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As filed with the Securities and Exchange Commission on January 6, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SUCCESSORIES, INC.
(Exact Name of Registrant as Specified in its Charter)
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<TABLE>
<S> <C>
ILLINOIS 36-3760230
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
</TABLE>
919 SPRINGER DRIVE, LOMBARD, ILLINOIS 60148, (630) 953-8440
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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TIMOTHY C. DILLON
SUCCESSORIES, INC.
919 SPRINGER DRIVE
LOMBARD, ILLINOIS 60148
(630) 953-8440
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Copy to:
GUY E. SNYDER
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 NORTH LASALLE STREET
SUITE 2600
CHICAGO, ILLINOIS 60601
(312) 609-7656
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the Registration
Statement becomes effective.------------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
SHARES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(1)
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<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per
share............................. 1,105,900 $6.875 $7,603,063 $2,304
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</TABLE>
(1) Pursuant to Rule 457(c), the proposed offering price and registration fee
are based upon the average of the high and low prices reported on the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") for the Registrant's Common Stock on January 3, 1997.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 6, 1997
PROSPECTUS
1,105,900 SHARES
SUCCESSORIES, INC.
COMMON STOCK
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This Prospectus relates to the offer and sale of shares (the "Shares") of
common stock, par value $0.01 per share (the "Common Stock"), of Successories,
Inc., an Illinois corporation (the "Company"). The Shares may be offered and
sold from time to time by certain selling shareholders of the Company (the
"Selling Shareholders") in transactions in the open market, in negotiated
transactions or a combination of such methods of sale, at fixed prices which may
be changed, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. The Selling
Shareholders may effect such transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Shareholders and/or the
purchasers of the Shares for whom such broker-dealers may act as agents or to
whom they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). See "Sale of the
Shares."
The Selling Shareholders acquired 1,212 shares of the Company's Series B
Cumulative Convertible Preferred Stock (the "Series B Preferred Stock") on
December 17, 1996 in a private transaction exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act").
The Preferred Stock is convertible into a maximum of 1,105,900 Shares. See
"Recent Development," "Selling Shareholders" and "Sale of the Shares."
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by the Company. The Company has agreed to bear all
expenses (other than underwriting discounts, broker or dealer commissions, and
fees and expenses of counsel (in excess of $10,000) or other advisors to the
Selling Shareholders) in connection with the registration and sale of the Shares
being offered by the Selling Shareholders and to indemnify the Selling
Shareholders against certain liabilities, including certain liabilities under
the Securities Act.
SEE "RISK FACTORS" BEGINNING ON PAGE THREE FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF SHARES OF COMMON
STOCK OFFERED HEREBY.
The Common Stock is listed on NASDAQ. On January 3, 1997, the last reported
sale price of the Common Stock of the Company on NASDAQ was $6.875 per share.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is January 6, 1997.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement"), of which this Prospectus forms a part, covering the Shares to be
sold pursuant to this offering.
As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information, exhibits and undertakings contained in the
Registration Statement. Such additional information, exhibits and undertakings
can be inspected at and obtained from the Commission as set forth below. For
additional information regarding the Company, the Common Stock and related
matters and documents, reference is made to the Registration Statement and
exhibits thereto.
CERTAIN DOCUMENTS PREVIOUSLY FILED BY THE COMPANY WITH THE COMMISSION
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE
ACT"), ARE INCORPORATED BY REFERENCE IN THIS PROSPECTUS. SEE "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE." COPIES OF ANY DOCUMENTS INCORPORATED HEREIN BY
REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS THEY ARE SPECIFICALLY
INCORPORATED BY REFERENCE THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO
WHOM A PROSPECTUS IS DELIVERED UPON REQUEST TO THE SECRETARY, SUCCESSORIES,
INC., 919 SPRINGER DRIVE, LOMBARD, ILLINOIS 60148, (TELEPHONE: (630) 953-8440).
The Company is subject to the informational and reporting requirements of
the Exchange Act, and accordingly files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed with the Commission, as well as the Registration Statement,
are available for inspection and copying at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and at certain regional offices of the Commission
located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and
Seven World Trade Center, 13th Floor, New York, New York 10007. Copies of such
material can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, at prescribed
rates. The reports, proxy statements and other information filed with the
Commission, as well as the Registration Statement, are available on a Web site
that the Commission maintains. The address of the Commission's Web site is
http://www.sec.gov.
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THE COMPANY
The Company's principal executive offices are located at 919 Springer
Drive, Lombard, Illinois 60148. Its telephone number is (630) 953-8440.
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following factors in
evaluating the Company, its business and an investment in the Shares offered by
this Prospectus.
NO ASSURANCE OF CONTINUED GROWTH AND PROFITABILITY
Since its formation in 1985, the Company has experienced rapid growth and,
as part of its business strategy, the Company intends to pursue the continuation
of this growth. The Company intends to open new stores, sell additional
franchises, expand its wholesale channels of distribution and increase catalog
revenues. The Company's expansion plans will place significant demands on its
management, working capital, information systems, financial and management
controls and staff. The Company's ability to control and manage this growth
effectively is vital to the Company's long-term profitability. There can be no
assurance that this rapid growth will continue in the future, or, if it does
continue, that the Company will operate profitably.
NO ASSURANCE OF PROFITABLE EXPANSION OF RETAIL OPERATIONS
In 1991, the Company initiated a Company-owned retail store concept and by
the end of the fiscal year ended February 3, 1996, had 54 retail locations in
addition to 43 franchised locations. As of December 31, 1996, there were 56
Company-owned retail locations and 44 franchised locations. The Company
anticipates opening new Company-owned retail locations and franchised locations
in the year ahead. The Company expects to rely increasingly upon new geographic
markets to effect its planned expansion and may be expanding into geographic
markets in which it has no previous operating experience. There can be no
assurance that the Company will be able to open its planned new retail stores or
that it can continue to operate its retail stores profitably. The Company's
ability to expand will depend upon a number of factors, including: selection and
availability of suitable store locations; negotiation of acceptable lease terms;
the securing of required state and local permits and approvals; accuracy and
proper utilization of management information systems; timely build-out; hiring;
training and retention of skilled management and other personnel; availability
of adequate financing; general economic conditions; and other factors, many of
which are beyond the Company's control. Moreover, the opening of additional
stores in current markets could have the effect of diverting sales from the
Company's existing stores.
NO ASSURANCE OF PROFITABLE EXPANSION OF FRANCHISING OPERATIONS
As of December 31, 1996, the Company had 44 franchised retail locations.
The Company's franchise expansion plan will depend upon a number of factors:
including the ability of the Company's franchisees to obtain suitable sites for
new stores; the recruitment of new franchisees; the hiring and training of
qualified personnel; the opening of new stores in a timely manner; and the
availability of capital to franchisees. There can be no assurance that the
Company will achieve its planned franchise expansion or that the expansion will
be profitable.
GOVERNMENT REGULATION MAY ADVERSELY AFFECT FRANCHISING EXPANSION AND
PROFITABILITY
As a franchisor, the Company is subject to various federal and state
franchise laws and regulations. Although the Company believes it is currently in
compliance in all material respects with existing federal and state laws, there
is a trend toward increased government regulation of franchising. Additional
legislation is currently pending both at the federal and state levels which
could expand pre-sale disclosure requirements, further regulate substantive
aspects of the franchise relationship and require the Company to file its
franchise
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offering circulars with additional government authorities. The promulgation of
new franchising laws and regulations could adversely affect the Company.
GROWTH DEPENDENT UPON CONTINUED EFFECTIVENESS OF MANAGEMENT INFORMATION SYSTEMS
The Company's success is dependent upon, among other factors, the accuracy
and proper utilization of its management information systems. The Company's
ability to manage its inventory and accounts receivable collections, to
purchase, sell and ship its products efficiently and on a timely basis, and to
operate in a cost effective manner is dependent upon the quality and utilization
of the information generated by its management information systems. The Company
continuously evaluates the effectiveness of its retail and direct marketing
management information systems. The Company believes, however, that its
management information systems, coupled with planned enhancements are sufficient
to sustain its present operations and its anticipated growth for the foreseeable
future. If the growth of the Company surpasses the capacity of its management
information systems, the Company's operations could be negatively affected.
GROWTH DEPENDENT ON RETAINING KEY PERSONNEL
The success of the Company's business will largely depend upon the efforts
and abilities of its executive officers and certain other key employees. The
Company's Chief Executive Officer, Chief Operating Officer and Senior Vice
President/Creative Director are the only key employees subject to written
employment agreements. The Company believes that its future success is also
dependent upon its ability to continue to attract and retain qualified personnel
in all areas of its business.
CONTINUED GROWTH DEPENDENT UPON ABILITY TO PROTECT INTELLECTUAL PROPERTY AND
PROPRIETARY RIGHTS
The Company relies on copyright and trademark laws to protect its
proprietary rights in the names, distinctive configurations and original art
work and authorship of its products and services. There can be no assurance that
this protection is adequate. Moreover, the laws of certain countries in which
the Company's products are sold do not protect the Company's products and
intellectual property rights to the same extent as do the laws of the United
States.
SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS AFFECT OPERATING RESULTS
The Company generally experiences peak sales in the fourth quarter of its
fiscal year (November through January) due to the holiday season, and its lowest
sales levels in its second fiscal quarter (May through July). The effects of
seasonality are greater in the Company's retail operations than in its catalog
operations. Most expenses are incurred evenly throughout the year, although some
selling and administrative expenses are variable with sales. The Company's
quarterly results may also vary depending upon such factors as the opening of
new stores, new catalog mailings and the timing of new product introductions by
the Company.
COMPANY OPERATES IN A HIGHLY COMPETITIVE INDUSTRY
The industry supplying motivational, self-improvement and custom awards is
highly competitive and fragmented with limited barriers to entry. The primary
bases for competition are customer service, selection, price, quality and name
recognition. There can be no assurance that other companies with greater
resources than the Company will not enter the industry and compete directly
against the Company. In addition, in its franchising operations the Company
competes with other franchisors for qualified franchisees. Many competing
franchisors have established business concepts and significantly greater
financial and other resources than the Company.
INCREASES IN POSTAGE AND SHIPPING EXPENSES COULD ADVERSELY AFFECT OPERATING
RESULTS
Postage and shipping are significant expenses in the operation of the
Company's mail order business. The Company ships its products to customers
generally by overnight delivery and surface services. The Company generally
invoices the costs of delivery and parcel shipments directly to customers as
separate shipping and handling charges. Any increases in shipping rates or
postal rates (paid by the Company for its catalog
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mailings) could have an adverse effect on the Company's operating results.
Similarly, strikes or other service interruptions by such shippers could
adversely affect the Company's ability to market or deliver product on a timely
basis.
IMPOSITION OF STATE SALES TAX COLLECTION OBLIGATION COULD INCREASE EXPENSES AND
ADVERSELY AFFECT THE COMPANY'S BUSINESS
The Company presently collects retail occupation tax, commonly referred to
as sales tax, or other similar tax only on sales of products to residents of the
states in which the Company operates retail locations. Various states have
sought to impose on direct marketers the burden of collecting state sales tax on
the sale of products shipped to that state's residents. The United States
Supreme Court has ruled that the various states, absent congressional
legislation, may not impose tax collection obligations on an out-of-state mail
order company whose only contacts with the taxing state are the distribution of
catalogs and other advertisement materials through the mail and whose subsequent
delivery of purchased goods is by U.S. mail or interstate common carriers.
Legislation has been introduced in the United States Senate in the past which,
if passed, would allow states to impose state sales tax collection obligations
on out-of-state mail order companies, such as the Company, whose sales to
residents of the taxing state exceed certain levels. The Company believes if
such legislation was passed its present sales to residents of numerous states
would be subject to sales tax. Although no legislation is currently pending
which would subject the Company to a sales tax collection obligation,
legislation similar to that proposed in the past could be introduced and if
enacted, the imposition of a sales tax collection obligation on the Company may
result in additional administrative expenses to the Company and price increases
to the customer that could adversely affect the Company, its financial condition
and results of operation.
PRINCIPAL STOCKHOLDERS HAVE SIGNIFICANT INFLUENCE ON MANAGEMENT AND OPERATIONS
The directors and officers of the Company beneficially own approximately
29% of the Company's outstanding shares of Common Stock. As a result, the
directors and officers will have significant influence on the management and
direction of the Company.
PREFERRED STOCK AND CERTAIN ANTI-TAKEOVER PROVISIONS COULD PREVENT TAKEOVER
ATTEMPTS AND ADVERSELY AFFECT STOCK PRICE
The Board of Directors has authority to establish the designations,
liquidation preferences, dividend rights, terms of redemption, conversion
rights, sinking fund terms and all other preferences and rights (including
voting rights) of any series of preferred stock of the Company ("Preferred
Stock"). The Board of Directors, without stockholder approval, can issue shares
of Preferred Stock with voting and conversion rights that could adversely affect
the voting power and other rights of holders of shares of Common Stock. Any
designation and issuance of such shares could be used to dilute the share
ownership of persons seeking to gain control of the Company and could otherwise
have the effect of delaying, deferring or preventing a change in control of the
Company. In addition, certain statutory provisions of Illinois law and the
Company's Articles of Incorporation could have an anti-takeover effect.
Accordingly, the possible impact on takeover attempts could adversely affect the
price of the Common Stock. Although the Company has no current plans to issue or
to designate any additional series of Preferred Stock, there can be no assurance
that the Company will not do so in the future.
STOCK PRICE HAS HISTORICALLY BEEN SUBJECT TO VOLATILITY
In recent years, the stock market has experienced a high level of price and
volume volatility, and market prices for securities of many companies have
experienced wide price fluctuations not necessarily related to the operating
performance of such companies. In addition to such market risks, the price for
the Common Stock may be affected by fluctuations in the Company's quarterly
results, increased competition, higher operating expenses, general economic
conditions and other factors.
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SIZE OF OFFERING COULD ADVERSELY AFFECT ABILITY OF HOLDERS TO SELL STOCK
Up to 1,105,900 shares of Common Stock may be offered and sold from time to
time pursuant to this Prospectus. Due to the large number of shares of Common
Stock offered hereby relative to the number of outstanding shares that are
currently freely tradeable (either pursuant to registration or to Rule 144) and
to the fluctuations in the trading volume of the Common Stock, if holders of a
significant number of shares of Common Stock attempt to sell their shares
concurrently, the trading price of the Common Stock and the availability of a
liquid trading market for shares of Common Stock could be negatively affected.
PAST OPERATIONAL DIFFICULTIES HAVE ADVERSELY AFFECTED THE MARKET PRICE FOR THE
COMMON STOCK
Due to the significant growth the Company experienced, many of the
Company's internal systems and controls were unable to keep pace with the
Company's growth. The weaknesses in these controls and systems inhibited timely
identification of escalating costs. Further, during the 1994 Holiday selling
season, the Company experienced construction delays in opening new stores and
operational difficulties during the implementation of a new automated order
fulfillment system. Shortly thereafter, the Company discovered that the value of
its inventory was overstated primarily as a result of an incorrect estimate of
inventory costs. As a result, the Company experienced a loss from operations for
the fiscal year ended April 30, 1995 and the trading price of the Company's
stock was adversely affected. While the Company has made and continues to make
substantial improvements to its internal operations to more effectively manage
operating expenses, there can be no assurance that further problems in these
areas or others will not adversely affect the Company's operating results or
that the Company will be able to operate profitably in the future.
RECENT DEVELOPMENT
On December 17, 1996, the Company sold the Preferred Stock to Infinity
Investors, Ltd. ("Infinity") and Seacrest Capital Limited ("Seacrest") for
$5,000,000 pursuant to a Regulation D Securities Subscription Agreement (the
"Subscription Agreement"). As of December 31, 1996, Infinity sold 242 shares of
Preferred Stock to Fairway Capital Limited ("Fairway") for a payment of
$1,000,000. In connection with such sale Fairway agreed to be bound by the terms
of the Subscription Agreement and the related documents described below,
acknowledged that the Preferred Stock is unregistered and may not be offered,
sold or otherwise transferred unless in compliance with federal and state
securities laws, and represented that it was acquiring the shares of Preferred
Stock for its own account, for investment and not with a view to distribution
thereof. Infinity, Seacrest and Fairway are referred to herein as the "Selling
Shareholders". The Preferred Stock has a liquidation preference equal to $5,000
per share plus dividends that have accrued and not been paid when due (the
"Liquidation Preference"). The Preferred Stock provides for quarterly dividends
at an annual dividend rate of 4.95% on the Liquidation Preference.
Each share of Preferred Stock is convertible into that number of shares of
Common Stock obtained by dividing the Liquidation Preference by the Conversion
Price (as described below) subject to the following limitations: (i) 606 shares
of Preferred Stock are convertible commencing February 16, 1997; (ii) 606 shares
of Preferred Stock are convertible commencing March 18, 1997; (iii) all
outstanding Preferred Stock shall automatically be converted into Common Stock
on December 17, 1998; (iv) the conversion right of a Selling Shareholder is
limited (subject to certain exceptions) so that in no instance shall the maximum
number of shares of Common Stock which a Selling Shareholder may receive on
conversion exceed at any one time, an amount equal to the remainder of (X) 4.99%
of the then issued and outstanding shares of Common Stock following such
conversion minus (Y) the number of shares of Common Stock of the Company then
owned by the Selling Shareholder; and (v) the Company shall not be obligated to
honor any conversion (including any automatic conversions on December 17, 1998)
if after giving effect to the issuance of the shares of Common Stock, the
Company would not be in compliance with applicable National Association of
Securities Dealers corporate governance rules (the "Conversion Limit"). Any
shares of Preferred Stock which cannot be converted solely as a result of the
Conversion Limit must be redeemed by the Company for an amount equal to the
number of shares of Common Stock that would have been issued upon such
conversion multiplied by the average of the closing bid prices per share of
Common Stock on NASDAQ for the five consecutive trading
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days immediately preceding the date of determination (the "Market Price"). The
Conversion Price is equal to the lesser of (X) $9.00 and (Y) the Market Price.
