UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-22834
SUCCESSORIES, INC.
(Exact name of registrant as specified in its charter)
ILLINOIS 36-3760230
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
919 SPRINGER DRIVE, LOMBARD, ILLINOIS 60148
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (630) 953-8440
CELEX GROUP, INC.
(Former name, former address and former fiscal year, if changed since last
report)
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 [ X ]
No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date:
CLASS OUTSTANDING AS OF SEPTEMBER 1, 1996
Common stock, $0.01 par value 5,239,319
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE NUMBER
Item 1. Financial Statements
Comparative Consolidated Balance Sheets .......... 3
Consolidated Income Statements..................... 4
Consolidated Statement of Changes in
Stockholders' Equity............................... 5
Consolidated Statements of Cash Flows.............. 6
Notes to Consolidated Financial Statements......... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .............................. 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information ................................... 13
Item 6. Exhibits and Reports on Form 8-K..................... 14
Signatures................................................ 15
Index to Exhibits ........................................... 16
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUCCESSORIES, INC.
COMPARATIVE CONSOLIDATED BALANCE SHEETS
(Unaudited)
August 3, February 3,
1996 1996
ASSETS
Current assets:
Cash $1,061,648 $1,229,573
Accounts and notes receivable, net 2,460,263 3,295,819
Inventory, net 9,003,008 9,087,872
Prepaid catalog expenses 2,729,966 3,725,391
Other prepaid expenses 1,481,682 1,067,015
Total current assets 16,736,567 18,405,670
Property & equipment, net 10,365,565 10,615,454
Notes receivable, net 389,204 471,145
Deposits 271,179 172,823
Deferred income taxes 2,732,139 1,600,000
Intangibles & other assets 962,478 901,166
TOTAL ASSETS $ 31,457,132 $32,166,258
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $12,801,773 $1,881,673
Accounts payable 5,178,471 6,652,211
Accrued expenses 1,199,261 1,487,524
Total current liabilities 19,179,505 10,021,408
Long-term debt 114,434 8,528,170
Total liabilities 19,293,939 18,549,578
Minority interest in consolidated
subsidiaries 460,008 583,167
Stockholders' equity:
Common stock $.01 par - 20,000,000 shares authorized;
5,239,319 and 5,208,452 shares issued and
outstanding, respectively 52,398 52,085
Common stock warrants 370,000 370,000
Additional paid-in capital 16,479,345 16,301,104
Accumulated deficit (5,128,206) (3,481,754)
Foreign currency translation adjustment (70,352) (207,922)
Total stockholders' equity 11,703,185 13,033,513
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $31,457,132 $32,166,258
The accompanying notes are an integral part of this statement.
SUCCESSORIES, INC.
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
FOR THE THREE MONTHS ENDED* FOR THE SIX MONTHS ENDED*
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
Net product sales $11,529,295 $ 9,816,787 $23,138,285 $20,478,644
Cost of goods sold 5,015,608 4,158,379 9,564,251 10,827,156
Gross profit on
product 6,513,587 5,658,408 13,574,034 9,651,488
Fees, royalties &
other income 268,396 208,676 421,697 405,202
Gross margin 6,782,083 5,867,084 13,995,731 10,056,690
Operating expenses 7,781,213 7,006,833 15,926,565 16,682,375
Income (loss) from
operations (999,130) (1,139,749) (1,930,734) (6,625,685)
Other income (expenses):
Minority interest in
subsidiaries (11,427) 32,982 (33,779) 6,826
Interest income 11,262 0 17,646 22,360
Interest expense (404,843) (194,467) (844,602) (483,153)
Other 14,153 7,721 24,945 (103,664)
Total other income
(expense) (390,855) (153,764) (835,790) (557,631)
Income (loss) before
income taxes (1,389,985) (1,293,513) (2,766,524) (7,183,316)
Income tax expense
(benefit) (581,532) 0 (1,120,072) 0
Net income (loss) ($808,453) ($1,293,513) ($1,646,452) ($7,183,316)
Earnings (loss) per
common and common
equivalent share ($0.15) ($0.25) ($0.32) ($1.40)
Weighted average
number of common
and common equivalent
shares outstanding 5,223,000 5,120,000 5,223,000 5,120,000
*NOTE: The Company converted to a 4-5-4-week reporting basis for the nine-
month fiscal period ending February 3, 1996. Therefore, for 1996 the quarter
represents 13 weeks, and the six-month period represents 26 weeks. In 1995,
the quarter represents 12 weeks and 6 days, and the six-month period
represents 25 weeks and four days.
The accompanying notes are an integral part of this statement.
SUCCESSORIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Foreign
Common Common Additional Currency Total
Stock Stock Paid-in Retained Translation Stockholders'
Shares Amount Capital Earnings Adjustment Warrants Equity
Balance at
February 3,
1996 5,208,452 $52,085$16,301,104($3,481,754)($207,922)$370,000$13,033,513
Net loss
for period (1,646,452) (1,646,452)
Foreign
currency
translation
adjustment 137,570 137,570
Common stock transactions:
Sales of
common
shares 30,867 313 178,241 178,554
Balance at
August 3,
1996 5,239,319 $52,398$16,479,345($5,128,206)($70,352)$370,000$11,703,185
The accompanying notes are an integral part of this statement.
SUCCESSORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE SIX MONTHS ENDED
August 3, July 29,
1996 1995
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss ($1,646,452) ($7,183,316)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation expense 555,519 1,013,225
Amortization expense 289,756 --
Accretion of subordinated note 150,364 --
Deferred income taxes (1,132,139) (812,593)
(1,782,952) (6,982,684)
Changes in operating assets and liabilities:
Accounts and notes receivable 835,556 3,393,743
Inventories 84,864 2,710,580
Prepaid catalog expense 892,912 1,351,253
Other prepaid expenses (414,667) --
Accounts payable (1,473,740) (2,448,596)
Accrued expenses (288,263) 1,408,656
Other 39,214 462,691
Net cash used in operating activities (2,107,076) (104,357)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid in acquisitions (126,000)
Purchase of fixed assets (565,385) (1,188,761)
Net cash used in investing activities (565,385) (1,314,761)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuing common stock, net 154,536 102,539
Proceeds from exercise of stock options
and warrants 156,520
Proceeds from debt borrowings 2,500,000 2,449,676
Repayment of debt (150,000) (1,480,272)
Net cash provided by financing activities 2,504,536 1,228,463
NET DECREASE IN CASH (167,925) (190,655)
Cash at beginning of period 1,229,573 1,603,282
Cash at end of period $1,061,648 $1,412,627
Supplemental disclosure of cash flow information:
Interest paid $463,332 $518,694
Taxes paid $11,150 $96,720
The accompanying notes are an integral part of this statement.
SUCCESSORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION OF UNAUDITED FINANCIAL STATEMENTS:
The consolidated financial statements contained herein have been prepared by
management and are unaudited. The financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
Annual Report on Form 10-K of Celex Group, Inc. ("Celex") for the period ended
February 3, 1996. On August 2, 1996, Celex Group, Inc. changed its name to
Successories, Inc. ("Successories" or the "Company").
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly the results of
the interim periods presented and all such adjustments are of a normal
recurring nature.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of all subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The results of franchise
operations have not been reflected in the Company's financial statements.
LOSS PER COMMON SHARE - Loss per common and common equivalent shares are
computed by dividing net loss by the weighted average number of common shares
outstanding during each period presented, including common share equivalents
arising from the assumed exercise of stock options and warrants. For the
quarter and six months ended August 3, 1996 and July 29, 1995, common stock
equivalents have been excluded from the calculation of earnings per share as
the effect of inclusion is anti-dilutive.
PREPAID CATALOG EXPENSES/ADVERTISING - Effective May 1, 1995, the Company
adopted SOP 93-7, "Reporting on Advertising Costs," which outlines the
accounting for direct marketing advertising costs. The Company expenses the
production costs of advertising as it occurs, except for direct-response
advertising, which is capitalized and amortized over its expected period of
future benefits.
Direct-response advertising consists primarily of catalogs for the Company's
products. The capitalized costs of the advertising are amortized over the
twelve-month period following the date the catalog was mailed.
At August 3, 1996 and February 3, 1996, $2,729,966 and $3,725,391,
respectively, of advertising was reported as assets. Advertising expense was
$6,070,696 for the six months ended August 3, 1996 and $6,599,907 for the six
months ended July 29, 1995.
CHANGE IN REPORTING PERIOD AND YEAR END - Effective May 1, 1995, the Company
changed its reporting periods to a 4-5-4 week format, a more traditional retail
approach to reporting results. As a result, the financial results for the
quarter and six-month period of the current year reflect 13 weeks and 26 weeks
of activity, respectively, while the financial results for the quarter and six-
month period of the prior year reflect 12 weeks and six days, and 25 weeks and
four days of activity, respectively.
Furthermore, the Company changed its fiscal year end from April 30 to the
Saturday closest to January 31, i.e., February 3, 1996 and February 1, 1997 for
the fiscal 1995 and 1996, respectively. The change was made to conform to
industry reporting practices.
STOCK OPTIONS AND WARRANTS - In October 1995, the Financial Accounting
Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation."
This pronouncement, which becomes effective in the current fiscal year,
establishes financial accounting and reporting standards for stock-based
employee compensation plans. This Standard requires the Company to determine
the fair value of its stock options at the date of grant and either record the
fair value as compensation expense in the financial statements or disclose the
pro-forma impact of such compensation on net income and earnings per share
in the notes to the financial statements. The Company has elected to adopt
the disclosure method of presentation and such disclosures will be made in the
year end financial statements for the fiscal year ending February 1, 1997.
NOTE 3 - INVENTORIES ARE COMPRISED OF THE FOLLOWING:
AUGUST 3, 1996 FEBRUARY 3, 1996
Finished goods $ 5,158,711 $ 5,705,532
Raw materials 3,972,297 3,533,759
9,131,008 9,239,291
Less-Reserve for obsolescence (128,000) (151,419)
Total $ 9,003,008 $ 9,087,872
NOTE 4 - DEBT:
At August 3, 1996 and February 3, 1996, the Company's notes payable were as
follows:
AUGUST 3, 1996 FEBRUARY 3,1996
Line of credit facility:
Term loan $ 8,850,000 $ 9,000,000
Revolving credit loan 2,500,000 --
Subordinated Notes (unsecured),
less discount of $123,336 and 1,376,664 1,191,666
$308,334, respectively
Capital lease obligations 157,006 182,639
Other 32,537 35,538
12,916,207 10,409,843
Less - Current portion (12,801,773) (1,881,673)
Total $ 114,434 $8,528,170
On February 7, 1996, the Credit Agreement was amended to reestablish borrowing
capabilities through May 1, 1996 under the Revolving Loan to the lesser of (a)
75% of eligible receivables and 15% of eligible inventory, or (b) $2,500,000.
Two officers of the Company severally guaranteed borrowings under the loan up
to an aggregate amount of $1,000,000. On February 13, 1996, the Company
borrowed $2,500,000 under the amended Credit Agreement.
The bank further agreed to extend the maturity date of borrowing capability
under both the Term Loan and Revolving Loan to May 1, 1997.
Under the Credit Agreement,as amended, among other things, future
indebtedness, dividends and capital expenditures are restricted.
NOTE 5 - INCOME TAXES:
At February 3, 1996 and August 3, 1996, the net deferred assets were $1,600,000
and $2,732,139, respectively. For the six months ended August 3, 1996, net
deferred assets were increased by the current year's net tax benefit.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company designs, manufactures and markets a diverse range of proprietary
business and personal motivational and self-improvement products, including
wall decor, desk decor, books, audio tapes, video tapes, personalized gifts and
awards. The Company sells its products through two primary distribution
channels: direct marketing and retail stores. Sales are also made to
wholesale customers. The Company's products are marketed to a wide range of
customers and clients, including Fortune 500 companies, mid-sized and small
companies, corporate management personnel and retail customers.
