Table of Contents

 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-K
 	 	 	 	 	
þ	 	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	 	 	
 	
 	 	For the fiscal year ended December 31, 2004	 	 	
 	
or	
 	
o	 	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	 	 	
Commission file number 1-5989
Anixter International Inc.
(Exact name of Registrant as specified in its charter)
 	 	 	
Delaware	 	94-1658138	
(State or other jurisdiction of
incorporation or organization)	 	(I.R.S. Employer
Identification No.)	
2301 Patriot Blvd.
Glenview, IL 60026
(224) 521-8000
(Address and telephone number of principal executive offices in its charter)
Securities registered pursuant to Section 12(b) of the Act:
 	 	 	
Title of each class on which registered	 	Name of each exchange	
 	 	 	
Common stock, $1 par value 	 	New York Stock Exchange	
Convertible notes due 2020   	 	New York Stock Exchange	
Securities registered pursuant to Section 12(g) of the Act:
None.
     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  þ           No  o
     Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     Yes  þ           No  o
     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes  þ           No  o
     The aggregate market value of the shares of Registrant’s Common Stock, $1 par value, held by nonaffiliates of Registrant was approximately $1,240,228,688 as of July 2, 2004.
     At February 17, 2005, 37,517,110 shares of Registrant’s Common Stock, $1 par value, were outstanding.
Documents incorporated by reference:
      Certain portions of the Registrant’s Proxy Statement for the 2005 Annual Meeting of Stockholders of Anixter International Inc. are incorporated by reference into Part III.

TABLE OF CONTENTS
 	 	 	 	 	 	 	
 	 	 	 	Page		
 	 	 	 	 		
  PART I	
  Item 1.	 	  Business of the Company	 	 	1	 	
  Item 2.	 	  Properties	 	 	4	 	
  Item 3.	 	  Legal Proceedings	 	 	4	 	
  Item 4.	 	  Submission of Matters to a Vote of Security Holders	 	 	4	 	
  PART II	
  Item 5.	 	  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	 	 	6	 	
  Item 6.	 	  Selected Financial Data	 	 	6	 	
  Item 7.	 	  Management’s Discussion and Analysis of Financial Conditions and Results of Operations	 	 	8	 	
  Item 7A.	 	  Quantitative and Qualitative Disclosures about Market Risk	 	 	24	 	
  Item 8.	 	  Consolidated Financial Statements and Supplementary Data	 	 	24	 	
  Item 9.	 	  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	 	 	58	 	
  Item 9A.	 	  Controls and Procedures	 	 	58	 	
  Item 9B.	 	  Other Information	 	 	60	 	
  PART III	
  Item 10.	 	  Directors and Executive Officers of the Registrant	 	 	60	 	
  Item 11.	 	  Executive Compensation	 	 	60	 	
  Item 12.	 	  Security Ownership of Certain Beneficial Owners and Management	 	 	60	 	
  Item 13.	 	  Certain Relationships and Related Transactions	 	 	60	 	
  Item 14.	 	  Principal Accountant Fees and Services	 	 	60	 	
  PART IV	
  Item 15.	 	  Exhibits, Financial Statement Schedules	 	 	61	 	
  Indenture	
  Second Amendment to Amended and Restated Receivables Sale Agreement	
  Second Amendment to Amended and Restated Receivables Purchase Agreement	
  Management Incentive Plan	
  First Amendment to 2001 Stock Incentive Plan	
  Supplemental Executive Retirement Plan	
  Computation of Ratio of Earnings to Fixed Charges	
  Code of Ethics	
  List of Subsidiaries	
  Consent of Independent Registered Public Accounting Firm	
  Power of Attorney	
  Certification of President and CEO	
  Certification of Senior VP and CFO	
  Certification of President and CEO	
  Certification of Senior VP and CFO	
(i) 

Table of Contents

PART I

		
ITEM 1.	BUSINESS OF THE COMPANY.	
(a) General Development of Business
      Anixter International Inc. (the “Company”), formerly known as Itel Corporation, which was incorporated in Delaware in 1967, is engaged in the distribution of communications and specialty wire and cable products and fasteners and other small parts (“C” class inventory components) through Anixter Inc. and its subsidiaries (collectively “Anixter”).
      On June 22, 2004, the Company purchased substantially all of the assets and operations of Distribution Dynamics, Inc. (“DDI”). DDI was a privately held value-added distributor of fasteners, hardware and related products specializing in inventory logistics management programs directed at supporting the production lines of original equipment manufacturers across a broad spectrum of industries. DDI employs approximately 230 people located in sixteen locations in the United States.
      In the third quarter of 2003, the Company purchased 100% of the stock of Walters Hexagon Group Limited (“Walters Hexagon”), a leading distributor of fasteners and other small parts to original equipment manufacturers and provider of inventory management services to a range of markets and industries. Walters Hexagon operates a network of nine service centers in the United Kingdom, France and Italy and employs approximately 350 people.
      In September 2002, the Company completed the purchase of the operations and assets of Pentacon, Inc. (“Pentacon”), also a leading distributor of fasteners and other small parts to original equipment manufacturers and provider of inventory management services.
(b) Financial Information about Industry Segments
      The Company is engaged in the distribution of communications and specialty wire and cable products and “C” class inventory components from top suppliers to contractors and installers and to end users, including manufacturers, natural resources companies, utilities and original equipment manufacturers. The Company is organized by geographic regions and, accordingly, has identified North America (United States and Canada), Europe and Emerging Markets (Asia Pacific and Latin America) as reportable segments. The Company obtains and coordinates financing, legal, tax, information technology and other related services, certain of which are rebilled to subsidiaries. Interest expense and other non-operating items are not allocated to the segments or reviewed on a segment basis.
      No customer accounted for 10% or more of sales in 2004, 2003 or 2002. For certain financial information concerning the Company’s business segments, see Note 13 “Business Segments” in the Notes to the Consolidated Financial Statements.
(c) Narrative Description of Business
Overview
      The Company is a leader in the provision of advanced inventory management services including procurement, just-in-time delivery, quality assurance testing, advisory engineering services, component kit production, small component assembly and e-commerce and electronic data interchange to a broad spectrum of customers. The Company’s comprehensive supply chain management solutions are designed to reduce customer procurement and management costs and enhance overall production efficiencies. Inventory management services are frequently provided under customer contracts for periods in excess of one year and include the interfacing of Anixter and customer information systems and the maintenance of dedicated distribution facilities.
      Through a combination of its service capabilities and a portfolio of products from industry leading manufacturers, Anixter is the leading global distributor of data, voice, video and security network communication products and largest North American distributor of specialty wire and cable products. In addition, Anixter is a leading distributor of “C” class inventory components which are incorporated into a wide variety of end
1 

Table of Contents

use applications and include screws, bolts, nuts, washers, pins, rings, fittings, springs, electrical connectors and similar small parts, many of which are specialized or highly engineered for particular applications.
Customers
      The Company sells products to over 90,000 active customers. These customers include international, national, regional and local companies that include end users of the Company’s products, installers, integrators and resellers of the Company’s products as well as original equipment manufacturers who use the Company’s products as a component of their end product. Customers for the Company’s products cover all industry groups including manufacturing, telecommunications, internet service, finance, education, healthcare, transportation, utilities and government as well as contractors, installers, system integrators, value-added resellers, architects, engineers and wholesale distributors. The Company’s customer base is well-diversified with no single customer accounting for more than 10% of sales and no single end-market industry group accounting for more than 19% of sales.
Products
      Anixter sells over 275,000 products. These products include communications (voice, data, video and security) products used to connect personal computers, peripheral equipment, mainframe equipment, security equipment and various networks to each other. The products consist of an assortment of transmission media (copper and fiber optic cable), connectivity products, support and supply products, and security surveillance and access control products. These products are incorporated into enterprise networks, physical security networks, central switching offices, web hosting sites and remote transmission sites. Anixter also provides industrial wire and cable products, including electrical and electronic wire and cable, control and instrumentation cable and coaxial cable that is used in a wide variety of maintenance, repair and construction-related applications. The Company also provides a wide variety of electrical and electronic wire and cable products, fasteners and other small components that are used by original equipment manufacturers in manufacturing a wide variety of products. The acquisitions of Pentacon, Walters Hexagon and DDI in 2002, 2003 and 2004, respectively, have gradually increased the Company’s product portfolio.
Suppliers
      The Company sources products from over 3,500 suppliers. However, over 30% of Anixter’s dollar volume purchases in 2004 were from its five largest suppliers. An important element of Anixter’s overall business strategy is to develop and maintain close relationships with its key suppliers, which include the world’s leading manufacturers of communication cabling, connectivity, support and supply products, electrical wiring systems, and fasteners. Such relationships stress joint product planning, inventory management, technical support, advertising and marketing. In support of this strategy, Anixter does not compete with its suppliers in product design or manufacturing activities. Anixter also does not sell product that is privately labeled as either an Anixter brand or a brand name exclusive to Anixter. If any of these suppliers changed its sales strategy to reduce its reliance in distribution channels, or decided to terminate its business relationship with Anixter, the Company’s sales and earnings could be adversely affected until the Company was able to establish relationships with suppliers of comparable products. Although the Company believes its relationships with these key suppliers are good, they could change their strategies as a result of a change in control, expansion of their direct sales force, changes in the marketplace or other factors beyond the Company’s control.
      Significant terms of the Company’s typical distribution agreement are described as follows:

			
 	• 	A non-exclusive right to re-sell products to any customer in a geography (typically defined as a country);	
 		
 	• 	Usually cancelable upon 90 days notice by either party for any reason;	
 		
 	• 	Excludes any minimum purchase agreements, although pricing may change with volume on a prospective basis; and	
 		
 	• 	The right to pass through the manufacturer’s warranty to Anixter’s customers.	
2 

Table of Contents

Distribution and Service Platform
      Anixter cost-effectively serves its customers’ needs through its proprietary computer system, which connects most of its warehouses and sales offices throughout the world. The system is designed for sales support, order entry, inventory status, order tracking, credit review and material management. Customers may also conduct business through Anixter’s e-commerce platform, one of the most comprehensive, user-friendly and secure websites in the industry.
      Anixter operates a series of large modern regional warehouses in key distribution centers in North America, Europe and Emerging Markets that provide for cost-effective, reliable storage and delivery of products to its customers. Anixter has designated 13 warehouses as regional warehouses. Collectively these facilities store approximately 40% of Anixter’s inventory. In certain cities, some smaller warehouses are also maintained to maximize transportation efficiency and to provide for the local pick-up needs of customers. The network of warehouses and sales offices consists of 124 locations in the United States, 21 in Canada, 20 in the United Kingdom, 28 in Continental Europe, 14 in Latin America, 11 in Asia and 4 in Australia/ New Zealand.
      Anixter has also developed close relationships with certain freight, package delivery and courier services to minimize transit times between its facilities and customer locations. The combination of its information systems, distribution network and delivery partnerships allows Anixter to provide a high level of customer service while maintaining a reasonable level of investment in inventory and facilities.
Employees
      At December 31, 2004, the Company and its subsidiaries employed approximately 5,600 people. Approximately 46% of the employees are engaged in sales or sales related activities, 40% are engaged in warehousing and distribution operations and 14% are engaged in support activities including inventory management, information services, finance, human resources and general management. Less than one percent of the Company’s employees are covered by collective bargaining agreements.
Competition
      Given the Company’s role as an aggregator of many different types of products from many different sources and the fact that these products are sold to many different industry groups, there is no well-defined industry group against which the company competes. The Company views the competitive environment as highly fragmented with hundreds of distributors and manufacturers that sell products directly or through multiple distribution channels to end users or other resellers. Competition is based primarily on breadth of products, quality, services, price and geographic proximity. Anixter believes that it has a significant competitive advantage due to its comprehensive product and service offerings, highly-skilled workforce and global distribution network. The Company can ship 99% of orders from inventory for delivery within 24 to 48 hours to all major global markets. In addition, the Company has common systems and processes throughout most of its operations in 45 countries that provide its customers and suppliers with global consistency.
      Anixter enhances its value to both key suppliers and customers through its specifications and testing facilities and numerous quality assurance certification programs such as ISO 9002 and QSO 9000. The Company uses its testing facilities in conjunction with suppliers to develop product specifications and to test quality compliance. At its suburban Chicago data network-testing lab, the Company also works with customers to design and test various product configurations to optimize network design and performance specific to the customers’ needs.
      Many of the Company’s competitors are privately held and, as a result, reliable competitive information is not available.
Contract Sales and Backlog
      The Company has a number of customers who purchase products under long-term (generally 3 to 5 year) contractual arrangements. In such circumstances, the relationship with the customer typically involves a high degree of material requirements planning and information systems interfaces and, in some cases, may require the maintenance of a dedicated distribution facility or dedicated personnel and inventory at or in close
3 

Table of Contents

proximity to the customer site to meet the needs of the customer. Such contracts do not generally require the customer to purchase any minimum amount of goods from the Company, but would require that materials acquired as a result of joint material requirements planning between the Company and the customer be purchased by the customer.
      Backlog orders are not material as a significant amount of orders are shipped within 24 to 48 hours of receipt.
(d) Financial Information about Geographic Areas
      For information concerning foreign and domestic operations and export sales see Note 10 “Income Taxes” and Note 13 “Business Segments” in the Notes to the Consolidated Financial Statements.
(e) Available Information
      The Company maintains an Internet website at http://www.anixter.com that includes links to the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to these reports. These forms are available without charge as soon as reasonably practical following the time they are filed with or furnished to the Securities and Exchange Commission (“SEC”). Shareholders and other interested parties may request email notifications of the posting of these documents through the Investor Relations section of the Company’s website.
      The Company’s Internet website also contains corporate governance information including corporate governance guidelines; audit, compensation and nomination and governance committee charters; nomination process for directors and the Company’s business ethics and conduct policy.

		
ITEM 2. 	PROPERTIES.	
      The Company’s distribution network consists of approximately 169 warehouses in 45 countries with more than 4.6 million square feet. There are 13 regional distribution centers (100,000 – 575,000 square feet), 29 local distribution centers (35,000 – 100,000 square feet) and 127 service centers. Additionally, the Company has approximately 53 sales offices throughout the world. All these facilities are leased. No one facility is material to operations, and the Company believes there is ample supply of alternative warehousing space available on similar terms and conditions in each of its markets.

		
ITEM 3. 	LEGAL PROCEEDINGS.	
      From time to time, in the ordinary course of business, the Company and its subsidiaries become involved as plaintiffs or defendants in various legal proceedings. The claims and counterclaims in such litigation, including those for punitive damages, individually in certain cases and in the aggregate, involve amounts that may be material. However, it is the opinion of the Company’s management, based upon the advice of its counsel, that the ultimate disposition of pending litigation will not be material.

		
ITEM 4. 	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.	
      During the fourth quarter of 2004, no matters were submitted to a vote of the security holders.
4 

Table of Contents
EXECUTIVE OFFICERS OF THE REGISTRANT
      The following table lists the name, age as of February 23, 2005, position, offices and certain other information with respect to the executive officers of the Company. The term of office of each executive officer will expire upon the appointment of his successor by the Board of Directors.
 	 	 	
John A. Dul, 43	 	Secretary of the Company since November 2002; General Counsel since May 1998; Assistant Secretary from May 1995 to November 2002; General Counsel and Secretary of Anixter since January 1996.	
Terrance A. Faber, 53	 	Vice-President Controller of the Company since October 2000; Chief Financial Officer of International Survey Research from January 2000 to October 2000.	
Robert W. Grubbs Jr., 48	 	President and Chief Executive Officer of the Company since February 1998; President and Chief Executive Officer of Anixter since July 1994.	
Dennis J. Letham, 53	 	Chief Financial Officer, Senior Vice-President – Finance of the Company since January 1995; Chief Financial Officer, Executive Vice President of Anixter since July 1993.	
Philip F. Meno, 45	 	Vice-President – Taxes of the Company since May 1993.	
Rodney A. Shoemaker, 47	 	Vice-President – Treasurer of the Company and Anixter since July 1999.	
5 

Table of Contents

PART II

		
ITEM 5. 	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.	
      Anixter International Inc.’s Common Stock is traded on the New York Stock Exchange under the symbol AXE. Stock price information, dividend information and shareholders of record are set forth in Note 15 “Selected Quarterly Financial Data (Unaudited)” in the Notes to the Consolidated Financial Statements. There have been no sales of unregistered securities.

		
ITEM 6. 	SELECTED FINANCIAL DATA.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Fiscal Year		
 	 	 		
 	 	2004*		 	2003*		 	2002*		 	2001		 	2000		
 	 	 		 	 		 	 		 	 		 	 		
 	 	(In millions, except per share amounts)		
Selected Income Statement Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net sales	 	$	3,275.2	 	 	$	2,625.2	 	 	$	2,520.1	 	 	$	3,144.2	 	 	$	3,514.4	 	
 	Operating income (a)	 	 	138.0	 	 	 	92.3	 	 	 	87.7	 	 	 	102.0	 	 	 	189.8	 	
 	Interest expense and other, net (b)	 	 	(16.7	)	 	 	(12.8	)	 	 	(15.2	)	 	 	(43.8	)	 	 	(55.2	)	
 	Extinguishment of debt (c)	 	 	(0.7	)	 	 	(6.6	)	 	 	(0.7	)	 	 	(5.5	)	 	 	—	 	
 	Income before extraordinary gain (a)(b)(c)	 	 	73.6	 	 	 	41.9	 	 	 	43.1	 	 	 	30.3	 	 	 	78.7	 	
 	Extraordinary gain, net (c)(d)	 	 	4.1	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	Net income (a)(b)(c)(d)	 	$	77.7	 	 	$	41.9	 	 	$	43.1	 	 	$	30.3	 	 	$	78.7	 	
 	Basic income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Income before extraordinary item	 	$	2.00	 	 	$	1.15	 	 	$	1.17	 	 	$	0.83	 	 	$	2.15	 	
 	 	Net income	 	$	2.11	 	 	$	1.15	 	 	$	1.17	 	 	$	0.83	 	 	$	2.15	 	
 	Diluted income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Income before extraordinary item	 	$	1.90	 	 	$	1.13	 	 	$	1.13	 	 	$	0.80	 	 	$	2.03	 	
 	 	Net income	 	$	2.01	 	 	$	1.13	 	 	$	1.13	 	 	$	0.80	 	 	$	2.03	 	
 	Dividend per common share (e)	 	$	1.50	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	
Selected Balance Sheet Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Total assets (b)(f)	 	$	1,706.6	 	 	$	1,371.4	 	 	$	1,226.0	 	 	$	1,198.8	 	 	$	1,686.0	 	
 	Total debt (b)	 	$	412.4	 	 	$	239.2	 	 	$	195.1	 	 	$	241.1	 	 	$	451.9	 	
 	Stockholders’ equity (e)	 	$	763.0	 	 	$	690.8	 	 	$	634.8	 	 	$	563.1	 	 	$	554.9	 	
 	Diluted book value per share	 	$	19.75	 	 	$	18.58	 	 	$	16.71	 	 	$	14.90	 	 	$	13.57	 	
 	Weighted-average diluted shares	 	 	38.6	 	 	 	37.2	 	 	 	38.0	 	 	 	37.8	 	 	 	40.9	 	
 	Year-end outstanding shares	 	 	37.4	 	 	 	36.4	 	 	 	37.5	 	 	 	36.9	 	 	 	37.7	 	
Other Financial Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Working capital (b)(f)	 	$	815.3	 	 	$	562.7	 	 	$	462.5	 	 	$	476.3	 	 	$	687.6	 	
 	Capital expenditures	 	$	14.5	 	 	$	25.9	 	 	$	16.9	 	 	$	22.0	 	 	$	22.6	 	
 	Depreciation and amortization	 	$	25.6	 	 	$	24.3	 	 	$	23.5	 	 	$	32.4	 	 	$	29.6	 	
* In June of 2004 and September of 2003 and 2002, the Company acquired DDI, Walters Hexagon and Pentacon for $32.9 million, $44.6 million and $111.4 million, respectively, inclusive of legal and advisory fees. The acquisitions were accounted for as purchases and the results of operations of the acquired businesses are included in the consolidated financial statements from the date of acquisition. See Note 6 “Acquisitions” in the Notes to the Consolidated Financial Statements for further information.
 
Notes:

			
(a)		For the year ended December 31, 2004, operating income includes net favorable adjustments to cost of sales of $10.2 million ($0.16 per diluted share) arising primarily from the reduction in risks associated with the value of certain inventories, an impairment charge of $1.8 million ($0.03 per diluted share) to write-down to fair value the value assigned to the Pentacon name when it was acquired in 2002 and unfavorable expenses of $5.2 million ($0.09 per diluted share) related to the relocation of the Company’s largest distribution facility, severance costs associated with staffing reductions in Europe and acquisition-related charges; 2001 includes a restructuring charge of $31.7 million ($0.50 per diluted share) associated with reducing its workforce, closing or consolidating certain facilities and exiting the Korean market.	
6 

Table of Contents

			
		Additionally, 2001 and 2000 include goodwill amortization of $9.0 million ($0.24 per diluted share) and $8.4 million ($0.20 per diluted share), respectively.	
 		
(b)		In the fourth quarter of 2000, the Company incurred an $8.8 million charge ($0.12 per diluted share) relating to the discount on the initial non-recourse sale of accounts receivable to an unconsolidated wholly owned special purpose corporation (“ARC”) in connection with an accounts receivable securitization program. The Company expected to substantially recover this amount upon termination of the program. In the intervening years, due to a decline in the amount of accounts receivable in the program, $2.4 million of the initial discount costs had been recouped. Due to the accounting consolidation of ARC at the end of the third quarter of 2004, the Company recovered the remaining $6.4 million ($0.10 per diluted share) of discount costs during the fourth quarter of 2004. As a result of the consolidation of ARC, working capital, total assets and debt increased $222.2 million, $168.3 million and $161.8 million, respectively.	
 		
(c)		Fiscal year 2001 and 2002 have been restated to reflect our adoption of Statement of Financial Accounting Standards No. 145 which required gains and losses from extinguishment of debt be recorded as other income or expense before income taxes.	
 		
(d)		An extraordinary gain of $4.1 million ($0.11 per diluted share) was recorded in 2004 associated with the receipt of $4.7 million of cash for a 1983 matter related to Itel Corporation, the predecessor of the Company.	
 		
(e)		Stockholders’ equity reflects treasury stock purchases of $35.6 million, $46.9 million and $15.4 million in 2003, 2001 and 2000, respectively. The Company did not purchase any treasury shares in 2004 or 2002. As of December 31, 2004, stockholders’ equity reflects the dividend of $1.50 per common share, or $55.8 million, as a return of excess capital to shareholders.	
 		
(f)		In 2000, the Company had $120.0 million of inventories returnable to vendor which had been paid for by the Company. The inventory was returned for cash in the first quarter of 2001.	
7 

Table of Contents

		
ITEM 7. 	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	
      The following Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements can be identified by the use of forward-looking terminology such as “believe,” “expects,” “prospects,” “estimated,” “should,” “may” or the negative thereof or other variations thereon or comparable terminology indicating the Company’s expectations or beliefs concerning future events. The Company cautions that such statements are qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, a number of which are identified in this report. Other factors also could cause actual results to differ materially from expected results included in these statements. These factors include changes in supplier relationships, foreign political, economic and currency risks, risks associated with inventory, commodity price fluctuations and risks associated with the integration of recently acquired companies. The information contained in this financial review should be read in conjunction with the consolidated financial statements, including the notes thereto, on pages 26 to 57 of this Report.
Acquisitions of Distribution Dynamics, Walters Hexagon and Pentacon, Inc.
      On June 22, 2004, the Company purchased substantially all of the assets and operations of Distribution Dynamics, Inc. (“DDI”). Anixter paid $32.9 million in cash, inclusive of legal and advisory fees, for tangible assets with a fair value of $19.7 million. DDI was a privately held value-added distributor of fasteners, hardware and related products specializing in inventory logistics management programs directed at supporting the production lines of original equipment manufacturers across a broad spectrum of industries. Headquartered in Eden Prairie, Minnesota, DDI employs approximately 230 associates located in sixteen locations in the United States. The Company believes DDI’s business model complements its strategy of building a global original equipment manufacturer supply business.
      In the third quarter of 2003, the Company purchased 100% of the stock of Walters Hexagon Group Limited (“Walters Hexagon”). Anixter paid $43.9 million in cash and assumed $0.7 million of debt, inclusive of legal and advisory fees, for tangible assets with a fair value of $16.2 million. Headquartered in Worcester, England, Walters Hexagon is a leading distributor of fasteners and other small parts to original equipment manufacturers and provides inventory management services to a range of markets and industries. Walters Hexagon operates a network of nine service centers in the United Kingdom, France and Italy and employs approximately 350 people. The Company believes Walters Hexagon’s business model and position as a value-added distributor complements its existing U.S. original equipment manufacturer supply business.
      On September 20, 2002, the Company completed the purchase of the operations and assets of Pentacon, Inc. (“Pentacon”). Anixter paid $111.4 million in cash, inclusive of legal and advisory fees, for tangible assets with a fair value of $74.7 million. Pentacon is a leading distributor of fasteners and other small parts to original equipment manufacturers and provider of inventory management services and has 21 distribution and sales facilities in the United States, along with sales offices and agents in Europe, Canada, Mexico and Australia.
      These acquisitions were accounted for as purchases and the results of operations of the acquired businesses are included in the consolidated financial statements from the date of acquisition. Had these acquisitions occurred at the beginning of the year of acquisition, the impact on the Company’s operating results would not have been significant. For further information regarding these acquisitions and related purchase accounting, see Note 6 “Acquisitions” in the Notes to the Consolidated Financial Statements.
      As a part of bringing the acquired businesses of DDI, Walters Hexagon and Pentacon together to form an industry leading supply chain solution that combines the individual strengths and expertise of the acquired companies with the financial strength and global capabilities of the Company, a new brand name, Anixter Fasteners sm , was introduced in 2004 to reflect the combined capabilities. As a result of this new brand name introduction, the Company recorded an asset impairment charge of $1.8 million in 2004 to write-down to fair value the value assigned to the Pentacon name when that business was acquired by the Company, as the Pentacon brand name will no longer be used in the industrial operations.
8 

Table of Contents
Financial Liquidity and Capital Resources
Overview
      As a distributor, the Company’s use of capital is largely for working capital to support its revenue base. Capital commitments for property, plant and equipment are limited to information technology assets, warehouse equipment, office furniture and fixtures and leasehold improvements, since the Company operates from leased facilities. Therefore, in any given reporting period, the amount of cash consumed or generated by operations will primarily be a factor of the rate of sales increase or decline, due to the corresponding change in working capital.
      In periods when sales are increasing, the expanded working capital needs will be funded first by cash from operations, secondly from additional borrowings and lastly from additional equity offerings. Also, the Company will, from time to time, issue or retire borrowings or equity in an effort to maintain a cost-effective capital structure consistent with its anticipated capital requirements.
Cash Flow
      Year ended December 31, 2004: Consolidated net cash provided by continuing operating activities was $57.4 million in 2004, compared to $125.1 million for the same period in 2003. The decrease in cash flows from operations was primarily due to an increase in working capital of $47.2 million to support the 24.8% growth in sales. In 2003, working capital (accounts receivable, inventory and accounts payable and accrued liabilities) decreased $35.5 million due to a much lower sales growth rate of 4.2%. In 2004, net deferred tax assets increased $16.2 million as compared to a decrease of $14.1 million in the corresponding period in 2003 due to the reclassification of certain income tax reserves. Excluding non-cash items, primarily depreciation and amortization and the accretion of the zero coupon convertible notes, net income generated cash of $111.2 million in 2004 compared to $82.0 million in 2003.
      Consolidated net cash used in investing activities increased to $49.3 million in 2004 versus $36.8 million for the same period in 2003. During 2004, the Company spent $32.9 million to acquire DDI and $1.9 million in additional purchase consideration for Walters Hexagon, as compared to $42.0 million to acquire Walters Hexagon in the same period of 2003. Capital expenditures decreased $11.4 million during 2004 as compared to the corresponding period in 2003. The decrease is primarily the result of the Company spending $18.4 million during 2003 to complete the construction of the new corporate headquarters building. In the fourth quarter of 2003, the Company recovered approximately $27.0 million of capital that had been invested in this project during 2002 and 2003 through a sale and leaseback transaction. Capital expenditures are expected to be approximately $14.5 million in 2005.
      Consolidated net cash used in financing activities was $55.7 million in 2004 compared to $4.5 million in the corresponding 2003 period. In 2004, the Company used $55.1 million to fund the special dividend of $1.50 per common share that was paid on March 31, 2004. In 2003, the Company issued $378.1 million of 3.25% zero coupon convertible notes due 2033. Proceeds of $143.8 million were used to purchase a portion of the $35.6 million of treasury stock and $80.2 million of its 7% zero coupon convertible notes and retire its 8% senior notes. The Company did not purchase any treasury stock, or debt prior to maturity, during 2004. However, the Company completed the exchange of its convertible notes due 2033 for new notes due 2033 and refinanced its $275.0 million revolving credit facility with a similar sized facility in 2004. This resulted in additional deferred financing costs of $1.6 million as compared to $4.9 million of deferred financing costs recorded in the corresponding period in 2003 primarily related to the issuance of the convertible notes due 2033. In 2004, the Company had a net payment on the revolving credit agreements of $19.8 million compared to $33.6 million during 2003. Proceeds from the issuance of common stock relating to the exercise of stock options and the employee stock purchase plan were $20.9 million in 2004 compared to $6.5 million in 2003. In 2004, as a result of the exercise of stock options and the employee stock purchase plan, approximately 1.0 million shares were issued at an average price of $20.39. In the corresponding period in 2003, approximately 0.4 million shares were issued at an average price of $16.83.
      Year ended January 2, 2004: Consolidated net cash provided by continuing operating activities was $125.1 million in 2003, compared to $165.7 million for the same period in 2002. Excluding non-cash items, primarily depreciation and amortization and the accretion of the zero coupon convertible notes, net income
9 

Table of Contents

generated cash of $82.0 million in 2003 compared to $76.3 million in 2002. Due to the decline in sales in 2002, working capital reductions provided $87.8 million compared to only $35.5 million in 2003 when sales, excluding acquired operations, were relatively flat. The significant reduction in the 2002 working capital was primarily driven by an $81.4 million reduction in inventory compared to only $33.9 million in 2003. In 2003, the Company ended the year in a net prepaid income tax position of $6.8 million compared to an accrual position of $4.7 million in 2002. The cash surrender value of company life insurance policies increased $5.4 million ($2.9 million due to premiums paid) in 2003 compared to a decline of $0.6 million in 2002. There were no premiums paid in 2002.
      Consolidated net cash used in investing activities decreased to $36.8 million in 2003 versus $122.4 million for the same period in 2002. During 2003, the Company spent $42.0 million to acquire Walters Hexagon as compared to $110.4 million used to acquire Pentacon in the same period of 2002. Capital expenditures increased $9.0 million during 2003 as compared to the corresponding period in 2002. The increase is primarily the result of the Company spending $18.4 million to complete the construction of the new corporate headquarters building. In the fourth quarter of 2003, the Company recovered approximately $27.0 million of capital that had been invested in this project during 2002 and 2003 through a sale and leaseback transaction.
      Consolidated net cash used in financing activities was $4.5 million in 2003 compared to $48.8 million in the corresponding 2002 period. In 2003, the Company issued $378.1 million of 3.25% zero coupon convertible notes due 2033. Proceeds of $143.8 million were used to purchase a portion of the $35.6 million of treasury stock and $80.2 million of its 7% zero coupon convertible notes and retire its 8% senior notes. In the same period of 2002, the Company paid $118.3 million for the repurchase of its 7% zero coupon convertible notes and 8% senior notes. Net cash used to repay borrowings under the revolving credit agreements were $33.6 million during 2003 as compared to net proceeds from borrowing under the revolving credit agreements of $62.6 million in 2002. In 2003, the Company received $6.5 million from the issuance of 0.5 million shares of common stock for the exercise of stock options and the employee stock purchase plan compared to $7.5 million in 2002 for the issuance of 0.6 million shares.
Financings
Convertible Notes Due 2033
      In July 2003, the Company issued $378.1 million of 3.25% zero coupon convertible senior notes due 2033 (“Old Securities”) and exchanged the notes in December 2004 for new zero coupon convertible notes due 2033 (“New Securities”). As of the expiration of the exchange offer on December 10, 2004, $378.1 million aggregate principal amount at maturity of Old Securities had been tendered in exchange for an equal principal amount at maturity of New Securities. Each of the New Securities has a principal value at maturity of $1,000.
      The conversion of the Old Securities could be settled in stock, cash or a combination of cash and stock. The conversion of the New Securities will be settled in cash up to the accreted principal amount of the convertible note. If the conversion value of the convertible note exceeds the accreted principal amount of the convertible note at the time of conversion, the amount in excess of the accreted value will be settled in stock.
      Similar to the Old Securities, holders of the New Securities may convert each of them in any calendar quarter based on certain conditions.
      The Company may redeem the New Securities, at any time in whole or in part, on July 7, 2011 for cash at the accreted value. Additionally, holders may require the Company to purchase all or a portion of their New Securities at various prices on certain future dates beginning July 7, 2007. The company is required to pay the purchase price in cash.
      The convertible notes due 2033 are structurally subordinated to the indebtedness of Anixter. At December 31, 2004 and January 2, 2004, the book value of the convertible notes due 2033 was $150.9 million and $146.1 million, respectively. For further information regarding the convertible notes due 2033 see Note 8 “Debt” in the Notes to the Consolidated Financial Statements.
10 

Table of Contents

Accounts Receivable Securitization Program
      In October 2000, the Company entered into an accounts receivable securitization program. The program allows the Company to sell, on an ongoing basis without recourse, a majority of the accounts receivable originating in the United States to Anixter Receivables Corporation (“ARC”), a wholly owned, bankruptcy remote special purpose entity. The assets of ARC are not available to creditors of Anixter in the event of bankruptcy or insolvency proceedings. ARC may in turn sell an interest in these receivables to a financial institution for proceeds of up to $225.0 million. Effective October 1, 2004, ARC, which was previously unconsolidated, is consolidated for accounting purposes only in the financial statements of the Company (See Note 1 “Summary of Significant Accounting Policies”). At December 31, 2004, and January 2, 2004, ARC’s outstanding funding was $161.8 million and $145.7 million and had an effective interest rate of 2.90% and 1.68%, respectively.
      The average outstanding funding extended to ARC during the year ended December 31, 2004 and January 2, 2004 was approximately $159.2 million and $130.1 million, respectively. The effective funding rate on the ARC funding was 2.04%, 2.06% and 2.60% in 2004, 2003 and 2002, respectively.
Convertible Notes Due 2020
      On June 28, 2000, the Company issued $792.0 million of 7% zero coupon convertible notes due 2020 (“Convertible Notes due 2020”). Each Convertible Note due 2020 has a principal value at maturity of $1,000. The net proceeds from the issue were $193.4 million and were initially used to repay working capital borrowings under the floating rate bank line of credit. The discount associated with the issuance is being amortized through June 28, 2020, using the effective interest rate method. Through 2003, the Company has repurchased a portion of the Convertible Notes due 2020 with a book value of $177.2 million at a cost of $179.4 million. There were no repurchases in 2004. Remaining issuance costs at December 31, 2004 of approximately $1.3 million are being amortized through June 2020 using the straight-line method.
      Holders of the remaining Convertible Notes due 2020 may convert at any time on or before the maturity date, unless the notes have previously been redeemed or purchased, into 7.4603 shares of the Company’s common stock for which the Company has reserved 1.4 million shares at December 31, 2004 based on the number of currently outstanding bonds. Additionally, holders may require the Company to purchase all or a portion of their Convertible Notes due 2020 at the accreted value on certain future dates beginning June 28, 2005. In December 2004, the Company gave notice under the indenture governing the Convertible Notes due 2020 of its irrevocable election to pay such amounts in cash.
      The Convertible Notes due 2020 are structurally subordinated to the indebtedness of Anixter. The remaining face value of the Convertible Notes due 2020 outstanding was $196.3 million with a book value of $67.6 million and $63.1 million at December 31, 2004 and January 2, 2004, respectively. For more information regarding the Convertible Notes due 2020 see Note 8 “Debt” in the Notes to the Consolidated Financial Statements.
8% Senior Notes
      During 2003, the Company retired the remaining $8.0 million outstanding 8% senior notes. The Company recorded a loss on the extinguishment of debt of $0.4 million in 2002 from repurchases of a portion of these notes prior to maturity.
Revolving Lines of Credit
      On June 18, 2004, Anixter Inc. entered into a new five-year, senior unsecured $275.0 million revolving credit agreement to support future growth of the business. This new facility replaces a similar sized facility that was set to expire in October 2005. The borrowing rate under the new revolving credit agreement is LIBOR plus 77.5 basis points. In addition, there are facility fees on the revolving credit facility equal to 22.5 basis points. The new agreement, which is guaranteed by Anixter International Inc., contains covenants that among other things restrict the leverage ratio and set a minimum fixed charge coverage ratio. In connection with this refinancing, the company recorded a pre-tax loss of $0.7 million in the second quarter of 2004 for the write-off of deferred financing costs remaining from the refinanced facility.
11 

Table of Contents

      In March 2003, Anixter cancelled $115.0 million of the $390.0 million five-year agreement that was set to expire in October 2005 in order to reduce costs associated with this excess availability. Accordingly, in 2003, Anixter recorded a loss on the extinguishment of debt in its consolidated statements of operations of approximately $0.4 million to expense the financing fees associated with this portion of the revolving credit agreement.
      At December 31, 2004, the primary liquidity source for Anixter is the new $275.0 million, five-year revolving credit agreement, $30.0 million of which was outstanding, leaving $245.0 million available to be borrowed. Approximately $67.0 million may be used to pay the Company for intercompany liabilities. The borrowing rate on the revolving credit agreement was 3.50% at December 31, 2004. Facility fees of 22.5 basis points in 2004 and 25.0 basis points in 2003 and 2002, respectively, payable on the five-year revolving credit agreement totaled $0.7 million, $0.7 million and $1.0 million in 2004, 2003 and 2002, respectively, and were included in interest expense in the consolidated statements of operations. This revolving credit agreement requires certain covenant ratios to be maintained. The Company is in compliance with all of these covenant ratios and believes that there is adequate margin between the covenant ratios and the actual ratios given the current trends of the business. See Exhibit 4.3 for definitions of the covenant ratios. Under the leverage ratio, as of December 31, 2004, all of the $245.0 million available under bank revolving lines of credit at Anixter would be permitted to be borrowed, of which $190.7 million may be used to pay dividends to the Company.
      At December 31, 2004 and January 2, 2004, certain foreign subsidiaries had approximately $24.0 million and $20.4 million, respectively, available under bank revolving lines of credit, $2.1 million of which was outstanding at December 31, 2004 and none at January 2, 2004.
Shelf Registration
      On December 17, 2004, Anixter Inc. filed a shelf registration statement with the Securities and Exchange Commission to offer from time to time up to $300.0 million of debt securities, guaranteed by the Company. The registration became effective on February 15, 2005.
Contractual Cash Obligations and Commitments
      The Company has the following contractual cash obligations as of December 31, 2004:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Payments due by period		
 	 	 		
 	 	 	 	Beyond		 	 	
 	 	2005		 	2006		 	2007		 	2008		 	2009		 	2009		 	Total		
 	 	 		 	 		 	 		 	 		 	 		 	 		 	 		
 	 	(In millions)		
Long-Term Debt 1	 	$	—	 	 	$	—	 	 	$	161.8	 	 	$	—	 	 	$	32.1	 	 	$	574.4	 	 	$	768.3	 	
Purchase Obligations 2	 	 	269.4	 	 	 	0.3	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	269.7	 	
Operating Leases	 	 	43.8	 	 	 	34.8	 	 	 	26.1	 	 	 	19.5	 	 	 	17.2	 	 	 	88.8	 	 	 	230.2	 	
Deferred Compensation Liability 3	 	 	0.2	 	 	 	2.7	 	 	 	1.3	 	 	 	0.8	 	 	 	0.6	 	 	 	15.0	 	 	 	20.6	 	
Pension Plans 4	 	 	10.0	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	10.0	 	
Capital Lease Obligations	 	 	0.2	 	 	 	0.2	 	 	 	0.2	 	 	 	0.2	 	 	 	0.2	 	 	 	0.5	 	 	 	1.5	 	
Restructuring Liability	 	 	0.6	 	 	 	0.3	 	 	 	0.2	 	 	 	0.1	 	 	 	0.1	 	 	 	—	 	 	 	1.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Obligations	 	$	324.2	 	 	$	38.3	 	 	$	189.6	 	 	$	20.6	 	 	$	50.2	 	 	$	678.7	 	 	$	1,301.6	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
1   Holders of the Company’s 7% zero coupon convertible notes, with a face value of $196.3 million, may require the Company to purchase, at a book value of $67.6 million, all or a portion of their convertible notes in June 2005. Holders of the Company’s 3.25% zero coupon convertible notes, with a face value of $378.1 million, may require the Company to purchase, at a book value of $150.9 million, all or a portion of their convertible notes in July 2007. The securitization program is a three-year agreement expiring in 2007. The outstanding balance at December 31, 2004 was $161.8 million. Anixter entered into a five-year revolving credit agreement in 2004 and had borrowings of $32.1 million as of December 31, 2004.
2   Purchase obligations primarily consists of purchase orders for products sourced from unaffiliated third party suppliers, in addition to commitments related to various capital expenditures. Many of these obligations may be cancelled with limited or no financial penalties.
12 

Table of Contents

3   A non-qualified deferred compensation plan was implemented on January 1, 1995. The plan provides for benefit payments upon retirement, death, disability, termination or other scheduled dates determined by the participant. At December 31, 2004, the long-term deferred compensation liability was $20.6 million. In an effort to ensure that adequate resources are available to fund the deferred compensation liability, the Company has purchased a series of company-owned life insurance policies on the lives of plan participants. At December 31, 2004, the cash surrender value of these company life insurance policies was $21.8 million.
4   The majority of the Company’s various pension plans are non-contributory and cover substantially all full-time domestic employees and certain employees in other countries. Retirement benefits are provided based on compensation as defined in the plans. The Company’s policy is to fund these plans as required by the Employee Retirement Income Security Act, the Internal Revenue Service and local statutory law. As of December 31, 2004 and January 2, 2004, the pension liability was $43.6 million and $34.6 million, respectively. The Company currently estimates that it will contribute $10.0 million to its pension funds in 2005. Due to the future impact of various market conditions, rates of return and changes in plan participants, the Company cannot provide a meaningful estimate of its future contributions beyond 2005.
Share Repurchases
      In 2003, the Company repurchased 1,567,650 shares at an average cost of $22.74. Purchases were made in the open market and were financed from cash generated by operations and the net proceeds ($139.8 million) from the issuance of $378.1 million of the Convertible Notes due 2033. No shares were repurchased in 2004 or 2002. However, the Company may purchase additional shares with the volume and timing dependent on market conditions.
Interest Expense
      Interest expense for continuing operations was $13.8 million, $12.8 million and $15.5 million for 2004, 2003, and 2002, respectively. The increase in interest expense in 2004 from 2003 is due to higher debt levels as a result of an increase in working capital to support the sales growth along with the accounting consolidation of the securitization facility. The decrease in interest expense in 2003 from 2002 is due to a reduction in interest rates. The Company has entered into interest rate agreements that effectively fix or cap, for a period of time, the interest rate on a portion of its floating-rate obligations. As a result, the interest rate on 60.3% and 100% of debt obligations at December 31, 2004 and January 2, 2004, respectively, was fixed or capped. Total outstanding debt at December 31, 2004 and January 2, 2004 was $412.4 million and $239.2 million, respectively. In 2003, ARC had outstanding debt of $145.7 million, which was not consolidated. The impact of interest rate swaps and caps for 2004, 2003 and 2002 was an increase to interest expense of $0.6 million, $0.6 million and $0.1 million, respectively.
Income Taxes
      Various foreign subsidiaries of the Company had aggregate cumulative net operating loss (“NOL”) carryforwards for foreign income tax purposes of approximately $134.2 million at December 31, 2004, which are subject to various provisions of each respective country. Approximately $40.0 million of this amount expires between 2005 and 2014, and $94.2 million of the amount has an indefinite life. Of the $134.2 million NOL carryforwards of foreign subsidiaries, $91.4 million relates to losses that have already provided a tax benefit in the U.S. due to rules permitting flow-through of such losses in certain circumstances. Without such losses included, the cumulative NOL carryforwards at December 31, 2004, were approximately $42.8 million, which are subject to various provisions of each respective country. Approximately $25.2 million of this amount expires between 2005 and 2014 and $17.6 million of the amount has an indefinite life. During 2004, a tax benefit of $2.9 million was recognized for NOLs for which future utilization was determined to be probable. The deferred tax asset and valuation allowance has been adjusted to reflect only the carryforwards for which the Company has not taken a tax benefit in the United States.
13 

Table of Contents

Liquidity Considerations and Other
      Certain debt agreements entered into by the Company’s operating subsidiaries contain various restrictions, including restrictions on payments to the Company. These restrictions have not had nor are expected to have an adverse impact on the Company’s ability to meet its cash obligations.
      At the current level of operating margin and working capital turns, the Company estimates that in 2005 it will have positive cash flow from operating activities and after capital expenditures. The Company may continue to pursue opportunities to acquire businesses and issue or retire borrowings or equity in an effort to maintain a cost-effective capital structure consistent with its anticipated capital requirements. Assuming the current level of operating margins and working capital turns, if the sales growth rate in 2005 were to exceed approximately 15% to 17%, then the incremental working capital required to support the increase in sales may result in the Company having negative cash flows from operations. The Company has adequate facilities to fund its expected growth in operations.
      Shortly after the filing of the Company’s 2004 Form 10-K, Anixter Inc. is planning on issuing $200 million of senior, unsecured 10-year notes. These notes will be fully and unconditionally guaranteed by the Company. The proceeds of this note offering will be used to redeem on June 28, 2005 all of the issued and outstanding Convertible Notes due 2020, pay down our revolving line of credit and for general corporate purposes.
Results of Operations
      The Company competes with distributors and manufacturers who sell products directly or through existing distribution channels to end users or other resellers. The Company’s relationship with the manufacturers for which it distributes products could be affected by decisions made by these manufacturers as the result of changes in management or ownership as well as other factors. Although relationships with its suppliers are good, the loss of a major supplier could have a temporary adverse effect on the Company’s business, but would not have a lasting impact since comparable products are available from alternate sources. In addition to competitive factors, future performance could be subject to economic downturns and possible rapid changes in applicable technologies.
      Our recent operating results have been favorably affected by the rise in commodity prices, primarily petrochemicals and copper, which are components in some of the products we sell. As current purchase costs with suppliers increase due to higher commodity prices, our percentage mark-up to customers remains relatively constant, resulting in higher sales revenue and gross profit. In addition, existing inventory purchased at previously lower prices and sold as prices increase, results in a higher gross profit margin. Conversely, a decrease in commodity prices in a short period of time would have the opposite effect, negatively affecting our results.
Overview
      In 2004, we saw positive trends in all of the geographies in which the Company operates, helping to make 2004 a year of organic revenue growth for the first time since 2000. Net sales increased $650.0 million, or approximately 24.8%, to $3,275.2 million in 2004. The acquisitions of DDI and Walters Hexagon, excluding foreign exchange of $2.4 million, contributed $121.3 million to the increase in sales in 2004 as compared to the corresponding period in 2003. Excluding these acquisitions, net sales increased $526.3 million in 2004 due to improved economic conditions, commodity driven price increases, an increase in larger capital projects and an expanded product offering. Exchange rate changes related to the weaker U.S. dollar increased sales by $67.9 million.
      Operating margins increased in 2004 to 4.2% as compared to approximately 3.5% in 2003. Gross margins declined 40 basis points in 2004 as compared to 2003 primarily due to an increase in larger capital projects, excess industry capacity and the timing of passing through commodity price increases to customers with long-term contracts. Gross margins were positively affected in 2004 by net favorable adjustments to cost of sales of $10.2 million arising primarily from the reduction in risks associated with the value of certain inventories.
      Operating expenses were unfavorably affected in 2004 by $5.2 million related to the relocation of the Company’s largest distribution facility, severance costs associated with a staff reduction in Europe and
14 

Table of Contents

acquisition related charges. In 2004, the Company recorded an impairment charge of $1.8 million for the write-off of intangible assets associated with the Pentacon trade name. As compared to 2003, the Company saw operating profits increase 49.5% in 2004. The increase in operating profit is due to the combination of unit growth and commodity driven price increases, the acquisitions of Walters Hexagon and DDI, exchange rate changes related to the weaker U.S. dollar and net favorable adjustments mentioned above that occurred in the fourth quarter of 2004. Including the unfavorable operating expense adjustments, operating expenses as a percent of sales declined 100 basis points from the corresponding period in 2003 due to the Company’s continued tight expense controls and the leveraging of existing infrastructure. As a result, operating margins of 4.2% showed an improvement of 70 basis points over 2003.
      Beginning in the fourth quarter of 2004, $1.2 million of costs associated with the accounts receivable securitization program (primarily funding costs), have been recorded as “interest expense,” while similar type costs are included in “other expense” in 2003. At the inception of this program in 2000, the Company recorded a charge of $8.8 million for the initial discounting of receivables sold to ARC. The Company expected to substantially recover this amount upon termination of the program. In the intervening years, due to a decline in the amount of accounts receivable in the program, $2.4 million of the initial discount costs had been recouped. With the consolidation of ARC, the remaining $6.4 million of discount costs were recovered during the fourth quarter of 2004.
      Other expenses increased in the current year due to larger foreign exchange losses. Foreign exchange losses totaled $5.6 million in 2004, as compared to minimal gains and losses in the corresponding period in 2003 and 2002. In 2004, a $1.5 million gain was recorded relating to the cash surrender value of life insurance policies compared to a gain of $2.5 million in 2003 and a loss of $0.5 million in 2002. In addition, the Company incurred $0.9 million of fees related to the exchange of the Convertible Notes due 2033 in 2004.
      In 2004, the Company recorded a pre-tax loss of $0.7 million related to the write-off of deferred financing costs associated with early termination and refinancing of the Company’s $275.0 million revolving credit facility. In the prior year, the Company recorded a pre-tax loss of $6.6 million for the early extinguishment of $67.5 million of its 7% zero coupon convertible notes and debt issuance costs associated with the cancellation of $115.0 million of its available revolving credit facility. In 2002, the Company recorded a pre-tax loss of $0.7 million for the early extinguishment of $109.7 million of its 7% zero coupon convertible notes and $10.7 million of its 8% senior notes. The extraordinary gain of $4.1 million in 2004 was the result of monies received from an escrow account in connection with the 1983 bankruptcy of Itel Corporation, the predecessor to the Company.
      As a distributor, the Company’s use of capital is largely for working capital to support its revenue base. In any given reporting period, the amount of cash consumed or generated by operations will primarily be a function of the rate of sales increase or decline, due to the corresponding change in working capital. In periods when sales are increasing, the expanded working capital (accounts receivable, inventory and accounts payable and accrued liabilities) needs will be funded primarily by cash provided by operations. In 2004, working capital increased $47.2 million to support the 24.8% growth in sales. On March 31, 2004, the Company returned $55.1 million to its shareholders through a special dividend. As of December 31, 2004, the Company had $53.4 million in cash and its debt to total capitalization was a modest 35.1%.
2004 versus 2003
Consolidated Results of Operations
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended		
 	 	 		
 	 	December 31,		 	January 2,		 	Percent		
 	 	2004		 	2004		 	Change		
 	 	 		 	 		 	 		
 	 	(In millions)		
Net sales	 	$	3,275.2	 	 	$	2,625.2	 	 	 	24.8%	 	
Gross profit	 	$	790.3	 	 	$	642.2	 	 	 	23.1%	 	
Operating expenses	 	$	652.3	 	 	$	549.9	 	 	 	18.6%	 	
Operating income	 	$	138.0	 	 	$	92.3	 	 	 	49.5%	 	
15 

Table of Contents

      Net Sales: The Company’s net sales increased 24.8% to $3,275.2 million from $2,625.2 million in the same period in 2003. The acquisitions of Walters Hexagon in September 2003 and DDI in June 2004, along with favorable effects from changes in exchange rates, accounted for $121.3 million and $67.9 million of the increase, respectively. Excluding the acquisitions of Walters Hexagon and DDI and the effects from changes in exchange rates, the Company’s net sales increased 17.7% during 2004 from the same period in 2003. The increase in net sales was due to improved economic conditions, commodity-driven price increases, an increase in larger capital projects, an expanded product offering and market share gains.
      Gross Margins: Gross margins decreased to 24.1% in 2004 from 24.5% in the corresponding period in 2003. The primary reason for the decline was an increase in larger capital projects during 2004 as compared to 2003. Due to excess capacity in the industry, pricing on these projects was extremely competitive, which reduced gross margins. Also, the timing of passing through commodity price increases to customers with long-term contracts put pressure on gross margins. Gross margins were positively affected in 2004 by net favorable adjustments to cost of sales of $10.2 million, arising primarily from the reduction in risks associated with the value of certain inventories.
      Operating Income: As a result of higher sales, operating margins were 4.2% for the fiscal year ended December 31, 2004 as compared to 3.5% in the corresponding period in 2003. Operating expenses increased $102.4 million in 2004 from the corresponding period in 2003. The Walters Hexagon and DDI acquisitions increased operating expenses by $30.3 million, while changes in exchange rates increased operating expenses by $13.5 million. Operating expenses were negatively affected in 2004 by unfavorable expenses of $5.2 million related to the relocation of the Company’s largest distribution facility, severance costs associated with a staffing reduction in Europe and acquisition related charges. As a result of the Company’s new branding strategy of its recently-acquired fastener and small parts supply businesses, the Company recorded a pre-tax asset impairment charge of $1.8 million in the third quarter of 2004 to write-down to fair value the value assigned to the Pentacon tradename when it was acquired in September 2002. Excluding the above, operating expenses increased $51.5 million, or 9.4%, primarily due to variable costs associated with higher sales volumes, increases in healthcare and pension costs, expenses associated with additional restricted stock grants and an increase in employee incentives due to our improved operating performance.
      Interest Expense: Consolidated interest expense increased to $13.8 million in 2004 from $12.8 million in 2003. Interest expense increased due to the accounting consolidation of ARC, effective October 1, 2004, and an increase in the average borrowings. The average long-term funding balance was $309.0 million and $229.7 million for 2004 and 2003, respectively. The average interest rate for 2004 and 2003 was 4.5% and 5.6%, respectively. The increase in average funding associated with the ARC facility was $45.4 million with an average interest rate of 2.6%.
      Other, net income (expense):
 	 	 	 	 	 	 	 	 	