The Conversion Price may be increased by an amount equal to the formula:
I = (C - (1.25 X 9.00)) /2, where
I = Increase in Conversion Price
C = Market Price
Each holder of Preferred Stock shall have the same voting rights as a
holder of the number of shares of Common Stock which such holder would own if it
converted its Preferred Stock. However, the voting rights of a Selling
Shareholder are limited (subject to certain exceptions) such that in no event
will a Selling Shareholder be entitled to vote more than 4.99% of the then
issued and outstanding shares of Common Stock of the Company.
At any time commencing April 17, 1997, the Company may redeem the Preferred
Stock for the Liquidation Preference plus all accrued but unpaid dividends (the
"Redemption Price"). In the event the Company: (i) sells all or substantially
all of its assets; or (ii) enters into a consolidation or merger transaction
(with certain exceptions) the Company must redeem the outstanding Preferred
Shares for the redemption price. Finally, in the event of a change of control,
as defined in the Certificate of Designation creating the Preferred Stock, each
holder of Preferred Stock may elect to have its Preferred Stock redeemed for the
Redemption Price.
The Preferred Stock ranks on parity with the Company's Series A Cumulative
Convertible Preferred Stock and is senior to the Common Stock as to dividends or
upon liquidation.
Under the terms of a Registration Rights Agreement dated December 17, 1996,
among the Company and the initial Selling Shareholders (the "Registration Rights
Agreement") and the Subscription Agreement, the Company agreed to register the
Shares for resale by the Selling Shareholders and has agreed to indemnify the
Selling Shareholders against certain liabilities under the Securities Act. The
Registration Statement of which this Prospectus is a part was filed with the
Commissions pursuant to the Registration Rights Agreement and the Subscription
Agreement.
The Subscription Agreement also grants the Selling Shareholders a right of
first refusal on certain future financings for a maximum of 180 days from
December 17, 1996.
The foregoing is a description of the terms of the Preferred Stock and the
related agreements. This description does not purport to be complete and is
subject to and qualified in its entirety by reference to the Certificate of
Designation relating to the Preferred Stock, which was filed with the Illinois
Secretary of State as part of the Company's Articles of Incorporation and the
related agreements, copies of which will be made available to prospective
investors by the Company upon request.
SELLING SHAREHOLDERS
The Shares covered by this Prospectus are being offered and sold by the
Selling Shareholders.
The following table sets forth the number of Shares beneficially owned by
each of the Selling Shareholders as of January 6, 1997, the number of Shares to
be offered by each of the Selling Shareholders pursuant to this Prospectus and
the number of Shares to be beneficially owned by each of the Selling
Shareholders if all of the Shares offered hereby are sold as described herein.
The Selling Shareholders have
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not held any positions or offices with, been employed by, or otherwise had a
material relationship with, the Company or any of its predecessors or affiliates
since December 31, 1993.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED NUMBER OF SHARES
NAME OF AS OF NUMBER OF SHARES BENEFICIALLY OWNED
SELLING SHAREHOLDER JANUARY 6, 1997 OFFERED HEREBY AFTER OFFERING
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<S> <C> <C> <C>
Infinity Investors, Ltd.................... 664,270(1) 664,270 0
SeaCrest Capital Limited................... 256,716(1)(2) 220,815 36,101
Fairway Capital Limited.................... 281,464(1)(2) 220,815 60,649
</TABLE>
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(1) Includes the maximum number of Shares which may be issued upon conversion of
the Series B Preferred Stock which is 664,270 Shares for Infinity
Investors, Ltd., 220,815 Shares for Seacrest Capital Limited and 220,815
Shares for Fairway Capital Limited. See "Recent Development" for a
description of the limitations on conversion of the Preferred Stock.
(2) Includes Shares issued by the Company upon conversion of the Company's
Series A Cumulative Convertible Preferred Stock (the "Series A Preferred
Stock"). On September 18, 1996, the Company issued 400 shares of Series A
Preferred Stock in a transaction to non-U.S. persons pursuant to Regulation
S under the Securities Act. Seacrest Capital Limited purchased 148 shares
of Series A Preferred Stock, has converted 98 shares of Series A Preferred
Stock into 73,002 Shares, and at the close of business on January 3, 1997,
owned 50 shares of Series A Preferred Stock which were convertible into
36,101 Shares. Fairway Capital Limited purchased 252 shares of Series A
Preferred Stock, has converted 168 shares of Series A Preferred Stock, into
124,515 Shares, and at the close of business on January 3, 1997, owned 84
shares of Series A Preferred Stock which were convertible into 60,649
Shares. This table includes the Shares that would be issued if the
remaining Series A Preferred Stock was converted at the close of business
on January 3, 1997.
Under the terms of the Registration Rights Agreement and Subscription
Agreement, the Company agreed to file a registration statement with respect to
the potential resale of the Shares and to maintain the effectiveness of such
registration statement for a period of two (2) years. All of the registration
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses and reasonable fees and disbursements (not
to exceed $10,000) of one counsel for all the Selling Shareholders will be paid
by the Company; provided, however, that any underwriters' discounts and selling
commissions, fees and disbursements of counsel for the Selling Shareholders in
excess of $10,000 and fees and disbursements of other advisors to the Selling
Shareholders will be borne by the Selling Shareholders. See "Recent
Development."
SALE OF THE SHARES
Sales of the Shares may be made by the Selling Shareholders, or, subject to
applicable law, by pledgees, donees, transferees or other successors in
interest, in the over-the-counter market or otherwise at prices and at terms
then prevailing or at prices related to the then current market price, or in
negotiated transactions. The Shares may be sold by one or more of the following:
(a) a block trade in which the broker or dealer so engaged will attempt to sell
the Shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus; and (c) ordinary brokerage transactions and transactions in which
the broker solicits purchasers. In effecting sales, brokers or dealers engaged
by the Selling Shareholders may arrange for other brokers or dealers to
participate. Brokers or dealers will receive commissions or discounts from the
Selling Shareholders in amounts to be negotiated immediately prior to sale. Such
brokers or dealers may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales.
In offering the Shares covered hereby, the Selling Shareholders and any
broker-dealers and any other participating broker-dealers who execute sales for
the Selling Shareholders may be deemed to be "underwriters" within the meaning
of the Securities Act in connection with such sales, and any profits realized by
the Selling
8
<PAGE> 10
Shareholders and the compensation of such broker-dealer may be deemed to be
underwriting discounts and commissions. In addition, any Shares covered by this
Prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule
144 rather than pursuant to this Prospectus. None of the Shares covered by this
Prospectus presently qualifies for sale pursuant to Rule 144.
The Company has advised the Selling Shareholders that during such time as
they may be engaged in a distribution of Shares included herein they are
required to comply with Rules 10b-6 and 10b-7 under the Exchange Act (as those
Rules are described in more detail below) and, in connection therewith, that
they may not engage in any stabilization activity in connection with the Shares,
are required to furnish to each broker-dealer through which Shares included
herein may be offered copies of this Prospectus, and may not bid for or purchase
any securities of the Company or attempt to induce any person to purchase any
securities of the Company except as permitted under the Exchange Act. The
Selling Shareholders have agreed to inform the Company when the distribution of
the Shares is completed.
Rule 10b-6 under the Exchange Act prohibits, with certain exceptions,
participants in a distribution from bidding for or purchasing, for an account in
which the participant has a beneficial interest, any of the securities that are
the subject of the distribution. Rule 10b-7 governs bids and purchases made in
order to stabilize the price of a security in connection with a distribution of
the security.
LEGAL MATTERS
A legal opinion to the effect that upon conversion of the Series B
Preferred Stock, the Shares will be validly issued, fully paid and nonassessable
has been rendered by Vedder, Price, Kaufman & Kammholz, Chicago, Illinois. Guy
E. Snyder, a partner of Vedder, Price, Kaufman & Kammholz, is a director of the
Company.
EXPERTS
The financial statements and schedule of the Company for the transition
period from May 1, 1995 to February 3, 1996 incorporated by reference in this
Prospectus and elsewhere in the Registration Statement have been audited by
Price Waterhouse LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act (Commission File No. 0-22834) are incorporated
herein by this reference:
(1) The Company's Annual Report on Form 10-K for the transition period
from May 1, 1995 to February 3, 1996;
(2) The Company's Quarterly Reports on Form 10-Q for the quarters
ended May 4, 1996, August 3, 1996 and November 2, 1996;
(3) The Company's Current Report on Form 8-K dated October 18, 1996;
and
(4) The description of the Company's Common Stock contained in the
Company's Registration Statement filed pursuant to Section 12 of the
Exchange Act on Form 8-A, as amended.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the date
upon which this offering is terminated shall be deemed to be incorporated by
reference herein and to be part hereof from the date any such document is filed.
Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also incorporates by reference) modifies
or
9
<PAGE> 11
supersedes such statement. Any statement so modified or superseded shall not be
deemed to constitute a part hereof except as so modified or superseded. All
information appearing in this Prospectus is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in the
documents incorporated herein by reference, except to the extent set forth in
this paragraph.
------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE SELLING SHAREHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SHARES OF COMMON STOCK
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
10
<PAGE> 12
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration fee to the Securities and Exchange Commission........ $ 2,304.00
NASDAQ............................................................ 17,500.00
Accounting fees and expenses...................................... 1,000.00
Legal fees and expenses........................................... 10,000.00
Miscellaneous expenses............................................ 2,000.00
----------
Total........................................................ $
==========
</TABLE>
The foregoing items, except for the SEC registration fee and the NASDAQ
listing fee, are estimated. The Company has agreed to bear all expenses (other
than underwriting discounts, broker or dealer commissions, and fees and expenses
of counsel (in excess of $10,000) or other advisors to the Selling Shareholders)
in connection with the registration and sale of the Shares being offered by the
Selling Shareholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 8.75 of the Illinois Business Corporation Act of 1953 (the
"Illinois BCA") empowers a corporation, subject to certain limitations, to
indemnify its directors and officers against expenses (including attorneys'
fees, judgments, fines and certain settlements) actually and reasonably incurred
by them in connection with any suit or proceeding to which they are a party so
long as they acted in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to a
criminal action or proceeding, so long as they had no reasonable cause to
believe their conduct to have been unlawful. The Registrant's By-laws provide
that the Registrant shall indemnify its directors and such of its officers,
employees and agents as the Board of Directors may determine from time to time,
to the fullest extent permitted by Section 8.75 of the Illinois BCA.
The Company has entered into Indemnification Agreements with each of its
directors (the "Indemnification Agreements"). Under the Indemnification
Agreements, the Company has agreed to indemnify and hold each of the directors
of the Company harmless against any and all expenses (including attorneys' fees
and disbursements), judgments, fines, amounts paid in settlement and any other
liabilities incurred by reason of the fact that the director was or is a
director, officer, employee or agent of the Company to the fullest extent
permitted by the Illinois BCA. Under the Indemnification Agreements, the Company
will also advance to directors expenses incurred by the directors in (i)
defending any suit or other proceeding to which the director is, or is
threatened to be made, a party by reason such director's being (or having been)
a director, officer, employee or agent of the Company, and (ii) prosecuting any
suit or other proceeding to enforce such director's rights under the
Indemnification Agreement, subject to certain conditions set forth in the
Indemnification Agreements. The rights granted to Directors by the Company under
the Indemnification Agreements shall continue to be valid, binding and
enforceable both before and after a director has ceased to be a director,
officer, employee or agent of the Company.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
3.1 Articles of Incorporation of Registrant (1)
3.2 By-laws of Registrant (1)
3.3 Certificate of Designation creating the Company's Series A Cumulative Convertible
Preferred Stock (filed herewith)
3.4 Certificate of Designation creating the Company's Series B Cumulative Convertible
Preferred Stock (filed herewith)
</TABLE>
II-1
<PAGE> 13
<TABLE>
<C> <S>
4.1 Specimen Common Stock Certificate (1)
4.2 Specimen Series A Cumulative Convertible Preferred Stock Certificate (filed herewith)
4.3 Specimen Series B Cumulative Convertible Preferred Stock Certificate (filed herewith)
5.1 Opinion of Vedder, Price, Kaufman & Kammholz as to the legality of the Securities
being registered (12)
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
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 (10)
10.19 Employment Agreement with James M. Beltrame dated June 1, 1996 (10)
10.20 Employment Agreement with Michael H. McKee dated June 1, 1996 (10)
10.21 Common Stock Option Agreement granted to James M. Beltrame dated June 17, 1996 (10)
10.22 Agreement and Plan of Merger among Successories, Inc., British Links Acquisition
Corp., British Links Gold Classics, Inc., David J. Houston and Michael McArthur dated
October 1, 1996 (11)
10.23 Regulation S Securities Subscription Agreement between Successories, Inc. and
Seacrest Capital Limited and Fairway Capital Limited dated September 16, 1996 (11)
10.24 Regulations D Securities Subscription Agreement between Successories, Inc. and
Infinity Investors Limited and Seacrest Capital Limited dated December 17, 1996
(filed herewith)
</TABLE>
II-2
<PAGE> 14
<TABLE>
<C> <S>
10.25 Registration Rights Agreement dated as of December 17, 1996, by and among
Successories, Inc., Infinity Investors Limited and Seacrest Capital Limited (included
as Exhibit D to Exhibit 10.24 hereof)
10.26 Form of Subordinated Note Extensions, Stock Options and Subordination Agreement
relating to the extension of $1,250,000 of Subordinated Notes, and options to
purchase 125,000 shares of the Company's Common Stock (filed herewith)
21.1 Subsidiaries (filed herewith)
23.1 Consent of Price Waterhouse LLP (filed herewith)
23.2 Consent of Vedder, Price, Kaufman & Kammholz (included in Exhibit 5.1 hereto)
24.1 Power of Attorney (see signature page to this Registration Statement)
</TABLE>
- -------------------------
(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. 33-67530-C 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.
(10) Previously filed with the Company's Form 10-Q for the quarter ended August
3, 1996, and incorporated herein by reference.
(11) Previously filed with the Company's Form 10-Q for the quarter ended
November 2, 1996, and incorporated herein by reference.
(12) To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
II-3
<PAGE> 15
Provided, however, that paragraphs (l)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction to the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-4
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Village of Lombard, State of Illinois, on January 6, 1997.
SUCCESSORIES, INC.
By: /s/ JAMES M. BELTRAME
------------------------------------
President and Chief Operating
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Timothy C. Dillon and James M. Beltrame, and each
of them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND CAPACITY DATE
- ------------------------------------------------------ ----------------
<C> <S>
/s/ ARNOLD M. ANDERSON January 6, 1997
- ------------------------------------------------------
Arnold M. Anderson,
Chief Executive Officer,
Chairman of the Board and Director
(Principal Executive Officer)
/s/ JAMES M. BELTRAME January 6, 1997
- ------------------------------------------------------
James M. Beltrame, President, Chief
Operating Officer and Director
/s/ SEAMAS T. COYLE January 6, 1997
- ------------------------------------------------------
Seamas T. Coyle, Director
/s/ TIMOTHY C. DILLON January 6, 1997
- ------------------------------------------------------
Timothy C. Dillon, Vice President
and Director
/s/ M. ANDREW KING January 6, 1997
- ------------------------------------------------------
M. Andrew King, Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ C. JOSEPH LABONTE January 6, 1997
- ------------------------------------------------------
C. Joseph LaBonte, Director
</TABLE>
S-1
<PAGE> 17
<TABLE>
<CAPTION>
NAME AND CAPACITY DATE
- ------------------------------------------------------ ----------------
<C> <S>
/s/ STEVEN B. LARRICK January 6, 1997
- ------------------------------------------------------
Steven B. Larrick, Director
/s/ MICHAEL H. MCKEE January 6, 1997
- ------------------------------------------------------
Michael H. McKee, Senior Vice President,
Creative Director and Director
/s/ MERVYN C. PHILLIPS, JR. January 6, 1997
- ------------------------------------------------------
Mervyn C. Phillips, Jr., Director
/s/ MICHAEL SINGLETARY January 6, 1997
- ------------------------------------------------------
Michael Singletary, Director
/s/ GUY E. SNYDER January 6, 1997
- ------------------------------------------------------
Guy E. Snyder, Director
</TABLE>
S-2
<PAGE> 1
EXHIBIT 3.3
EXHIBIT A
TO REGULATION S
SECURITIES SUBSCRIPTION AGREEMENT
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A
CONVERTIBLE PREFERRED STOCK OF
SUCCESSORIES, INC.
PURSUANT TO SECTION 6.10 OF THE
ILLINOIS BUSINESS CORPORATION ACT OF 1983, AS AMENDED
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority conferred
upon the Board Directors of this Corporation in accordance with the provisions
of the Articles of Incorporation there is hereby established a series of the
authorized preferred stock of the Corporation, $100 par value per share, which
series shall be designated as "Series A Cumulative Convertible Preferred Stock,"
and which shall consist of Four Hundred (400) shares (collectively the "Series A
Shares" or singularly, a "Series A Share") and shall have the following dividend
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and other rights, qualifications, limitations and restrictions.
(a) Dividend Rights
0.1 A. The holder of record of each Series A Share (a "Holder") as
of the Record Date (as defined below) shall be entitled to receive, when, as and
if declared by the Corporation's Board Directors or a duly authorized committee
thereof, on January 1, April 1, July 1 and October 1 of each year (a "Dividend
Payment Date"), at the option of the Corporation, either:
(a) out of the funds of the Corporation legally available therefor,
cumulative dividends per Series A Share (the "Cash Dividends") in cash equal to
the "Cash Rate" (as hereinafter defined) multiplied by the Liquidation
Preference (as defined in Paragraph 2 and as adjusted pursuant Paragraph 1.1.D
below) for each Quarterly Payment Period (as hereinafter defined) that such
Series A Share is outstanding; or
<PAGE> 2
(b) cumulative dividends per Series A Share (the "PIK Dividends") in
additional Series A Shares equal to the "PIK Rate" (as hereinafter defined)
multiplied by the Liquidation Preference (and as adjusted pursuant to
Paragraph 1.1.D below) for each Quarterly Payment Period that such Series A
Share is outstanding.