Although the Company utilizes multiple marketing channels for its products, the
Company's products have similar purposes and uses in each channel of
distribution and similar opportunities for growth. The profitability varies
among products and marketing channels. The Company utilizes its facilities
interchangeably for each distribution channel. Furthermore, the marketing
channels are directed at a single customer base located primarily in the United
States.
For the three and six months ended August 3, 1996 and July 29, 1995,
respectively, retail sales, direct mail sales, and wholesale distribution sales
(net product sales -- which exclude fees, royalties and other income), account
for the following percentages of the Company's net product sales:
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
Retail 35% 33% 33% 32%
Direct mail 49% 49% 51% 50%
Wholesale distribution* 16% 18% 16% 18%
*Includes sales to franchisees.
Percentages for the three and six months ended August 3, 1996 do not differ
materially from the same periods in the prior year.
The gross profit margins for retail sales attributable to Company-owned
stores are less than gross profit margins for Direct Mail sales due to shipping
costs associated with the retail inventory,as well as differences in the
product mix between the two channels. The gross profit margin for wholesale
distributors and sales to franchisees are lower than Retail or Direct
Marketing, since these sales are made at a discount from retail prices.
RESULTS OF OPERATIONS
QUARTER ENDED AUGUST 3, 1996 COMPARED TO QUARTER ENDED JULY 29, 1995
Net product sales for the quarter ended August 3, 1996 increased 17.5% to
$11,529,000 compared to $9,817,000 for the three months ended July 29, 1995.
Of the $1,712,000 net product sales increase, approximately one-half of the
increase is attributable to Direct Marketing sales and the balance of the
increase is attributable to Retail sales. Same store sales increased by 8.2%
or $244,000 for the three months ended August 3, 1996, when compared to the
same time period in the prior year. The number of direct mail pieces mailed in
the three months ended August 3, 1996 increased to approximately 3 million from
2.8 million pieces mailed for the same period in the prior year.
Cost of sales as a percentage of net sales was 43.5% for the three months ended
August 3, 1996 compared to 42.4% for the same three-month period ended in the
prior year. The increase in the cost of goods sold percentage from 1996 to the
prior year is primarily the result of an increase in licensed product sales and
planned discount sales programs in retail stores and through a special
closeout catalog of discontinued product issued during the quarter.
Licensed product sales, those for which a fee and a royalty is paid to a
celebrity or creator, have risen substantially over the prior year.
Operating expenses for the quarter were 68% of net product sales which
represents an improvement over the 72% operating expenses which were
experienced in the same quarter during the prior year.
Interest expense increased from $194,000 for the quarter ended July 29, 1995 to
$404,000 for the quarter ended August 3, 1996, an increase of $210,000. This
increase reflects additional borrowings which have occurred subsequent to the
quarter ending July 29, 1995.
The Company's effective income tax rate was 39% for the quarter ended August 3,
1996. The Company recorded a tax benefit associated with the loss before taxes
of $1,390,000.
The net loss of $808,000 for the quarter ended August 3, 1996 compares to a net
loss of $1,294,000 for the quarter ended July 29, 1995, an improvement of
$486,000. As a percentage of sales, net loss decreased from (13.2%) for the
quarter ended July 29, 1995 to (7%) for the quarter ended August 3, 1996.
SIX MONTHS ENDED AUGUST 3, 1996 COMPARED TO THE SIX MONTHS ENDED JULY 29, 1995
Net product sales for the six months ended August 3, 1996 increased 13.0% to
$23,138,000 compared to $20,479,000 for the six months ended August 3, 1996.
Of the $2,659,000 net product sales increase, approximately 60% of the increase
is attributable to Direct Marketing sales and the balance of the increase is
attributable to Retail sales. Same store sales increased by 2.3% or $137,000
for the six months ended August 3, 1996, when compared to the same time period
in the prior year. As of August 3, 1996, the Company operated 56 Retail
locations compared to 55 locations as of July 29, 1995. As of August 3, 1996
and July 29, 1995, the Company had 42 Franchise locations. The number of
direct mail pieces mailed was approximately the same (7.1 million) for the six-
month periods ending August 3, 1996 and July 29, 1995.
Cost of sales as a percentage of net sales was 41.3% for the six months ended
August 3, 1996 compared to 52.9% for the same six-month period ended in the
prior year. The prior years cost of goods sold reflects inefficiencies which
resulted from a fulfillment system failure and other problems which occurred
during and after the Company's peak selling season. Significant improvements
have been made in manufacturing processes, as well as streamlining the
Company's order fulfillment system. Operating expenses for the six months
ended were 68.8% of net product sales which represents a significant
improvement over the 81.5% operating expenses which were experienced in the
same six-month period during the prior year.
Interest expense increased from $483,000 for the six months ended July 29, 1995
to $845,000 for the six months ended August 3, 1996, an increase of $362,000.
This increase reflects additional borrowings which have occurred subsequent to
the six months ended July 29, 1995.
The Company's effective income tax rate was 39% for the six months ended August
3, 1996. The Company recorded a tax benefit associated with the loss before
taxes of $2,767,000.
The net loss of $1,646,000 for the six months ended August 3, 1996 compares to
a net loss of $7,183,000 for the six months ended July 29, 1995, an improvement
of $5,537,000. As a percentage of sales, net loss decreased from (35.1%) for
the six months ended July 29, 1995 to (7.1%) for the quarter ended August 3,
1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's ongoing cash requirements are for working capital, capital
expenditures and debt service. The Company expects to rely on cash generated
from operations, supplemented by the Company's revolving credit facility
to fund its principal cash requirements.
The Company believes that its cash flows will be sufficient to enable it to
service its cash requirements in the near term. In the next fiscal year, the
Company will be required to either renegotiate the terms of its Term Loan and
Revolving Loan with its bank or to seek an alternative financing arrangement
with another lender. Such renegotiations must be completed on or before May 1,
1997. See Note 4 to the Notes to Consolidated Financial Statements.
The Company's net working capital decreased from $8,384,262 on February 3,
1996, to ($2,442,938) on August 3, 1996. The current ratio decreased from
1.84:1 on February 3, 1996 to .87:1 on August 3, 1996. The decrease in working
capital is due almost entirely to the increase in the current portion of long-
term debt. Excluding the current portion of long-term debt from the net
working calculation results in only a modest increase between the two periods.
The Company's net property and equipment remained relatively even with February
3, 1996, increasing 1.6% to $10,365,565 at August 3, 1996. The Company has no
major capital commitment as of August 3, 1996.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings against the Company. The
Company is, however, involved in routine litigation arising in the ordinary
course of its business, and, while the results of the proceedings cannot be
predicted with certainty, the Company believes that the final outcome of such
matters will not have a materially adverse effect on the Company's consolidated
financial position or results of operations. As previously reported, the
Company is a defendant in a lawsuit filed by Cullman Ventures, Inc. involving
the use of the names and trademarks Success and Successories on dated calendar
products. The Company believes the complaint is without merit and is
vigorously defending the action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Celex Group, Inc.'s 1996 Annual Meeting of Shareholders was held on
July 30, 1996. Of the shares outstanding as of the record date,
4,544,337 shares were present at the meeting or represented by
proxies, representing approximately 86.5% of the total votes
eligible to be cast.
(b) At the Annual Meeting of Shareholders, the shareholders took the
following actions:
(i) Each of the following persons was elected by the vote
indicated to serve as a Class I director of the Company until
the 1999 Annual Meeting of Shareholders or until his
successor is elected and qualified:
NAME FOR AGAINST WITHHELD
Seamas T. Coyle 4,471,979 0 72,358
Timothy C. Dillon 4,472,842 0 71,495
Steven B. Larrick 4,472,181 0 72,156
Guy E. Snyder 4,471,979 0 72,358
(ii) A proposal to amend and restate the Company's Stock Option
Plan was approved with 2,341,965 shares voted in favor of,
and 615,563 shares voted against, such amendment and
restatement. 33,678 shares abstained from voting.
(iii) A proposal to amend the Company's Articles of Incorporation
to change the Company's name to Successories, Inc. was
approved with 4,539,378 shares voted in favor of, and 3,604
shares voted against, such amendment. 1,355 shares abstained
from voting.
(iv) The appointment by the Board of Directors of Price Waterhouse
LLP as independent accountants for the fiscal year ending
February 1, 1997 was ratified. 4,280,272 shares were voted
in favor of, and 227,837 shares were voted against, such
ratification. 36,228 shares abstained from voting.
ITEM 5. OTHER INFORMATION
On July 30, 1996, the Company announced that it had signed a Letter of Intent
to purchase British Links Golf Classics, Inc. British Links Golf Classics,
Inc. is a Dallas, Texas-based catalog company which sells golf wall decor and
high-end golf gifts. The purchase price for British Links is $1,100,000 and
will be comprised of a combination of cash, Successories stock and promissory
notes.
ITEM 6. EXHIBITS AND REPORTING ON FORM 8-K
No reports on Form 8-K have been filed during the quarter ended August 3, 1996.
The Exhibits filed as a part of this report are listed below.
See Index to Exhibits on Page 16, immediately following the Signature page.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUCCESSORIES, INC.
(Registrant)
Date: 9/16/96 By:
James M. Beltrame
President, Chief Operating Officer and Director
(Principal Executive Officer)
Date: 9/16/96 By:
M. Andrew King
Chief Financial Officer
(Principal Financial Officer)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUCCESSORIES, INC.
(Registrant)
Date: 9/16/96 By: /S/ JAMES M. BELTRAME
James M. Beltrame
President, Chief Operating Officer and Director
(Principal Executive Officer)
Date: 9/16/96 By: /S/ M. ANDREW KING
M. Andrew King
Chief Financial Officer
(Principal Financial Officer)
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION SEQUENTIAL PAGE
3.1 Articles of Incorporation of Registrant (1)
3.2 By-laws of Registrant (1)
4.1 Specimen Common Stock Certificate (1)
10.1 Form of Franchising Agreement (3)
10.2 Employment Agreement with Arnold M. Anderson dated
February 28, 1993 (1)
10.3 Credit Agreement with Harris Trust and Savings Bank (4)
10.4 Credit Agreement and Guaranty between the Company
and NBD Bank (5)
10.5 First Forbearance Agreement between the Company and NBD Bank (6)
10.6 Amended and Restated Credit Agreement between the Company
and NBD Bank dated as of July 31, 1995 (7)
10.7 Lease Agreements between LaSalle National Trust Bank as Trustee
under Trust No. 107739 and Celebrating Excellence (4)
10.8 Stock Option Instrument for Arnold M. Anderson dated November 19,
1991 (1)
10.9 Celex Group, Inc. Stock Option Plan (2)
10.10 Joint Venture Agreement with Morrison DFW, Inc. and related
documents (4)
10.11 Indemnification Agreement dated May 26, 1995 between the Company
and Arnold M. Anderson (7)
Indemnification Agreements in the form filed were also entered into
by the Messrs. James M. Beltrame, Seamas T. Coyle, Timothy C.