 	 	Years ended		
 	 	 		
 	 	December 31,		 	January 2,		
 	 	2004		 	2004		
 	 	 		 	 		
 	 	(In millions)		
Foreign exchange	 	$	(5.6)	 	 	$	 — 	 	
Accounts receivable securitization	 	 	3.6 	 	 	 	(2.8)	 	
Cash surrender value of life insurance policies	 	 	1.5 	 	 	 	2.5 	 	
Exchange offer fees	 	 	(0.9)	 	 	 	— 	 	
Sale of fixed assets	 	 	(0.2)	 	 	 	(0.3)	 	
Other	 	 	(1.3)	 	 	 	0.6 	 	
 	 	 	 	 	 	 	
 	 	$	(2.9)	 	 	$	 — 	 	
 	 	 	 	 	 	 	
      Foreign exchange produced a net loss of $5.6 million in 2004 as compared to minimal gains in the corresponding period of 2003. A significant portion of the net loss in 2004 resulted from the February 2004 devaluation of the Venezuelan Bolivar. The accounts receivable securitization program had income of $3.6 million for 2004, compared to $2.8 million of expenses in 2003. In the fourth quarter of 2004, the Company recorded $6.4 million of income for the recovery of discount costs previously incurred on accounts receivable sold to ARC. Beginning in the fourth quarter of 2004, funding costs associated with the accounts
16 

Table of Contents

receivable securitization program are included in interest expense as ARC is now consolidated for accounting purposes in the Company’s consolidated financial statements. In conjunction with the exchange offer of the Company’s Convertible Notes due 2033, the Company incurred $0.9 million of fees.
      Income Taxes: The consolidated tax provision increased to $47.0 million in 2004 from $31.0 million in the corresponding period in 2003, due to an increase in income before taxes and extraordinary gain. The 2004 effective tax rate (excluding extraordinary gain) is 39.0% compared to 42.5% in 2003. The decrease in the effective tax rate is primarily due to a change in the mix of foreign income and losses by country as compared to country-level net operating loss positions. The Company recorded a tax benefit of $2.9 million in 2004 related to the adjustment of valuation allowances for certain foreign NOL carryforwards, which was offset by a $3.2 million charge associated with the conclusion of the examination of the 1999-2001 federal income tax returns by the IRS. The change in tax rate increased income before extraordinary gain and net income by $4.2 million or $0.11 per diluted share in 2004.
      Net Income: Net income for 2004 was $77.7 million compared with $41.9 million for 2003. In addition to the above, the Company recorded a pre-tax loss of $0.7 million related to the write-off of deferred financing costs associated with early termination and refinancing of the Company’s $275.0 million revolving credit facility. In 2003, the Company recorded a pre-tax loss of $6.6 million in 2003 for the early extinguishment of $67.5 million of its 7% zero coupon convertible notes and debt issuance costs associated with the cancellation of $115.0 million of its available revolving credit facility.
North America Results of Operations
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended		
 	 	 		
 	 	December 31,		 	January 2,		 	Percent		
 	 	2004		 	2004		 	Change		
 	 	 		 	 		 	 		
 	 	(In millions)		
Net sales	 	$	2,494.5	 	 	$	2,044.1	 	 	 	22.0%	 	
Gross profit	 	$	602.2	 	 	$	496.4	 	 	 	21.3%	 	
Operating expenses	 	$	482.0	 	 	$	420.7	 	 	 	14.6%	 	
Operating income	 	$	120.2	 	 	$	75.7	 	 	 	58.7%	 	
      Net Sales: When compared to 2003, North America net sales for 2004 increased 22.0% to $2,494.5 million. The acquisition of DDI accounted for $34.2 million of the increase, while favorable changes in the Canadian exchange rate accounted for $23.7 million of the increase. Excluding DDI and the exchange rate impact, North America net sales increased 19.2% during 2004 as compared to the corresponding period in 2003. The combined enterprise cabling and industrial wire and cable sales increased 21.0% in 2004 as compared to the corresponding period in 2003, due to improved economic conditions, price increases driven by higher copper and data cabling prices, expanded product offering and a favorable exchange rate impact. In the OEM supply market, the Pentacon operations reported a 22.5% increase in sales on a combination of improved customer demand and new contract additions. Sales to telecom-related OEMs increased 11.9% in 2004 as compared to the corresponding period in 2003.
      Gross Margins: North America’s gross margins decreased slightly to 24.1% in 2004 from 24.3% for the same period in 2003. The decrease is primarily due to a higher percentage of larger capital projects, which had lower gross margins due to excess capacity in the industry. Also, the timing of passing through commodity price increases to customers with long-term contracts put pressure on gross margins. North America gross margins were positively affected in 2004 by net favorable adjustments to cost of sales of $10.2 million arising primarily from the reduction in risks associated the value of certain inventories.
      Operating Income: Operating expenses increased $61.3 million in 2004 from the corresponding period in 2003. The DDI acquisition accounted for $10.0 million of the increase, while changes in exchange rates increased operating expenses by $4.0 million. Excluding the acquisition of DDI and the exchange rate impact, North America operating expenses increased 11.2%, primarily due to variable costs associated with the increase in sales volume, higher pension and healthcare costs, expenses related to additional restricted stock grants and an increase in employee incentives due to our strong operating performance. North America operating expenses were negatively affected in 2004 by unfavorable expenses of $3.3 million related to the relocation of the Company’s largest distribution facility and acquisition-related charges. As a result of the
17 

Table of Contents

Company’s new branding strategy of its recently acquired fastener and small parts supply businesses, the Company recorded a pre-tax asset impairment charge of $1.8 million in the third quarter of 2004 to write-down to fair value the value assigned to the Pentacon tradename when it was acquired in September 2002. Primarily as a result of higher daily sales, continued tight expense controls and the leveraging of the existing infrastructure, North America operating margins increased to 4.8% in 2004 from 3.7% in same period in 2003. Exchange rate changes had a $1.2 million favorable impact on operating income.
Europe Results of Operations
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended		
 	 	 		
 	 	December 31,		 	January 2,		 	Percent		
 	 	2004		 	2004		 	Change		
 	 	 		 	 		 	 		
 	 	(In millions)		
Net sales	 	$	554.3	 	 	$	393.1	 	 	 	41.0%	 	
Gross profit	 	$	141.0	 	 	$	107.5	 	 	 	31.1%	 	
Operating expenses	 	$	131.1	 	 	$	93.1	 	 	 	40.9%	 	
Operating income	 	$	9.9	 	 	$	14.4	 	 	 	(30.6)%	 	
      Net Sales: Europe net sales increased 41.0% in 2004 to $554.3 million from $393.1 million in the corresponding period in 2003, including a $42.6 million favorable effect from changes in exchange rates and an increase of $87.1 million as a result of the acquisition of Walters Hexagon at the end of the third quarter of 2003. Excluding Walters Hexagon and exchange rate impact, sales increased 8.4%. Overall, demand remains comparatively weak resulting in significant margin pressure.
      Gross Margins: Europe’s gross margins decreased to 25.4% in 2004 from 27.4% in the same period in 2003. The decrease is primarily due to large projects at reduced margins, a change in product mix which had lower gross margins and significant pricing pressures resulting from excess capacity in the industry. Walters Hexagon added 50 basis points to Europe’s gross margins in 2004.
      Operating Income: Compared to 2003, Europe operating expenses increased 40.9%, or $38.0 million, to $131.1 million in 2004. Included in the increase are $20.3 million of expenses related to Walters Hexagon and $9.2 million for changes in exchange rates. Excluding Walters Hexagon and the exchange rate impact, operating expenses increased $8.5 million, or 9.7%, higher than 2003. Operating margins decreased in 2004 to 1.8% from 3.7% as compared to 2003. The decrease is primarily due to a higher percentage of large projects at reduced margins, significant pricing pressures and severance costs associated with a staff reduction. Walters Hexagon added 60 basis points to Europe’s operating margins, while exchange rate changes had a $1.1 million favorable impact on operating income.
Emerging Markets Results of Operations
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended		
 	 	 		
 	 	December 31,		 	January 2,		 	Percent		
 	 	2004		 	2004		 	Change		
 	 	 		 	 		 	 		
 	 	(In millions)		
Net sales	 	$	226.4	 	 	$	188.0	 	 	 	20.5%	 	
Gross profit	 	$	47.1	 	 	$	38.3	 	 	 	23.1%	 	
Operating expenses	 	$	39.2	 	 	$	36.1	 	 	 	8.1%	 	
Operating income	 	$	7.9	 	 	$	2.2	 	 	 	258.4%	 	
      Net Sales: Emerging Markets (Asia Pacific and Latin America) net sales were up 20.5% to $226.4 million in 2004 from $188.0 million in the corresponding period in 2003, including a $1.5 million favorable impact from changes in exchange rates. The increase reflects larger projects and product and market expansion.
      Gross Margins: During 2004, Emerging Markets’ gross margins increased to 20.8% from 20.4% in the corresponding period in 2003. The improvement is primarily due to price increases in Venezuela and higher gross margins throughout Asia.
      Operating Income: Emerging Markets operating income increased $5.7 million from $2.2 million in 2003. Operating expenses increased 8.1% as compared to the corresponding period in 2003. As a result of the higher
18 

Table of Contents

sales levels, improved gross margins and tight expense controls, operating margins increased to 3.5% in 2004 from 1.2% in the corresponding period in 2003. Exchange rate changes had a $0.4 million favorable impact on operating income.
2003 versus 2002
Consolidated Results of Operations
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended		
 	 	 		
 	 	January 2,		 	January 3,		 	Percent		
 	 	2004		 	2003		 	Change		
 	 	 		 	 		 	 		
 	 	(In millions)		
Net sales	 	$	2,625.2	 	 	$	2,520.1	 	 	 	4.2%	 	
Gross profit	 	$	642.2	 	 	$	597.1	 	 	 	7.6%	 	
Operating expenses	 	$	549.9	 	 	$	509.4	 	 	 	8.0%	 	
Operating income	 	$	92.3	 	 	$	87.7	 	 	 	5.2%	 	
      Net Sales: The Company’s net sales during 2003 increased 4.2% to $2.6 billion from $2.5 billion in the same period in 2002. The acquisition of Pentacon in September 2002 and Walters Hexagon in September 2003, along with favorable effects from changes in exchange rates, accounted for $228.8 million of the increase. North America sales to telecom-related original equipment manufacturers declined by $80.0 million, while Europe continued to be impacted by weak economic conditions. In addition, 2003 had 52 weeks as compared to 53 weeks in 2002.
      Gross Margins: Gross margins improved to 24.5% in 2003 from 23.7% in 2002. The improvement was a result of a lower percentage of contract sales to telecom-related original equipment manufacturers in 2003 (which have lower gross margins), the addition of higher gross margin Pentacon and Walters Hexagon sales and more price competitive U.S. dollar-sourced inventory in foreign operations.
      Operating Income: Operating margins were 3.5% for 2003, which were flat as compared to the prior year. Operating expenses increased $40.5 million in 2003 from the corresponding period in 2002. The Pentacon and Walters Hexagon acquisitions increased operating expenses by $38.6 million, while changes in exchange rates increased operating expenses by $17.2 million. Excluding the above, operating expenses declined $15.3 million primarily due to reduced sales levels and tight expense controls, including further staff reductions in 2003.
      Interest Expense: Consolidated interest expense decreased to $12.8 million in 2003 from $15.5 million in 2002. Interest expense decreased due to a reduction in interest rates. The average long-term debt balance was $229.7 million and $209.0 million for 2003 and 2002, respectively. The average interest rate for 2003 was 5.6% compared to 7.4% in 2002.
      Other, net income (expense):
 	 	 	 	 	 	 	 	 	
 	 	Years ended		
 	 	 		
 	 	January 2,		 	January 3,		
 	 	2004		 	2003		
 	 	 		 	 		
 	 	(In millions)		
Accounts receivable securitization	 	$	(2.8	)	 	$	(2.7	)	
Cash surrender value of life insurance policies	 	 	2.5	 	 	 	(0.5	)	
Sale of fixed assets and securities	 	 	(0.3	)	 	 	2.9	 	
Foreign exchange	 	 	—	 	 	 	(0.1	)	
Other	 	 	0.6	 	 	 	0.7	 	
 	 	 	 	 	 	 	
 	 	$	—	 	 	$	0.3	 	
 	 	 	 	 	 	 	
      Income Taxes: The consolidated effective tax provision increased to $31.0 million in 2003 from $28.7 million in 2002, primarily due to an increase in the income tax rate. The 2003 effective tax rate was 42.5% compared to 40.0% in 2002. The increase in the effective tax rate was primarily a result of an increase in non-deductible losses in certain foreign entities.
19 

Table of Contents

      Net Income: Net income for 2003 was $41.9 million compared with $43.1 million for 2002. In addition to the items described above, the Company recorded a pre-tax loss of $6.6 million in 2003 for the early extinguishment of $67.5 million of its 7% zero coupon convertible notes and debt issuance costs associated with the cancellation of $115.0 million of its available revolving credit facility. In 2002, the Company recorded a pre-tax loss of $0.7 million for the early extinguishment of $109.7 million of its 7% zero coupon convertible notes and $10.7 million of its 8% senior notes.
North America Results of Operations
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended		
 	 	 		
 	 	January 2,		 	January 3,		 	Percent		
 	 	2004		 	2003		 	Change		
 	 	 		 	 		 	 		
 	 	(In millions)		
Net sales	 	$	2,044.1	 	 	$	1,996.2	 	 	 	2.4%	 	
Gross profit	 	$	496.4	 	 	$	471.7	 	 	 	5.2%	 	
Operating expenses	 	$	420.7	 	 	$	388.0	 	 	 	8.4%	 	
Operating income	 	$	75.7	 	 	$	83.7	 	 	 	(9.6)%	 	
      Net Sales: When compared to the corresponding period in 2002, North America net sales for the year ended January 2, 2004 increased 2.4% to over $2.0 billion. The acquisition of Pentacon on September 20, 2002 represents $133.3 million of the increase. The sales decline in the remaining business was primarily due to a decrease of $80.0 million in sales to telecom-related original equipment manufacturers. In addition, 2003 had 52 weeks compared to 53 weeks in 2002. Daily sales levels for the remainder of the business remained steady.
      Gross Margins: Gross margins increased to 24.3% in 2003 from 23.6% for the same period in 2002. The increase was primarily due to a lower percentage of contract sales to telecom-related original equipment manufacturers in 2003, which have lower gross margins, and the addition of higher gross margin Pentacon sales. Pentacon increased the North America gross margins by 50 basis points in 2003 from 2002. Sales to telecom-related original equipment manufacturers represented 10.5% of North America sales in 2003 as compared to 14.7% in 2002.
      Operating Income: Operating expenses increased $32.7 million in 2003 from the corresponding period in 2002, due to the acquisition of Pentacon. In addition, the 2002 operating expense included the reversal of $0.9 million of excess restructuring accruals. The reduction in variable costs associated with the reduced sales levels more than offset higher pension, healthcare and insurance costs. The 2003 North America operating income included $4.8 million of operating income related to Pentacon, as compared to $0.5 million in 2002. Primarily as a result of lower sales to telecom-related original equipment manufacturers, North America operating margins declined to 3.7% in 2003 from 4.2% in the same period in 2002.
Europe Results of Operations
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended		
 	 	 		
 	 	January 2,		 	January 3,		 	Percent		
 	 	2004		 	2003		 	Change		
 	 	 		 	 		 	 		
 	 	(In millions)		
Net sales	 	$	393.1	 	 	$	344.9	 	 	 	14.0%	 	
Gross profit	 	$	107.5	 	 	$	90.3	 	 	 	19.1%	 	
Operating expenses	 	$	93.1	 	 	$	85.0	 	 	 	9.7%	 	
Operating income	 	$	14.4	 	 	$	5.3	 	 	 	169.2%	 	
      Net Sales: Europe net sales increased 14.0% in 2003 to $393.1 million from $344.9 million in 2002, including a $50.8 million favorable effect from changes in exchange rates and an increase of $19.0 million as a result of the acquisition of Walters Hexagon. The decrease in local currency sales reflected the continued weak economic conditions in many of the major countries. In addition, 2003 had 52 weeks as compared to 53 weeks in 2002.
      Gross Margins: Europe’s gross margins increased to 27.4% in 2003 from 26.2% in 2002. The improvement was primarily due to the weaker U.S. dollar making U.S-sourced inventory more price competitive and the
20 

Table of Contents

addition of higher gross margins from Walters Hexagon sales. Walters Hexagon added 10 basis points to Europe’s gross margins in 2003.
      Operating Income: Compared to 2002, operating expenses increased 9.7%, or $8.1 million, to $93.1 million in 2003. Included in the increase are $4.8 million of expenses related to Walters Hexagon and $13.1 million for changes in exchange rates. In 2003, Europe incurred a gain of $1.6 million from the settlement of certain pension plans. In 2002, Europe incurred $1.4 million of additional restructuring costs. Finally, corporate overhead allocation to Europe was reduced by $1.0 million in 2003. As a result of the above, operating margin for 2003 was 3.7% compared to 1.5% in 2002. Exchange rate changes had a minimal impact on operating income.
Emerging Markets Results of Operations
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended		
 	 	 		
 	 	January 2,		 	January 3,		 	Percent		
 	 	2004		 	2003		 	Change		
 	 	 		 	 		 	 		
 	 	(In millions)		
Net sales	 	$	188.0	 	 	$	179.0	 	 	 	5.0%	 	
Gross profit	 	$	38.3	 	 	$	35.1	 	 	 	9.2%	 	
Operating expenses	 	$	36.1	 	 	$	36.4	 	 	 	(0.9)%	 	
Operating income (loss)	 	$	2.2	 	 	$	(1.3	)	 	 	263.0%	 	
      Net Sales: Emerging Markets’ (Asia Pacific and Latin America) net sales were up 5.0% to $188.0 million in 2003 from $179.0 million in 2002, including a $1.8 million unfavorable impact from changes in exchange rates and one additional week in 2002 as compared to 2003. The increase reflected an overall improvement in average daily volume from new customers and sales to telecom-related original equipment manufacturers in Asia Pacific.
      Gross Margins: For 2003, Emerging Markets’ gross margins increased to 20.4% from 19.6% in 2002. The improvement was primarily due to a reduction in inventory obsolescence provisions for Asia Pacific.
      Operating Income: Emerging Markets’ operating income increased $3.5 million from a $1.3 million loss in 2002 to $2.2 million of income in 2003. The operating loss in 2002 included the benefit of the reversal of excess restructuring accruals of $0.5 million. The $3.5 million improvement reflects the higher sales levels, improved gross margins and tightened expense controls. Exchange rate changes had a minimal impact on operating income.
Critical Accounting Policies and Estimates
      The Company believes that the following are critical areas that either require significant judgement by management or may be affected by changes in general market conditions outside the control of management. As a result, changes in estimates and general market conditions could cause actual results to differ materially from future expected results. Historically, our estimates in these critical areas have not differed materially from actual results.
      Allowance for Doubtful Accounts: Each quarter the Company segregates the doubtful receivable balances into the following major categories and determines the bad debt reserve required as outlined below:

			
 	• 	Customers that have refused to pay their balances are reserved based on the historical write-off percentages;	
 		
 	• 	Risk accounts are individually reviewed and the reserve is based on the probability of potential default; and	
 		
 	• 	The outstanding balance for customers who have declared bankruptcy is reserved at 100%.	
      If circumstances change (i.e., higher/lower than expected defaults or an unexpected material change in a major customer’s ability to meet its financial obligations to the Company), the Company’s estimates of the recoverability of amounts due to the Company could be reduced/increased by a material amount.
21 

Table of Contents

      Inventory Obsolescence: At December 31, 2004 and January 2, 2004, the Company reported inventory of $580.1 million and $499.1 million, respectively. Each quarter the Company reviews the excess inventory and makes an assessment of the realizable value. There are many factors that management considers in determining whether or not a reserve should be established. These factors include the following:

			
 	• 	Return or rotation privileges with vendors;	
 		
 	• 	Price protection from vendors;	
 		
 	• 	Expected usage during the next twenty-four months;	
 		
 	• 	Whether or not a customer is obligated by contract to purchase the inventory;	
 		
 	• 	Current market pricing; and	
 		
 	• 	Risk of obsolescence.	
      If circumstances change (i.e., unexpected shift in market demand, pricing or customer defaults), there could be a material impact on the net realizable value of the inventory.
      Deferred Tax Assets: The Company applies a three-year cumulative taxable income test for foreign subsidiaries whose results are not included in the U.S. tax return in determining whether to recognize an income tax benefit for their respective foreign NOL carryforwards, with a resultant adjustment to the valuation allowance. Qualitative factors surrounding a particular subsidiary are also examined and, in certain circumstances (e.g., projections of further losses for that subsidiary in the short-term), an income tax benefit may not be recorded (and therefore, the valuation allowance not adjusted) even when the three-year cumulative taxable income is positive for a given subsidiary.
      Pension Expense: The Company accounts for its defined benefit pension plans in accordance with the Statement of Financial Accounting Standards (“SFAS”) No. 87, Employers’ Accounting for Pensions, which requires that amounts recognized in financial statements be determined on an actuarial basis. In 2004, the Company made a $10.2 million contribution to its various plans. SFAS No. 87 and the policies used by the Company generally reduce the volatility of the net benefit cost from changes in pension liability discount rates and the performance of the pension plan’s assets, as significant actuarial gains/losses are amortized over the service lives of the plan participants.
      A significant element in determining the Company’s net periodic benefit cost in accordance with SFAS No. 87 is the expected return on plan assets. The Company has assumed that the weighted-average expected long-term rate of return on plan assets will be 7.95%. This expected return on plan assets is included in the net periodic benefit cost. The plan assets produced an actual return of approximately 9% in 2004. If significant, the difference between this expected return and the actual return on plan assets is amortized over the service lives of the plan participants.
      At the end of each year, the Company determines the discount rate to be used to discount the plan liabilities. The discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of the year. In estimating this rate, the Company looks to rates of return on relevant market indices (Citigroup pension liability index, Moody’s Aa corporate bond yield and Bloomberg AAA/ AA 15 + year). These rates are adjusted to match the duration of the liabilities associated with the pension plans. At December 31, 2004, the Company determined this rate to be 5.79% on a consolidated basis.
      As of December 31, 2004, the Company’s consolidated pension liability was $43.6 million, up from $34.6 million at the end of 2003. For the year ended December 31, 2004, the Company recognized a consolidated pre-tax net periodic cost of $12.2 million, up from $9.1 million in 2003. Due to its long duration, the pension liability is very sensitive to changes in the discount rate. As a result of a reduced discount rate and other actuarial gains and losses, the Company estimates its 2005 net periodic cost to increase by 5.0% to 10.0%. As a sensitivity measure, the effect of a 50 basis point decline in the discount rate assumption would result in an increase in the 2005 pension expense of approximately $3.1 million and an increase in the projected benefit obligations at December 31, 2004 of $22.3 million.
22 

Table of Contents

      Tax Contingencies: The Company believes it has a reasonable basis in the tax law for all of the positions it takes on the various tax returns it files. However, in recognition of the fact that various taxing authorities may take opposing views on some issues, that the costs and hazards of litigation in maintaining the positions that the Company has taken on various returns might be significant and that the taxing authorities may prevail in their attempts to overturn such positions, the Company maintains tax reserves. The amounts of such reserves, the potential issues they are intended to cover and their adequacy to do so are topics of frequent review internally and with outside tax professionals. Where necessary, periodic adjustments are made to such reserves to reflect the lapsing of statutes of limitations, closings of ongoing examinations or the commencement of new examinations.
      As of December 31, 2004, the Company has recorded a current income tax payable of $32.8 million. The aggregate amount of global income tax reserves and related interest recorded in current taxes payable was approximately $15.1 million. These reserves cover a wide range of issues and involve numerous different taxing jurisdictions. The single largest item ($3.5 million) relates to a dispute with the state of Wisconsin concerning income taxes payable upon the 1993 sale of a short-line railroad that operated wholly within such state. Other significant exposures for which reserves exist include, but are not limited to, a variety of foreign jurisdictional transfer pricing disputes and foreign withholding tax issues related to inter-company transfers and services.
Other
      The Company’s independent registered public accounting firm, Ernst & Young LLP, informed our Audit Committee of our Board of Directors that, in connection with certain income tax compliance services, a member firm of Ernst & Young LLP held employment and business and corporate income tax related funds of a de minimis amount and made payment of such funds to the applicable tax authorities in respect of our representative offices in China and employees in those offices. These actions by the member firm of Ernst & Young LLP have been discontinued.
      Ernst & Young LLP has also informed our Audit Committee that certain partners in a member firm of Ernst & Young LLP had an investment in a company, an affiliate of which provided a registered office and corporate secretarial services to our Singapore subsidiary. Fees paid for these services were de minimis. These partners have sold their ownership interest, and the entity providing services to us is no longer considered an associated entity of Ernst & Young LLP.
      Ernst & Young LLP has concluded that these activities, although violative of the SEC’s independence rules, have not impaired their independence. Ernst & Young LLP has represented to us that they are independent certified public accountants with respect to us within the meaning of the federal securities laws and the rules and regulations thereunder, including the independence rules adopted by the SEC pursuant to the Sarbanes-Oxley Act of 2002 and Rule 3600 T of the Public Company Accounting Oversight Board.
23 

Table of Contents

		
ITEM 7A. 	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	
      The Company is exposed to the impact of interest rate changes and fluctuations in foreign currencies, as well as changes in the market value of its financial instruments. The Company periodically enters into derivatives in order to minimize these risks, but not for trading purposes. The Company’s strategy is to negotiate terms for its derivatives and other financial instruments to be perfectly effective, such that the change in the value of the derivative perfectly offsets the impact of the underlying hedged item. Any resulting gains or losses from hedge ineffectiveness are reflected directly in income. See in Note 1 “Interest rate agreements” and “Foreign currency forward contracts” and Note 8 “Debt” to the Notes to the Consolidated Financial Statements for further detail on interest rate agreements and outstanding debt obligations. Approximately 30% of the Company’s sales were denominated in foreign currency in 2004 and approximately 28% in 2003 and 27% in 2002. The Company’s exposure to currency rate fluctuations primarily relate to the Euro, British Pound, Canadian Dollar, Venezuelan Bolivar, Brazilian Real and Mexican Peso.
      As of December 31, 2004 and January 2, 2004, the Company had a significant amount of assets and liabilities that are denominated in currencies other than the functional currency of the reporting entity. The absolute value of these assets and liabilities at December 31, 2004 and January 2, 2004, were approximately $151.9 million and $157.2 million, respectively. The Company has purchased approximately $72.3 million of short-term foreign currency forward contracts to minimize the effect of fluctuating foreign currencies. If there was a 10 percent adverse change in the exchange rates, the Company would record a foreign exchange loss of approximately $8.0 million.
      The Company has entered into interest rate agreements that effectively fix or cap, for a period of time, the London Interbank Offered Rate (“LIBOR”) component of the interest rate on a portion of its floating rate obligations. As a result, the interest rate on 60.3% and 100% of debt obligations at December 31, 2004 and January 2, 2004, respectively, was fixed or capped.
      The Company prepared sensitivity analyses of its derivatives and other financial instruments assuming a one-percentage point adverse change in interest rates and a 10 percent adverse change in the foreign currency contracts outstanding. Holding all other variables constant, the hypothetical adverse changes would have increased interest expense by $0.3 million and $0.3 million in 2004 and 2003, respectively, and decreased the value of foreign currency forward contracts by $7.7 million and $8.4 million in 2004 and 2003, respectively. The estimated fair market value of the Company’s outstanding fixed rate debt at December 31, 2004 and January 2, 2004 was $273.2 million and $229.1 million, respectively. If interest rates were to increase or decrease by 1%, the fair market value of the fixed rate debt would decrease or increase by 2.0% or 2.1%, respectively, for 2004 and decrease by 2.8% or increase by 3.0% for 2003, respectively. Changes in the market value of the Company’s debt do not affect the reported results of operations unless the Company is retiring such obligations prior to their maturity. These analyses did not consider the effects of a changed level of economic activity that could exist in such an environment and certain other factors. Further, in the event of a change of this magnitude, management would likely take actions to further mitigate its exposure to possible changes. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analyses assume no changes in the Company’s financial structure.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 	 	 	 	 	
 	 	Page		
 	 	 		
  Report of Independent Registered Public Accounting Firm	 	 	25	 	
  Consolidated Statements of Operations	 	 	26	 	
  Consolidated Balance Sheets	 	 	27	 	
  Consolidated Statements of Cash Flows	 	 	28	 	
  Consolidated Statements of Stockholders’ Equity	 	 	29	 	
  Notes to the Consolidated Financial Statements	 	 	30	 	
  Selected Quarterly Financial Data (Unaudited)	 	 	57	 	
24 

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Anixter International Inc.:
      We have audited the accompanying consolidated balance sheets of Anixter International Inc. and subsidiaries as of December 31, 2004 and January 2, 2004 and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2004. Our audits also included the financial statement schedules listed in the Index at Item 15(a)(2). These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
      In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Anixter International Inc. at December 31, 2004 and January 2, 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Anixter International Inc.’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2005 expressed an unqualified opinion thereon.
ERNST & YOUNG LLP
Chicago, Illinois
February 23, 2005
25 

Table of Contents
ANIXTER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended		
 	 	 		
 	 	December 31,		 	January 2,		 	January 3,		
 	 	2004		 	2004		 	2003		
 	 	 		 	 		 	 		
Net sales	 	$	3,275.2	 	 	$	2,625.2	 	 	$	2,520.1	 	
Cost of operations:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Cost of goods sold	 	 	2,484.9	 	 	 	1,983.0	 	 	 	1,923.0	 	
 	Operating expenses	 	 	647.8	 	 	 	548.2	 	 	 	509.0	 	
 	Amortization of intangibles	 	 	2.7	 	 	 	1.7	 	 	 	0.4	 	
 	Impairment charge	 	 	1.8	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
 	 	Total costs and expenses	 	 	3,137.2	 	 	 	2,532.9	 	 	 	2,432.4	 	
 	 	 	 	 	 	 	 	 	 	
Operating income	 	 	138.0	 	 	 	92.3	 	 	 	87.7	 	
Other (expense) income:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Interest expense	 	 	(13.8	)	 	 	(12.8	)	 	 	(15.5	)	
 	Extinguishment of debt	 	 	(0.7	)	 	 	(6.6	)	 	 	(0.7	)	
 	Other, net	 	 	(2.9	)	 	 	—	 	 	 	0.3	 	
 	 	 	 	 	 	 	 	 	 	
Income before income taxes and extraordinary gain	 	 	120.6	 	 	 	72.9	 	 	 	71.8	 	
Income tax expense	 	 	47.0	 	 	 	31.0	 	 	 	28.7	 	
 	 	 	 	 	 	 	 	 	 	
Income before extraordinary gain	 	 	73.6	 	 	 	41.9	 	 	 	43.1	 	
Extraordinary gain, net of tax of $0.6	 	 	4.1	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
Net income	 	$	77.7	 	 	$	41.9	 	 	$	43.1	 	
 	 	 	 	 	 	 	 	 	 	
Basic income per share:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Income before extraordinary gain	 	$	2.00	 	 	$	1.15	 	 	$	1.17	 	
 	Extraordinary gain	 	$	0.11	 	 	$	—	 	 	$	—	 	
 	Net income	 	$	2.11	 	 	$	1.15	 	 	$	1.17	 	
Diluted income per share:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Income before extraordinary gain	 	$	1.90	 	 	$	1.13	 	 	$	1.13	 	
 	Extraordinary gain	 	$	0.11	 	 	$	—	 	 	$	—	 	
 	Net income	 	$	2.01	 	 	$	1.13	 	 	$	1.13	 	
Dividend per common share	 	$	1.50	 	 	$	—	 	 	$	—	 	
See accompanying notes to the consolidated financial statements.
26 

Table of Contents
ANIXTER INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share amounts)
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31,		 	January 2,		
 	 	2004		 	2004		
 	 	 		 	 		
ASSETS	
Current assets	 	 	 	 	 	 	 	 	
 	Cash and cash equivalents	 	$	53.4	 	 	$	101.4	 	
 	Accounts receivable (less allowances of $18.0 and $17.3 in 2004 and 2003, respectively)	 	 	620.4	 	 	 	255.5	 	
 	Note receivable — unconsolidated subsidiary	 	 	—	 	 	 	56.5	 	
 	Inventories	 	 	580.1	 	 	 	499.1	 	
 	Deferred income taxes	 	 	16.3	 	 	 	16.5	 	
 	Other current assets	 	 	11.7	 	 	 	18.9	 	
 	 	 	 	 	 	 	
 	 	 	 	Total current assets	 	 	1,281.9	 	 	 	947.9	 	
Property and equipment, at cost	 	 	183.8	 	 	 	180.7	 	
Accumulated depreciation	 	 	(141.2	)	 	 	(137.6	)	
 	 	 	 	 	 	 	
 	 	 	 	Net property and equipment	 	 	42.6	 	 	 	43.1	 	
Goodwill	 	 	293.6	 	 	 	278.5	 	
Other assets	 	 	88.5	 	 	 	101.9	 	
 	 	 	 	 	 	 	
 	 	$	1,706.6	 	 	$	1,371.4	 	

LIABILITIES AND STOCKHOLDERS’ EQUITY	
Current liabilities	 	 	 	 	 	 	 	 	
 	Accounts payable	 	$	323.2	 	 	$	304.4	 	
 	Accrued expenses	 	 	143.4	 	 	 	80.8	 	
 	 	 	 	 	 	 	
 	 	 	 	Total current liabilities	 	 	466.6	 	 	 	385.2	 	
Long-term debt	 	 	412.4	 	 	 	239.2	 	
Other liabilities	 	 	64.6	 	 	 	56.2	 	
 	 	 	 	 	 	 	
 	 	 	 	Total liabilities	 	 	943.6	 	 	 	680.6	 	
Stockholders’ equity	 	 	 	 	 	 	 	 	
Common stock — $1.00 par value, 100,000,000 shares authorized, 37,375,676 and 36,376,411 shares issued and outstanding in 2004 and 2003, respectively	 	 	37.4	 	 	 	36.4	 	
Capital surplus	 	 	50.7	 	 	 	21.8	 	
Retained earnings	 	 	660.1	 	 	 	638.2	 	
Accumulated other comprehensive income (loss):	 	 	 	 	 	 	 	 	
 	 	Foreign currency translation	 	 	16.6	 	 	 	(4.8	)	
 	 	Minimum pension liability	 	 	(1.8	)	 	 	(0.5	)	
 	 	Unrealized loss on derivatives	 	 	—	 	 	 	(0.3	)	
 	 	 	 	 	 	 	
 	 	 	Total accumulated other comprehensive income (loss)	 	 	14.8	 	 	 	(5.6	)	
 	 	 	 	 	 	 	
 	 	 	 	Total stockholders’ equity	 	 	763.0	 	 	 	690.8	 	
 	 	 	 	 	 	 	
 	 	$	1,706.6	 	 	$	1,371.4	 	
 	 	 	 	 	 	 	
See accompanying notes to the consolidated financial statements.
27 

Table of Contents
ANIXTER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended		
 	 	 		
 	 	December 31,		 	January 2,		 	January 3,		
 	 	2004		 	2004		 	2003		
 	 	 		 	 		 	 		
Operating activities	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net income	 	$	77.7	 	 	$	41.9	 	 	$	43.1	 	
 	Adjustments to reconcile net income to net cash provided by continuing operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Extraordinary gain	 	 	(4.1	)	 	 	—	 	 	 	—	 	
 	 	Impairment of intangible asset	 	 	1.8	 	 	 	—	 	 	 	—	 	
 	 	Loss on extinguishment of debt	 	 	0.7	 	 	 	6.6	 	 	 	0.7	 	
 	 	Loss (gain) on sale or disposal of fixed assets and securities	 	 	0.2	 	 	 	0.3	 	 	 	(2.9	)	
 	 	Depreciation	 	 	16.4	 	 	 	18.0	 	 	 	19.1	 	
 	 	Accretion of zero coupon convertible notes	 	 	9.3	 	 	 	8.9	 	 	 	11.9	 	
 	 	Amortization of restricted stock	 	 	5.8	 	 	 	3.9	 	 	 	3.4	 	
 	 	Amortization of intangible assets and deferred financing costs	 	 	3.4	 	 	 	2.4	 	 	 	1.0	 	
 	 	Income tax savings from employee stock plans	 	 	3.9	 	 	 	0.6	 	 	 	2.5	 	
 	 	Deferred income taxes	 	 	(16.2	)	 	 	14.1	 	 	 	(0.8	)	
 	 	Changes in assets and liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Accounts receivable	 	 	(57.3	)	 	 	(7.1	)	 	 	37.8	 	
 	 	 	Inventory	 	 	(57.1	)	 	 	33.9	 	 	 	81.4	 	
 	 	 	Accounts payable and accruals	 	 	67.2	 	 	 	8.7	 	 	 	(31.4	)	
 	 	 	Other, net	 	 	5.7	 	 	 	(7.1	)	 	 	(0.1	)	
 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Net cash provided by continuing operating activities	 	 	57.4	 	 	 	125.1	 	 	 	165.7	 	
Investing activities	 	 	 	 	 	 	 	 	 	 	 	 	
 	Capital expenditures	 	 	(14.5	)	 	 	(25.9	)	 	 	(16.9	)	
 	Acquisition of businesses	 	 	(34.8	)	 	 	(42.0	)	 	 	(110.4	)	
 	Proceeds from sale of fixed assets	 	 	—	 	 	 	28.6	 	 	 	2.9	 	
 	Proceeds from sale of investment	 	 	—	 	 	 	2.5	 	 	 	2.0	 	
 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Net cash used in continuing investing activities	 	 	(49.3	)	 	 	(36.8	)	 	 	(122.4	)	
Financing activities	 	 	 	 	 	 	 	 	 	 	 	 	
 	Proceeds from long-term borrowings	 	 	446.9	 	 	 	345.3	 	 	 	262.6	 	
 	Repayment of long-term borrowings	 	 	(466.7	)	 	 	(378.9	)	 	 	(200.0	)	
 	Payment of cash dividend	 	 	(55.1	)	 	 	—	 	 	 	—	 	
 	Proceeds from issuance of common stock	 	 	20.9	 	 	 	6.5	 	 	 	7.5	 	
 	Deferred financing costs	 	 	(1.6	)	 	 	(4.9	)	 	 	(0.6	)	
 	Proceeds from issuance of notes payable	 	 	—	 	 	 	143.8	 	 	 	—	 	
 	Retirement of notes payable	 	 	—	 	 	 	(80.2	)	 	 	(118.3	)	
 	Purchases of common stock for treasury	 	 	—	 	 	 	(35.6	)	 	 	—	 	
 	Other, net	 	 	(0.1	)	 	 	(0.5	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Net cash used in continuing financing activities	 	 	(55.7	)	 	 	(4.5	)	 	 	(48.8	)	
 	 	 	 	 	 	 	 	 	 	
(Decrease) increase in cash and cash equivalents from continuing operations	 	 	(47.6	)	 	 	83.8	 	 	 	(5.5	)	
Cash used in discontinued operations	 	 	(0.4	)	 	 	(1.5	)	 	 	(2.6	)	
Cash and cash equivalents at beginning of year	 	 	101.4	 	 	 	19.1	 	 	 	27.2	 	
 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents at end of year	 	$	53.4	 	 	$	101.4	 	 	$	19.1	 	
 	 	 	 	 	 	 	 	 	 	
See accompanying notes to the consolidated financial statements.
28 

Table of Contents
ANIXTER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	Accumulated		 	 	
 	 	Common Stock		 	 	 	 	 	Other		 	 	
 	 	 		 	Capital		 	Retained		 	Comprehensive		 	Comprehensive		
 	 	Shares		 	Amount		 	Surplus		 	Earnings		 	Income		 	Income		
 	 	 		 	 		 	 		 	 		 	 		 	 		
Balance at December 28, 2001	 	 	36.9	 	 	$	36.9	 	 	$	32.5	 	 	$	553.2	 	 	$	(59.5	)	 	 	 	 	
Net income	 	 	—	 	 	 	—	 	 	 	—	 	 	 	43.1	 	 	 	—	 	 	$	43.1	 	
Other comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Foreign currency translation	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20.7	 	 	 	20.7	 	
 	Minimum pension liabilities, net of tax of $0.2	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(0.3	)	 	 	(0.3	)	
 	Change in fair market value of foreign exchange contracts, net of tax of $3.4	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(5.1	)	 	 	(5.1	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	58.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of common stock and related tax benefits	 	 	0.6	 	 	 	0.6	 	 	 	12.7	 	 	 	—	 	 	 	—	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at January 3, 2003	 	 	37.5	 	 	 	37.5	 	 	 	45.2	 	 	 	596.3	 	 	 	(44.2	)	 	 	 	 	
Net income	 	 	—	 	 	 	—	 	 	 	—	 	 	 	41.9	 	 	 	—	 	 	$	41.9	 	
Other comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Foreign currency translation	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	39.1	 	 	 	39.1	 	
 	Minimum pension liability, net of tax of $0.1	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(0.2	)	 	 	(0.2	)	
 	Change in fair market value of foreign exchange contracts, net of tax of $0.2	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(0.3	)	 	 	(0.3	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	80.5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of common stock and related tax benefits	 	 	0.5	 	 	 	0.5	 	 	 	10.6	 	 	 	—	 	 	 	—	 	 	 	 	 	
Purchase and retirement of treasury stock	 	 	(1.6	)	 	 	(1.6	)	 	 	(34.0	)	 	 	—	 	 	 	—	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at January 2, 2004	 	 	36.4	 	 	 	36.4	 	 	 	21.8	 	 	 	638.2	 	 	 	(5.6	)	 	 	 	 	
Net income	 	 	—	 	 	 	—	 	 	 	—	 	 	 	77.7	 	 	 	—	 	 	$	77.7	 	
Other comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Foreign currency translation	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	21.4	 	 	 	21.4	 	
 	Minimum pension liability, net of tax of $0.6	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1.3	)	 	 	(1.3	)	
 	Change in fair market value of foreign exchange contracts, net of tax of $0.2	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	0.3	 	 	 	0.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	98.1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends on common stock ($1.50 per share)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(55.8	)	 	 	—	 	 	 	 	 	
Issuance of common stock and related tax benefits	 	 	1.0	 	 	 	1.0	 	 	 	28.9	 	 	 	—	 	 	 	—	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2004	 	 	37.4	 	 	$	37.4	 	 	$	50.7	 	 	$	660.1	 	 	$	14.8	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to the consolidated financial statements.
29 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

		
NOTE 1. 	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	
      Organization: Anixter International Inc., formerly known as Itel Corporation, which was incorporated in Delaware in 1967, is engaged in the distribution of communications and specialty wire and cable products, fasteners and small parts through Anixter Inc. and its subsidiaries (collectively “Anixter”).
      Basis of presentation: The consolidated financial statements include the accounts of Anixter International Inc. and its majority-owned subsidiaries. The Company’s fiscal year ends on the Friday nearest December 31 and included 52 weeks in 2004 and 2003 and 53 weeks in 2002. Certain amounts for prior years have been reclassified to conform to the current year presentation.
      The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
      Receivables and allowance for doubtful accounts: The Company carries its accounts receivable at their face amounts less an allowance for doubtful accounts. On a regular basis, the Company evaluates its accounts receivable and establishes the allowance for doubtful accounts based on a combination of specific customer circumstances, as well as credit conditions and history of write-offs and collections. A receivable is considered past due if payments have not been received within the agreed upon invoice terms. The provision for doubtful accounts was $10.5 million, $7.4 million and $13.9 million in 2004, 2003 and 2002, respectively.
      Accounts receivable program: On October 6, 2000, the Company entered into an accounts receivable securitization program. The underlying agreements for this program were most recently amended on September 30, 2004 to extend the program. The program is conducted through Anixter Receivables Corporation (“ARC”), a wholly-owned, bankruptcy remote, special purpose subsidiary. The 2004 amendment provides ARC with a call right with respect to receivables sold. As a result of this call right, ARC no longer holds a passive interest in the receivables and, thus, is no longer considered a qualified special purpose entity for accounting purposes. Accordingly, ARC, which was previously unconsolidated, is now consolidated in the financial statements of the Company. Approximately $161.8 million of long-term funding and $282.4 million of accounts receivable sold to ARC are reflected in the Company’s consolidated balance sheet at December 31, 2004. Additionally, Anixter’s investment in ARC and the inter-company note between Anixter and ARC is eliminated in consolidation. The receivables will continue to be sold by Anixter to ARC. The assets of ARC are not available to creditors of Anixter in the event of bankruptcy or insolvency proceedings. See Note 8 “Debt” for further information.
      Prior to the consolidation of the accounts receivable securitization facility at the end of the third quarter of 2004, ARC funding was not recorded on the Company’s balance sheet. Generally accepted accounting principles required that the interest expense be classified as other expense when it was accounted for by the equity method as part of the Company’s 100% ownership of ARC. However, it was considered to be part of the Company’s financing strategy and therefore viewed as interest expense by the Company. Included in the ARC net (income) expense amount was funding costs incurred by ARC of $3.3 million (of which $1.2 million is recorded as “Interest expense” in the consolidated statement of operations), $2.8 million and $3.4 million in 2004, 2003 and 2002, respectively. The average outstanding funding extended to ARC during the year ended December 31, 2004 and January 2, 2004 was $159.2 million and $130.1 million, respectively. The effective funding rate on the ARC debt was 2.04%, 2.06% and 2.60% in 2004, 2003 and 2002, respectively.
      Interest expense of $1.2 million incurred by ARC during the fourth quarter of 2004 is included in interest expense in the 2004 Consolidated Statement of Operations due to the consolidation of ARC at the end of the third quarter of 2004. Net (income) expense of ($3.6) million, $2.8 million and $2.7 million was recorded as
30 

Table of Contents
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
“Other, net” in the 2004, 2003 and 2002 Consolidated Statements of Operations, respectively, as ARC was previously unconsolidated. The net (income) expense is as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2004		 	2003		 	2002		
 	 	 		 	 		 	 		
 	 	(In millions)		
Loss on sales of receivables	 	$	22.1	 	 	$	29.6	 	 	$	24.5	 	
Gain on collection of receivables by ARC	 	 	(27.8	)	 	 	(29.6	)	 	 	(25.2	)	
Interest expense incurred by ARC	 	 	2.1	 	 	 	2.8	 	 	 	3.4	 	
 	 	 	 	 	 	 	 	 	 	
 	Total	 	$	(3.6	)	 	$	2.8	 	 	$	2.7	 	
 	 	 	 	 	 	 	 	 	 	
      At the inception of this program, the Company recorded a charge of $8.8 million for the initial discounting of receivables sold to ARC. The Company expected to substantially recover this amount upon termination of the program. In the intervening years, due to a decline in the amount of accounts receivable in the program, $2.4 million of the initial discount costs had been recouped. With the consolidation of ARC, the remaining $6.4 million of discount costs were recovered during the fourth quarter of 2004 (included above in the $27.8 million gain on collection of receivables of ARC).
      Anixter had total billings to ARC of $1,687.2 million, $1,417.1 million and $1,544.2 million in 2004, 2003 and 2002, respectively. These billings were for the sale of receivables, servicing fees and interest costs calculated on the outstanding balance of the note receivable. These billings are not included in the consolidated sales results of the Company. Anixter received proceeds from ARC of $1,684.0 million, $1,430.1 million and $1,586.0 million in 2004, 2003 and 2002, respectively, as payment for the Anixter billings.
      Note receivable: At January 2, 2004, the Company’s note receivable of $56.5 million represents the amount due to Anixter from ARC primarily for the sale of accounts receivable. As a result of the accounting consolidation of ARC at the end of the third quarter of 2004, this note receivable was eliminated in consolidation.
      Inventories: Inventories, consisting primarily of finished goods, are stated at the lower of cost or market. Cost is determined using the average-cost method. The Company has agreements with some of its vendors that provide a right to return products. This right is typically limited to a small percentage of the Company’s total purchases from that vendor. The Company can return slow moving product, and the vendor will replace it with faster moving product chosen by the Company. Some vendor agreements contain price protection provisions that require the manufacturer to issue a credit in an amount sufficient to reduce the Company’s current inventory carrying cost down to the manufacturer’s current price. The Company considers these agreements in determining its reserve for obsolescence.
      Property and equipment: At December 31, 2004, net property and equipment consisted of $35.9 million of equipment and computer software, $6.3 million of leasehold improvements and $0.4 million of other miscellaneous property. At January 2, 2004, net property and equipment consisted of $36.4 million of equipment and computer software and $6.7 million of leasehold improvements. Equipment and computer software are recorded at cost and depreciated by applying the straight-line method over their estimated useful lives, which range from 3 to 10 years. Leasehold improvements are depreciated over the useful life or over the term of the related lease, whichever is shorter. Upon sale or retirement, the cost and related depreciation are removed from the respective accounts and any gain or loss is included in income. Maintenance and repair costs are expensed as incurred. Depreciation expense charged to operations was $16.4 million, $18.0 million and $19.1 million in 2004, 2003 and 2002, respectively.
31 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
      Goodwill: Goodwill is the excess of cost over the fair value of the net assets of businesses acquired. Goodwill is reviewed annually for impairment. The Company performs its impairment tests utilizing the two step process outlined in Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and other Intangible Assets. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss would be recognized in an amount equal to that excess, not to exceed the carrying amount of the goodwill. The Company currently expects the carrying amount to be fully recoverable.
      Intangible assets: Intangible assets primarily consist of customer relationships that are being amortized on a straight-line basis over periods ranging from 8 to 10 years. The Company continually evaluates whether events or circumstances have occurred that would indicate the remaining estimated useful lives of its intangible assets warrant revision or that the remaining balance of such assets may not be recoverable. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the asset in measuring whether the asset is recoverable.
      In 2004, a new brand name, Anixter Fasteners SM , was introduced to reflect the combined capabilities of Pentacon, Walters Hexagon and DDI. As a result of this new brand name introduction, the Company recorded an asset impairment charge of $1.8 million in 2004 to write-down to fair value the value assigned to the Pentacon name when that business was acquired by Anixter, as the Pentacon brand name will no longer be used in the industrial operations.
      Interest rate agreements: The Company utilized interest rate agreements that effectively fix or cap, for a period of time, the London Interbank Offered Rate (“LIBOR”) component of the interest rate on a portion of its floating rate obligations. At December 31, 2004 and January 2, 2004, as a result of this type of interest rate agreement along with fixed rate debt, the interest rate on 60.3% and 100% of debt obligations, respectively, was fixed or capped. At December 31, 2004 and January 2, 2004, the Company had interest rate swap agreements outstanding with a notional amount of $30.0 million. These swap agreements obligate the Company to pay a fixed rate of approximately 3.5% through October 2007. At December 31, 2004 and January 2, 2004, the fair market value of outstanding interest rate agreements, which is the estimated amount that the Company would have received or paid to enter into similar interest rate agreements at the current interest rate, was a minimal liability in 2004 and a $0.4 million liability in 2003. The impact of interest rate agreements was to increase interest expense by $0.6 million, $0.6 million and $0.1 million in 2004, 2003 and 2002, respectively. The Company does not enter into interest rate transactions for speculative purposes.
      Foreign currency forward contracts: The Company uses foreign currency forward contracts to reduce its exposure to adverse fluctuations in foreign exchange rates. When entered into, these financial instruments are designated as hedges of underlying exposures. The Company does not enter into derivative financial instruments for trading purposes.
      The Company purchased foreign currency forward contracts to minimize the effect of fluctuating foreign currency denominated payables (fair value hedges) on its reported income. The forward contracts were revalued at current foreign exchange rates, with the changes in valuation reflected directly in income offsetting the transaction gain/loss recorded on the foreign currency denominated payable. The net impact of these foreign currency forward contracts on the income statement was insignificant in 2004, 2003 and 2002. At December 31, 2004 and January 2, 2004, the face amount of the foreign currency forward contracts outstanding was approximately $72.3 million and $84.3 million, respectively. The Company recognized the difference between the face amount and the fair value of its forward contracts and recorded a liability of $0.1 million and $0.4 million at December 31, 2004 and January 2, 2004, respectively.
32 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
      Foreign currency translation: The results of operations for foreign subsidiaries, where the functional currency is not the U.S. dollar, are translated into U.S. dollars using the average exchange rates during the year, while the assets and liabilities are translated using period-end exchange rates. The related translation adjustments are recorded in a separate component of Stockholders’ equity, “Foreign currency translation.” Gains and losses from foreign currency transactions are included in “Other, net” in the consolidated statements of operations. The Company recognized $5.6 million in net foreign exchange losses in 2004. In 2003 and 2002, the Company’s net foreign exchange was minimal.
      Revenue recognition: Sales to customers, resellers and distributors and related cost of sales are recognized upon transfer of title, which occurs upon shipment of products. Services, such as design and testing of product configurations for customers and contractual supply chain management, are not billed separately and are included in the sales price of the product.
      In those cases where the Company does not have goods in stock and delivery times are critical, product is purchased from the manufacturer and drop shipped to the customer. The Company takes title to the goods when shipped by the manufacturer and then bills the customer for the product upon transfer of the title.
      Advertising and sales promotion: Advertising and sales promotion costs are expensed as incurred. Advertising and promotion costs were $9.7 million, $7.8 million and $6.3 million in 2004, 2003 and 2002, respectively.
      Shipping and handling fees and costs: The Company incurred shipping and handling costs totaling $78.3 million, $65.9 million and $60.8 million for the years ended 2004, 2003 and 2002, respectively. These costs are included in Operating expenses in the consolidated statements of operations.
      Income taxes: Using the liability method, provisions for income taxes include deferred taxes resulting from temporary differences in determining income for financial and tax purposes. Such temporary differences result primarily from differences in the carrying value of assets and liabilities.
      Stock based compensation: Beginning in 2003, the Company granted employee stock units in lieu of employee stock options. The fair value of the stock units is amortized over the four-year vesting period from the date of grant. Total expense for fiscal 2004 for the employee stock units that were issued in lieu of stock options was $4.3 million as compared to $1.6 million in 2003.
      Under the provisions of Statement of Financial Accounting Standard (“SFAS”) No. 123, Accounting for Stock-Based Compensation, and SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of SFAS No. 123, the Company has elected to continue to apply the intrinsic value method of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and its related interpretations in accounting for its stock-based compensation plans. In accordance with the APB Opinion No. 25, compensation cost for the Company’s fixed stock options issued were measured as the excess, if any, of the quoted market price of the company’s stock at the date of the grant over the option exercise price and is charged to operations over the vesting period. The Company applied the disclosure-only provisions of SFAS No. 123. Accordingly, because the options were granted at market value, no compensation expense has been recognized in the consolidated statements of operations for the stock option plans.
33 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
      The Black-Scholes option-pricing model was developed for estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options and, because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock options. Had compensation costs for the plans been determined based on the fair value at the grant date using the Black-Scholes option pricing model and amortized over the respective vesting period, the Company’s net income would have been reduced to the pro forma amounts indicated below:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2004		 	2003		 	2002		
 	 	 		 	 		 	 		