To the extent permitted by applicable law and not prohibited pursuant to the
terms of applicable credit instruments, senior securities or the Articles of
Incorporation, the Board of Directors shall declare either Cash Dividends or
PIK Dividends (collectively referred to hereinafter as "Dividends") on each
Dividend Payment Date (or, if such day is not a business day, on the next
business day thereafter).
B. A "Quarterly Payment Period" shall mean the three-month period
ending on March 31, June 30, September 30 and December 31 of each year.
C. The "Cash Rate" and "PIK Rate" both shall mean an annual dividend
rate of 5.53% (i.e., a quarterly dividend rate of 1.38%). The Cash Rate and PIK
Rate shall collectively be referred to as the "Dividend Rate." The number of
Series A Shares issued as a PIK Dividend shall be the result obtained by
dividing the dollar amount of the Cash Dividend which would have been paid in
lieu of the PIK Dividend by $3,950 per Series A Share.
D. Dividends shall accrue (whether or not paid) during each
Quarterly Payment Period from the Dividend Payment Date immediately preceding
such Quarterly Payment Period to the last day of such Quarterly Payment Period,
provided that, for the first Quarterly Payment Period, Dividends shall accrue
commencing as of the date of initial issuance of the Series A Shares and shall
be payable for the Quarterly Payment Period ending December 31, 1996. Dividends
shall be calculated on the basis of a 90-day Quarterly Payment Period and the
actual number of days elapsed. For any Quarterly Payment Period with respect to
which the Dividend is not fully paid in cash or in Series A Shares on the
Dividend Payment Date at the end of such Quarterly Payment Period, such accrued
but unpaid Dividends shall be added to the Liquidation Preference of the Series
A Shares effective at the beginning of the Quarterly Payment Period next
succeeding the Quarterly Payment Period as to which such Dividends were not
paid, and shall thereafter accrue additional Dividends at the
<PAGE> 3
Dividend Rate. During any Quarterly Payment Period in which a Notice of
Conversion (as defined in Paragraph 5.2 below) is delivered by a Holder, or a
Redemption Transaction (as defined in Paragraph 5.4A) occurs, the Corporation
may, at its option, pay in cash all Dividends which have accrued from the end of
the immediately preceding Quarterly Payment Period. Any Dividend payment made
on Series A Shares shall be credited against the earliest accrued but unpaid
Dividend which has been added to the Liquidation Preference of the Series A
Shares pursuant to this Paragraph 1.1.D and shall reduce the Liquidation
Preference by the amount of the Dividend paid.
0.2 Dividends, if and when declared on each Series A Share,
shall to the extent permitted by applicable law be declared at least twenty (20)
business days prior to the next Dividend Payment Date for payment on the next
Dividend Payment Date to the Holders of record on the date determined in such
declaration, which date shall in no event be more than fifteen (15) business
days after the date of declaration (the "Record Date"). Dividends shall be
payable on each Dividend Payment Date (or if any such day is not a business day,
the next succeeding business day), except that Dividends for the period during
which a Redemption (as defined in Paragraph 5.1) shall occur shall be payable on
Series A Shares redeemed in accordance with Paragraph 5.2 (unless otherwise paid
on a Dividend Payment Date for a Record Date occurring prior to a Redemption
Date (as defined in Paragraph 5.2)). The Holder of any Series A Shares which are
the subject of a conversion pursuant to Paragraph 4 shall, on the Conversion
Date (as defined in Paragraph 4.G), cease to have any rights with respect to any
accrued Dividends on such Series A Shares which have not been declared and paid
on or before such Conversion Date except to the extent that such accrued but
unpaid Dividends have been added to the Liquidation Preference of such Shares
and except that in the event a conversion of Series A Shares is effected after a
Redemption Notice (as defined in Paragraph 5.2) is delivered by the Corporation
but prior to a Redemption Date, then, to the extent lawful, the Corporation
shall pay to such Holder an amount in cash equal to all accrued and unpaid
Dividends from the last Dividend Payment Date until the date the converting
Holder delivered its notice of conversion pursuant to Paragraph 4.G.
0.3 So long as any Series A Shares arc outstanding, the
Corporation shall not declare, pay or set aside for payment any dividend (other
than in shares of Junior Stock
<PAGE> 4
(as hereinafter defined)) or other distribution in respect of its Junior Stock,
or call for redemption, redeem, purchase or otherwise acquire for any
consideration (other than shares of its Junior Stock) any shares of its Junior
Stock, any warrants, rights, calls or options exercisable for any shares of
Junior Stock unless all dividends accumulated and unpaid with respect to the
Series A Shares are simultaneously declared and paid. "Junior Stock" means
Common Stock (as hereinafter defined) or any other series of preferred stock of
the Corporation which ranks junior to or on a parity with (as determined
pursuant to Paragraph 6) the Series A Shares. "Common Stock" means the common
stock, par value $.01 per share, of the Corporation and any share of successor
or replacement stock.
0.4 Each Holder shall be entitled to participate with the
holders of Common Stock equally and ratably (on the basis of the number of
shares of Common Stock such Holder would then own if it then converted its
Series A Shares pursuant to Paragraph 4) in any subscription rights or other
similar rights to acquire securities or property of the Corporation granted to
any holder of Common Stock.
1. Rights on Liquidation and Ranking
1.1 In the event of the liquidation, dissolution, winding-up or
sale or other disposition of all or substantially all of the assets of the
Corporation, whether voluntary or involuntary ("Liquidation"), the Holder of a
Series A Share shall be entitled to receive with respect to such Series A Share,
after the satisfaction of all distributions to holders of other series of
preferred stock, if any, which are required (at the direction of the holder
thereof or otherwise) to be redeemed prior to or in connection with the
consummation of such Liquidation or which are expressly senior in liquidation
preference to the Series A Shares including any series of preferred stock which
is mandatorily redeemable (collectively, the "Senior Payments") but before any
distribution is made to or set aside for the holders of Common Stock or any
other series of preferred stock of the Corporation, if any, which are not then
required to be redeemed or which are junior in liquidation preference to the
Series A Shares, cash or any other assets of the Corporation in an amount (or
having a fair market value) equal to Five Thousand Dollars ($5,000) per share
(the "Liquidation Preference") plus all accrued but unpaid Dividends which have
been added to the Liquidation Preference of such shares pursuant to Paragraph
1.1.D up to the date of the
<PAGE> 5
final distribution in Liquidation. If, after the satisfaction of all Senior
Payments, the assets of the Corporation available for distribution to Holders
shall be insufficient to permit the payment in full of the amount due the
Holders pursuant to this Paragraph 2, then the entire assets of the Corporation
available for distribution to Holders after the satisfaction of all Senior
Payments shall be distributed pari passu among the Holders and the holders of
other series of preferred stock which are not junior in liquidation preferences
to the Series A Shares, if any, in accordance with their respective liquidation
preferences. The fair market value of any assets of the Corporation and the
proportion of cash and other assets distributed by the Corporation to the
Holders of the Series A Shares shall be reasonably determined in good faith by
the Board of Directors. A merger or consolidation of the Corporation with
another corporation (or other business entity) or a voluntary sale of all or
substantially all of the assets of the Corporation principally in exchange for
stock and/or securities of another corporation (all referred to as a "Merger")
shall not be deemed a Liquidation if such Merger does not occur as part of a
proceeding under Title 11 of the United States Code or any federal or state law
for the protection of creditors or relief of debtors.
1.2 With regard to rights to receive distributions upon
Liquidation of the Corporation and dividends, the Series A Shares shall rank
senior to the Common Stock and any other equity securities of the Corporation
that by their terms are not made senior to or on a parity with the Series A
Shares as to such rights.
2. Voting Rights
2.1 Except as otherwise provided in Paragraphs 3.2 and 3.3
below, each Holder shall have the same voting rights as a holder of the number
of shares of Common Stock which such Holder would then own if it then converted
its Series A Shares pursuant to Paragraph 4; provided that the voting rights of
such Holder shall be limited to the extent necessary such that in no event will
the Holder be entitled to vote more than 4.99% of the then issued and
outstanding shares of voting stock of the Corporation.
2.2 So long as any of the Series A Shares are outstanding the
Corporation will not, without the affirmative vote or consent of the Holders of
at least eighty percent (80%)
<PAGE> 6
of the Series A Shares at the time outstanding, given in person or by proxy,
either in writing or by a resolution adopted at a meeting called for such
purpose, with the Holders of the Series A Shares voting or consenting separately
as a class:
A. amend, alter or repeal any of the provisions of the
Corporation's Articles of Incorporation or Bylaws or the resolution
providing for the issue of the Series A Shares or pass any stockholder
resolution, including such action effected by merger or similar
transaction in which the Corporation is the surviving corporation, if
such amendment or resolution would affect adversely the preferences,
special rights or powers of the Series A Shares except if such action
is otherwise permitted under the other provisions of this Paragraph
3.2;
B. increase or decrease (other than by redemption or
conversion) the total number of authorized Series A Shares;
C. issue any capital stock (other than PIK Dividends) which
ranks senior to or on a parity with the Series A Shares with respect to
rights to receive distributions upon liquidation, dissolution, or winding
up of the Corporation or with respect to dividends; or
D. enter into a Merger in which the Corporation is not the
surviving corporation; provided, however, that the provisions of this
subparagraph D shall not be applicable to any such Merger if the authorized
capital stock of the surviving corporation immediately after such Merger
shall include only classes or series of stock for which no such consent or
vote would have been required pursuant to Paragraph 3.2 if such class or
series had been authorized by the Corporation immediately prior to such
Merger or which have the same rights, preferences and limitations and
authorized amount as a class or series of stock of the Corporation
authorized prior to such Merger and continuing as an authorized class or
series at the time thereof.
A Merger of the Corporation, or similar Merger in which the
holders of its capital stock receive all cash shall not be deemed to adversely
affect the preferences, special rights or
<PAGE> 7
powers of the Series A Shares. The authorization or issuance of any other
series of preferred stock if such other series ranks junior to the Series A
Shares with respect to rights to receive distributions upon liquidation,
dissolution or winding up of the Corporation or with respect to dividends, shall
not be deemed to adversely affect the preferences, special rights or powers of
the Series A Shares.
2.3 In the event of an issuance by means of a stock split,
reverse split or stock dividend or other similar event or reclassification of
shares of Common Stock outstanding, the voting rights of the Series A Shares
shall be fairly and equitably (in the judgment of the Board of Directors of the
Corporation) adjusted at the same time and in the same manner as the adjustment
is made in the rights of the Common Stock in order to maintain the same voting
rights as the Series A Shares had on the date of issuance.
2.4 Copies of all notices sent to the holders of Common Stock
shall be simultaneously sent to each Holder.
3. Conversion Rights - Common stock
A. Number of Series A Shares. Each Series A Share shall be
convertible, at the option of the Holder thereof, at any time and from time to
time into that number of shares of Common Stock, obtained by dividing the
Liquidation Preference (including any Dividends added to Liquidation Preference
pursuant to Paragraph 1.1.D) of such Series A Share by the "Conversion Price"
determined in accordance with Paragraph 4.B as follows: (i) one-third (133) of
the Series A Shares shall be convertible commencing October 29, 1996; (ii)
one-third (133) of the Series A Shares shall be convertible commencing November
28, 1996; and (iii) one-third (134) of the Series A Shares shall be convertible
commencing December 28, 1996: provided, however, notwithstanding the foregoing,
the conversion right of each Holder shall be limited, except upon a Redemption
Transaction (as defined in Paragraph 5 below), solely to the extent required,
from time to time, such that in no instance shall the maximum number of shares
of Common Stock into which the Holder may convert the Series A Shares exceed, at
any time, an amount equal to the remainder of (i) 4.99% of the then issued and
outstanding shares of Common Stock of the Corporation following such conversion,
minus (ii) the number of shares of Common Stock of the Corporation held by such
Holder. Notwithstanding the foregoing, the maximum number
<PAGE> 8
of shares of Common Stock into which the Series A Shares may convert in the
aggregate is 1,272,972 shares of Common Stock, subject to adjustment as set
forth in subparagraph 4.D(a) below (the "Conversion Limit").
B. Conversion Price. The Conversion Price shall be equal to
the lesser of (x) $7.75 (the "Fixed Price") and (y) the "Market Price" of the
Common Stock (as defined in Paragraph 4.J below). The Conversion Price is
subject to adjustment from time to time pursuant to Paragraph 4.D.
C. Conversion and Redemption. In case any Series A Share is
called for redemption, the right to convert such Series A Share shall terminate
with respect to all Series A Shares for which a Notice of Conversion (as defined
in Paragraph 4.F below) shall not have previously been delivered to the Transfer
Agent (as hereafter defined) pursuant to the procedures described in Paragraph
5.2 below at the close of business on the date which is three (3) business days
preceding the Redemption Date (as defined in Paragraph 5.1 below); provided that
no default by the Corporation in the payment of the applicable Redemption Price
(as defined in Paragraph 5.1) shall have occurred and be continuing.
D. Adjustment of Conversion Price and Ratio for Conversion.
Except as otherwise provided herein (i) the Fixed Price and (ii) the Market
Price (if any of the events specified in clauses (a) or (b) below occurs
following the delivery of a Conversion Notice which specifies that the
Conversion Price is equal to the Market Price) shall each be subject to
adjustment from time to time only as follows:
(a) In case the Corporation shall (1) take a record of the
holders of Common Stock for the purpose of entitling them to
receive a dividend payable in shares of Common Stock, (2)
subdivide (by stock split, merger, consolidation or otherwise)
the outstanding shares of Common Stock into a greater number of
shares, (3) combine (by reverse stock split, merger,
consolidation or otherwise) the outstanding shares of Common
Stock into a smaller number of shares or (4) increase or decrease
the number of shares of outstanding Common Stock by
reclassification of its Common Stock, then the Conversion Price
(then in effect)
<PAGE> 9
shall be adjusted so that each Holder shall thereafter be
entitled upon the conversion of each Series A Share held by him
to receive for such Series A Share the number of shares of Common
Stock which he would have owned and/or have been entitled to
receive upon the occurrence of an event or record date described
above had the Series A Share been converted immediately prior to
the happening of the event, the adjustment to the Conversion
Price to become effective immediately after (x) the record date
(in the case of a dividend) or (y) the day upon which such
subdivision or combination shall become effective and the
Conversion Limit shall be correspondingly adjusted.
(b) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Common Stock property, including
securities, but excluding: (x) any dividend or distribution paid in
Common Stock; or (y) any dividend or distribution paid in cash out of
the surplus of the Corporation (provided that such distribution shall
not reduce stockholders' equity below the sum of the aggregate
Liquidation Preference of the Series A Shares then outstanding and the
aggregate Liquidation Preference of all other shares ranking senior or
pari passu to the Series A Shares), then the Conversion Price shall be
adjusted by multiplying (a) the Conversion Price in effect immediately
prior to the close of business on the date fixed for the determination
of stockholders entitled to receive the distribution by (b) a
fraction, the numerator of which is the excess of the Market Price (as
defined in Paragraph 4.J) for that date over the fair market value on
that date (as reasonably determined in good faith by the Board of
Directors, whose determination shall be conclusive) of the property so
distributed per share of Common Stock, and the denominator of which is
the Market Price for that date. The adjustment shall become effective
immediately prior to the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive
the distribution.
<PAGE> 10
(c) In case the Corporation shall sell or issue shares of Common
Stock or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of
Common Stock, excluding shares of Common Stock issued or reserved for
issuance by the Corporation in the following situations:
(i) in any transaction described in clause (a) or (b)
above;
(ii) pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the Corporation,
and the investment of additional optional amounts with respect to
such plan, in shares of Common Stock in any such case at a price
per share of not less than 95% of the Market Price per share of
Common Stock, or pursuant to any employee benefit plan or program
of the Corporation as to which a binding commitment existed as of
the date of initial issuance of the Series A Shares;
(iii) shares of Common Stock issued upon conversion of the
Series A Shares or upon conversion, exercise or exchange of
rights, options, warrants or convertible or exchangeable
securities outstanding or as to which a binding commitment
existed as of the date of initial issuance of the Series A
Shares; or
(iv) shares of Common Stock issued pursuant to or in
connection with (A) warrants for the purchase of 112,000 shares
of the Corporation's Common Stock issued to certain investors
holding subordinated debt of the Corporation and options for the
purchase of 150,000 shares of the Corporation's Common Stock to
be issued in connection with the extension of the terms of such
subordinated debt; (B) the Corporation's 1995 Employee Stock
Purchase Plan (together with any increases thereto or
replacements thereof); (C) the Corporation's Stock Option Plan
(together with any increases thereto or replacements thereof);
(D) options granted to Arnold M. Anderson pursuant
<PAGE> 11
to the terms of that certain Common Stock Option Agreement and
that certain Incentive Stock Option Agreement; (E) options
granted to James M. Beltrame pursuant to the terms of that
certain Common Stock Option Agreement and that certain Incentive
Stock Option Agreement; (F) any merger or acquisition entered
into by the Corporation; and (G) any options or warrants existing
as of the date hereof;
and the price per share (determined in the case of rights, options,
warrants or convertible or exchangeable securities as the quotient of
(x) the aggregate consideration received or receivable by the
Corporation upon the sale and issuance of such rights, options,
warrants or convertible or exchangeable securities plus the total
consideration payable to the Corporation upon such exercise or
conversion divided by (y) the total number of shares of Common Stock
covered by such rights, options, warrants or convertible or
exchangeable securities) is lower than the Market Price on the date of
such initial sale and issuance, then the Conversion Price in effect
immediately prior to such issuance shall upon such issuance be reduced
to the price determined by multiplying such Conversion Price by a
fraction, the numerator of which shall be an amount equal to the sum
of (A) the number of shares of Common Stock outstanding on a
fully-diluted basis immediately prior to such issuance multiplied by
the Market Price in effect immediately prior to such issuance plus (B)
the consideration, if any, received by the Corporation upon such
issuance, and the denominator of which shall be the product of (A) the
Market Price in effect immediately prior to such issuance and (B) the
total number of shares of Common Stock outstanding on a fully diluted
basis, immediately after such issuance.