Dillon, C. Joseph LaBonte, Steve Larrick, Michael H. McKee,
Mervyn C. Phillips, Jr., Michael Singletary, Guy E. Snyder and
Peter C. Walts
10.12 First Amendment to the Credit Agreement between the Company and
NBD Bank dated as of September 25, 1995 (8)
10.13 Second Amendment to the Credit Agreement between the Company
and NBD Bank dated as of February 7, 1996 (9)
10.14 Form of Subordinated Note, Common Stock Purchase Warrant and
Subordination Agreement relating to issuance of $1,500,000
Subordinated Notes and Warrants to purchase 120,000 shares of the
Company's Common Stock (9)
10.15 Common Stock Option Agreement granted to Arnold M. Anderson
and Incentive Stock Option Agreement granted to Arnold M. Anderson
(9)
10.16 Common Stock Option Agreement granted to James M. Beltrame and
Incentive Stock Option Agreement granted to James M. Beltrame (9)
10.17 Third Amendment to the Credit Agreement between the Company
and NBD Bank dated as of May 2, 1996 (9)
10.18 Employment Agreement with Arnold M. Anderson dated March 1, 1996
(filed herewith)
10.19 Employment Agreement with James M. Beltrame dated June 1, 1996
(filed herewith)
10.20 Employment Agreement with Michael H. McKee dated June 1, 1996
(filed herewith)
10.21 Common Stock Option Agreement granted to James M. Beltrame dated
June 17, 1996 (filed herewith)
22.1 Subsidiaries (4)
_____________________________
(1) Previously filed with Registration Statement on Form SB-2, No. 33-76530C
filed on August 17, 1993, and incorporated herein by reference.
(2) Previously filed with Amendment Number 1 to the Registration Statement of
Form SB-2, No. 33-67530C filed on September 24, 1993, and incorporated
herein by reference.
(3) Previously filed with Post-effective Amendment Number 1 to the
Registration Statement of Form SB-2, No. 33-67530C filed on January 19,
1994, and incorporated herein by reference.
(4) Previously filed with the Annual Report on Form 10-K for the year ended
April 30, 1994 and incorporated herein by reference.
(5) Previously filed with the Company's Form 10-Q/A-1 for the quarter ended
July 31, 1995 and incorporated herein by reference.
(6) Previously filed with the Company's Form 8-K on June 7, 1995 reporting
Date of Event May 26, 1995, and incorporated herein by reference.
(7) Previously filed with the Annual Report on Form 10-K for the year ended
April 30, 1995, and incorporated herein by reference.
(8) Previously filed with the Company's Form 10-Q for the quarter ended
October 28, 1995, and incorporated herein by reference.
(9) Previously filed with the Company's Annual Report on Form 10-K for the
year ended February 3, 1996, and incorporated herein by reference.
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</TABLE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into on this 1st day of
March, 1996, BETWEEN:
(1) Celex Group, Inc., an Illinois corporation ("the Company"); and,
(2) Arnold M. Anderson, a resident of Illinois ("the Employee").
THE COMPANY AND THE EMPLOYEE HEREBY AGREE, in consideration of the mutual
obligations and covenants set forth below, to the following terms and
conditions:
1 EMPLOYMENT
1.1 The Company shall employ the Employee as Chief Executive Officer
subject to the terms and conditions specified in this Employment
Agreement ("the Employment").
1.2 The Employment pursuant to this Employment Agreement shall
commence on March 1, 1996 and continue for a term of three (3)
years ("the Term of Employment").
1.3 Unless either party to this Employment Agreement, at least one
year prior to the conclusion of the Term of Employment, provides
written notice to the other party that it wishes not to renew
this Employment Agreement, then the Term of Employment will be
automatically extended for one additional year. There is no
limit on the number of extensions of the Term of Employment that
may occur pursuant to this section.
2 COMMENCEMENT AND PLACE OF EMPLOYMENT
The Company hereby employs the Employee as its Chief Executive Officer
effective on the date specified above, and the Employee hereby accepts such
employment on the terms and conditions set forth in this Employment
Agreement. The Employment shall be in Lombard, Illinois.
3 DUTIES
The Employee shall faithfully and diligently perform the duties and
responsibilities assigned to him by the Company.
4 EXCLUSIVITY OF SERVICE
While employed by the Company, the Employee shall devote all of his time,
attention, and energies to the Company's business.
5 COMPENSATION AND BENEFITS
5.1 Effective as of March 1, 1996, the Company shall pay the Employee
a minimum base salary of TWO HUNDRED THOUSAND DOLLARS ($200,000)
per year, payable in arrears on a monthly basis. The Company may
make deductions or withholdings as required by applicable State
and Federal law, or as may be or has been consented to by the
Employee. The minimum base salary shall be adjusted on an annual
basis (but not reduced below the minimum base salary set forth
above in this paragraph) by the Company for purposes of the
second, third, and, if applicable, any succeeding year of the
Employment due to its extension.
5.2 The Employee shall also be entitled to receive a bonus on an
annual basis in an amount not less than ONE HUNDRED THOUSAND
DOLLARS ($100,000) per year. Within thirty (30) days after the
commencement of the Company's fiscal years, the Employee and the
Company's Board of Directors shall agree in writing upon the
specific performance standards and criteria that will be used to
determine how the bonus is actually earned. In addition, the
Employee and the Company's Board of Directors will also agree at
that time as to the amount of the actual bonus opportunity of the
Employee for the forthcoming fiscal year. For fiscal year 1997,
the Employee and the Company's Board of Directors shall reach in
writing said agreement on or before June 30, 1996. The
Employee's bonus shall vest at a rate of 1/12th of the total
amount (of the bonus) per month during each year of the
Employment Agreement and its extension.
5.3 The Company shall also reimburse the Employee, against receipts
or other satisfactory evidence, all reasonable business expenses
properly incurred by him in the course of the Employment and in
accordance with the Company's rules relating to reimbursement of
expenses.
5.4 The Company shall also provide the Employee with paid vacation in
accordance with the Company's policies, but in no event less than
twenty (20) days per annum, to be taken at such time as is
mutually agreed between the Employee and the Company. The
Employee will not forfeit any paid vacation if less than twenty
(20) days of vacation are taken in any year.
5.5 The Company shall also afford the Employee certain fringe
benefits at least equal to those made available by the Company to
its other senior executive employees, and in accordance with the
terms of such plans and policies, including but not limited to
entitlement to holidays, personal leave, sick leave, family
leave, medical insurance, disability insurance, dental insurance,
and life insurance.
5.6 The Employee shall also be entitled to receive options to be
granted under the Company's stock option plan as determined by
the Compensation Committee of the Board of Directors.
6 REASONABLENESS OF RESTRICTIONS
The Employee acknowledges that, during the term of Employment, the Company
will provide the Employee with the use of and access to trade secrets and
confidential information. In turn, the Employee recognizes that, while
performing his duties hereunder he will have access to and come into
contact with trade secrets and confidential information belonging to the
Company and will obtain personal knowledge of and influence over its
customers and/or employees. The Employee therefore agrees that the
restrictions contained in Sections 7, 8, and 9 are reasonable and necessary
to protect the legitimate business interests of the Company both during and
after the termination of the Employment (if the termination is for cause,
as defined in paragraph 10.5 of this Employment Agreement).
7 CONFIDENTIALITY
7.1 The Employee shall neither during the Employment (except in the
proper performance of his duties) nor at any time (without limit)
after the termination thereof directly or indirectly:
7.1.1 use for his own purposes or those of any other person,
company, business entity, or other organization whatsoever,
or,
7.1.2 disclose to any person, company, business entity, or other
organization whatsoever,
any trade secrets or confidential information relating or
belonging to the Company, including but not limited to any
such information relating to clients or customers, client or
customer lists or requirements, market information, business
plans or dealings, financial information and plans, trading
models, market access information, research activities, any
document marked Confidential, or any information which the
Employee has been told is Confidential, or any information
which has been given the Company in confidence by customers,
suppliers, or other persons.
8 TRADE SECRETS
8.1 During the term of this Employment Agreement, the Employee
acknowledges that he will be afforded access to and become
familiar with various trade secrets of the Company, including,
but not necessarily be limited to the following: the Company's
business plans, financial information, marketing strategies,
customer or client lists, software and research and proprietary
technology information. The Employee acknowledges that these
trade secrets are owned and shall continue to be owned solely by
the Company and that they contain specialized and confidential
information not generally known in the industry and which
constitute the Company's trade secrets. The Employee recognizes
and acknowledges that it is essential to the Company to protect
this trade secret information.
8.2 The Employee further represents to the Company that, as an
inducement for his employment, the Employee will hold this
information in trust and confidence for the Company's sole
benefit and use during the Employment and after the Employment
terminates, the Employee agrees not to use this information for
any purpose whatsoever or to divulge this information to any
person other than the Company or persons to whom the Company has
given without express written authorization.
9 POST-TERMINATION OBLIGATIONS
9.1 NON-COMPETITION. The Employee hereby agrees that, during his
employment by the Company pursuant to this Employment Agreement
and for a period of one (1) year or for a period of time which
corresponds to the total severance payment made to Employee
hereunder, whichever is greater, following the termination of the
Employment under this Employment Agreement, he will not, directly
or indirectly and in any way, whether as principal or as
director, officer, employee, consultant, agent, partner or
stockholder to another entity (other than by the ownership of a
passive investment interest of not more than 2.5% in a company
with publicly traded equity securities):
9.1.1 own, manage, operate, control, be employed by, participate
in, or be connected in any manner with the ownership,
management, operation, or control of any business competing
with any business of the Company in the one (1) year
immediately preceding such termination;
9.1.2 contact, interfere with, solicit on behalf of another, or
attempt to entice away from the Company (or any affiliate or
subsidiary of the Company):
(i) any client or customer of the Company (or any affiliate
or subsidiary of the Company); or,
(ii) any contract, agreement or arrangement that the Company
(or any affiliate or subsidiary of the Company) is
actively negotiating with any other party; or,
(iii) any prospective business opportunity that the Company
(or any affiliate or subsidiary of the Company) has
identified.
9.2 NON-SOLICITATION OF EMPLOYEES. The Employee hereby agrees that
he will not for a period of one (1) year or for a period of time
which corresponds to the total severance payment made to Employee
hereunder, whichever is greater, immediately following the
termination of his employment, howsoever arising, either on his
own account or in conjunction with or on behalf of any other
person, company, business entity, or other organization
whatsoever directly or indirectly:
9.2.1 induce, solicit, entice or procure any person who is an
employee of the Company to leave such employment, where that
person is:
9.2.2 a Company Employee on the Termination date; or,
9.2.3 had been a Company Employee in any part of the one (1) year
period immediately preceding the Termination Date;
9.2.4 accept into employment or otherwise engage or use the
services of any person who:
9.2.5 is a Company Employee on the Termination Date; or,
9.2.6 had been a Company Employee in any part of the one (1) year
period immediately preceding the Termination Date.
9.3 The Employee agrees that in the event of receiving from any
person, company, business entity, or other organization an offer
or employment either during the continuance of this Employment
Agreement or during the continuance in force of any of the
restrictions set out herein, he will forthwith provide to such
person, company, business entity, or other organization making
such the offer of employment a full and accurate copy of this
Employment Agreement signed by the parties hereto.
10 TERMINATION
10.1 The Company and the Employee agree that this employment
relationship is for a term of three (3) years commencing on the
date specified in paragraph 1.2 of this Employment Agreement.
10.2 On termination of the Employment for whatever reason, the
Employee shall return to the Company in accordance with its
instructions all of the Company's proprietary technology and
trading models, records, software, models, reports, and other
documents and any copies thereof and any other property belonging
to the Company which are in the Employee's possession or under
his control. The Employee shall, if so required by the Company,
confirm in writing his compliance with his obligations under this
paragraph.
10.3 The termination of the Employment shall be without prejudice to
any right the Employee or the Company may have in respect of any
breach by the other of any provisions of this Employment
Agreement which may have occurred prior to such termination.
10.4 In the event of termination of the Employment hereunder however
arising, the Employee agrees that he will not at any time after
such termination represent himself as still having any connection
with the Company, except as a former employee for the purpose of
communicating with prospective employers or complying with any
applicable statutory requirements.
