as of the _____ day of May 1997. ANICOM, INC. By:____________________________ Title:_________________________ EXHIBIT I ANICOM, INC. NOTICE OF CONVERSION Reference is made to the Certificate of Designations, Preferences and Rights of Convertible Preferred Stock, Series A, of Anicom, Inc. (the "DESIGNATION"). In accordance with and pursuant to the Designation, the undersigned hereby elects to convert the number of shares of Convertible Preferred Stock, Series A, par value $.001 (the "SERIES A PREFERRED"), of Anicom, Inc., a Delaware corporation (the "COMPANY"), indicated below into shares of Common Stock, par value $.001 (the "COMMON STOCK"), of the Company, by tendering the stock certificate(s) representing the share(s) of Series A Preferred specified below as of the date specified below: Date of Conversion _________________________________ Number of shares of Series A Preferred to be converted: _________________________________ Stock certificates no(s). of Series A Preferred to be converted: _________________________________ Please confirm the following information: Conversion Price: _________________________________ Number of shares of Common Stock to be issued: _________________________________ Please issue the Common Stock into which the Series A Preferred shares are being converted in the following name and to the following address: Issue to: _________________________________ _________________________________ _________________________________ _________________________________ Phone No. of converting holder: _________________________________ Duly executed: By _________________________________ Name & Title: _________________________________ Dated: _________________________________ EX-99.5 6 STOCKHOLDERS' AGREEMENT Exhibit 5 STOCKHOLDERS' AGREEMENT THIS STOCKHOLDERS' AGREEMENT (this "Agreement") is entered into as of this ____ day of May, 1997, among Anicom, Inc., a Delaware corporation (the "Company"), Scott C. Anixter ("Anixter") and each of the persons listed on the signature page hereto under the caption "Purchasers" (collectively, the "Purchasers"). RECITALS The Company and the Purchasers have entered into that certain Stock Purchase Agreement (as amended from time to time, the "Stock Purchase Agreement"), dated May ___, 1997, pursuant to which the Company has agreed to sell, and the Purchasers have agreed to purchase, in the aggregate, 27,000 shares (the "Covered Shares") of Series A Convertible Preferred Stock, par value of $.01 per share (the "Preferred Stock"), which shall be convertible into a number of shares of Anicom's common stock, par value of $.001 per share (the "Common Stock") (as converted, the "Conversion Shares"), in accordance with the terms of the Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of Anicom, Inc. (the "Certificate of Designations") and except as otherwise provided hereunder. The purchase price for the Preferred Stock is $1,000.00 per share. As a condition to the obligations set forth in the Stock Purchase Agreement, each of the parties hereto has agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual promises herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company, Anixter and the Purchasers agree as follows: Tag-Along Rights. Right to Sell Proportionate Number of Shares of Common Stock. Anixter agrees that, if he shall receive and determine to accept any bona fide written offer (a "Notice of Offer") from a Buyer to purchase or otherwise acquire for value, in one transaction or a series of related transactions, shares of Common Stock (the "Offer Shares") beneficially owned by him and representing 20% or more of all of the then issued and outstanding Common Stock of the Company beneficially owned by Anixter, each of the Purchasers shall have the right to participate in such transaction in the manner set forth in this Agreement. The term "Buyer", as used herein, means a person or entity, other than Anixter or any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with Anixter, that has offered to purchase or otherwise acquire for value shares of Common Stock of the Company (other than in connection with a registered public offering). Notifications. Anixter shall, promptly after his receipt of a Notice of Offer (and in any event not later than 10 days after such receipt), send a copy thereof to the Company and to each of the Purchasers. The delivery of such Notice of Offer shall be effected not less than 60 days prior to the closing of such proposed sale or other acquisition. Upon receipt of a Notice of Offer, each Purchaser