(d) In case the Corporation shall distribute to the holders of
its Common Stock evidences of its indebtedness or assets (excluding
Dividends or distributions made out of current or retained earnings or
rights or warrants to subscribe other than as referred to in
subparagraph (c) above), then in each such case the number of shares
of Common Stock into
<PAGE> 12
which each Series A Share shall thereafter be convertible shall be
determined by multiplying the number of shares of Common Stock into
which such Series A Shares was theretofore convertible by a fraction,
of which the numerator shall be the current Market Price per share of
Common Stock on the date of such distribution, and the denominator of
which shall be the current Market Price per share of Common Stock,
less the excess of the then fair market value (as reasonably
determined by the Board of Directors of the Corporation) of the
assets, evidence of indebtedness, subscription rights or warrants so
distributed (the "Distributed Property") over the aggregate
consideration receivable by the Corporation, if any, for the
Distributed Property, as applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made
(unless an adjustment is made pursuant to subparagraph (a), (b) or (c)
above, in which case such subparagraphs shall apply), but shall also
be effective retroactively as to Series A Shares converted after the
record date for the determination of stockholders entitled to receive
such distribution and before the date such distribution is made.
(e) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1 % of such price; provided that any adjustments which by reason
of this clause (e) are not required to be made shall be carried
forward and taken into account in a subsequent adjustment. All
calculations shall be made to the nearest cent or the nearest
one-hundredth of a share, as the case may be.
(f) If the adjustment provided for in subparagraphs (b), (c) or
(d) above would cause the Series A Shares to be convertible in the
aggregate into a number of shares of Common Stock which exceeds the
Conversion Limit, then the Corporation shall not engage in any such
transaction without the affirmative vote or consent of the Holders of
at least eighty percent (80%) of the Series A Shares at the time
outstanding.
<PAGE> 13
E. Conversion Upon Reorganization. In case the Corporation shall
effect a reorganization, reclassification of its Common Stock (other than a
subdivision or combination described in clause (a) of Paragraph 4.D) or Merger,
and pursuant to any such reorganization, reclassification or Merger, any assets
or securities of the Corporation, any successor or transferee corporation or any
affiliate thereof or cash is received by or distributed to the holders of Common
Stock, then each Holder shall have the right thereafter to convert each Series A
Share held by such Holder into the kind and amount of shares or assets,
securities or cash receivable as a result of consummation of such transaction by
a holder of the number of shares of Common Stock into which such Series A Share
might have been converted immediately prior to such transaction and shall have
no other conversion rights nor shall there be any adjustment to the Conversion
Price; in any such event effective provision shall be made in the certificate of
incorporation of the successor or transferee corporation or otherwise, so that
the provisions set forth herein for the protection of the conversion rights of
the Series A Shares shall thereafter be applicable, as nearly as reasonably may
be, to any such other securities, cash and assets deliverable upon conversion of
the Series A Shares or other convertible stock or securities received by the
Holders in place thereof, and any such successor or transferee corporation shall
expressly assume the obligation to deliver, upon the exercise of the conversion
privilege, such other securities, cash or assets as the Holders of the Series A
Shares, or other convertible stock or securities received by the Holders in
place thereof, shall be entitled to receive pursuant to the provisions hereof,
and to make provision for the protection of the conversion right as above
provided. In case securities other than Common Stock, cash or assets shall be
issuable, payable or deliverable by the Corporation upon conversion as
aforesaid, then all references in this Paragraph 4.E shall be deemed to apply,
so far as appropriate and as nearly as may be, to such other securities, cash or
assets.
F. Conversion Method. Any Holder of Series A Shares may, at any
time prior to the close of business on the date which is three (3) business days
prior to the Redemption Date for such Series A Shares, exercise the conversion
rights as to such Series A Shares by delivering to the Corporation during
regular business hours, care of the then transfer agent (the "Transfer Agent")
for the Corporation, a notice requesting conversion on a specified date and the
number of Series A Shares that the Holder elects to
<PAGE> 14
convert (a "Notice of Conversion"). The Notice of Conversion shall also state
the names and addresses of the persons to whom certificates for shares of Common
Stock shall be issued, the denominations of such certificates and reasonable
delivery instructions with respect thereto. Each conversion shall be deemed to
have been effected immediately on the close of business on the date such Notice
of Conversion (the "Conversion Date") is received by the Transfer Agent
(including receipt via facsimile). The person in whose name any certificate for
shares of Common Stock is issuable upon the conversion shall be deemed to have
become the holder of record of the Common Stock at such time. If the stock
transfer books of the Corporation are closed on the Conversion Date, the
Conversion Date for purposes of determining record ownership shall be the next
succeeding day on which the stock transfer books are open (and the conversion
shall be deemed to have been effected immediately prior to the close of business
on that day), but in all cases the conversion shall be at the Conversion Price
in effect on the Conversion Date specified in the notice of conversion. As
promptly as practicable after the Conversion Date but in any event within three
(3) Trading Days (as defined below) of the receipt of the Notice of Conversion,
the Corporation shall cause the Transfer Agent to issue and deliver to such
Holder, at the expense of the Corporation and in accordance with such Holder's
delivery instructions, a certificate or certificates for the number of full
shares of Common Stock to which such Holder is entitled and cash with respect to
any fractional interest in a share of Common Stock as provided in Paragraph 4.G
below (which shall be promptly deposited by the Corporation with the Transfer
Agent for delivery to the Holder).
G. Fractional Shares of Common Stock. No fractional shares of
Common Stock or scrip shall be issued upon conversion of Series A Shares. If
more than one Series A Share shall be surrendered for conversion at any one time
by the same Holder, the number of full shares of Common Stock issuable upon
conversion of such Series A Shares shall be computed on the basis of the
aggregate number of Series A Shares so surrendered. Instead of any fractional
shares of Common Stock which otherwise would be issuable upon conversion of any
Series A Shares, the Corporation shall pay a cash adjustment in respect of such
fractional interest based upon the Conversion Price in effect at the close of
business on the last business day prior to the Conversion Date.
<PAGE> 15
H. Taxes. All shares of Common Stock issued upon conversion of
Series A Shares will be validly issued, fully paid and nonassessable. The
Corporation shall pay any and all documentary stamp or similar issue or transfer
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series A Shares pursuant hereto. The Corporation
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of shares of Common Stock in
a name other than that in which the Series A Shares so converted were
registered, and no such issue or delivery shall be made unless and until the
person requesting such transfer has paid to the Corporation the amount of any
such tax or has established to the satisfaction of the Corporation that such tax
has been paid or that no such tax is payable.
I. Surrendered Series A Shares. All certificates representing
Series A Shares converted or redeemed shall be appropriately canceled on the
books of the Corporation and the Series A Shares so converted or redeemed
represented by such certificates shall be restored to the status of authorized
but unissued Series A Shares.
J. Market Price. The term "Market Price" on any day shall mean the
average of the closing bid prices per share of Common Stock on the National
Association of Securities Dealers Inc. Automated Quotation System (the "NASDAQ
System"), or on such exchange as the Common Stock is then traded, in each case,
for the five (5) consecutive Trading Days immediately preceding the date of
determination. A "Trading Day" is a business day in which the principal market
on which the Common Stock is traded is open for trading for at least four hours.
If at the time of any computation pursuant to this paragraph the Common Stock is
not then traded on any trading market, the "Market Price" for the purposes
hereof shall be the fair value as reasonably determined in good faith by the
Board of Directors of the Corporation.
K. Available Common Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of Series A Shares,
such number of shares of Common Stock as shall from time to time be sufficient
to effect a conversion of all outstanding Series A Shares under Paragraph 4.A,
as such number may from time to time be adjusted pursuant to Paragraph 4.D, and
if at any time the number of
<PAGE> 16
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding Series A Shares, the Corporation
shall promptly take such corporate action as may, in the opinion of its counsel
and subject to any necessary approval of its stockholders, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
L. Notice to Holders. In the event (i) the Corporation shall
declare a dividend or other distribution on the Common Stock other than regular
cash dividends declared in the ordinary course or dividends or other
distributions payable in Common Stock, (ii) the Common Stock is subdivided,
combined or reclassified, (iii) of a Merger, (iv) of a Liquidation, or (v) the
Corporation offers for subscription pro rata to holders of Common Stock any
additional shares of stock of any class or series or other rights, then the
Corporation shall mail to each Holder at the Holder's address as it appears in
the stock records of the Corporation, promptly and in any event at least 15 days
prior to the date described in clause (a) below, a notice stating (a) the date
for the determination of holders of Common Stock entitled to receive the
distribution, subscription rights or the consideration in the Merger or
Liquidation, or (b) the date of determination as to which shares of Common Stock
will be affected by a subdivision, combination, reclassification, (c) a brief
statement of the facts requiring such notice, and (d) if applicable, that the
Conversion Price shall be adjusted in accordance with this Paragraph 4. Upon any
adjustment in the Conversion Price, the Corporation shall mail to each Holder at
the Holder's address as it appears in the stock records of the Corporation a
notice setting forth the adjusted Conversion Price and the method of calculation
thereof, provided that, if such address is outside of the United States, then
such notice shall be sent by facsimile transmission (if such Holder shall have
provided a facsimile number).
M. Conclusive Determination. Whenever the Conversion Price is
adjusted as herein provided, the Corporation shall promptly file with the
Transfer Agent a certificate of a firm of independent public accountants
regularly employed by the Corporation setting forth the adjusted Conversion
Price, along with a brief statement of the facts requiring the adjustment and
the manner of computing the adjustment, which certificate shall
<PAGE> 17
be conclusive evidence of the correctness of the adjustment, absent manifest
error.
N. Conversion Limit Exception Mechanism. If, at any time, the
aggregate number of shares of Common Stock into which the outstanding Series A
Shares may be converted exceeds the Conversion Limit then in effect:
(i) the Corporation shall deliver a notice to that effect to
the Holders and the Transfer Agent; and
(ii) the Corporation shall seek to obtain shareholder approval
within 90 days of the Notice specified in clause (i) above to
eliminate the Conversion Limit and any other matters required by The
NASDAQ Stock Market, Inc. (the "NASDAQ") for the Corporation to
maintain its designation as a NASDAQ National Market issuer and upon
such approval the Conversion Limit shall be eliminated; provided,
that, at any time, notwithstanding such request for shareholder
approval, each Holder may elect to convert the Series A Shares for up
to its prorata portion of the unconverted portion of the Conversion
Limit and cause the Corporation to redeem the unconverted portion of
all (but not less than all) of the remaining outstanding Series A
Shares for the aggregate Redemption Price thereof.
4. Redemption Rights
4.1 Voluntary Redemption. The Corporation may, at any time
commencing January 14, 1996 (but not prior thereto), at its option redeem (a
"Redemption") for cash at the Redemption Price, from funds legally available
therefor, all or any portion of the outstanding Series A Shares (for which a
Notice of Conversion has not been delivered three business days prior to the
Redemption Date. The Redemption Price shall be the Liquidation Preference of
each Series A Share plus all accrued but unpaid Dividends thereon through the
Redemption Date.
4.2 Notice of Redemption. If the Corporation elects to redeem
any or all Series A Shares pursuant to a Redemption, the Corporation shall (a)
give written notice of such Redemption to the Transfer Agent and each Holder of
Series A Shares to be redeemed at its address as it appears on the stock records
of the Corporation by deposit thereof in class U.S. mail, postage prepaid, and,
in the case of a Holder with an address outside of the United State Redemption
Notice shall be sent by facsimile transmission (if such Holder shall have
provided a facsimile number), and (b) either set aside, apart from its other
funds, or provide written evidence
<PAGE> 18
reasonably satisfactory to each Holder of the Corporation's ability to fund the
Redemption Price, an amount equal to the Redemption Price of all Series A Shares
subject to Redemption at that time for the benefit of all Holders of Series A
Shares subject to Redemption, and the Series A Shares then subject to Redemption
and not otherwise converted prior to the Redemption Date in accordance with
Paragraph 4 shall, on the date which is twenty (20) business days after the
deposit of Redemption Notice in accordance with clause (a) of this sentence (the
"Redemption Date"), cease to outstanding and the rights of the Holders and
owners thereof shall be limited to payment of the Redemption Price thereof. The
Corporation shall deposit with the Transfer Agent for delivery to each Holder of
a Series A Share the Redemption Price thereof within one (1) business day prior
to the Redemption Date. Should any Holder not receive payment of any amounts
due on Redemption of its Series A Shares at the times prescribed by reason of
the Corporation's failure to give a Redemption Notice at the times or in the
manner prescribed above or to make payment at the times prescribed above for any
reason, the Corporation shall pay to the applicable Holder on demand (x)
interest on the sums not paid when due at an annual rate equal to two percent in
excess of the "Prime Rate" that is then in effect or announced by Citibank, N.A.
or its successor, compounding at the end of each thirty (30) days, until the
applicable Holder is paid in full and (y) all costs of collection, including but
not limited to attorneys' fees and costs, whether or not suit or other formal
proceedings are instituted. The Redemption Price shall (in the discretion of
the Board of Directors of the Corporation) be adjusted to take into account any
stock split or other similar change in the Series A Shares.
4.3 Selection of Shares. The Corporation shall select the
Series A Shares to be redeemed in a Redemption in which not all Series A Shares
are to be redeemed so that the Series A Shares of each Holder selected for
Redemption shall bear the same proportion to the total Series A Shares owned by
that Holder the proportion of all Series A Shares selected for Redemption bears
to the total of all then outstanding Series A Shares, but adjusted as determined
by the Board of Directors to avoid the redemption of fractional Series A Shares.
Should any Series A Shares required to be redeemed under the terms hereof not be
redeemed solely by reason of limitations imposed by law, the applicable Series A
Shares shall be redeemed on the earliest possible date thereafter that the
applicable Series A Shares may be redeemed to the maximum extent permitted by
law. Except as set forth above, the Board of Directors shall prescribe the
manner in which any Redemption shall be effected. Any monies deposited with the
Transfer Agent by the Corporation for the holders of Series A Shares subject to
Redemption which shall not be claimed at the end of one (1) year after the first
service of the applicable Redemption Notice shall be released and repaid to the
Corporation but shall be paid to the Holder of the applicable Series A Shares so
long as submission of its shares occurs within five (5) years after the first
service of the applicable Redemption Notice.
4.4 Mandatory Redemption.
A. Redemption on Holder's Option. In the event the
Corporation enters into (I) a transaction or series of transactions to sell all
or substantially all of its assets, or (II) any consolidation of the Corporation
with, or merger of the Corporation into, any other Person, or any merger of
another Person into the Corporation (other than a merger (x) which does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of common
<PAGE> 19
stock or (y) which is effected solely to change the jurisdiction of
incorporation of the Corporation and results in a reclassification, conversion
or exchange of outstanding shares of Common Stock solely into shares of Common
Stock), (each, together with any Change of Control as hereafter defined, the
occurrence of a conversion limitation event described in Paragraph 4.N and any
redemption effected by the Corporation pursuant to Paragraph 5.1, being a
"Redemption Transaction"), the Corporation shall provide at least thirty (30)
days advance written notice of the proposed consummation thereof (the latter of
the date pursuant to which a Material Corporate Transaction is effected or
thirty (30) days after providing such notice is referred to herein as the
"Effective Date of Redemption"). The right to convert each Series A Share shall
terminate with respect to all Series A Shares for which a Notice of Conversion
shall not have previously been delivered to the Transfer Agent pursuant to the
procedures described in Paragraph 5.2 above at the close of business on the date
which is three business days prior to the Effective Date of Redemption. On the
Effective Date of Redemption, the Corporation shall redeem all remaining Series
A Shares for the Redemption Price and the Corporation shall deposit the
Redemption Price for all outstanding Series A Shares with the Transfer Agent for
the benefit of the respective holders of the Series A Shares not previously
redeemed. Simultaneously, the Corporation shall deposit irrevocable instruction
and authority to the Transfer Agent to pay in cash the Redemption Price to the
Holders of the Series A Shares.
B. Redemption on Change of Control. In the event of a Change of
Control (as hereinafter defined), the Series A Shares shall be redeemed in full
at the option of each Holder upon written notice provided to the Corporation by
such Holder at any time following such Change of Control for cash at the
Redemption Price. For purposes of this Section 5.4.B, Change of Control shall
be deemed to have occurred at such time as:
(i) any person (other than the Corporation, any subsidiary of
the Corporation or any employee benefit plan of the Corporation)
("Person") is or becomes the beneficial owner, directly or indirectly,
through a purchase, merger or other acquisition or transaction or
series of transactions, of shares of capital stock of the Corporation
entitling such Person to exercise 50% or more of the total voting
power of all shares of capital stock of the Corporation entitled to
vote generally in the election of directors; or
(ii) a change in the Board of Directors of the Corporation in
which the individuals who constituted the Board of Directors of the
Corporation at the beginning of the two-year period immediately
preceding such change (together with any other director whose election
by the Board of Directors of the Corporation or whose nomination for
election by the shareholders of the Corporation was approved by a vote
of at least a majority of the directors then in office either who were
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the directors then in office.
<PAGE> 20
Upon receipt by the Corporation of any such notice from a Holder, such notice
shall be treated as a Redemption Notice for all of such Series A Shares held by
such Holder, and the procedures set forth in Section 5.2 shall be applicable
thereto.
5. Ranking of Stock of the Corporation
For purposes of this resolution, any stock of any class or classes of
the Corporation shall be deemed to rank:
A. Prior to the Series A Shares, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution, liquidation
or winding up of the Corporation, as the case may be, in preference or priority
to the Holders;
B. On a parity with the Series A Shares, either as to dividends or
upon liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if any,
are different from those of the Series A Shares, if the holders of such stock
shall be entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the holders of such stock
and the Holders; and
C. Junior to the Series A Shares, either as to dividends or upon
liquidation, if such class shall be Common Stock or if the Holders shall be
entitled to receipt of dividends or of amounts distributable upon dissolution,
liquidation, winding up of the Corporation, or upon redemption as the case may
be, in preference or priority to the holders of shares of such class or classes.