10.5 Notwithstanding anything to the contrary in this Employment
Agreement, the Company may terminate this Employment Agreement
for "just cause" by providing to the Employee written notice of
the termination on account of just cause and the specific grounds
thereof. Upon termination of the Employment for just cause, the
Employment will immediately end and the Employee will not be
entitled to receive any further compensation after that date
except as may be required by law. The term "just cause" means
(a) an act of fraud or dishonesty by the Employee that results
directly or indirectly in gain or personal enrichment of the
Employee at the Company's expense, (b) an act by the Employee
that the Company's Board of Directors reasonably believes
constitutes a felony, or (c) any material breach by the Employee
of any provision of this Employment Agreement that has not been
cured by the Employee within 30 days of written notice of such a
breach from the Company.
10.6 Notwithstanding anything to the contrary in this Employment
Agreement, the Company's obligations under this Employment
Agreement shall cease or terminate upon the death of the Employee
or upon the determination that the Employee has a disability.
Upon the death of the Employee, the Company shall pay the
surviving spouse (if any) of the Employee one (1) year of the
then current base salary of the Employee and any other
compensation or pro rata bonus due the Employee; if there is no
surviving spouse, the Company shall pay those sums to the estate
of the Employee. For purposes of this paragraph only, the
Employee will be deemed to have a "disability" only where the
Employee has suffered a physical or mental illness, injury, or
infirmity that prevents the Employee from fulfilling all of his
duties under this Employment Agreement for at least ninety (90)
consecutive days and the Company's Board of Directors has
determined, in good faith and with the advice of the Employee's
physician (or other relevant medical professional), that the
Employee's illness, injury, or infirmity is more than likely to
continue indefinitely. In these circumstances, after a
determination has been made in good faith by the Company's Board
of Directors that the Employee has a disability, the Company
shall pay to the Employee, the Employee's guardian or
administrator, or the Employee's estate, the then current monthly
compensation, including bonus compensation, provided under this
Employment Agreement commencing with the first month after the
determination of the existence of a disability and until the
expiration of the Employment Agreement or for a period of one (1)
year, whichever is greater.
10.7 Notwithstanding anything to the contrary in this Employment
Agreement, the Company may, in connection with the notice of non-
renewal delivered to the Employee pursuant to paragraph 1.3,
elect not to utilize the Employee's services during the remainder
of the Term of Employment and relieve the Employee of any further
obligation to perform his duties under this Employment Agreement.
If the Company so elects, then the Employee shall cease to occupy
his office or otherwise have access to the Company's premises,
but the Company shall pay and will remain obligated to pay the
Employee the remainder of his base salary, bonus and all other
benefits during the remainder of the Term of Employment or for a
period of one (1) year, whichever is greater. Employee shall
also have the right to demand that any loans or guarantees made
by Employee to/for the Company be repaid to Employee or replaced
upon the termination of this Agreement. In addition, any options
granted to the Employee under any Stock Option Plan will vest
immediately. In such event, the Employee also will not be
required to mitigate his damages by seeking other alternative
employment during the remainder of the Term of Employment under
this Employment Agreement. Moreover, the Company shall pay all
of the Employee's expenses for continued insurance coverage made
available pursuant to COBRA.
10.8 Notwithstanding anything to the contrary in this Employment
Agreement, the Employee may terminate the Employment under this
Employment Agreement for good reason in which event the Company
shall still have the same obligations to the Employee as provided
in paragraph 5. For purposes of this paragraph, "good reason"
shall mean: (a) without the Employee's express written consent,
the assignment to the Employee of any duties inconsistent with
his title, position, duties, responsibilities, and status with
the Company prior to a Change in Control as hereinafter defined,
or a change in his reporting responsibilities, title, or office
as in effect after a Change in Control, or any removal of the
Employee from or any failure to reelect him to any such
positions, except in connection with the termination of the
Employment for just cause, disability, or as a result of his
death; (b) a reduction in the Employee's minimum base salary or
benefits or breach of the Company's obligations undertaken in
this Employment Agreement; (c) in the event of the occurrence of
a "Change in Control," which means the occurrence of one or more
of the following: (i) without prior approval of the Board of
Directors, a single entity or group of affiliated entities
acquires more than 50% of the Company's outstanding stock, (ii)
the Company is involved in a merger or a sale of all or
substantially all of its assets so that its shareholders before
the merger or sale own less than 50% of the voting power of the
surviving or acquiring corporation, (iii) a liquidation or
dissolution of the Company occurs, (iv) a change in the majority
of the Board of Directors occurs during any twenty-four (24)
month period without the approval of a majority of the directors
in office at the beginning of such period; or (v) neither Arnold,
M. Anderson nor James M. Beltrame serves as the Company's chief
executive officer; (d) subsequent to a Change in Control of the
Company, the failure by the Company to obtain the assumption of
the obligation to perform this Employment Agreement by any
successor; or (e) subsequent to a Change in Control of the
Company, any purported termination of the Employee's Employment
which is not effected pursuant to a notice of termination
satisfying the requirements of paragraphs 1.3 or 10 hereof. In
the event that the Employee determines to terminate his
Employment for good reason, the Employee shall be obligated to
give notice of termination of sixty (60) days to the Company. In
such event, the Employee shall be entitled to the remainder of
the compensation due under the Term of Employment, and in any
event a sum equivalent to not less than one (1) year's base
minimum salary plus the pro rata portion of any bonus earned or
accrued through the date of the delivery of such notice of
termination. At his sole option and discretion, the Employee may
designate the manner and method by which the Company shall pay to
the Employee this remaining compensation and benefits, including
but not limited to a lump sum payment, monthly installments,
deferred payments of different amounts, or in other manner
specified by the Employee to the Company at any time during the
remainder of the Term of Employment under this Employment
Agreement.
11 SEVERABILITY
The various provisions and sub-provisions of this Employment Agreement are
severable, and if any provision or sub-provision or identifiable part
thereof is held to be invalid or unenforceable by any court of competent
jurisdiction, then such invalidity or unenforceability shall not affect the
validity or enforceability of the remaining provisions or sub-provisions or
identifiable parts in this Employment Agreement.
12 WARRANTY
The Employee represents and warrants that he is not prevented by any other
Employment Agreement, arrangement, contract, understanding, Court Order or
otherwise, which in any way directly or indirectly conflicts, is
inconsistent with, or restricts or prohibits him from fully performing the
duties of the Employment, in accordance with the terms and conditions of
this Employment Agreement.
13 NOTICES
Any notice to be given hereunder may be delivered (a) in the case of the
Company by first class mail addressed to its Registered Office and (b) in
the case of the Employee, either to him personally or by first class mail
to his last known residence address. Notices served by mail shall be
deemed given when they are mailed.
14 WAIVERS AND AMENDMENTS
No act, delay, omission, or course of dealing on the part of any party
hereto in exercising any right, power, or remedy hereunder shall operate
as, or be construed as, a waiver thereof or otherwise prejudice such
party's rights, powers, and remedies under this Employment Agreement. This
Employment Agreement may be amended only by a written instrument signed by
the Employee and a duly authorized officer of the Company or the Board of
Directors.
15 PRIOR AGREEMENTS
This Employment Agreement cancels and is in substitution for all previous
letters of engagement, offer letters, agreements, and arrangements (whether
oral or in writing) relating to the subject-matter hereof between the
Company and the Employee, all of which shall be deemed to have been
terminated by mutual consent, with the exception of any rights the Employee
may have under any stock option plan or bonus plan previously in existence.
This Employment Agreement constitutes the entire terms and conditions of
the Employee's employment and no waiver or modification thereof shall be
valid unless in writing, signed by the parties, and only to the extent
therein set forth.
16 ARBITRATION JURISDICTION AND GOVERNING LAW
Except for disputes arising under or in connection with Sections 7, 8, and
9, all disputes arising under or in connection with this Employment
Agreement or concerning in any way the Employee's employment shall be
submitted exclusively to arbitration in Chicago, Illinois under the Rules
of the American Arbitration Association then in effect, and the decision of
the arbitrator shall be final and binding upon the parties. Judgment upon
the award rendered may be entered and enforced in any court having
jurisdiction. The Employee and the Company consent to personal
jurisdiction of any state or federal court sitting in Du Page County,
Illinois, in order to enforce any arbitration judgment or the rights of the
Employee or of the Company under Sections 7, 8, and 9 and waive any
objection that such forum is inconvenient. The Employee and the Company
hereby consent to service of process in any such action by U.S. mail or
other commercially reasonable means of receipted delivery. The parties
also agree that the party found to be at fault shall reimburse the other
party for all reasonable attorneys' fees that the other party incurs in
pursing their remedies in good faith under this Employment Agreement.
17 GOVERNING LAW
This Employment Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois.
18 ASSIGNABILITY
The rights and obligations contained herein shall be binding on and inure
to the benefit of the successors and assigns of the Company. The Employee
may not assign his rights or obligations hereunder without the express
written consent of the Company.
19 HEADINGS; CONSTRUCTION
The headings contained in this Employment Agreement are inserted for
reference and inserted for reference and convenience only and in no way
define, limit, extend, or describe the scope of this Employment Agreement
or the meaning or construction of any of the provisions hereof. As used
herein, unless the context otherwise requires, the single shall include the
plural and vice versa, words of any gender shall include words of any other
gender, and "or" is used in the inclusive sense.
20 SURVIVAL OF TERMS
If this Employment Agreement is terminated for any reason, the provisions
of Sections 7, 8, and 9 shall survive and the Employee and the Company, as
the case may be, shall continue to be bound by the terms thereof to the
extent provided therein.
21 EMPLOYEE ACKNOWLEDGMENT AND ADVICE OF COUNSEL
THE EMPLOYEE REPRESENTS THAT HE HAS HAD AMPLE OPPORTUNITY TO REVIEW THIS
AGREEMENT AND THE EMPLOYEE ACKNOWLEDGES THAT HE UNDERSTANDS THAT IT
CONTAINS IMPORTANT CONDITIONS OF THE EMPLOYMENT AND THAT IT EXPLAINS
POSSIBLE CONSEQUENCES, BOTH FINANCIAL AND LEGAL, IF THE EMPLOYEE BREACHES
THE AGREEMENT. The Company agrees to reimburse the Employee for any legal
fees the Employee incurs in obtaining legal advice concerning this
Employment Agreement prior to the execution of this Employment Agreement.
AS WITNESS the hands of a duly authorized officer of the Company and of the
Employee the day and year first before written.
SIGNED by __________________ )
For and on behalf of Celex Group, Inc.)
Date
SIGNED by Arnold M. Anderson )
[name of Employee] )
Date
- 2 -
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into on this 1st day of June,
1996, BETWEEN:
(1) Celex Group, Inc., an Illinois corporation ("the Company"); and,
(2) James M. Beltrame, a resident of Illinois ("the Employee").
THE COMPANY AND THE EMPLOYEE HEREBY AGREE, in consideration of the mutual
obligations and covenants set forth below, to the following terms and
conditions:
1 EMPLOYMENT
1.1 The Company shall employ the Employee as President & Chief
Operating Officer subject to the terms and conditions specified
in this Employment Agreement ("the Employment").
1.2 The Employment pursuant to this Employment Agreement shall
commence on June 1, 1996 and continue for a term of three (3)
years ("the Term of Employment").
1.3 Unless either party to this Employment Agreement, at least one
year prior to the conclusion of the Term of Employment, provides
written notice to the other party that it wishes not to renew
this Employment Agreement, then the Term of Employment will be
automatically extended for one additional year. There is no
limit on the number of extensions of the Term of Employment that
may occur pursuant to this section.
2 COMMENCEMENT AND PLACE OF EMPLOYMENT
The Company hereby employs the Employee as its President & Chief Operating
Officer effective on the date specified above, and the Employee hereby
accepts such employment on the terms and conditions set forth in this
Employment Agreement. The Employment shall be in Lombard, Illinois.
3 DUTIES
The Employee shall faithfully and diligently perform the duties and
responsibilities assigned to him by the Company.
<PAGE>
4 EXCLUSIVITY OF SERVICE
While employed by the Company, the Employee shall devote all of his time,
attention, and energies to the Company's business.