 	 	(In millions, except per share		
 	 	data)		
Basic earnings per share	 	 	 	 	 	 	 	 	 	 	 	 	
Net income as reported	 	$	77.7	 	 	$	41.9	 	 	$	43.1	 	
Add: APB Opinion No. 25 Stock-based employee compensation included in net income, net	 	 	3.5	 	 	 	2.5	 	 	 	2.1	 	
Deduct: SFAS No. 123 Stock-based employee compensation expense, net	 	 	(8.8	)	 	 	(9.9	)	 	 	(10.1	)	
 	 	 	 	 	 	 	 	 	 	
Pro forma net income	 	$	72.4	 	 	$	34.5	 	 	$	35.1	 	
 	 	 	 	 	 	 	 	 	 	
Basic earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	
 	As reported	 	$	2.11	 	 	$	1.15	 	 	$	1.17	 	
 	Pro forma	 	$	1.96	 	 	$	0.95	 	 	$	0.95	 	
Diluted earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	
 	As reported	 	$	2.01	 	 	$	1.13	 	 	$	1.13	 	
 	Pro forma	 	$	1.87	 	 	$	0.93	 	 	$	0.95	 	
      The weighted average fair value of the Company’s stock options (which was $14.74 per share in 2002) was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions: expected stock price volatility of 46%; expected dividend yield of zero; risk-free interest rate of 4.7%; and an average expected life of 8 years.
      Recently issued accounting pronouncements: In September of 2004, the Emerging Issues Tasks Force (“EITF”) reached a final conclusion on EITF Issue No. 04-8, The Effect of Contingently Convertible Debt on Diluted Earnings Per Share, that contingently convertible debt instruments will be subject to the if-converted method under SFAS No. 128, Earnings Per Share, regardless of the contingent features included in the instrument. Under prior practice, issuers of contingently convertible debt instruments exclude potential common shares underlying the debt instruments from the calculation of diluted earnings per share until the market price or other contingency is met. The effective date for Issue 04-8 is for reporting periods ending after December 15, 2004. The effect of adopting EITF 04-08 required the Company to retroactively restate earnings per share to reflect the impact of adoption based on the form of the debt as of the year ended December 31, 2004. In December 2004, the Company modified its Convertible Notes due 2033 whereby the conversion of the Convertible Notes due 2033 will be settled in cash up to the accreted principal amount of the convertible note. If the conversion value of the convertible note exceeds the accreted principal amount of the convertible note at the time of conversion, the amount in excess of the accreted value will be settled in stock. The restatement of earnings per share had a minimal impact in the first and second quarters of 2004. The restatement of earnings per share for the third quarter of 2004 resulted in a lower number of diluted shares and, in turn, results in a higher diluted earnings per share calculation of $0.44. There was no impact for 2003. See Note 2 “Income Per Share” for further information.
34 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
      In December 2004, the FASB issued SFAS No. 123 (Revised 2004), a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. The accounting provisions of SFAS No. 123 (Revised 2004) are effective for reporting periods beginning after June 15, 2005. We are required to adopt SFAS No. 123 (Revised 2004) in the third quarter of fiscal 2005. The Company will be required to measure the cost of all employee share-based payments to employees, including grants of employee stock options, using a fair-value-based method. The cost of share-based payments will be recognized over the period during which an employee is required to provide service in exchange for the award. The pro forma disclosures previously permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition. See “Stock based compensation” above for the pro forma net income and net income per share amounts for 2004, 2003, and 2002 as if we had used a fair-value-based method similar to the methods required under SFAS No. 123 (Revised 2004) to measure compensation expense for employee stock incentive awards. The adoption of SFAS No. 123 (Revised 2004) by the Company is expected to result in an additional expense of approximately $2.0 million to be recognized in the second half of 2005.
      In December 2004, the FASB issued Staff Position No. 109-1 (“FAS 109-1”), Application of SFAS No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004. The American Jobs Creation Act of 2004 (“AJCA”) introduces a special 9% tax deduction on qualified production activities. FAS 109-1 clarifies that this tax deduction should be accounted for as a special tax deduction in accordance with SFAS No. 109. Pursuant to the AJCA and the guidance that has been forthcoming to date, the Company will likely not be viewed as conducting “qualified production activities” and, thus, not be able to claim this tax benefit. Accordingly, we do not expect the adoption of these new tax provisions to have a material impact on our consolidated financial position, results of operations or cash flows.
      In December 2004, the FASB issued Staff Position No. 109-2 (“FAS 109-2”), Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004. The AJCA introduces a limited time 85% dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer (repatriation provision), provided certain criteria are met. FAS 109-2 provides accounting and disclosure guidance for the repatriation provision. Although FAS 109-2 is effective immediately, we do not expect to be able to complete our evaluation of the repatriation provision until after Congress or the Treasury Department provides additional clarifying language on key elements of the provision. In January 2005, the Treasury Department began to issue the first of a series of clarifying guidance documents related to this provision. We expect to complete our evaluation of the effects of the repatriation provision within the first two fiscal quarters of 2005. The range of possible amounts that may be available for repatriation under this provision is between zero and $217.7 million. While we estimate that the related potential range of additional U.S. federal income tax is between zero and $11.0 million, this estimation is subject to change following technical correction legislation that we believe is forth-coming from Congress. We estimate that the related potential range of additional foreign withholding tax is between zero and $7.7 million.
      Final determination of the amounts which we may repatriate under the regulations will be limited by the qualifying investment requirements of the Act. Based on the rules promulgated to-date, the Company believes the actual amounts it will repatriate will be substantially less than the high-end noted above.
35 

Table of Contents
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		
NOTE 2. 	INCOME PER SHARE	
      The table below sets forth the computation of basic and diluted income per share:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended		
 	 	 		
 	 	December 31,		 	January 2,		 	January 3,		
 	 	2004		 	2004		 	2003		
 	 	 		 	 		 	 		
 	 	(In millions, except per share data)		
Basic Income per Share:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Income before extraordinary gain	 	$	73.6	 	 	$	41.9	 	 	$	43.1	 	
 	Extraordinary gain, net	 	 	4.1	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
 	Net income	 	$	77.7	 	 	$	41.9	 	 	$	43.1	 	
 	 	 	 	 	 	 	 	 	 	
 	Weighted-average common shares outstanding	 	 	36.9	 	 	 	36.3	 	 	 	37.0	 	
 	Income per share before extraordinary gain	 	$	2.00	 	 	$	1.15	 	 	$	1.17	 	
 	Extraordinary gain per share	 	$	0.11	 	 	$	—	 	 	$	—	 	
 	Net income per share	 	$	2.11	 	 	$	1.15	 	 	$	1.17	 	
Diluted Income per Share:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Income before extraordinary gain	 	$	73.6	 	 	$	41.9	 	 	$	43.1	 	
 	Extraordinary gain, net	 	 	4.1	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
 	Net income	 	$	77.7	 	 	$	41.9	 	 	$	43.1	 	
 	 	 	 	 	 	 	 	 	 	
 	Weighted-average common shares outstanding	 	 	36.9	 	 	 	36.3	 	 	 	37.0	 	
 	Effect of dilutive securities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Stock options and units	 	 	1.3	 	 	 	0.9	 	 	 	1.0	 	
 	 	Convertible notes due 2033	 	 	0.4	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
 	Weighted-average common shares outstanding	 	 	38.6	 	 	 	37.2	 	 	 	38.0	 	
 	 	 	 	 	 	 	 	 	 	
 	Income per share before extraordinary gain	 	$	1.90	 	 	$	1.13	 	 	$	1.13	 	
 	Extraordinary gain per share	 	$	0.11	 	 	$	—	 	 	$	—	 	
 	Net income per share	 	$	2.01	 	 	$	1.13	 	 	$	1.13	 	
      The Convertible Notes due 2033 are convertible into 13.5584 of the Company’s common stock in any calendar quarter if:

			
 	• 	the sales price of our common stock reaches specified thresholds;	
 		
 	• 	during any period in which the credit rating assigned to the Convertible Notes due 2033 is below a specified level;	
 		
 	• 	the Convertible Notes due 2033 are called for redemption; or	
 		
 	• 	specified corporate transactions have occurred.	
      Upon conversion, the Company is required to deliver an amount of cash equal to the accreted principal amount and a number of common stock shares with a value equal to the amount, if any, by which the conversion value exceeds the accreted principal amount at the time of the conversion. In accordance with the provisions of EITF 04-8, additional shares of 0.4 million related to the Convertible Notes due 2033 have been included in the diluted weighted average common shares outstanding for 2004. The inclusion in diluted earnings per share of all contingently issuable stock is required regardless of whether or not the above-mentioned triggers have been met.
36 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
      In 2004, the Company excluded 1.4 million of common stock equivalents relating to the Convertible Notes due 2020 from its calculation of diluted income per share because the effect would not have been dilutive. Because the Convertible Notes due 2020 were not included in the diluted shares outstanding, the related $2.7 million of net interest expense was not excluded from the determination of net income in the calculation of diluted income per share.
      In 2003 and 2002, the Company excluded from its calculation of diluted income per share 6.3 million and 3.1 million shares of common stock equivalents relating to Convertible Notes due 2033 and 2020, respectively. The Convertible Notes due 2033 were excluded as the conversion value did not exceed the accreted principle amount during 2003. The Convertible Notes due 2020 were excluded for both years because the effect would have been antidilutive. Because the convertible notes were not included in the diluted shares outstanding, the related $4.0 million and $7.3 million of net interest expense for 2003 and 2002, respectively, was not excluded from the determination of income in the calculation of diluted income per share.

		
NOTE 3. 	EXTRAORDINARY GAIN	
      In December 2003, the Company received $4.7 million from an escrow account established in connection with the 1983 bankruptcy of Itel Corporation, the predecessor of the Company. As of January 2, 2004, the Company was unable to determine the appropriate beneficiary of this receipt and was in the process of an investigation to determine its proper disposition. As of January 2, 2004, the Company had not recorded income associated with this receipt because of the uncertainty of the beneficiary. During the first quarter of 2004, the Company completed the investigation and concluded that the funds are the property of the Company. Accordingly, in the first quarter of 2004, the Company recorded a $4.1 million extraordinary after-tax gain as a result of the receipt.

		
NOTE 4. 	IMPAIRMENT CHARGE	
      Following the September 2002 acquisition of the assets and operations of Pentacon, Anixter acquired Walters Hexagon as well as the assets and operations of DDI. All three of these businesses are engaged in the supply of “C” class inventory components to original equipment manufacturers throughout the United States and the United Kingdom along with a location in each of France and Italy. As a part of bringing these businesses together to form an industry leading supply chain solution that combines the individual strengths and expertise of the acquired companies with the financial strength and global capabilities of Anixter, a new brand name, Anixter Fasteners sm was introduced in 2004 to reflect the combined capabilities. As a result of this new brand name introduction, the Company recorded an asset impairment charge in its North America business segment of $1.8 million in 2004 to write-down to fair value the value assigned to the Pentacon name when that business was acquired by Anixter, as the Pentacon brand name will no longer be used in the industrial operations.

		
NOTE 5. 	SPECIAL DIVIDEND	
      On February 11, 2004, the Company’s Board of Directors declared a special dividend of $1.50 per common share, or $55.8 million, as a return of excess capital to shareholders. On March 31, 2004, the Company paid $55.1 million of the dividend to shareholders of record as of March 16, 2004. In addition, as required by the plan documents, the remaining dividend of $0.7 million was accrued at December 31, 2004 for payments to be made on the vesting date to holders of employee stock units and restricted stock.
      In accordance with the provisions of the stock option plan, the exercise price and number of options outstanding were adjusted to reflect the special dividend. The average exercise price of outstanding options decreased from $21.48 to $20.40 and the number of outstanding options increased from 4.3 million to 4.5 million. These changes resulted in no additional compensation expense.
37 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
      In accordance with the provisions of the enhanced incentive plan, stock units granted in 2001 were adjusted to reflect the special dividend. The number of outstanding stock units associated with the 2001 grant increased from 53,680 to 56,531. This change resulted in no additional compensation expense.
      The conversion rate of the Convertible Notes due 2033 was adjusted in March 2004 to reflect the special dividend. Holders of the Convertible Notes due 2033 may convert each note into 13.5584 shares of the Company’s common stock to the extent the conversion value exceeds the accreted value per note. For further information regarding the conversion of the Convertible Notes due 2033, see Note 8 “Debt.”

		
NOTE 6. 	ACQUISITIONS	
      On June 22, 2004, the Company purchased substantially all of the assets and operations of DDI. DDI was a privately held value-added distributor of fasteners, hardware and related products specializing in inventory logistics management programs directed at supporting the production lines of original equipment manufacturers across a broad spectrum of industries. Headquartered in Eden Prairie, Minnesota, DDI employs approximately 230 people located in sixteen locations in the United States. The Company believes DDI’s business model complements its strategy of building a global original equipment manufacturer supply business. Included in the results of the Company for 2004, are $34.2 million of sales and $1.0 million of operating losses which includes $0.8 million of acquisition related costs. The purchase was funded with on-hand excess cash balances and cash available under the Company’s revolving credit facility. The Company purchased DDI for $32.9 million inclusive of legal and advisory fees, acquiring tangible assets with a fair value of $19.7 million. The tangible net assets primarily consist of accounts receivable, inventory, fixed assets and prepaid expenses. Based upon a third party valuation, the fair value of customer relationships has been recorded in the Company’s Consolidated Balance Sheet as of December 31, 2004. The Company continues to evaluate the fair value of the remaining assets. Intangible assets have been recorded as follows:

			
 	• 	$2.8 million of intangible assets with a finite life of 8.5 years (customer relationships); and	
 		
 	• 	$10.4 million of goodwill.	
      In the third quarter of 2003, the Company purchased 100% of the stock of Walters Hexagon. Headquartered in Worcester, England, Walters Hexagon is a leading distributor of fasteners and other small parts to original equipment manufacturers and provides inventory management services to a range of markets and industries. Walters Hexagon operates a network of nine service centers in the United Kingdom, France and Italy and employs approximately 350 people. The Company believes Walters Hexagon’s business model and position as a value-added distributor complements its existing U.S. original equipment manufacturer supply business. The Company purchased Walters Hexagon for $43.9 million and assumed $0.7 million of debt, inclusive of legal and financial advisory fees and the additional consideration discussed below, acquiring tangible assets with a fair value of $16.2 million. The tangible net assets primarily consist of accounts receivable, inventory, office and warehouse equipment and furnishings, accounts payable and select operating liabilities. Based upon a third party valuation, assets and liabilities have been recorded at estimated fair value based on an allocation of the purchase price. Intangible assets are recorded as follows:

			
 	• 	$8.3 million of intangible assets with a finite life of 10 years (customer relationships); and	
 		
 	• 	$20.1 million of goodwill.	
      In accordance with the stock purchase agreement, the Company paid additional consideration of £1.0 million ($1.9 million) in the fourth quarter of 2004. The additional consideration paid in the fourth quarter of 2004 was based only on actual operating performance of Walters Hexagon and was recorded as an adjustment to the purchase price. The stock purchase agreement also provides for additional consideration of up to a maximum £2.5 million ($4.9 million at current exchange rates) based on the future operating performance of Walters Hexagon and is also contingent upon identified employees meeting certain service
38 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
requirements. The accrual for the additional consideration is being recorded as compensation expense over the service period through December 2006. The purchase was funded with on-hand excess cash balances along with the assumption of $0.7 million of Walters Hexagon’s debt. Included in the results of the Company for 2004 and 2003 are $108.6 million and $19.0 million of sales and $4.4 million and $0.6 million of operating income, respectively, related to Walters Hexagon.
      On September 20, 2002, the Company completed the purchase of the operations and assets of Pentacon a leading distributor of fasteners and other small parts to original equipment manufacturers and provider of inventory management services, for a total of $111.4 million.
      These acquisitions were accounted for as purchases and the results of operations of the acquired businesses are included in the consolidated financial statements from the date of acquisition. Had these acquisitions occurred at the beginning of the year of acquisition, the impact on the Company’s operating results would not have been significant. Intangible amortization expense is expected to be approximately $2.8 million per year for the next five years.

		
NOTE 7. 	ACCRUED EXPENSES	
      Accrued expenses consisted of the following:
 	 	 	 	 	 	 	 	 	 	
 	 	December 31,		 	January 2,		
 	 	2004		 	2004		
 	 	 		 	 		
 	 	(In millions)		
Salaries and fringe benefits	 	$	59.8	 	 	$	40.7	 	
Income tax payable	 	 	32.8	 	 	 	1.2	 	
Other miscellaneous taxes	 	 	14.9	 	 	 	4.9	 	
Facility	 	 	7.8	 	 	 	4.3	 	
Selling and promotion	 	 	6.9	 	 	 	4.7	 	
Freight	 	 	5.1	 	 	 	4.0	 	
Discontinued operations	 	 	3.7	 	 	 	2.6	 	
Professional fees	 	 	3.7	 	 	 	2.4	 	
Other	 	 	8.7	 	 	 	16.0	 	
 	 	 	 	 	 	 	
 	Total accrued expenses	 	$	143.4	 	 	$	80.8	 	

		
NOTE 8. 	DEBT	
      Debt is summarized below:
 	 	 	 	 	 	 	 	 	 	
 	 	December 31,		 	January 2,		
 	 	2004		 	2004		
 	 	 		 	 		
 	 	(In millions)		
Accounts receivable securitization	 	$	161.8	 	 	$	—	 	
3.25% zero coupon convertible notes	 	 	150.9	 	 	 	146.1	 	
7% zero coupon convertible notes	 	 	67.6	 	 	 	63.1	 	
Bank revolving lines of credit	 	 	32.1	 	 	 	30.0	 	
 	 	 	 	 	 	 	
 	Total debt	 	$	412.4	 	 	$	239.2	 	
 	 	 	 	 	 	 	
39 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		
	Accounts Receivable Securitization Program	
      In October 2000, the Company entered into an accounts receivable securitization program. The program allows the Company to sell, on an ongoing basis without recourse, a majority of the accounts receivable originating in the United States to Anixter Receivables Corporation (“ARC”), a wholly-owned, bankruptcy remote special purpose entity. The securitization program is a three-year agreement expiring in 2007. The assets of ARC are not available to creditors of Anixter in the event of bankruptcy or insolvency proceedings. ARC may in turn sell an interest in these receivables to a financial institution for proceeds of up to $225.0 million. Effective October 1, 2004, ARC, which was previously unconsolidated, is consolidated in the financial statements of the Company (See Note 1 “Significant Accounting Policies”). At December 31, 2004, ARC’s outstanding funding was $161.8 million and had an effective interest rate of 2.90%.
      The average outstanding funding extended to ARC during the year ended December 31, 2004 and January 2, 2004 was approximately $159.2 million and $130.1 million, respectively. The effective funding rate on the ARC debt was 2.04%, 2.06% and 2.60% in 2004, 2003 and 2002, respectively.
Convertible Notes Due 2033
      In July 2003, the Company issued $378.1 million of 3.25% zero coupon convertible senior notes due 2033 (“Old Securities”) and exchanged the notes in December 2004 for new zero coupon convertible notes due 2033 (“New Securities”). All but $5,000 of the Old Securities were tendered in exchange for an equal amount of New Securities. Each of the New Securities has a principal value at maturity of $1,000.
      The net proceeds from the issuance in July 2003 were $139.8 million and were initially used (i) to fund repurchases of $63.5 million of accreted value of the Company’s outstanding 7% zero coupon convertible senior notes from a limited number of holders, (ii) to fund repurchases of approximately $17.2 million of the Company’s common stock and (iii) for general corporate purposes, including the repayment of working capital borrowings under a floating rate bank line of credit. The Company expects to reborrow such amounts under the line of credit from time to time for general corporate purposes. The discount associated with the issuance is being amortized through June 2033, using the effective interest rate method. Issuance costs at December 31, 2004 of approximately $4.2 million are being amortized through June 2033 using the straight-line method.
      The conversion of the Old Securities could be settled in stock, cash or a combination of cash and stock. The conversion of the New Securities will be settled in cash up to the accreted principal amount of the convertible note. If the conversion value of the convertible note exceeds the accreted principal amount of the convertible note at the time of conversion, the amount in excess of the accreted value will be settled in stock.
      Similar to the Old Securities, holders of the New Securities may convert each of them in any calendar quarter if:

			
 	• 	the sales price of our common stock reaches specified thresholds;	
 		
 	• 	during any period in which the credit rating assigned to the New Securities is below a specified level;	
 		
 	• 	the New Securities are called for redemption; or	
 		
 	• 	specified corporate transactions have occurred.	
40 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
      The Company may redeem the New Securities, at any time in whole or in part, on July 7, 2011 for cash at the accreted value. Additionally, holders may require the Company to purchase all or a portion of their New Securities on the following dates:

			
 	• 	July 7, 2007 at a price equal to $432.48 per Convertible Note due 2033;	
 		
 	• 	July 7, 2009 at a price equal to $461.29 per Convertible Note due 2033;	
 		
 	• 	July 7, 2011 at a price equal to $492.01 per Convertible Note due 2033;	
 		
 	• 	July 7, 2013 at a price equal to $524.78 per Convertible Note due 2033;	
 		
 	• 	July 7, 2018 at a price equal to $616.57 per Convertible Note due 2033;	
 		
 	• 	July 7, 2023 at a price equal to $724.42 per Convertible Note due 2033; and	
 		
 	• 	July 7, 2028 at a price equal to $851.13 per Convertible Note due 2033.	
The company is required to pay the purchase price in cash.
      The Company must pay contingent cash interest to the holders of the New Securities during any six-month period commencing July 7, 2011 if the average market price of the New Securities for a five trading day measurement period preceding the applicable six-month period equals 120% or more of the sum of the original issuance price and accrued original issue discount for the New Securities as of the day immediately preceding the relevant six-month period. The contingent interest payable per New Security in respect of any six-month period will equal an annual rate of 0.25% of the average market price of a New Security for the five trading day measurement period and will be payable on the last day of the relevant six-month period. Except for the contingent interest described above, the Company will not pay cash interest on the New Securities prior to maturity. The original issue discount will continue to accrue at the yield to maturity whether or not contingent interest is paid.
      The New Securities are structurally subordinated to the indebtedness of Anixter. The face value of the New Securities outstanding was $378.1 million with a book value of $150.9 million at December 31, 2004. The book value of the Old Securities outstanding at January 2, 2004 was $146.1 million.
Convertible Notes Due 2020
      On June 28, 2000, the Company issued $792.0 million of 7% zero coupon convertible notes due 2020 (“Convertible Notes due 2020”). The Convertible Notes due 2020 are structurally subordinated to the indebtedness of Anixter. The remaining face value of the Convertible Notes due 2020 outstanding was $196.3 million with a book value of $67.6 million and $63.1 million at December 31, 2004 and January 2, 2004, respectively. The discount associated with the issuance is being amortized through June 28, 2020, using the effective interest rate method. Remaining issuance costs at December 31, 2004 of approximately $1.3 million are being amortized through June 2020 using the straight-line method.
      The Company recorded losses on the extinguishment of debt of $6.2 million and $0.3 million in its consolidated statements of operations for the years ended January 2, 2004 and January 3, 2003, respectively,
41 

Table of Contents
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
for repurchases of these notes prior to their maturity and the write-off of associated debt issuance costs. No repurchase activity occurred in 2004. The repurchase activity for 2003 and 2002 is summarized below:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended		
 	 	 		
 	 	January 2, 2004		 	January 3, 2003		
 	 	 		 	 		
 	 	(In millions)		
 	 	Book		 	 	 	Book		 	 	
 	 	Value		 	Cost		 	Value		 	Cost		
 	 	 		 	 		 	 		 	 		
7% zero coupon convertible notes	 	$	67.5	 	 	$	72.2	 	 	$	109.7	 	 	$	107.2	 	
Debt issuance costs written-off	 	$	1.5	 	 	$	—	 	 	$	2.8	 	 	$	—	 	
      Holders of the remaining Convertible Notes due 2020 may convert at any time on or before the maturity date, unless the notes have previously been redeemed or purchased, into 7.4603 shares of the Company’s common stock for which the Company has reserved 1.4 million shares at December 31, 2004 based on the number of currently outstanding bonds. Additionally, holders may require the Company to purchase all or a portion of their Convertible Notes due 2020 on the following dates:

			
 	• 	June 28, 2005, at a price of $356.28 per Convertible Note due 2020;	
 		
 	• 	June 28, 2010, at a price of $502.57 per Convertible Note due 2020; and	
 		
 	• 	June 28, 2015, at a price of $708.92 per Convertible Note due 2020.	
      The Company is required to pay the purchase price in cash.
8% Senior Notes
      During 2003, the Company retired the last of the outstanding 8% senior notes at maturity for $8.0 million. The Company recorded a loss on the extinguishment of debt of $0.4 million in 2002 from repurchases of a portion of these notes prior to maturity.
Revolving Lines of Credit
      On June 18, 2004, Anixter Inc. entered into a new five-year, senior unsecured $275.0 million revolving credit agreement to support future growth of the business. This new facility replaces a similar sized facility that was set to expire in October 2005. The borrowing rate under the new revolving credit agreement is LIBOR plus 77.5 basis points. In addition, there are facility fees on the revolving credit facility equal to 22.5 basis points. The new agreement, which is guaranteed by Anixter International Inc., contains covenants that among other things restricts the leverage ratio and sets a minimum fixed charge coverage ratio. In connection with this refinancing, the company recorded a pre-tax loss of $0.7 million in the second quarter of 2004 for the write-off of deferred financing costs remaining from the refinanced facility.
      In March 2003, Anixter cancelled $115.0 million of the $390.0 million refinanced five-year agreement that was set to expire in October 2005 in order to reduce costs associated with this excess availability. Accordingly, in 2003 Anixter recorded a loss on the extinguishment of debt of approximately $0.4 million to expense the financing fees associated with this portion of the revolving credit agreement that was set to expire in October 2005, in its consolidated statements of operations.
      At December 31, 2004, the primary liquidity source for Anixter is the new $275.0 million, five-year revolving credit agreement, $30.0 million of which was outstanding, leaving $245.0 million available to be borrowed. Approximately $67.0 million may be used to pay the Company for intercompany liabilities. The borrowing rate on the revolving credit agreement is LIBOR plus 77.5 basis points and the interest rate on the $30.0 million outstanding balance was 3.50% at December 31, 2004. Facility fees of 22.5 basis points in 2004 and 25.0 basis points in 2003 and 2002, respectively, payable on the five-year revolving credit agreement
42 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
totaled $0.7 million, $0.7 million and $1.0 million in 2004, 2003 and 2002, respectively, and were included in interest expense in the consolidated statements of operations. This revolving credit agreement requires certain covenant ratios to be maintained. The Company is in compliance with all of these covenant ratios and believes that there is adequate margin between the covenant ratios and the actual ratios given the current trends of the business. See Exhibit 4.3 for definitions of the covenant ratios. Under the leverage ratio, as of December 31, 2004, all of the $245.0 million available under bank revolving lines of credit at Anixter would be permitted to be borrowed, of which $190.7 million may be used to pay dividends to the Company.
      At December 31, 2004 and January 2, 2004, certain foreign subsidiaries had approximately $24.0 million and $20.4 million, respectively, available under bank revolving lines of credit, $2.1 million of which was outstanding at December 31, 2004 and none at January 2, 2004.
Other
      On December 17, 2004, Anixter Inc. filed a shelf registration statement with the Securities and Exchange Commission to offer from time to time up to $300.0 million of debt securities, guaranteed by the Company. The registration became effective on February 15, 2005.
      Interest paid in 2004, 2003 and 2002 was $3.7 million, $3.4 million and $4.3 million, respectively.
      Certain debt agreements entered into by the Company’s subsidiaries contain various restrictions, including restrictions on payments to the Company. The Company has guaranteed substantially all of the debt of its subsidiaries. Restricted net assets of its subsidiaries were approximately $979.4 million and $649.6 million at December 31, 2004 and January 2, 2004, respectively.
      Aggregate annual maturities of debt at December 31, 2004 were as follows: 2005 — none; 2006 — none; 2007 — $161.8 million; 2008 — none; 2009 — $32.1 million; and $218.5 million thereafter.
      The estimated fair value of the Company’s debt at December 31, 2004 and January 2, 2004 was $467.2 million and $259.1 million, respectively, based on public quotations and current market rates.

		
NOTE 9. 	COMMITMENTS AND CONTINGENCIES	
      Substantially all of the Company’s office and warehouse facilities and equipment are leased under operating leases. A certain number of these leases are long-term operating leases containing rent escalation clauses and expire at various dates through 2023. Most operating leases entered into by the Company contain renewal options.
      During 2003, the Company completed a sale and leaseback of its corporate headquarters facility. Under the terms of the transaction, Anixter received proceeds of $27.0 million equal to the amount expended for construction of the facility during 2002 and 2003. At the same time, Anixter entered into a 20-year operating lease agreement for the facility. Proceeds from the transaction were used for general corporate purposes.
      Minimum lease commitments under operating leases at December 31, 2004 are as follows:
 	 	 	 	 	
 	 	(In millions)		
 	 	 		
2005	 	$	43.8	 	
2006	 	 	34.8	 	
2007	 	 	26.1	 	
2008	 	 	19.5	 	
2009	 	 	17.2	 	
2010 and thereafter	 	 	88.8	 	
 	 	 	 	
Total	 	$	230.2	 	
 	 	 	 	
43 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
      Total rental expense was $57.8 million, $50.1 million and $50.5 million in 2004, 2003 and 2002, respectively. Aggregate future minimum rentals to be received under noncancelable subleases at December 31, 2004 was $4.8 million.
      From time to time, in the ordinary course of business, the Company and its subsidiaries become involved as plaintiffs or defendants in various legal proceedings. The claims and counterclaims in such litigation, including those for punitive damages, individually in certain cases and in the aggregate, involve amounts that may be material. However, it is the opinion of the Company’s management, based upon the advice of its counsel, that the ultimate disposition of pending litigation will not be material to the Company’s financial position and results of operation.
NOTE 10. INCOME TAXES
      The Company and its U.S. subsidiaries file their federal income tax return on a consolidated basis. As of December 31, 2004, the Company had no net operating loss (“NOL”) or tax credit carryforwards for U.S. federal income tax purposes.
      At December 31, 2004, various foreign subsidiaries of the Company had aggregate cumulative NOL carryforwards for foreign income tax purposes of approximately $134.2 million, which are subject to various provisions of each respective country. Approximately $40.0 million of this amount expires between 2005 and 2014 and $94.2 million of the amount has an indefinite life.
      Of the $134.2 million NOL carryforwards of foreign subsidiaries mentioned above, $91.4 million relates to losses that have already provided a tax benefit in the U.S. due to rules permitting flow-through of such losses in certain circumstances. Without such losses included, the cumulative NOL carryforwards at December 31, 2004 were approximately $42.8 million, which are subject to various provisions of each respective country. Approximately $25.2 million of this amount expires between 2005 and 2014 and $17.6 million of the amount has an indefinite life. The deferred tax asset and valuation allowance, shown below relating to foreign NOL carryforwards, have been adjusted to reflect only the carryforwards for which the Company has not taken a tax benefit in the United States. In 2004 and 2003, the Company recorded a valuation allowance related to our foreign NOL carryforwards to reduce the deferred tax asset to the amount that is more likely than not to be realized.
      Domestic income before income taxes was $85.8 million, $44.9 million and $62.7 million for 2004, 2003 and 2002, respectively. Foreign income before income taxes was $34.8 million, $28.0 million and $9.0 million for 2004, 2003 and 2002, respectively.
      Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $171.9 million at December 31, 2004. Historically, the Company considered those earnings to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes or any withholding taxes has been recorded. Upon distribution of those earnings in the form of dividends or otherwise, the Company may be subject to both U.S. income taxes (subject to adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. The American Jobs Creation Act of 2004 (“AJCA”) has created an opportunity, and incentive, for U.S. companies to cause the distribution of earnings of foreign subsidiaries to the U.S. at a significantly reduced U.S. tax cost, in many cases, compared to the costs before such legislation. The requirements of this legislation are highly complex and details continue to be clarified in IRS pronouncements. The Company is studying the feasibility of making distributions from its foreign subsidiaries in 2005, which is the duration of the opportunity. As a distribution business, the Company’s ability to identify qualified investments is limited. Additionally, with respect to the countries that have undistributed earnings as of December 31, 2004, according to the foreign laws and treaties in place at that time, estimated U.S. federal income tax of approximately $27.0 million and various foreign jurisdiction withholding taxes of approximately $14.5 million would be payable upon the remittance of all earnings at December 31, 2004. These computations
44 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
do not reflect the AJCA provided favorable taxation of such a distribution as no “repatriation plan” was in effect as of such date.
      The Company had net payments for income taxes in 2004, 2003 and 2002 of $20.7 million, $27.4 million and $26.1 million, respectively.
      As of December 31, 2004, the Company has recorded a current income tax payable of $32.8 million. The aggregate amount of global income tax reserves and related interest recorded in current taxes payable was approximately $15.1 million. These reserves cover a wide range of issues and involve numerous different taxing jurisdictions. The single largest item ($3.5 million) relates to a dispute with the state of Wisconsin concerning income taxes payable upon the 1993 sale of a short-line railroad that operated wholly within such state. Other significant exposures for which reserves exist include, but are not limited to, a variety of foreign jurisdictional transfer pricing disputes and foreign withholding tax issues related to inter-company transfers and services.
      Significant components of the Company’s deferred tax assets and (liabilities) were as follows:
 	 	 	 	 	 	 	 	 	 	
 	 	December 31,		 	January 2,		
 	 	2004		 	2004		
 	 	 		 	 		
 	 	(In millions)		
Accreted interest	 	$	(3.5	)	 	$	(1.0	)	
Other	 	 	—	 	 	 	(14.4	)	
 	 	 	 	 	 	 	
 	Gross deferred tax liabilities	 	 	(3.5	)	 	 	(15.4	)	
Deferred compensation	 	 	21.9	 	 	 	20.2	 	
Foreign NOL carryforwards	 	 	15.4	 	 	 	19.1	 	
Inventory reserves	 	 	9.1	 	 	 	10.2	 	
Allowance for doubtful accounts	 	 	3.7	 	 	 	3.3	 	
Depreciation and amortization	 	 	3.0	 	 	 	3.5	 	
Other	 	 	5.6	 	 	 	4.2	 	
 	 	 	 	 	 	 	
 	Gross deferred tax assets	 	 	58.7	 	 	 	60.5	 	
 	 	 	 	 	 	 	
 	Gross net deferred tax assets	 	 	55.2	 	 	 	45.1	 	
Valuation allowance	 	 	(12.5	)	 	 	(19.1	)	
 	 	 	 	 	 	 	
 	Net deferred tax assets	 	$	42.7	 	 	$	26.0	 	
 	 	 	 	 	 	 	
Net current deferred tax assets	 	$	16.3	 	 	$	16.5	 	
Net non-current deferred tax assets	 	 	26.4	 	 	 	9.5	 	
 	 	 	 	 	 	 	
 	Net deferred tax assets	 	$	42.7	 	 	$	26.0	 	
 	 	 	 	 	 	 	
45 

Table of Contents
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
      Income tax expense (benefit) from continuing operations was comprised of:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended		
 	 	 		
 	 	December 31,		 	January 2,		 	January 3,		
 	 	2004		 	2004		 	2003		
 	 	 		 	 		 	 		
 	 	(In millions)		
Current:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Foreign	 	$	15.1	 	 	$	10.6	 	 	$	9.7	 	
 	State	 	 	9.5	 	 	 	2.7	 	 	 	1.9	 	
 	Federal	 	 	39.1	 	 	 	7.8	 	 	 	15.4	 	
 	 	 	 	 	 	 	 	 	 	
 	 	 	63.7	 	 	 	21.1	 	 	 	27.0	 	
Deferred:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Foreign	 	 	(5.7	)	 	 	0.6	 	 	 	4.3	 	
 	State	 	 	(4.0	)	 	 	0.7	 	 	 	0.2	 	
 	Federal	 	 	(7.0	)	 	 	8.6	 	 	 	(2.8	)	
 	 	 	 	 	 	 	 	 	 	
 	 	 	(16.7	)	 	 	9.9	 	 	 	1.7	 	
 	 	 	 	 	 	 	 	 	 	
 	 	Income tax expense	 	$	47.0	 	 	$	31.0	 	 	$	28.7	 	
 	 	 	 	 	 	 	 	 	 	
      Reconciliations of income tax expense on continuing operations to the statutory corporate federal tax rate of 35% were as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended		
 	 	 		
 	 	December 31,		 	January 2,		 	January 3,		
 	 	2004		 	2004		 	2003		
 	 	 		 	 		 	 		
 	 	(In millions)		
Statutory tax expense	 	$	42.2	 	 	$	25.5	 	 	$	25.1	 	
Increase (reduction) in taxes resulting from:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Foreign tax NOLs	 	 	(2.9	)	 	 	0.3	 	 	 	4.7	 	
 	State income taxes	 	 	3.6	 	 	 	2.2	 	 	 	1.4	 	
 	IRS audit activity*	 	 	2.8	 	 	 	—	 	 	 	—	 	
 	Other foreign tax effects	 	 	0.8	 	 	 	0.4	 	 	 	1.8	 	
 	Other, net	 	 	0.5	 	 	 	2.6	 	 	 	(4.3	)	
 	 	 	 	 	 	 	 	 	 	
 	 	Income tax expense	 	$	47.0	 	 	$	31.0	 	 	$	28.7	 	
 	 	 	 	 	 	 	 	 	 	
* Charge associated with the conclusion of the examination of the 1999-2001 federal income tax returns by the IRS.
46 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		
NOTE 11. 	PENSION PLANS, POST-RETIREMENT BENEFITS AND OTHER BENEFITS	
      The Company has various defined benefit and defined contributory pension plans. The defined benefit plans of the Company are the Anixter Inc. Pension Plan, Executive Benefit Plan and Supplemental Executive Retirement Plan (together the “Domestic Plans”) and various pension plans covering employees of foreign subsidiaries (“Foreign Plans”). The majority of the Company’s pension plans are non-contributory and cover substantially all full-time domestic employees and certain employees in other countries. Retirement benefits are provided based on compensation as defined in both the Domestic and Foreign Plans. The Company’s policy is to fund all plans as required by the Employee Retirement Income Security Act of 1974 (“ERISA”), the Internal Revenue Service and applicable foreign laws. Assets in the various plans consisted primarily of equity securities and fixed income fund investments.
      The investment objective of both the Domestic and Foreign Plans is to ensure, over the long-term life of the Plans, an adequate level of assets to fund the benefits to employees and their beneficiaries at the time they are payable. In meeting this objective, Anixter seeks to achieve a high level of total investment return consistent with a prudent level of portfolio risk. The risk tolerance of Anixter indicates an above average ability to accept risk relative to that of a typical contributory or non-contributory pension plan as the duration of the projected benefit obligation is longer than the average company. The risk preference indicates a willingness to accept some increases in short-term volatility in order to maximize long-term returns.
      The Domestic Plans’ and Foreign Plans’ asset mixes as of December 31, 2004 and January 2, 2004 and the Company’s asset allocation guidelines for such plans are summarized as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Domestic Plans		
 	 	 		
 	 	 	 	Allocation Guidelines		
 	 	December 31,		 	January 2,		 	 		
 	 	2004		 	2004		 	Min		 	Target		 	Max		
 	 	 		 	 		 	 		 	 		 	 		
Large capitalization U.S. stocks	 	 	33.3	%	 	 	34.0	%	 	 	20	%	 	 	30	%	 	 	40%	 	
Small capitalization U.S. stocks	 	 	17.1	 	 	 	17.1	 	 	 	10	 	 	 	15	 	 	 	20	 	
International stocks	 	 	14.9	 	 	 	14.4	 	 	 	10	 	 	 	15	 	 	 	20	 	
Convertible investments	 	 	9.4	 	 	 	9.9	 	 	 	5	 	 	 	10	 	 	 	15	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total equity securities	 	 	74.7	 	 	 	75.4	 	 	 	 	 	 	 	70	 	 	 	 	 	
Fixed income investments	 	 	24.7	 	 	 	24.2	 	 	 	25	 	 	 	30	 	 	 	35	 	
Other investments	 	 	0.6	 	 	 	0.4	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	100.0	%	 	 	100.0	%	 	 	 	 	 	 	100	%	 	 	 	 	

 	 	Foreign Plans		
 	 	 		
 	 	 	 	Allocation Guidelines		
 	 	December 31,		 	January 2,		 	 		
 	 	2004		 	2004		 	 	 	Target		 	 	
 	 	 		 	 		 	 	 	 		 	 	
Equity securities	 	 	73.3	%	 	 	75.4	%	 	 	 	 	 	 	70	%	 	 	 	 	
Fixed income investments	 	 	21.0	 	 	 	21.3	 	 	 	 	 	 	 	20	 	 	 	 	 	
Other investments	 	 	5.7	 	 	 	3.3	 	 	 	 	 	 	 	10	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	100.0	%	 	 	100.0	%	 	 	 	 	 	 	100	%	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
47 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
      The pension committees meet regularly to assess investment performance and re-allocate assets that fall outside of its allocation guidelines.
      The North American investment policy guidelines are as follows:

			
 	• 	Each asset class is actively managed by one investment manager;	
 		
 	• 	Each asset class may be invested in a commingled fund, mutual fund, or separately managed account;	
 		
 	• 	Each manager is expected to be “fully invested” with minimal cash holdings;	
 		
 	• 	The use of options and futures is limited to covered hedges only;	
 		
 	• 	Each equity asset manager has a minimum number of individual company stocks that need to be held and there are restrictions on the total market value that can be invested in any one industry and the percentage that any one company can be of the portfolio total. The domestic equity funds are limited as to the percentage that can be invested in international securities;	
 		
 	• 	The international stock fund is limited to readily marketable securities; and	
 		
 	• 	The fixed income fund has similar restrictions as the equity funds and is further restricted by minimum investment ratings.	
      The investment policies for the European plans are the responsibility of the various trustees. Generally, the investment policy guidelines are as follows:

			
 	• 	Make sure that the obligations to the beneficiaries of the Plan can be met;	
 		
 	• 	Maintain funds at a level to meet the minimum funding requirements; and	
 		
 	• 	The investment managers are expected to provide a return, within certain tracking tolerances, close to that of the relevant market’s indices.	
48 

Table of Contents
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
      The expected long-term rate of return on both the Domestic and Foreign Plans’ assets reflects the average rate of earnings expected on the invested assets and future assets to be invested to provide for the benefits included in the projected benefit obligation. The expected rate of return on plan assets for 2005 is 7.95%.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Pension Benefits		
 	 	 		
 	 	Domestic		 	Foreign		 	Total		
 	 	 		 	 		 	 		
 	 	2004		 	2003		 	2004		 	2003		 	2004		 	2003		
 	 	 		 	 		 	 		 	 		 	 		 	 		
 	 	(In millions)		
Change in projected benefit obligation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Beginning balance	 	$	115.2	 	 	$	100.1	 	 	$	62.3	 	 	$	39.1	 	 	$	177.5	 	 	$	139.2	 	
 	Service cost	 	 	6.0	 	 	 	5.1	 	 	 	3.9	 	 	 	3.4	 	 	 	9.9	 	 	 	8.5	 	
 	Interest cost	 	 	7.4	 	 	 	6.4	 	 	 	3.7	 	 	 	2.4	 	 	 	11.1	 	 	 	8.8	 	
 	Plan participants contributions	 	 	—	 	 	 	—	 	 	 	0.3	 	 	 	—	 	 	 	0.3	 	 	 	—	 	
 	Net effect of settlement	 	 	—	 	 	 	—	 	 	 	(0.1	)	 	 	(2.2	)	 	 	(0.1	)	 	 	(2.2	)	
 	Actuarial loss	 	 	12.7	 	 	 	6.7	 	 	 	6.0	 	 	 	1.5	 	 	 	18.7	 	 	 	8.2	 	
 	Acquisition	 	 	—	 	 	 	—	 	 	 	—	 	 	 	13.2	 	 	 	—	 	 	 	13.2	 	
 	Amendment	 	 	(0.1	)	 	 	—	 	 	 	1.2	 	 	 	—	 	 	 	1.1	 	 	 	—	 	
 	Benefits paid	 	 	(3.2	)	 	 	(3.1	)	 	 	(0.7	)	 	 	(1.0	)	 	 	(3.9	)	 	 	(4.1	)	
 	Unrecognized prior service cost	 	 	4.6	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	4.6	 	 	 	—	 	
 	Foreign currency exchange rate changes	 	 	—	 	 	 	—	 	 	 	5.9	 	 	 	5.9	 	 	 	5.9	 	 	 	5.9	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Ending balance	 	$	142.6	 	 	$	115.2	 	 	$	82.5	 	 	$	62.3	 	 	$	225.1	 	 	$	177.5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Change in plan assets at fair value:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Beginning balance	 	$	75.0	 	 	$	58.2	 	 	$	43.5	 	 	$	27.7	 	 	$	118.5	 	 	$	85.9	 	
 	Actual return on plan assets	 	 	7.4	 	 	 	14.6	 	 	 	3.5	 	 	 	2.4	 	 	 	10.9	 	 	 	17.0	 	
 	Acquisitions	 	 	—	 	 	 	—	 	 	 	—	 	 	 	8.3	 	 	 	—	 	 	 	8.3	 	
 	Company contributions	 	 	6.3	 	 	 	5.3	 	 	 	3.9	 	 	 	3.0	 	 	 	10.2	 	 	 	8.3	 	
 	Plan participants contributions	 	 	—	 	 	 	—	 	 	 	0.3	 	 	 	—	 	 	 	0.3	 	 	 	—	 	
 	Benefits paid	 	 	(3.2	)	 	 	(3.1	)	 	 	(0.7	)	 	 	(1.0	)	 	 	(3.9	)	 	 	(4.1	)	
 	Net effect of settlement	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1.2	)	 	 	—	 	 	 	(1.2	)	
 	Foreign currency exchange rate changes	 	 	—	 	 	 	—	 	 	 	6.0	 	 	 	4.3	 	 	 	6.0	 	 	 	4.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Ending balance	 	$	85.5	 	 	$	75.0	 	 	$	56.5	 	 	$	43.5	 	 	$	142.0	 	 	$	118.5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reconciliation of funded status:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Projected benefit obligation	 	$	(142.6	)	 	$	(115.2	)	 	$	(82.5	)	 	$	(62.3	)	 	$	(225.1	)	 	$	(177.5	)	
 	Plan assets at fair value	 	 	85.5	 	 	 	75.0	 	 	 	56.5	 	 	 	43.5	 	 	 	142.0	 	 	 	118.5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Funded status	 	 	(57.1	)	 	 	(40.2	)	 	 	(26.0	)	 	 	(18.8	)	 	 	(83.1	)	 	 	(59.0	)	
 	Unrecognized net actuarial loss	 	 	26.8	 	 	 	15.5	 	 	 	13.5	 	 	 	7.7	 	 	 	40.3	 	 	 	23.2	 	
 	Unrecognized prior service cost	 	 	5.9	 	 	 	1.7	 	 	 	0.2	 	 	 	0.3	 	 	 	6.1	 	 	 	2.0	 	
 	Minimum pension liability	 	 	(4.2	)	 	 	—	 	 	 	(2.7	)	 	 	(0.8	)	 	 	(6.9	)	 	 	(0.8	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Accrued benefit cost	 	$	(28.6	)	 	$	(23.0	)	 	$	(15.0	)	 	$	(11.6	)	 	$	(43.6	)	 	$	(34.6	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average assumptions used for measurement of the projected benefit obligation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Discount rate	 	 	5.90	%	 	 	6.25	%	 	 	5.59	%	 	 	5.66	%	 	 	5.79	%	 	 	6.04%	 	
 	Salary growth rate	 	 	4.80	%	 	 	5.44	%	 	 	3.80	%	 	 	3.89	%	 	 	4.41	%	 	 	4.82%	 	
49 

Table of Contents
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Pension Benefits		
 	 	 		
 	 	Domestic		 	Foreign		 	Total		
 	 	 		 	 		 	 		
 	 	2004		 	2003		 	2002		 	2004		 	2003		 	2002		 	2004		 	2003		 	2002		
 	 	 		 	 		 	 		 	 		 	 		 	 		 	 		 	 		 	 		
 	 	(In millions)		
Components of net periodic cost:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Service cost	 	$	6.0	 	 	$	5.1	 	 	$	4.1	 	 	$	3.9	 	 	$	3.4	 	 	$	3.0	 	 	$	9.9	 	 	$	8.5	 	 	$	7.1	 	
 	Interest cost	 	 	7.4	 	 	 	6.4	 	 	 	6.3	 	 	 	3.7	 	 	 	2.4	 	 	 	2.0	 	 	 	11.1	 	 	 	8.8	 	 	 	8.3	 	
 	Expected return on plan assets	 	 	(6.5	)	 	 	(5.3	)	 	 	(6.1	)	 	 	(3.4	)	 	 	(2.2	)	 	 	(2.1	)	 	 	(9.9	)	 	 	(7.5	)	 	 	(8.2	)	
 	Net amortization	 	 	0.9	 	 	 	0.7	 	 	 	0.1	 	 	 	0.2	 	 	 	0.2	 	 	 	(0.2	)	 	 	1.1	 	 	 	0.9	 	 	 	(0.1	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Periodic benefit cost prior to settlement	 	 	7.8	 	 	 	6.9	 	 	 	4.4	 	 	 	4.4	 	 	 	3.8	 	 	 	2.7	 	 	 	12.2	 	 	 	10.7	 	 	 	7.1	 	
 	Net settlement	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1.6	)	 	 	—	 	 	 	—	 	 	 	(1.6	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net periodic cost	 	$	7.8	 	 	$	6.9	 	 	$	4.4	 	 	$	4.4	 	 	$	2.2	 	 	$	2.7	 	 	$	12.2	 	 	$	9.1	 	 	$	7.1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average assumption used to measure
net periodic cost:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Discount rate	 	 	6.25	%	 	 	6.75	%	 	 	7.25	%	 	 	5.66	%	 	 	5.69	%	 	 	5.71	%	 	 	6.03	%	 	 	6.45	%	 	 	6.81	%	
 	Expected return on plan assets	 	 	8.50	%	 	 	9.00	%	 	 	9.00	%	 	 	7.11	%	 	 	7.19	%	 	 	7.22	%	 	 	7.95	%	 	 	8.42	%	 	 	8.43	%	
 	Salary growth rate	 	 	5.44	%	 	 	5.44	%	 	 	5.44	%	 	 	3.89	%	 	 	3.89	%	 	 	3.95	%	 	 	4.83	%	 	 	4.82	%	 	 	4.82	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Estimated Future Benefit		
 	 	Payments		
 	 	 		
 	 	Domestic		 	Foreign		 	Total		
 	 	 		 	 		 	 		
2005	 	$	3.2	 	 	$	0.4	 	 	$	3.6	 	
2006	 	 	3.3	 	 	 	0.5	 	 	 	3.8	 	
2007	 	 	3.4	 	 	 	0.5	 	 	 	3.9	 	
2008	 	 	3.7	 	 	 	0.6	 	 	 	4.3	 	
2009	 	 	3.9	 	 	 	0.7	 	 	 	4.6	 	
2010-2014	 	 	29.5	 	 	 	7.2	 	 	 	36.7	 	
 	 	 	 	 	 	 	 	 	 	
Total	 	$	47.0	 	 	$	9.9	 	 	$	56.9	 	
 	 	 	 	 	 	 	 	 	 	
      The accumulated benefit obligation for the Domestic Plans in 2004 and 2003 was $109.9 million and $87.6 million, respectively, and for the Foreign Plans it was $61.1 million and $45.6 million, respectively. The Company has seven plans in 2004 and five plans in 2003 where the accumulated benefit obligation is in excess of the fair value of plan assets.
      A minimum pension liability is defined as the difference between the accumulated benefit obligation and the underlying pension plan assets and the accrued pension liability. In 2004, the Company was required to record a minimum pension liability of $4.2 million relating to the Domestic Plans. There was no income statement impact as the offset to the minimum pension liability adjustment for the Domestic Plans was an intangible asset of $4.2 million in 2004. No additional minimum pension liability existed in 2003. In 2004 and 2003, the Company recorded a minimum pension liability of $2.7 million and $0.8 million, respectively, relating to its Foreign Plans. The Foreign Plans’ offset, net of deferred taxes, was to other comprehensive income of $1.3 million and $0.5 million in 2004 and 2003, respectively. In 2003, two foreign defined benefit pension plans were terminated and replaced by two foreign defined contribution plans. As a result of the settlement, the Company realized a cumulative gain of $1.6 million, net of tax, which was recorded in the year ended January 2, 2004 consolidated results of operations. The measurement date for all plans is December 31.
      The Company currently estimates that it will make contributions of approximately $6.0 million to its Domestic Plan and $4.0 million to its Foreign Plans in 2005.
50 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
      Non-union domestic employees of the Company hired on or after June 1, 2004 earn a benefit under a personal retirement account (cash balance account). Each year, a participant’s account receives a credit equal to 2.0% of the participant’s salary (2.5% if the participant’s years of service at the beginning of the plan year are five or more). Interest earned on the credited amount is not credited to the personal retirement account, but is contributed to the participant’s account in the Anixter Inc. Employee Savings Plan. The contribution equals the interest earned on the personal retirement account in the Domestic Plan and is based on the 10-year Treasury securities rate as of the last business day of December.
      Anixter Inc. adopted the Anixter Inc. Employee Savings Plan effective January 1, 1994. The Plan is a defined-contribution plan covering all non-union domestic employees of the Company. Participants are eligible and encouraged to enroll in the tax-deferred plan on their date of hire. The savings plan is subject to the provisions of ERISA. The Company makes a matching contribution equal to 25% of a participant’s contribution, up to 6% of a participant’s compensation. The Company’s contributions to these plans are based upon various levels of employee participation. The total cost of all of the defined contribution plans was $1.9 million, $1.5 million and $1.6 million in 2004, 2003 and 2002, respectively.
      The Company has no other post-retirement benefits other than the pension plans and savings plans described herein.
      A non-qualified deferred compensation plan was implemented on January 1, 1995. The plan permits selected employees to make pre-tax deferrals of salary and bonus. Interest is accrued quarterly on the deferred compensation balances based on the average 10-year treasury note rate for the previous three months times a factor of 1.4, and the rate is further adjusted if certain Company financial goals are achieved. The plan provides for benefit payments upon retirement, death, disability, termination or other scheduled dates determined by the participant. At December 31, 2004 and January 2, 2004, the long-term deferred compensation liability was $20.6 million and $17.4 million, respectively.
      Concurrent with the implementation of the deferred compensation plan, the Company purchased variable, separate account life insurance policies on the lives of the participants. To provide for the liabilities associated with the deferred compensation plan and an executive non-qualified defined benefit plan, fixed general account “increasing whole life” insurance policies were purchased on the lives of certain participants. The Company pays level annual premiums on the above company-owned policies. The last premium is due in 2005. Policy proceeds are payable to the Company upon the insured participant’s death. At December 31, 2004 and January 2, 2004, the cash surrender value of $28.2 million and $23.9 million, respectively, was recorded under this program and reflected in “Other assets” on the consolidated balance sheets.