RESOLVED FURTHER, that the Chief Executive Officer or any Vice President
and the Secretary or any Assistant Secretary of the Corporation are each
authorized to do or cause to be done all such acts or things and to make,
execute and deliver or cause to be made, executed and delivered all such
agreements, documents, instruments and certificates in the name and on behalf of
the Corporation or otherwise as they deem necessary, desirable or appropriate to
execute or carry out the purpose and intent of the foregoing resolutions.
<PAGE> 21
[Signature page follows]
<PAGE> 22
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury as of this ___ day
of September, 1996.
SUCCESSORIES, INC.
By:
Title:
Secretary
<PAGE> 1
EXHIBIT 3.4
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES B
CONVERTIBLE PREFERRED STOCK OF
SUCCESSORIES, INC.
PURSUANT TO SECTION 6.10 OF THE
ILLINOIS BUSINESS CORPORATION ACT OF 1983, AS AMENDED
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority conferred
upon the Board Directors of this Corporation in accordance with the provisions
of the Articles of Incorporation there is hereby established a series of the
authorized preferred stock of the Corporation, $100 par value per share, which
series shall be designated as "Series B Cumulative Convertible Preferred
Stock," and which shall consist of One Thousand Two Hundred Twelve (1,212)
shares (collectively the "Series B Shares" or singularly, a "Series B Share")
and shall have the following dividend rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and other rights,
qualifications, limitations and restrictions.
1. DIVIDEND RIGHTS
1.1 A. The holder of record of each Series B Share (a "Holder") as of
the Record Date (as defined below) shall be entitled to receive, when, as and
if declared by the Corporation's Board Directors or a duly authorized committee
thereof, on January 1, April 1, July 1 and October 1 of each year (a "Dividend
Payment Date") out of the funds of the Corporation legally available therefor,
cumulative dividends per Series B Share (the "Dividends") in cash equal to the
"Cash Rate" (as hereinafter defined) multiplied by the Liquidation Preference
(as defined in Paragraph 2 and as adjusted pursuant Paragraph 1.1.D below) for
each Quarterly Payment Period (as hereinafter defined) that such Series B Share
is outstanding.
To the extent permitted by applicable law and not prohibited pursuant to the
terms of applicable credit instruments, senior securities or the Articles of
Incorporation, the Board of Directors shall declare Dividends on each Dividend
Payment Date (or, if such day is not a business day, on the next business day
thereafter).
B. A "Quarterly Payment Period" shall mean the three-month period
ending on March 31, June 30, September 30 and December 31 of each year.
C. The "Cash Rate" shall mean an annual dividend rate of 4.95%
(i.e., a quarterly dividend rate of 1.2375%). The Cash Rate shall be referred
to as the "Dividend Rate."
CERTIFICATE OF DESIGNATION - PAGE 1
(SUCCESSORIES, INC.)
<PAGE> 2
D. Dividends shall accrue (whether or not paid) during each Quarterly
Payment Period from the Dividend Payment Date immediately preceding such
Quarterly Payment Period to the last day of such Quarterly Payment Period,
provided that, for the first Quarterly Payment Period, Dividends shall accrue
commencing as of the date of initial issuance of the Series B Shares and shall
be payable for the Quarterly Payment Period ending March 31, 1997. Dividends
shall be calculated on the basis of a 90-day Quarterly Payment Period and the
actual number of days elapsed. For any Quarterly Payment Period with respect
to which the Dividend is not fully paid in cash on the Dividend Payment Date at
the end of such Quarterly Payment Period, such accrued but unpaid Dividends
shall be added to the Liquidation Preference of the Series B Shares effective
at the beginning of the Quarterly Payment Period next succeeding the Quarterly
Payment Period as to which such Dividends were not paid, and shall thereafter
accrue additional Dividends at the Dividend Rate. During any Quarterly Payment
Period in which a Notice of Conversion (as defined in Paragraph 5.2 below) is
delivered by a Holder, or a Redemption Transaction (as defined in Paragraph
5.4A) occurs, the Corporation may, at its option, pay in cash all Dividends
which have accrued from the end of the immediately preceding Quarterly Payment
Period. Any Dividend payment made on Series B Shares shall be credited against
the earliest accrued but unpaid Dividend which has been added to the
Liquidation Preference of the Series B Shares pursuant to this Paragraph 1.1.D
and shall reduce the Liquidation Preference by the amount of the Dividend paid.
1.2 Dividends, if and when declared on each Series B Share, shall to the
extent permitted by applicable law be declared at least twenty (20) business
days prior to the next Dividend Payment Date for payment on the next Dividend
Payment Date to the Holders of record on the date determined in such
declaration, which date shall in no event be more than fifteen (15) business
days after the date of declaration (the "Record Date"). Dividends shall be
payable on each Dividend Payment Date (or if any such day is not a business
day, the next succeeding business day), except that Dividends for the period
during which a Redemption (as defined in Paragraph 5.1) shall occur shall be
payable on Series B Shares redeemed in accordance with Paragraph 5.2 (unless
otherwise paid on a Dividend Payment Date for a Record Date occurring prior to
a Redemption Date (as defined in Paragraph 5.2)). The Holder of any Series B
Shares which are the subject of a conversion pursuant to Paragraph 4 shall, on
the Conversion Date (as defined in Paragraph 4.G), cease to have any rights
with respect to any accrued Dividends on such Series B Shares which have not
been declared and paid on or before such Conversion Date except to the extent
that such accrued but unpaid Dividends have been added to the Liquidation
Preference of such Shares and except that in the event a conversion of Series B
Shares is effected after a Redemption Notice (as defined in Paragraph 5.2) is
delivered by the Corporation but prior to a Redemption Date, then, to the
extent lawful, the Corporation shall pay to such Holder an amount in cash equal
to all accrued and unpaid Dividends from the last Dividend Payment Date until
the date the converting Holder delivered its notice of conversion pursuant to
Paragraph 4.G.
1.3 So long as any Series B Shares are outstanding, the Corporation shall
not declare, pay or set aside for payment any dividend (other than in shares of
Junior Stock (as hereinafter defined)) or other distribution in respect of its
Junior Stock, or call for redemption,
CERTIFICATE OF DESIGNATION - PAGE 2
(SUCCESSORIES, INC.)
<PAGE> 3
redeem, purchase or otherwise acquire for any consideration (other than
shares of its Junior Stock) any shares of its Junior Stock, any warrants,
rights, calls or options exercisable for any shares of Junior Stock unless all
dividends accumulated and unpaid with respect to the Series B Shares are
simultaneously declared and paid. "Junior Stock" means Common Stock (as
hereinafter defined) or any other series of preferred stock of the Corporation
which ranks junior to or on a parity with (as determined pursuant to Paragraph
6) the Series B Shares, other than the Series A Shares (as defined in Paragraph
6 hereof). "Common Stock" means the common stock, par value $.01 per share, of
the Corporation and any share of successor or replacement stock.
1.4 Holder shall be entitled to participate with the holders of
Common Stock equally and ratably (on the basis of the number of shares of
Common Stock such Holder would then own if it then converted its Series B
Shares pursuant to Paragraph 4) in any subscription rights or other similar
rights to acquire securities or property of the Corporation granted to any
holder of Common Stock.
2. RIGHTS ON LIQUIDATION AND RANKING
2. 1 In the event of the liquidation, dissolution, winding-up or sale
or other disposition of all or substantially all of the assets of the
Corporation, whether voluntary or involuntary ("Liquidation"), the Holder of a
Series B Share shall be entitled to receive with respect to such Series B
Share, after the satisfaction of all distributions to holders of other series
of preferred stock, if any, which are required (at the direction of the holder
thereof or otherwise) to be redeemed prior to or in connection with the
consummation of such Liquidation or which are expressly senior in liquidation
preference to the Series B Shares including any series of preferred stock which
is mandatorily redeemable (collectively, the "Senior Payments") but before any
distribution is made to or set aside for the holders of Common Stock or any
other series of preferred stock of the Corporation, if any, which are not then
required to be redeemed or which are junior in liquidation preference to the
Series B Shares, cash or any other assets of the Corporation in an amount (or
having a fair market value) equal to Five Thousand Dollars ($5,000) per share
(the "Liquidation Preference") plus all accrued but unpaid Dividends which have
been added to the Liquidation Preference of such shares pursuant to Paragraph
1.1.D up to the date of the final distribution in Liquidation. If, after the
satisfaction of all Senior Payments, the assets of the Corporation available
for distribution to Holders shall be insufficient to permit the payment in full
of the amount due the Holders pursuant to this Paragraph 2, then the entire
assets of the Corporation available for distribution to Holders after the
satisfaction of all Senior Payments shall be distributed pari passu among the
Holders and the holders of other series of preferred stock which are not junior
in liquidation preferences to the Series B Shares, if any, in accordance with
their respective liquidation preferences. The fair market value of any assets
of the Corporation and the proportion of cash and other assets distributed by
the Corporation to the Holders of the Series B Shares shall be reasonably
determined in good faith by the Board of Directors. A merger or consolidation
of the Corporation with another corporation (or other business entity) or a
voluntary sale of all or substantially all of the assets of the Corporation
principally in exchange for stock and/or securities of another corporation (all
CERTIFICATE OF DESIGNATION - PAGE 3
(SUCCESSORIES, INC.)
<PAGE> 4
referred to as a "Merger") shall not be deemed a Liquidation if such Merger
does not occur as part of a proceeding under Title 11 of the United States Code
or any federal or state law for the protection of creditors or relief of
debtors.
2.2 With regard to rights to receive distributions upon Liquidation of
the Corporation and dividends, the Series B Shares shall rank senior to the
Common Stock and any other equity securities of the Corporation that by their
terms are not made senior to or on a parity with the Series B Shares as to such
rights.
3. VOTING RIGHTS
3.1 Except as otherwise provided in Paragraphs 3.2 and 3.3 below,
each Holder shall have the same voting rights as a holder of the number of
shares of Common Stock which such Holder would then own if it then converted
its Series B Shares pursuant to Paragraph 4.
3.2 So long as any of the Series B Shares are outstanding the
Corporation will not, without the affirmative vote or consent of the Holders of
at least eighty percent (80%) of the Series B Shares at the time outstanding,
given in person or by proxy, either in writing or by a resolution adopted at a
meeting called for such purpose, with the Holders of the Series B Shares voting
or consenting separately as a class:
A. amend, alter or repeal any of the provisions of the
Corporation's Articles of Incorporation or Bylaws or the resolution
providing for the issue of the Series B Shares or pass any
stockholder resolution, including such action effected by merger or
similar transaction in which the Corporation is the surviving
corporation, if such amendment or resolution would affect adversely
the preferences, special rights or powers of the Series B Shares
except if such action is otherwise permitted under the other
provisions of this Paragraph 3.2;
B. increase or decrease (other than by redemption or
conversion) the total number of authorized Series B Shares;
C. issue any capital stock which ranks senior to or on a
parity with the Series B Shares with respect to rights to receive
distributions upon liquidation, dissolution, or winding up of the
Corporation or with respect to dividends; or
D. enter into a Merger in which the Corporation is not the
surviving corporation; provided, however, that the provisions of
this subparagraph D shall not be applicable to any such Merger if
the authorized capital stock of the surviving corporation
immediately after such Merger shall include only classes or series
of stock for which no such consent or vote would have been required
pursuant to Paragraph 3.2 if such class or series had been
authorized by the Corporation immediately prior to such Merger or
which have the same rights,
CERTIFICATE OF DESIGNATION - PAGE 4
(SUCCESSORIES, INC.)
<PAGE> 5
preferences and limitations and authorized amount as a
class or series of stock of the Corporation authorized prior to
such Merger and continuing as an authorized class or series at the
time thereof.
A Merger of the Corporation, or similar Merger in which the
holders of its capital stock receive all cash shall not be deemed to
adversely affect the preferences, special rights or powers of the Series B
Shares. The authorization or issuance of any other series of preferred stock
if such other series ranks junior to the Series B Shares with respect to rights
to receive distributions upon liquidation, dissolution or winding up of the
Corporation or with respect to dividends, shall not be deemed to adversely
affect the preferences, special rights or powers of the Series B Shares.
3.3 In the event of an issuance by means of a stock split, reverse
split or stock dividend or other similar event or reclassification of shares of
Common Stock outstanding, the voting rights of the Series B Shares shall be
fairly and equitably (in the judgment of the Board of Directors of the
Corporation) adjusted at the same time and in the same manner as the adjustment
is made in the rights of the Common Stock in order to maintain the same voting
rights as the Series B Shares had on the date of issuance.
3.4 Copies of all notices sent to the holders of Common Stock shall
be simultaneously sent to each Holder.
4. CONVERSION RIGHTS - COMMON STOCK
A. NUMBER OF SERIES B SHARES. Each Series B Share shall be
convertible, at the option of the Holder thereof, at any time and from
time to time into that number of shares of Common Stock, obtained by dividing
the Liquidation Preference (including any Dividends added to Liquidation
Preference pursuant to Paragraph 1.1.D) of such Series B Share by the
"Conversion Price" determined in accordance with Paragraph 4.B as follows: (i)
606 of the Series B Shares shall be convertible commencing February 16, 1997,
and (ii) 606 of the Series B Shares shall be convertible commencing March 18,
1997. Notwithstanding the foregoing, each Series B Share outstanding on
December 17, 1998 shall automatically be converted into Common Stock on such
date at the Conversion Price and December 17, 1998 shall be deemed the
Conversion Date with respect to such conversion without the requirement of the
delivery of a Notice of Conversion provided, such automatic conversion shall
not occur if, at such time, the Corporation is in default of any of its
obligations hereunder which has not been cured within seven (7) days after
receipt of written Notice from a Holder of the event creating such default.
Furthermore, the Company shall not be obligated to honor any Notice of
Conversion (or any automatic conversion on December 17, 1998) for any Series B
Shares delivered by the Holders, if after giving effect to the issuance of
Shares of Common Stock in connection therewith the Company would not be in
compliance with applicable National Association of Securities Dealers ("NASD")
corporate governance rules (the "Conversion Limit"). In such case, the number
of Series B Shares which cannot be converted solely as a result of the
Conversion Limit shall be redeemed by the Corporation and the Holders shall be
entitled to receive cash in exchange
CERTIFICATE OF DESIGNATION - PAGE 5
(SUCCESSORIES, INC.)
<PAGE> 6
therefor in an amount equal to the number of shares of Common Stock
that would have been issued upon such conversion multiplied by the Market Price
(as defined in Paragraph 4.J. below) on the date of such conversion, pursuant
to the redemption provisions of Paragraph 4.N. below.
B. CONVERSION PRICE. The Conversion Price shall be equal to the lesser
of (x) $9.00 (the "Fixed Price") and (y) the "Market Price" of the Common Stock
(as defined in Paragraph 4.J below). The Conversion Price is also subject to
adjustment from time to time pursuant to Paragraph 4.D. Notwithstanding the
foregoing, the Conversion Price shall be increased by an amount equal to the
formula I=(C-(1.25*F))/2, where:
I=Increase in Conversion Price,
C=Market Price of the Common Stock, and
F=Fixed Price;
provided, that such formula will only operate to increase the Conversation
Price and not as a decrease thereto.
C. CONVERSION AND REDEMPTION. In case any Series B Share is called for
redemption, the right to convert such Series B Share shall terminate with
respect to all Series B Shares for which a Notice of Conversion (as defined in
Paragraph 4.F below) shall not have previously been delivered to the Transfer
Agent (as hereafter defined) pursuant to the procedures described in Paragraph
5.2 below at the close of business on the date which is three (3) business days
preceding the Redemption Date (as defined in Paragraph 5.1 below); provided
that no default by the Corporation in the payment of the applicable Redemption
Price (as defined in Paragraph 5.1) shall have occurred and be continuing.
D. ADJUSTMENT OF CONVERSION PRICE AND RATIO FOR CONVERSION. Except as
otherwise provided herein (i) the Fixed Price and (ii) the Market Price (if any
of the events specified in clauses (a) or (b) below occurs following the
delivery of a Conversion Notice which specifies that the Conversion Price is
equal to the Market Price) shall each be subject to adjustment from time to
time only as follows:
(a) In case the Corporation shall (1) take a record of the
holders of Common Stock for the purpose of entitling them to
receive a dividend payable in shares of Common Stock, (2) subdivide
(by stock split, merger, consolidation or otherwise) the
outstanding shares of Common Stock into a greater number of shares,
(3) combine (by reverse stock split, merger, consolidation or
otherwise) the outstanding shares of Common Stock into a smaller
number of shares or (4) increase or decrease the number of shares
of outstanding Common Stock by reclassification of its Common
Stock, then the Conversion Price (then in effect) shall be adjusted
so that each Holder shall thereafter be entitled upon the
conversion of each Series B Share held by him to receive for such
Series B Share the number of shares of Common Stock which he would
have owned and/or have
CERTIFICATE OF DESIGNATION - PAGE 6
(SUCCESSORIES, INC.)
<PAGE> 7
been entitled to receive upon the occurrence of an event or
record date described above had the Series B Share been converted
immediately prior to the happening of the event, the adjustment to
the Conversion Price to become effective immediately after (x) the
record date (in the case of a dividend) or (y) the day upon which
such subdivision or combination shall become effective and the
Conversion Limit shall be correspondingly adjusted.
(b) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Common Stock property, including
securities, but excluding: (x) any dividend or distribution paid in
Common Stock; or (y) any dividend or distribution paid in cash out
of the surplus of the Corporation (provided that such distribution
shall not reduce stockholders' equity below the sum of the
aggregate Liquidation Preference of the Series B Shares then
outstanding and the aggregate Liquidation Preference of all other
shares ranking senior or pari passu to the Series B Shares), then
the Conversion Price shall be adjusted by multiplying (a) the
Conversion Price in effect immediately prior to the close of
business on the date fixed for the determination of stockholders
entitled to receive the distribution by (b) a fraction, the
numerator of which is the excess of the Market Price (as defined in
Paragraph 4.J) for that date over the fair market value on that
date (as reasonably determined in good faith by the Board of
Directors, whose determination shall be conclusive) of the property
so distributed per share of Common Stock, and the denominator of
which is the Market Price for that date. The adjustment shall
become effective immediately prior to the opening of business on
the day following the date fixed for the determination of
stockholders entitled to receive the distribution.