5 COMPENSATION AND BENEFITS
5.1 Effective as of June 1, 1996, the Company shall pay the Employee
a minimum base salary of ONE HUNDRED SEVENTY FIVE THOUSAND
DOLLARS ($175,000) per year, payable in arrears on a monthly
basis. The Company may make deductions or withholdings as
required by applicable State and Federal law, or as may be or has
been consented to by the Employee. The minimum base salary shall
be adjusted on an annual basis (but not reduced below the minimum
base salary set forth above in this paragraph) by the Company for
purposes of the second, third, and, if applicable, any succeeding
year of the Employment due to its extension.
5.2 The Employee shall also be entitled to receive a bonus on an
annual basis in an amount not less than ONE HUNDRED THOUSAND
DOLLARS ($100,000) per year. Within thirty (30) days after the
commencement of the Company's fiscal years, the Employee and the
Company's Board of Directors shall agree in writing upon the
specific performance standards and criteria that will be used to
determine how the bonus is actually earned. In addition, the
Employee and the Company's Board of Directors will also agree at
that time as to the amount of the actual bonus opportunity of the
Employee for the forthcoming fiscal year. For fiscal year 1997,
the Employee and the Company's Board of Directors shall reach in
writing said agreement on or before June 30, 1996. The
Employee's bonus shall vest at a rate of 1/12th of the total
amount (of the bonus) per month during each year of the
Employment Agreement and its extension.
5.3 The Company shall also reimburse the Employee, against receipts
or other satisfactory evidence, all reasonable business expenses
properly incurred by him in the course of the Employment and in
accordance with the Company's rules relating to reimbursement of
expenses.
5.4 The Company shall also provide the Employee with paid vacation in
accordance with the Company's policies, but in no event less than
twenty (20) days per annum, to be taken at such time as is
mutually agreed between the Employee and the Company. The
Employee will not forfeit any paid vacation if less than twenty
(20) days of vacation are taken in any year.
5.5 The Company shall also afford the Employee certain fringe
benefits at least equal to those made available by the Company to
its other senior executive employees, and in accordance with the
terms of such plans and policies, including but not limited to
entitlement to holidays, personal leave, sick leave, family
leave, medical insurance, disability insurance, dental insurance,
and life insurance.
5.6 The Employee shall also be entitled to receive options to be
granted under the Company's stock option plan as determined by
the Compensation Committee of the Board of Directors.
6 REASONABLENESS OF RESTRICTIONS
The Employee acknowledges that, during the term of Employment, the Company
will provide the Employee with the use of and access to trade secrets and
confidential information. In turn, the Employee recognizes that, while
performing his duties hereunder he will have access to and come into
contact with trade secrets and confidential information belonging to the
Company and will obtain personal knowledge of and influence over its
customers and/or employees. The Employee therefore agrees that the
restrictions contained in Sections 7, 8, and 9 are reasonable and necessary
to protect the legitimate business interests of the Company both during and
after the termination of the Employment (if the termination is for cause,
as defined in paragraph 10.5 of this Employment Agreement).
7 CONFIDENTIALITY
7.1 The Employee shall neither during the Employment (except in the
proper performance of his duties) nor at any time (without limit)
after the termination thereof directly or indirectly:
7.1.1 use for his own purposes or those of any other person,
company, business entity, or other organization whatsoever,
or,
7.1.2 disclose to any person, company, business entity, or other
organization whatsoever,
any trade secrets or confidential information relating or
belonging to the Company, including but not limited to any
such information relating to clients or customers, client or
customer lists or requirements, market information, business
plans or dealings, financial information and plans, trading
models, market access information, research activities, any
document marked Confidential, or any information which the
Employee has been told is Confidential, or any information
which has been given the Company in confidence by customers,
suppliers, or other persons.
8 TRADE SECRETS
8.1 During the term of this Employment Agreement, the Employee
acknowledges that he will be afforded access to and become
familiar with various trade secrets of the Company, including,
but not necessarily be limited to the following: the Company's
business plans, financial information, marketing strategies,
customer or client lists, software and research and proprietary
technology information. The Employee acknowledges that these
trade secrets are owned and shall continue to be owned solely by
the Company and that they contain specialized and confidential
information not generally known in the industry and which
constitute the Company's trade secrets. The Employee recognizes
and acknowledges that it is essential to the Company to protect
this trade secret information.
8.2 The Employee further represents to the Company that, as an
inducement for his employment, the Employee will hold this
information in trust and confidence for the Company's sole
benefit and use during the Employment and after the Employment
terminates, the Employee agrees not to use this information for
any purpose whatsoever or to divulge this information to any
person other than the Company or persons to whom the Company has
given without express written authorization.
9 POST-TERMINATION OBLIGATIONS
9.1 NON-COMPETITION. The Employee hereby agrees that, during his
employment by the Company pursuant to this Employment Agreement
and for a period of one (1) year or for a period of time which
corresponds to the total severance payment made to Employee
hereunder, whichever is greater, following the termination of the
Employment under this Employment Agreement, he will not, directly
or indirectly and in any way, whether as principal or as
director, officer, employee, consultant, agent, partner or
stockholder to another entity (other than by the ownership of a
passive investment interest of not more than 2.5% in a company
with publicly traded equity securities):
9.1.1 own, manage, operate, control, be employed by, participate
in, or be connected in any manner with the ownership,
management, operation, or control of any business competing
with any business of the Company in the one (1) year
immediately preceding such termination;
9.1.2 contact, interfere with, solicit on behalf of another, or
attempt to entice away from the Company (or any affiliate or
subsidiary of the Company):
(i) any client or customer of the Company (or any affiliate
or subsidiary of the Company); or,
(ii) any contract, agreement or arrangement that the Company
(or any affiliate or subsidiary of the Company) is
actively negotiating with any other party; or,
(iii) any prospective business opportunity that the Company
(or any affiliate or subsidiary of the Company) has
identified.
9.2 NON-SOLICITATION OF EMPLOYEES. The Employee hereby agrees that
he will not, for a period of one (1) year or for a period of time
which corresponds to the total severance payment made to Employee
hereunder, whichever is greater, immediately following the
termination of his employment, howsoever arising, either on his
own account or in conjunction with or on behalf of any other
person, company, business entity, or other organization
whatsoever directly or indirectly:
9.2.1 induce, solicit, entice or procure any person who is an
employee of the Company to leave such employment, where that
person is:
9.2.2 a Company Employee on the Termination date; or,
9.2.3 had been a Company Employee in any part of the one (1) year
period immediately preceding the Termination Date;
9.2.4 accept into employment or otherwise engage or use the
services of any person who:
9.2.5 is a Company Employee on the Termination Date; or,
9.2.6 had been a Company Employee in any part of the one (1) year
period immediately preceding the Termination Date.
9.3 The Employee agrees that in the event of receiving from any
person, company, business entity, or other organization an offer
or employment either during the continuance of this Employment
Agreement or during the continuance in force of any of the
restrictions set out herein, he will forthwith provide to such
person, company, business entity, or other organization making
such the offer of employment a full and accurate copy of this
Employment Agreement signed by the parties hereto.
10 TERMINATION
10.1 The Company and the Employee agree that this employment
relationship is for a term of three (3) years commencing on the
date specified in paragraph 1.2 of this Employment Agreement.
10.2 On termination of the Employment for whatever reason, the
Employee shall return to the Company in accordance with its
instructions all of the Company's proprietary technology and
trading models, records, software, models, reports, and other
documents and any copies thereof and any other property belonging
to the Company which are in the Employee's possession or under
his control. The Employee shall, if so required by the Company,
confirm in writing his compliance with his obligations under this
paragraph.
10.3 The termination of the Employment shall be without prejudice to
any right the Employee or the Company may have in respect of any
breach by the other of any provisions of this Employment
Agreement which may have occurred prior to such termination.
10.4 In the event of termination of the Employment hereunder however
arising, the Employee agrees that he will not at any time after
such termination represent himself as still having any connection
with the Company, except as a former employee for the purpose of
communicating with prospective employers or complying with any
applicable statutory requirements.
10.5 Notwithstanding anything to the contrary in this Employment
Agreement, the Company may terminate this Employment Agreement
for "just cause" by providing to the Employee written notice of
the termination on account of just cause and the specific grounds
thereof. Upon termination of the Employment for just cause, the
Employment will immediately end and the Employee will not be
entitled to receive any further compensation after that date
except as may be required by law. The term "just cause" means
(a) an act of fraud or dishonesty by the Employee that results
directly or indirectly in gain or personal enrichment of the
Employee at the Company's expense, (b) an act by the Employee
that the Company's Board of Directors reasonably believes
constitutes a felony, or (c) any material breach by the Employee
of any provision of this Employment Agreement that has not been
cured by the Employee within 30 days of written notice of such a
breach from the Company.
10.6 Notwithstanding anything to the contrary in this Employment
Agreement, the Company's obligations under this Employment
Agreement shall cease or terminate upon the death of the Employee
or upon the determination that the Employee has a disability.
Upon the death of the Employee, the Company shall pay the
surviving spouse (if any) of the Employee one (1) year of the
then current base salary of the Employee and any other
compensation or pro rata bonus due the Employee; if there is no
surviving spouse, the Company shall pay those sums to the estate
of the Employee. For purposes of this paragraph only, the
Employee will be deemed to have a "disability" only where the
Employee has suffered a physical or mental illness, injury, or
infirmity that prevents the Employee from fulfilling all of his
duties under this Employment Agreement for at least ninety (90)
consecutive days and the Company's Board of Directors has
determined, in good faith and with the advice of the Employee's
physician (or other relevant medical professional), that the
Employee's illness, injury, or infirmity is more than likely to
continue indefinitely. In these circumstances, after a
determination has been made in good faith by the Company's Board
of Directors that the Employee has a disability, the Company
shall pay to the Employee, the Employee's guardian or
administrator, or the Employee's estate, the then current monthly
compensation, including bonus compensation, provided under this
Employment Agreement commencing with the first month after the
determination of the existence of a disability and until the
expiration of the Employment Agreement or for a period of one (1)
year, whichever is greater.
10.7 Notwithstanding anything to the contrary in this Employment
Agreement, the Company may, in connection with the notice of non-
renewal delivered to the Employee pursuant to paragraph 1.3,
elect not to utilize the Employee's services during the remainder
of the Term of Employment and relieve the Employee of any further
obligation to perform his duties under this Employment Agreement.
If the Company so elects, then the Employee shall cease to occupy
his office or otherwise have access to the Company's premises,
but the Company shall pay and will remain obligated to pay the
Employee the remainder of his base salary, bonus and all other
benefits during the remainder of the Term of Employment or for a
period of one (1) year, whichever is greater. Employee shall
also have the right to demand that any loans or guarantees made
by Employee to/for the Company be repaid to Employee or replaced
upon the termination of this Agreement. In addition, any options
granted to the Employee under any Stock Option Plan will vest
immediately. In such event, the Employee also will not be
required to mitigate his damages by seeking other alternative
employment during the remainder of the Term of Employment under
this Employment Agreement. Moreover, the Company shall pay all
of the Employee's expenses for continued insurance coverage made
available pursuant to COBRA.