		
NOTE 12. 	PREFERRED STOCK AND COMMON STOCK	

		
	Preferred Stock	
      The Company has the authority to issue 15.0 million shares of preferred stock, par value $1.00 per share, none of which was outstanding at the end of 2004 and 2003.

		
	Common Stock	
      The Company has the authority to issue 100.0 million shares of common stock, par value $1.00 per share, of which 37.4 million shares and 36.4 million shares were outstanding at the end of 2004 and 2003, respectively.
      In 2003, the Company repurchased 1.6 million shares at an average cost of $22.74. Purchases were made in the open market and were financed from cash generated by operations and the net proceeds ($139.8 million) from the issuance of $378.1 million of the Convertible Notes due 2033. No shares were repurchased in
51 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2004 or 2002. However, the Company may purchase additional shares with the volume and timing dependent on market conditions.

		
	Restricted Shares and Stock Units	
      The Company issued restricted shares in 2000, 2001 and 2002. The 2002 issuance was cancelled in 2003. Restricted stock fully vests after four years from the date of grant. At December 31, 2004, there were 10,447 restricted shares outstanding which will vest on January 2, 2005. Compensation expense associated with the restricted stock grants was $0.2 million, $0.8 million and $1.7 million in 2004, 2003 and 2002, respectively.
      Beginning in 2003, the Company granted stock units in lieu of employee stock options under the 2001 Stock Incentive Plan. The Company granted approximately 244,630 stock units to employees in 2004 and 248,000 in 2003 with a weighted-average grant date fair value of $30.50 and $23.34 per share, respectively. The grant date value of the stock units is amortized and converted to common stock over a four-year vesting period from the date of grant. Compensation expense associated with the stock units was $4.6 million, $2.2 million and $1.1 million in 2004, 2003 and 2002, respectively.
      In 1996, the Company adopted a Director Stock Unit Plan to pay its non-employee directors annual retainer fees in the form of stock units. These stock units convert to common stock of the Company at a pre-arranged time selected by each director. Stock units were granted to eleven directors in 2004, ten directors in 2003 and nine directors in 2002 having an aggregate value at grant date of $1.0 million, $1.1 million and $0.6 million, respectively.
      The following table summarizes the activity under the director and employee stock unit plans:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Weighted		 	 	 	Weighted		
 	 	Director		 	Average		 	Employee		 	Average		
 	 	Stock		 	Grant Date		 	Stock		 	Grant Date		
 	 	Units		 	Value		 	Units		 	Value		
 	 	 		 	 		 	 		 	 		
 	 	(Units in thousands)		
Balance at December 28, 2001	 	 	83.0	 	 	$	21.32	 	 	 	161.0	 	 	$	18.81	 	
Granted	 	 	24.8	 	 	 	23.02	 	 	 	—	 	 	 	—	 	
Converted	 	 	(6.6	)	 	 	18.33	 	 	 	(53.6	)	 	 	18.81	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at January 3, 2003	 	 	101.2	 	 	 	21.93	 	 	 	107.4	 	 	 	18.81	 	
Granted	 	 	47.8	 	 	 	23.56	 	 	 	248.0	 	 	 	23.34	 	
Converted	 	 	(7.1	)	 	 	26.32	 	 	 	(53.6	)	 	 	18.81	 	
Canceled	 	 	—	 	 	 	—	 	 	 	(17.1	)	 	 	22.89	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at January 2, 2004	 	 	141.9	 	 	 	22.26	 	 	 	284.7	 	 	 	22.51	 	
Adjustment *	 	 	—	 	 	 	—	 	 	 	2.8	 	 	 	18.81	 	
Granted	 	 	30.4	 	 	 	33.24	 	 	 	244.6	 	 	 	30.50	 	
Converted	 	 	(9.2	)	 	 	26.87	 	 	 	—	 	 	 	—	 	
Canceled	 	 	—	 	 	 	—	 	 	 	(6.4	)	 	 	25.57	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2004	 	 	163.1	 	 	$	24.05	 	 	 	525.7	 	 	$	26.17	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
* In accordance with the provisions of the enhanced incentive plan, stock units granted in 2001 were adjusted to reflect the special dividend. The number of outstanding stock units associated with the 2001 grant increased from 53,680 to 56,531. This change resulted in no additional compensation expense.
52 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		
	Stock Options and Stock Grants	
      At December 31, 2004, the Company had reserved a total of 7.4 million shares for future issuance, 6.6 million of which were reserved for the holders of the convertible notes as discussed in Note 8 “Debt.” Additionally, the Company had stock incentive plans that reserve 0.8 million shares for additional stock option awards or stock grants. Options previously granted under these plans have been granted with exercise prices at, or higher than, the fair market value of the common stock on the date of grant. One-fourth of the employee options granted become exercisable each year after the year of grant. The director options fully vest in one year. All options expire ten years after the date of grant.
      The following table summarizes the 2004, 2003 and 2002 activity under the employee and director option plans:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Weighted		 	 	 	Weighted		
 	 	 	 	Average		 	 	 	Average		
 	 	Employee		 	Exercise		 	Director		 	Exercise		
 	 	Options		 	Price		 	Options		 	Price		
 	 	 		 	 		 	 		 	 		
 	 	(Options in thousands)		
Balance at December 28, 2001	 	 	4,084.6	 	 	$	19.37	 	 	 	220.0	 	 	$	15.57	 	
Granted	 	 	1,216.5	 	 	 	25.86	 	 	 	—	 	 	 	—	 	
Exercised	 	 	(407.7	)	 	 	15.46	 	 	 	(60.0	)	 	 	8.42	 	
Canceled	 	 	(55.9	)	 	 	22.65	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at January 3, 2003	 	 	4,837.5	 	 	 	21.30	 	 	 	160.0	 	 	 	18.26	 	
Exercised	 	 	(233.9	)	 	 	15.95	 	 	 	(60.0	)	 	 	16.22	 	
Canceled	 	 	(116.1	)	 	 	24.34	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at January 2, 2004	 	 	4,487.5	 	 	 	21.50	 	 	 	100.0	 	 	 	19.47	 	
Adjustment*	 	 	224.9	 	 	 	20.28	 	 	 	4.5	 	 	 	18.75	 	
Exercised	 	 	(846.0	)	 	 	20.63	 	 	 	(62.4	)	 	 	17.74	 	
Canceled	 	 	(15.9	)	 	 	23.50	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2004	 	 	3,850.5	 	 	$	20.37	 	 	 	42.1	 	 	$	19.65	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Options exercisable at year-end:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	2002	 	 	2,184.9	 	 	$	18.49	 	 	 	160.0	 	 	$	18.26	 	
 	2003	 	 	2,906.3	 	 	$	19.58	 	 	 	100.0	 	 	$	19.47	 	
 	2004	 	 	3,000.9	 	 	$	19.20	 	 	 	42.1	 	 	$	19.65	 	

		
* 	In accordance with the provisions of the stock option plan, the exercise price and number of options outstanding were adjusted to reflect the special dividend (See Note 5 “Special Dividend”).	
53 

Table of Contents
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
     The weighted average remaining life of the director stock options is 1.0 year. The following table summarizes information relating to employee options outstanding and exercisable at December 31, 2004, using various ranges of exercise prices:
Employee Options
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Options Outstanding		 	Options Exercisable		
 	 	 		 	 		
 	 	 	 	Weighted		 	Weighted		 	 	 	Weighted		
 	 	 	 	Average		 	Average		 	 	 	Average		
Range of	 	 	 	Exercise		 	Remaining		 	 	 	Exercise		
Exercise Prices	 	Outstanding		 	Price		 	Years		 	Exercisable		 	Price		
 	 	 		 	 		 	 		 	 		 	 		
 	 	(Options in thousands)		
$12.05-$17.75	 	 	1,108.2	 	 	$	14.47	 	 	 	4.1	 	 	 	1,108.2	 	 	$	14.47	 	
$18.64-$27.60	 	 	2,727.0	 	 	$	22.72	 	 	 	6.5	 	 	 	1,883.8	 	 	$	21.94	 	
$28.30-$30.39	 	 	15.3	 	 	$	28.43	 	 	 	7.7	 	 	 	8.9	 	 	$	28.50	 	
Employee Stock Purchase Plan
      The Company discontinued the Employee Stock Purchase Plan (“ESPP”) at the end of the 2003 plan year on June 30, 2004. Participants could request that up to 10% of their base compensation be applied toward the purchase of common stock under the Company’s ESPP. The discounted purchase price for the ESPP on June 30, 2004 was $19.92, or 85% of the fair market value of the common stock at the beginning of the ESPP year, July 1, 2003. Under the ESPP, the Company sold 87,274 shares, 92,503 shares and 81,900 shares to employees in 2004, 2003 and 2002, respectively.
Stock Option Plans of Anixter Inc.
      In 1995 and prior years, Anixter granted to key employees options to purchase the common stock of Anixter. Substantially all options were granted with exercise prices at the fair market value of the common stock on the date of grant. These options vested over four years and terminated seven to ten years from the date of grant. As of January 3, 2003, there were no Anixter options outstanding. At December 31, 2004, the Company owned 100.0% of the approximately 2,714 shares of outstanding Anixter common stock. In 2002, the balance of 18,000 options were exercised at a value of $14.50 under this program. In 2004 and 2003, there was no stock option activity related to the Anixter stock option plan.
NOTE 13. BUSINESS SEGMENTS
      The Company is engaged in the distribution of communications and specialty wire and cable products and “C” class inventory components from top suppliers to contractors and installers, and also to end users including manufacturers, natural resources companies, utilities and original equipment manufacturers. The Company is organized by geographic regions and, accordingly, has identified North America (United States and Canada), Europe and Emerging Markets (Asia Pacific and Latin America) as reportable segments. The Company obtains and coordinates financing, tax, information technology, legal and other related services, certain of which are rebilled to subsidiaries. Interest expense and other non-operating items are not allocated to the segments or reviewed on a segment basis.
      In 2004, the Company recorded an extraordinary gain of $4.1 million and an impairment charge of $1.8 million in its North America segment. Tangible long-lived assets in the United States declined $35.2 million primarily due to the elimination of Anixter’s investment in Anixter Receivables Corporation, as
54 

Table of Contents
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
it is now a consolidated entity. No customer accounted for 10% or more of sales in 2004, 2003 or 2002. Export sales were insignificant. Segment information for 2004, 2003 and 2002 was as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	North America		 	 	 	 	 	 	
 	 	 		 	 	 	 	 	 	
 	 	United		 	 	 	 	 	Emerging		 	 	
 	 	States		 	Canada		 	Total		 	Europe		 	Markets		 	Total		
 	 	 		 	 		 	 		 	 		 	 		 	 		
 	 	(In millions)		
2004	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	2,169.9	 	 	$	324.6	 	 	$	2,494.5	 	 	$	554.3	 	 	$	226.4	 	 	$	3,275.2	 	
Operating income	 	 	103.1	 	 	 	17.1	 	 	 	120.2	 	 	 	9.9	 	 	 	7.9	 	 	 	138.0	 	
Depreciation	 	 	12.4	 	 	 	0.7	 	 	 	13.1	 	 	 	2.5	 	 	 	0.8	 	 	 	16.4	 	
Amortization	 	 	8.3	 	 	 	—	 	 	 	8.3	 	 	 	0.9	 	 	 	—	 	 	 	9.2	 	
Goodwill	 	 	248.4	 	 	 	13.8	 	 	 	262.2	 	 	 	24.4	 	 	 	7.0	 	 	 	293.6	 	
Tangible long-lived assets	 	 	59.7	 	 	 	2.0	 	 	 	61.7	 	 	 	8.1	 	 	 	2.3	 	 	 	72.1	 	
Total assets	 	 	1,163.7	 	 	 	145.4	 	 	 	1,309.1	 	 	 	271.8	 	 	 	125.7	 	 	 	1,706.6	 	
Capital expenditures	 	 	10.5	 	 	 	0.7	 	 	 	11.2	 	 	 	2.5	 	 	 	0.8	 	 	 	14.5	 	
2003	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	1,794.4	 	 	$	249.7	 	 	$	2,044.1	 	 	$	393.1	 	 	$	188.0	 	 	$	2,625.2	 	
Operating income	 	 	62.3	 	 	 	13.4	 	 	 	75.7	 	 	 	14.4	 	 	 	2.2	 	 	 	92.3	 	
Depreciation	 	 	14.4	 	 	 	0.7	 	 	 	15.1	 	 	 	1.9	 	 	 	1.0	 	 	 	18.0	 	
Amortization	 	 	6.1	 	 	 	—	 	 	 	6.1	 	 	 	0.2	 	 	 	—	 	 	 	6.3	 	
Goodwill	 	 	238.1	 	 	 	12.8	 	 	 	250.9	 	 	 	20.9	 	 	 	6.7	 	 	 	278.5	 	
Tangible long-lived assets	 	 	94.9	 	 	 	1.7	 	 	 	96.6	 	 	 	7.2	 	 	 	2.5	 	 	 	106.3	 	
Total assets	 	 	906.1	 	 	 	120.2	 	 	 	1,026.3	 	 	 	228.0	 	 	 	117.1	 	 	 	1,371.4	 	
Capital expenditures	 	 	23.7	 	 	 	0.2	 	 	 	23.9	 	 	 	1.0	 	 	 	1.0	 	 	 	25.9	 	
2002	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	1,771.6	 	 	$	224.6	 	 	$	1,996.2	 	 	$	344.9	 	 	$	179.0	 	 	$	2,520.1	 	
Operating income (loss)	 	 	72.1	 	 	 	11.6	 	 	 	83.7	 	 	 	5.3	 	 	 	(1.3	)	 	 	87.7	 	
Depreciation	 	 	15.2	 	 	 	0.9	 	 	 	16.1	 	 	 	1.8	 	 	 	1.2	 	 	 	19.1	 	
Amortization	 	 	4.4	 	 	 	—	 	 	 	4.4	 	 	 	—	 	 	 	—	 	 	 	4.4	 	
Goodwill	 	 	227.6	 	 	 	10.6	 	 	 	238.2	 	 	 	4.4	 	 	 	5.0	 	 	 	247.6	 	
Tangible long-lived assets	 	 	126.1	 	 	 	1.9	 	 	 	128.0	 	 	 	3.5	 	 	 	3.1	 	 	 	134.6	 	
Total assets	 	 	842.7	 	 	 	96.8	 	 	 	939.5	 	 	 	171.2	 	 	 	115.3	 	 	 	1,226.0	 	
Capital expenditures	 	 	15.2	 	 	 	0.1	 	 	 	15.3	 	 	 	0.7	 	 	 	0.9	 	 	 	16.9	 	
55 

Table of Contents

ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		
NOTE 14. 	SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.	
      The parent company of Anixter Inc. guarantees, fully and unconditionally, substantially all of the debt of its subsidiaries, which includes Anixter Inc. The parent company has no independent assets or operations and all other subsidiaries other than Anixter Inc. are minor. Certain debt agreements entered into by Anixter Inc. contain various restrictions including restrictions on payments to the Company. Such restrictions have not had nor are expected to have an adverse impact on the Company’s ability to meet its cash obligations. See Note 8 “Debt” for further details on restricted assets. The following summarizes the financial information for Anixter Inc.:
ANIXTER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 	 	 	 	 	 	 	 	 	 	
 	 	December 31,		 	January 2,		
 	 	2004		 	2004		
 	 	 		 	 		
 	 	(In millions)		
Assets:	 	 	 	 	 	 	 	 	
 	Current assets	 	$	1,280.6	 	 	$	875.4	 	
 	Property, net	 	 	42.2	 	 	 	43.1	 	
 	Goodwill and other intangibles	 	 	319.3	 	 	 	301.1	 	
 	Other assets	 	 	77.7	 	 	 	109.6	 	
 	 	 	 	 	 	 	
 	 	$	1,719.8	 	 	$	1,329.2	 	

Liabilities and Stockholders’ Equity:	 	 	 	 	 	 	 	 	
 	Current liabilities	 	$	445.7	 	 	$	384.9	 	
 	Subordinated notes payable to parent	 	 	205.3	 	 	 	147.8	 	
 	Long-term debt	 	 	194.0	 	 	 	30.0	 	
 	Other liabilities	 	 	86.2	 	 	 	79.1	 	
 	Stockholders’ equity	 	 	788.6	 	 	 	687.4	 	
 	 	 	 	 	 	 	
 	 	$	1,719.8	 	 	$	1,329.2	 	
 	 	 	 	 	 	 	
ANIXTER INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended		
 	 	 		
 	 	December 31,		 	January 2,		 	January 3,		
 	 	2004		 	2004		 	2003		
 	 	 		 	 		 	 		
 	 	(In millions)		
Net sales	 	$	3,275.2	 	 	$	2,625.2	 	 	$	2,520.1	 	
Operating income	 	$	141.9	 	 	$	94.5	 	 	$	88.5	 	
Income from continuing operations before income taxes	 	$	121.4	 	 	$	79.5	 	 	$	70.6	 	
Discontinued operations gain	 	$	—	 	 	$	—	 	 	$	0.3	 	
Net income	 	$	72.8	 	 	$	46.0	 	 	$	35.7	 	
56 

Table of Contents
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
      The following is a summary of the unaudited interim results of operations and the price range of the common stock composite for each quarter in the years ended December 31, 2004 and January 2, 2004. The Company has never paid regular cash dividends on its common stock. However, in 2004 the Company declared a special dividend of $1.50 per common share, or $55.8 million, as a return of excess capital to shareholders. The dividend was payable March 31, 2004 to shareholders of record on March 16, 2004. As of February 17, 2005, the Company had 3,635 shareholders of record.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	First		 	Second		 	Third		 	Fourth		
 	 	Quarter		 	Quarter		 	Quarter		 	Quarter		
 	 	 		 	 		 	 		 	 		
 	 	(In millions, except per share amounts)		
Year ended December 31, 2004	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	764.2	 	 	$	813.1	 	 	$	849.6	 	 	$	848.3	 	
Cost of sales	 	 	581.5	 	 	 	621.6	 	 	 	647.7	 	 	 	634.1	 	
Operating income	 	 	29.0	 	 	 	33.7	 	 	 	33.9	 	 	 	41.4	 	
Income before extraordinary gain	 	 	14.0	 	 	 	16.8	 	 	 	17.2	 	 	 	25.6	 	
Extraordinary gain	 	 	4.1	 	 	 	—	 	 	 	—	 	 	 	—	 	
Net income	 	 	18.1	 	 	 	16.8	 	 	 	17.2	 	 	 	25.6	 	
Basic income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Income before extraordinary gain	 	 	0.38	 	 	 	0.46	 	 	 	0.46	 	 	 	0.69	 	
 	Extraordinary gain	 	 	0.11	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	Net income	 	 	0.50	 	 	 	0.46	 	 	 	0.46	 	 	 	0.69	 	
Diluted income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Income before extraordinary gain*	 	 	0.37	 	 	 	0.44	 	 	 	0.44	 	 	 	0.64	 	
 	Extraordinary gain	 	 	0.11	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	Net income*	 	 	0.48	 	 	 	0.44	 	 	 	0.44	 	 	 	0.64	 	
Composite stock price range:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	High	 	 	30.55	 	 	 	34.03	 	 	 	36.40	 	 	 	38.96	 	
 	Low	 	 	26.85	 	 	 	28.42	 	 	 	31.71	 	 	 	35.42	 	
 	Close	 	 	29.10	 	 	 	33.62	 	 	 	36.00	 	 	 	35.99	 	
Year ended January 2, 2004	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	662.2	 	 	$	644.8	 	 	$	653.4	 	 	$	664.8	 	
Cost of sales	 	 	501.4	 	 	 	486.8	 	 	 	495.1	 	 	 	499.7	 	
Operating income	 	 	22.6	 	 	 	21.3	 	 	 	23.3	 	 	 	25.1	 	
Income before income taxes	 	 	17.5	 	 	 	12.8	 	 	 	20.1	 	 	 	22.5	 	
Net income	 	 	10.2	 	 	 	7.3	 	 	 	11.3	 	 	 	13.1	 	
Basic income per share	 	 	0.28	 	 	 	0.20	 	 	 	0.31	 	 	 	0.36	 	
Diluted income per share	 	 	0.27	 	 	 	0.20	 	 	 	0.31	 	 	 	0.36	 	
Composite stock price range:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	High	 	 	25.02	 	 	 	24.72	 	 	 	24.39	 	 	 	25.95	 	
 	Low	 	 	21.31	 	 	 	21.25	 	 	 	21.03	 	 	 	22.40	 	
 	Close	 	 	22.08	 	 	 	22.08	 	 	 	23.55	 	 	 	25.83	 	

		
* 	First, second and third quarter of 2004 diluted income per share amounts have been restated in accordance with EITF 04-08,“The Effect of Contingently Convertible Debt on Diluted Earnings Per Share.” There was minimal impact on the first and second quarter diluted income per share amounts. For further information, see Note 1 “ Summary of Significant Accounting Policies” and Note 2 “Income Per Share.”	
57 

Table of Contents

		
ITEM 9. 	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.	
      None.

		
ITEM 9A. 	CONTROLS AND PROCEDURES.	
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
      Under the supervision and the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation as of December 31, 2004 of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule, 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.
Management’s Report on Internal Control Over Financial Reporting
      Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework, issued by the committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2004.
      Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report below.
58 

Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Board of Directors and Shareholders
of Anixter International Inc.
      We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Anixter International Inc. maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Anixter International Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.
      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
      In our opinion, management’s assessment that Anixter International Inc. maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Anixter International Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the COSO criteria.
      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Anixter International Inc. as of December 31, 2004 and January 2, 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004 and our report dated February 23, 2005 expressed an unqualified opinion thereon.
ERNST & YOUNG LLP
Chicago, Illinois
February 23, 2005
59 

Table of Contents

ITEM 9B. OTHER INFORMATION.
      None.
PART III

		
ITEM 10. 	DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.	
      See Registrant’s Proxy Statement for the 2005 Annual Meeting of Stockholders — “Election of Directors,” “Corporate Governance — Code of Ethics” and “Section 16(a) Beneficial Ownership Reporting Compliance.” The Company’s Code of Ethics and changes or waivers, if any, related thereto are located on the Company’s website at http://www.anixter.com.
      Information regarding executive officers is included as a supplemental item at the end of Part I of this Form 10-K.

		
ITEM 11. 	EXECUTIVE COMPENSATION.	
      See Registrant’s Proxy Statement for the 2005 Annual Meeting of Stockholders — “Executive Compensation,” “Compensation of Directors,” “Employment Contracts and Termination of Employment and Change-in-Control Arrangements,” “Compensation Committee Interlocks and Insider Participation” and “Performance Graph.”

		
ITEM 12. 	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.	
      See Registrant’s Proxy Statement for the 2005 Annual Meeting of Stockholders — “Security Ownership of Management,” “Security Ownership of Principal Stockholders” and “Equity Compensation Plan Information.”
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
      None.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
      See Registrant’s Proxy Statement for the 2005 Annual Meeting of Stockholders — “Independent Auditors and their Fees.”
60 

Table of Contents

PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) Index to Consolidated Financial Statements, Financial Statement Schedules and Exhibits.
(1) Financial Statements.
      The following Consolidated Financial Statements of Anixter International Inc. and Report of Independent Registered Public Accounting Firm are filed as part of this report.
 	 	 	 	 	
 	 	Page		
 	 	 		
Report of Independent Registered Public Accounting Firm	 	 	25	 	
Consolidated Statements of Operations for the years ended December 31, 2004, January  2, 2004, and January 3, 2003	 	 	26	 	
Consolidated Balance Sheets at December 31, 2004, and January 2, 2004	 	 	27	 	
Consolidated Statements of Cash Flows for the years ended December 31, 2004, January  2, 2004, and January 3, 2003	 	 	28	 	
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2004, January 2, 2004, and January 3, 2003	 	 	29	 	
Notes to the Consolidated Financial Statements	 	 	30	 	
(2) Financial Statement Schedules.
      The following financial statement schedules of Anixter International Inc. are filed as part of this report and should be read in conjunction with the Consolidated Financial Statements of Anixter International Inc.:
 	 	 	 	 	
 	 	Page		
 	 	 		
I. Condensed financial information of registrant. 	 	 	65	 	
II. Valuation and qualifying accounts and reserves	 	 	69	 	
      All other schedules are omitted because they are not required, are not applicable, or the required information is shown in the Consolidated Financial Statements or notes thereto.
(3) Exhibit List.
      Each management contract or compensation plan required to be filed as an exhibit is identified by an asterisk (*).
 	 	 	 	 	
 Exhibit		 	 	
No.		 	Description of Exhibit	
 		 	 	
(3)  Articles of Incorporation and by–laws.	
 	3.1	 	 	Restated Certificate of Incorporation of Anixter International Inc., filed with Secretary of the State of Delaware on September 29, 1987 and Certificate of Amendment thereof, filed with the Secretary of Delaware on August 31, 1995 (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 3.1).	
 	3.2	 	 	By-laws of Anixter International Inc. as amended through November 21, 2002. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended January 3, 2003, Exhibit 3.2).	
(4)  Instruments defining the rights of security holders, including indentures.	
 	4.1	 	 	Indenture dated September 17, 1996, between Anixter Inc., Anixter International Inc. and the Bank of New York, as Trustee, providing for 8% Senior Notes due 2003. (Incorporated by reference from Amendment No. 1 to Anixter Inc.’s Registration Statement on Form S-3, Registration Number 333-121428, filed February 9, 2005, Exhibit 4.1).	
61 

Table of Contents

Exhibit		 	 	
No.		 	Description of Exhibit	
 		 	 	
 	4.2	 	 	Indenture dated as of June 28, 2000, by and between Anixter International Inc. and Bank of New York, as Trustee, offering 7% zero coupon convertible notes due 2020. (Incorporated by reference from Anixter International Inc.’s Registration Statement on Form S-3, Registration Number 333-42788, filed August 1, 2000, Exhibit 4.1).	
 	4.3	 	 	Five-year, $275.0 million, Revolving Credit Agreement, dated June 18, 2004, among Anixter Inc., Bank of America, N.A., as Agent, and other banks named therein. (Incorporated by reference from Anixter International Inc., Quarterly Report on Form 10-Q for the quarterly period ended July 2, 2004, Exhibit 4.1).	
 	4.4	 	 	Amended and Restated Receivables Sale Agreement dated October 3, 2002, between Anixter Inc. and Anixter Receivables Corporation. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended January 3, 2003, Exhibit 4.6).	
 	4.5	 	 	Amended and Restated Receivables Purchase Agreement dated October 3, 2002, among Anixter Receivables Corporation, as Seller, Anixter Inc., as Servicer, Bank One, NA, as Agent and the other financial institutions named herein. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended January 3, 2003, Exhibit 4.7).	
 	4.6	 	 	Indenture dated December 8, 2004, by and between Anixter International Inc. and Bank of New York, as Trustee, with respect to 3.25% zero coupon convertible notes due 2033.	
 	4.7	 	 	Amendment No. 1 to Amended and Restated Receivables Sale dated October 2, 2003 between Anixter Inc. and Anixter Receivables Corporation. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended January 2, 2004, Exhibit 4.9).	
 	4.8	 	 	Amendment No. 1 to Amended and Restated Receivables Purchase dated October 2, 2003 among Anixter Receivables Corporation, as Seller, Anixter Inc., as Servicer, Bank One, NA, as Agent and the other financial institutions named herein. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended January 2, 2004, Exhibit 4.10).	
 	4.9	 	 	Amendment No. 2 to Amended and Restated Receivables Sale Agreement, dated September 30, 2004 between Anixter Inc. and Anixter Receivables Corporation.	
 	4.10	 	 	Amendment No. 2 to Amended and Restated Receivables Purchase Agreement, dated September 30, 2004 among Anixter Receivables Corporation, as Seller, Anixter Inc., as Servicer, Bank One, NA, as Agent and the other financial institutions named herein.	
(10)  Material contracts.	
 	10.1	 	 	Purchase Agreement between Mesirow Realty Sale-Leaseback, Inc. (‘Buyer”) and Anixter-Real Estate, Inc., a subsidiary of the Company (‘Seller‘). (Incorporated by reference from Anixter International Inc., Quarterly Report on Form 10-Q for the quarterly period ended April 2, 2004, Exhibit 10.1).	
 	10.2	*	 	Company’s 1983 Stock Incentive Plan as amended and restated July 16, 1992. (Incorporated by reference from Itel Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Exhibit 10.3).	
 	10.3	*	 	Anixter International Inc. 1998 Stock Incentive Plan. (Incorporated by reference from Anixter International Inc. Registration Statement on Form S-8, file number 333-56935, Exhibit 4a).	
 	10.4	*	 	Company’s Key Executive Equity Plan, as amended and restated July 16, 1992. (Incorporated by reference from Itel Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Exhibit 10.8).	
 	10.5	*	 	Company’s Director Stock Option Plan. (Incorporated by reference from Itel Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Exhibit 10.24).	
 	10.6	*	 	Form of Stock Option Agreement. (Incorporated by reference from Itel Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Exhibit 10.24).	
62 

Table of Contents

Exhibit		 	 	
No.		 	Description of Exhibit	
 		 	 	
 	10.7	*	 	Form of Indemnity Agreement with all directors and officers. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.24).	
 	10.8	*	 	Anixter International Inc. 1996 Stock Incentive Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.26).	
 	10.9	*	 	Form of Stock Option Grant. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.27).	
 	10.10	*	 	Anixter Excess Benefit Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.28).	
 	10.11	*	 	Forms of Anixter Stock Option, Stockholder Agreement and Stock Option Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.29).	
 	10.12	*	 	(a) Anixter Deferred Compensation Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.30).	
 	 	 	 	(b) Anixter 1999 Restated Deferred Compensation Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1999, Exhibit 10.15(b)).	
 	 	 	 	(c) Amendment No. 1 to Anixter 1999 Restated Deferred Compensation Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 28, 2001, Exhibit 10.12 (c)).	
 	 	 	 	(d) Amendment No. 2 to Anixter 1999 Restated Deferred Compensation Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 28, 2001, Exhibit 10.12 (d)).	
 	 	 	 	(e) Amendment No. 3 to Anixter 1999 Restated Deferred Compensation Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended January 3, 2003, Exhibit 10.12 (e)).	
 	 	 	 	(f) Amendment No. 4 to Anixter 1999 Restated Deferred Compensation Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended January 2, 2004, Exhibit 10.12 (f)).	
 	10.13	*	 	Employment Agreement with Robert W. Grubbs, dated July 22, 1999. (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q for the quarterly period ended October 1, 1999, Exhibit 10.22).	
 	10.14	*	 	Employment Agreement with Dennis J. Letham, dated July 22, 1999. (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q for the quarterly period ended October 1, 1999, Exhibit 10.23).	
 	10.15	*	 	Anixter International Inc. Management Incentive Plan effective May 20, 2004.	
 	10.16	*	 	Amendment to Employee Agreements with Robert W. Grubbs and Dennis J. Letham, dated February 14, 2001. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 29, 2000, Exhibit 10.23).	
 	10.17	*	 	Anixter International Inc. 2001 Stock Incentive Plan. (Incorporated by reference from Anixter International Inc. Registration Statement on Form S-8, File number 333-103270, Exhibit 4a).	
 	10.18	*	 	First Amendment to the Anixter International Inc. 2001 Stock Incentive Plan effective May 20, 2004.	
63 

Table of Contents

 	 	 	 	 	
 Exhibit		 	 	
No.		 	Description of Exhibit	
 		 	 	
 	10.19	*	 	Anixter International Inc. 2001 Mid-Level Stock Option Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended January 3, 2003, Exhibit 10.19).	
 	10.20	*	 	Anixter International Inc. 1998 Mid-Level Stock Option Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended January 3, 2003, Exhibit 10.20).	
 	10.21	*	 	Form of Anixter International Inc. Restricted Stock Unit Grant Agreement. (Incorporated by reference from Anixter International Inc., Quarterly Report on Form 10-Q for the quarterly period ended April 4, 2003, Exhibit 10.1).	
 	10.22	*	 	Anixter Inc. Supplemental Executive Retirement Plan with Robert W. Grubbs and Dennis J. Letham, dated August 4, 2004.	
 	
(12)  Statements regarding computation of ratios.	
 	12.1	 	 	Computation of ratio of earnings to fixed charges for the five years ended December 31, 2004.	
 	
(14)  Code of ethics.	
 	14.1	 	 	Code of ethics.	
 	
(21)  Subsidiaries of the Registrant.	
 	21.1	 	 	List of Subsidiaries of the Registrant.	
 	
(23)  Consents of experts and counsel.	
 	23.1	 	 	Consent of Independent Registered Public Accounting Firm.	
 	
(24)  Power of attorney.	
  	24.1	 	 	Power of Attorney executed by Lord James Blyth, Robert L. Crandall, Robert W. Grubbs, F. Philip Handy, Melvyn N. Klein, George Muñoz, Stuart M. Sloan, Thomas C. Theobald, Mary Agnes Wilderotter, Matthew Zell and Samuel Zell.	
 	
(31)  Rule 13a — 14(a)/15d — 14(a) Certifications.	
 	31.1	 	 	Robert W. Grubbs, President and Chief Executive Officer, Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	31.2	 	 	Dennis J. Letham, Senior Vice President-Finance and Chief Financial Officer, Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	
(32)  Section 1350 Certifications.	
 	32.1	 	 	Robert W. Grubbs, President and Chief Executive Officer, Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 Sarbanes-Oxley Act of 2002.	
 	32.2	 	 	Dennis J. Letham, Senior Vice President-Finance and Chief Financial Officer, Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley of Act of 2002.	
      Copies of other instruments defining the rights of holders of long-term debt of the Company and its subsidiaries not filed pursuant to Item 601(b)(4)(iii) of Regulation S-K and omitted copies of attachments to plans and material contracts will be furnished to the Securities and Exchange Commission upon request.
64 

Table of Contents
ANIXTER INTERNATIONAL INC.
SCHEDULE 1 — CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ANIXTER INTERNATIONAL INC. (PARENT COMPANY)
STATEMENTS OF OPERATIONS
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended		
 	 	 		
 	 	December 31,		 	January 2,		 	January 3,		
 	 	2004		 	2004		 	2003		
 	 	 		 	 		 	 		
 	 	(In millions)		
Operating loss	 	$	(3.2	)	 	$	(2.6	)	 	$	(1.9	)	
Other income (expense):	 	 	 	 	 	 	 	 	 	 	 	 	
 	Interest income, including intercompany	 	 	5.7	 	 	 	3.4	 	 	 	5.6	 	
 	Loss on extinguishment of debt	 	 	—	 	 	 	(6.2	)	 	 	(0.3	)	
 	Other	 	 	(1.0	)	 	 	1.1	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
Income (loss) before income taxes, extraordinary gain and equity in earnings of subsidiaries	 	 	1.5	 	 	 	(4.3	)	 	 	3.4	 	
Income tax benefit	 	 	0.3	 	 	 	1.6	 	 	 	5.7	 	
 	 	 	 	 	 	 	 	 	 	
Income (loss) before extraordinary gain and equity in earnings of subsidiaries	 	 	1.8	 	 	 	(2.7	)	 	 	9.1	 	
Extraordinary gain, net of tax of $0.6	 	 	4.1	 	 	 	—	 	 	 	—	 	
Equity in earnings of subsidiaries	 	 	71.8	 	 	 	44.6	 	 	 	34.0	 	
 	 	 	 	 	 	 	 	 	 	
Net income	 	$	77.7	 	 	$	41.9	 	 	$	43.1	 	
 	 	 	 	 	 	 	 	 	 	
See accompanying note to the condensed financial information of registrant.
65 

Table of Contents
ANIXTER INTERNATIONAL INC.
SCHEDULE 1 — CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ANIXTER INTERNATIONAL INC. (PARENT COMPANY)
BALANCE SHEETS
 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31,		 	January 2,		
 	 	2004		 	2004		
 	 	 		 	 		
 	 	(In millions)		
ASSETS	
Current assets:	 	 	 	 	 	 	 	 	
 	Cash and cash equivalents	 	$	0.7	 	 	$	59.9	 	
 	Accounts receivable	 	 	—	 	 	 	3.3	 	
 	Amounts currently due from affiliates, net	 	 	4.0	 	 	 	1.3	 	
 	Other assets	 	 	0.4	 	 	 	1.1	 	
 	 	 	 	 	 	 	
 	 	Total current assets	 	 	5.1	 	 	 	65.6	 	
Investment in and advances to subsidiaries	 	 	994.2	 	 	 	836.0	 	
Other assets	 	 	5.4	 	 	 	5.5	 	
 	 	 	 	 	 	 	
 	 	$	1,004.7	 	 	$	907.1	 	
 	 	 	 	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	
Liabilities:	 	 	 	 	 	 	 	 	
 	Accounts payable and accrued expenses, due currently	 	$	2.8	 	 	$	7.1	 	
 	Income taxes, net	 	 	19.8	 	 	 	—	 	
 	Long-term debt	 	 	218.5	 	 	 	209.2	 	
 	Other non-current liabilities	 	 	0.6	 	 	 	—	 	
 	 	 	 	 	 	 	
 	 	Total liabilities	 	 	241.7	 	 	 	216.3	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	
 	Common stock	 	 	37.4	 	 	 	36.4	 	
 	Capital surplus	 	 	50.7	 	 	 	21.8	 	
 	Accumulated other comprehensive income (Loss)	 	 	14.8	 	 	 	(5.6	)	
 	Retained earnings	 	 	660.1	 	 	 	638.2	 	
 	 	 	 	 	 	 	
 	 	Total stockholders’ equity	 	 	763.0	 	 	 	690.8	 	
 	 	 	 	 	 	 	
 	 	$	1,004.7	 	 	$	907.1	 	
 	 	 	 	 	 	 	
See accompanying note to the condensed financial information of registrant.
66 

Table of Contents
ANIXTER INTERNATIONAL INC.
SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ANIXTER INTERNATIONAL INC. (PARENT COMPANY)
STATEMENTS OF CASH FLOWS
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended		
 	 	 		
 	 	December 31,		 	January 2,		 	January 3,		
 	 	2004		 	2004		 	2003		
 	 	 		 	 		 	 		
 	 	(In millions)		
Operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net income	 	$	77.7	 	 	$	41.9	 	 	$	43.1	 	
 	Adjustments to reconcile net income to net cash (used in) provided by operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Extraordinary gain	 	 	(4.1	)	 	 	—	 	 	 	—	 	
 	Loss on extinguishment of debt	 	 	—	 	 	 	6.2	 	 	 	0.3	 	
 	Depreciation and amortization	 	 	1.1	 	 	 	0.8	 	 	 	0.8	 	
 	Income tax benefit	 	 	(0.3	)	 	 	(1.6	)	 	 	(5.7	)	
 	Deferred income taxes	 	 	20.4	 	 	 	(3.5	)	 	 	(4.8	)	
 	Equity in earnings of subsidiaries	 	 	(71.8	)	 	 	(44.6	)	 	 	(34.0	)	
 	Accretion of zero coupon convertible notes	 	 	(0.2	)	 	 	—	 	 	 	(1.9	)	
 	Income tax savings from employee stock plans	 	 	0.2	 	 	 	0.6	 	 	 	2.5	 	
 	Change in other operating items	 	 	4.7	 	 	 	2.7	 	 	 	9.3	 	
 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Net cash provided by operating activities	 	 	27.7	 	 	 	2.5	 	 	 	9.6	 	
Investing activities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Investment in Anixter Inc. 	 	 	(4.3	)	 	 	(71.3	)	 	 	—	 	
 	Proceeds from sale of Anixter Inc. shares to Anixter Inc. 	 	 	—	 	 	 	18.4	 	 	 	66.7	 	
 	 	 	 	 	 	 	 	 	 	
 	 	 	Net cash (used in) provided by investing activities	 	 	(4.3	)	 	 	(52.9	)	 	 	66.7	 	
Financing activities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Loans (to) from subsidiaries, net	 	 	(48.0	)	 	 	71.3	 	 	 	22.9	 	
 	Proceeds from issuance of common stock	 	 	20.9	 	 	 	6.5	 	 	 	7.5	 	
 	Payment of cash dividend	 	 	(55.1	)	 	 	—	 	 	 	—	 	
 	Debt issuance costs	 	 	(0.4	)	 	 	(3.9	)	 	 	—	 	
 	Proceeds from 3.25% zero coupon convertible notes	 	 	—	 	 	 	143.8	 	 	 	—	 	
 	Retirement of 7% zero coupon convertible notes	 	 	—	 	 	 	(72.2	)	 	 	(107.1	)	
 	Purchase of treasury stock	 	 	—	 	 	 	(35.6	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
 	 	Net cash (used in) provided by financing activities	 	 	(82.6	)	 	 	109.9	 	 	 	(76.7	)	
 	 	 	 	 	 	 	 	 	 	
(Decrease) increase in cash and cash equivalents	 	 	(59.2	)	 	 	59.5	 	 	 	(0.4	)	
Cash and cash equivalents at beginning of year	 	 	59.9	 	 	 	0.4	 	 	 	0.8	 	
 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents at end of year	 	$	0.7	 	 	$	59.9	 	 	$	0.4	 	
 	 	 	 	 	 	 	 	 	 	
See accompanying note to the condensed financial information of registrant.
67 

Table of Contents

ANIXTER INTERNATIONAL INC.
SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ANIXTER INTERNATIONAL INC. (PARENT COMPANY)
NOTE TO THE CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Note A — Basis of Presentation
      In the parent company condensed financial statements, the Company’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. The Company’s share of net income of its unconsolidated subsidiaries is included in consolidated income using the equity method. The parent company financial statements should be read in conjunction with the Company’s consolidated financial statements.
68 

Table of Contents
ANIXTER INTERNATIONAL INC.
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years ended December 31, 2004, January 2, 2004 and January 3, 2003
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Balance at		 	 	 	Charged		 	 	 	Balance at		
 	 	beginning of		 	Charged		 	to other		 	 	 	end of		
Description	 	the period		 	to income		 	accounts		 	Deductions		 	the period		
 	 	 		 	 		 	 		 	 		 	 		
 	 	(In millions)		
Year ended December 31, 2004:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Allowance for doubtful accounts	 	$	17.3	 	 	$	10.5	 	 	$	(0.2	)	 	$	(9.6	)	 	$	18.0	 	
 	Allowance for deferred tax asset	 	$	19.1	 	 	$	(2.9	)	 	$	(3.7	)	 	$	—	 	 	$	12.5	 	
Year ended January 2, 2004:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Allowance for doubtful accounts	 	$	15.4	 	 	$	7.4	 	 	$	(2.1	)	 	$	(3.4	)	 	$	17.3	 	
 	Allowance for deferred tax asset	 	$	23.8	 	 	$	0.3	 	 	$	(5.0	)	 	$	—	 	 	$	19.1	 	
Year ended January 3, 2003:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Allowance for doubtful accounts	 	$	20.9	 	 	$	13.9	 	 	$	(9.6	)	 	$	(9.8	)	 	$	15.4	 	
 	Allowance for deferred tax asset	 	$	24.5	 	 	$	4.7	 	 	$	(5.4	)	 	$	—	 	 	$	23.8	 	
69 

Table of Contents
SIGNATURES
      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Glenview, State of Illinois, on the 23th day of February, 2005.

		
 	ANIXTER INTERNATIONAL INC.	
			
 	By: 	/s/ Dennis J. Letham	

 	Dennis J. Letham	
 	Senior Vice President-Finance	
 	and Chief Financial Officer	
      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Robert W. Grubbs
 
Robert W. Grubbs	 	President and Chief Executive Officer
(Principal Executive Officer)	 	February 23, 2005	
 	
/s/ Dennis J. Letham
 
Dennis J. Letham	 	Senior Vice President — Finance
(Chief Financial Officer)	 	February 23, 2005	
 	
/s/ Terrance A. Faber
 
Terrance A. Faber	 	Vice President — Controller
(Chief Accounting Officer)	 	February 23, 2005	
 	
/s/ Lord James Blyth*
 
Lord James Blyth	 	Director	 	February 23, 2005	
 	
/s/ Robert L. Crandall*
 
Robert L. Crandall	 	Director	 	February 23, 2005	
 	
/s/ Robert W. Grubbs
 
Robert W. Grubbs	 	Director	 	February 23, 2005	
 	
/s/ F. Philip Handy*
 
F. Philip Handy	 	Director	 	February 23, 2005	
 	
/s/ Melvyn N. Klein*
 
Melvyn N. Klein	 	Director	 	February 23, 2005	
 	
/s/ George Muñoz*
 
George Muñoz	 	Director	 	February 23, 2005	
 	
/s/ Stuart M. Sloan*
 
Stuart M. Sloan	 	Director	 	February 23, 2005	
 	
/s/ Thomas C. Theobald*
 
Thomas C. Theobald	 	Director	 	February 23, 2005	
 	
/s/ Mary Agnes Wilderotter*
 
Mary Agnes Wilderotter	 	Director	 	February 23, 2005	
 	
/s/ Matthew Zell*
 
Matthew Zell	 	Director	 	February 23, 2005	
 	
/s/ Samuel Zell*
 
Samuel Zell	 	Director	 	February 23, 2005	
 	
*By	 	/s/ Dennis J. Letham	 	 	 	 	
 	 	 	 	 	 	 	
 	 	Dennis J. Letham (Attorney in fact)
 Dennis J. Letham, as attorney in fact for each person indicated	 	 	
70
 
EXHIBIT 4.6
ANIXTER INTERNATIONAL INC.
Zero Coupon Convertible Notes
due 2033
$378,135,000

INDENTURE
Dated December 8, 2004

THE BANK OF NEW YORK
TRUSTEE

CROSS REFERENCE TABLE*

TIA Section............................................   Indenture Section
310    (a)(1)..........................................         N.A.
       (a)(2)..........................................         N.A.
       (a)(3)..........................................         N.A.
       (a)(4)..........................................         N.A.
       (b).............................................         N.A.
       (c).............................................         N.A.
311    (a).............................................         N.A.
       (b).............................................         N.A.
       (c).............................................         N.A.
312    (a).............................................         2.05
       (b).............................................        12.03
       (c).............................................        12.03
313    (a).............................................         N.A.
       (b)(1)..........................................         N.A.
       (b)(2)..........................................         N.A.
       (c).............................................        12.02
       (d).............................................         N.A.
314    (a).............................................      4.02; 4.03
       (b).............................................         N.A.
       (c)(1)..........................................        12.04
       (c)(2)..........................................        12.04
       (c)(3)..........................................         N.A.
       (d).............................................         N.A.
       (e).............................................        12.05
       (f).............................................         N.A.
315    (a).............................................         7.01
       (b).............................................         7.05
       (c).............................................         7.01
       (d)(1)..........................................         7.01
       (d)(2)..........................................         7.01
       (d)(3)..........................................         7.01
       (e).............................................         6.11
316    (a) (last sentence).............................         2.08
       (a)(1)(A).......................................         6.05
       (a)(1)(B).......................................         6.04
       (a)(2)..........................................         N.A.
       (b).............................................         6.07
317    (a)(1)..........................................         6.08
       (a)(2)..........................................         6.09
       (b).............................................         2.04
318    (a).............................................        12.01
                           N.A. means Not Applicable.	