(c) In case the Corporation shall sell or issue shares of
Common Stock or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock, excluding shares of Common Stock
issued or reserved for issuance by the Corporation in the following
situations:
(i) in any transaction described in clause (a) or (b)
above;
(ii) pursuant to any plan providing for the reinvestment
of dividends or interest payable on securities of the
Corporation, and the investment of additional optional
amounts with respect to such plan, in shares of Common Stock
in any such case at a price per share of not less than 95% of
the Market Price per share of Common Stock, or pursuant to
any employee benefit plan or program of the Corporation as to
which a binding commitment existed as of the date of initial
issuance of the Series B Shares;
CERTIFICATE OF DESIGNATION - PAGE 7
(SUCCESSORIES, INC.)
<PAGE> 8
(iii) shares of Common Stock issued upon conversion of
the Series B Shares, or Series A Shares, or upon conversion,
exercise or exchange of rights, options, warrants or
convertible or exchangeable securities outstanding or as to
which a binding commitment existed as of the date of initial
issuance of the Series B Shares, or Series A Shares; or
(iv) shares of Common Stock issued pursuant to or in
connection with (A) warrants for the purchase of 112,000
shares of the Corporation's Common Stock issued to certain
investors holding subordinated debt of the Corporation and
options for the purchase of 125,000 shares of the
Corporation's Common Stock issued in connection with the
extension of the terms of such subordinated debt; (B) the
Corporation's 1995 Employee Stock Purchase Plan (together
with any increases thereto or replacements thereof); (C) the
Corporation's Stock Option Plan (together with any increases
thereto or replacements thereof); (D) options granted to
Arnold M. Anderson pursuant to the terms of that certain
Common Stock Option Agreement and that certain Incentive
Stock Option Agreement; (E) options granted to James M.
Beltrame pursuant to the terms of that certain Common Stock
Option Agreement and that certain Incentive Stock Option
Agreement; (F) any merger or acquisition entered into by the
Corporation; and (G) any options or warrants existing as of
the date hereof;
and the price per share (determined in the case of rights, options,
warrants or convertible or exchangeable securities as the quotient
of (x) the aggregate consideration received or receivable by the
Corporation upon the sale and issuance of such rights, options,
warrants or convertible or exchangeable securities plus the total
consideration payable to the Corporation upon such exercise or
conversion divided by (y) the total number of shares of Common
Stock covered by such rights, options, warrants or convertible or
exchangeable securities) is lower than the Market Price on the date
of such initial sale and issuance, then the Conversion Price in
effect immediately prior to such issuance shall upon such issuance
be reduced to the price determined by multiplying such Conversion
Price by a fraction, the numerator of which shall be an amount
equal to the sum of (A) the number of shares of Common Stock
outstanding on a fully-diluted basis immediately prior to such
issuance multiplied by the Market Price in effect immediately prior
to such issuance plus (B) the consideration, if any, received by
the Corporation upon such issuance, and the denominator of which
shall be the product of (A) the Market Price in effect immediately
prior to such issuance and (B) the total number of shares of Common
Stock outstanding on a fully diluted basis, immediately after such
issuance.
(d) In case the Corporation shall distribute to the holders of
its Common Stock evidences of its indebtedness or assets (excluding
Dividends or
CERTIFICATE OF DESIGNATION - PAGE 8
(SUCCESSORIES, INC.)
<PAGE> 9
distributions made out of current or retained earnings
or rights or warrants to subscribe other than as referred to in
subparagraph (c) above), then in each such case the number of
shares of Common Stock into which each Series B Share shall
thereafter be convertible shall be determined by multiplying the
number of shares of Common Stock into which such Series B Shares
was theretofore convertible by a fraction, of which the numerator
shall be the current Market Price per share of Common Stock on the
date of such distribution, and the denominator of which shall be
the current Market Price per share of Common Stock, less the excess
of the then fair market value (as reasonably determined by the
Board of Directors of the Corporation) of the assets, evidence of
indebtedness, subscription rights or warrants so distributed (the
"Distributed Property") over the aggregate consideration receivable
by the Corporation, if any, for the Distributed Property, as
applicable to one share of Common Stock. Such adjustment shall be
made whenever any such distribution is made (unless an adjustment
is made pursuant to subparagraph (a), (b) or (c) above, in which
case such subparagraphs shall apply), but shall also be effective
retroactively as to Series B Shares converted after the record date
for the determination of stockholders entitled to receive such
distribution and before the date such distribution is made.
(e) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1 % of such price; provided that any adjustments which by
reason of this clause (e) are not required to be made shall be
carried forward and taken into account in a subsequent adjustment.
All calculations shall be made to the nearest cent or the nearest
one-hundredth of a share, as the case may be.
(f) If the adjustment provided for in subparagraphs (b), (c)
or (d) above would cause the Series B Shares to be convertible in
the aggregate into a number of shares of Common Stock which exceeds
the Conversion Limit, then the Corporation shall not engage in any
such transaction without the affirmative vote or consent of the
Holders of at least eighty percent (80%) of the Series B Shares at
the time outstanding.
E. CONVERSION UPON REORGANIZATION. In case the Corporation shall
effect a reorganization, reclassification of its Common Stock (other
than a subdivision or combination described in clause (a) of Paragraph 4.D) or
Merger, and pursuant to any such reorganization, reclassification or Merger,
any assets or securities of the Corporation, any successor or transferee
corporation or any affiliate thereof or cash is received by or distributed to
the holders of Common Stock, then each Holder shall have the right thereafter
to convert each Series B Share held by such Holder into the kind and amount of
shares or assets, securities or cash receivable as a result of consummation of
such transaction by a holder of the number of shares of Common Stock into which
such Series B Share might have been converted immediately prior to such
transaction and shall have no other conversion rights nor shall there be any
adjustment to the Conversion Price; in any such event effective provision shall
be made in the certificate
CERTIFICATE OF DESIGNATION - PAGE 9
(SUCCESSORIES, INC.)
<PAGE> 10
of incorporation of the successor or transferee corporation or otherwise, so
that the provisions set forth herein for the protection of the conversion
rights of the Series B Shares shall thereafter be applicable, as nearly as
reasonably may be, to any such other securities, cash and assets deliverable
upon conversion of the Series B Shares or other convertible stock or securities
received by the Holders in place thereof, and any such successor or transferee
corporation shall expressly assume the obligation to deliver, upon the exercise
of the conversion privilege, such other securities, cash or assets as the
Holders of the Series B Shares, or other convertible stock or securities
received by the Holders in place thereof, shall be entitled to receive pursuant
to the provisions hereof, and to make provision for the protection of the
conversion right as above provided. In case securities other than Common
Stock, cash or assets shall be issuable, payable or deliverable by the
Corporation upon conversion as aforesaid, then all references in this
Paragraph 4.E shall be deemed to apply, so far as appropriate and as nearly as
may be, to such other securities, cash or assets.
F. CONVERSION METHOD. Any Holder of Series B Shares may, at any time
prior to the close of business on the date which is two (2) business days prior
to the Redemption Date for such Series B Shares, exercise the conversion rights
as to such Series B Shares by delivering to the Corporation during regular
business hours, care of the then transfer agent (the "Transfer Agent") for the
Corporation, a notice requesting conversion on a specified date and the number
of Series B Shares that the Holder elects to convert (a "Notice of
Conversion"). The Notice of Conversion shall also state the names and
addresses of the persons to whom certificates for shares of Common Stock shall
be issued, the denominations of such certificates and reasonable delivery
instructions with respect thereto. Each conversion shall be deemed to have
been effected immediately on the close of business on the date such Notice of
Conversion (the "Conversion Date") is received by the Transfer Agent (including
receipt via facsimile). The person in whose name any certificate for shares of
Common Stock is issuable upon the conversion shall be deemed to have become the
holder of record of the Common Stock at such time. If the stock transfer books
of the Corporation are closed on the Conversion Date, the Conversion Date for
purposes of determining record ownership shall be the next succeeding day on
which the stock transfer books are open (and the conversion shall be deemed to
have been effected immediately prior to the close of business on that day), but
in all cases the conversion shall be at the Conversion Price in effect on the
Conversion Date specified in the notice of conversion. As promptly as
practicable after the Conversion Date but in any event within three (3) Trading
Days (as defined below) of the receipt of the Notice of Conversion, the
Corporation shall cause the Transfer Agent to issue and deliver to such Holder,
at the expense of the Corporation and in accordance with such Holder's delivery
instructions, a certificate or certificates for the number of full shares of
Common Stock to which such Holder is entitled and cash with respect to any
fractional interest in a share of Common Stock as provided in Paragraph 4.G
below (which shall be promptly deposited by the Corporation with the Transfer
Agent for delivery to the Holder).
G. FRACTIONAL SHARES OF COMMON STOCK. No fractional shares of Common
Stock or scrip shall be issued upon conversion of Series B Shares. If more
than one Series B Share shall be surrendered for conversion at any one time by
the same Holder, the number of
CERTIFICATE OF DESIGNATION - PAGE 10
(SUCCESSORIES, INC.)
<PAGE> 11
full shares of Common Stock issuable upon conversion of such Series B
Shares shall be computed on the basis of the aggregate number of Series B
Shares so surrendered. Instead of any fractional shares of Common Stock which
otherwise would be issuable upon conversion of any Series B Shares, the
Corporation shall pay a cash adjustment in respect of such fractional interest
based upon the Conversion Price in effect at the close of business on the last
business day prior to the Conversion Date.
H. TAXES. All shares of Common Stock issued upon conversion of Series B
Shares will be validly issued, fully paid and nonassessable. The Corporation
shall pay any and all documentary stamp or similar issue or transfer taxes that
may be payable in respect of any issue or delivery of shares of Common Stock on
conversion of Series B Shares pursuant hereto. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the Series B Shares so converted were registered, and
no such issue or delivery shall be made unless and until the person requesting
such transfer has paid to the Corporation the amount of any such tax or has
established to the satisfaction of the Corporation that such tax has been paid
or that no such tax is payable.
I. SURRENDERED SERIES B SHARES. All certificates representing Series B
Shares converted or redeemed shall be appropriately canceled on the books of
the Corporation and the Series B Shares so converted or redeemed represented by
such certificates shall be restored to the status of authorized but unissued
Series B Shares.
J. MARKET PRICE. The term "Market Price" on any day shall mean the
average of the closing bid prices per share of Common Stock on the National
Association of Securities Dealers Inc. Automated Quotation System as reported
by Blomberg, L.P. (the "NASDAQ System"), or on such exchange as the Common
Stock is then traded, in each case, for the five (5) consecutive Trading Days
immediately preceding the date of determination. A "Trading Day" is a business
day in which the principal market on which the Common Stock is traded is open
for trading for at least four hours. If at the time of any computation pursuant
to this paragraph the Common Stock is not then traded on any trading market,
the "Market Price" for the purposes hereof shall be the fair value as
reasonably determined in good faith by the Board of Directors of the
Corporation.
K. AVAILABLE COMMON STOCK. The Corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of Series B Shares,
such number of shares of Common Stock as shall from time to time be sufficient
to effect a conversion of all outstanding Series B Shares under Paragraph 4.A,
as such number may from time to time be adjusted pursuant to Paragraph 4.D, and
if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding Series
B Shares, the Corporation shall promptly take such corporate action as may, in
the opinion of its counsel and subject to any necessary approval of its
stockholders, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
CERTIFICATE OF DESIGNATION - PAGE 11
(SUCCESSORIES, INC.)
<PAGE> 12
L. NOTICE TO HOLDERS. In the event (i) the Corporation shall declare a
dividend or other distribution on the Common Stock other than regular cash
dividends declared in the ordinary course or dividends or other distributions
payable in Common Stock, (ii) the Common Stock is subdivided, combined or
reclassified, (iii) of a Merger, (iv) of a Liquidation, or (v) the Corporation
offers for subscription pro rata to holders of Common Stock any additional
shares of stock of any class or series or other rights, then the Corporation
shall mail to each Holder at the Holder's address as it appears in the stock
records of the Corporation, promptly and in any event at least 15 days prior to
the date described in clause (a) below, a notice stating (a) the date for the
determination of holders of Common Stock entitled to receive the distribution,
subscription rights or the consideration in the Merger or Liquidation, or (b)
the date of determination as to which shares of Common Stock will be affected
by a subdivision, combination, reclassification, (c) a brief statement of the
facts requiring such notice, and (d) if applicable, that the Conversion Price
shall be adjusted in accordance with this Paragraph 4. Upon any adjustment in
the Conversion Price, the Corporation shall mail to each Holder at the Holder's
address as it appears in the stock records of the Corporation a notice setting
forth the adjusted Conversion Price and the method of calculation thereof,
provided that, if such address is outside of the United States, then such
notice shall be sent by facsimile transmission (if such Holder shall have
provided a facsimile number).
M. CONCLUSIVE DETERMINATION. Whenever the Fixed Price is adjusted as
herein provided, the Corporation shall promptly file with the Transfer Agent a
certificate of a firm of independent public accountants regularly employed by
the Corporation setting forth the adjusted Fixed Price, along with a brief
statement of the facts requiring the adjustment and the manner of computing the
adjustment, which certificate shall be conclusive evidence of the correctness
of the adjustment, absent manifest error.
N. CONVERSION LIMIT EXCEPTION MECHANISM. If, at any time, the aggregate
number of shares of Common Stock into which the outstanding Series B Shares may
be converted exceeds the Conversion Limit then in effect:
(i) the Corporation shall deliver a notice to that effect to
the Holders and the Transfer Agent; and
(ii) each Holder may elect to convert the Series B Shares for
up to its prorata portion of the unconverted portion of the
Conversion Limit and cause the Corporation to redeem the
unconverted portion of all (but not less than all) of the remaining
outstanding Series B Shares for consideration specified in
Paragraph 4.A. hereof.
5. REDEMPTION RIGHTS
5.1 VOLUNTARY REDEMPTION. The Corporation may, at any time commencing
April 17, 1997 (but not prior thereto), at its option redeem (a "Redemption")
for cash at the Redemption Price, from funds legally available therefor, all or
any portion of the outstanding
CERTIFICATE OF DESIGNATION - PAGE 12
(SUCCESSORIES, INC.)
<PAGE> 13
Series B Shares (for which a Notice of Conversion has not been
delivered two (2) business days prior to the Redemption Date. The Redemption
Price shall be the Liquidation Preference of each Series B Share plus all
accrued but unpaid Dividends thereon through the Redemption Date.
5.2 NOTICE OF REDEMPTION. If the Corporation elects to redeem any or
all Series B Shares pursuant to a Redemption, the Corporation shall (a) give
two (2) business days' prior written notice of such Redemption to the Transfer
Agent and each Holder of Series B Shares to be redeemed at its address as it
appears on the stock records of the Corporation by deposit thereof in class
U.S. mail, postage prepaid, and, in the case of a Holder with an address
outside of the United State Redemption Notice shall be sent by facsimile
transmission (if such Holder shall have provided a facsimile number), and (b)
either set aside, apart from its other funds, or provide written evidence
reasonably satisfactory to each Holder of the Corporation's ability to fund the
Redemption Price, an amount equal to the Redemption Price of all Series B
Shares subject to Redemption at that time for the benefit of all Holders of
Series B Shares subject to Redemption, and the Series B Shares then subject to
Redemption and not otherwise converted prior to the Redemption Date in
accordance with Paragraph 4 shall, on the date which is twenty (20) business
days after the deposit of Redemption Notice in accordance with clause (a) of
this sentence (the "Redemption Date"), cease to outstanding and the rights of
the Holders and owners thereof shall be limited to payment of the Redemption
Price thereof. The Corporation shall deposit with the Transfer Agent for
delivery to each Holder of a Series B Share the Redemption Price thereof within
one (1) business day prior to the Redemption Date. Should any Holder not
receive payment of any amounts due on Redemption of its Series B Shares by
reason of the Corporation's failure to make payment at the times prescribed
above for any reason, the Corporation shall pay to the applicable Holder on
demand (x) interest on the sums not paid when due at an annual rate equal to
two percent in excess of the "Prime Rate" that is then in effect or announced
by Citibank, N.A. or its successor, compounding at the end of each thirty (30)
days, until the applicable Holder is paid in full and (y) all costs of
collection, including but not limited to attorneys' fees and costs, whether or
not suit or other formal proceedings are instituted. The Redemption Price
shall (in the discretion of the Board of Directors of the Corporation) be
adjusted to take into account any stock split or other similar change in the
Series B Shares.
5.3 SELECTION OF SHARES. The Corporation shall select the Series B
Shares to be redeemed in a Redemption in which not all Series B Shares are to
be redeemed so that the Series B Shares of each Holder selected for Redemption
shall bear the same proportion to the total Series B Shares owned by that
Holder the proportion of all Series B Shares selected for Redemption bears to
the total of all then outstanding Series B Shares, but adjusted as determined
by the Board of Directors to avoid the redemption of fractional Series B
Shares. Should any Series B Shares required to be redeemed under the terms
hereof not be redeemed solely by reason of limitations imposed by law, the
applicable Series B Shares shall be redeemed on the earliest possible date
thereafter that the applicable Series B Shares may be redeemed to the maximum
extent permitted by law. Except as set forth above, the Board of Directors
shall prescribe the manner in which any Redemption shall be effected. Any
monies deposited with the Transfer Agent by the Corporation for the holders of
Series B Shares subject to Redemption
CERTIFICATE OF DESIGNATION - PAGE 13
(SUCCESSORIES, INC.)