10.8 Notwithstanding anything to the contrary in this Employment
Agreement, the Employee may terminate the Employment under this
Employment Agreement for good reason in which event the Company
shall still have the same obligations to the Employee as provided
in paragraph 5. For purposes of this paragraph, "good reason"
shall mean: (a) without the Employee's express written consent,
the assignment to the Employee of any duties inconsistent with
his title, position, duties, responsibilities, and status with
the Company prior to a Change in Control as hereinafter defined,
or a change in his reporting responsibilities, title, or office
as in effect after a Change in Control, or any removal of the
Employee from or any failure to reelect him to any such
positions, except in connection with the termination of the
Employment for just cause, disability, or as a result of his
death; (b) a reduction in the Employee's minimum base salary or
benefits or breach of the Company's obligations undertaken in
this Employment Agreement; (c) in the event of the occurrence of
a "Change in Control," which means the occurrence of one or more
of the following: (i) without prior approval of the Board of
Directors, a single entity or group of affiliated entities
acquires more than 50% of the Company's outstanding stock, (ii)
the Company is involved in a merger or a sale of all or
substantially all of its assets so that its shareholders before
the merger or sale own less than 50% of the voting power of the
surviving or acquiring corporation, (iii) a liquidation or
dissolution of the Company occurs, (iv) a change in the majority
of the Board of Directors occurs during any twenty-four (24)
month period without the approval of a majority of the directors
in office at the beginning of such period; or (v) neither Arnold,
M. Anderson nor the Employee serves as the Company's chief
executive officer; (d) subsequent to a Change in Control of the
Company, the failure by the Company to obtain the assumption of
the obligation to perform this Employment Agreement by any
successor; or (e) subsequent to a Change in Control of the
Company, any purported termination of the Employee's Employment
which is not effected pursuant to a notice of termination
satisfying the requirements of paragraphs 1.3 or 10 hereof. In
the event that the Employee determines to terminate his
Employment for good reason, the Employee shall be obligated to
give notice of termination of sixty (60) days to the Company. In
such event, the Employee shall be entitled to the remainder of
the compensation due under the Term of Employment, and in any
event a sum equivalent to not less than one (1) year's base
minimum salary plus the pro rata portion of any bonus earned or
accrued through the date of the delivery of such notice of
termination. At his sole option and discretion, the Employee may
designate the manner and method by which the Company shall pay to
the Employee this remaining compensation and benefits, including
but not limited to a lump sum payment, monthly installments,
deferred payments of different amounts, or in other manner
specified by the Employee to the Company at any time during the
remainder of the Term of Employment under this Employment
Agreement.
11 SEVERABILITY
The various provisions and sub-provisions of this Employment Agreement are
severable, and if any provision or sub-provision or identifiable part
thereof is held to be invalid or unenforceable by any court of competent
jurisdiction, then such invalidity or unenforceability shall not affect the
validity or enforceability of the remaining provisions or sub-provisions or
identifiable parts in this Employment Agreement.
12 WARRANTY
The Employee represents and warrants that he is not prevented by any other
Employment Agreement, arrangement, contract, understanding, Court Order or
otherwise, which in any way directly or indirectly conflicts, is
inconsistent with, or restricts or prohibits him from fully performing the
duties of the Employment, in accordance with the terms and conditions of
this Employment Agreement.
13 NOTICES
Any notice to be given hereunder may be delivered (a) in the case of the
Company by first class mail addressed to its Registered Office and (b) in
the case of the Employee, either to him personally or by first class mail
to his last known residence address. Notices served by mail shall be
deemed given when they are mailed.
14 WAIVERS AND AMENDMENTS
No act, delay, omission, or course of dealing on the part of any party
hereto in exercising any right, power, or remedy hereunder shall operate
as, or be construed as, a waiver thereof or otherwise prejudice such
party's rights, powers, and remedies under this Employment Agreement. This
Employment Agreement may be amended only by a written instrument signed by
the Employee and a duly authorized officer of the Company or the Board of
Directors.
15 PRIOR AGREEMENTS
This Employment Agreement cancels and is in substitution for all previous
letters of engagement, offer letters, agreements, and arrangements (whether
oral or in writing) relating to the subject-matter hereof between the
Company and the Employee, all of which shall be deemed to have been
terminated by mutual consent, with the exception of any rights the Employee
may have under any stock option plan or bonus plan previously in existence.
This Employment Agreement constitutes the entire terms and conditions of
the Employee's employment and no waiver or modification thereof shall be
valid unless in writing, signed by the parties, and only to the extent
therein set forth.
16 ARBITRATION JURISDICTION AND GOVERNING LAW
Except for disputes arising under or in connection with Sections 7, 8, and
9, all disputes arising under or in connection with this Employment
Agreement or concerning in any way the Employee's employment shall be
submitted exclusively to arbitration in Chicago, Illinois under the Rules
of the American Arbitration Association then in effect, and the decision of
the arbitrator shall be final and binding upon the parties. Judgment upon
the award rendered may be entered and enforced in any court having
jurisdiction. The Employee and the Company consent to personal
jurisdiction of any state or federal court sitting in Du Page County,
Illinois, in order to enforce any arbitration judgment or the rights of the
Employee or of the Company under Sections 7, 8, and 9 and waive any
objection that such forum is inconvenient. The Employee and the Company
hereby consent to service of process in any such action by U.S. mail or
other commercially reasonable means of receipted delivery. The parties
also agree that the party found to be at fault shall reimburse the other
party for all reasonable attorneys' fees that the other party incurs in
pursing their remedies in good faith under this Employment Agreement.
17 GOVERNING LAW
This Employment Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois.
18 ASSIGNABILITY
The rights and obligations contained herein shall be binding on and inure
to the benefit of the successors and assigns of the Company. The Employee
may not assign his rights or obligations hereunder without the express
written consent of the Company.
19 HEADINGS; CONSTRUCTION
The headings contained in this Employment Agreement are inserted for
reference and inserted for reference and convenience only and in no way
define, limit, extend, or describe the scope of this Employment Agreement
or the meaning or construction of any of the provisions hereof. As used
herein, unless the context otherwise requires, the single shall include the
plural and vice versa, words of any gender shall include words of any other
gender, and "or" is used in the inclusive sense.
20 SURVIVAL OF TERMS
If this Employment Agreement is terminated for any reason, the provisions
of Sections 7, 8, and 9 shall survive and the Employee and the Company, as
the case may be, shall continue to be bound by the terms thereof to the
extent provided therein.
21 EMPLOYEE ACKNOWLEDGMENT AND ADVICE OF COUNSEL
THE EMPLOYEE REPRESENTS THAT HE HAS HAD AMPLE OPPORTUNITY TO REVIEW THIS
AGREEMENT AND THE EMPLOYEE ACKNOWLEDGES THAT HE UNDERSTANDS THAT IT
CONTAINS IMPORTANT CONDITIONS OF THE EMPLOYMENT AND THAT IT EXPLAINS
POSSIBLE CONSEQUENCES, BOTH FINANCIAL AND LEGAL, IF THE EMPLOYEE BREACHES
THE AGREEMENT. The Company agrees to reimburse the Employee for any legal
fees the Employee incurs in obtaining legal advice concerning this
Employment Agreement prior to the execution of this Employment Agreement.
AS WITNESS the hands of a duly authorized officer of the Company and of the
Employee the day and year first before written.
SIGNED by __________________ )
For and on behalf of Celex Group, Inc.)
Date
SIGNED by James M. Beltrame )
[name of Employee] )
Date
- 2 -
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into on this 1st day of June,
1996, BETWEEN:
(1) Celex Group, Inc., an Illinois corporation ("the Company"); and,
(2) Michael H. McKee, a resident of Illinois ("the Employee").
THE COMPANY AND THE EMPLOYEE HEREBY AGREE, in consideration of the mutual
obligations and covenants set forth below, to the following terms and
conditions:
1 EMPLOYMENT
1.1 The Company shall employ the Employee as a Senior Vice President
subject to the terms and conditions specified in this Employment
Agreement ("the Employment").
1.2 The Employment pursuant to this Employment Agreement shall
commence on June 1, 1996 and continue for a term of three (3)
years ("the Term of Employment").
1.3 Unless either party to this Employment Agreement, at least one
year prior to the conclusion of the Term of Employment, provides
written notice to the other party that it wishes not to renew
this Employment Agreement, then the Term of Employment will be
automatically extended for one additional year. There is no
limit on the number of extensions of the Term of Employment that
may occur pursuant to this section.
2 COMMENCEMENT AND PLACE OF EMPLOYMENT
The Company hereby employs the Employee as a Senior Vice President
effective on the date specified above, and the Employee hereby accepts such
employment on the terms and conditions set forth in this Employment
Agreement. The Employment shall be in Lombard, Illinois.
3 DUTIES
The Employee shall faithfully and diligently perform the duties and
responsibilities assigned to him by the Company.
4 EXCLUSIVITY OF SERVICE
While employed by the Company, the Employee shall devote all of his time,
attention, and energies to the Company's business.
5 COMPENSATION AND BENEFITS
5.1 Effective as of June 1, 1996, the Company shall pay the Employee
a minimum base salary of ONE HUNDRED FIFTY THOUSAND DOLLARS
($150,000) per year, payable in arrears on a monthly basis. The
Company may make deductions or withholdings as required by
applicable State and Federal law, or as may be or has been
consented to by the Employee. The minimum base salary shall be
adjusted on an annual basis (but not reduced below the minimum
base salary set forth above in this paragraph) by the Company for
purposes of the second, third, and, if applicable, any succeeding
year of the Employment due to its extension.
5.2 The Employee shall also be entitled to receive a bonus on an
annual basis in an amount not less than FIFTY THOUSAND DOLLARS
($50,000) per year. Within thirty (30) days after the
commencement of the Company's fiscal years, the Employee and the
Company's Board of Directors shall agree in writing upon the
specific performance standards and criteria that will be used to
determine how the bonus is actually earned. In addition, the
Employee and the Company's Board of Directors will also agree at
that time as to the amount of the actual bonus opportunity of the
Employee for the forthcoming fiscal year. For fiscal year 1997,
the Employee and the Company's Board of Directors shall reach in
writing said agreement on or before June 30, 1996. The
Employee's bonus shall vest at a rate of 1/12th of the total
amount (of the bonus) per month during each year of the
Employment Agreement and its extension.
5.3 The Company shall also reimburse the Employee, against receipts
or other satisfactory evidence, all reasonable business expenses
properly incurred by him in the course of the Employment and in
accordance with the Company's rules relating to reimbursement of
expenses.
5.4 The Company shall also provide the Employee with paid vacation in
accordance with the Company's policies, but in no event less than
twenty (20) days per annum, to be taken at such time as is
mutually agreed between the Employee and the Company. The
Employee will not forfeit any paid vacation if less than twenty
(20) days of vacation are taken in any year.
5.5 The Company shall also afford the Employee certain fringe
benefits at least equal to those made available by the Company to
its other senior executive employees, and in accordance with the
terms of such plans and policies, including but not limited to
entitlement to holidays, personal leave, sick leave, family
leave, medical insurance, disability insurance, dental insurance,
and life insurance.
5.6 The Employee shall also be entitled to receive options to be
granted under the Company's stock option plan as determined by
the Compensation Committee of the Board of Directors.
6 REASONABLENESS OF RESTRICTIONS
The Employee acknowledges that, during the term of Employment, the Company
will provide the Employee with the use of and access to trade secrets and
confidential information. In turn, the Employee recognizes that, while
performing his duties hereunder he will have access to and come into
contact with trade secrets and confidential information belonging to the
Company and will obtain personal knowledge of and influence over its
customers and/or employees. The Employee therefore agrees that the
restrictions contained in Sections 7, 8, and 9 are reasonable and necessary
to protect the legitimate business interests of the Company both during and
after the termination of the Employment (if the termination is for cause,
as defined in paragraph 10.5 of this Employment Agreement).
7 CONFIDENTIALITY
7.1 The Employee shall neither during the Employment (except in the
proper performance of his duties) nor at any time (without limit)
after the termination thereof directly or indirectly:
7.1.1 use for his own purposes or those of any other person,
company, business entity, or other organization whatsoever,
or,
7.1.2 disclose to any person, company, business entity, or other
organization whatsoever,
any trade secrets or confidential information relating or
belonging to the Company, including but not limited to any
such information relating to clients or customers, client or
customer lists or requirements, market information, business
plans or dealings, financial information and plans, trading
models, market access information, research activities, any
document marked Confidential, or any information which the
Employee has been told is Confidential, or any information
which has been given the Company in confidence by customers,
suppliers, or other persons.