* Note: This Cross Reference Table shall not, for any purpose, be deemed to be part of the Indenture.
TABLE OF CONTENTS*

                                                                                                        Page
                                                                                                        ----
                                              ARTICLE 1
                              DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01.                  Definitions............................................................    1
SECTION 1.02.                  Other Definitions......................................................    5
SECTION 1.03.                  Incorporation by Reference of Trust Indenture Act......................    6
SECTION 1.04.                  Rules of Construction..................................................    6
SECTION 1.05.                  Acts of Holders........................................................    6

                                              ARTICLE 2
                                            THE SECURITIES

SECTION 2.01.                  Form and Dating........................................................    8
SECTION 2.02.                  Execution and Authentication...........................................    9
SECTION 2.03.                  Registrar, Paying Agent, Conversion Agent and Bid Solicitation Agent...    9
SECTION 2.04.                  Paying Agent to Hold Money and Securities in Trust.....................   10
SECTION 2.05.                  Securityholder Lists...................................................   10
SECTION 2.06.                  Transfer and Conversion................................................   11
SECTION 2.07.                  Replacement Securities.................................................   11
SECTION 2.08.                  Outstanding Securities; Determinations of Holders' Action..............   12
SECTION 2.09.                  Temporary Securities...................................................   13
SECTION 2.10.                  Cancellation...........................................................   13
SECTION 2.11.                  Persons Deemed Owners..................................................   14
SECTION 2.12.                  Global Securities......................................................   14
SECTION 2.13.                  CUSIP Numbers..........................................................   15

                                              ARTICLE 3
                                       REDEMPTION AND PURCHASES

SECTION 3.01.                  Right to Redeem; Notices to Trustee....................................   16
SECTION 3.02.                  Selection of Securities to Be Redeemed.................................   16
SECTION 3.03.                  Notice of Redemption...................................................   17
SECTION 3.04.                  Effect of Notice of Redemption.........................................   18
SECTION 3.05.                  Deposit of Redemption Price............................................   18
SECTION 3.06.                  Securities Redeemed in Part............................................   18
SECTION 3.07.                  Conversion Arrangement on Call for Redemption..........................   18
SECTION 3.08.                  Purchase of Securities at Option of the Holder.........................   19
SECTION 3.09.                  Purchase of Securities at Option of the Holder upon Change in Control..   21
SECTION 3.10.                  Effect of Purchase Notice or Change in Control Purchase Notice.........   24
SECTION 3.11.                  Deposit of Purchase Price or Change in Control Purchase Price..........   25	

Note: This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture.

i

SECTION 3.12.                  Securities Purchased in Part...........................................   26
SECTION 3.13.                  Covenant to Comply With Securities Laws Upon Purchase of Securities....   26
SECTION 3.14.                  Repayment to the Company...............................................   27

                                              ARTICLE 4
                                              COVENANTS

SECTION 4.01.                  Payment of Securities..................................................   27
SECTION 4.02.                  SEC and Other Reports..................................................   27
SECTION 4.03.                  Compliance Certificate.................................................   28
SECTION 4.04.                  Further Instruments and Acts...........................................   28
SECTION 4.05.                  Maintenance of Office or Agency........................................   28
SECTION 4.06.                  Calculation of Tax Original Issue Discount.............................   28

                                              ARTICLE 5
                                        SUCCESSOR CORPORATION

SECTION 5.01.                  Company May Consolidate, etc. Only on Certain Terms....................   29
SECTION 5.02.                  Successor Corporation Substituted......................................   30

                                              ARTICLE 6
                                        DEFAULTS AND REMEDIES

SECTION 6.01.                  Events of Default......................................................   30
SECTION 6.02.                  Acceleration...........................................................   32
SECTION 6.03.                  Other Remedies.........................................................   33
SECTION 6.04.                  Waiver of Past Defaults................................................   33
SECTION 6.05.                  Control by Majority....................................................   33
SECTION 6.06.                  Limitation on Suits....................................................   33
SECTION 6.07.                  Rights of Holders to Receive Payment...................................   34
SECTION 6.08.                  Collection Suit by Trustee.............................................   34
SECTION 6.09.                  Trustee May File Proofs of Claim.......................................   34
SECTION 6.10.                  Priorities.............................................................   35
SECTION 6.11.                  Undertaking for Costs..................................................   36
SECTION 6.12.                  Waiver of Stay, Extension or Usury Laws................................   36

                                              ARTICLE 7
                                               TRUSTEE

SECTION 7.01.                  Duties of Trustee......................................................   37
SECTION 7.02.                  Rights of Trustee......................................................   38
SECTION 7.03.                  Individual Rights of Trustee...........................................   39
SECTION 7.04.                  Trustee's Disclaimer...................................................   39
SECTION 7.05.                  Notice of Defaults.....................................................   39
SECTION 7.06.                  Reports by Trustee to Holders..........................................   39
SECTION 7.07.                  Compensation and Indemnity.............................................   40
SECTION 7.08.                  Replacement of Trustee.................................................   41	

ii

SECTION 7.09.                  Successor Trustee by Merger............................................   42
SECTION 7.10.                  Eligibility; Disqualification..........................................   42

                                              ARTICLE 8
                                        DISCHARGE OF INDENTURE

SECTION 8.01.                  Discharge of Liability on Securities...................................   42
SECTION 8.02.                  Repayment to the Company...............................................   42

                                              ARTICLE 9
                                              AMENDMENTS

SECTION 9.01.                  Without Consent of Holders.............................................   43
SECTION 9.02.                  With Consent of Holders................................................   43
SECTION 9.03.                  Compliance with Trust Indenture Act....................................   44
SECTION 9.04.                  Revocation and Effect of Consents, Waivers and Actions.................   44
SECTION 9.05.                  Notation on or Exchange of Securities..................................   45
SECTION 9.06.                  Trustee to Sign Supplemental Indentures................................   45
SECTION 9.07.                  Effect of Supplemental Indentures......................................   45

                                              ARTICLE 10
                                              CONVERSION

SECTION 10.01.                 Conversion Privilege...................................................   45
SECTION 10.02.                 Conversion Procedure...................................................   46
SECTION 10.03.                 Fractional Shares......................................................   48
SECTION 10.04.                 Taxes on Conversion....................................................   48
SECTION 10.05.                 Company to Provide Stock...............................................   48
SECTION 10.06.                 Adjustment for Change In Capital Stock.................................   48
SECTION 10.07.                 Adjustment for Rights Issue............................................   49
SECTION 10.08.                 Adjustment for Other Distributions.....................................   50
SECTION 10.09.                 When Adjustment May Be Deferred........................................   53
SECTION 10.10.                 When No Adjustment Required............................................   53
SECTION 10.11.                 Notice of Adjustment...................................................   54
SECTION 10.12.                 Voluntary Increase.....................................................   54
SECTION 10.13.                 Notice of Certain Transactions.........................................   54
SECTION 10.14.                 Reorganization of Company; Special Distributions.......................   55
SECTION 10.15.                 Company Determination Final............................................   56
SECTION 10.16.                 Trustee's Adjustment Disclaimer........................................   56
SECTION 10.17.                 Simultaneous Adjustments...............................................   56
SECTION 10.18.                 Successive Adjustments.................................................   56
SECTION 10.19.                 Rights Issued in Respect of Common Stock Issued Upon Conversion........   56

                                              ARTICLE 11
                                         PAYMENT OF INTEREST

SECTION 11.01.                 Interest Payments......................................................   57	

iii

SECTION 11.02.                 Defaulted Interest.....................................................   57
SECTION 11.03.                 Interest Rights Preserved..............................................   58

                                              ARTICLE 12
                                            MISCELLANEOUS

SECTION 12.01.                 Trust Indenture Act Controls...........................................   58
SECTION 12.02.                 Notices; Address of Agency.............................................   59
SECTION 12.03.                 Communication by Holders with Other Holders............................   59
SECTION 12.04.                 Certificate and Opinion as to Conditions Precedent.....................   60
SECTION 12.05.                 Statements Required in Certificate or Opinion..........................   60
SECTION 12.06.                 Separability Clause....................................................   60
SECTION 12.07.                 Rules by Trustee, Paying Agent, Conversion Agent and Registrar.........   61
SECTION 12.08.                 Calculations...........................................................   61
SECTION 12.09.                 Legal Holidays.........................................................   61
SECTION 12.10.                 Governing Law..........................................................   61
SECTION 12.11.                 No Recourse Against Others.............................................   61
SECTION 12.12.                 Successors.............................................................   61
SECTION 12.13.                 Multiple Originals.....................................................   61	

LIST OF EXHIBITS
 Exhibit A Form of Global Security
Exhibit B Projected Payment Schedule
iv
INDENTURE dated as of December 8, 2004 between Anixter International Inc., a Delaware corporation (the "Company"), and The Bank of New York, a New York banking corporation (the "Trustee").
Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's Zero Coupon Convertible Notes due 2033 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Affiliate" of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "control" when used with respect to any specified person means the power to direct or cause the direction of the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Applicable Procedures" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, in each case to the extent applicable to such transaction and as in effect from time to time.
"Board of Directors" means either the board of directors of the Company or any duly authorized committee of such board.
"Business Day" means each day of the year other than a Saturday or a Sunday or other day on which banking institutions in The City of New York are required or authorized to close.
"Capital Stock" for any corporation means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by that corporation.
"Common Stock" shall mean the shares of common stock, par value $1.00 per share, of the Company as it exists on the date of this Indenture or any other shares of Capital Stock of the Company into which the Common Stock shall be reclassified or changed.
"Company" means the party named as the "Company" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors.
"Company Request" or "Company Order" means a written request or order signed in the name of the Company by any two Officers.
"Corporate Trust Office" means the principal office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at c/o BNY Midwest Trust Company, 2 North LaSalle Street, Suite 1020, Chicago, Illinois 60602, Attention: Corporate Trust Services or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as a successor Trustee may designate from time to time by notice to the Holders and the Company).
"Default" means any event which is, or after notice or passage of time or both would be, an Event of Default.
"Global Securities" means Securities that are in the form of the Securities attached hereto as Exhibit A.
"Holder" or "Securityholder" means a person in whose name a Security is registered on the Registrar's books.
"Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof, including the provisions of the TIA that are deemed to be a part hereof.
"Initial Accreted Principal Amount" of any Security means, in connection with the initial issuance of such Security, the accreted principal amount of such Security as of its initial issuance, as set forth on the face of the Security.
"Issue Date" of any Security means the date on which the Security was originally issued or deemed issued as set forth on the face of the Security.
"Issue Discount" of any Security means the difference between the Initial Accreted Principal Amount and the Principal Amount at Maturity of such Security as set forth on the face of such Security.
"Issue Price" means, with respect to any Security, the initial price at which the LYONs exchanged for such Security were originally sold on July 7, 2003.
"LYONs" mean Liquid Yield Option Notes due 2033 for which the Securities were exchanged.
"Officer" means the President, any Senior Vice President, any Vice President, the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of the Company.
"Officers' Certificate" means a written certificate containing the information specified in Sections 12.04 and 12.05 hereof, signed in the name of the Company by any two Officers, and delivered to the Trustee.
2
"Operating Company" means Anixter Inc., a Delaware corporation and a wholly owned Subsidiary of the Company.
"Opinion of Counsel" means a written opinion containing the information specified in Sections 12.04 and 12.05 hereof, from legal counsel who is acceptable to the Trustee. The counsel may be an employee of, or counsel to, the Company.
"Original Issue Discount" means original issue discount, as determined for United States federal income tax purposes, attributable to the Securities and the LYONs.
"Person" or "person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof.
"Principal Amount at Maturity" of a Security means the Principal Amount at Maturity as set forth on the face of the Security.
"Purchase Date" means each date specified as such in paragraph 7 of the Securities.
"Purchase Price" means, with respect to any Purchase Date, the applicable amount specified as such in paragraph 7 of the Securities.
"Redemption Date" or "redemption date" means the date specified for redemption of the Securities in accordance with the terms of the Securities and this Indenture.
"Redemption Price" or "redemption price" shall have the meaning set forth in paragraph 6 of the Securities.
"Responsible Officer" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, or trust officer or other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of the Indenture.
"Sale Price" on any date means the closing per share sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and average ask prices) on such date as reported in composite transactions on the New York Stock Exchange or such other principal United States securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, (i) as reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated, or (ii) if such bid and ask prices are not reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated, in a manner to be determined by the Company on the basis of such quotation as the Company considers appropriate in its sole and absolute discretion.
3
"SEC" means the Securities and Exchange Commission.
"Securities" or "Security" means any of the Company's Convertible Notes due 2033 (Zero Coupon-Senior), as amended or supplemented from time to time, issued under this Indenture.
"Securityholder" or "Holder" means a person in whose name a Security is registered on the Registrar's books.
"Significant Subsidiary" means a "significant subsidiary", as such term is defined in Rule 1-02 of Regulation S-X under the Securities Act.
"Special Record Date" means for the payment of any Defaulted Interest, the date fixed by the Trustee pursuant to Section 11.02 hereof.
"Stated Maturity", when used with respect to any Security or any installment of contingent interest thereon, means the date specified in such Security as the fixed date on which an amount equal to the Principal Amount at Maturity of such Security or such installment of contingent interest is due and payable.
"Subsidiary" means (i) a corporation, a majority of whose Voting Stock is, at the date of determination, directly or indirectly owned by the Company, by one or more Subsidiaries of the Company, or by the Company and one or more Subsidiaries of the Company, (ii) a partnership in which the Company, a Subsidiary of the Company or the Company and one or more Subsidiaries of the Company, holds a majority interest in the equity capital or profits of such partnership, or (iii) any other person (other than a corporation or a partnership) in which the Company, a Subsidiary of the Company, or the Company and one or more Subsidiaries of the Company, directly or indirectly, at the date of determination, has (x) at least a majority ownership interest or (y) the power to elect or direct the election of a majority of the directors or trustees, as the case may be, or other governing body of such person.
"TIA" means the Trust Indenture Act of 1939 as in effect on the date of this Indenture, provided, however, that in the event the TIA is amended after such date, TIA means, to the extent required by any such amendment, the TIA as so amended.
"Trading Day" means a day on which the New York Stock Exchange is open for trading or, if the Common Stock is not listed on the New York Stock Exchange, on the principal other national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not listed on a national or regional securities exchange, on the National Association of Securities Dealers Automated Quotation System or, if the Common Stock is not quoted on the National Association of Securities Dealers Automated Quotation System or, on any Business Day.
"Trustee" means the party named as the "Trustee" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors.
4
"Voting Stock" means, with respect to any corporation, association, company or business trust, stock or other securities of the class or classes having general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such corporation, association, company or business trust, provided that, for the purposes hereof, stock or other securities which carry only the right to vote conditionally on the happening of an event shall not be considered Voting Stock whether or not such event shall have happened.
SECTION 1.02. Other Definitions.

Term                                 Defined in Section
-------------------                  ------------------
"Act"                                     1.05(a)
"Agent Members"                           2.12(e)
"Average Sale Price"                     10.01
"Bankruptcy Law"                          6.01
"beneficial owner"                        3.09(a)
"Bid Solicitation Agent"                  2.03
"cash"                                    3.08(b)
"Change in Control"                       3.09(a)
"Change in Control Purchase Date"         3.09(a)
"Change in Control Purchase Notice"       3.09(c)
"Change in Control Purchase Price"        3.09(a)
"Company Notice"                          3.08(e)
"Company Notice Date"                     3.08(c)
"Conversion Agent"                        2.03
"Conversion Date"                        10.02
"Conversion Rate"                        10.01
"Custodian"                               6.01
"Defaulted Interest"                     11.02
"Depositary"                              2.01(a)
"DTC"                                     2.01(a)
"Event of Default"                        6.01
"Exchange Act"                            2.12(b)(1)
"Ex-Dividend Date"                       10.08(b)
"Ex-Dividend Measurement Period"         10.08(a)
"Ex-Dividend Time"                       10.01
"Extraordinary Cash Dividend"            10.08(a)
"Legal Holiday"                          12.09
"noncontingent bond method"               4.06
"Notice of Default"                       6.01
"Paying Agent"                            2.03
"Post-Distribution Price"                10.08(b)
"Protected Purchaser"                     2.07(a)
"Purchase Notice"                         3.08(a)
"Registrar"                               2.03
"Relevant Cash Dividends"                10.08(a)
"Rights"                                 10.19	

5

Term                                  Defined in Section
----                                  ------------------
"Rights Agreement"                         10.19
"Special Record Date"                      11.02
"Time of Determination"                    10.01	

SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company.
All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with United States generally accepted accounting principles as in effect from time to time;
(3) "or" is not exclusive;
(4) "including" means including, without limitation; and
(5) words in the singular include the plural, and words in the plural include the singular.
SECTION 1.05. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and
6
evidenced by one or more instruments (which may take the form of an electronic writing or messaging or otherwise be in accordance with customary procedures of the Depositary or the Trustee) of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing (which may be in electronic form); and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent (either of which may be in electronic form) shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution (or electronic delivery) or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing or delivering such instrument or writing acknowledged to such officer the execution thereof (or electronic delivery). Where such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer's authority. The fact and date of the execution of any such instrument or writing (electronic or otherwise), or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the register for the Securities maintained by the Registrar.
(d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.
(e) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a resolution of the Board of Directors, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date.
7
ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating.
The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage (provided that any such notation, legend or endorsement required by usage is in a form acceptable to the Company). The Company shall provide any such notations, legends or endorsements to the Trustee in writing. Each Security shall be dated the date of its authentication.
(a) Certificated Securities. Except as provided in this Section 2.12 hereof, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of Securities in definitive form.
(b) Global Securities in General. Each Global Security shall represent such of the outstanding Securities as shall be specified therein and each shall provide that it shall represent the aggregate Principal Amount at Maturity of outstanding Securities from time to time endorsed thereon and that the aggregate Principal Amount at Maturity of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions and conversions.
Any adjustment of the aggregate Principal Amount at Maturity of a Global Security to reflect the amount of any increase or decrease in the Principal Amount at Maturity of outstanding Securities represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.12 hereof and shall be made on the records of the Trustee and the Depositary.
(c) Book-Entry Provisions. This Section 2.01(c) shall apply only to Global Securities deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with this Section 2.01(d), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depositary, (b) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instructions and (c) shall bear legends substantially to the following effect:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
8
THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS, IN WHOLE BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF."
SECTION 2.02. Execution and Authentication.
The Securities shall be executed on behalf of the Company by any Officer. The signature of the Officer on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of an individual who was at the time of the execution of the Securities the proper Officer of the Company shall bind the Company, notwithstanding that such individual has ceased to hold such office prior to the authentication and delivery of such Securities or did not hold such office at the date of authentication of such Securities.
No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized officer of the Trustee, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder.
Subject to the terms of Section 12.04 and 12.05 hereof, the Trustee shall authenticate and deliver Securities for original issue in an aggregate Principal Amount at Maturity of up to $378,135,000 (subject to Section 2.07 hereof) upon a Company Order without any further action by the Company. The aggregate Principal Amount at Maturity of Securities outstanding at any time may not exceed the amount set forth in the foregoing sentence, except as provided in
Section 2.07 hereof.
The Securities shall be issued only in registered form without coupons and only in denominations of $1,000 of Principal Amount at Maturity and any integral multiple thereof.
SECTION 2.03. Registrar, Paying Agent, Conversion Agent and Bid Solicitation Agent.
The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange for other Securities ("Registrar"), an office or agency where Securities may be presented for purchase or payment ("Paying Agent") and an office or agency where Securities may be presented for conversion into Common Stock ("Conversion Agent"). The Company shall also appoint a bid solicitation agent (the "Bid
9
Solicitation Agent") to act pursuant to Paragraph 5 of the Securities. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars, one or more additional paying agents and one or more additional conversion agents. The term Paying Agent includes any additional paying agent, including any named pursuant to
Section 4.05 hereof. The term Conversion Agent includes any additional conversion agent, including any named pursuant to Section 4.05 hereof.
The Company shall enter into an appropriate agency agreement with any Registrar or co-registrar, Paying Agent, Conversion Agent or Bid Solicitation Agent (other than the Trustee). The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar, Paying Agent, Conversion Agent or Bid Solicitation Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07 hereof. The Company or any Subsidiary or an Affiliate of either of them may act as Paying Agent, Registrar, Conversion Agent or co-registrar. None of the Company or any Subsidiary or any Affiliate of either of them may act as Bid Solicitation Agent.
The Company initially appoints the Trustee as Registrar, Conversion Agent, Paying Agent and Bid Solicitation Agent in connection with the Securities.
SECTION 2.04. Paying Agent to Hold Money and Securities in Trust.
Except as otherwise provided herein, by no later than 10:00 a.m., New York City time, on or prior to each due date of payments in respect of any Security, the Company shall deposit with the Paying Agent a sum of money (in immediately available funds if deposited on the due date) or Common Stock sufficient to make such payments when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money and Common Stock held by the Paying Agent for the making of payments in respect of the Securities and shall notify the Trustee of any default by the Company in making any such payment. At any time during the continuance of any such default, the Paying Agent shall, upon the written request of the Trustee, forthwith pay to the Trustee all money and Common Stock so held in trust. If the Company, a Subsidiary or an Affiliate of either of them acts as Paying Agent, it shall segregate the money and Common Stock held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money and Common Stock held by it to the Trustee and to account for any funds and Common Stock disbursed by it. Upon doing so, the Paying Agent shall have no further liability for the money or Common Stock.
SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall cause to be furnished to the Trustee at least semiannually on May 1 and November 1 a listing of Securityholders dated within 15 days of the date on which the list is furnished and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders.
10
SECTION 2.06. Transfer and Conversion.
Subject to Section 2.12 hereof,
(a) upon surrender for registration of transfer of any Security, together with a written instrument of transfer satisfactory to the Registrar duly executed by the Securityholder or such Securityholder's attorney duly authorized in writing, at the office or agency of the Company designated as Registrar or co-registrar pursuant to Section 2.03 hereof, the Company shall execute, and the Trustee upon receipt of a Company Order shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denomination or denominations, of a like aggregate Principal Amount at Maturity. The Company shall not charge a service charge for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the registration of transfer or exchange of the Securities from the Securityholder requesting such registration of transfer or exchange.
(b) Notwithstanding any provision to the contrary herein, so long as a Global Security remains outstanding and is held by or on behalf of the Depositary, transfers of a Global Security, in whole or in part, shall be made only in accordance with Section 2.12 hereof and this Section 2.06(b) hereof. Transfers of a Global Security shall be limited to transfers of such Global Security in whole, or in part, to nominees of the Depositary or to a successor of the Depositary or such successor's nominee.
(c) Successive registrations and registrations of transfers and exchanges as aforesaid may be made from time to time as desired, and each such registration shall be noted on the register for the Securities.
(d) Any Registrar appointed pursuant to Section 2.03 hereof shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Securities upon registration of transfer or exchange of Securities.
(e) No Registrar shall be required to make registrations of transfer or exchange of Securities during any periods designated in the text of the Securities or in this Indenture as periods during which such registration of transfers and exchanges need not be made.
SECTION 2.07. Replacement Securities.
(a) If (i) any mutilated Security is surrendered to the Trustee, or
(ii) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a protected purchaser within the meaning of Article 8 of the Uniform Commercial Code as in effect from time to time in the State of New York (a "Protected Purchaser"), the Company shall execute and upon its written request the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and Principal Amount at Maturity, bearing a number not contemporaneously outstanding.
11
(b) In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be purchased by the Company pursuant to Article 3 hereof, the Company in its discretion may, instead of issuing a new Security, pay or purchase such Security, as the case may be.
(c) Upon the issuance of any new Securities under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.
(d) Every new Security issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.
(e) The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.08. Outstanding Securities; Determinations of Holders' Action.
(a) Securities outstanding at any time are all the Securities authenticated by the Trustee except for those cancelled by it, those paid pursuant to Section 2.07 hereof and delivered to it for cancellation and those described in this Section 2.08 hereof as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate thereof holds the Security; provided, however, that in determining whether the Holders of the requisite Principal Amount at Maturity of Securities have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Subject to the foregoing, only Securities outstanding at the time of such determination shall be considered in any such determination (including, without limitation, determinations pursuant to Articles 6 and 9 hereof).
(b) If a Security is replaced pursuant to Section 2.07 hereof, the replaced Security ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to each of them that the replaced Security is held by a Protected Purchaser.
(c) If the Paying Agent holds, in accordance with this Indenture, on a Redemption Date, or on the Business Day following the Purchase Date or a Change in Control Purchase Date, or on Stated Maturity, money or securities, if permitted hereunder, sufficient to pay Securities payable on that date, then immediately after such Redemption Date, Purchase Date, Change in Control Purchase Date or Stated Maturity, as the case may be, such Securities shall cease to be outstanding and Issue Discount and interest (including contingent interest), if
12
any, on such Securities shall cease to accrue whether or not the Security is delivered to the Paying Agent; provided, that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture.
(d) If a Security is converted in accordance with Article 10 hereof, then from and after the time of conversion on the Conversion Date, such Security shall cease to be outstanding and Issue Discount and interest (including contingent interest), if any, shall cease to accrue on such Security.
SECTION 2.09. Temporary Securities.
(a) Pending the preparation of definitive Securities, the Company may execute, and the Trustee upon receipt of a Company Order shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities.
(b) If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 2.03 hereof, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee upon receipt of a Company Order shall authenticate and deliver in exchange therefor a like Principal Amount at Maturity of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities.
SECTION 2.10. Cancellation.
All Securities surrendered for payment, purchase by the Company pursuant to Article 3 hereof, conversion, redemption or registration of transfer or exchange shall, if surrendered to any person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. The Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation or that any Holder has converted pursuant to Article 10 hereof. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of by the Trustee in accordance with the Trustee's customary procedure.
13
SECTION 2.11. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of the Security or the payment of any Redemption Price, Purchase Price or Change in Control Purchase Price in respect thereof, and interest (including contingent interest, if any) thereon, for the purpose of conversion and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.
SECTION 2.12. Global Securities.
(a) Notwithstanding any other provisions of this Indenture or the Securities, transfers of a Global Security, in whole or in part, shall be made only in accordance with Section 2.06 and Section 2.12(a) hereof. A Global Security may not be transferred, in whole or in part, to any Person other than the Depositary or a nominee or any successor thereof, and no such transfer to any such other Person may be registered; provided that this clause (a) shall not prohibit any transfer of a Security that is issued in exchange for a Global Security but is not itself a Global Security. No transfer of a Security to any Person shall be effective under this Indenture or the Securities unless and until such Security has been registered in the name of such Person. As used in this paragraph, the term "transfer" encompasses any sale, pledge, transfer, hypothecation or other disposition of any Security.
(b) The provisions of clauses (1), (2), (3) and (4) below shall apply only to Global Securities:
(1) Notwithstanding any other provisions of this Indenture or the Securities, except as provided in Section 2.12(a), a Global Security shall not be exchanged in whole or in part for a Security registered in the name of any Person other than the Depositary or one or more nominees thereof, provided that a Global Security may be exchanged for Securities registered in the names of any person designated by the Depositary in the event that (i) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or such Depositary has ceased to be a "clearing agency" registered under the Securities Exchange Act of 1934 (the "Exchange Act"), and a successor Depositary is not appointed by the Company within 90 days, (ii) the Company decides to discontinue use of the system of book-entry transfer through DTC (or any successor depositary); or (iii) an Event of Default has occurred and is continuing with respect to the Securities. Any Global Security exchanged pursuant to clause (i) or (ii) above shall be so exchanged in whole and not in part, and any Global Security exchanged pursuant to clause (iii) above may be exchanged in whole or from time to time in part as directed by the Depositary. Any Security issued in exchange for a Global Security or any portion thereof shall be a Global Security; provided that any such Security so issued that is registered in the name of a Person other than the Depositary or a nominee thereof shall not be a Global Security.
14
(2) Securities issued in exchange for a Global Security or any portion thereof shall be issued in definitive, fully registered form, without interest coupons, shall have an aggregate Principal Amount at Maturity equal to that of such Global Security or portion thereof to be so exchanged, shall be registered in such names and be in such authorized denominations as the Depositary shall designate and shall bear the applicable legends provided for herein. Any Global Security to be exchanged in whole shall be surrendered by the Depositary to the Trustee, as Registrar. With regard to any Global Security to be exchanged in part, either such Global Security shall be so surrendered for exchange or, if the Trustee is acting as custodian for the Depositary or its nominee with respect to such Global Security, the Principal Amount at Maturity thereof shall be reduced, by an amount equal to the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records of the Trustee. Upon any such surrender or adjustment, the Trustee shall authenticate and deliver the Security issuable on such exchange to or upon the order of the Depositary or an authorized representative thereof.
(3) Subject to the provisions of clause (5) below, the registered Holder may grant proxies and otherwise authorize any Person, including Agent Members (as defined below) and persons that may hold interests through Agent Members, to take any action which a holder is entitled to take under this Indenture or the Securities.
(4) In the event of the occurrence of any of the events specified in clause (1) above, the Company will promptly make available to the Trustee a reasonable supply of Securities in definitive, fully registered form, without interest coupons.
(5) Neither any members of, or participants in, the Depositary (collectively, the "Agent Members") nor any other Persons on whose behalf Agent Members may act shall have any rights under this Indenture with respect to any Global Security registered in the name of the Depositary or any nominee thereof, or under any such Global Security, and the Depositary or such nominee, as the case may be, may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and holder of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or impair, as between the Depositary, its Agent Members and any other person on whose behalf an Agent Member may act, the operation of customary practices of such Persons governing the exercise of the rights of a holder of any Security.
SECTION 2.13. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a
15
convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE 3
REDEMPTION AND PURCHASES
SECTION 3.01. Right to Redeem; Notices to Trustee.
The Company, at its option, may redeem the Securities in accordance with the provisions of paragraphs 6 and 8 of the Securities. If the Company elects to redeem Securities pursuant to paragraph 6 of the Securities, it shall notify the Trustee in writing of the Redemption Date, the Principal Amount at Maturity of Securities to be redeemed, the CUSIP number of Securities to be redeemed, the Redemption Price and the amount of contingent interest, if any, payable on the Redemption Date.
The Company shall give the notice to the Trustee provided for in this Section 3.01 by a Company Order, at least 30 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee).
SECTION 3.02. Selection of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by any other method selected by the Trustee in its sole discretion (so long as such method is not prohibited by the rules of any stock exchange on which the Securities are then listed). The Trustee shall make the selection at least 30 days but not more than 60 days before the Redemption Date from outstanding Securities not previously called for redemption.
Securities and portions of them the Trustee selects shall be in Principal Amounts at Maturity of $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed.
If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection.
16
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail, postage prepaid, to each Holder of Securities to be redeemed.
The notice shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and, to the extent known at the time of such notice, the amount of contingent interest, if any, payable on the Redemption Date;
(3) the Conversion Rate;
(4) the name and address of the Paying Agent and Conversion Agent;
(5) that Securities called for redemption may be converted at any time before the close of business on the second Business Day immediately preceding the Redemption Date;
(6) that Holders who want to convert Securities must satisfy the requirements set forth in paragraph 9 of the Securities;
(7) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price and contingent interest, if any;
(8) if fewer than all the outstanding Securities are to be redeemed, the certificate number and Principal Amounts at Maturity of the particular Securities to be redeemed;
(9) that, unless the Company defaults in making payment of such Redemption Price and contingent interest, if any, Issue Discount and contingent interest, if any, on Securities called for redemption will cease to accrue on and after the Redemption Date and the Securities will cease to be convertible; and
(10) the CUSIP number of the Securities.
At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense, provided that the Company makes such request at least five Business Days (unless a shorter period shall be satisfactory to the Trustee) prior to the date such notice of redemption must be mailed.
17
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is given, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price (together with accrued contingent interest, if any, to but not including the date of redemption) stated in the notice except for Securities which are converted in accordance with the terms of this Indenture. Upon surrender to the Paying Agent, such Securities shall be paid at the Redemption Price (together with accrued contingent interest, if any, to but not including the date of redemption) stated in the notice.
SECTION 3.05. Deposit of Redemption Price.
Prior to 10:00 a.m. (New York City time) on any Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary or an Affiliate of either of them is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the Redemption Price of, and any accrued and unpaid contingent interest to but not including the date of redemption with respect to, all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which on or prior thereto have been delivered by the Company to the Trustee for cancellation or have been converted. The Paying Agent shall as promptly as practicable return to the Company any money, not required for that purpose because of conversion of Securities pursuant to Article 10. If such money is then held by the Company in trust and is not required for such purpose it shall be discharged from such trust.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder a new Security in an authorized denomination equal in Principal Amount at Maturity to the unredeemed portion of the Security surrendered.
SECTION 3.07. Conversion Arrangement on Call for Redemption.
In connection with any redemption of Securities, the Company may arrange for the purchase and conversion of any Securities called for redemption by an agreement with one or more investment banks or other purchasers to purchase such Securities by paying to the Trustee in trust for the Securityholders, on or prior to 10:00 a.m. New York City time on the Redemption Date, an amount that, together with any amounts deposited with the Trustee by the Company for the redemption of such Securities, is not less than the Redemption Price of, and any accrued and unpaid contingent interest with respect to, such Securities. Notwithstanding anything to the contrary contained in this Article 3, the obligation of the Company to pay the Redemption Prices of such Securities shall be deemed to be satisfied and discharged to the extent such amount is so paid by such purchasers. If such an agreement is entered into, any Securities not duly surrendered for conversion by the Holders thereof may, at the option of the Company, be deemed, to the fullest extent permitted by law, acquired by such purchasers from such Holders and (notwithstanding anything to the contrary contained in Article 10 hereof) surrendered by such purchasers for conversion, all as of immediately prior to the close of business on the Business Day prior to the Redemption Date, subject to payment of the above amount as
18
aforesaid. The Trustee shall hold and pay to the Holders whose Securities are selected for redemption any such amount paid to it for purchase and conversion in the same manner as it would moneys deposited with it by the Company for the redemption of Securities. Without the Trustee's prior written consent, no arrangement between the Company and such purchasers for the purchase and conversion of any Securities shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Trustee as set forth in this Indenture, and the Company agrees to indemnify the Trustee from, and hold it harmless against, any loss, liability or expense arising out of or in connection with any such arrangement for the purchase and conversion of any Securities between the Company and such purchasers, including the costs and expenses incurred by the Trustee in the defense of any claim or liability arising out of or in connection with the exercise or performance of any of its powers, duties, responsibilities or obligations under this Indenture.
SECTION 3.08. Purchase of Securities at Option of the Holder.
(a) General. Securities shall be purchased by the Company pursuant to paragraph 7 of the Securities at the option of the Holder thereof, upon:
(1) delivery to the Paying Agent by the Holder of a written notice of purchase (a "Purchase Notice") at any time from the opening of business on the date that is 20 Business Days prior to a Purchase Date until the close of business on the Business Day immediately preceding such Purchase Date stating:
(A) if definitive Securities in fully registered form have been issued, the certificate number of the Security which the Holder will deliver to be purchased or, if not, such information as may be required under Applicable Procedures,
(B) the portion of the Principal Amount at Maturity of the Security which the Holder will deliver to be purchased, which portion must be a Principal Amount at Maturity of $1,000 or an integral multiple thereof, and
(C) that such Security shall be purchased as of the Purchase Date pursuant to the terms and conditions specified in paragraph 7 of the Securities and in this Indenture.
(2) delivery of such Security to the Paying Agent prior to, on or after the Purchase Date (together with all necessary endorsements) at the offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Purchase Price therefor; provided, however, that such Purchase Price shall be so paid pursuant to this Section 3.08 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Purchase Notice, as determined by the Company.
The Company shall purchase from the Holder thereof, pursuant to this
Section 3.08, a portion of a Security if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security.
19
Any purchase by the Company contemplated pursuant to the provisions of this Section 3.08 shall be consummated by the delivery of the consideration to be received by the Holder (including accrued and unpaid contingent interest, if any) promptly following the later of the Purchase Date and the time of delivery of the Security.
Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Purchase Notice contemplated by this Section 3.08(a) shall have the right to withdraw such Purchase Notice at any time prior to the close of business on the Business Day immediately preceding the Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.10 hereof.
The Paying Agent shall promptly notify the Company of the receipt by it of any Purchase Notice or written notice of withdrawal thereof.
(b) Purchase with Cash. On each Purchase Date, the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.08(a) hereof has been given, or a specified percentage thereof, shall be paid by the Company with cash equal to the aggregate Purchase Price of such Securities. The Company Notice, as provided in Section 3.08(c) hereof, shall be sent to Holders (and to beneficial owners as required by applicable law) not less than 20 Business Days prior to such Purchase Date (the "Company Notice Date").
(c) Notice of Election. The Company's notice shall be sent to the Holders (and to beneficial owners as required by applicable law) in the manner provided in Section 12.02 at the time specified in Section 3.08(b) hereof (the "Company Notice").
Each Company Notice shall include a form of Purchase Notice to be completed by a Securityholder and shall state:
(i) the Purchase Price, the Conversion Rate and, to the extent known at the time of such notice, the amount of contingent interest, if any, that will be accrued and payable with respect to the Securities as of the Purchase Date;
(ii) the name and address of the Paying Agent and the Conversion Agent;
(iii) that Securities as to which a Purchase Notice has been given may be converted pursuant to Article 10 hereof only if the applicable Purchase Notice has been withdrawn in accordance with the terms of this Indenture;
(iv) that Securities must be surrendered to the Paying Agent to collect payment of the Purchase Price and contingent interest, if any;
(v) that the Purchase Price for any Security as to which a Purchase Notice has been given and not withdrawn, together with any accrued contingent interest payable with respect thereto, will be paid promptly following the later of the Purchase Date and the time of surrender of such Security as described in (iv);
20
(vi) the procedures the Holder must follow to exercise rights under this Section 3.08 and a brief description of those rights;
(vii) briefly, the conversion rights of the Securities;
(viii) the procedures for withdrawing a Purchase Notice;
(ix) that, unless the Company defaults in making payment of such Purchase Price and contingent interest, if any, Issue Discount and contingent interest, if any, on Securities surrendered for purchase will cease to accrue on and after the Purchase Date; and
(x) the CUSIP number of the Securities.
At the Company's request, the Trustee shall give such Company Notice in the Company's name and at the Company's expense; provided, however, that, in all cases, the text of such Company Notice shall be prepared by the Company.
(d) Procedure upon Purchase. The Company shall deposit cash at the time and in the manner as provided in Section 3.11 hereof, sufficient to pay the aggregate Purchase Price of, and any accrued and unpaid contingent interest with respect to, all Securities to be purchased pursuant to this Section 3.08.
SECTION 3.09. Purchase of Securities at Option of the Holder upon Change in Control.
(a) If on or prior to the date specified in paragraph 7 of the Securities, there shall have occurred a Change in Control, Securities shall be purchased by the Company, at the option of the Holder thereof, at a purchase price specified in paragraph 7 of the Securities (the "Change in Control Purchase Price"), as of the date that is no later than 35 Business Days after the occurrence of the Change in Control but in no event prior to the date on which such Change in Control occurs (the "Change in Control Purchase Date"), subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 3.09(c) hereof.
A "Change in Control" shall be deemed to have occurred at such time as either of the following events shall occur:
(1) any person, including its respective Affiliates and associates, other than the Company, its Subsidiaries or any employee benefits plan of the Company or its Subsidiaries, files a Schedule 13D or Schedule TO (or any successor schedule, form or report) pursuant to the Exchange Act, disclosing that such person has become the beneficial owner of 50% or more of the aggregate voting power of the Common Stock and other Capital Stock with equivalent voting rights, or other Capital Stock into which the Common Stock is reclassified or changed; provided, however, that a person shall not be deemed beneficial owner of, or to own beneficially, (A) any securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates until such tendered securities are accepted for purchase or exchange thereunder, or (B) any
21
securities if such beneficial ownership (1) arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation made pursuant to the applicable rules and regulations under the Exchange Act, and (2) is not also then reportable on Schedule 13D (or any successor schedule) under the Exchange Act; or
(2) there shall be consummated any share exchange, consolidation or merger of the Company pursuant to which the Common Stock would be converted into cash, securities or other property, in each case other than a share exchange, consolidation or merger of the Company in which the holders of the Common Stock and other Capital Stock with equivalent voting rights immediately prior to the share exchange, consolidation or merger have, directly or indirectly, at least a majority of the total voting power in the aggregate of all classes of Capital Stock of the continuing or surviving corporation immediately after such share exchange, consolidation or merger.
For purposes of defining a change in control:
(x) the term "person" and the term "group" have the meanings given by Section 13(d) and 14(d) of the Exchange Act or any successor provisions;
(y) the term "group" includes any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act or any successor provision; and
(z) the term "beneficial owner" is determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act or any successor provisions, except that a person will be deemed to have beneficial ownership of all shares that person has the right to acquire irrespective of whether that right is exercisable immediately or only after the passage of time.
(b) Within 15 Business Days after the occurrence of a Change in Control, the Company shall mail a written notice of Change in Control by first-class mail to the Trustee and to each Holder (and to beneficial owners as required by applicable law). The notice shall include a form of Change in Control Purchase Notice to be completed by the Securityholder and shall state:
(1) briefly, the events causing a Change in Control and the date of such Change in Control;
(2) the date by which the Change in Control Purchase Notice pursuant to this Section 3.09 must be given;
(3) the Change in Control Purchase Date;
(4) the Change in Control Purchase Price and, to the extent known at the time of such notice, the amount of contingent interest, if any, that will be accrued and payable with respect to the Securities as of the Change in Control Purchase Date;
22
(5) the name and address of the Paying Agent and the Conversion Agent;
(6) the Conversion Rate and any adjustments thereto;
(7) that Securities as to which a Change in Control Purchase Notice has been given may be converted pursuant to Article 10 hereof only if the Change in Control Purchase Notice has been withdrawn in accordance with the terms of this Indenture;
(8) that Securities must be surrendered to the Paying Agent to collect payment of the Change in Control Purchase Price and contingent interest, if any;
(9) that the Change in Control Purchase Price for any Security as to which a Change in Control Purchase Notice has been duly given and not withdrawn, together with any accrued contingent interest payable with respect thereto, will be paid promptly following the later of the Change in Control Purchase Date and the time of surrender of such Security as described in (8);
(10) briefly, the procedures the Holder must follow to exercise rights under this Section 3.09;
(11) briefly, the conversion rights of the Securities;
(12) the procedures for withdrawing a Change in Control Purchase Notice;
(13) that, unless the Company defaults in making payment of such Change in Control Purchase Price and contingent interest, if any, Issue Discount and contingent interest, if any, on Securities surrendered for purchase will cease to accrue on and after the Change in Control Purchase Date; and
(14) the CUSIP number of the Securities.
(c) A Holder may exercise its rights specified in Section 3.09(a) hereof upon delivery of a written notice of purchase (a "Change in Control Purchase Notice") to the Paying Agent at any time prior to the close of business on the Change in Control Purchase Date, stating:
(1) if definitive Securities in fully registered form have been issued, the certificate number of the Security which the Holder will deliver to be purchased or, if not, such information as may be required under Applicable Procedures;
(2) the portion of the Principal Amount at Maturity of the Security which the Holder will deliver to be purchased, which portion must be $1,000 or an integral multiple thereof; and
(3) that such Security shall be purchased pursuant to the terms and conditions specified in paragraph 7 of the Securities.
The delivery of such Security to the Paying Agent prior to, on or after the Change in Control Purchase Date (together with all necessary endorsements) at the offices of the Paying
23
Agent shall be a condition to the receipt by the Holder of the Change in Control Purchase Price therefor; provided, however, that such Change in Control Purchase Price shall be so paid pursuant to this Section 3.09 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof set forth in the related Change in Control Purchase Notice.
The Company shall purchase from the Holder thereof, pursuant to this
Section 3.09, a portion of a Security if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security.
Any purchase by the Company contemplated pursuant to the provisions of this Section 3.09 shall be consummated by the delivery of the consideration to be received by the Holder (together with accrued and unpaid contingent interest, if any) promptly following the later of the Change in Control Purchase Date and the time of delivery of the Security to the Paying Agent in accordance with this Section 3.09.
Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Change in Control Purchase Notice contemplated by this Section 3.09(c) shall have the right to withdraw such Change in Control Purchase Notice at any time prior to the close of business on the Change in Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.10 hereof.
The Paying Agent shall promptly notify the Company of the receipt by it of any Change in Control Purchase Notice or written withdrawal thereof.
The Company shall not be required to comply with this Section 3.09 if a third party mails a written notice of Change in Control in the manner, at the times and otherwise in compliance with this Section 3.09 and repurchases all Securities for which a Change in Control Purchase Notice shall be delivered and not withdrawn.
SECTION 3.10. Effect of Purchase Notice or Change in Control Purchase Notice.
Upon receipt by the Paying Agent of the Purchase Notice or Change in Control Purchase Notice specified in Section 3.08(a) or Section 3.09(c) hereof, as applicable, the Holder of the Security in respect of which such Purchase Notice or Change in Control Purchase Notice, as the case may be, was given shall (unless such Purchase Notice or Change in Control Purchase Notice is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Purchase Price or Change in Control Purchase Price, as the case may be, and any accrued and unpaid contingent interest, with respect to such Security. Such Purchase Price or Change in Control Purchase Price and contingent interest, if any, shall be paid to such Holder, subject to receipt of funds by the Paying Agent, promptly following the later of (x) the Purchase Date or the Change in Control Purchase Date, as the case may be, with respect to such Security (provided the conditions in Section 3.08(a) or Section 3.09(c) hereof, as applicable, have been satisfied) and (y) the time of delivery of such Security to the Paying Agent by the Holder thereof in the manner required by
Section 3.08(a) or Section 3.09(c) hereof, as applicable. Securities in
24
respect of which a Purchase Notice or Change in Control Purchase Notice, as the case may be, has been given by the Holder thereof may not be converted pursuant to Article 10 hereof on or after the date of the delivery of such Purchase Notice or Change in Control Purchase Notice, as the case may be, unless such Purchase Notice or Change in Control Purchase Notice, as the case may be, has first been validly withdrawn as specified in the following two paragraphs.
A Purchase Notice or Change in Control Purchase Notice, as the case may be, may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent in accordance with the Purchase Notice or Change in Control Purchase Notice, as the case may be, at any time prior to the close of business on the Business Day immediately preceding the Purchase Date or the close of business on the Change in Control Purchase Date, as the case may be, specifying:
(1) if definitive Securities in fully registered form have been issued, the certificate number of the Security in respect of which such notice of withdrawal is being submitted, or, if not, such information as may be required under Applicable Procedures,
(2) the Principal Amount at Maturity of the Security with respect to which such notice of withdrawal is being submitted, and
(3) the Principal Amount at Maturity, if any, of such Security which remains subject to the original Purchase Notice or Change in Control Purchase Notice, as the case may be, and which has been or will be delivered for purchase by the Company.
There shall be no purchase of any Securities pursuant to Section 3.08 or Section 3.09 hereof if there has occurred (prior to, on or after, as the case may be, the giving, by the Holders of such Securities, of the required Purchase Notice or Change in Control Purchase Notice, as the case may be) and is continuing an Event of Default (other than a default in the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, and any accrued and unpaid contingent interest with respect to such Securities). The Paying Agent will promptly return to the respective Holders thereof any Securities (x) with respect to which a Purchase Notice or Change in Control Purchase Notice, as the case may be, has been withdrawn in compliance with this Indenture, or (y) held by it during the continuance of an Event of Default (other than a default in the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, and any accrued and unpaid contingent interest with respect to such Securities) in which case, upon such return, the Purchase Notice or Change in Control Purchase Notice with respect thereto shall be deemed to have been withdrawn.
SECTION 3.11. Deposit of Purchase Price or Change in Control Purchase Price.
Prior to 10:00 a.m. (local time in The City of New York) on the Business Day following the Purchase Date or the Change in Control Purchase Date, as the case may be, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and
25
hold in trust as provided in Section 2.04 hereof) an amount of money (in immediately available funds if deposited on such Business Day) sufficient to pay the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of, and any accrued and unpaid contingent interest with respect to, all the Securities or portions thereof which are to be purchased as of the Purchase Date or Change in Control Purchase Date, as the case may be.
SECTION 3.12. Securities Purchased in Part.
Any Security which is to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate Principal Amount at Maturity equal to, and in exchange for, the portion of the Principal Amount at Maturity of the Security so surrendered which is not purchased.
SECTION 3.13. Covenant to Comply With Securities Laws Upon Purchase of Securities.
In connection with any offer to purchase or purchase of Securities under Section 3.08 or 3.09 hereof (provided that such offer or purchase constitutes an "issuer tender offer" for purposes of Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act at the time of such offer or purchase), the Company shall, to the extent required by law, (i) comply with Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act which may then apply, (ii) file the related Schedule TO (or any other required schedule) under the Exchange Act, and (iii) otherwise comply with all Federal and state securities laws so as to permit the rights and obligations under Sections 3.08 and 3.09 hereof to be exercised in the time and in the manner specified in Sections 3.08 and 3.09 hereof.
SECTION 3.14. Repayment to the Company.
The Trustee and the Paying Agent shall return to the Company any cash that remain unclaimed as provided in paragraph 14 of the Securities, together with interest, if any, thereon (subject to the provisions of Section 7.01(f) hereof), held by them for the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, or contingent interest, if any; provided, however, that to the extent that the aggregate amount of cash deposited by the Company pursuant to Section 3.11 hereof exceeds the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of, and the accrued and unpaid contingent interest with respect to, the Securities or portions thereof which the Company is obligated to purchase as of the Purchase Date or Change in Control Purchase Date, as the case may be, whether as a result of withdrawal or otherwise, then promptly after the Business Day following the Purchase Date or Change in Control Purchase Date, as the case may be, the Trustee shall return any such excess to the Company together with interest, if any, thereon (subject to the provisions of Section 7.01(f) hereof).
26
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall promptly make all payments in respect of the Securities on the dates and in the manner provided in the Securities or pursuant to this Indenture. Any amounts to be given to the Trustee or Paying Agent, shall be deposited with the Trustee or Paying Agent by 10:00 a.m., New York City time, by the Company. Principal Amount at Maturity, Initial Accreted Principal Amount plus accrued Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, and contingent interest, if any, shall be considered paid on the applicable date due if on such date (or, in the case of a Purchase Price or Change in Control Purchase Price, on the Business Day following the applicable Purchase Date or Change in Control Purchase Date, as the case may be) the Trustee or the Paying Agent holds, in accordance with this Indenture, money or securities, if permitted hereunder, sufficient to pay all such amounts then due.
The Company shall, to the extent permitted by law, pay interest on overdue amounts at the rate per annum set forth in paragraph 1 of the Securities, compounded semiannually, which interest shall accrue from the date such overdue amount was originally due to the date payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand. The accrual of such interest on overdue amounts shall be in lieu of, and not in addition to, the continued accrual of Issue Discount.
SECTION 4.02. SEC and Other Reports.
The Company shall deliver to the Trustee, within 15 days after it files such annual and quarterly reports, information, documents and other reports with the SEC, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. In the event the Company is at any time no longer subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall continue to provide the Trustee with reports containing substantially the same information as would have been required to be filed with the SEC had the Company continued to have been subject to such reporting requirements. In such event, such reports shall be provided at the times the Company would have been required to provide reports had it continued to have been subject to such reporting requirements. The Company also shall comply with the other provisions of TIA Section 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of the same shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates).
27
SECTION 4.03. Compliance Certificate.
The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company (beginning with the fiscal year ending on or about December 31, 2003) an Officers' Certificate, one of the signers of which is the chief executive, chief financial or chief accounting officer, stating whether or not to the knowledge of the signers thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.
SECTION 4.04. Further Instruments and Acts.
Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.
SECTION 4.05. Maintenance of Office or Agency.
The Company will maintain an office or agency of the Trustee, Registrar, Paying Agent and Conversion Agent where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer, exchange for other Securities, purchase, redemption or conversion for Common Stock and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The agency specified in
Section 12.02 hereof shall initially be such office or agency for all of the aforesaid purposes. The Company shall give prompt written notice to the Trustee of the location, and of any change in the location, of any such office or agency (other than a change in the location of the office of the Trustee). If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 12.02 hereof.
The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations.
SECTION 4.06. Calculation of Tax Original Issue Discount.
The Company agrees, and each Holder and any beneficial owner of a Security by its purchase thereof shall be deemed to agree, to treat, for United States federal income tax purposes, the Securities as debt instruments that are subject to Treasury Regulation Section 1.1275-4(b). For United States federal income tax purposes, the Company agrees, and each Holder and any beneficial owner of a Security by its purchase thereof shall be deemed to agree, to treat the cash and the fair market value of any Common Stock received upon the conversion of a Security, as a contingent payment for purposes of Treasury Regulation Section 1.1275-4(b) and to accrue interest with respect to outstanding Securities as Original Issue Discount for United States federal income tax purposes according to the "noncontingent bond method," set forth in
Section 1.1275-4(b) of the Treasury Regulations, using the comparable
28
yield set forth in Exhibit B attached hereto, compounded semiannually, and the projected payment schedule in Exhibit B attached hereto.
The Company acknowledges and agrees, and each Holder and any beneficial owner of a Security by its purchase thereof shall be deemed to acknowledge and agree, that (i) the comparable yield means the annual yield the Company would pay on a noncontingent, nonconvertible, fixed-rate debt security with terms and conditions otherwise comparable to those of the Securities, (ii) the schedule of projected payments is determined on the basis of an assumption of linear growth of the stock price and a constant dividend yield and is not determined for any purpose other than for the determination of interest accruals and adjustments thereof in respect of the Securities for United States federal income tax purposes and (iii) the comparable yield and the schedule of projected payments do not constitute a projection or representation regarding the amounts payable on the Securities.
In addition, the Company agrees, and each Holder and any beneficial owner of a Security by its participation in the exchange offer of Liquid Yield Option TM Notes due 2033 for Securities shall be deemed to agree to treat the exchange offer and the payment of the exchange fee as not constituting an exchange for which gain or loss might be recognized in whole or in part for United States federal income tax purposes.
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01. Company May Consolidate, etc. Only on Certain Terms.
The Company shall not consolidate with or merge with or into any other person or convey, transfer or lease all or substantially all of its properties and assets to any person, unless:
(a) in case the Company shall consolidate with or merge with or into another corporation or convey, transfer or lease all or substantially all of its properties and assets to any person, the person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, all or substantially all of the properties and assets of the Company shall be a corporation, limited liability company, partnership, trust or other entity organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the Principal Amount at Maturity, Initial Accreted Principal Amount plus accrued Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price and contingent interest, if any, on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed;
(b) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have happened and be continuing; and
(c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance, transfer or lease
29
and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been met.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation with or merger with or into any other person, or any conveyance, transfer or lease of all or substantially all of the properties and assets of the Company in accordance with Section 5.01 hereof, the successor person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor had been named as the Company herein, and thereafter, except in the case of a lease, the Company (which term for this purpose shall mean the person named as the "Company" in the first paragraph of this instrument or any successor person which shall theretofore have become such in the manner presented in this Article 5) shall be relieved of all obligations and covenants under this Indenture and the Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default.
"Event of Default", wherever used herein with respect to the Securities, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law, pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(1) the Company defaults in payment of any contingent interest on any of the Securities, which default continues for 30 days;
(2) the Company defaults in the payment of the Principal Amount at Maturity, Initial Accreted Principal Amount plus accrued Issue Discount, Redemption Price, Purchase Price or Change in Control Purchase Price on any Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration, when due for purchase by the Company or otherwise;
(3) the Company fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in clauses (1) and (2) above) and such failure continues for 30 days after there has been given by registered or certified mail, to the Company by the Trustee, or to the Company and the Trustee by the Holders of at least 25% in aggregate Principal Amount at Maturity of the outstanding Securities, a written notice specifying such default and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder;
(4) a default under any (i) indebtedness for any money borrowed by the Company or the Operating Company, (ii) mortgage, indenture or other instrument under
30
which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or the Operating Company or (iii) guarantee by the Company or the Operating Company of payment for money borrowed, which default shall consist of a payment default at the stated maturity thereof, after giving effect to any applicable grace period, or shall have resulted in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such indebtedness or accelerated indebtedness having been discharged, or such acceleration having been cured, waived, rescinded or annulled, within a period of 30 days after there shall have been given, by registered or certified mail, to the Company by the Trustee, or to the Company and the Trustee by the Holders of at least 25% in aggregate Principal Amount at Maturity of the outstanding Securities, a written notice specifying such default and requiring the Company or the Operating Company, as the case may be, to cause such indebtedness or accelerated indebtedness to be discharged or cause such acceleration to be cured, waived, rescinded or annulled, as the case may be, and stating that such notice is a "Notice of Default" hereunder; provided, that a default shall exist under this subsection only if the aggregate principal amount outstanding under all such indebtedness that is so in default or has become due prior to the date on which it would otherwise become due and payable exceeds $25,000,000;
(5) the Company or the Operating Company shall fail within 60 days to pay, bond or otherwise discharge any uninsured judgment or court order in excess of $25,000,000 which is not stayed;
(6) the Company or the Operating Company pursuant to or under or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against it in an involuntary case or proceeding or the commencement of any case against it;
(C) consents to the appointment of a Custodian of it or for any substantial part of its property;
(D) makes a general assignment for the benefit of its creditors;
(E) files a petition in bankruptcy or answer or consent seeking reorganization or relief; or
(F) consents to the filing of such petition or the appointment of or taking possession by a Custodian; or
(7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
31
(A) is for relief against the Company or the Operating Company in an involuntary case or proceeding, or adjudicates the Company or the Operating Company insolvent or bankrupt;
(B) appoints a Custodian of the Company or the Operating Company or for any substantial part of the property of the Company or the Operating Company; or
(C) orders the winding up or liquidation of the Company or the Operating Company;
and the order or decree remains unstayed and in effect for 60 days.
"Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors.
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.
A Default under clause (3) or clause (4) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate Principal Amount at Maturity of the Securities at the time outstanding notify the Company and the Trustee, of the Default and the Company does not cure such Default (and such Default is not waived) within the time specified in clause (3) or clause (4) above after actual receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after it becomes aware of the occurrence thereof, written notice of any event which with the giving of notice or the lapse of time, or both, would become an Event of Default under clause (3) or clause (4) above, its status and what action the Company is taking or proposes to take with respect thereto.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 6.01(5), (6) or (7) hereof in respect of the Company or the Operating Company) occurs and is continuing, the Trustee by Notice to the Company, or the Holders of at least 25% in aggregate Principal Amount at Maturity of the Securities at the time outstanding by notice to the Company and the Trustee, may declare the Initial Accreted Principal Amount plus accrued Issue Discount through the date of declaration, and any accrued and unpaid contingent interest through the date of such declaration, on all the Securities to be immediately due and payable. Upon such a declaration, such Initial Accreted Principal Amount plus accrued Issue Discount, and such accrued and unpaid contingent interest, if any, shall be due and payable immediately. If an Event of Default specified in
Section 6.01(5), (6) or (7) hereof in respect of the Company or the Operating Company occurs and is continuing, the Initial Accreted Principal Amount plus accrued Issue Discount plus any accrued and unpaid contingent interest, on all the Securities shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in aggregate Principal
32
Amount at Maturity of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Securityholder) may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of the Initial Accreted Principal Amount plus accrued Issue Discount plus accrued and unpaid contingent interest that have become due solely as a result of acceleration and if all amounts due to the Trustee under
Section 7.07 hereof have been paid. No such rescission shall affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of the Initial Accreted Principal Amount plus accrued Issue Discount plus any accrued and unpaid contingent interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if the Trustee does not possess any of the Securities or does not produce any of the Securities in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. Except as set forth in Section 2.07 hereof, no remedy is exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults.
Subject to Section 6.02 hereof, the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Securityholder), may waive an existing Default and its consequences except (1) an Event of Default described in Section 6.01(1) or (2) hereof, (2) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected or (3) a Default which constitutes a failure to convert any Security in accordance with the terms of Article 10 hereof. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. This
Section 6.04 shall be in lieu of Section 316(a)(1)(A) of the TIA and such
Section 316(a)(1)(A) is hereby expressly excluded from this Indenture, as permitted by the TIA.
SECTION 6.05. Control by Majority.
The Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Securityholders or could, in reasonable likelihood, impose personal liability upon the Trustee unless the Trustee is offered indemnity satisfactory to it. This Section 6.05 shall be in lieu of Section 316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) is hereby expressly excluded from this Indenture, as permitted by the TIA.
33
SECTION 6.06. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing;
(2) the Holders of at least 25% in aggregate Principal Amount at Maturity of the Securities at the time outstanding make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee security or indemnity satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after receipt of such notice, request and offer of security or indemnity; and
(5) the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding do not give the Trustee a direction inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of any other Securityholder or to obtain a preference or priority over any other Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of the Principal Amount at Maturity, Initial Accreted Principal Amount plus accrued Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, and contingent interest, if any, in respect of the Securities held by such Holder, on or after the respective due dates expressed in the Securities or any Redemption Date, and to convert the Securities in accordance with Article 10 hereof, or to bring suit for the enforcement of any such payment on or after such respective dates or the right to convert, shall not be impaired or affected adversely without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default described in Section 6.01(1) or (2) hereof occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount owing with respect to the Securities and the amounts provided for in Section 7.07 hereof.
SECTION 6.09. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such
34
other obligor or their creditors, the Trustee (irrespective of whether the Principal Amount at Maturity, Initial Accreted Principal Amount plus accrued Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, and contingent interest, if any, in respect of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of any such amount) shall be entitled and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of the Principal Amount at Maturity, Initial Accreted Principal Amount plus accrued Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price as the case may be, or contingent interest, if any, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel or any other amounts due the Trustee under Section 7.07 hereof) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
SECOND: to Securityholders for amounts due and unpaid on the Securities for the Principal Amount at Maturity, Initial Accreted Principal Amount plus accrued Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, as the case may be, and contingent interest, if any, ratably, without preference or priority of any kind, according to such amounts due and payable on the Securities; and
THIRD: the balance, if any, to the Company.
35
The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. At least 15 days before such record date, the Trustee shall mail to each Securityholder and the Company a notice that states the record date, the payment date and the amount to be paid.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit (other than the Trustee) of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit (other than the Trustee), having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof or a suit by Holders of more than 10% in aggregate Principal Amount at Maturity of the Securities at the time outstanding. This Section 6.11 shall be in lieu of Section 315(e) of the TIA and such Section 315(e) is hereby expressly excluded from this Indenture, as permitted by the TIA.
SECTION 6.12. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company from paying all or any portion of the Principal Amount at Maturity, Initial Accreted Principal Amount plus accrued Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, as the case may be, and contingent interest, if any, in respect of Securities, or any interest on such amounts, as contemplated herein, or which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
36
(1) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others; and
(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificate or opinion furnished to the Trustee and conforming to the requirements of this Indenture, but in case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture, but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein. This Section 7.01(b) shall be in lieu of
Section 315(a) of the TIA and such Section 315(a) is hereby expressly excluded from this Indenture, as permitted by the TIA.
(c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:
(1) this paragraph (c) does not limit the effect of paragraph
(b) of this Section 7.01;
(2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.
Subparagraphs (c)(1), (2) and (3) shall be in lieu of Sections
315(d)(1), 315(d)(2) and 315(d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and 315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the TIA.
(d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.01.
(e) The Trustee may refuse to perform any duty or exercise any right or power or extend or risk its own funds or otherwise incur any financial liability unless it receives indemnity satisfactory to it against any loss, liability or expense.
(f) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee (acting in any capacity hereunder) shall be under no liability for interest on any money received by it hereunder unless otherwise agreed in writing with the Company.
37
SECTION 7.02. Rights of Trustee.
Subject to its duties and responsibilities under the provisions of
Section 7.01 hereof, and, except as expressly excluded from this Indenture pursuant to Section 7.01 hereof, subject also to its duties and responsibilities under the TIA:
(a) the Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate;
(c) the Trustee and the Bid Solicitation Agent may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;
(d) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith which it believes to be authorized or within its rights or powers conferred under this Indenture;
(e) the Trustee may consult with counsel selected by it and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;
(f) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby;
(g) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a resolution of the Board of Directors;
(h) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, including, without limitation, any Company Request, Company Order or Officers' Certificate, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and
38
premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation or lack thereof;
(i) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee received written notice of an event which is in fact such a Default or Event of Default, and such notice references the Securities and this Indenture, describes the event with specificity, and alleges that the occurrence of this event is a Default or an Event of Default under this Indenture;
(j) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder; and
(k) the Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, Conversion Agent or co-registrar may do the same with like rights. However, the Trustee must comply with Section 7.10 hereof.
SECTION 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use or application of the proceeds from the Securities, it shall not be responsible for any statement in the registration statement for the Securities under the Securities Act or in the Indenture or the Securities (other than its certificate of authentication), or the determination as to which beneficial owners are entitled to receive any notices hereunder.
SECTION 7.05. Notice of Defaults.
If a Default occurs and if it is known to the Trustee, the Trustee shall give to each Securityholder notice of the Default within 90 days after the Trustee gains knowledge of the Default unless such Default shall have been cured or waived before the giving of such notice. Except in the case of a Default described in Section 6.01(1) or (2) hereof, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Securityholders. The second sentence of this Section 7.05 shall be in lieu of the proviso to
Section 315(b) of the TIA and such proviso is hereby expressly excluded from this Indenture, as permitted by the TIA. The Trustee
39
shall not be deemed to have knowledge of a Default unless a Responsible Officer of the Trustee has received written notice of such Default in the manner described in Section 7.02(i) hereof.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall transmit to each Securityholder requesting such, in the manner and to the extent provided in Section 12.02 hereof, a brief report, dated as of such May 15, with respect to:
(1) any change to its eligibility under Section 7.10 hereof;
(2) the character and amount of any advances made by the Trustee, as Trustee, which remain unpaid on the date of such report, and for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securityholders, on the trust estate or on property or funds held or collected by it, if such advances so remaining unpaid aggregate more than one-half of one percent of the aggregate Principal Amount at Maturity of Securities outstanding on such date;
(3) any change to the property and funds physically in the Trustee's possession as Trustee on the date of such report; and
(4) any action taken by it in the performance of its duties under this Indenture which it has not previously reported and which in its opinion materially affects the Securities or the trust estate, except action in respect of a Default, notice of which has been or is to be withheld by it in accordance with Section 7.05 hereof.
SECTION 7.07. Compensation and Indemnity.
The Company agrees:
(a) to pay to the Trustee from time to time such reasonable compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited (to the extent permitted by law) by any provision of law in regard to the compensation of a trustee of an express trust);
(b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses, advances and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and
(c) to indemnify the Trustee or any predecessor Trustee and their agents for, and to hold them harmless against, any loss, damage, claim, liability, cost or expense (including reasonable attorney's fees and expenses and taxes (other than taxes based upon, measured by or determined by the income of the Trustee)) reasonably incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the reasonable costs and expenses of defending itself against any claim (whether
40
asserted by the Company or any Holder or any other Person) or liability in connection with the acceptance, exercise or performance of any of its powers or duties hereunder.
To secure the Company's payment obligations in this Section 7.07 hereof, Holders shall have been deemed to have granted to the Trustee a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay the Principal Amount at Maturity, Initial Accreted Principal Amount plus accrued Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, contingent interest or interest, if any, as the case may be, on particular Securities.
The Company's payment obligations pursuant to this Section 7.07 hereof shall survive the discharge of this Indenture and the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(5) or (6) hereof, the expenses including the reasonable charges and expenses of its counsel, are intended to constitute expenses of administration under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company; provided, however, no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.08. The Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may remove the Trustee by so notifying the Trustee and the Company. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or public officer takes charge of the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint, by resolution of the Board of Directors, a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company satisfactory in form and substance to the retiring Trustee and the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in
Section 7.07 hereof.
If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may petition
41
any court of competent jurisdiction at the expense of the Company for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
The resignation or removal of a Trustee shall not diminish, impair or terminate its rights to indemnification pursuant to Section 7.07 hereof as they relate to periods prior to such resignation or removal.
SECTION 7.09. Successor Trustee by Merger.
If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee and shall have a combined capital and surplus of at least $50,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then, for the purposes of this Section 7.10, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.10, it shall resign immediately in the manner and with the effect hereinafter specified in this Article 7.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. Discharge of Liability on Securities.
When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07 hereof) for cancellation or (ii) all outstanding Securities have become due and payable and the Company deposits with the Trustee, the Paying Agent (if the Paying Agent is not the Company or any Subsidiary or any Affiliate of either of them) or the Conversion Agent cash or, if expressly permitted by the terms of the Securities or the Indenture, Common Stock or governmental obligations sufficient to pay all amounts due and owing on all outstanding Securities (other than Securities replaced pursuant to Section 2.07 hereof), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 7.07 hereof, cease to be of further effect. The Trustee shall join in the execution of a document prepared by the Company acknowledging satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and Opinion of Counsel and at the cost and expense of the Company.
42
SECTION 8.02. Repayment to the Company.
The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property law. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person and the Trustee and the Paying Agent shall have no further liability to the Securityholders with respect to such money or securities for that period commencing after the return thereof.
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders.
The Company and the Trustee may amend this Indenture or the Securities without the consent of any Securityholder:
(1) to comply with Article 5 or Section 10.14 hereof;
(2) to secure the Company's obligations under the Securities and this Indenture;
(3) to add to the Company's covenants for the benefit of the Securityholders or to surrender any right or power conferred upon the Company;
(4) to make any change to comply with the TIA, or any amendment thereto, or to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA, or as necessary in connection with the registration of the Securities under the Securities Act if at any time the Company seeks to register the Securities thereunder;
(5) to make any changes necessary or appropriate for the issuance of Securities in definitive, fully registered form pursuant to
Section 2.12(b) hereof; or
(6) to cure any ambiguity, omission, defect or inconsistency, to correct or supplement any provision of this Indenture or the Securities or to make any other provisions with respect to matters or questions arising under this Indenture or the Securities, so long as the interests of the Holders are not adversely affected in any material respect.
Any amendment described in clause (6) above made solely to conform this Indenture or the Securities to the final offering memorandum provided to investors in connection with the initial offering of the Securities by the Company will not be deemed to adversely affect the interests of the Holders in any respect.
43
SECTION 9.02. With Consent of Holders.
With the written consent of the Holders of at least a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding, the Company and the Trustee may amend this Indenture or the Securities. However, without the consent of each Securityholder affected, an amendment to this Indenture or the Securities may not:
(1) change the provisions of this Indenture that relate to modifying or amending this Indenture;
(2) make any change in the manner of calculation or rate of accrual of, or that adversely affects the right to receive, Issue Discount; make any change in the manner of calculation or rate of accrual of, or that adversely affects the right to receive, contingent interest; reduce the rate of interest referred to in paragraph 1 of the Securities; or extend the time for payment of Issue Discount or contingent interest, if any, on any Security;
(3) reduce the Principal Amount at Maturity, Initial Accreted Principal Amount or the accrued Issue Discount or change the Stated Maturity of any Security;
(4) reduce the Redemption Price, Purchase Price or Change in Control Purchase Price of any Security;
(5) make any Security payable in money or securities other than that stated in the Security;
(6) make any change in Section 6.04 hereof, Section 6.07 hereof or this Section 9.02, except to increase any percentage set forth therein;
(7) make any change that adversely affects the right to convert any Security;
(8) make any change that adversely affects the right to require the Company to purchase the Securities in accordance with the terms thereof and this Indenture; or
(9) impair the right to receive payment with respect to, a Security, or right to institute suit for the enforcement of any payment with respect to, or conversion of, the Securities.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section 9.02 becomes effective, the Company shall mail to each Holder a notice briefly describing the amendment. Failure to mail such notice or a defect in the notice shall not affect the validity of the amendment.
44
SECTION 9.03. Compliance with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall comply with the TIA.
SECTION 9.04. Revocation and Effect of Consents, Waivers and Actions.
Until an amendment, waiver or other action by Holders becomes effective, a consent thereto by a Holder of a Security hereunder is a continuing consent by the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same obligation as the consenting Holder's Security, even if notation of the consent, waiver or action is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment, waiver or action becomes effective. After an amendment, waiver or action becomes effective, it shall bind every Securityholder.
SECTION 9.05. Notation on or Exchange of Securities.
Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for outstanding Securities.
SECTION 9.06. Trustee to Sign Supplemental Indentures.
The Trustee shall sign any supplemental indenture authorized pursuant to this Article 9 if the amendment contained therein does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign such supplemental indenture. In signing such supplemental indenture the Trustee shall receive, and (subject to the provisions of Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 12.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture.
SECTION 9.07. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article 9, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
45
ARTICLE 10
CONVERSION
SECTION 10.01. Conversion Privilege.
A Holder of a Security may convert such Security into cash and Common Stock at any time during the period stated in paragraph 9 of the Securities subject to the provisions of this Article 10. The amount of cash and number of shares of Common Stock issuable upon conversion of a Security per $1,000 of Principal Amount at Maturity thereof (the "Conversion Rate") shall be determined in accordance with paragraph 9 of the Securities, subject to adjustment as herein and therein set forth.
A Holder may convert a portion of the Principal Amount at Maturity of a Security if the portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security.
"Average Sale Price" means the average of the Sale Prices of the Common Stock for the shorter of
(i) 30 consecutive Trading Days ending on the last full Trading Day prior to the Time of Determination (as defined below) with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated, or
(ii) the period (x) commencing on the date next succeeding the first public announcement of (a) the issuance of rights, warrants or options or (b) the distribution, in each case, in respect of which the Average Sale Price is being calculated and (y) proceeding through the last full Trading Day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated (excluding days within such period, if any, which are not Trading Days), or
(iii) the period, if any, (x) commencing on the date next succeeding the Ex-Dividend Time with respect to the next preceding (a) issuance of rights, warrants or options or (b) distribution, in each case, for which an adjustment is required by the provisions of Section 10.06(4), 10.07 or 10.08 hereof and (y) proceeding through the last full Trading Day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated (excluding days within such period, if any, which are not Trading Days).
In the event that the Ex-Dividend Time (or in the case of a subdivision, combination or reclassification, the effective date with respect thereto) with respect to a dividend, subdivision, combination or reclassification to which Section 10.06(1), (2), (3) or (4) applies occurs during the period applicable for calculating "Average Sale Price" pursuant to the definition in the preceding sentence, "Average Sale Price" shall be calculated for such period in a
46
manner determined by the Board of Directors to reflect the impact of such dividend, subdivision, combination or reclassification on the Sale Price of the Common Stock during such period.
"Time of Determination" means the time and date of the earlier of
(i) the determination of stockholders entitled to receive rights, warrants or options or a distribution, in each case, to which Section 10.07 or 10.08 hereof applies and (ii) the time ("Ex-Dividend Time") immediately prior to the commencement of "ex-dividend" trading for such rights, warrants or options or distribution on the New York Stock Exchange or such other national or regional exchange or market on which the Common Stock is then listed or quoted.
SECTION 10.02. Conversion Procedure.
To convert a Security a Holder must satisfy the requirements in paragraph 9 of the Securities. The date on which the Holder satisfies all those requirements is the conversion date (the "Conversion Date"). The Conversion Agent shall notify the Company of the Conversion Date within one Business Day of the Conversion Date. As soon as practicable following the fifth Trading Day immediately following the Conversion Date, the Company shall deliver to the Holder, through the Conversion Agent, cash and a certificate for the number of full shares of Common Stock deliverable upon the conversion and cash in lieu of any fractional shares determined pursuant to Section 10.03 hereof.
The person in whose name the certificate representing such shares is registered shall be treated as a stockholder of record on and after the Conversion Date; provided, however, that no surrender of a Security on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; such conversion shall be at the Conversion Rate in effect on the date that such Security shall have been surrendered for conversion, as if the stock transfer books of the Company had not been closed. Upon conversion of a Security, such person shall no longer be a Holder of such Security.
No payment or adjustment will be made for dividends on, or other distributions with respect to, any Common Stock except as provided in this Article 10. On conversion of a Security, accrued Original Issue Discount attributable from the period from July 7, 2003 through but not including the Conversion Date and (except as provided below) accrued contingent interest, if any, with respect to the converted Security shall not be paid in cash to Holders of such Security, nor shall it be cancelled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through delivery of the cash payment and the Common Stock, if any, in exchange for the Security being converted pursuant to the provisions hereof; and such cash payment and the fair market value of such shares of Common Stock, shall be treated as delivered, to the extent thereof, first in exchange for an Original Issue Discount accrued through the Conversion Date and accrued contingent interest, if any, and the balance, if any, of such cash and the fair market value of such Common Stock, if any, shall be treated as delivered in exchange for the Issue Price of the Security being converted pursuant to the provisions hereof.
47
If the Holder converts more than one Security at the same time, the number of shares of Common Stock issuable upon the exchange shall be based on the total Principal Amount at Maturity of the Securities converted.
If the last day on which a Security may be converted is a Legal Holiday (as defined in Section 12.09 hereof), the Security may be surrendered on the next succeeding day that is not a Legal Holiday.
Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Security in an authorized denomination equal in Principal Amount at Maturity to the unconverted portion of the Security surrendered.
SECTION 10.03. Fractional Shares.
The Company will not issue a fractional share of Common Stock upon conversion of a Security. Instead, the Company will deliver cash for the current market value of the fractional share. The current market value of a fractional share shall be determined, to the nearest 1/1,000th of a share, by multiplying the Sale Price of the Common Stock, on the last Trading Day prior to the Conversion Date, of a full share by the fractional amount and rounding the product to the nearest whole cent.
SECTION 10.04. Taxes on Conversion.
If a Holder converts a Security, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of any shares of Common Stock upon the conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder's name. The Conversion Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder's name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be delivered in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulations.
SECTION 10.05. Company to Provide Stock.
The Company shall, prior to issuance of any Securities under this Article 10, and from time to time as may be necessary, reserve out of its authorized but unissued Common Stock a sufficient number of shares of Common Stock to permit the conversion of the Securities.
All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares or treasury shares, shall be duly and validly issued and fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim.
The Company will comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities, if any, and will list or cause to have quoted such shares of Common Stock on each national securities exchange or in the over-the-counter market or such other market on which the Common Stock is then listed or quoted.
48
SECTION 10.06. Adjustment for Change In Capital Stock.
If, after the Issue Date of the Securities, the Company:
(1) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock;
(2) subdivides its shares of Common Stock into a greater number of shares;
(3) combines its shares of Common Stock into a smaller number of shares;
(4) pays a dividend or makes a distribution on its Common Stock in shares of its Capital Stock (other than Common Stock or rights, warrants or options for its Capital Stock); or
(5) issues by reclassification of its Common Stock any shares of its Capital Stock (other than rights, warrants or options for its Capital Stock),
then the conversion privilege and the Conversion Rate in effect immediately prior to such action shall be adjusted so that the Holder of a Security thereafter converted may receive the number of shares of Capital Stock of the Company which such Holder would have owned immediately following such action if such Holder had converted the Security immediately prior to such action.
The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification.
If after an adjustment a Holder of a Security upon conversion of such Security may receive shares of two or more classes of Capital Stock of the Company, the Conversion Rate shall thereafter be subject to adjustment upon the occurrence of an action taken with respect to any such class of Capital Stock as is contemplated by this Article 10 with respect to the Common Stock, on terms comparable to those applicable to Common Stock in this Article 10.
SECTION 10.07. Adjustment for Rights Issue.
If after the Issue Date of the Securities, the Company distributes any rights, warrants or options to all holders of its Common Stock entitling them, for a period expiring within 60 days after the record date for such distribution, to purchase shares of Common Stock at a price per share less than the Sale Price of the Common Stock as of the Time of Determination, the Conversion Rate shall be adjusted in accordance with the formula:
R' = R x (O + N) O +(N x P)/M
where:
R' = the adjusted Conversion Rate.
49
R = the current Conversion Rate.
O = the number of shares of Common Stock outstanding on the record date for the distribution to which this Section 10.07 is being applied.
N = the number of additional shares of Common Stock offered pursuant to the distribution.
P = the offering price per share of the additional shares.
M = the Average Sale Price, minus, in the case of (i) a distribution to which Section 10.06(4) applies or (ii) a distribution to which
Section 10.08 applies, for which, in each case, (x) the record date shall occur on or before the record date for the distribution to which this Section 10.07 applies and (y) the Ex-Dividend Time shall occur on or after the date of the Time of Determination for the distribution to which this Section 10.07 applies, the fair market value (on the record date for the distribution to which this Section 10.07 applies) of the
(1) Capital Stock of the Company distributed in respect of each share of Common Stock in such Section 10.06(4) distribution and
(2) assets of the Company (including cash) or debt securities or any rights, warrants or options to purchase securities of the Company distributed in respect of each share of Common Stock in such Section 10.08 distribution.
The Board of Directors shall determine fair market values for the purposes of this Section 10.07.
The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the rights, warrants or options to which this Section 10.07 applies. If all of the shares of Common Stock subject to such rights, warrants or options have not been issued when such rights, warrants or options expire, then the Conversion Rate shall promptly be readjusted to the Conversion Rate which would then be in effect had the adjustment upon the issuance of such rights, warrants or options been made on the basis of the actual number of shares of Common Stock issued upon the exercise of such rights, warrants or options.
No adjustment shall be made under this Section 10.07 if the application of the formula stated above in this Section 10.07 would result in a value of R' that is equal to or less than the value of R.
SECTION 10.08. Adjustment for Other Distributions.
(a) If, after the Issue Date of the Securities, the Company distributes to all holders of its Common Stock
(i) any of its assets or debt securities or any rights, warrants or options to purchase securities of the Company (including securities or cash, but
50
excluding (x) distributions of Capital Stock referred to in
Section 10.06 and distributions of rights, warrants or options referred to in Section 10.07, (y) distributions of Capital Stock or equity interests referred to in Section 10.08(b) below, and (z) cash dividends or other cash distributions referred to in subclauses (a)(ii) and (a)(iii) below); or
(ii) dividends or distributions consisting exclusively of cash, for which the Ex-Dividend Time with respect to such dividend or distribution occurs on or before July 7, 2011; or
(iii) dividends or distributions consisting exclusively of cash that constitute Extraordinary Cash Dividends, for which the Ex-Dividend Time with respect to such dividend or distribution occurs after July 7, 2011,
then, in each case, the Conversion Rate shall be adjusted, subject to the provisions of Section 10.08(c), in accordance with the formula:
R' = (R x M) M-F
where:
R' = the adjusted Conversion Rate.