<PAGE> 14
which shall not be claimed at the end of one (1) year after the first
service of the applicable Redemption Notice shall be released and repaid to the
Corporation but shall be paid to the Holder of the applicable Series B Shares
so long as submission of its shares occurs within five (5) years after the
first service of the applicable Redemption Notice.
5.4 MANDATORY REDEMPTION.
A. REDEMPTION ON HOLDER'S OPTION. In the event the Corporation enters
into (I) a transaction or series of transactions to sell all or substantially
all of its assets, or (II) any consolidation of the Corporation with, or merger
of the Corporation into, any other Person, or any merger of another Person into
the Corporation (each, a "Material Corporate Transaction") (other than a merger
(x) which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of common stock or (y) which is effected
solely to change the jurisdiction of incorporation of the Corporation and
results in a reclassification, conversion or exchange of outstanding shares of
Common Stock solely into shares of Common Stock), together with any Change of
Control as hereafter defined, the occurrence of a conversion limitation event
described in Paragraph 4.N and any redemption effected by the Corporation
pursuant to Paragraph 5.1, being a "Redemption Transaction"), the Corporation
shall provide at least two (2) days advance written notice of the proposed
consummation thereof (the latter of the date pursuant to which a Material
Corporate Transaction is effected or thirty (30) days after providing such
notice is referred to herein as the "Effective Date of Redemption"). The right
to convert each Series B Share shall terminate with respect to all Series B
Shares for which a Notice of Conversion shall not have previously been
delivered to the Transfer Agent pursuant to the procedures described in
Paragraph 4F above at the close of business on the date which is three business
days prior to the Effective Date of Redemption. On the Effective Date of
Redemption, the Corporation shall redeem all remaining Series B Shares for the
Redemption Price and the Corporation shall deposit the Redemption Price for all
outstanding Series B Shares with the Transfer Agent for the benefit of the
respective holders of the Series B Shares not previously redeemed.
Simultaneously, the Corporation shall deposit irrevocable instruction and
authority to the Transfer Agent to pay in cash the Redemption Price to the
Holders of the Series B Shares.
B. REDEMPTION ON CHANGE OF CONTROL. In the event of a Change of Control
(as hereinafter defined), the Series B Shares shall be redeemed in full at the
option of each Holder upon written notice provided to the Corporation by such
Holder at any time following such Change of Control for cash at the Redemption
Price. For purposes of this Section 5.4.B, Change of Control shall be deemed
to have occurred at such time as:
(i) any person (other than the Corporation, any subsidiary of
the Corporation or any employee benefit plan of the Corporation)
("Person") is or becomes the beneficial owner, directly or
indirectly, through a purchase, merger or other acquisition or
transaction or series of transactions, of shares of capital stock
of the Corporation entitling such Person to exercise 50% or more of
the total voting power of all shares of capital stock of the
Corporation entitled to vote generally in the election of
directors; or
CERTIFICATE OF DESIGNATION - PAGE 14
(SUCCESSORIES, INC.)
<PAGE> 15
(ii) a change in the Board of Directors of the Corporation in
which the individuals who constituted the Board of Directors of the
Corporation at the beginning of the two-year period immediately
preceding such change (together with any other director whose
election by the Board of Directors of the Corporation or whose
nomination for election by the shareholders of the Corporation was
approved by a vote of at least a majority of the directors then in
office either who were directors at the beginning of such period or
whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
directors then in office.
Upon receipt by the Corporation of any such notice from a Holder, such notice
shall be treated as a Redemption Notice for all of such Series B Shares held by
such Holder, and the procedures set forth in Section 5.2 shall be applicable
thereto.
6. RANKING OF STOCK OF THE CORPORATION
For purposes of this resolution, any stock of any class or classes of the
Corporation shall be deemed to rank:
A. Prior to the Series B Shares and Series A Shares, either as to
dividends or upon liquidation, if the holders of such class or classes shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in preference or priority to the Holders;
B. On a parity with the Series B Shares and Series A Shares, either as
to dividends or upon liquidation, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share or sinking and fund
provisions, if any, are different from those of the Series B Shares or Series A
Shares, if the holders of such stock shall be entitled to the receipt of
dividends or of amounts distributable upon dissolution, liquidation or winding
up of the Corporation, as the case may be, in proportion to their respective
dividend rates or liquidation prices without preference or priority, one over
the other, as between the holders of such stock and the Holders, and
C. Junior to the Series B Shares and Series A Shares, either as to
dividends or upon liquidation, if such class shall be Common Stock or if the
Holders of the Series A Shares or the Series B Shares shall be entitled to
receipt of dividends or of amounts distributable upon dissolution, liquidation,
winding up of the Corporation, or upon redemption as the case may be, in
preference or priority to the holders of shares of such class or classes. The
Series B Shares shall rank pari passu in all right of payment (including
Dividends, redemption and liquidation rights) with the four hundred (400)
shares of Series A Cumulative Convertible Preferred Stock of the Corporation
issued September 16, 1996 (the "Series A Shares").
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of the Corporation are each authorized to
do or cause to be done all such
CERTIFICATE OF DESIGNATION - PAGE 15
(SUCCESSORIES, INC.)
<PAGE> 16
acts or things and to make, execute and deliver or cause to be made,
executed and delivered all such agreements, documents, instruments and
certificates in the name and on behalf of the Corporation or otherwise as they
deem necessary, desirable or appropriate to execute or carry out the purpose
and intent of the foregoing resolutions.
CERTIFICATE OF DESIGNATION - PAGE 16
(SUCCESSORIES, INC.)
<PAGE> 1
EXHIBIT 4.2
SPECIMEN SERIES A CUMULATIVE CONVERTIBLE
PREFERRED STOCK CERTIFICATE
SEE REVERSE SIDE FOR RESTRICTIONS
ON THE TRANSFER OF THESE SHARES
NUMBER SHARES
SUCCESSORIES, INC.
This Certifies that __________________ is the owner of ______________________
full paid and non-assessable SERIES A CUMULATIVE PREFERRED Shares, $100.00 par
value, of SUCCESSORIES, INC. transferable only on the books of the Corporation
by the holder hereof in person or by duly authorized Attorney upon the surrender
of this Certificate properly endorsed.
A statement, in full, of all the designations, preferences,
qualifications, limitations, restrictions, and special or relative rights of
the shares of each class authorized to be issued, will be furnished by the
Corporation to any shareholder upon request and without charge.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation, this 18th day of September A.D. 1996.
Timothy C. Dillon James M. Beltrame
Secretary President
<PAGE> 2
SEE REVERSE
For Value Received, ______ hereby sell, assign and transfer unto
________________ Shares represented by the within Certificate, and do hereby
irrevocably constitute and appoint __________ Attorney to transfer the said
Shares on the books of the within named Corporation with full power of
substitution in the premises.
Dated __________________, 19___
In presence of
__________________________________ __________________________________
THE SECURITIES OF SUCCESSORIES, INC. (THE "ISSUER") REPRESENTED
HEREBY HAVE BEEN ISSUED PURSUANT TO REGULATION S, PROMULGATED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND HAVE NOT BEEN REGISTERED UNDER THE ACT OR ANY
APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT
OF A "U.S. PERSON" (AS THAT TERM IS DEFINED IN REGULATION S)
DURING THE PERIOD COMMENCING ON THE SALE OF THESE SECURITIES AND
ENDING ON THE FORTIETH (40TH) DAY FOLLOWING COMPLETION OF THE
REGULATION S OFFERING OF THE ISSUER PURSUANT TO WHICH THESE
SECURITIES HAVE BEEN ISSUED, WHICH DAY IS SEPTEMBER 18, 1996 (THE
"RESTRICTED PERIOD"). THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY FIRST BE CONVERTED INTO COMMON STOCK OF THE ISSUER
ON OCTOBER 28, 1996 AND ARE SUBJECT TO FURTHER RESTRICTIONS ON
CONVERSION AS SET FORTH IN THIS CERTIFICATE. THE ISSUER WILL
NOTIFY THE TRANSFER AGENT OF THE DATE OF COMPLETION OF SUCH
OFFERING AND OF THE EXPIRATION OF SUCH RESTRICTED PERIOD.
FURTHERMORE, THE SECURITIES OF THE ISSUER REPRESENTED HEREBY HAVE
BEEN ISSUED PURSUANT TO THAT CERTAIN REGULATION S SECURITIES
SUBSCRIPTION AGREEMENT DATED AS OF SEPTEMBER 18, 1996 (THE
"AGREEMENT"), AND EACH HOLDER OF THESE SECURITIES IS REQUIRED TO
CONVERT THEIR SECURITIES PURSUANT TO THE AGREEMENT, ON A PRORATA
BASIS WITH THE OTHER HOLDERS OF THE SECURITIES OR THEIR RESPECTIVE
TRUSTEES.
<PAGE> 1
EXHIBIT 4.3
SPECIMEN SERIES B CUMULATIVE CONVERTIBLE
PREFERRED STOCK CERTIFICATE
SEE REVERSE SIDE FOR RESTRICTIONS
ON THE TRANSFER OF THESE SHARES
NUMBER SHARES
SUCCESSORIES, INC.
This Certifies that ____________________ is the owner of _________________ full
paid and non-assessable SERIES B CUMULATIVE CONVERTIBLE PREFERRED Shares,
$100.00 par value, of SUCCESSORIES, INC. transferable only on the books of the
Corporation by the holder hereof in person or by duly authorized Attorney upon
the surrender of this Certificate properly endorsed.
A statement, in full, of all the designations, preferences, qualifications,
limitations, restrictions, and special or relative rights of the shares of each
class authorized to be issued, will be furnished by the Corporation to any
shareholder upon request and without charge.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation, this 17th day of December A.D. 1996.
Timothy C. Dillon James M. Beltrame
Secretary President
<PAGE> 2
SEE REVERSE
For Value Received, ______ hereby sell, assign and transfer unto
________________ Shares represented by the within Certificate, and do hereby
irrevocably constitute and appoint __________ Attorney to transfer the said
Shares on the books of the within named Corporation with full power of
substitution in the premises.
Dated __________________, 19___
In presence of
__________________________________ __________________________________
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE
SECURITIES LAW. THEY HAVE BEEN ISSUED PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D ("REGULATION D") PROMULGATED
UNDER THE ACT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE
PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS. FURTHERMORE, THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN LIMITATIONS
ON CONVERSION AND VOTING AS DESCRIBED IN THAT CERTAIN REGULATION D
SECURITIES SUBSCRIPTION AGREEMENT OF THE COMPANY DATED DECEMBER
17, 1996, A COPY OF WHICH IS ON FILE WITH AND MAY BE OBTAINED FROM
THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.
<PAGE> 1
EXHIBIT 10.24
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT
By and between
SUCCESSORIES, INC.
and
INFINITY INVESTORS LIMITED
and
SEACREST CAPITAL LIMITED,
as Subscribers
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE
SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER REGULATION D ("REGULATION D") PROMULGATED UNDER THE ACT.
THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS,
OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. FURTHERMORE, THE SECURITIES
ARE SUBJECT TO CERTAIN LIMITATIONS ON CONVERSION AND VOTING AS DESCRIBED IN
THAT CERTAIN REGULATION D SECURITIES SUBSCRIPTION AGREEMENT OF THE COMPANY
DATED DECEMBER 17, 1996, A COPY OF WHICH IS ON FILE WITH AND MAY BE OBTAINED
FROM THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.
<PAGE> 2
THIS REGULATION D SECURITIES SUBSCRIPTION AGREEMENT (the "Agreement" or
the "Subscription Agreement") is executed by each of the undersigned (each a
"Subscriber" and collectively, the "Subscribers") in connection with the
subscription by the Subscribers for Series B Cumulative Convertible Preferred
Stock (the "Preferred Stock") of SUCCESSORIES, INC., an Illinois corporation
(the "Company").
WHEREAS, the Company is offering (the "Offering") for sale pursuant to
Regulation D ("Regulation D") under the United States Securities Act of 1933,
as amended (the "Act") 1, 212 shares of Preferred Stock (the "Preferred
Shares"), with a liquidation preference of $5,000 per share at a purchase price
of $4,125.41 per share, the terms of which are set forth in the form of a
Certificate of Designation of the Preferred Stock attached hereto as Exhibit A
(the "Certificate of Designation"); and
WHEREAS, each Subscriber wishes to subscribe for the Preferred Shares set
forth opposite such Subscriber's name on Schedule 1.1 hereto, in accordance
with the terms and conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. SUBSCRIPTION AND CLOSING; ESCROW
1.1 SUBSCRIPTION. Subject to the terms and conditions of this Agreement,
each Subscriber hereby subscribes for, and the Company hereby agrees to issue
and sell to each such Subscriber, the number of Preferred Shares, and at the
aggregate price set forth, opposite each Subscriber's name as indicated on
Schedule 1.1 to this Agreement. Certificates for the Preferred Shares will be
issued in the names and denominations as indicated on Schedule 1.1.
1.2 CLOSING. Contemporaneous herewith, each Subscriber, the Company, and
Illinois Stock Transfer Company, serving as the transfer agent for the Company
(the "Transfer Agent") shall enter into that certain Transfer Agent Agreement
in the form attached hereto as Exhibit B (the "Transfer Agent Agreement"). As
contemplated therein, the Transfer Agent shall serve as an escrow agent to
facilitate the closing of the subscription referred to above (the "Closing"),
and, thereafter, shall perform the "paying agent" and "book entry" functions
contemplated therein.
1.3 PAYMENT OF PURCHASE PRICE AND DELIVERY OF PREFERRED SHARES. Payment
of the purchase price for the Preferred Shares by the Subscribers, and delivery
of the Preferred Shares by the Company, shall be effected pursuant to the
procedures established in the Transfer Agent Agreement.
1.4 MULTIPLE SUBSCRIBERS. This Agreement may be executed by one or more
Subscribers. In the event that this Agreement pertains to a subscription by a
single Subscriber
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 1
(SUCCESSORIES, INC.)
<PAGE> 3
only, all references to the "Subscribers" or "each Subscriber" shall be
deemed to refer to such single Subscriber.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY
The Company represents and warrants to and covenants with the Subscribers
as follows:
2.1 ORGANIZATION, GOOD STANDING, AND QUALIFICATION.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Illinois and has all
requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted. The Company is duly qualified
to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on
the business or properties of the Company and its subsidiaries taken as a
whole.
(b) Each subsidiary of the Company is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted.
Each such subsidiary is duly qualified to transact business and is in
good standing in each jurisdiction in which the failure to so qualify
would have a material adverse effect on the business or properties of
such subsidiary.
2.2 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, and the performance of all obligations of the
Company hereunder and the authorization, issuance (or reservation for issuance)
and delivery of the Preferred Shares and the shares of the common stock, par
value $.01 per share (the "Common Stock") of the Company issuable upon
conversion of the Preferred Shares have been taken (such shares of Common Stock
are hereinafter referred to as the "Common Shares", and the Preferred Shares
and Common Shares are hereinafter referred to as the "Securities").
2.3 AGREEMENT. This Agreement has been duly executed and delivered
by the Company and, assuming due authorization, execution and delivery
of this Agreement by each Subscriber, is a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
2.4 CAPITAL STOCK. The Company has an authorized capitalization as set
forth on Schedule 2.4. All outstanding shares of capital stock of the Company
have been duly authorized and are fully paid and non-assessable. Other than as
set forth on Schedule 2.4 or as disclosed in the SEC Reports (as such term is
defined in Section 2.6 below), there are no outstanding options, warrants,
rights, calls, commitments, conversion rights, rights of exchange, plans or
other agreements of any character providing for the purchase, issuance or sale
of any shares of capital stock of the Company.
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 2
(SUCCESSORIES, INC.)
<PAGE> 4
2.5 VALID ISSUANCE OF SECURITIES. When issued and delivered in accordance
with the terms of this Agreement, the Preferred Shares will be duly and validly
issued and outstanding, fully paid and non-assessable, free and clear of any
claims or pre-emptive rights, and (assuming the representations and warranties
of the Subscribers herein are true and correct in all material respects) will
have been issued in compliance with all applicable U.S. federal and state
securities law.
2.6 SEC REPORTS; FINANCIAL STATEMENTS. The Company has timely filed all
forms, reports and documents with the Securities and Exchange Commission (the
"Commission") since January 1, 1995, required to be filed by it under the
Securities Exchange Act of 1934, as amended (the "1934 Act") through the date
hereof (collectively, the "SEC Reports"). Such SEC Reports, at the time filed,
complied as to form in all material respects with the requirements of the 1934
Act. None of the SEC Reports, including without limitation any financial
statements or schedules included therein, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading. Except as set forth in Schedule 2.6, there have been no material
adverse changes in the Company's business, properties, results of operations,
condition (financial or otherwise) or prospects since the date of the Company's
most recent Report on Form 10-Q for the quarter ended August 2, 1996, which
have not been disclosed to the Subscribers in writing (either directly by the
Company or by delivery by the Company to the Subscribers). The audited and
unaudited consolidated balance sheets of the Company and its subsidiaries
contained in the SEC Reports, and the related consolidated statements of
income, changes in stockholders' equity and changes in cash flows for the
periods then ended (the consolidated balance sheet of the Company and its
subsidiaries as of February 3, 1996 is hereinafter referred to as the "Balance
Sheet"), including the footnotes thereto, except as indicated therein, have
been prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods indicated, except that the
unaudited financial statements do not contain notes and may be subject to
normal audit adjustments and normal annual adjustments. The Balance Sheet
fairly presents the financial condition of the Company and its subsidiaries at
the date thereof and, except as indicated therein, reflects all claims against
and all debts and liabilities of the Company and its subsidiaries, fixed or
contingent, as at the date thereof and the related statements of income,
stockholders' equity and changes in cash flows fairly present the results of
the operations of the Company and its subsidiaries and the changes in their
financial position for the period indicated. Since February 3, 1996 (the
"Balance Sheet Date"), except as disclosed in the SEC Reports and as set forth
in Schedule 2.6, there has been (x) no material adverse change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in the
results of operations or prospects, of the Company and its subsidiaries,
whether as a result of any legislative or regulatory change, revocation of any
license or rights to do business, fire, explosion, accident, casualty, labor
trouble, flood, drought, riot, storm, condemnation, act of God, public force or
otherwise and (y) no material adverse change in the assets or liabilities, or
in the business or condition, financial or otherwise, or in the results of
operations or prospects, of the Company and its subsidiaries except in the
ordinary course of business; and no fact or condition exists or is contemplated
or threatened which might cause such a change in the future.