shall have 30 days to deliver a written notice of its election to participate in such sale or other acquisition and of the number of its Covered Shares to be included in such sale or other acquisition, which Covered Shares shall be converted into Conversion Shares, subject to and effective upon the closing of such sale or other acquisition; provided, however, that such number of Conversion Shares to be included shall not exceed the number determined in Section 1.3 below. If such written notice of election is not received from a Purchaser within the 30-day period specified above, Anixter shall have the right to sell or otherwise transfer the aforesaid Common Stock to the Buyer without any participation by such Purchaser, but only (a) on the terms and conditions stated in the Notice of Offer and (b) if the sale or other transfer is consummated not later than 60 days after the end of the aforesaid 60-day period. Selling a Proportionate Number of Shares of Common Stock. Each Purchaser shall have the right to sell or transfer, pursuant to the Notice of Offer, Conversion Shares representing the same percentage of the Conversion Shares into which all Covered Shares owned by such Purchaser are then convertible as the Offer Shares are of all shares of Common Stock then beneficially owned by Anixter. In the event the number of Conversion Shares for which Purchasers elect to exercise such right, along with the Offer Shares and any other shares of the Company to be sold or transferred by other shareholders of the Company pursuant to any similar rights granted to such other shareholders prior to the date hereof, exceed the number of shares which the Buyer is willing to purchase, the number of shares to be sold or transferred to the Buyer by each transferor shall be reduced so that each transferor is entitled to sell or transfer the same percentage of its shares as each other transferor. Purchase Price of Covered Shares. The purchase price for each Conversion Share ("Purchase Price") of the Purchasers under this Agreement and the terms of the purchase or other acquisition thereof shall be the same as are applicable to the purchase or other acquisition of each share of Common Stock of Anixter and shall be as set forth in such Notice of Offer; provided, however, that the Purchasers shall not be required to provide any representation, warranty or other undertaking other than with respect to their ownership of, and authority to sell or transfer, such Conversion Shares free of any liens or encumbrances. Closing of Sale. Each Purchaser in respect of a Notice of Offer shall deliver to the Buyer in respect of such Notice of Offer, against payment of the total purchase price for the Covered Shares to be purchased (at the price per share specified above in Section 1.4), on the closing date specified in such Notice of Offer, a certificate or certificates representing the number of such Covered Shares which it has elected to sell pursuant to this Agreement, together with appropriate instruments of transfer duly endorsed in blank. Entire Agreement. This Agreement and the other documents referenced herein contain the entire agreement between the parties with respect to the subject matter hereof and supersede any and all prior arrangements and understandings, both written and oral, with respect thereto. Severability. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the law and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, in the event that any provision of this Agreement would be held in any jurisdiction to be invalid, prohibits or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of Delaware, without giving effect to the principles of conflict of laws thereof. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereof and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. Notice. Whenever a party to this Agreement is required to give notice to any other party hereunder, such notice shall be given at the address set forth next to such party's name on the signature page of this Agreement or at such other address as the parties designate to each by giving notice hereunder, and such notice shall be made in writing and deemed to have been duly delivered when (a) delivered by hand (b) one day after upon confirmation of delivery by a nationally recognized overnight delivery service or (c) three days after sent by Certified U.S. Mail, return receipt requested. A copy of any such notices delivered to Anixter or 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. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. ANICOM, INC. PURCHASERS: By: __________________________ CAHILL, WARNOCK STRATEGIC Scott C. Anixter, Chairman PARTNERS FUND, L.P. and Chief Executive Officer By: CAHILL, WARNOCK STRATEGIC PARTNERS, L.P., its general partner - ------------------------------ Scott C. Anixter By: _________________________ David L. Warnock, a general partner Address: One South Street Suite 2150 Baltimore, MD 21202 Attn:David Warnock Hyonmyong Cho (Hoch) With a copy to: Wilmer, Cutler & Pickering 100 Light Street Baltimore, MD 21202 Attn: George P. Stamas STRATEGIC ASSOCIATES, L.P. By: CAHILL, WARNOCK & COMPANY, L.L.C., a managing member By:______________________ David L. Warnock, a managing member Address: One South Street Suite 2150 Baltimore, MD 21202 Attn: David Warnock Hyonmyong Cho (Hoch) With a copy to: Wilmer, Cutler & Pickering 100 Light Street Baltimore, MD 21202 Attn: George P. Stamas FLEMING US DISCOVERY FUND III, L.P. By: FLEMING US DISCOVERY PARTNERS, L.P., its general partner By: FLEMING US DISCOVERY, LLC, its general partner By: ___________________ Robert L. Burr, member Address: 320 Park Avenue New York, NY 10022 Attn: Robert L. Burr Chris Jones David Edwards With a copy to: Morgan, Lewis, Bockius, LLP 101 Park Avenue New York, NY 10178 Attn: David Pollack FLEMING US DISCOVERY OFFSHORE FUND III, L.P. By: FLEMING US DISCOVERY PARTNERS, L.P., its general partner By: FLEMING US DISCOVERY, LLC, its general partner By: ___________________ Robert L. Burr, member Address: 320 Park Avenue New York, NY 10022 Attn: Robert L. Burr Chris Jones David Edwards With a copy to: Morgan, Lewis, Bockius, LLP 101 Park Avenue New York, NY 10178 Attn: David Pollack ____________________________________________ Peter H. Huizenga ____________________________________________ Heidi A. Huizenga PETER H. HUIZENGA TESTAMENTARY TRUST By:_________________________________ Its:_______________________ BETSY HUIZENGA TRUST By:_________________________________ Its:_______________________ GRETA HUIZENGA TRUST By:_________________________________ Its:_______________________ PETER HUIZENGA JR. TRUST By:_________________________________ Its:_______________________ TIMOTHY DEAN HUIZENGA TRUST By:_________________________________ Its:_______________________ In each case, c/o Huizenga Capital Management Address: 2215 York Road Suite 500 Oak Brook, IL 60521 Attn: Mike Wik With a copy to: Hlustik, Williams & Vander Woude 20 N. Wacker Drive Suite 2800 Chicago, IL 60606 Attn: Paul Vander Woude SUMMER HILL PARTNERS, L.P. By: Summer Hill, Inc., its general partner By:__________________________________ Richard L. Roeding, President SUMMER HILL R.T. ENTERPRISES LIMITED PARTNERSHIP By: Summer Hill, Inc., its general partner By:__________________________________ Richard L. Roeding, President GARFAM INVESTORS LLC By:____________________________________________________ Thomas Mueller, Treasurer S. JAMES PERLOW By:__________________________________ Name: Title: Address: 2900 S. 25th Ave. Broadview, IL 60153 With a copy to: EARL PERLOW By:___________________________________ Name: Title: Address: 2900 S. 25th Ave. Broadview, IL 60153 With a copy to: MARK PERLOW By:___________________________________ Name: Title: Address: 2900 S. 25th Ave. Broadview, IL 60153 With a copy to: KA TRADING By:___________________________________ Irv Kessler Title: Address: 1712 Hopkins Crossroads Minneapolis, MN 55305 Attn: Andrew Redleaf Richard Field KA MANAGEMENT By:___________________________________ Irv Kessler Title: Address: 1712 Hopkins Crossroads Minneapolis, MN 55305 Attn: Andrew Redleaf Richard Field With a copy to: CEW PARTNERS By:___________________________________ Name: Title: Address: 45 Rockerfeller Plaza New York, NY 10020 Attn: Geoffrey Colvin With a copy to: TRUST INVESTMENTS, INC. By:___________________________________ Name: Title: Address: 52 Stiles Road Salem, NH 03079 Attn: M. Terence Conklin With a copy to: THE LINCOLN FUND, L.P. By: MATLINS FINANCIAL CONSULTING, INC., its general partner By:_________________________ Neal Matlins, President 4 West Old State Capitol Plaza Suite 810 Springfield, IL 62701 THE LINCOLN FUND TAX ADVANTAGE, L.P. By: MATLINS FINANCIAL CONSULTING, INC., its general partner By: _________________________ Neal Matlins, President 4 West Old State Capitol Plaza Suite 810 Springfield, IL 62701 THE GORDON FUND, L.P. By: LIGHTHOUSE CAPITAL MANAGEMENT, L.L.C. By: _________________________ Neal Matlins, President 4 West Old State Capitol Plaza Suite 810 Springfield, IL 62701 -----END PRIVACY-ENHANCED MESSAGE-----