R  =  the current Conversion Rate.

M  =  the Average Sale Price, minus, in the case of a distribution to
      which Section 10.06(4) applies, for which (i) the record date shall
      occur on or before the record date for the distribution to which
      this Section 10.08(a) applies and (ii) the Ex-Dividend Time shall
      occur on or after the date of the Time of Determination for the
      distribution to which this Section 10.08(a) applies, the fair market
      value (on the record date for the distribution to which this Section
      10.08(a) applies) of any Capital Stock of the Company distributed in
      respect of each share of Common Stock in such Section 10.06(4)
      distribution.

F  =  the fair market value (on the record date for the distribution to
      which this Section 10.08(a) applies) of the assets, securities,
      rights, warrants or options to be distributed in respect of each
      share of Common Stock in the distribution to which this Section
      10.08(a) is being applied (including, in the case of cash dividends
      or other cash distributions giving rise to an adjustment, all such
      cash distributed concurrently).	

The Board of Directors shall determine fair market values for the purposes of this Section 10.08(a).
The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the distribution to which this Section 10.08(a) applies.
51
For purposes of this Section 10.08(a), the term "Extraordinary Cash Dividend" shall mean any cash dividend or distribution with respect to the Common Stock the amount of which, together with the aggregate amount of cash dividends or distributions on the Common Stock to be aggregated with such cash dividend or distribution in accordance with the provisions of this paragraph, equals or exceeds the threshold percentage set forth in item (i) below. For purposes of item (i) below, the "Ex-Dividend Measurement Period" with respect to a cash dividend or distribution on the Common Stock shall mean the 365 consecutive day period ending on the date prior to the Ex-Dividend Time with respect to such cash dividend or distribution, and the "Relevant Cash Dividends" with respect to a cash dividend or distribution on the Common Stock shall mean the cash dividends or distributions on the Common Stock with Ex-Dividend Times occurring in the Ex-Dividend Measurement Period.
(i) If, upon the date prior to the Ex-Dividend Time with respect to a cash dividend or distribution on the Common Stock, the aggregate amount of such cash dividend or distribution together with the amounts of all Relevant Cash Dividends equals or exceeds on a per share basis the sum of (a) 5% of the Sale Price of the Common Stock on the last Trading Day preceding the date of declaration by the Board of Directors of the cash dividend or distribution with respect to which this provision is being applied, and (b) the quotient of the amount of any contingent interest paid on a Security during the Ex-Dividend Measurement Period and divided by the Conversion Rate in effect on the payment date of such relevant contingent interest payment date, then such cash dividend or distribution together with all Relevant Cash Dividends, shall be deemed to be an Extraordinary Cash Dividend and for purposes of applying the formula set forth above in this Section 10.08(a), the value of "F" shall be equal to
(y) the aggregate amount of such cash dividend or distribution together with the amount of all Relevant Cash Dividends, minus (z) the aggregate amount of all Relevant Cash Dividends for which a prior adjustment in the Conversion Rate was previously made under this Section 10.08(a).
In making the determinations required by item (i) above, the amount of cash dividends or distributions paid on a per share basis and the amount of any Relevant Cash Dividends specified in item (i) above, shall be appropriately adjusted to reflect the occurrence during such period of any event described in
Section 10.06.
(b) If, after the Issue Date of the Securities, the Company pays a dividend or makes a distribution to all holders of its Common Stock consisting of Capital Stock of any class or series, or similar equity interests, of or relating to a Subsidiary or other business unit of the Company, then the Conversion Rate shall be adjusted in accordance with the formula:
R' = R x (1 + F/M)
where:
R' = the adjusted Conversion Rate.
R = the current Conversion Rate.
52
M = the average of the Post-Distribution Prices of the Common Stock for the 10 Trading Days commencing on and including the fifth Trading Day after the date on which "ex-dividend trading" commences for such dividend or distribution on the principal United States exchange or market which such securities are then listed or quoted (the "Ex-Dividend Date").
F = the fair market value of the securities distributed in respect of each share of Common Stock in the distribution to which this Section 10.08(b) applies, which shall be determined by multiplying the number of securities distributed in respect of each share of Common Stock by the average of the Post-Distribution Prices of those securities distributed for the 10 Trading Days commencing on and including the fifth Trading Day after the Ex-Dividend Date.
"Post-Distribution Price" of Capital Stock or any similar equity interest on any date means the closing per unit sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date for trading of such units on a "when issued" basis without due bills (or similar concept) as reported in the composite transactions for the principal United States securities exchange on which such Capital Stock or equity interest is traded or, if the Capital Stock or equity interest, as the case may be, is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated; provided that if on any date such units have not traded on a "when issued" basis, the Post-Distribution Price shall be the closing per unit sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date for trading of such units on a "regular way" basis without due bills (or similar concept) as reported in the composite transactions for the principal United States securities exchange on which such Capital Stock or equity interest is traded or, if the Capital Stock or equity interest, as the case may be, is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated. In the absence of such quotation, the Company shall be entitled to determine the Post-Distribution Price on the basis of such quotations which reflect the post-distribution value of the Capital Stock or equity interests as it considers appropriate.
The adjustment shall become effective immediately after the earlier of (i) the date on which the distribution to which this Section 10.08(b) applies is to be made or (ii) the fourteenth Trading Day after the Ex-Dividend Date.
(c) In the event that, with respect to any distribution to which
Section 10.08(a) would otherwise apply, the difference "M-F" is less than $1.00 or "F" is equal to or greater than "M", then the adjustment provided by Section 10.08(a) shall not be made and in lieu thereof the provisions of Section 10.14 shall apply to such distribution.
53
SECTION 10.09. When Adjustment May Be Deferred.
No adjustment in the Conversion Rate need be made unless the adjustment would require an increase or decrease of at least 1% in the Conversion Rate. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Article 10 shall be made to the nearest cent or to the nearest 1/1,000th of a share, as the case may be (with one-half cent and 5/10,000ths of a share being rounded upward).
SECTION 10.10. When No Adjustment Required.
No adjustment need be made for a transaction referred to in Section 10.06, 10.07, 10.08 or 10.14 hereof if Securityholders are to participate in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction. Such participation by Securityholders may include participation upon conversion provided that an adjustment shall be made at such time as the Securityholders are no longer entitled to participate.
No adjustment need be made for rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no par value of the Common Stock.
To the extent the Securities become convertible pursuant to this Article 10 into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash.
SECTION 10.11. Notice of Adjustment.
Whenever the Conversion Rate is adjusted, the Company shall promptly mail to Securityholders a notice of the adjustment. The Company shall file with the Trustee and the Conversion Agent such notice and a certificate from the Company's independent public accountants briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such certificate except to exhibit the same to any Holder desiring inspection thereof.
SECTION 10.12. Voluntary Increase.
The Company from time to time may increase the Conversion Rate by any amount for any period of time. Whenever the Conversion Rate is increased, the Company shall mail to Securityholders and file with the Trustee and the Conversion Agent a notice of the increase. The Company shall mail the notice at least 15 days before the date the increased Conversion Rate takes effect. The notice shall state the increased Conversion Rate and the period it will be in effect.
54
A voluntary increase of the Conversion Rate does not change or adjust the Conversion Rate otherwise in effect for purposes of Section 10.06, 10.07 or 10.08 hereof.
SECTION 10.13. Notice of Certain Transactions.
If:
(1) the Company takes any action that would require an adjustment in the Conversion Rate pursuant to Section 10.06, 10.07 or 10.08 hereof (unless no adjustment is to occur pursuant to Section 10.10 hereof); or
(2) the Company takes any action that would require a supplemental indenture pursuant to Section 10.14 hereof; or
(3) there is a liquidation or dissolution of the Company;
then the Company shall mail to Securityholders and file with the Trustee and the Conversion Agent a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, binding share exchange, transfer, liquidation or dissolution. The Company shall file and mail the notice at least 15 days before such date. Failure to file or mail the notice or any defect in it shall not affect the validity of the transaction.
In the event the Company makes a distribution described in Section 10.07 or 10.08 hereof, which, in the case of Section 10.08 hereof, has a fair market value per share (as determined by the Board of Directors) equal to more than 15% of the Sale Price of the Common Stock on the Business Day immediately preceding the date of declaration for such dividend or distribution, the Company will be required to give notice to the Holders of Securities not less than 20 days prior to the Ex-Dividend Time for such distribution. In the case of a notice given in respect of a distribution described in Section 10.08(b), such notice shall (i) state the date on which the related adjustment to the Conversion Rate will become effective and (ii) include a statement that, to the extent the Securities are convertible otherwise than on account of the distribution to which Section 10.08(b) applies, a Holder who converts its Securities at any time after the close of business on the record date for determination of shareholders entitled to such distribution and before the effective date of the related adjustment to the Conversion Rate will neither be entitled to such distribution nor be entitled to the benefit of such adjustment to the Conversion Rate.
SECTION 10.14. Reorganization of Company; Special Distributions.
If the Company is a party to a transaction subject to Section 5.01 hereof (other than a sale of all or substantially all of the assets of the Company in a transaction in which the holders of Common Stock immediately prior to such transaction do not receive securities, cash or other assets of the Company or any other person) or a merger or binding share exchange which reclassifies or changes the outstanding Common Stock of the Company, the person obligated to deliver securities, cash or other assets upon conversion of Securities shall enter into a supplemental indenture. If the issuer of securities deliverable upon conversion of Securities is an Affiliate of the successor Company, that issuer shall join in the supplemental indenture.
55
The supplemental indenture shall provide that the Holder of a Security may convert it into the kind and amount of securities, cash or other assets which such Holder would have received immediately after the consolidation, merger, binding share exchange or transfer if such Holder had converted the Security immediately before the effective date of the transaction, assuming (to the extent applicable) that such Holder (i) was not a constituent person or an Affiliate of a constituent person to such transaction; (ii) made no election with respect thereto; and (iii) was treated alike with the plurality of non-electing Holders. The supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Article 10. The successor Company shall mail to Securityholders a notice briefly describing the supplemental indenture.
If this Section applies, neither Section 10.06 nor 10.07 hereof applies.
If the Company makes a distribution to all holders of its Common Stock of any of its assets, or debt securities or any rights, warrants or options to purchase securities of the Company that, but for the provisions of
Section 10.08(c) hereof, would otherwise result in an adjustment in the Conversion Rate pursuant to the provisions of Section 10.08 hereof, then, from and after the record date for determining the holders of Common Stock entitled to receive the distribution, a Holder of a Security that converts such Security in accordance with the provisions of this Indenture shall upon such conversion be entitled to receive, in addition to the shares of Common Stock into which the Security is convertible, the kind and amount of securities, cash or other assets comprising the distribution that such Holder would have received if such Holder had converted the Security immediately prior to the record date for determining the holders of Common Stock entitled to receive the distribution.
SECTION 10.15. Company Determination Final.
Any determination that the Company or the Board of Directors must make pursuant to Section 10.03, 10.06, 10.07, 10.08, 10.09, 10.10, 10.14 or 10.17 hereof is conclusive.
SECTION 10.16. Trustee's Adjustment Disclaimer.
The Trustee has no duty to determine when an adjustment under this Article 10 should be made, how it should be made or what it should be. The Trustee has no duty to determine whether a supplemental indenture under Section 10.14 need be entered into or whether any provisions of any supplemental indenture are correct. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities. The Trustee shall not be responsible for the Company's failure to comply with this Article 10. Each Conversion Agent shall have the same protection under this Section 10.16 as the Trustee.
SECTION 10.17. Simultaneous Adjustments.
In the event that this Article 10 requires adjustments to the Conversion Rate under more than one of Sections 10.06(4), 10.07 or 10.08 hereof, and the record dates for the distributions giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of Section 10.06 hereof, second, the provisions of Section 10.08 hereof and, third, the provisions of Section 10.07 hereof.
56
SECTION 10.18. Successive Adjustments.
After an adjustment to the Conversion Rate under this Article 10, any subsequent event requiring an adjustment under this Article 10 shall cause an adjustment to the Conversion Rate as so adjusted.
SECTION 10.19. Rights Issued in Respect of Common Stock Issued Upon Conversion.
Each share of Common Stock issued upon conversion of Securities pursuant to this Article 10 shall be entitled to receive the appropriate number of rights ("Rights"), if any, and the certificates representing the Common Stock issued upon such conversion shall bear such legends, if any, in each case as may be provided by the terms of any shareholders rights agreement adopted by the Company, as the same may be amended form time to time (in each case, a "Rights Agreement"). Provided that such Rights Agreement requires that each share of Common Stock issued upon conversion of Securities at any time prior to the distribution of separate certificates representing the Rights be entitled to receive such Rights, then, notwithstanding anything else to the contrary in this Article 10, there shall not be any adjustment to the conversion privilege or Conversion Rate as a result of the issuance of Rights, the distribution of separate certificates representing the Rights, the exercise or redemption of such Rights in accordance with any Rights Agreement, or the termination or invalidation of such Rights.
ARTICLE 11
PAYMENT OF INTEREST
SECTION 11.01. Interest Payments.
Contingent interest on any Security that is payable, and is punctually paid or duly provided for, on any applicable payment date shall be paid to the person in whose name that Security is registered at the close of business on the accrual date for such interest, as described in Paragraph 5 of the Securities, at the office or agency of the Company maintained for such purpose. Each installment of contingent interest payable in cash on any Security shall be paid in same-day funds by transfer to an account maintained by the payee located inside the United States, if the Trustee shall have received proper wire transfer instructions from such payee not later than the related accrual date or, if no such instructions have been received by check drawn on a bank in The City of New York mailed to the payee at its address set forth on the Registrar's books. In the case of a permanent Global Security, contingent interest payable on any applicable payment date will be paid to the Depositary, with respect to that portion of such permanent Global Security held for its account by Cede & Co. for the purpose of permitting such party to credit the interest received by it in respect of such permanent Global Security to the accounts of the beneficial owners thereof.
SECTION 11.02. Defaulted Interest.
Except as otherwise specified with respect to the Securities, any contingent interest on any Security that is payable, but is not punctually paid or duly provided for, within 30
57
days following any applicable payment date (herein called "Defaulted Interest", which term shall include any accrued and unpaid interest that has accrued on such defaulted amount in accordance with paragraph 1 of the Securities), shall forthwith cease to be payable to the registered Holder thereof on the relevant accrual date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause
(1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the persons in whose names the Securities are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment (which shall not be less than 20 days after such notice is received by the Trustee), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment (the "Special Record Date"). The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities at his address as it appears on the list of Securityholders maintained pursuant to Section 2.05 not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names the Securities are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest on the Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.
SECTION 11.03. Interest Rights Preserved.
Subject to the foregoing provisions of this Article 11 and Section 2.06 hereof, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to any contingent interest accrued and unpaid, and to accrue, which were carried by such other Security.
58
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control.
SECTION 12.02. Notices; Address of Agency.
Any request, demand, authorization, notice, waiver, consent or communication shall be in writing and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows or transmitted by facsimile transmission (confirmed by guaranteed overnight courier) to the following facsimile numbers:
if to the Company:
Anixter International Inc.
2301 Patriot Boulevard
Glenview, Illinois 60026
Attention: General Counsel Telephone No.: (224) 521-8000 Facsimile No.: (224) 521-8604
if to the Trustee:
The Bank of New York
c/o BNY Midwest Trust Company 2 North LaSalle Street, Suite 1020 Chicago, Illinois 60602 Telephone No.: (312) 827-8546 Facsimile No.: (312) 827-8542 Attention: Corporate Trust Department
The Company or the Trustee by notice given to the other in the manner provided above may designate additional or different addresses for subsequent notices or communications.
Any notice or communication given to a Securityholder shall be mailed to the Securityholder, by first-class mail, postage prepaid, at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee.
59
If the Company mails a notice or communication to the Securityholders, it shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion Agent or co-registrar.
SECTION 12.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar, the Paying Agent, the Conversion Agent and anyone else shall have the protection of TIA Section 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.
SECTION 12.05. Statements Required in Certificate or Opinion.
Unless the Trustee agrees, in its sole discretion, to accept a different form or format, each Officers' Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include:
(1) a statement that each person making such Officers' Certificate or Opinion of Counsel has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers' Certificate or Opinion of Counsel are based;
(3) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable such person to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(4) a statement that, in the opinion of such person, such covenant or condition has been complied with.
SECTION 12.06. Separability Clause.
In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
60
SECTION 12.07. Rules by Trustee, Paying Agent, Conversion Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar, Conversion Agent and the Paying Agent may make reasonable rules for their functions.
SECTION 12.08. Calculations.
The calculation of the Purchase Price, Change in Control Purchase Price, Conversion Rate, Market Price, Sale Price of the Common Stock and each other calculation to be made hereunder shall be the obligation of the Company. All calculations made by the Company as contemplated pursuant to this Section 12.08 shall be final and binding on the Company and the Holders absent manifest error. The Trustee, Paying Agent, Conversion Agent and Bid Solicitation Agent shall not be obligated to recalculate, recompute or confirm any such calculations.
SECTION 12.09. Legal Holidays.
A "Legal Holiday" is any day other than a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action shall be taken on the next succeeding day that is not a Legal Holiday, and, if the action to be taken on such date is a payment in respect of the Securities, no Issue Discount or interest, if any, shall accrue for the intervening period.
SECTION 12.10. Governing Law.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND
THE SECURITIES.
SECTION 12.11. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities.
SECTION 12.12. Successors.
All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor.
SECTION 12.13. Multiple Originals.
The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture.
61
IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Indenture on behalf of the respective parties hereto as of the date first above written.
ANIXTER INTERNATIONAL INC.

By:  /s/ Dennis J. Letham
     ----------------------------------
Name: Dennis J. Letham
Title:   Chief  Financial Officer and
         Senior Vice President - Finance	

THE BANK OF NEW YORK, as Trustee

By:  /s/ Robert A. Massimillo
     ----------------------------------
Name: Robert A. Massimillo
Title: Vice President	

62
EXHIBIT A
[FORM OF FACE OF GLOBAL SECURITY]
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH AN INDETERMINATE AMOUNT OF ORIGINAL ISSUE DISCOUNT AND THE ISSUE DATE OF THIS SECURITY IS JULY 7, 2003. IN ADDITION, THIS SECURITY IS SUBJECT TO UNITED STATES FEDERAL INCOME TAX REGULATIONS GOVERNING CONTINGENT PAYMENT DEBT INSTRUMENTS. FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THE ISSUE PRICE OF EACH SECURITY IS $380.16 PER $1,000 OF PRINCIPAL AMOUNT AND THE COMPARABLE YIELD IS 7.3%, COMPOUNDED SEMI-ANNUALLY FROM JULY 7, 2003 (WHICH WILL BE TREATED AS THE YIELD FOR UNITED STATES FEDERAL INCOME TAX PURPOSES). THE YIELD FOR ACCRUING ISSUE DISCOUNT FOR NON-TAX PURPOSES IS 3.25% PER YEAR (COMPUTED ON A SEMI-ANNUAL BOND EQUIVALENT BASIS) CALCULATED FROM DECEMBER __, 2004, EXCLUDING ANY CONTINGENT INTEREST.
THE ISSUER AGREES, AND BY ACCEPTING A BENEFICIAL OWNERSHIP INTEREST IN THIS SECURITY EACH HOLDER OF THIS SECURITY WILL BE DEEMED TO HAVE AGREED, FOR UNITED STATES FEDERAL INCOME TAX PURPOSES (1) TO TREAT THIS SECURITY AS A DEBT INSTRUMENT THAT IS SUBJECT TO TREAS. REG. SEC. 1.1275-4 (THE "CONTINGENT PAYMENT REGULATIONS"), (2) TO TREAT THE FAIR MARKET VALUE OF ANY STOCK RECEIVED UPON ANY CONVERSION OF THIS SECURITY, AS A CONTINGENT PAYMENT FOR PURPOSES OF THE CONTINGENT PAYMENT REGULATIONS, AND (3) TO ACCRUE INTEREST WITH RESPECT TO THE SECURITY AS ORIGINAL ISSUE DISCOUNT FOR UNITED STATES FEDERAL INCOME TAX PURPOSES ACCORDING TO THE "NONCONTINGENT BOND METHOD," SET FORTH IN THE CONTINGENT PAYMENT REGULATIONS, AND TO BE BOUND BY THE ISSUER'S DETERMINATION OF THE "COMPARABLE YIELD" AND "PROJECTED PAYMENT SCHEDULE," WITHIN THE MEANING OF THE CONTINGENT PAYMENT REGULATIONS, WITH RESPECT TO THIS SECURITY. THE ISSUER AGREES TO PROVIDE PROMPTLY TO THE HOLDER OF THIS SECURITY, UPON WRITTEN REQUEST, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE, YIELD TO MATURITY, COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE. ANY SUCH WRITTEN REQUEST SHOULD BE SENT TO THE ISSUER AT THE FOLLOWING ADDRESS: ANIXTER INTERNATIONAL INC., 2301 PATRIOT BOULEVARD, GLENVIEW, IL 60026, ATTENTION: CORPORATE SECRETARY.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO
A-1
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
A-2
 
ANIXTER INTERNATIONAL INC.

                            Convertible Note due 2033
                              (Zero Coupon-Senior)

No. R-                                            CUSIP:  __________________
Issue Date: December __, 2004                     Issue Discount: $_________
Initial Accreted Principal Amount:  $________
(for each $1,000 Principal Amount at Maturity)	

ANIXTER INTERNATIONAL INC., a Delaware Corporation, promises to pay to Cede & Co. or registered assigns, the Principal Amount at Maturity of __________________________ DOLLARS ($______) on July 7, 2033.
This Security shall not bear interest except as specified on the other side of this Security. Issue Discount will accrue as specified on the other side of this Security. This Security is convertible as specified on the other side of this Security.
Additional provisions of this Security are set forth on the other side of this Security.

Dated: December ___, 2004                             ANIXTER INTERNATIONAL INC.

                                                      By:______________________
                                                         Name:
                                                         Title:

TRUSTEE'S CERTIFICATE OF
  AUTHENTICATION

Dated: December __, 2004

THE BANK OF NEW YORK,
as Trustee, certifies that this
is one of the Securities referred
to in the within-mentioned Indenture.

By:________________________________
         Authorized Signatory	

A-3
[FORM OF REVERSE SIDE OF CONVERTIBLE NOTE]
Convertible Note due 2033
 (Zero Coupon-Senior)
1. Interest.
This Security shall not bear interest, except as specified in this Paragraph 1 or in Paragraph 5 hereof. If the Principal Amount at Maturity hereof or any portion of such Principal Amount at Maturity is not paid when due (whether upon acceleration pursuant to Section 6.02 of the Indenture, upon the date set for payment of the Redemption Price pursuant to Paragraph 6 hereof, upon the date set for payment of the Purchase Price or Change in Control Purchase Price pursuant to Paragraph 7 hereof or upon the Stated Maturity of this Security) or if any contingent interest due hereon is not paid when due in accordance with Paragraph 5 hereof, then in each such case the overdue amount shall, to the extent permitted by law, bear interest at the rate of 3.25% per annum, compounded semiannually, which interest shall accrue from the date such overdue amount was originally due to the date payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand. The accrual of such interest on overdue amounts shall be in lieu of, and not in addition to, the continued accrual of Issue Discount.
Issue Discount (the difference between the Initial Accreted Principal Amount and the Principal Amount at Maturity of the Security), in the period during which a Security remains outstanding, shall accrue at 3.25% per annum, on a semiannual bond equivalent basis using a 360-day year composed of twelve 30-day months, from the Issue Date of this Security.
2. Method of Payment.
Subject to the terms and conditions of the Indenture, the Company will make payments in respect of Redemption Prices, Purchase Prices, Change in Control Purchase Prices and Principal Amount at Maturity to Holders who surrender Securities to a Paying Agent to collect such payments in respect of the Securities. The Company will pay any cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may make such cash payments by check payable in such money.
3. Paying Agent, Conversion Agent, Registrar and Bid Solicitation Agent.
Initially, The Bank of New York (the "Trustee"), will act as Paying Agent, Conversion Agent, Registrar and Bid Solicitation Agent. The Company may appoint and change any Paying Agent, Conversion Agent, Registrar or co-registrar or Bid Solicitation Agent without notice, other than notice to the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent, Registrar or co-registrar. None of the Company, any of its Subsidiaries or any of their Affiliates shall act as Bid Solicitation Agent.
4. Indenture.
The Company issued the Securities under an Indenture dated as of December 7, 2004 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture
A-4
Act of 1939, as in effect from time to time (the "TIA"). Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture for a statement of those terms.
The Securities are general unsecured and unsubordinated obligations of the Company limited to $378,135,000 aggregate Principal Amount at Maturity (subject to Section 2.07 of the Indenture). The Indenture does not limit other indebtedness of the Company, secured or unsecured.
5. Contingent Interest.
Subject to the accrual and record date provisions specified in this Paragraph 5, the Company shall pay contingent cash interest to the Holders during any six-month period (a "Contingent Interest Period") from July 8 to January 7 and from January 8 to July 7, commencing after July 7, 2011, if the average Securities Market Price for the Applicable Five Trading Day Period with respect to such Contingent Interest Period equals 120% or more of the sum of the Initial Accreted Principal Amount of a Security and the Issue Discount accrued thereon to the day immediately preceding the first day of the relevant Contingent Interest Period.
The amount of contingent interest payable per $1,000 Principal Amount at Maturity hereof in respect of any Contingent Interest Period shall equal an annual rate of 0.25% of the average Securities Market Price for the Applicable Five Trading Day Period.
Contingent interest, if any, will accrue and be payable to Holders on the last day of the relevant Contingent Interest Period (on July 7 or January 7, as the case may be) to Holders of record as of the immediately preceding June 22 or December 23, as the case may be. Issue Discount will continue to accrue at 3.25% per annum, on a semi-annual bond equivalent basis using a 360-day year comprised of twelve 30-day months, whether or not contingent interest is paid.
"Applicable Five Trading Day Period" means, with respect to any Contingent Interest Period, the five Trading Days ending on the third Trading Day immediately preceding the first day of such Contingent Interest Period.
"Securities Market Price" means, as of any date of determination, the average of the secondary market bid quotations per $1,000 Principal Amount at Maturity obtained by the Bid Solicitation Agent for $10 million Principal Amount at Maturity of Securities at approximately 4:00 p.m., New York City time, on such determination date from three nationally recognized securities dealers in The City of New York (none of which shall be an Affiliate of the Company) selected by the Company; provided, however, if (a) at least three such bids are not obtained by the Bid Solicitation Agent or (b) in the Company's reasonable judgment, the bid quotations are not indicative of the secondary market value of the Securities as of such determination date, then the Securities Market Price for such determination date shall equal (i) the Conversion Rate in effect as of such determination date multiplied by (ii) the average Sale Price of the Common Stock for the five Trading Days ending on such determination date, appropriately adjusted to take into account the occurrence, during the period commencing on the first of such Trading Days during such five Trading Day period and ending on such determination date, of any event
A-5
described in Section 10.06, 10.07 or 10.08 (subject to the conditions set forth in Sections 10.09 and 10.10) of the Indenture.
Upon determination that Holders will be entitled to receive contingent interest which may become payable during a Contingent Interest Period, on or prior to the first day of such Contingent Interest Period, the Company shall promptly notify the Trustee of such determination and shall issue a press release and publish such information on its web site on the World Wide Web or through such other public medium as the Company may use at that time as soon as practicable.
The determination of the amount of contingent interest, if any, and the payment thereof is the sole responsibility of the Company.
6. Redemption at the Option of the Company.
No sinking fund is provided for the Securities. The Securities are redeemable for cash as a whole, at any time, or in part from time to time at the option of the Company in accordance with the Indenture at the Redemption Prices set forth below, provided that the Securities are not redeemable prior to July 7, 2011.
The table below shows Redemption Prices of a Security per $1,000 Principal Amount at Maturity on the dates shown below and at Stated Maturity, which prices reflect accrued Issue Discount calculated to each such date. The Redemption Price of a Security redeemed between such dates shall include an additional amount reflecting the additional Issue Discount accrued since the preceding date in the table and until, but not including, the Redemption Date.
A-6

                                               REDEMPTION
REDEMPTION DATE                                  PRICE
                                               ----------
July 7:
2011....................................       $   492.01
2012....................................       $   508.13
2013....................................       $   524.78
2014....................................       $   541.97
2015....................................       $   559.73
2016....................................       $   578.07
2017....................................       $   597.01
2018....................................       $   616.57
2019....................................       $   636.77
2020....................................       $   657.64
2021....................................       $   679.18
2022....................................       $   701.44
2023....................................       $   724.42
2024....................................       $   748.15
2025....................................       $   772.66
2026....................................       $   797.98
2027....................................       $   824.13
2028....................................       $   851.13
2029....................................       $   879.01
2030....................................       $   907.81
2031....................................       $   937.56
2032....................................       $   968.28
At Stated Maturity......................       $ 1,000.00	

In addition to the Redemption Price payable with respect to all Securities or portions thereof to be redeemed as of a Redemption Date, the Holders of such Securities (or portions thereof) shall be entitled to receive accrued and unpaid contingent interest, if any, with respect thereto, which interest shall be paid in cash on the Redemption Date.
7. Purchase by the Company at the Option of the Holder.
Subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase, at the option of the Holder, the Securities held by such Holder on the following Purchase Dates and at the following Purchase Prices per $1,000 Principal Amount at Maturity, upon delivery of a Purchase Notice containing the information set forth in the Indenture, at any time from the opening of business on the date that is 20 Business Days prior to such Purchase Date until the close of business on the Business Day immediately preceding such Purchase Date and upon delivery of the Securities to the Paying Agent by the Holder as set forth in the Indenture.