8 TRADE SECRETS
8.1 During the term of this Employment Agreement, the Employee
acknowledges that he will be afforded access to and become
familiar with various trade secrets of the Company, including,
but not necessarily be limited to the following: the Company's
business plans, financial information, marketing strategies,
customer or client lists, software and research and proprietary
technology information. The Employee acknowledges that these
trade secrets are owned and shall continue to be owned solely by
the Company and that they contain specialized and confidential
information not generally known in the industry and which
constitute the Company's trade secrets. The Employee recognizes
and acknowledges that it is essential to the Company to protect
this trade secret information.
8.2 The Employee further represents to the Company that, as an
inducement for his employment, the Employee will hold this
information in trust and confidence for the Company's sole
benefit and use during the Employment and after the Employment
terminates, the Employee agrees not to use this information for
any purpose whatsoever or to divulge this information to any
person other than the Company or persons to whom the Company has
given without express written authorization.
9 POST-TERMINATION OBLIGATIONS
9.1 NON-COMPETITION. The Employee hereby agrees that, during his
employment by the Company pursuant to this Employment Agreement
and for a period of one (1) year or for a period of time which
corresponds to the total severance payment made to Employee
hereunder, whichever is greater, following the termination of the
Employment under this Employment Agreement, he will not, directly
or indirectly and in any way, whether as principal or as
director, officer, employee, consultant, agent, partner or
stockholder to another entity (other than by the ownership of a
passive investment interest of not more than 2.5% in a company
with publicly traded equity securities):
9.1.1 own, manage, operate, control, be employed by, participate
in, or be connected in any manner with the ownership,
management, operation, or control of any business competing
with any business of the Company in the one (1) year
immediately preceding such termination;
9.1.2 contact, interfere with, solicit on behalf of another, or
attempt to entice away from the Company (or any affiliate or
subsidiary of the Company):
(i) any client or customer of the Company (or any affiliate
or subsidiary of the Company); or,
(ii) any contract, agreement or arrangement that the Company
(or any affiliate or subsidiary of the Company) is
actively negotiating with any other party; or,
(iii) any prospective business opportunity that the Company
(or any affiliate or subsidiary of the Company) has
identified.
9.2 NON-SOLICITATION OF EMPLOYEES. The Employee hereby agrees that
he will not for a period of one (1) year or for a period of time
which corresponds to the total severance payment made to Employee
hereunder, whichever is greater, immediately following the
termination of his employment, howsoever arising, either on his
own account or in conjunction with or on behalf of any other
person, company, business entity, or other organization
whatsoever directly or indirectly:
9.2.1 induce, solicit, entice or procure any person who is an
employee of the Company to leave such employment, where that
person is:
9.2.2 a Company Employee on the Termination date; or,
9.2.3 had been a Company Employee in any part of the one (1) year
period immediately preceding the Termination Date;
9.2.4 accept into employment or otherwise engage or use the
services of any person who:
9.2.5 is a Company Employee on the Termination Date; or,
9.2.6 had been a Company Employee in any part of the one (1) year
period immediately preceding the Termination Date.
9.3 The Employee agrees that in the event of receiving from any
person, company, business entity, or other organization an offer
or employment either during the continuance of this Employment
Agreement or during the continuance in force of any of the
restrictions set out herein, he will forthwith provide to such
person, company, business entity, or other organization making
such the offer of employment a full and accurate copy of this
Employment Agreement signed by the parties hereto.
10 TERMINATION
10.1 The Company and the Employee agree that this employment
relationship is for a term of three (3) years commencing on the
date specified in paragraph 1.2 of this Employment Agreement.
10.2 On termination of the Employment for whatever reason, the
Employee shall return to the Company in accordance with its
instructions all of the Company's proprietary technology and
trading models, records, software, models, reports, and other
documents and any copies thereof and any other property belonging
to the Company which are in the Employee's possession or under
his control. The Employee shall, if so required by the Company,
confirm in writing his compliance with his obligations under this
paragraph.
10.3 The termination of the Employment shall be without prejudice to
any right the Employee or the Company may have in respect of any
breach by the other of any provisions of this Employment
Agreement which may have occurred prior to such termination.
10.4 In the event of termination of the Employment hereunder however
arising, the Employee agrees that he will not at any time after
such termination represent himself as still having any connection
with the Company, except as a former employee for the purpose of
communicating with prospective employers or complying with any
applicable statutory requirements.
10.5 Notwithstanding anything to the contrary in this Employment
Agreement, the Company may terminate this Employment Agreement
for "just cause" by providing to the Employee written notice of
the termination on account of just cause and the specific grounds
thereof. Upon termination of the Employment for just cause, the
Employment will immediately end and the Employee will not be
entitled to receive any further compensation after that date
except as may be required by law. The term "just cause" means
(a) an act of fraud or dishonesty by the Employee that results
directly or indirectly in gain or personal enrichment of the
Employee at the Company's expense, (b) an act by the Employee
that the Company's Board of Directors reasonably believes
constitutes a felony, or (c) any material breach by the Employee
of any provision of this Employment Agreement that has not been
cured by the Employee within 30 days of written notice of such a
breach from the Company.
10.6 Notwithstanding anything to the contrary in this Employment
Agreement, the Company's obligations under this Employment
Agreement shall cease or terminate upon the death of the Employee
or upon the determination that the Employee has a disability.
Upon the death of the Employee, the Company shall pay the
surviving spouse (if any) of the Employee one (1) year of the
then current base salary of the Employee and any other
compensation or pro rata bonus due the Employee; if there is no
surviving spouse, the Company shall pay those sums to the estate
of the Employee. For purposes of this paragraph only, the
Employee will be deemed to have a "disability" only where the
Employee has suffered a physical or mental illness, injury, or
infirmity that prevents the Employee from fulfilling all of his
duties under this Employment Agreement for at least ninety (90)
consecutive days and the Company's Board of Directors has
determined, in good faith and with the advice of the Employee's
physician (or other relevant medical professional), that the
Employee's illness, injury, or infirmity is more than likely to
continue indefinitely. In these circumstances, after a
determination has been made in good faith by the Company's Board
of Directors that the Employee has a disability, the Company
shall pay to the Employee, the Employee's guardian or
administrator, or the Employee's estate, the then current monthly
compensation, including bonus compensation, provided under this
Employment Agreement commencing with the first month after the
determination of the existence of a disability and until the
expiration of the Employment Agreement or for a period of one (1)
year, whichever is greater.
10.7 Notwithstanding anything to the contrary in this Employment
Agreement, the Company may, in connection with the notice of non-
renewal delivered to the Employee pursuant to paragraph 1.3,
elect not to utilize the Employee's services during the remainder
of the Term of Employment and relieve the Employee of any further
obligation to perform his duties under this Employment Agreement.
If the Company so elects, then the Employee shall cease to occupy
his office or otherwise have access to the Company's premises,
but the Company shall pay and will remain obligated to pay the
Employee the remainder of his base salary, bonus and all other
benefits during the remainder of the Term of Employment or for a
period of one (1) year, whichever is greater. Employee shall
also have the right to demand that any loans or guarantees made
by Employee to/for the Company be repaid to Employee or replaced
upon the termination of this Agreement. In addition, any options
granted to the Employee under any Stock Option Plan will vest
immediately. In such event, the Employee also will not be
required to mitigate his damages by seeking other alternative
employment during the remainder of the Term of Employment under
this Employment Agreement. Moreover, the Company shall pay all
of the Employee's expenses for continued insurance coverage made
available pursuant to COBRA.
10.8 Notwithstanding anything to the contrary in this Employment
Agreement, the Employee may terminate the Employment under this
Employment Agreement for good reason in which event the Company
shall still have the same obligations to the Employee as provided
in paragraph 5. For purposes of this paragraph, "good reason"
shall mean: (a) without the Employee's express written consent,
the assignment to the Employee of any duties inconsistent with
his title, position, duties, responsibilities, and status with
the Company prior to a Change in Control as hereinafter defined,
or a change in his reporting responsibilities, title, or office
as in effect after a Change in Control, or any removal of the
Employee from or any failure to reelect him to any such
positions, except in connection with the termination of the
Employment for just cause, disability, or as a result of his
death; (b) a reduction in the Employee's minimum base salary or
benefits or breach of the Company's obligations undertaken in
this Employment Agreement; (c) in the event of the occurrence of
a "Change in Control," which means the occurrence of one or more
of the following: (i) without prior approval of the Board of
Directors, a single entity or group of affiliated entities
acquires more than 50% of the Company's outstanding stock, (ii)
the Company is involved in a merger or a sale of all or
substantially all of its assets so that its shareholders before
the merger or sale own less than 50% of the voting power of the
surviving or acquiring corporation, (iii) a liquidation or
dissolution of the Company occurs, (iv) a change in the majority
of the Board of Directors occurs during any twenty-four (24)
month period without the approval of a majority of the directors
in office at the beginning of such period; or (v) neither Arnold,
M. Anderson nor James M. Beltrame serves as the Company's chief
executive officer; (d) subsequent to a Change in Control of the
Company, the failure by the Company to obtain the assumption of
the obligation to perform this Employment Agreement by any
successor; or (e) subsequent to a Change in Control of the
Company, any purported termination of the Employee's Employment
which is not effected pursuant to a notice of termination
satisfying the requirements of paragraphs 1.3 or 10 hereof. In
the event that the Employee determines to terminate his
Employment for good reason, the Employee shall be obligated to
give notice of termination of sixty (60) days to the Company. In
such event, the Employee shall be entitled to the remainder of
the compensation due under the Term of Employment, and in any
event a sum equivalent to not less than one (1) year's base
minimum salary plus the pro rata portion of any bonus earned or
accrued through the date of the delivery of such notice of
termination. At his sole option and discretion, the Employee may
designate the manner and method by which the Company shall pay to
the Employee this remaining compensation and benefits, including
but not limited to a lump sum payment, monthly installments,
deferred payments of different amounts, or in other manner
specified by the Employee to the Company at any time during the
remainder of the Term of Employment under this Employment
Agreement.
11 SEVERABILITY
The various provisions and sub-provisions of this Employment Agreement are
severable, and if any provision or sub-provision or identifiable part
thereof is held to be invalid or unenforceable by any court of competent
jurisdiction, then such invalidity or unenforceability shall not affect the
validity or enforceability of the remaining provisions or sub-provisions or
identifiable parts in this Employment Agreement.
12 WARRANTY
The Employee represents and warrants that he is not prevented by any other
Employment Agreement, arrangement, contract, understanding, Court Order or
otherwise, which in any way directly or indirectly conflicts, is
inconsistent with, or restricts or prohibits him from fully performing the
duties of the Employment, in accordance with the terms and conditions of
this Employment Agreement.
13 NOTICES
Any notice to be given hereunder may be delivered (a) in the case of the
Company by first class mail addressed to its Registered Office and (b) in
the case of the Employee, either to him personally or by first class mail
to his last known residence address. Notices served by mail shall be
deemed given when they are mailed.
14 WAIVERS AND AMENDMENTS
No act, delay, omission, or course of dealing on the part of any party
hereto in exercising any right, power, or remedy hereunder shall operate
as, or be construed as, a waiver thereof or otherwise prejudice such
party's rights, powers, and remedies under this Employment Agreement. This
Employment Agreement may be amended only by a written instrument signed by
the Employee and a duly authorized officer of the Company or the Board of
Directors.
15 PRIOR AGREEMENTS
This Employment Agreement cancels and is in substitution for all previous
letters of engagement, offer letters, agreements, and arrangements (whether
oral or in writing) relating to the subject-matter hereof between the
Company and the Employee, all of which shall be deemed to have been
terminated by mutual consent, with the exception of any rights the Employee
may have under any stock option plan or bonus plan previously in existence.