July 7, 2007    $432.48
July 7, 2009    $461.29	

A-7

July 7, 2011    $492.01
July 7, 2013    $524.78
July 7, 2018    $616.57
July 7, 2023    $724.42
July 7, 2028    $851.13	

The Purchase Price (equal to the Accreted Initial Principal Amount plus accrued Issue Discount to the Purchase Date) shall be paid in cash.
At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase the Securities held by such Holder as of a date that is no later than 35 Business Days after the occurrence of a Change in Control of the Company, but in no event prior to the date on which such Change in Control occurs, on or prior to July 7, 2011 for a Change in Control Purchase Price equal to the Accreted Initial Principal Amount plus accrued Issue Discount to the Change in Control Purchase Date, which Change in Control Purchase Price shall be paid in cash.
In addition to the Purchase Price or Change in Control Purchase Price, as the case may be, payable with respect to all Securities or portions thereof to be purchased as of the Purchase Date or the Change in Control Purchase Date, as the case may be, the Holders of such Securities (or portions thereof) shall be entitled to receive any accrued and unpaid contingent interest with respect thereto, which shall be paid in cash promptly following the later of the Purchase Date or the Change in Control Purchase Date, as the case may be and the time of delivery of such Securities to the Paying Agent pursuant to the Indenture.
Holders have the right to withdraw any Purchase Notice or Change in Control Purchase Notice, as the case may be, by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture.
If cash sufficient to pay the Purchase Price or Change in Control Purchase Price, as the case may be, of, together with any accrued and unpaid contingent interest with respect to, all Securities or portions thereof to be purchased as of the Purchase Date or the Change in Control Purchase Date, as the case may be, is deposited with the Paying Agent on the Business Day following the Purchase Date or the Change in Control Purchase Date, as the case may be, Issue Discount and any contingent interest shall cease to accrue on such Securities (or portions thereof) immediately after such Purchase Date or Change in Control Purchase Date, as the case may be, and the Holder thereof shall have no other rights as such (other than the right to receive the Purchase Price or Change in Control Purchase Price, as the case may be, and any accrued and unpaid contingent interest upon surrender of such Security).
8. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at the Holder's registered address. If money sufficient to pay the Redemption Price of, and accrued and unpaid contingent interest,
A-8
if any, with respect to, all Securities (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent prior to or on the Redemption Date, on such Redemption Date, Issue Discount and contingent interest, if any, shall cease to accrue on such Securities or portions thereof. Securities in denominations larger than $1,000 of Principal Amount at Maturity may be redeemed in part but only in integral multiples of $1,000 of Principal Amount at Maturity.
9. Conversion.
Subject to the provisions of this Paragraph 9, a Holder of a Security may convert it into cash and Common Stock of the Company if at least one of the conditions described below is satisfied at any time before the close of business on July 6, 2033. If the Security is called for redemption, the Holder may convert it only until the close of business on the second Business Day immediately preceding the Redemption Date. A Security in respect of which a Holder has delivered a Purchase Notice or Change in Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Security may be converted only if such notice of exercise is withdrawn in accordance with the terms of the Indenture.
Upon determination that Holders are or will be entitled to convert their Security into shares of Common Stock in accordance with the following provisions, the Company will promptly notify the Holders thereof and post this information on the Company's web site on the World Wide Web or otherwise publicly disclose this information.
(a) Conversion Based on Common Stock Price. Subject to the provisions of this Paragraph 9, Holders may convert the Securities into Common Stock in any fiscal quarter, if, as of the last day of the preceding fiscal quarter, the Sale Price of the Common Stock for at least 20 Trading Days in a period of 30 consecutive Trading Days ending on the last Trading Day of such preceding fiscal quarter is more than 120% of the accreted conversion price per share of Common Stock on the last day of such preceding fiscal quarter.
The "accreted conversion price" per share of Common Stock as of any day equals the quotient of:
- the Accreted Initial Principal Amount of a Security and accrued Issue Discount to that day, divided by
- the number of shares of Common Stock issuable upon conversion of $1,000 Principal Amount at Maturity of Securities on that day.
(b) Conversion Based on Credit Rating Downgrade. Subject to the provisions of this Paragraph 9, Holders may convert the Securities into cash and Common Stock on a Conversion Date during any period in which (i) the credit rating assigned to the Securities by a Rating Agency is at or below the Applicable Rating, (ii) the Securities are no longer rated by either or both of Standard & Poor's or Moody's, or (iii) either or both of Standard & Poor's or Moody's have suspended or withdrawn their ratings of the Securities. "Rating Agency" means Standard & Poor's Credit Market Services and its successors, Moody's Investors Service or Fitch, Inc. and its successors ("Fitch"). "Applicable Rating" means, in the case of Standard &
A-9
Poor's, B+, in the case of Moody's, B3, or in the case of Fitch, B+ (or their respective equivalents under any successor ratings categories of Standard & Poor's, Moody's or Fitch), or the equivalent in respect of ratings categories of any Rating Agencies successor to Standard & Poor's, Moody's or Fitch, as the case may be.
(c) Conversion Based on Redemption. Subject to the provisions of this Paragraph 9, a Holder may convert into cash and Common Stock a Security or portion of a Security which has been called for redemption pursuant to Paragraph 6 hereof, even if the Securities are not otherwise convertible at such time, but such Securities may be surrendered for conversion only until the close of business on the second Business Day immediately preceding the Redemption Date.
(d) Conversion Upon Occurrence of Certain Corporate Transactions. Subject to the provisions of this Paragraph 9, in the event the Company is a party to a consolidation, merger or binding share exchange or a transfer of all or substantially all of the assets of the Company pursuant to which the Common Stock would be converted into cash, securities or other property as set forth in
Section 10.14 of the Indenture, the Securities may be surrendered for conversion at any time from and after the date which is 15 days prior to the anticipated effective date until 15 days after the actual effective date of such transaction, and at the effective date of such transaction the right to convert a Security into cash and Common Stock will be deemed to have changed into a right to convert it into the kind and amount of cash, securities or other assets of the Company or another person which the holder would have received if the holder had converted its Security immediately prior to the transaction.
If the Company makes a distribution described in Section 10.07 or Section 10.08 of the Indenture which, in the case of a dividend or distribution described in Section 10.08 of the Indenture, has a fair market value per share (as determined by the Board of Directors) equal to more than 15% of the Sale Price of the Common Stock on the Business Day immediately preceding the date of declaration for such dividend or distribution, the Securities may be surrendered for conversion beginning on the date the Company gives notice to the Holders of such dividend or distribution, which notice shall be given not less than 20 days prior to the Ex-Dividend Time for such dividend or distribution, and Securities may be surrendered for conversion at any time thereafter until the close of business on the Business Day prior to the Ex-Dividend Time or until the Company announces that such dividend or distribution will not take place.
A Security in respect of which a Holder has delivered a Purchase Notice or Change in Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Security may be converted only if such notice of exercise is withdrawn in accordance with the terms of the Indenture.
The Conversion Rate is 13.5584 shares of Common Stock per $1,000 Principal Amount at Maturity, subject to adjustment in certain events described in the Indenture. Except as otherwise described in this paragraph 9, upon conversion, the Company will deliver:
- cash (the "Cash Amount") in an amount equal to the lesser of
(a) the Initial Accreted Principal Amount and Issue Discount accrued thereon and (b) the
A-10
product of the Conversion Rate multiplied by the average Sale Price of the Common Stock for the five consecutive Trading Days immediately following the Conversion Date (the "Settlement Stock Price"), and
- a number of shares equal to (x) the Conversion Rate multiplied by the Settlement Stock Price, minus (y) the Cash Amount, all divided by (z) the Settlement Stock Price. The Company will deliver cash in lieu of any fractional share of Common Stock.
Accrued and unpaid contingent interest will not be paid in cash on Securities that are converted but will be paid in the manner provided in the following paragraph; provided, however, that Securities surrendered for conversion during the period from the close of business on any record date for a contingent interest payment to the opening of business on the date on which such contingent interest is payable, shall be entitled to receive such contingent interest payable on such Securities on the corresponding date on which such contingent interest is payable and (except Securities with respect to which the Company has mailed a notice of redemption) Securities surrendered for conversion during such period must be accompanied by payment of an amount equal to the contingent interest with respect thereto that the registered Holder is to receive.
A Holder may convert a portion of a Security if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000. No payment or adjustment will be made for dividends on the Common Stock except as provided in the Indenture. On conversion of a Security, accrued Original Issue Discount attributable to the period from July 7, 2003 through but not including the Conversion Date and (except as provided above) accrued contingent interest, if any, with respect to the converted Security shall not be paid in cash to Holders of such Security, nor shall it be cancelled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through delivery of the cash payment and Common Stock, if any, in exchange for the Security being converted pursuant to the terms hereof; and the cash and the fair market value of such shares of Common Stock, if any, shall be treated as delivered, to the extent thereof, first in exchange for Original Issue Discount accrued through the Conversion Date and accrued contingent interest, if any, and the balance, if any, of such cash and the fair market value of such Common Stock, if any, shall be treated as delivered in exchange for the Issue Price of the Security being converted pursuant to the provisions hereof.
To convert a Security, a Holder must (1) complete and manually sign the conversion notice below (or complete and manually sign a facsimile of such notice) and deliver such notice to the Conversion Agent, (2) surrender the Security to the Conversion Agent, (3) furnish appropriate endorsements and transfer documents if required by the Conversion Agent, the Company or the Trustee and (4) pay any transfer or similar tax, if required.
The Conversion Rate will be adjusted for dividends or distributions on Common Stock payable in Common Stock or other Capital Stock; subdivisions, combinations or certain reclassifications of Common Stock; distributions to all holders of Common Stock of certain rights to purchase Common Stock for a period expiring within 60 days of the record date for such distribution at less than the Sale Price of the Common Stock at the Time of Determination; distributions to such holders of assets (including shares of Capital Stock of, or similar equity
A-11
interests in, a Subsidiary or other business unit of the Company) or debt securities of the Company or certain rights to purchase securities of the Company (excluding any dividend, distribution or rights referred to above and any dividend or distribution paid exclusively in cash); and certain dividends or distributions consisting exclusively of cash to such holders, in each case as described in the Indenture. However, no adjustment need be made if Securityholders may participate in the transaction or in certain other cases. The Company from time to time may voluntarily increase the Conversion Rate.
If the Company is a party to a consolidation, merger or binding share exchange or a transfer of all or substantially all of its assets, or upon certain distributions described in the Indenture, the right to convert a Security into cash and Common Stock may be changed into a right to convert it into the kind and amount of securities, cash or other assets of the Company or another person which the Holder would have received if the Holder had converted its Securities immediately prior to the transaction.
10. Conversion Arrangement on Call for Redemption.
Any Securities called for redemption, unless surrendered for conversion before the close of business on the second Business Day immediately preceding the Redemption Date, may be deemed to be purchased from the Holders of such Securities at an amount not less than the Redemption Price, by one or more investment bankers or other purchasers who may agree with the Company to purchase such Securities from the Holders, to convert them into Common Stock of the Company and to make payment for such Securities to the Trustee in trust for such Holders.
11. Defaulted Interest.
Except as otherwise specified with respect to the Securities, any Defaulted Interest on any Security shall forthwith cease to be payable to the registered Holder thereof on the relevant accrual date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company as provided for in Section 11.02 of the Indenture.
12. Denominations; Transfer; Exchange.
The Securities are in fully registered form, without coupons, in denominations of $1,000 of Principal Amount at Maturity and integral multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities in respect of which a Purchase Notice or Change in Control Purchase Notice has been given and not withdrawn (except, in the case of a Security to be purchased in part, the portion of the Security not to be purchased) or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed.
A-12
13. Persons Deemed Owners.
The registered Holder of this Security may be treated as the owner of this Security for all purposes.
14. Unclaimed Money or Securities.
The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property laws. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person.
15. Amendment; Waiver.
Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding and (ii) certain Defaults may be waived with the written consent of the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to comply with Article 5 or Section 10.14 of the Indenture, to secure the Company's obligations under this Security or to add to the Company's covenants for the benefit of the Securityholders or to surrender any right or power conferred, to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act of 1939 and any amendment thereof, or as necessary in connection with the registration of the Securities under the Securities Act, or to cure any ambiguity, omission, defect or inconsistency, to correct or supplement any provision, or to make any other provision with respect to matters or questions arising under the Indenture or the Securities, so long as the interests of the Holders of Securities are not adversely affected in any material respect.
16. Defaults and Remedies.
Under the Indenture, Events of Default include (i) default in the payment of contingent interest when the same becomes due and payable, which default continues for 30 days; (ii) default in payment of the Principal Amount at Maturity, Initial Accreted Principal Amount plus accrued Issue Discount, Redemption Price, Purchase Price or Change in Control Purchase Price, as the case may be, in respect of the Securities when the same becomes due and payable;
(iii) failure by the Company to comply with other agreements in the Indenture or the Securities, subject to notice and lapse of time; (iv) default under any (a) indebtedness for any money borrowed by the Company or the Operating Company, (b) mortgage, indenture or other instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or the Operating Company or (c) guarantee by the Company or the Operating Company of payment for money borrowed, which default consists of a payment default at the stated maturity thereof or results in acceleration of such
A-13
indebtedness, in an aggregate principal amount outstanding under all such indebtedness in excess of $25,000,000, subject to notice and lapse of time; (v) final unsatisfied judgments not covered by insurance aggregating in excess of $25,000,000 million rendered against the Company or the Operating Company and not stayed, bonded or discharged within 60 days; and (vi) certain events of bankruptcy or insolvency. If an Event of Default occurs and is continuing, the Trustee, or the Holders of at least 25% in aggregate Principal Amount at Maturity of the Securities at the time outstanding, may declare the Initial Accreted Principal Amount plus the Issue Discount through the date of such declaration, and any accrued and unpaid interest (including contingent interest) if any, through the date of such declaration, on all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Initial Accreted Principal Amount plus the Issue Discount on the Securities, and any accrued and unpaid interest (including contingent interest) if any, through the occurrence of such event, becoming due and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives indemnity or security reasonably satisfactory to it. Subject to certain limitations, Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of amounts specified in clause (i) or (ii) above) if it determines that withholding notice is in their interests.
17. Trustee Dealings with the Company.
Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.
18. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities.
19. Authentication.
This Security shall not be valid until an authorized officer of the Trustee manually signs the Trustee's Certificate of Authentication on the other side of this Security.
20. Abbreviations.
Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint
A-14
tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).
21. Original Issue Discount Information Reporting Requirements.
In accordance with the United States Treasury Regulation Section 1.1275-3, a Holder may obtain the projected payment schedule by submitting a written request for such information to the following representative of the Company:
Anixter International Inc., 2301 Patriot Boulevard, Glenview, Illinois 60025, Attention: Corporate Secretary.
22. GOVERNING LAW.
THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS
SECURITY.

The Company will furnish to any Securityholder upon written request and without charge a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to:
Anixter International Inc.
2301 Patriot Boulevard
Glenview, IL 60026
Telephone No.: (224) 521-8000 Facsimile No.: (224) 521-8604 Attention: General Counsel
A-15
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to

(Insert assignee's soc. sec. or tax ID no.)

(Print or type assignee's name, address and zip code)
and irrevocably appoint
___________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.
CONVERSION NOTICE
To convert this Security into cash and Common Stock of the Company, check the box: [ ]
To convert only part of this Security, state the Principal Amount at Maturity to be converted (which must be $1,000 or an integral multiple of $1,000):
$_________________
If you want the stock certificate made out in another person's name, fill in the form below:

(Insert assignee's soc. sec. or tax ID no.)

(Print or type assignee's name, address and zip code)

Date:___________________________________________________________________________ Your Signature: _______________________________________________________________*

* Your signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Trustee, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
A-16
(Sign exactly as your name appears on the other side of this Security)
A-17
 
EXHIBIT B
Projected Payment Schedule*
Comparable Yield = 7.3%, compounded semiannually

DATE             PROJECTED PAYMENT PER LYON
----             --------------------------
01/07/04                   $0.00
07/07/04                    0.00
01/07/05                    0.00
07/07/05                    0.00
01/07/06                    0.00
07/07/06                    0.00
01/07/07                    0.00
07/07/07                    0.00
01/07/08                    0.00
07/07/08                    0.00
01/07/09                    0.00
07/07/09                    0.00
01/07/10                    0.00
07/07/10                    0.00
01/07/11                    0.00
07/07/11                    0.00
01/07/12                    0.00
07/07/12                    0.00
01/07/13                    0.00
07/07/13                    0.79
01/07/14                    0.82
07/07/14                    0.85
01/07/15                    0.89
07/07/15                    0.92
01/07/16                    0.96
07/07/16                    1.00
01/07/17                    1.04
07/07/17                    1.08
01/07/18                    1.12
07/07/18                    1.17
01/07/19                    1.21
07/07/19                    1.26
01/07/20                    1.31
07/07/20                    1.36
01/07/21                    1.42
07/07/21                    1.47
01/07/22                    1.53
07/07/22                    1.59
01/07/23                    1.66	

B-1

DATE             PROJECTED PAYMENT PER LYON
----             --------------------------
07/07/23                   1.72
01/07/24                   1.79
07/07/24                   1.86
01/07/25                   1.94
07/07/25                   2.01
01/07/26                   2.09
07/07/26                   2.18
01/07/27                   2.26
07/07/27                   2.35
01/07/28                   2.45
07/07/28                   2.54
01/07/29                   2.64
07/07/29                   2.75
01/07/30                   2.86
07/07/30                   2.97
01/07/31                   3.09
07/07/31                   3.21
01/07/32                   3.34
07/07/32                   3.47
01/07/33                   3.61
07/07/33                3125.80	

* The comparable yield means the annual yield the Company would pay on a noncontingent, nonconvertible, fixed-rate debt security with terms and conditions otherwise comparable to those of the Securities. The schedule of projected payments has been determined on the basis of an assumption of linear growth of the stock price and a constant dividend yield and has not been determined for any purpose other than for the determination of interest accruals and adjustments thereof in respect of the Securities for United States federal income tax purposes. The comparable yield and the schedule of projected payments do not constitute a projection or representation regarding the amounts payable on the Securities.

B-2
 
EXHIBIT 4.9
AMENDMENT NO. 2 TO
AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT
THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (the "Amendment"), dated as of September 30, 2004, between ANIXTER INC., a Delaware corporation, (the "Originator") and ANIXTER RECEIVABLES CORPORATION, a Delaware corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Originator and the Buyer are parties to that certain Amended and Restated Receivables Sale Agreement, dated as of October 3, 2002 (as amended, restated, supplemented or otherwise modified from time to time, the "Agreement"); and
WHEREAS the parties hereto desire to amend the Agreement on the terms and conditions set forth below;
NOW THEREFORE, in consideration of the premises herein contained, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Agreement.
SECTION 2. Amendments to the Agreement. The Agreement is hereby amended as follows:
(a) Section 6.1 of the Agreement is hereby amended to delete the following parenthetical from the sentence immediately following the proviso to Section 6.1:
"(including, without limitation, losses in respect of uncollectible receivables, regardless of whether reimbursement therefor would constitute recourse to Originator)"
(b) The defined term "Excluded Receivable" is hereby restated in its entirety as follows:
"Excluded Receivable" means indebtedness and other obligations owed to Originator, in respect of: (i) all accounts receivable generated by Originator's Latin American export locations; (ii) all accounts receivable generated by Originator's "Pacer" division, (iii) all accounts receivable generated by Originator's "Pentacon" division which are not included in Originator's main subledger system, (iv) all accounts receivable owing by Obligors with the following customer numbers: 139661, 804470, 544876, 520222, 037690,
608556, 514221 or 548357, and (v) all accounts receivable existing at Originator's general corporate division coded WC.
(c) Exhibit II to the Agreement is hereby replaced with Exhibit II attached hereto.
SECTION 3. Effective Date. This Amendment shall become effective and shall be deemed effective as of the date first written above when the parties shall have received a copy of this Amendment duly executed by each of the parties hereto.
SECTION 4. Representations and Warranties of the Originator. In order to induce the parties hereto to enter into this Amendment, the Originator represents and warrants to the Buyer, as to itself, that the execution and delivery by such Originator of this Amendment has been duly authorized by proper corporate proceedings of such Originator and this Amendment, and the Agreement, as amended by this Amendment, constitutes the legal, valid and binding obligation of such Originator, enforceable against such Originator in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws of general applicability affecting the enforcement of creditors' rights generally.
SECTION 5. Ratification. The Agreement, as amended hereby, is hereby ratified, approved and confirmed in all respects.
SECTION 6. Reference to Agreement. From and after the effective date hereof, each reference in the Agreement to "this Agreement", "hereof", or "hereunder" or words of like import, and all references to the Agreement in any and all agreements, instruments, documents, notes, certificates and other writings of every kind and nature shall be deemed to mean the Agreement, as amended by this Amendment.
SECTION 7. CHOICE OF LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.
SECTION 8. Execution of Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
-2-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized officers as of the date first written above:
ANIXTER INC.,
as the Originator
By: ___________________________
Name:
Title:
ANIXTER RECEIVABLES CORPORATION,
as the Buyer
By: ___________________________
Name:
Title:
Amendment No. 2
to
Amended and Restated Receivables Sale Agreement
Acknowledged and Agreed
this 30th day of September, 2004:
FALCON ASSET SECURITIZATION
CORPORATION
By: ___________________________
Name:
Title: Authorized Signatory
THREE PILLARS FUNDING CORPORATION
By: ___________________________
Name:
Title: Authorized Signatory
BANK ONE, NA, as a Financial Institution, a Managing Agent and as Agent
By: ___________________________
Name:
Title:
SUNTRUST BANK, as a
Financial Institution
By :___________________________
Name:
Title:
SUNTRUST CAPITAL MARKETS INC.,
as a Managing Agent
By: ___________________________
Name:
Title:
Amendment No. 2 to Amended and Restated Receivables Sale Agreement
EXHIBIT II
Attached.
 
EXHIBIT 4.10
AMENDMENT NO. 2 TO
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT
THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED RECEIVABLES PURCHASE
AGREEMENT (the "Amendment"), dated as of September 30, 2004, among ANIXTER RECEIVABLES CORPORATION, a Delaware corporation (the "Seller"), ANIXTER INC., a Delaware corporation ("Anixter"), as the initial Servicer, each financial institution party hereto as a Financial Institution, FALCON ASSET SECURITIZATION CORPORATION ("Falcon") and THREE PILLARS FUNDING LLC (f/k/a Three Pillars Funding Corporation) ("Three Pillars"), as conduits, (collectively, the "Conduits" and each individually, a "Conduit") and SUNTRUST CAPITAL MARKETS and BANK ONE, NA ("Bank One"), as managing agents (collectively, the "Managing Agents" and each individually, a "Managing Agent") and Bank One, as agent for the Purchasers (the "Agent").
W I T N E S S E T H:
WHEREAS, the Seller, Anixter, the Financial Institutions, Falcon, Three Pillars, the Managing Agents and the Agent are parties to that certain Amended and Restated Receivables Purchase Agreement, dated as of October 3, 2002 (as amended, restated, supplemented or otherwise modified from time to time, the "Agreement"); and
WHEREAS the parties hereto desire to amend the Agreement on the terms and conditions set forth below;
NOW THEREFORE, in consideration of the premises herein contained, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Agreement.
SECTION 2. Amendments to the Agreement. The Agreement is hereby amended as follows:
(a) The first sentence of Section 2.7 of the Agreement is hereby restated in its entirety as follows:
"In addition to Seller's rights pursuant to Section 1.3, Seller shall have the right (after providing three (3) Business Days' written notice to each Managing Agent), at any time, to repurchase from the Purchasers all, but not less than all, of the then outstanding Purchaser Interests."
(b) Clause (ii) of Section 5.1(t) of the Agreement is hereby restated in its entirety as follows:
"(ii) Each Receivable included in the Net Receivables Balance as an Eligible Receivable on any Monthly Report, Mid-Month Report and any other report delivered pursuant to Section 8.5 was an Eligible Receivable as of the date of such Monthly Report, Mid-Month Report or other report."
(c) Section 7.1(i)(J) of the Agreement is hereby amended to add the following immediately after the clause "except as herein specifically provided":
"or in connection with collections in respect of Excluded Receivables, which Collections the Servicer has indicated are readily identifiable"
(d) Section 7.1(i)(Q) of the Agreement is hereby restated in its entirety as follows:
"(Q) take such other actions as are necessary on its part to ensure that the facts and assumptions set forth in the opinion issued by Schiff Hardin LLP, as counsel for Seller, in connection with the closing or initial Incremental Purchase under this Agreement and relating to substantive consolidation issues, and in the certificates accompanying such opinion, remain true and correct in all material respects at all times, it being acknowledged that the assumption set forth in the ninth paragraph of Section 1 of such opinion to the extent it indicated that the Seller would not be consolidated with Anixter Inc. for financial reporting purposes, is no longer true."
(e) The last sentence of Section 8.1(a) of the Agreement is hereby restated in its entirety as follows:
"The Managing Agents may at any time designate as Servicer any Person to succeed Anixter or any Successor Servicer."
(f) Section 8.5 of the Agreement is hereby amended to add the following sentence at the end thereof:
"In addition to the foregoing, upon the request of the Agent, the Servicer shall provide to the Agent a list of Receivables (including such information regarding such Receivables as the Agent may request) as to which (as of the date specified by the Agent in such request) any payment of part thereof remains unpaid 90 days or more past the original due date therefor but less than 120 days past the original invoice date with respect to such Receivable."
-2-
(g) Section 10.1 of the Agreement is hereby amended to delete the words "or the Servicer" from the parenthetical in the sentence immediately following the proviso to Section 10.1.
(h) The definition of the term "Affiliate" set forth in Exhibit I to the Agreement is hereby restated in its entirety as follows:
"Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person or any Subsidiary of such Person; provided that so long as Ariel Capital Management, Inc. ("Ariel") does not own more than 30% of any class of voting stock of Anixter International Inc., "Affiliate" shall exclude (with respect to Anixter) any other Person under direct or indirect control of Ariel, unless such other Person directly or indirectly controls or is controlled by Anixter. A Person shall be deemed to control another Person if the controlling Person owns 20% or more of any class of voting securities of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise.
(i) The definition of the term "Applicable Margin" set forth in Exhibit I to the Agreement is hereby restated in its entirety as follows:
"Applicable Margin" means, as of any date of determination, the percentage set forth in the table below opposite the then applicable Debt Rating:

                 Debt Ratings
Pricing Level  S&P/Moody's/Fitch  Applicable Margin
-------------  -----------------  -----------------
      1             >A-/A3              0.45%
      2            BBB+/Baa1            0.60%
      3            BBB/Baa2             0.70%
      4            BBB-/Baa3           0.775%
      5             BB+/Ba1            0.975%
      6            <BB+/Ba1             1.15%	

(j) The definition of the term "Assignment Agreement" set forth in Exhibit I to the Agreement is hereby restated in its entirety as follows:
"Assignment Agreement" has the meaning set forth in Section 12.1(b).
(k) The definition of the term "Credit Agreement" set forth in Exhibit I to the Agreement is hereby restated in its entirety as follows:
-3-
"Credit Agreement" means that certain Credit Agreement dated as of June 18, 2004 by and among Anixter, the Subsidiaries of Anixter identified as Borrowing Subsidiaries thereunder, Bank of America, N.A., as Administrative Agent, Wachovia Bank N.A., as Syndication Agent, Bank One, N.A., The Bank of Nova Scotia and Wells Fargo Bank, N.A. as Co-Documentation Agents, and the lenders party thereto from time to time, as amended, supplemented or otherwise modified from time to time.
(l) The definition of the term "Dilution Reserve" set forth in Exhibit I to the Agreement is hereby restated in its entirety as follows:
"Dilution Reserve" means, on any date, an amount equal to (x) the greater of (i) 9% and (ii) the Dilution Reserve Ratio then in effect, times (y) the Net Receivables Balance as of the close of business on the immediately preceding Business Day.
(m) The definition of the term "Excluded Receivable" set forth in Exhibit I to the Agreement is hereby restated in its entirety as follows:
"Excluded Receivable" means indebtedness and other obligations owed to Originator, in respect of: (i) all accounts receivable generated by Originator's Latin American export locations; (ii) all accounts receivable generated by Originator's "Pacer" division, (iii) all accounts receivable generated by Originator's "Pentacon" division which are not included in Originator's main subledger system, (iv) all accounts receivable owing by Obligors with the following customer numbers: 139661, 804470, 544876, 520222, 037690, 608556, 514221 or 548357, and (v) all accounts receivable existing at Originator's general corporate division coded WC.
(n) The definition of the term "Facility Account" set forth in Exhibit I to the Agreement is hereby amended and restated in its entirety to read as follows:
"Facility Account" means Seller's Account No. 8188016122 at Bank of America.
(o) Clause (iii) of the definition of the term "Facility Termination Date" set forth in Exhibit I to the Agreement is hereby restated in its entirety as follows:
"(iii) September 27, 2007"
(p) The definition of the term "Liquidity Termination Date" set forth in Exhibit I to the Agreement is hereby amended and restated in its entirety to read as follows:
"Liquidity Termination Date" means September 29, 2005.
-4-
(q) The definition of the term "Loss Reserve" set forth in Exhibit I to the Agreement is hereby amended to delete therefrom the reference to "12%" and to substitute a reference to "9%" therefor.
(r) The definition of the term "Standard Concentration Limit" set forth in Exhibit I to the Agreement is hereby amended to delete therefrom the reference to "4%" and to substitute a reference to "3%" therefor.
SECTION 3. Effective Date. This Amendment shall become effective and shall be deemed effective as of the date first written above when the Agent shall have received the following:
(a) a copy of this Amendment duly executed by each of the parties hereto; and
(b) a bring-down opinion from Schiff Hardin LLP regarding true-sale and non-consolidation matters.
SECTION 4. Representations and Warranties of the Seller Parties. In order to induce the parties hereto to enter into this Amendment, each of the Seller Parties represents and warrants to the Agent and the Purchasers, as to itself, that:
(a) The representations and warranties of such Seller Party set forth in Section 5.1 of the Agreement, as hereby amended, are true, correct and complete on the date hereof as if made on and as of the date hereof and there exists no Amortization Event or Potential Amortization Event on the date hereof, provided that in the case of any representation or warranty in Section 5.1 that expressly relates to facts in existence on an earlier date, the reaffirmation thereof under this Section 4(a) shall be made as of such earlier date.
(b) The execution and delivery by such Seller Party of this Amendment has been duly authorized by proper corporate proceedings of such Seller Party and this Amendment, and the Agreement, as amended by this Amendment, constitutes the legal, valid and binding obligation of such Seller Party, enforceable against such Seller Party in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws of general applicability affecting the enforcement of creditors' rights generally.
SECTION 5. Ratification. The Agreement, as amended hereby, is hereby ratified, approved and confirmed in all respects.
SECTION 6. Reference to Agreement. From and after the effective date hereof, each reference in the Agreement to "this Agreement", "hereof", or "hereunder" or words of like import, and all references to the Agreement in any and all agreements, instruments, documents, notes, certificates and other writings of every kind and nature shall be deemed to mean the Agreement, as amended by this Amendment.
-5-
SECTION 7. CHOICE OF LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.
SECTION 8. Execution of Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
-6-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized officers as of the date first written above:
ANIXTER RECEIVABLES CORPORATION,
as the Seller
By: ___________________________
Name:
Title:
ANIXTER INC.,
 as the initial Servicer
By: ___________________________
Name:
Title:
Signature Page
to Amendment No 2 to
Amended and Restated Receivables Purchase Agreement
FALCON ASSET SECURITIZATION
CORPORATION
By: ___________________________
Name:
Title: Authorized Signatory
BANK ONE, NA, as a Financial
Institution, a Managing Agent
and as Agent
By: ___________________________
Name:
Title:
Signature Page
to Amendment No 2 to
Amended and Restated Receivables Purchase Agreement
THREE PILLARS FUNDING LLC (f/k/a Three
Pillars Funding Corporation)
By: ___________________________
Name:
Title: Authorized Signatory
SUNTRUST BANK, as a
Financial Institution
By :___________________________
Name:
Title:
SUNTRUST CAPITAL MARKETS INC., as a
Managing Agent
By: ___________________________
Name:
Title:
Signature Page
to Amendment No 2 to
Amended and Restated Receivables Purchase Agreement
 
EXHIBIT 10.15
ANIXTER INTERNATIONAL INC.
MANAGEMENT INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Anixter International Inc., a Delaware corporation (the "Company"), hereby establishes an incentive compensation plan to be known as the "Anixter International Inc. Management Incentive Plan" (the "Plan"), as set forth herein and as it may be amended from time to time.
Subject to approval by the Company's shareholders, the Plan shall become effective as of the date the shareholders first approve the Plan (the "Effective Date"), and shall remain in effect as provided in Section 1.3 hereof.
1.2 OBJECTIVES OF THE PLAN. The primary objectives of the Plan are: (a) to attract, motivate, and retain high-caliber individuals by providing competitive annual incentive opportunities, (b) to provide an incentive to key employees of the Company who have significant responsibility for the success and growth of the Company, and (c) to satisfy the requirements of Section 162(m) of the Code.
1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date and shall remain in effect, subject to the right of the Committee to amend or terminate the Plan at any time pursuant to Article 9 hereof, for a period of ten
(10) years, at which time the right to grant Awards under the Plan shall terminate.
ARTICLE 2. DEFINITIONS
Whenever the following terms are used in the Plan, with their initial letter(s) capitalized, they shall have the meanings set forth below:
(a) "AWARD" means an award described in Article 5 hereof.
(b) "AWARD POOL" means, with respect to a Plan Year, 3 percent (3 %) of Operating Income for the Plan Year.
(c) "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act, as amended from time to time, or any successor rule.
(d) "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the Company.
(e) "CODE" means the Internal Revenue Code of 1986, as amended from time to time.
(f) "COMMITTEE" means the Compensation Committee of the Board or any other committee appointed by the Board to administer the Plan and Awards to Participants hereunder, as specified in Article 3 hereof.
(g) "COMPANY" means Anixter International Inc., a Delaware corporation, and any successor thereto as provided in Article 11 hereof.
(h) "DIRECTOR" means any individual who is a member of the Board.
(i) "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1 hereof.
(j) "EMPLOYEE" means any employee of the Company or of a Subsidiary. Directors who are employed by the Company or by a Subsidiary shall be considered Employees under the Plan.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute.
(l) "INSIDER" means an individual who is, on the relevant date, subject to the reporting requirements of Section 16(a) of the Exchange Act.
(m) "OPERATING INCOME" means the amount reported on the Company's Consolidated Statements of Operations for the Plan Year.
(n) "PARTICIPANT" means a key Employee who has been selected to receive an Award or who holds an outstanding Award.
(o) "PERFORMANCE-BASED EXCEPTION" means the performance-based exception from the tax deductibility limitation imposed by Code Section
162(m), as set forth in Code Section 162(m)(4)(C).
(p) "PLAN" means the Anixter International Inc. Management Incentive Plan, as set forth herein and as it may be amended from time to time.
(q) "PLAN YEAR" means the Company's fiscal year.
(r) "SUBSIDIARY" means a corporation, partnership, joint venture, or other entity in which the Company has an ownership or other proprietary interest of more than fifty percent (50%).
ARTICLE 3. ADMINISTRATION
3.1 GENERAL. Except as otherwise determined by the Board in its discretion, the Plan shall be administered by the Committee, which shall consist exclusively of two (2) or more nonemployee directors within the meaning of the rules promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act who also qualify as outside directors within the meaning of Code Section 162(m) and the related regulations under the Code. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board. The Committee shall have the authority to delegate administrative duties to officers or Directors of the Company; provided that the Committee may not delegate its authority with respect to: (a) nonministerial actions with respect to Insiders; (b) nonministerial actions with respect to Awards that are intended to qualify for the Performance-Based Exception; and (c) certifying that any performance goals and other material terms attributable to Awards intended to qualify for the Performance-Based Exception have been satisfied.
3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law or by the Certificate of Incorporation or Bylaws of the Company, and subject to the provisions hereof, the Committee shall have full power in its discretion to select key Employees who shall participate in the Plan; determine the sizes and types of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; construe and interpret the Plan and any Award, document, or instrument issued under the Plan; establish, amend, or waive rules and regulations for the Plan's administration; and (subject to the provisions of Article 9 hereof) amend the terms and conditions of any outstanding Award as provided in the Plan. Further,the
-2-
Committee shall make all other determinations that may be necessary or advisable for the administration of the Plan.
3.3 DECISIONS BINDING. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders and resolutions of the Committee shall be final, conclusive, and binding on all persons, including the Company, its shareholders, Directors, Employees, Participants, and their estates and beneficiaries.
3.4 PERFORMANCE-BASED AWARDS. For purposes of the Plan, it shall be presumed, unless the Committee indicates to the contrary, that all Awards are intended to qualify for the Performance-Based Exception. If the Committee does not intend an Award to qualify for the Performance-Based Exception, the Committee shall reflect its intent in its records in such manner as the Committee determines to be appropriate.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBILITY. All key Employees are eligible to participate in the Plan.
4.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees those to whom Awards shall be granted and shall determine the nature and amount of each Award.
ARTICLE 5. AWARDS
5.1 GRANT OF AWARDS. All Awards under the Plan shall be granted upon terms approved by the Committee. However, no Award shall be inconsistent with the terms of the Plan or fail to satisfy the requirements of applicable law. Each Award shall relate to a designated Plan Year.
5.2 AWARD POOL LIMITATION. The sum of the Awards for a single Plan Year shall not exceed one hundred percent (100%) of the amount in the Award Pool for that Plan Year.
5.3 INDIVIDUAL MAXIMUM AWARDS. For any given Plan Year, no one Participant shall receive an Award in excess of fifty percent (50%) of the Award Pool.
5.4 LIMITATIONS ON COMMITTEE DISCRETION. The Committee may reduce, but may not increase, any of the following:
(a) The maximum Award for any Participant; and
(b) The size of the Award Pool.
5.5 PAYMENT. Payment of Awards shall be subject to the following:
(a) Unless otherwise determined by the Committee, in its sole discretion, a Participant shall have no right to receive a payment under an Award for a Plan Year unless the Participant is employed by the Company or a Subsidiary at all times during the Plan Year.
(b) The Committee may, in its discretion, authorize payment to a Participant of less than the Participant's maximum Award and may provide that a Participant shall not receive any payment with respect to an Award. In exercising its discretion, the Committee
-3-
shall consider such factors as it considers appropriate. The Committee's decision shall be final and binding upon any person claiming a right to a payment under the Plan.
(c) Payments of Awards shall be wholly in cash.
(d) Each Award shall be paid on a date prescribed by the Committee, unless the Participant has elected to defer payment in accordance with the rules and regulations established by the Committee.
ARTICLE 6. BENEFICIARY DESIGNATION
Each Participant may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of the Participant's death before the Participant receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant with respect to such benefit, shall be in a form prescribed by the Company, and shall be effective only when filed by the Participant in writing with the Company during the Participant's lifetime. In the absence of any such designation, any benefits remaining unpaid under the Plan at the Participant's death shall be paid to the Participant's estate.
ARTICLE 7. DEFERRALS
The Committee may permit or require a Participant to defer such Participant's receipt of the payment of cash that would otherwise be due to such Participant in connection with any Awards. If any such deferral election is required or permitted, the Committee shall, in its discretion, establish rules and procedures for such payment deferrals.
ARTICLE 8. NO RIGHT TO EMPLOYMENT OR PARTICIPATION
8.1 EMPLOYMENT. The Plan shall not interfere with or limit in any way the right of the Company or of any Subsidiary to terminate any Participant's employment at any time, and the Plan shall not confer upon any Participant the right to continue in the employ of the Company or of any Subsidiary.
8.2 PARTICIPATION. No Employee shall have the right to be selected to receive an Award or, having been so selected, to be selected to receive a future Award.
ARTICLE 9. AMENDMENT, MODIFICATION, AND TERMINATION
9.1 AMENDMENT, MODIFICATION, AND TERMINATION. Subject to the terms of the Plan, the Committee may at any time and from time to time, alter, amend, suspend, or terminate the Plan in whole or in part; provided that unless the Committee specifically provides otherwise, any revision or amendment that would cause the Plan to fail to comply with any requirement of applicable law, regulation, or rule if such amendment were not approved by the shareholders of the Company shall not be effective unless and until shareholder approval is obtained.
9.2 ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR NONRECURRING EVENTS. The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan; provided that the Committee shall not be authorized to adjust an Award that the Committee intends to qualify for the Performance-Based Exception if such adjustment (or the authority to make such adjustment) would prevent the Award from qualifying for the Performance-Based Exception.
-4-
9.3 AWARDS PREVIOUSLY GRANTED. Notwithstanding any other provision of the Plan to the contrary (but subject to Section 1.1 hereof), no termination, amendment, or modification of the Plan shall cause any previously granted Awards to be forfeited. After the termination of the Plan, any previously granted Award shall remain in effect and shall continue to be governed by the terms of the Plan and the Award.
ARTICLE 10. WITHHOLDING
The Company and its Subsidiaries shall have the power and the right to deduct or withhold, or to require a Participant to remit to the Company or to a Subsidiary, an amount that the Company or a Subsidiary reasonably determines to be required to comply with federal, state, local, or foreign tax withholding requirements.
ARTICLE 11. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
ARTICLE 12. LEGAL CONSTRUCTION
12.1 GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, any feminine term used herein also shall include the masculine, and the plural shall include the singular and the singular shall include the plural.
12.2 SEVERABILITY. If any provision of the Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
12.3 REQUIREMENTS OF LAW. The granting of Awards under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies as may be required.
12.4 GOVERNING LAW. The Plan and all Awards shall be construed in accordance with and governed by the laws of the state of Delaware (without regard to the legislative or judicial conflict of laws rules of any state), except to the extent superseded by federal law.
-5-
 
EXHIBIT 10.18
FIRST AMENDMENT TO THE ANIXTER INTERNATIONAL INC.
2001 STOCK INCENTIVE PLAN
WHEREAS, Anixter International Inc., a Delaware corporation (the "Company"), established the Anixter International Inc. 2001 Stock Incentive Plan (the "2001 Plan") effective as of May 24, 2001 (the date of the 2001 shareholders' meeting).
WHEREAS, the Company has remaining authorized shares available totaling 858,636 under the 2001 Plan.
WHEREAS, the Company desires to amend the 2001 Plan to:
(a) Allow for the grant of 820,000 shares to be awarded in a form other than options or stock appreciation rights;
(b) Cancel 38,636 shares available under the Stock Plan; and
(c) Clarify the 2001 Plan language allowing for the grant of restricted stock units.
WHEREAS, shareholder approval is required for the above-mentioned amendments.
NOW, THEREFORE, effective upon shareholder approval, the 2001 Plan shall be amended as follows:
FIRST: The following language shall be inserted after the words "restricted stock," in Paragraph 5:
"restricted stock units"
SECOND: Paragraph 5(c) shall be deleted in its entirety and replaced with the following language:
"On or after May 20, 2004, no more than 820,000 Shares may be awarded in a form other than options or stock appreciation rights, except as necessary to give effect to adjustments specified in
Section 3 hereof."
ANIXTER INTERNATIONAL INC.
2001 STOCK INCENTIVE PLAN
1. PURPOSE AND EFFECTIVE DATE. Anixter International Inc. (the "Company") has established this 2001 Stock Incentive Plan (the "Plan") to facilitate the retention and continued motivation of key employees, consultants and directors and to align more closely their interests with those of the Company and its stockholders. The effective date of the Plan shall be the date it is approved by the Company's stockholders at the 2001 Annual Meeting of Stockholders.
2. ADMINISTRATION. The Plan shall be administered by the Board of Directors, or the Compensation Committee of the Company's Board of Directors or such other Board committee as the Board may designate (the "Committee"). The Committee has the authority and responsibility for the interpretation, administration and application of the provisions of the Plan, and the Committee's interpretations of the Plan, and all actions taken by it and determinations made by it shall be binding on all persons. No Board or Committee member shall be liable for any determination, decision or action made in good faith with respect to the Plan.
3. SHARES SUBJECT TO PLAN. A total of 2,500,000 shares of Common Stock of the Company ("Shares") may be issued pursuant to the Plan. The Shares may be authorized but unissued Shares or Shares reacquired by the Company and held in its treasury. Grants of incentive awards under the Plan will reduce the number of Shares available thereunder by the maximum number of Shares obtainable under such grants. If all or any portion of the Shares otherwise subject to any grant under the Plan are not delivered for any reason including, but not limited to, the cancellation, expiration or termination of any option right or unit, the settlement of any award in cash, the forfeiture of any restricted stock, or the repurchase of any Shares by the Company from a participant for the cost of the participant's investment in the Shares, such number of Shares shall be available again for issuance under the Plan. The number of Shares covered by or specified in the Plan and the number of Shares and the purchase price for Shares under any outstanding awards, may be adjusted proportionately by the Committee for any increase or decrease in the number of issued Shares or any change in the value of the Shares resulting from a subdivision or consolidation of Shares, reorganization, recapitalization, spin-off, payment of stock dividends on the Shares, any other increase or decrease in the number of issued Shares made without receipt of consideration by the Company, or the payment of an extraordinary cash dividend.
4. ELIGIBILITY. All key employees, active consultants and directors of the Company and its subsidiaries are eligible to be selected to receive a grant under the Plan by the Committee. The Committee may condition eligibility under the Plan or participation under the Plan, and any grant or exercise of an incentive award under the Plan on such conditions, limitations or restrictions as the Committee determines to be appropriate for any reason. No person may be granted in any period of two consecutive calendar years, awards covering more than 900,000 Shares.
5. AWARDS. The Committee may grant awards under the Plan to eligible persons in the form of stock options (including incentive stock options within the meaning of section 422 of the Code), stock grants, stock units, restricted stock, stock appreciation rights, performance shares and units and dividend equivalent rights, and reload options to purchase additional Shares if Shares are delivered in payment of any other options, and shall establish the number of Shares subject to each such grant and the terms thereof, including any adjustments for reorganizations and dividends, subject to the following:
(a) All awards granted under the Plan shall be evidenced by agreements in such form and containing such terms and conditions not inconsistent with the Plan as the Committee shall prescribe.
-2-
(b) The exercise price of any option or stock appreciation right shall not be less than the fair market value of a corresponding number of Shares as of the date of grant, except (i) options or stock appreciation rights being granted to replace options or rights not initially granted by the Company may be granted with exercise prices that in the judgment of the Committee result in options or rights having comparable value to the options or rights being replaced, and (ii) up to 10% of the Shares may be granted pursuant to options or stock appreciation rights that have exercise prices of not less than 85% of the fair market value of a corresponding number of Shares as of the date of grant.
(c) No more than 25% of the Shares may be awarded in a form other than options or stock appreciation rights.
(d) No option may be repriced by amendment, substitution or cancellation and regrant, unless authorized by the stockholders. Adjustments pursuant to Section 3 above shall not be considered repricing.
6. AMENDMENT OF THE PLAN. The Board of Directors or the Committee may from time to time suspend, terminate, revise or amend the Plan or the terms of any grant in any respect whatsoever, provided that, without the approval of the stockholders of the Company, no such revision or amendment may increase the number of Shares subject to the Plan, change the provisions of Section 5 above, or expand those eligible for grants under the Plan.
Adopted as of 14th day of February, 2001, by the Compensation Committee of the Board of Directors of Anixter International Inc.

James E. Knox Secretary

-3-
 
EXHIBIT 10.22
ANIXTER INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EFFECTIVE AS OF
 AUGUST 4, 2004
ANIXTER INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
SECTION 1. ESTABLISHMENT OF THE PLAN
1.1 Establishment of the Plan. Anixter Inc. (the "Corporation") hereby establishes the ANIXTER INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (the "Plan") effective as of August 4, 2004.
1.2 Description of the Plan. This Plan is intended to constitute a nonqualified deferred compensation plan which, in accordance with ERISA Sections 201(2), 301(a)(3) and 401(a)(1), is unfunded and established primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.
1.3 Purpose of the Plan. In addition to the description of the Plan as set forth in subsection 1.2 above, the primary objective of the Corporation in establishing this Plan is to provide supplemental retirement income to certain employees of the Company in addition to that provided through all other sources.
SECTION 2. DEFINITIONS
2.1 Definitions. Whenever used in the Plan, the following terms shall have the respective meanings set forth below, unless otherwise expressly provided herein or unless a different meaning is plainly required by the context, and when the defined meaning is intended, the term is capitalized. Other terms used herein without definition shall have the meanings ascribed to them in the Anixter Inc. Pension Plan as amended and restated from time to time or, if no such meaning is ascribed, the meanings attributed to them by the Committee in its reasonable discretion.
(a) "Beneficiary" means any person or entity designated by the Participant or otherwise entitled to receive any benefits under the Plan which may be due upon the Participant's death.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Cause" has the meaning set forth in any employment or other written agreement between the Participant and the Company. If there is no employment or other written agreement between the Participant and the Company, or if such agreement does not define "Cause," then "Cause" shall mean the Participant's:
(1) repeated material failure to follow appropriate instructions;
(2) material breach of his fiduciary obligations to the Company; or
(3) commission of dishonest acts that in the reasonable judgment of the Company makes the continuation of Participant's employment inappropriate.
In the absence of anything to the contrary contained in a Participant's employment agreement (if any), the Committee has the discretion to determine, in good faith, from all the facts and circumstances reasonably available to it, whether Cause exists.
(d) "Committee" means the Anixter Inc. Employee Benefits Administrative Committee.
(e) "Company" means the Corporation and any subsidiaries of the Corporation and their successor(s) or assign(s) that adopt this Plan with the approval by resolution of the Board.
(f) "Compensation Committee" means the Anixter International Inc. Compensation Committee.
(g) "Corporation" means Anixter Inc., a Delaware corporation, or any successor thereto.
(h) "Eligible Employee" means an Employee who is so designated by the Committee and approved by the Compensation Committee.
(i) "Employee" means a person who is actively employed by the Company and who falls under the usual common law rules applicable in determining the employer-employee relationship.
(j) "Life Annuity" means an annuity that is paid to the retired Participant for as long as he lives and which does not provide any payments to a Beneficiary. The amount of this annuity is determined by the benefit formula in Section 4.
(k) "Monthly Salary" means the Salary paid to the Participant during the applicable month. Monthly Salary shall be based upon the Salary paid for completed months.
(l) "Normal Retirement Date" means the first of the month coincident with or next following the attainment of the Participant's sixty-fifth birthday, unless otherwise specified by the Committee.
(m) "Participant" means any Eligible Employee who is participating in the Plan in accordance with the provisions herein set forth.
(n) "Plan" means this plan, the Anixter Inc. Supplemental Executive Retirement Plan.
2
(o) "Plan Administrator" means the Anixter Inc. Employee Benefits Administrative Committee.
(p) "Present Value" means the commuted present value lump sum of any amounts owed at the time of any such calculation (using the mortality assumptions used for the calculation of benefits under the Anixter Inc. Pension Plan), which shall be discounted to present value at a reasonable interest rate as determined by the Committee (or its designee) in its sole discretion.
(q) "Qualified Pension Benefit" means the Participant's Normal Form Life Annuity benefit payable from the Anixter Inc. Pension Plan.
(r) "Retirement" means any termination of employment with the Company, other than termination by the Company for Cause, on or after attaining his or her Normal Retirement Date or, with respect to any Participant, the Committee has determined in its sole discretion that such Participant is no longer regularly engaged in the provision of services to the Company, regardless of the Participant's payroll status.
(s) "Retirement Date" means the first day of the month coincident with or next following the date when a Participant retires after attaining his or her Normal Retirement Date.
(t) "Salary" means the remuneration paid to a Participant during a Plan Year, including overtime, regular bonus amounts or commissions in lieu of regular bonus amounts, before reduction for amounts deferred pursuant to any plan of the Corporation (including, without limitation, any tax-qualified or non-qualified plans of deferred compensation and any cafeteria plans, as defined in section 125 of the Internal Revenue Code), but excluding special performance bonus amounts, signing and relocation bonuses, extraordinary commissions, any amounts or payments received from a nonqualified deferred compensation plan, stock option, phantom stock option or similar long-term incentive plan maintained by the Company, severance pay, and other extraordinary payments.
2.2 Gender and Number. Except when otherwise indicated by the context, any masculine terminology used herein shall also include the feminine and the feminine shall include the masculine, and the use of any term herein in the singular may also include the plural and the plural shall include the singular.
SECTION 3. ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. An Employee must be designated by the Committee and approved by the Compensation Committee for participation in this Plan to become eligible to receive Benefits.
3
3.2 Reemployment of Former Participant. Notwithstanding any provision of the Plan to the contrary, any person reemployed as an Employee who previously participated in and received benefits under the Plan shall not be eligible to participate again in the Plan. Furthermore, any payments or future rights to payments under the Plan made or to be made with respect to such Participant shall not be discontinued on account of such reemployment.
SECTION 4. BENEFITS
4.1 Normal Benefit. A Participant who is eligible for Retirement or Vested Termination Benefits will receive from the Plan on a monthly basis a Life Annuity commencing on the later of his Normal Retirement Date or his Retirement Date equal to his Applicable Formula contained in Exhibit A. Exhibit A shall be updated as necessary to reflect Committee recommendations which are approved by the Compensation Committee.
4.2 Deferred Retirement. The Deferred Retirement Benefit shall be calculated according to Section 4.1, with the Life Annuity commencement on the first of the month coincident with or next following the Participant's Retirement Date.
4.3 Vested Termination. Unless otherwise provided in Section 4.1, if a Participant Retires or his or her employment terminates for any reason other than Cause, with at least five (5) years of service and after attaining fifty-five (55) years of age, he is eligible for Vested Benefits. The Vested Benefit shall be calculated according to Section 4.1.
4.4 Optional Payment Forms. The Normal Form of benefit will be the Life Annuity form commencing on the Participant's Normal Retirement Date. The Participant may elect one of the following Optional Payment Forms.
a) Early Commencement of Benefits. A Participant who is at least fifty-five (55) years of age may elect to have his benefit commence prior to his Normal Retirement Date. Such benefit shall be adjusted to be actuarially equivalent to his Normal Benefit.
b) 50% Joint and Survivor Annuity. A Participant may elect to have his benefit paid in the form of a 50% Joint and Survivor Annuity. 50% Joint and Survivor Annuity shall mean an annuity which is paid to the retired Participant with a survivor annuity paid during the life of the surviving spouse or non-spouse Beneficiary after the Participant's death. The annuity must be the actuarial equivalent of the Life Annuity for that Participant. The amount of the survivor annuity shall be fifty percent (50%) of the Participant's benefit.
4.5 Pre-Retirement Death Benefits. A Participant who dies will not receive special benefits on account of death. Such a Participant may receive benefits only if he qualifies for reasons other than death.
4
If a Participant dies after meeting the requirements for Vested Termination, either while employed or after termination of employment but prior to the commencement of benefit payments, his Beneficiary will be entitled to receive a survivor's benefit. The amount of the benefit payable would be the same amount that would be payable to the Beneficiary if the Participant had retired and begun receiving benefits in the form of a 50% Joint and Survivor Annuity on the day before his death.
4.6 Disability Benefits. A Participant who has been disabled will not receive special benefits on account of disability. Such a Participant may receive benefits only if he qualifies for reasons other than disability.
4.7 Forfeiture of Benefits. Notwithstanding anything in this Plan to the contrary, the Corporation's obligations to make the payments hereunder are conditioned upon the following:
(a) The Participant shall have continued in the active employ of the Corporation until such time as he is otherwise entitled to benefits under Section 4.
(b) The Participant's employment with the Company shall not have been terminated for Cause, or grounds discovered after termination of employment that would have led to termination for Cause.
If the Participant fails to satisfy the foregoing conditions, the Corporation's obligations hereunder shall cease.
SECTION 5. FINANCING
5.1 Financing of Benefits. Benefits shall be payable, when due, by the Corporation, out of its current operating revenue to the extent not paid from a trust created pursuant to Section 5.2. The Corporation's obligation to make payments to the recipient when due shall be contractual in nature only, and participation in the Plan will not create in favor of any Participant any right or lien against the assets of the Corporation. No benefits under the Plan shall be required to be funded by a trust fund or insurance contracts or otherwise.
5.2 "Rabbi" Trust. In connection with this Plan, the Board may establish a grantor trust (known as the "Anixter Inc. Executive Benefit Plan Trust") for the purpose of accumulating funds to satisfy the obligations incurred by the Corporation under this Plan (and such other plans and arrangements as determined from time to time by the Corporation). At any time, the Corporation may transfer assets to the Trust to satisfy all or part of the obligations incurred by the Corporation under this Plan, as determined in the sole discretion of the Committee, subject to the return of such assets to the Corporation at such time as determined in accordance with the terms of such Trust. Any assets of such Trust shall remain at all times subject to the claims of creditors of the Corporation in the event of the Corporation's insolvency; and no asset or other funding medium used to pay benefits accrued under the Plan shall result in the Plan being considered as other than "unfunded" under ERISA. Notwithstanding the establishment of
5
the Trust, the right of any Participant to receive future payments under the Plan shall remain an unsecured claim against the general assets of the Corporation.
SECTION 6. BENEFICIARY DESIGNATION
6.1 Designation of Beneficiary.
(a) All Beneficiary designations shall be in writing and signed by the Participant. The designation shall be effective only if and when delivered to the Corporation during the lifetime of the Participant. The Participant also may change his Beneficiary or Beneficiaries by a signed, written instrument delivered to the Corporation. The payment of amounts shall be in accordance with the last unrevoked written designation of Beneficiary that has been signed and delivered to the Corporation. All Beneficiary designations shall be addressed to the Secretary of Anixter Inc. and delivered to his office, and shall be processed as indicated in subsection (b) below by the Secretary or by his authorized designee.
(b) The Secretary of Anixter Inc. (or his authorized designee) shall, upon receipt of the Beneficiary designation:
(1) Ascertain that the designation has been signed, and if it has not been, return it to the Participant for his signature;
(2) If signed, stamp the designation "Received", indicate the date of receipt, and initial the designation in the proximity of the stamp.
(c) Death of his Beneficiary prior to the Participant's date of retirement shall void the selection involving that Beneficiary. The Participant shall be immediately required to make a different selection of payment form or to name another Beneficiary.
6.2 Ineffective Designation.
(a) If the Participant does not designate a Beneficiary, or if for any reason such designation is entirely ineffective, the amounts that otherwise would have been paid to the Beneficiary shall be paid to the Participant's estate as the alternate Beneficiary.
(b) If a designation is effective in part and ineffective in part, to the extent that a designation is effective, distribution shall be made so as to carry out as closely as discernable the intent of the Participant, with result that only to the extent that a designation is ineffective shall distribution instead be made to the Participant's estate as an alternate Beneficiary.
6
6.3 Simultaneous Death. If a Participant and Beneficiary die under circumstances such that it is not possible to determine who died first, it is presumed that the Participant survived the Beneficiary.
6.4 Disclaimer. A Beneficiary may disclaim any benefit hereunder in accordance with Internal Revenue Code Section 2518 and applicable state law.
SECTION 7. GENERAL PROVISIONS
7.1 Employment/Participation Rights.
(a) Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. If any Participant's employment is terminated for any reason and he is not then entitled to benefits in accordance with Section 4, nothing shall be paid to such Participant or his Beneficiary(ies) under this Plan.
(b) Nothing in the Plan shall be construed to be evidence of any agreement or understanding, express or implied, that the Company will continue to employ a Participant in any particular position or at any particular rate of remuneration.
(c) No employee shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant.
(d) Nothing in this Plan shall affect the right of a recipient to participate in and receive benefits under and in accordance with any pension, profit sharing, deferred compensation or other benefit plan or program of the Company. In addition, no payments under this Plan shall be deemed salary or other compensation to the Participant for the purpose of computing benefits to which the Participant may be entitled under any pension plan or other arrangements that the Company may have for the benefit of its employees.
7.2 Nonalienation of Benefits.
(a) No right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or change, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or change the same shall be void; nor shall any such disposition be compelled by operation of law except to the extent required by law.
(b) No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to benefits under the Plan.
7
(c) If any Participant or Beneficiary hereunder should become bankrupt

            or attempt to anticipate, alienate, sell, assign, pledge, encumber,
            or change any right or benefit hereunder, then such right or benefit
            shall, in the discretion of the Committee, cease, and the Committee
            shall direct in such event that the Corporation hold or apply the
            same or any part thereof for the benefit of the Participant or
            Beneficiary in such manner and in such proportion as the Committee
            may deem proper.

7.3   Severability. If any particular provision of the Plan shall be found to be
      illegal or unenforceable for any reason, the illegality or lack of
      enforceability of such provision shall not affect the remaining provisions
      of the Plan, and the Plan shall be construed and enforced as if the
      illegal or unenforceable provision had not been included.

7.4   No Individual Liability. It is declared to be the express purpose and
      intention of the Plan that no liability whatsoever shall attach to or be
      incurred by the shareholders, officers, or directors of the Corporation or
      any representative appointed hereunder by the Corporation, under or by
      reason of any of the terms or conditions of the Plan.

7.5   Applicable Law. The Plan shall be governed by and construed in accordance
      with the laws of the State of Illinois except to the extent governed by
      applicable Federal law.

7.6   Successors. The provisions of the Plan shall bind and inure to the benefit
      of Company and its successors and assigns. The term successors as used
      herein shall include any corporate or other business entity that shall,
      either by merger, consolidation, purchase or otherwise acquire all or
      substantially all of the business and assets of the Company, and
      successors of any such corporation or other business entity.

7.7   Indemnity of Committee. To the maximum extent permitted by applicable law,
      the Company shall indemnify, hold harmless and defend the Committee, each
      member of the Committee, any employee of the Company, or any individual
      acting as an employee or agent of any of them (to the extent not
      indemnified or saved harmless under any liability insurance or any other
      indemnification arrangement) from any and all claims, losses, damages,
      liabilities, costs and expenses (including attorneys' fees) arising out of
      any actual or alleged act or failure to act made in good faith in
      connection with the Plans (or any related trust agreements), including
      expenses reasonably incurred in the defense of any claim relating thereto.

7.8   Overpayment. If the Committee determines that any Participant or
      Beneficiary receives any payment to which he or she is not entitled
      hereunder, the Committee may seek recovery of such overpayment, plus
      interest.

7.9   Qualified Domestic Relations Order. If the Committee receives an order
      purporting to be a qualified domestic relations order with respect to a
      Participant's benefit under the Plan, to the extent possible it shall
      attempt to have such benefit assigned from the Anixter Inc. Pension Plan.

7.10  Information to Company. The Company shall furnish to the Committee in
      writing all information the Company deems appropriate for the Committee to
      exercise its duties

                                       8	

      hereunder. Such information shall include but shall not be limited to the
      names of all Participants and their Salary, date of birth, employment,
      termination of employment, retirement, or death.

7.11  Information to Participant. The Committee shall make available to such
      Participant and Beneficiary for examination at the principal office of the
      Company (or at such other location as may be determined by the Committee),
      a copy of the Plan and such of its records or copies thereof as may
      pertain to the benefits of such Participant or Beneficiary.

            SECTION 8. PLAN ADMINISTRATION, AMENDMENT AND TERMINATION

8.1   In General. The Plan shall be administered by the Committee, which shall
      have the sole authority to construe and interpret the terms and provisions
      of the Plan and determine the amount, manner and time of payment of any
      benefits hereunder. The Committee shall maintain records, make the
      requisite calculations and disburse payments hereunder, and its
      interpretations, determinations, regulations and calculations shall be
      final and binding on all persons and parties concerned. The Committee may
      adopt such rules as it deems necessary, desirable or appropriate in
      administering the Plan and the Committee may act at a meeting, in a
      writing without a meeting, or by having actions otherwise taken by a
      member of the Committee pursuant to a delegation of duties from the
      Committee. No member of the Committee may act, vote, or otherwise
      influence a decision of the Committee specifically relating to his
      benefits, if any, under the Plan.

8.2   Claims Procedure. If the Committee denies a benefit, in whole or in part,
      it shall advise the Participant or Beneficiary, as applicable, of (i) the
      specific basis or bases for the denial (ii) references to the specific
      Plan provisions upon which the denial is based (iii) a description of any
      additional material or information that the Participant or Beneficiary
      needs to process the claim, and an explanation of why that material or
      information is necessary; and (iv) a statement of the Plan's appeal
      procedures as hereinafter set forth. Any person dissatisfied with the
      Committee's determination of a claim for benefits hereunder must file a
      written request for reconsideration with the Committee within 60 days of
      the denial by the Committee. Such person has the right to request, free of
      charge, and obtain copies of all documents, records, and other information
      that was relied upon by the Committee in denying such person's benefits or
      was submitted, considered, or generated in the course of making the
      benefit denial, regardless of whether it was used in denying the claim.
      This request must include a written explanation setting forth the specific
      reasons for such reconsideration. The Committee shall review its
      determination within 60 days, plus an extension for an additional 60 days
      in special circumstances, and render a written decision with respect to
      the claim, setting forth the specific reasons for such denial written in a
      manner calculated to be understood by the claimant. Such claimant shall be
      given a reasonable time within which to comment, in writing, to the
      Committee with respect to such explanation. The Committee shall review its
      determination promptly and render a written decision with respect to the
      claim. Such decision upon matters within the scope of the authority of the
      Committee shall be conclusive, binding, and final upon all claimants under
      this Plan.

                                       9	

8.3   Finality of Determination. The determination of the Committee as to any
      disputed questions arising under this Plan, whether of law or of fact, or
      mixed questions of law and fact, including questions of construction and
      interpretation, shall be final, binding, and conclusive upon all persons.

8.4   Delegation of Authority. The Committee may, in its discretion, delegate
      its duties to an officer or other employee of the Company, or to a
      committee composed of officers or employees of the Company.

8.5   Expenses. The cost of payment from this Plan and the expenses of
      administering the Plan shall be borne by the Corporation.

8.6   Tax Withholding. The Corporation shall have the right to deduct from all
      payments made from the Plan any federal, state, or local taxes required by
      law to be withheld with respect to such payments.

8.7   Incompetency. Any person receiving or claiming benefits under the Plan
      shall be conclusively presumed to be mentally competent and of age until
      the Corporation receives written notice, in a form and manner acceptable
      to it, that such person is incompetent or a minor, and that a guardian,
      conservator, statutory committee or other person legally vested with the
      care of his estate has been appointed. In the event that the Corporation
      finds that any person to whom a benefit is payable under the Plan is
      unable to properly care for his affairs, or is a minor, then any payment
      due (unless a prior claim therefore shall have been made by a duly
      appointed legal representative) may be paid to the spouse, a child, a
      parent, or a brother or sister, or to any person deemed by the Corporation
      to have incurred expense for the care of such person otherwise entitled to
      payment.

      In the event a guardian or conservator or statutory committee of the
      estate of any person receiving or claiming benefits under the Plan shall
      be appointed by a court of competent jurisdiction, payments shall be made
      to such guardian or conservator or statutory committee provided that
      proper proof of appointment is furnished in a form and manner suitable to
      the Corporation. Any payment made under the provisions of this Section 8.7
      shall be a complete discharge of liability therefore under the Plan.

8.8   Action by Corporation. Any action required or permitted to be taken
      hereunder by the Corporation or its Board shall be taken by the Board, or
      by any person or persons authorized by the Board.

8.9   Notice of Address. Any payment made to a Participant or to his surviving
      Spouse at the last known post office address of the distributee on file
      with the Corporation, shall constitute a complete acquittance and
      discharge to the Corporation and any director, officer or employee
      including, without limitation, members of the Committee with respect
      thereto, unless the Corporation shall have received prior written notice
      of any change in the condition or status of the distributee. Neither the
      Corporation nor any director, officer or employee including, without
      limitation, members of the Committee

                                       10	

      shall have any duty or obligation to search for or ascertain the
      whereabouts of the Participant or the Beneficiary.

8.10  Amendment and Termination. The Plan may be amended, suspended or
      terminated, in whole or in part, by the Board of Directors, but no such
      action shall retroactively reduce the benefits under the Plan which have
      accrued prior to the effective date of such action. Notwithstanding the
      foregoing, a transfer of benefits provided hereunder and a concomitant
      transfer of liabilities to the Anixter Inc. Pension Plan shall not be
      regarded as an amendment reducing the benefits accrued under the Plan for
      any Participant. In addition, the Committee has concurrent authority to
      make technical and/or clarifying amendments to the Plan or amendments that
      either have no cost effect on the Company or an effect that is not
      reasonably expected to exceed $10,000, plus any correlative modifications
      thereto.

8.11  Savings Clause. Notwithstanding anything to the contrary contained herein,
      if (i) the Internal Revenue Service (IRS) prevails in its claim that all
      or a portion of the amounts contributed to the Plan, and/or earnings
      thereon, constitute taxable income to a Participant or beneficiary for any
      taxable year that is prior to the taxable year in which such contributions
      and/or earnings are actually distributed to such Participant or
      beneficiary, (ii) the U.S. Department of Labor (DOL) prevails in its claim
      that the Trust prevents the Plan from meeting the "unfunded" criterion of
      the exceptions to various requirements of Title I of ERISA for plans that
      are unfunded and maintained primarily for the purpose of providing
      deferred compensation for a select group of management or highly
      compensated employees, or (iii) legal counsel selected by the Committee
      advises the Committee that the IRS or DOL would likely prevail in such
      claim, the Participant's Account balance shall be immediately distributed
      to the Participant or beneficiary. For purposes of this Section, the IRS
      or DOL shall be deemed to have prevailed in a claim if such claim is
      upheld by a court of final jurisdiction, or if the Committee, based upon
      the advice of legal counsel selected by the Committee, fails to appeal a
      decision of the IRS or DOL, or a court of applicable jurisdiction, with
      respect to such claim, to an appropriate IRS or DOL appeals authority or
      to a court of higher jurisdiction within the appropriate time period.

8.12  Transfer of Benefits. Notwithstanding anything contained herein to the
      contrary, the Committee has the authority to provide that the benefits of
      one or more Participants shall be provided from and the liabilities
      attributable to such benefits shall be transferred to the Anixter Inc.
      Pension Plan. Upon such transfer being effected, the benefits of the
      affected Participants shall cease to be payable under the Plan.	

11
SECTION 9. EXECUTION
IN WITNESS WHEREOF, the Company has caused this Anixter Inc. Supplemental Executive Retirement Plan to be executed by its duly authorized officer this 4th day of August 2004, to be effective as of August 4, 2004.
Anixter Inc.
By: _____________________________
Title: __________________________
ATTEST:

Secretary

12

                                  ANIXTER INC.
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
                                    EXHIBIT A

                      APPLICABLE FORMULA FOR NORMAL BENEFIT
                      ELIGIBLE EMPLOYEES AS OF AUGUST 4, 20

Eligible Employee:              Robert Grubbs, Jr.

Normal Retirement Date:         54th birthday

Target Benefit (at age 65):     Monthly benefit equal to fifty percent (50%) of
                                Final Average Salary*

Benefit Offset:                 Normal Benefit Life Annuity payable from the
                                Anixter Inc. Pension Plan and the Anixter Inc.
                                Excess Benefit Plan

Normal Benefit (at age 65):     Target Benefit less Benefit Offsets

Reduction:                      Actuarially reduced (using the same assumptions
                                as provided under the Anixter Inc. Pension Plan)
                                for commencement prior to age 65, subject to a
                                minimum Normal Benefit of $550,000 per year
                                ($45,833.33 per month)

Eligible Employee:              Dennis Letham

Normal Retirement Date:         65th birthday

Target Benefit (at age 65):     Monthly benefit equal to fifty percent (50%) of
                                Final Average Salary*

Benefit Offset:                 Normal Benefit Life Annuity payable from the
                                Anixter Inc. Pension Plan and the Anixter Inc.
                                Excess Benefit Plan

Normal Benefit (at age 65):     Target Benefit less Benefit Offsets

Reduction:                      Actuarially reduced (using the same assumptions
                                as provided under the Anixter Inc. Pension Plan)
                                for commencement prior to age 65	

* "Final Average Salary" means the highest obtainable average of Monthly Salary which can be derived from the Monthly Salary earned during any sixty (60) consecutive calendar months in the one hundred twenty (120) calendar months prior to the month in which the Participant terminates employment for any reason, including his death or retirement. If the Participant has completed fewer than sixty (60) calendar months of employment, the average shall be based upon all calendar months of service prior to his termination of employment.
13
 
.
.
.
EXHIBIT 12.1
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for the periods indicated:

                                                                FISCAL YEAR ENDED
                            -----------------------------------------------------------------------------------------
                            DECEMBER 29, 2000  DECEMBER 28, 2001  JANUARY 3, 2003  JANUARY 2, 2004  DECEMBER 31, 2004
                            -----------------  -----------------  ---------------  ---------------  -----------------
Ratio of earnings to fixed
charges(1)                         3.18              1.72              2.93             3.13              4.97	

(1) Earnings represent income before taxes, excluding equity investment income relating to Anixter Receivables Corporation prior to consolidation at the end of the third quarter 2004, plus fixed charges. Fixed charges consist of (i) interest on all indebtedness and amortization of debt discount and deferred financing fees, (ii) capitalized interest and (iii) interest factor attributable to rentals. As a result of our adoption of Statement of Financial Accounting Standards No. 145 on January 4, 2003, any gain or loss from the extinguishment of debt is classified as income or loss from continuing operations rather than as an extraordinary item. As a result, the earnings in the above ratio for the fiscal year ended January 3, 2003 and prior periods have been revised to include
any loss on extinguishment of debt.
 
EXHIBIT 14.1
Anixter
Business
Ethics
and
Conduct
Policy
[ANIXTER LOGO]
 
TABLE OF CONTENTS

I.      INTRODUCTION
        A.   General Policy                                               1
        B.   Scope                                                        1
        C.   Effect of Policy Violation                                   2
        D.   Your Responsibilities and Rights Under this Policy           2
        E.   Definitions                                                  2
        F.   Additional Information                                       2

II.     CONFLICTS OF INTEREST OR VIOLATIONS OF TRUST
        A.   General                                                      2
        B.   Specific Examples of Conflicts or Violations                 3
        C.   Effect of Violations                                         3
        D.   Periodic Reporting                                           4

III.    ANTITRUST LAWS AND TRADE REGULATION
        A.   General                                                      4
        B.   U.S. Operations                                              4
        C.   International Operations                                     4
        D.   Specific Laws and Regulations                                4

IV.     OTHER LAWS AND REGULATIONS
        A.   Compliance with Governmental Authority                       5
        B.   Restrictions on Political Activity                           6
        C.   Relationships with Governmental Officials                    6
        D.   Restrictions Affecting Foreign Trade                         6

V.      EMPLOYMENT AND PERSONNEL PRACTICES
        A.   General                                                      7
        B.   Nondiscrimination                                            7
        C.   Prohibition of Harassment                                    7
        D.   Employment Contracts                                         8
        E.   Employee Record Confidentiality                              8
        F.   Substance Abuse                                              8

VI.     TRANSACTIONS IN SECURITIES
        A.   Trading in Anixter Securities                                8
        B.   Trading in the Securities of Other Companies                 8
        C.   Transactions by Others                                       9
        D.   Transactions by Officers and Directors                       9
        E.   Effect of Violations                                         9

VII.    PROPER RECORDING OF FUNDS, ASSETS AND DISBURSEMENTS
        A.   General                                                     10
        B.   Confidential Reporting of Accounting and Auditing Matters   10	

-i-

VIII.   DISCLOSURE OR USE OF COMPANY INFORMATION
        A.   General                                                     10
        B.   Outside Inquiries and Requests for Information              11	

-ii-
I. INTRODUCTION
All employees of Anixter can be proud of its reputation as an ethical and responsible company. Our reputation was built by employees who have understood the value we place on honesty, integrity and fair dealing. Each of us must strive to uphold the tradition of ethical conduct that has contributed so greatly to the success of our worldwide business operations.
Our Board of Directors has issued this Anixter Business Ethics and Conduct Policy to assist you in complying with the laws and principles defining ethical business conduct. While no policy can be complete in all respects, this Policy is designed to help you understand what Anixter expects of you in situations that you may encounter during your employment. You are expected to attain a level of understanding of this Policy that will permit you to exercise good judgment, the best safeguard against improper or unethical conduct.
When you are faced with a situation not addressed by this Policy, ask yourself:
If my associates, family or friends were to look closely at my decision, would I be concerned about the decision? Further, if the decision were to be fully reported in the news media, would I be concerned? I t is important to remember that, in cases where questionable decisions are reviewed after they have been made, perceptions can be as important as the actual facts surrounding the decision. Therefore, you should avoid situations which may give any impression of impropriety.
If you are in doubt about whether this Policy applies to a particular transaction or uncertain about the proper course of conduct to follow, you should contact the General Counsel's office in Glenview which is always available to answer questions and provide guidance.
Anixter's internal auditors and legal staff will monitor compliance with this Policy to assure that Anixter conducts itself in a manner consistent with its obligations to society and its stockholders. In addition, those with management responsibilities within any area covered by this Policy will periodically be required to complete the "Management Representation of Compliance with Company Policies." This questionnaire is illustrated on the inside back cover of this policy manual.
A. GENERAL POLICY
Anixter and its personnel will at all times transact business in full compliance with the law and in accordance with the highest principles of business ethics and conduct.
You must strictly adhere to these Policy guidelines at all times and under all circumstances. Policy violations may result in disciplinary action including, if appropriate, discharge from employment.
B. SCOPE
The guidelines set forth in this Policy apply to all directors, officers and employees and all Anixter-related transactions. You must be familiar with this Policy and must ensure that employees under your direction or control read and understand the Policy. Company officers and directors should also be aware that there are special legal requirements, not covered by this Policy, which apply to corporate fiduciaries.
Anixter's commitment to full compliance applies to all applicable laws, regulations and judicial decrees of the United States (federal, state, and local) and of other countries where Anixter transacts its business.
-1-
Portions of the Policy concentrate on laws and regulations which are particularly relevant to our business activities; however, this special emphasis on relevant areas of law does not limit the general policy described above. Anixter's interests are not served by any unethical practice or activity, even though not in technical violation of the law.
C. EFFECT OF POLICY VIOLATION
Any knowing violation of the laws, regulations or principles of ethics set forth in this Policy will be grounds for disciplinary action or dismissal from employment, and may subject you to civil liability and/or criminal prosecution under appropriate law. Any employee who knowingly authorizes or permits another to engage in a violation will also be subject to disciplinary action, dismissal and other penalties. Those who receive these guidelines shall be considered informed, and violation of clearly covered areas will be considered "knowing."
D. YOUR RESPONSIBILITIES AND RIGHTS UNDER THIS POLICY
You are required to adhere to this Policy and to report any violations or potential violations of which you are aware. Reports should be made to the Director of Internal Audit, the General Counsel's office or other individual or office as may be specified herein or in supplemental policies. You are required to contact the General Counsel's office for clarification of any uncertainties regarding legal or ethical issues involving Company affairs. Failure to report policy violations or secure advice could be costly to you and to Anixter. You should also be aware that the legal implications of your actions, as well as everything you write, may be scrutinized at some future date by government officials or third parties.
You have the right to report policy violations or seek the advice of counsel without risk to your job status or position by reason of such report or inquiry. Anixter will not tolerate any form of retribution or retaliation against employees for exercising their rights under this Policy. To help secure this right, each person to whom a report is made or from whom advice is sought shall use every reasonable means available to keep confidential the identity of any employee who requests such protection. Concerns regarding accounting or auditing matters may be reported confidentially and anonymously to a third party, as further described in Section VII.B. of this Policy. Reporting policy violations by others or seeking the advice of counsel will not, however, protect you from your own misconduct.
E. DEFINITIONS
As used herein, the terms "Anixter" and the "Company" include Anixter International Inc. and all of its subsidiaries. The terms "personnel" and "employee" apply to all Anixter officers, directors, managers and other employees. "General Counsel's office" refers to the internal legal counsel of Anixter.
F. ADDITIONAL INFORMATION
Portions of this Policy may be explained in greater detail in supplemental policies which are distributed to Company offices from time to time. Additional copies of this Policy, as well as any supplemental policies, are available from the Internal Audit Department in Glenview.
II. CONFLICTS OF INTEREST OR VIOLATIONS OF TRUST
A. GENERAL
You must not permit your personal interests to influence the decisions you make on behalf of Anixter in dealing with suppliers, customers or any other organizations or individuals doing or seeking to do business with Anixter. You should also avoid any situation which creates the appearance, if not the actual fact, of a conflict of interest.
-2-
If you are in a position to control or influence actions by Anixter which will beneficially affect other companies, you should be aware that an investment by you in such other companies could disqualify you from performing your job.
You should avoid outside business activities which may conflict with your ability to devote your efforts full time to the business of Anixter, unless those activities have been approved by your supervisor.
In many cases, you can avoid a potential conflict of interest or violation of trust by making a full disclosure of the facts prior to engaging in a transaction, thereby permitting Anixter to make an informed, independent decision regarding the transaction. Such disclosure should be made to the General Counsel's office. Many factors must be considered in determining whether a conflict exists, including the relationship of the other person or company to Anixter, the nature and extent of your interest in such other person or company, and the opportunity for Policy violations arising from the nature of your employment. Personnel in purchasing and related fields should exercise particular caution whenever there is a possible conflict.
B. SPECIFIC EXAMPLES OF CONFLICTS OR VIOLATIONS
It may be considered to be in conflict with Anixter's interest or a violation of trust for you or any immediate member of your family:
1. to have an undisclosed interest in or involvement with any person or organization which has business dealings with Anixter where there is an opportunity for preferential treatment to be given or received, except where such an interest comprises either: (i) securities in widely-held companies which are quoted and sold on the open market and the interest does not exceed the lesser of one percent of the outstanding securities or $50,000; (ii) securities in a widely-held company which are quoted and sold on the open market, where neither our sales to that company nor our purchases from that company exceed one percent of its purchases or sales; (iii) interests in mutual funds; or (iv) other interests determined by the General Counsel's office not to be inconsistent with this Policy because of the nature of your interest in and the business we do with that company;
2. to buy, sell or lease any kind of property, facilities or equipment from or to Anixter or to any company, firm or individual who is or is seeking to become a Company contractor, supplier or customer, except where such transaction is conducted in the ordinary course of business without special consideration given or received because of your status as an employee of Anixter, or where special consideration is made available to all employees of Anixter with the consent of Anixter;
3. to accept commissions, a share in profits (other than from investments in companies permitted under subparagraph [1], above) or other payments, loans (other than with established banking or financial institutions), services, excessive entertainment and travel, or gifts of more than nominal value, from any individual or organization doing or seeking to do business with Anixter; or
4. to take advantage of any opportunity for personal gain that rightfully belongs to Anixter. This would include business opportunities of which you become aware through your Anixter employment. You must offer such opportunities to Anixter.
-3-
C. EFFECT OF VIOLATIONS
As with any other violation of Policy, a violation of the above conflict of interest provisions will be grounds for disciplinary action or dismissal from employment, and may subject you to civil liability and/or criminal prosecution under appropriate law. Even so, not every potential conflict of interest is a Policy violation -- under some circumstances following a full disclosure of the relevant facts, Anixter may independently determine to engage in a particular transaction because no actual conflict of interest exists. Therefore, the effect of a particular conflict of interest or violation of trust will depend upon the nature of the conflict or violation, your disclosure, its effect upon Anixter, the severity of the violation, and the means available to recompense loss or prevent future injury.
D. PERIODIC REPORTING
To provide a means of disclosure and method of monitoring compliance, directors, officers and employees in sensitive positions may be required periodically to report their interests in companies with which we do business, including transactions in their securities.
III. ANTITRUST LAWS AND TRADE REGULATION
A. GENERAL
The antitrust laws and trade regulations of the United States are designed to promote full and fair competition in the market for products and services. Violations of these laws or regulations may subject Anixter to fines, injunctions and substantial monetary damages, and violations of certain antitrust laws may expose employees to the risk of fine and/or imprisonment.
B. U.S. OPERATIONS
The antitrust laws of the United States apply to all domestic businesses. Accordingly, the guidelines set forth herein will govern all Anixter operations in the United States.
C. INTERNATIONAL OPERATIONS
The United States antitrust laws apply to any international Company operations to the extent that competition within the United States is affected by a particular business transaction. Although differences in antitrust laws, or the absence of such laws in some countries, might prevent application of these guidelines to worldwide Anixter operations, the cautious approach to foreign antitrust compliance requires that Anixter comply with the antitrust laws of the United States in all international operations. If exceptions in particular circumstances appear appropriate due to the local laws of another country, you should discuss such exceptions with the General Counsel's office.
D. SPECIFIC LAWS AND REGULATIONS
Anixter sells its products and services in markets in which there is active competition and aggressively competes in these markets. The following guidelines set forth specific types of conduct or business practices which relate to antitrust law and trade regulation and which require you to be especially careful and actively consult with the General Counsel's office.
1. Discussions or Agreements with Competitors--You may not communicate or enter into agreements with any competitor regarding any matter which could affect Anixter's ability to conduct its business independently from its competitors. Examples of forbidden subjects include: purchasing costs or terms, selling/leasing prices or pricing policies, bids or quotes, terms or conditions of sale/lease, credit information, customers or customer-account data, territorial markets or market shares, marketing strategies or product plans, promotions, market surveys, production data, inventories, costs, profits or
-4-
profit margins, and other similar subjects. You must obtain approval of the General Counsel's office before submitting information relating to these subjects to any trade association or other group in which Anixter's competitors are likely to be members. Prior approval must also be obtained before participating in the establishment of standards which create hardship for any segment of the industry.
Anixter's pricing policies and decisions and the selection of its customers, suppliers and markets in which it will do business may never be based on any communication or agreement with a competitor. The prohibition of agreements with competitors includes formal written contracts, oral agreements, "gentlemen's agreements," tacit approvals, side letters, informal "off-the-record" understandings and "knowing winks." In some situations, subcontracting, joint venturing or particular customer or supplier relationships may create circumstances where discussions with a competitor are necessary and proper. When this occurs, it should be done pursuant to the advice of the General Counsel's office.
2. Reciprocity--The purchase of products or services should generally be on the basis of price, quality, service, and the financial responsibility of the supplier without consideration of its status as an Anixter customer. Deviations from these guidelines should be reviewed with the General Counsel's office.
3. Price Discrimination--You must make Anixter's products and services available to customers on a fair and equitable basis, without discrimination in price, unless a lower price is justified by a demonstrable cost savings to Anixter (and then only to that extent) or unless a lower price is believed in good faith to be necessary to meet an equally low price of a competitor. Similarly, there shall be no discrimination or preferential treatment in scheduled delivery dates, contract terms, services and facilities for similarly situated customers buying in similar situations and markets.
4. Inducing Preferential Price--You may not induce or attempt to induce a preferential price from a supplier if there is reason for you to know that the price is discriminatory (i.e., better than those otherwise received by competitors in similar circumstances) and cannot be justified by lower costs to the supplier or by the need for the supplier to meet competition. You may not accept services or facilities which are not commonly offered by the supplier to similarly situated customers.
5. Commission or Brokerage--All agreements appointing brokers must contain an express provision prohibiting the broker from passing on any part of its commission to a customer.
6. Marketing Communications -- You may not inaccurately disparage competing products or services, either orally, in writing, by advertising or by any other means of communication. Generally, market communiques should emphasize the merits of Anixter's own products and services rather than the negative aspects of a competitor's. Comments on the merits of a competing product or service are permissible whenever the commentary is supported by full facts which can be proven. All advertising and other marketing communications must be carefully reviewed and those found to be in any way deceptive may not be published or distributed.
7. Unfair Competition--You may not engage in any improper pricing or other unfair competitive practice, either alone or with others, for the purpose of reducing or destroying competition, eliminating a competitor, blocking the market entry of a potential competitor, or otherwise acting contrary to established business ethics, public values or public interest.
-5-
8. Tying Contracts--The sale or lease of a product, service or facility or the granting of an allowance or discount shall not be made on the condition that the purchaser also buy or lease another product, service or facility from Anixter.
IV. OTHER LAWS AND REGULATIONS
A. COMPLIANCE WITH GOVERNMENTAL AUTHORITY
Anixter shall comply with the laws, regulations, decrees and orders of every governmental agency, regulatory authority and judicial body having jurisdiction over it. Anixter shall cooperate with governmental agencies in the proper performance of their duties to the fullest extent permissible under this Policy, even when not mandated by law or judicial decree. To ensure Anixter's compliance and cooperation commitment is met, the General Counsel's office should be immediately informed of any governmental or judicial request or inquiry.
B. RESTRICTIONS ON POLITICAL ACTIVITY
1. Prohibition on Contributions in Federal Elections--No Company funds, property, time or any other thing of value shall be contributed, expended or reimbursed for any campaign purpose or to any candidate in connection with any election, primary election, political convention or caucus in which a candidate or nominee for the office of President, Vice President, Senator or Representative of Congress is to be voted upon or otherwise selected, nor under such circumstance shall Anixter provide any indirect payment or support, in any form or through any means, such as through consultants, suppliers, customers, employees or other third parties.
2. Other Company Activity or Contributions--The above prohibition on Company disbursements shall not prevent Anixter from advocating a position, expressing a view or taking other appropriate action with respect to any legislative or political matters affecting Anixter or its interests. In those cases where political contributions or other support are permitted by law, no Company funds, property, time or other thing of value shall be given except upon the advice of the General Counsel's office.
3. No Prohibition on Individual Activity--You, acting in your individual capacity and at your own expense, are not constrained by this Policy from engaging in political activity, making political contributions, expressing views or taking other appropriate action on any political or legislative matter.
C. RELATIONSHIPS WITH GOVERNMENTAL OFFICIALS
You may not make payments (regardless of amount), provide entertainment (other than meals where Company-related work activities are conducted), or give gifts (of more than nominal value) to governmental officials and other governmental personnel of the United States and other domestic or foreign jurisdictions, regardless of motive. Your relationship with public officials shall in all respects be of such nature that the integrity and reputation of the officials and Anixter will not be impugned in the event the full details of the relationship, including any gifts or entertainment, become a matter of public discussion.
In those rare cases where a facilitating payment is required to be made to a foreign government functionary whose duties are essentially of a minor ministerial or clerical nature, such payment must be insubstantial in amount, customary and legal where made, necessary to prevent a normal and fully legitimate transaction from being impeded, and properly reported and recorded as such in Anixter's books and records. You must obtain approval from the General Counsel's office prior to making any such facilitating payment.
-6-
D. RESTRICTIONS AFFECTING FOREIGN TRADE
1. General--Several U.S. and foreign laws and regulations restrict or otherwise impose conditions upon the ability of Anixter to conduct its international operations. Because trade policies change frequently, you should contact the General Counsel's office if you have any doubts about Anixter's ability to engage in a particular transaction.
2. Export Licensing and Embargoes--Any product made by a U.S. company or made using U.S. technology is subject to U.S. export laws, even if the product is located outside of the U.S. These laws regulate and may prohibit the export of the U.S. products from the U.S. or from one foreign country to another. These laws are gradually being relaxed to allow more products to be shipped to a greater number of countries with little or no restriction; however, you should be sure that Anixter has obtained all necessary approvals or licenses before exporting any U.S. products from the U.S. or from one foreign country to another.
Anixter is prohibited from having virtually any commercial contact with embargoed countries and any citizens of those countries. The list of embargoed countries changes from time to time; a current list is maintained by the General Counsel's office.
3. Antiboycott Laws--Anixter is prohibited from participating in economic boycotts directed against friendly countries. You may not refuse to do business with anyone based on race, religion, sex or national origin. You may not provide information to customers or others about the race, religion, sex or national origin of Anixter's owners, employees, suppliers or shippers, except in compliance with the legitimate affirmative action programs of Anixter or its U.S. customers or as otherwise approved in advance by the General Counsel's office. You may not provide information about relationships or business dealings that Anixter may or may not have with boycotted or "blacklisted" countries.
Anixter must report all requests to participate in a boycott, even if Anixter refuses to participate. Such requests may be found in almost any business document, including contracts, bids, letters of credit, purchase orders and questionnaires. You must, prior to engaging in the contemplated transaction bring to the attention of the General Counsel's office any document containing the words "boycott," "blacklist," provisions prohibiting the importation of goods from certain countries, provisions requiring that goods be shipped on vessels that are able to enter the ports of particular countries or any other language that you believe may be related to a boycott.
V. EMPLOYMENT AND PERSONNEL PRACTICES
A. GENERAL
You shall at all times abide by the strict legal requirements governing employment practices and employee relations. In addition, every person coming in contact with Anixter, as employee, customer, supplier, candidate for employment or other third party, shall be treated fairly, courteously and respectfully.
B. NONDISCRIMINATION
Anixter seeks to employ qualified persons without regard to race, color, religion, sex, age, national origin, disability or marital or veteran status. It is our intent that all matters related to hiring, training, compensation, benefits, promotion, transfer, working conditions and all other aspects of employment and employee relations should be free of discriminatory practices. Moreover, as opportunities for
-7-
transfer, advancement or promotion arise, care should be taken to ensure that only valid requirements are imposed for these opportunities.
C. PROHIBITION OF HARASSMENT
It is our goal to create a workplace which is conducive to the well-being and productivity of all our employees. You shall be free to perform your job duties and responsibilities, and participate in the benefits of employment with Anixter, without harassment or interference.
Harassment may include unwelcome sexual advances or conduct which creates an offensive or intimidating work environment. If you experience harassment you should promptly notify the General Counsel's office or one of the individuals named in Anixter's supplemental anti-harassment policy, which is available at all U.S locations and the General Counsel's office.
All complaints will be promptly investigated, and all information obtained will be held in confidence and disclosed only to the extent necessary to effectively investigate and resolve the matter. Confirmed instances of harassment will result in disciplinary action, which may include dismissal where appropriate.
D. EMPLOYMENT CONTRACTS
Anixter shall not enter any contract of employment without the prior written approval of the General Counsel's office.
E. EMPLOYEE RECORD CONFIDENTIALITY
All personnel records shall be treated as the confidential information of Anixter. You may not copy or release any employee's personnel or salary record to any third party, nor disclose any private personal information contained in such personnel record to any third party unless you have the prior written consent of either the affected employee or the General Counsel's office. If you are authorized to access personnel or salary records, you must institute measures to prevent the disclosure of any such records under your control.
F. SUBSTANCE ABUSE
With the exception of Anixter-sponsored affairs, you must not keep, serve or consume alcohol on Company premises. You may not keep, serve or consume illegal drugs on Company premises at any time. You are not permitted to use illegal drugs or abuse chemical substances at any time, and you may not come to work under the influence of alcohol. Anixter may at any time require testing of any employee reasonably believed to be in violation of this Policy, and any employee refusing to undergo such testing will not be permitted to continue in Anixter's employ.
VI. TRANSACTIONS IN SECURITIES
A. TRADING IN ANIXTER SECURITIES
Regardless of your motive, you are prohibited from trading in Company securities when you have material information about Anixter which is not publicly known. Information is considered material if it is important enough to affect a decision by anyone to buy, sell or hold securities. Information that will frequently be regarded as material includes: projections of future earnings or losses; news of a pending or proposed merger, acquisition or tender offer; news of a significant sale of assets or the disposition of a subsidiary; changes in dividend policies, the declaration of a stock split or the offering of additional securities; changes in management; significant new products or services; impending financial problems;
-8-
and the gain or loss of a substantial customer or supplier. Either positive or negative information may be material.
Because Anixter's shareholders and the investing public should be afforded adequate time to receive an announcement of material information and act upon it, as a general rule you should not trade in Company securities until you have checked with the General Counsel's office to confirm that such material information has been adequately disseminated.
You should not engage in short-term speculation in Company securities, nor should you engage in any transaction where you profit if the value of Company securities falls.
B. TRADING IN THE SECURITIES OF OTHER COMPANIES
You should not trade in securities of a company which has been targeted for acquisition or is being reviewed as an acquisition candidate by Anixter, which is being considered for or has just been awarded an important contract or relationship with Anixter or is being considered by Anixter for any other important business transaction.
From time to time, you may come into possession of material nonpublic information regarding companies with which we do business or otherwise have a relationship. Generally, you should not trade in the securities of such companies when, as a result of your employment with Anixter, you come into possession of information which may be considered to be material nonpublic information. Because the general statement of this policy may be more restrictive than required by current securities laws, you should consult with the General Counsel's office prior to engaging in any transaction which may be covered by this policy in order to determine your legal obligations.
C. TRANSACTIONS BY OTHERS
You may not in any way encourage any member of your family, your household or any other third party to engage in any transaction in which you cannot engage. Disclosing material nonpublic information about Anixter or about other companies with which we do business is prohibited.
D. TRANSACTIONS BY OFFICERS AND DIRECTORS
Directors and certain officers of Anixter are subject to additional statutory restrictions covering transactions in Company securities. These restrictions (a) prohibit officers and directors from profiting on transactions within a six-month period, (b) prohibit them from selling the stock short, and (c) may restrict the amount of securities some of them can sell within a three-month period. Officers covered by this provision include the president, principal financial officer, principal accounting officer or controller, vice presidents in charge of principal business units, divisions or functions, and any other person who performs a significant policy-making function. Persons which may be subject to this provision should review proposed transactions in Company securities with the General Counsel's office.
E. EFFECT OF VIOLATIONS
In addition to discipline for violating our Business Ethics and Conduct Policy, violations of our specific policy on transactions in securities may also constitute violations of the securities laws which provide for civil penalties of up to three times the profit gained or loss avoided, large criminal fines and lengthy imprisonment. Anixter and its responsible supervisors may also be subject to substantial civil and criminal penalties. If you are in doubt as to whether this policy applies to a particular transaction you are contemplating, seek guidance from the General Counsel's office.
-9-
VII. PROPER RECORDING OF FUNDS, ASSETS AND DISBURSEMENTS
A. GENERAL
To assure Anixter's financial statements are maintained in accordance with generally accepted accounting principles, requirements of taxing authorities or such other standards as may be appropriate, you must abide by the following policies:
1. Full Disclosure of Accounts--You may not establish or maintain any secret or unrecorded fund of monies or other assets of Anixter, and you must properly record in the appropriate records and books of account all funds, assets and disbursements of Anixter.
2. Accurate Entries to Accounts--You may not (i) make any false or fictitious entries on the books and records of Anixter, (ii) issue any false or misleading reports pertaining to Anixter or its operations, or (iii) engage in any transaction that requires or contemplates such prohibited activities on the part of Anixter. In addition, you may not cause or permit others to engage in any of the foregoing prohibited activities.
3. Accurate Expense Accounts--All employees who seek reimbursement from Anixter for expenses shall keep and submit to Anixter complete and accurate records of such expenditures and their business purpose.
B. CONFIDENTIAL REPORTING OF ACCOUNTING AND AUDITING MATTERS
Anixter has established procedures for the receipt, retention and handling of complaints received by the Company regarding accounting, internal accounting controls or auditing matters. Persons with concerns regarding questionable accounting or auditing matters may make a completely confidential, anonymous report by calling 1-888-361-5806 (within North America) or by calling collect to 1-770-613-6337 (outside North America). Calls will be answered by representatives of The Network, a third party with whom the Company has contracted to provide this service.
VIII. DISCLOSURE OR USE OF COMPANY INFORMATION
A. GENERAL
Anixter's information and related resources have been developed through our collective efforts at great expense. It is your duty to safeguard and keep private all Company proprietary and confidential information. The Anixter Information Security Steering Committee meets regularly to establish standards applicable to all employees. Policies and standards established by the Committee can be found on Lotus Notes at COR-PROD-01, SECURITY directory, Policy & Standards database. The disclosure of such Company information shall be permitted only when required by law or permitted by our policies. Disclosure may also be permitted when it would be in the best interest of Anixter or its personnel, but in such case, the approval of the General Counsel's office shall be obtained prior to the release of such information.
1. Disclosure of Business Information--Absent prior approval, you may not use or disclose any business information which might be prejudicial to the interests of Anixter, its employees or third parties, including information concerning the prices we pay and arrangements we make with our suppliers, the prices we obtain and the margins we earn from our customers, our customer lists, our budgets and sales, marketing or vendor strategies, our personnel, and our proprietary technology,
-10-
software, trade secrets, inventions, system design information, manuals, computer tapes, disks, data processing records, or any other confidential or proprietary matters of any nature whatsoever.
2. Discussions with Competitors--You should avoid conversations with competitors, and even in conversations with customers and suppliers you should take care to disclose only that information which they have a legitimate need to know.
3. Protection of Information Media--Our investment in computers and other communication technology enable us to quickly assemble and disseminate our business information. It is especially important to recognize the increased risk of unauthorized disclosure inherent in this technology and to take appropriate steps to control access to computer files, disks, tapes and other media containing sensitive information.
4. Ongoing Obligations--Your obligation to refrain from disclosing Company information continues after you leave Anixter, and prospective employers may be legally prohibited from using our information. Similarly, you should not solicit confidential information from persons currently or formerly employed by our competitors, nor accept the confidential information of others without the written consent of the rightful owners of such information.
B. OUTSIDE INQUIRIES AND REQUESTS FOR INFORMATION
If any third party makes contact with you requesting an interview or seeking information concerning any Company-related proprietary or confidential matter, or if any media representative requests an interview or seeks information or opinions concerning any Company-related matter, whether or not the matter is confidential or proprietary, the requester should be instructed to address its inquiry directly to Anixter's Chief Executive Officer, Chief Financial Officer or General Counsel so that questions can be answered with appropriate care by authorized personnel having unrestricted access to Anixter's information resources.
-11-
Employees with certain responsibilities will periodically be requested to complete a questionnaire similar to the one presented below.
ANIXTER INTERNATIONAL INC.
MANAGEMENT REPRESENTATION OF
COMPLIANCE WITH COMPANY POLICIES
It is the responsibility of each Company officer, director, and management employee to read and understand the Anixter International Business Ethics and Conduct Policy (the "Policy") and to complete this questionnaire and promptly return it to the Internal Audit Department, Anixter Inc., Glenview, Illinois. If you have supervisory duties, it is also your responsibility to ensure that employees reporting to you have read and understand the Policy. IN ADDITION, IF THE ANSWER TO ANY QUESTION BELOW IS "YES", YOU MUST ATTACH A BRIEF EXPLANATORY STATEMENT DISCLOSING THE FACTS SUPPORTING YOUR ANSWER.
1. Are you aware of any of the following practices related to Anixter's affairs:

                                                                                  Yes        No
                                                                                  ---        --
a)  A situation or transaction described in the Conflict of Interest or
    Violations of Trust guidelines set forth in the Policy regardless of
    whether or not that situation or transaction may have been disclosed
    or approved in accordance with the Policy?                                  ________  _________

b)  A violation of federal, state, or local law?                                ________  _________

c)  A fraud, embezzlement, unrecorded fund or account, or significant
    accounting error?                                                           ________  _________

d)  A political contribution or support, direct or indirect, using Company
    funds?                                                                      ________  _________

e)  An activity in violation of the Antitrust Laws and Trade Regulation
    guidelines set forth in the Policy?                                         ________  _________

f)  A practice in violation of the Employment and Personnel Practices
    guidelines of the Policy?                                                   ________  _________

g)  A transaction in violation of the Transactions in Securities
    guidelines set forth in the Policy?                                         ________  _________

h)  A payment or gift to governmental officials?                                ________  _________

i)  An unauthorized disclosure of information which is confidential or
    proprietary to the Company?                                                 ________  _________

j)  A transaction in violation of export, embargo or antiboycott laws?          ________  _________	

2.  Are you aware of any other transaction, practice, activity, event, or
    circumstance which you believe should be brought to Anixter's attention?    ________  _________	

The foregoing answers and any attached explanatory statements are true
and correct to the best of my knowledge and belief.
 
.
.
.
EXHIBIT 21.1
ANIXTER INTERNATIONAL
LIST OF SUBSIDIARIES

                                                                                                JURISDICTION
COMPANY NAME                                                                                  OF INCORPORATION
---------------------------------------------------------------------------------             ----------------
Anixter Inc.                                                                                       Delaware
            Accu-Tech Corporation                                                                  Georgia
                 Accu-Tech Enterprises, Inc. (formerly Wallace Electronics, Inc.)                  Georgia
            Anixter Australia Pty. Ltd.                                                            Australia
                 ALLNET Technologies Pty. Ltd.                                                     Australia
            Anixter Cables y Manufacturas, S.A. de C.V.                                            Mexico
            Anixter Chile S.A.                                                                     Chile
            Anixter Colombia S.A.                                                                  Colombia
            Anixter Costa Rica S.A.                                                                Costa Rica
            Anixter de Mexico, S.A. de C.V.                                                        Mexico
                 Anixter Logistica y Servicios (ALS)                                               Mexico
            Anixter do Brazil Ltda.                                                                Brazil
            Anixter Dominicana, S.A. (formerly AIS, S.A.)                                          Dominican Republic
            Anixter Financial Inc.                                                                 Delaware
                 Anixter Communications (Malaysia) Sdn Bhd                                         Malaysia
                 Anixter India Private Limited                                                     India
                 Anixter Singapore Pte Ltd.                                                        Singapore
                 Anixter Hong Kong Limited                                                         Hong Kong
                         Anixter International Trading (Qingdao) Company Ltd                       China
                         Anixter Trading (Shanghai) Company Limited                                China
                 Anixter Thailand Inc.                                                             Delaware
            Anixter Holdings, Inc.                                                                 Delaware
                 Anixter Argentina S.A.                                                            Argentina
                 Anixter AEH Holdings Inc.                                                         Delaware
                         B.E.L. Corporation                                                        Delaware
                                Anixter Eurotwo HoldingsB.V.                                       Netherlands
                                       Anixter Austria GmbH                                        Austria
                                       Anixter Danmark A/S                                         Denmark
                                       Anixter Deutschland GmbH                                    Germany
                                       Anixter Hungary Ltd.                                        Hungary
                                       Anixter Iletsim Sistemleri Pazarlama ve Ticaret A.S.        Turkey
                                       Anixter Network Systems Greece L.L.C.                       Greece
                                       Anixter Norge A.N.S.                                        Norway
                                       Anixter Poland Sp.z.o.o.                                    Poland
                                       Anixter Portugal S.A.                                       Portugal
                                       Anixter Sverige AB                                          Sweden
                         Anixter Eurofin B.V.                                                      Netherlands
                                Anixter Canada Inc.                                                Canada
                                       WireXpress Ltd.                                             Canada
                                Anixter Eurinvest B.V.                                             Netherlands
                                       Anixter Belgium B.V.B.A.                                    Belgium
                                       Anixter Espana S.L.                                         Spain
                                       Anixter France SARL                                         France
                                       Anixter International B.V.B.A.                              Belguim
                                       Anixter International Ltd.                                  United Kingdom	

                                              Anixter Power & Construction Ltd.                    United Kingdom
                                              Anixter U.K. Ltd.                                    United Kingdom
                                                     Anixter Distribution Ireland Ltd.             Ireland
                                              Walters Hexagon Group Limited                        United Kingdom
                                                     Burgess Fasteners Limited                     United Kingdom
                                                     Walters Hexagon Ltd.                          United Kingdom
                                                           Webb Fasteners Limited                  United Kingdom
                                                     Heyco Limited                                 United Kingdom
                                                           Plastic Screws Limited                  United Kingdom
                                                           Plastic Seals Limited                   United Kingdom
                                                     Heyco Technologies Limited                    United Kingdom
                                                     NedHex Ltd.                                   United Kingdom
                                       Anixter Italia S.r.l.                                       Italy
                                       Anixter Logistics, Europe B.V.B.A.                          Belgium
                                       Anixter Nederland B.V.                                      Netherlands
                                       Anixter Switzerland Sarl                                    Switzerland
                                Anixter Finance Ltd.                                               United Kingdom
                         Anixter (CIS) L.L.C. (Russia)                                             Russia
            Anixter Information Systems Corporation                                                Illinois
            Anixter Korea Limited                                                                  Korea
            Anixter New Zealand Limited                                                            New Zealand
            Anixter Peru, S.A.C.                                                                   Peru
            Anixter Philippines Inc.                                                               Delaware
            Anixter Procurement Corporation                                                        Illinois
            Anixter Puerto Rico, Inc.                                                              Delaware
            Anixter-Real Estate Inc.                                                               Illinois
            Anixter Receivables Corporation                                                        Delaware
            Anixter Venezuela Inc.                                                                 Delaware
GL Holding of Delaware, Inc.                                                                       Delaware
            Itel Corporation                                                                       Delaware
Itel Container Ventures Inc.                                                                       Delaware
            ICV GP Inc.                                                                            Delaware
Itel Rail Holdings Corporation                                                                     Delaware
            Fox River Valley Railroad Corporation                                                  Wisconsin
            Green Bay & Western Railroad Company                                                   Wisconsin
                     Michigan & Western Railroad Company                                           Michigan
            Rex Railways, Inc.                                                                     New Jersey
            Signal Capital Corporation                                                             Delaware
                     Richdale, Ltd.                                                                Delaware
                     Signal Capital Projects, Inc.                                                 Delaware
Railcar Services Corporation                                                                       Delaware

 
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in each of the following Registration Statements of Anixter International Inc. and in the related Prospectuses of our reports dated February 23, 2005, with respect to the consolidated financial statements and schedules of Anixter International Inc. Anixter International Inc., management's assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Anixter International Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2004.

   FORM AND REGISTRATION
       STATEMENT NO.                        PURPOSE
----------------------------  --------------------------------------
FORM S - 8 No. 2 - 93173      1983 Stock Incentive Plan
FORM S - 8 No. 33 - 13486     Key Executive Equity Plan
FORM S - 8 No. 33 - 38364     1989 Employee Stock Incentive Plan
FORM S - 8 No. 33 - 60676     1993 Director Stock Option Plan
FORM S - 8 No. 333 - 05907    1996 Stock Incentive Plan
FORM S - 8 No. 333 - 56815    1998 Mid - Level Stock Option Plan
FORM S - 8 No. 333 - 56935    1998 Stock Incentive Plan
FORM S - 8 No. 333 - 103270   2001 Stock Incentive Plan
FORM S - 3 No. 333 - 108807   Zero Coupon Convertible Notes Due 2033
FORM S - 8 No. 333 - 104506   2001 Mid - Level Stock Option Plan
FORM S - 3 No. 333 - 121428   $300 million Shelf Registration	

Ernst & Young LLP
Chicago, Illinois
February 23, 2005
 
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned director and/or officer of Anixter International Inc., a Delaware corporation (the "Corporation"), which is about to file an annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, on Form 10-K, hereby constitutes and appoints Dennis Letham, Terry Faber and John Dul, and each of them as his or her true and lawful attorney-in-fact and agent, with full power and all capacities, to sign the Corporation's Form 10-K and any and all amendments thereto, and any other documents in connection therewith, to be filed with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as she or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact agents or their substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and seal as of the 23rd day of February, 2005.

/s/ Lord James Blyth               /s/ Stuart M. Sloan
/s/ Robert L. Crandall             /s/ Thomas C. Theobald
/s/ Robert W. Grubbs               /s/ Mary Agnes Wilderotter
/s/ F. Philip Handy                /s/ Matthew Zell
/s/ Melvyn N. Klein                /s/ Samuel Zell

/s/ George Munoz	

EXHIBIT 31.1
PRESIDENT AND CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Robert W. Grubbs, certify that:
(1) I have reviewed this annual report on Form 10-K of Anixter International Inc.;
(2) Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
(3) Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
(4) The other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in internal control over financial reporting that occurred during the most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting;
(5) The other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the auditors and the audit committee of the board of directors:
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the internal control over financial reporting.

February 23, 2005                 /s/ Robert W. Grubbs
                                  --------------------------------------
                                      Robert W. Grubbs

                                      President and Chief Executive Officer	

EXHIBIT 31.2
SENIOR VICE PRESIDENT - FINANCE AND CHIEF FINANCIAL OFFICER CERTIFICATION
I, Dennis J. Letham, certify that:
(1) I have reviewed this annual report on Form 10-K of Anixter International Inc.;
(2) Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
(3) Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
(4) The other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in internal control over financial reporting that occurred during the most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting;
(5) The other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the auditors and the audit committee of the board of directors:
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the internal control over financial reporting.

February 23, 2005                   /s/ Dennis J. Letham
                                    --------------------------------------
                                        Dennis J. Letham
                                        Senior Vice President-Finance and

                                        Chief Financial Officer	

EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Anixter International Inc. (the "Company") on Form 10-K for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report") I, Robert W. Grubbs, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Robert W. Grubbs
-----------------------------------------
    Robert W. Grubbs
    President and Chief Executive Officer

    February 23, 2005	

EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Anixter International Inc. (the "Company") on Form 10-K for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date here of ("the Report") I, Dennis J. Letham, Senior Vice President-Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Dennis J. Letham
-------------------------------------------------------------
    Dennis J. Letham
    Senior Vice President-Finance and Chief Financial Officer

    February 23, 2005