This Employment Agreement constitutes the entire terms and conditions of
the Employee's employment and no waiver or modification thereof shall be
valid unless in writing, signed by the parties, and only to the extent
therein set forth.
16 ARBITRATION JURISDICTION AND GOVERNING LAW
Except for disputes arising under or in connection with Sections 7, 8, and
9, all disputes arising under or in connection with this Employment
Agreement or concerning in any way the Employee's employment shall be
submitted exclusively to arbitration in Chicago, Illinois under the Rules
of the American Arbitration Association then in effect, and the decision of
the arbitrator shall be final and binding upon the parties. Judgment upon
the award rendered may be entered and enforced in any court having
jurisdiction. The Employee and the Company consent to personal
jurisdiction of any state or federal court sitting in Du Page County,
Illinois, in order to enforce any arbitration judgment or the rights of the
Employee or of the Company under Sections 7, 8, and 9 and waive any
objection that such forum is inconvenient. The Employee and the Company
hereby consent to service of process in any such action by U.S. mail or
other commercially reasonable means of receipted delivery. The parties
also agree that the party found to be at fault shall reimburse the other
party for all reasonable attorneys' fees that the other party incurs in
pursing their remedies in good faith under this Employment Agreement.
17 GOVERNING LAW
This Employment Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois.
18 ASSIGNABILITY
The rights and obligations contained herein shall be binding on and inure
to the benefit of the successors and assigns of the Company. The Employee
may not assign his rights or obligations hereunder without the express
written consent of the Company.
19 HEADINGS; CONSTRUCTION
The headings contained in this Employment Agreement are inserted for
reference and inserted for reference and convenience only and in no way
define, limit, extend, or describe the scope of this Employment Agreement
or the meaning or construction of any of the provisions hereof. As used
herein, unless the context otherwise requires, the single shall include the
plural and vice versa, words of any gender shall include words of any other
gender, and "or" is used in the inclusive sense.
20 SURVIVAL OF TERMS
If this Employment Agreement is terminated for any reason, the provisions
of Sections 7, 8, and 9 shall survive and the Employee and the Company, as
the case may be, shall continue to be bound by the terms thereof to the
extent provided therein.
21 EMPLOYEE ACKNOWLEDGMENT AND ADVICE OF COUNSEL
THE EMPLOYEE REPRESENTS THAT HE HAS HAD AMPLE OPPORTUNITY TO REVIEW THIS
AGREEMENT AND THE EMPLOYEE ACKNOWLEDGES THAT HE UNDERSTANDS THAT IT
CONTAINS IMPORTANT CONDITIONS OF THE EMPLOYMENT AND THAT IT EXPLAINS
POSSIBLE CONSEQUENCES, BOTH FINANCIAL AND LEGAL, IF THE EMPLOYEE BREACHES
THE AGREEMENT. The Company agrees to reimburse the Employee for any legal
fees the Employee incurs in obtaining legal advice concerning this
Employment Agreement prior to the execution of this Employment Agreement.
AS WITNESS the hands of a duly authorized officer of the Company and of the
Employee the day and year first before written.
SIGNED by __________________ )
For and on behalf of Celex Group, Inc.)
Date
SIGNED by Michael H. McKee )
[name of Employee] )
Date
- 2 -
COMMON STOCK OPTION AGREEMENT
(Non-transferrable)
THE OPTION PROVIDED FOR HEREIN AND THE UNDERLYING SECURITIES ISSUABLE
UPON THE EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR APPLICABLE STATE SECURITIES LAWS, AND NEITHER SUCH OPTION NOR
SUCH UNDERLYING SECURITIES MAY BE ASSIGNED, HYPOTHECATED, PLEDGED, SOLD OR
OTHERWISE TRANSFERRED OR ENCUMBERED EXCEPT AS PROVIDED IN THIS OPTION
AGREEMENT.
CELEX Group, Inc.,
an Illinois Corporation
In consideration of services rendered, CELEX Group, Inc., an Illinois
corporation (the "Corporation"), hereby grants to JAMES M. BELTRAME (the
"Holder") the right and option (the "Option") to purchase the number of
shares as provided in Section 3 below (the "Shares") of the common stock,
$.01 par value, of the Corporation (the "Common Stock") for the price,
during the time period, and on the other terms and conditions set forth
herein.
1. CERTAIN TERMS AND CONDITIONS OF EXERCISE.
The Option and its exercise shall be subject to the following:
(a) The Option shall become exercisable, in whole or in part, as
follows:
PERCENTAGE OF SHARES
YEARS AFTER GRANT DATE EXERCISABLE
less than two years 0%
two years but less than three years 20%
three years but less than four years 40%
four years but less than five years 60%
five years but less than six years 80%
six years or more 100%
Nothwithstanding the above, this Option shall be fully exercisable
after a Change in Control. As used herein, Change of Control shall have
the same meaning as the term is defined in the Celex Group, Inc. Stock
Option Plan.
(b) The Option shall expire on June 17, 2006.
Upon expiration of the Option without its having been duly exercised,
the Option shall be and become null, void and of no further effect.
(c) The Holder shall exercise the Option by surrender to the
Corporation of this Option Agreement together with delivery to the
Corporation of a duly executed copy of the Purchase Form attached hereto as
Exhibit A, accompanied by payment in cash or by certified or cashier's
check of the Option Price (as defined in Section 2).
(d) Within twenty (20) business days after the exercise of the
Option the Corporation shall cause to be issued in the name of and
delivered to the Holder a certificate or certificates for the Shares. The
Corporation covenants that (i) all Shares issued and delivered upon the due
exercise of the Option by the Holder shall, upon such issuance and
delivery, be fully paid and non-assessable, and (ii) the Corporation shall
agree at all times to reserve and hold available a sufficient number of
shares of its authorized but unissued Common Stock to provide for delivery
of the Shares upon the exercise of the Option.
(e) The Holder agrees that at the time of exercise of the Option
he will, if the Corporation so requests, deliver to the Corporation a
written representation, in form satisfactory to the Corporation and its
counsel, to the effect that he is purchasing the Shares for investment and
not with a view to the offer for sale or the sale in connection with the
distribution thereof and containing such other related representations as
the Corporation may require.
2. THE OPTION PRICE.
The Option Price shall be $6.125 per share, which price is deemed to
be equal to the fair market value of the Shares as of the date hereof.
3. THE NUMBER OF THE SHARES.
The number of the Shares shall be: FORTY THOUSAND (40,000).
4. ANTI-DILUTION PROVISIONS.
Subject to the limitations of Section 5 herein, the number and kind of
securities purchasable upon the exercise of the Option and the Option Price
shall be subject to equitable adjustment to reflect a stock dividend, stock
split, reverse stock split, share combination, recapitalization, merger in
which the Corporation is the surviving corpopration, reorganization, rights
offering, liquidation or similar event.
5. EXPIRATION OF THE OPTION ON CERTAIN ADDITIONAL EVENTS.
Anything contained in this Option Agreement to the contrary
notwithstanding, if there shall occur any of the following:
(a) merger of the Corporation into any other corporation in which
merger the Corporation is not the surviving corporation,
(b) consolidation of the Corporation with any other corporation,
(c) share exchange with any other corporation in which the
Corporation is an acquired party,
(d) a sale, lease, exchange or other disposition of all or
substantially all of the assets of the Corporation, or
(e) the voluntary dissolution of the Corporation by consent or
vote of its shareholders,
then the Option (unless theretofore exercised) shall expire and be and
become null, void and of no further effect on and as of the record date for
determining the holders of the Common Stock entitled to vote upon such
merger, consolidation, share exchange, disposition or dissolution.
The Corporation covenants and agrees that, in addition to any other
notice requirement to which the Corporation may be subject, it shall give
the Holder not less than twenty (20) days' prior notice of the record date
for determining the holders of the Common Stock entitled to vote upon any
such merger, consolidation, share exchange, disposition or dissolution.
6. TRANSFER RESTRICTIONS
(a) The Holder acknowledges and agrees that the Option and the Shares
issuable upon the exercise of the Option have not been and will not be
registered under either the Securities Act of 1933 (the "Act") or any
applicable state securities law ("State Acts") and shall not be sold,
pledged, hypothecated, donated, or otherwise transferred (whether or not
for consideration) except upon the issuance to the Corporation of a
favorable opinion of counsel and a submission to the Corporation of such
evidence as may be satisfactory to counsel to the Corporation, in each such
case, to the effect that any such transfer shall not be in violation of the
Act and the State Acts.
(b) The stock certificates of the Corporation that will evidence the
Shares issuable upon exercise of the Option shall bear a conspicuous legend
in substantially the following form:
"The securities represented by this certificate have not been
registered under either the Securities Act of 1933 (the "Act") or
applicable state securities laws (the "State Acts") and shall not be
sold, pledged, hypothecated, donated or otherwise transferred (whether
or not for consideration) by the holder except upon the issuance to
the Corporation of a favorable opinion of its counsel and submission
to the Corporation of such other evidence as may be satisfacatory to
counsel of the Corporation, in each such case, to the effect that any
such transfer shall not be in violation of the Act and the State
Acts."
(c) The Corporation has not agreed and is not obligated to register
any of the Shares for distribution in accordance with the provisions of the
Act or the State Acts and the Corporation has not agreed and is not
obligated to comply with any exemption from registration under the Act or
the State Acts for the resale of any of the Shares. The Holder understands
that by virtue of the provisions of certain rules respecting "restricted
securities" promulgated by the Securities and Exchange Commission, the
Shares may be required to be held indefinitely, unless and until registered
under the Act and the State Acts, unless an exemption from registration is
available, in which case the Holder may continue to be limited as to the
number of Shares that may be sold.
7. NON-TRANSFERABILITY.
This Option Agreement and the Option shall not be assigned, pledged,
sold or otherwise transferred or encumbered by the Holder.
8. NOTICES.
Any notice or other communication to the Corporation or to the Holder
of this Option shall be in writing and any such notice or communication
shall be deemed duly given or made if mailed by registered or certified
mail, return receipt requested, postage prepaid
(a) if to the Corporation, to the Corporation's office at 919
Springer Drive, Lombard, Illinois 60148, or at such other address as the
Corporation may designate by notice to the Holder, and
(b) if to the Holder, to the address stated below, or at such
other address as the Holder may designate by notice to the Corporation.
9. GOVERNING LAW.
This Option shall be governed by and construed and enforced in
accordance with the laws of the State of Illinois.
10. SUCCESSORS AND ASSIGNS.
All of the provisions of this Option Agreement shall be binding on the
Corporation and its successors and assigns and the Holder, his heirs and
his personal representatives.
IN WITNESS WHEREOF, CELEX Group, Inc. has caused this Option Agreement
to be signed in its corporate name under its corporate seal by its
President and its corporate seal to be hereunto affixed and its execution
hereof to be attested by its Secretary, as of this 17th day of June, 1996.
CELEX Group, Inc.
By:
Its:
ATTEST:
_________________________
Secretary
Accepted: , 1996:
FEIN or SSN:
Holder (Signature)
James M. Beltrame
Holder (Print Name)
111 Adams
Hinsdale, Illinois 60521
Address
EXHIBIT A
PURCHASE FORM
To: CELEX Group, Inc.
919 Springer Drive
Lombard, IL 60148
The undersigned hereby irrevocably subscribes for shares of
Common Stock of CELEX Group, Inc. pursuant to and in accordance with the
terms and conditions of that certain Stock Option Agreement dated as of
, 19__, and hereby makes payment of Dollars
($ ) therefor and requests that a certificate for such shares be
issued in the name of the undersigned and delivered to the undersigned at
the address listed below.
Address:
Social Sec.
or FEI Number:
Dated: , 1996