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 3
(SUCCESSORIES, INC.)
<PAGE> 5
2.7 CURRENT PUBLIC INFORMATION. The Company's common stock is registered
under Section 12(b) or 12(g) of the 1934 Act. The Company has delivered to the
Subscribers copies of the Company's most recent annual report on Form 10-K (the
"Annual Report"), each Quarterly Report on Form 10-Q since the date of its
Annual Report, the most recent proxy statement for its Annual Meeting of
Shareholders, and each interim report on Form 8-K filed by the Company since
the date of its Annual Report. In addition, the Company has delivered to each
Subscriber a draft of the proposed Form 10-Q for the fiscal quarter ended
November 2, 1996.
2.8 NO CONFLICTS. Except as set forth on Schedule 2.8, the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby does not and will not conflict with or result in a breach
by the Company of any of the terms or provisions of, or constitute a default
under, the Certificate of Incorporation or bylaws of the Company, or any
indenture, mortgage, deed of trust or other agreement or instrument to which
the Company is a party or by which it or any of its properties or assets are
bound, or any existing applicable decree, judgment or order of any court,
Federal or State regulatory body, administrative agency or other governmental
body having jurisdiction over the Company or any of its properties or assets.
2.9 COMPLIANCE WITH LAWS. As of the date hereof, the conduct of the
business of the Company complies in all material respects with all statutes,
laws, regulations, ordinances, rules, judgments, orders or decrees applicable
thereto, except for non compliance which would not have a material adverse
effect on the business, properties, condition (financial or otherwise), results
of operations or prospects of the Company (a "Material Adverse Effect"). The
Company has not received notice of any alleged violation of any statute, law,
regulation, ordinance, rule, judgement, order or decree from any governmental
authority, which would have a Material Adverse Effect.
2.10 LITIGATION. Except as disclosed in the SEC Reports, there is no
action, suit or proceeding before or by any court or governmental agency or
body, domestic or foreign, now pending or, to the knowledge of the Company,
threatened, against or affecting the Company, or any of its properties, which
could reasonably be expected to result in any material adverse change in the
business, properties, results of operations, condition (financial or
otherwise), or prospects of the Company, or which could reasonably be expected
to materially and adversely affect the properties or assets of the Company or
which could reasonably be expected to interfere with the Company's ability to
consummate the transactions contemplated by this Agreement.
2.11 DISCLOSURES. There is no fact known to the Company (other than
general economic conditions known to the public generally) that has not
been disclosed in writing to the Subscribers that (a) could reasonably be
expected to have a Material Adverse Effect or (b) except as disclosed on
Schedule 2.8, could reasonably be expected to materially and adversely affect
the ability of the Company to perform its obligations pursuant to this
Agreement and the issuance of the Securities hereunder.
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 4
(SUCCESSORIES, INC.)
<PAGE> 6
2.12 PRIOR PRIVATE PLACEMENTS. Except as set forth in Schedule 2.12 or in
the SEC Reports, the Company has not issued any shares of its Common Stock (or
securities convertible into or exercisable for shares of Common Stock). The
offer and sale of the Preferred Shares are exempt from registration under
Section 5 of the Act. Neither the Company nor any person acting on its behalf
has taken or will take any action (including, without limitation, any offering
of any securities of the Company under circumstances which would require the
integration of such offering with the offering of the Preferred Shares or the
shares of Common Stock issuable upon conversion thereof) which subject the
offering or issuance or sale of the Preferred Shares (or the shares of Common
Stock issuable upon conversion thereof) to the registration requirements of
Section 5 of the Act.
2.13 COMMISSIONS. Except for a fee which is payable by the Company as
contemplated in the Transfer Agent Agreement to Alpine Capital Partners, Inc.
(Evan Bines) for services rendered to the Company not to exceed two and
one-half percent (2.5%) of the aggregate purchase price of the Preferred
Shares, no other person, firm or corporation will be entitled to receive any
brokerage fee, commission or other similar payment from the Company in
connection with the consummation of the transactions contemplated hereby and
the Company shall not make any such payment to any person, firm or corporation
other than Alpine Capital Partners, Inc. (Evan Bines).
3. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER; ACCESS TO INFORMATION;
INDEPENDENT INFORMATION; INDEPENDENT INVESTIGATION
Each Subscriber represents and warrants to the Company as follows:
3.1 INDEPENDENT INVESTIGATION. Each Subscriber, in offering to subscribe
for the Securities hereunder, has, prior to the date hereof, been given access
to and the opportunity to examine all books and records of the Company, and all
material contracts and documents of the Company. In making its investment
decision to purchase the Securities, no Subscriber is relying on any oral or
written representations or assurances from the Company or any other person or
any representation of the Company or any other person other than as set forth
in this Agreement, the SEC Reports or in a document executed by a duly
authorized representative of the Company making reference to this Agreement.
Each Subscriber has such experience in business and financial matters that it
is capable of evaluating the risk of its investment and determining the
suitability of its investment. Each Subscriber is a sophisticated investor, as
defined in Rule 506(b)(2)(ii) of Regulation D under the Act, and an "accredited
investor" as defined in Rule 501 of Regulation D under the Act, a copy of which
definition is attached hereto as Exhibit C.
3.2 ECONOMIC RISK. Each Subscriber understands and acknowledges that an
investment in the Securities involves a high degree of risk, including a
possible total loss of investment. Each Subscriber represents that it is able
to bear the economic risk of an investment in the Securities.
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 5
(SUCCESSORIES, INC.)
<PAGE> 7
3.3 NO GOVERNMENT RECOMMENDATION OR APPROVAL. Each Subscriber understands
that no United States federal or state agency or similar agency of any other
country has passed upon or made any recommendation or endorsement of the
Company, this transaction or the subscription of the Securities.
3.4 NO REGISTRATION. Each Subscriber understands that the Securities have
not been registered under the Act and are being offered and sold pursuant to an
exemption from registration contained in the Act based in part upon the
representations of such Subscriber contained herein. The Common Shares do,
however, carry certain registration rights as set forth in the Registration
Rights Agreement executed by the parties hereto in the form attached hereto as
Exhibit D (the "Registration Rights Agreement").
3.5 NO PUBLIC SOLICITATION. Without conducting any independent
investigation, no Subscriber knows of any public solicitation or advertisement
of an offer in connection with the proposed issuance and sale of the
Securities.
3.6 INVESTMENT INTENT. Each Subscriber is acquiring the Securities for
such Subscriber's own account, for investment and not with a view to
the distribution thereof. Each Subscriber understands that except as set forth
in the Registration Rights Agreement, the Company has no present intention of
registering any such sale of the Securities. Each Subscriber represents and
warrants to the Company that it has made no predetermined arrangements to sell
the Securities (other than the registration provisions contained in the
Registration Rights Agreement, which pertain only to a potential method of
disposing of the Common Shares).
3.7 INCORPORATION AND AUTHORITY. Each Subscriber is domiciled in Nevis,
West Indies. Each Subscriber has the full power and authority to execute,
deliver and perform this Agreement and to perform its obligations hereunder.
This Agreement has been duly approved by all necessary action of each
Subscriber, including any necessary shareholder approval, has been executed by
persons duly authorized by each Subscriber, and constitutes a valid and legally
binding obligation of each Subscriber, enforceable in accordance with its
terms.
3.8 NO RELIANCE ON TAX ADVICE. Each Subscriber has reviewed with his, her
or its own tax advisors the foreign, federal, state and local tax consequences
of this investment, where applicable, and the transactions contemplated by this
Agreement. Each Subscriber is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents and
understands that such Subscriber (and not the Company) shall be responsible for
the Subscriber's own income tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
3.9 INDEPENDENT LEGAL ADVICE. Each Subscriber acknowledges that it
has had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his, her or its own legal counsel. Each
Subscriber is relying solely on such counsel and not on any statements or
representations of the Company or any of its agents for legal advice with
respect to this investment or the transactions contemplated by this Agreement,
except for the
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 6
(SUCCESSORIES, INC.)
<PAGE> 8
representations, warranties and covenants set forth herein and on the
opinion provided for in Section 5.7 hereof.
4. LEGENDS; SUBSEQUENT TRANSFER OF SECURITIES
4.1 LEGENDS. The certificate(s) representing the Preferred Shares shall
bear a legend substantially as set forth on the cover page of this Agreement
and any other legend, if such legend or legends are reasonably required to
comply with state, federal or foreign law.
5. COVENANTS OF THE COMPANY
5.1 ACCOUNTANTS. For as long as any Preferred Shares remain outstanding,
the Company shall, until at least the second anniversary of the date of the
Closing (the "Closing Date"), maintain as its independent auditors an
accounting firm that is authorized to practice before the SEC.
5.2 CORPORATE EXISTENCE AND TAXES. For as long as any Preferred Shares
remain outstanding, the Company shall maintain its corporate existence in good
standing, and shall pay all its taxes when due except for taxes which the
Company disputes in good faith and for which adequate reserves are established
on the Company's books and records.
5.3 RESERVED SHARES AND LISTINGS. For so long as any Preferred Shares
remain outstanding:
(a) the Company will reserve from its authorized but unissued shares
of Common Stock a sufficient number of Common Shares to permit the
conversion in full of the then outstanding Preferred Shares; and
(b) the Company will maintain the listing of its Common Stock on the
NASDAQ stock market; and
(c) until such time as all of the Preferred Shares have been
converted into Common Shares, the Company will not repurchase more than
ten percent (10%) of its Common Stock issued and outstanding on the date
hereof or otherwise enter into any other transaction (including stock
split, recapitalization or other transaction) which would cause a
decrease in the number of its shares of Common Stock issued and
outstanding (other than transactions that similarly decrease the number
of shares of Common Stock into which the Preferred Shares are
convertible); and
(d) the Company will (I) retain the Transfer Agent as the stock
transfer agent of the Company, and (II) if the Transfer Agent voluntarily
or involuntarily fails to so serve, select an independent, unaffiliated
replacement stock transfer agent willing to perform the duties of the
Transfer Agent under the Transfer Agent Agreement.
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 7
(SUCCESSORIES, INC.)
<PAGE> 9
5.4 ISSUANCE OF COMMON SHARES. Upon conversion of the Preferred Shares in
accordance with their terms, the Company will, and will use its best lawful
efforts to cause the Transfer Agent to, issue one or more certificates
representing Common Shares in such name or names and in such denominations
specified by a Subscriber in a Notice of Conversion delivered to the Transfer
Agent (with a copy to the Company) pursuant to the procedures specified in the
Certificate of Designation and Transfer Agent Agreement (each, a "Notice of
Conversion").
5.5 COPIES OF INFORMATION. The Company undertakes to furnish each
Subscriber with copies of such other information as may be reasonably requested
by such Subscriber prior to consummation of this Offering. The Company will
provide the Subscribers with copies of all future filings under the 1934 Act
for so long as any Preferred Shares are outstanding.
5.6 COMPLIANCE WITH LAWS. The Company shall comply with all applicable
Federal and state securities laws with respect to the sale of the Securities,
including but not limited to the filing of all reports required to be filed in
connection therewith with the SEC or any stock exchange or the NASDAQ Stock
Market or any other regulatory authority.
5.7 OPINION OF COUNSEL. Each Subscriber shall, prior to the Closing,
receive an opinion letter from counsel to the Company, to the effect that (i)
the Company is duly incorporated and validly existing; (ii) this Agreement, the
issuance of the Preferred Shares, and the issuance of the Common Shares upon
conversion of the Preferred Shares have been duly approved by all required
corporate action, and that both the Preferred Shares and the Common Shares,
upon due issuance, shall be validly issued and outstanding, fully paid and
nonassessable; and (iii) this Agreement, the Transfer Agent Agreement and the
Registration Rights Agreement are each valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of
debtors and rules of laws governing specific performance and other equitable
remedies; except that with respect to the foregoing opinions counsel may add
such qualifications as are consistent with firm practice. The Company further
covenants that it will arrange for issuance of any legal opinions required by
the Company's Transfer Agent in order to ensure that, upon the effectiveness of
a registration statement described in the Transfer Agent Agreement, the Common
Shares may be sold pursuant thereto by each Subscriber with the purchaser
thereof receiving certificates without restrictive legend, which opinion shall
remain effective so long as such registration statement remains in full force
and effect. The applicable Subscriber shall certify to the Transfer Agent that
it has sold the Common Shares pursuant to such registration statement.
5.8 USE OF PROCEEDS. The Company shall use the net proceeds from the sale
of the Preferred Shares for general corporate purposes and shall not use such
proceeds to repurchase any securities (including shares of Common Stock) of the
Company.
5.9 REGISTRATION RIGHTS. The Company will grant the Subscribers the
registration rights covering the Common Shares issuable on conversion of the
Preferred Shares on the terms of the Registration Rights Agreement. In the
event the Registration Statement contemplated by
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 8
(SUCCESSORIES, INC.)
<PAGE> 10
the Registration Rights Agreement is not declared effective by the
Commission within the earlier to occur of (i) five (5) business days of the
receipt of any "no review" letter from the Commission (the "No Review Letter")
and (ii) sixty five days (65) following the Closing contemplated herein, and
such effectiveness is not maintained for a consecutive two (2) year period
(subject to the right of the Company to suspend the effectiveness thereof for
not more than an aggregate of 30 days during such two (2) year period), the
Company shall pay to the Subscribers, as liquidated damages and not as a
penalty, an amount equal to one percent (1%) of the aggregate outstanding
principal amount (based on the liquidation preference thereof) of the Preferred
Shares. An additional liquidated damage payment of one-half percent (.05%) of
the aggregate outstanding principal amount of the Preferred Shares (based on
the liquidation preference thereof) shall be payable as liquidated damages in
the event that such Registration Statement is not declared effective by the
Commission (i) for each additional five (5) business days following the receipt
of a No Review Letter and (ii) within ninety (90) days of the Closing
contemplated herein, and such effectiveness is not maintained for a consecutive
two (2) year period (subject to the right of the Company to suspend the
effectiveness thereof for not more than an aggregate of 30 days during such two
(2) year period). Such liquidated damages shall be paid in cash by the Company
to the Subscribers by wire transfer of immediately available funds on the last
day of each calendar month following the event requiring its payment.
6. COVENANTS OF THE SUBSCRIBERS.
6.1 NO SALE IN VIOLATION OF THE ACT. Each Subscriber further covenants that
it will not make any sale, transfer or other disposition of the Securities in
violation of the Act or the rules and regulations of the Commission promulgated
thereunder. Each Subscriber acknowledges and agrees that the Securities may and
will only be resold (a) pursuant to a Registration Statement under the Act; or
(b) pursuant to an exemption from registration under the Act.
7. ISSUANCE OF FURTHER SECURITIES
7.1 RIGHT OF FIRST REFUSAL. The Company hereby grants to the Subscribers
the right of first refusal to purchase all (or any part) of New Securities (as
defined in this Section) that the Company may, from time to time, propose to
sell and issue. "New Securities" shall mean any capital stock of the Company,
whether now authorized or not, and rights, options or warrants to purchase said
capital stock, and debt or equity securities of any type whatsoever that are,
or may become, convertible into said capital stock; provided, however, that the
term "New Securities" does not include securities issued in Excluded
Financings. "Excluded Financings" mean (i) non-convertible debt or
non-convertible preferred stock financings of any type, (ii) public offerings
at the market price of the Common Stock, (iii) private financings at a price,
including conversion price, at least equal to the then-current market price of
the Common Stock (determined as set forth in the Certificate of Designation),
(iv) project financings, (v) bank financings, (vi) the issuance and sale of, or
the grant of options to purchase, shares of Common Stock pursuant to any of the
Company's employee or director stock option, compensation, bonus or incentive
plans, (vii) the issuance or sale of Common Stock and/or warrants for the
acquisition by the Company of operating assets to be owned and operated by the
Company or
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 9
(SUCCESSORIES, INC.)
<PAGE> 11
a subsidiary of the Company; (viii) the issuance of shares of Common
Stock pursuant to or in connection with (A) warrants for the purchase of
112,000 shares of Common Stock issued to certain investors holding subordinated
debt of the Company and options for the purchase of 125,000 shares of Common
Stock issued in connection with the extension of the terms of such subordinated
debt; (B) the Company's 1995 Employee Stock Purchase Plan; (C) the Company's
Stock Option Plan; (D) options granted to Arnold M. Anderson pursuant to the
terms of that certain Common Stock Option Agreement and that certain Incentive
Stock Option Agreement; (E) options granted to James M. Beltrame pursuant to
the terms of that certain Common Stock Option Agreement and that certain
Incentive Stock Option Agreement; (F) any merger or acquisition entered into by
the Company; and (G) any existing options or warrants disclosed on Schedule 2.4
to this Agreement, and (ix) any other financings pursuant to which securities
of the Company are issued, provided that such securities are not convertible,
exchangeable or exercisable for shares of Common Stock which are either freely
tradeable, or freely tradeable upon effectiveness of a registration statement
which the Company is required to file with the SEC as part of such financing,
in each case within one (1) year of the date hereof. In the event that the
Company proposes to undertake an issuance of New Securities, it shall give the
Subscribers written notice of its intention, describing the type of New
Securities, the price and the general terms upon which the Company proposes to
issue the same. Each Subscriber shall have fifteen (15) days from the date of
receipt of any such notice to agree to purchase all or less than all of the New
Securities for the price and upon the general terms specified in the notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased. If any such Subscriber fails to exercise in full
the right of first refusal within such fifteen (15) day period, then the
Company shall have sixty (60) days thereafter to sell the New Securities
respecting which the Subscribers' rights were not exercised, at a price and
upon general terms no more favorable to the purchasers thereof than specified
in the Company's notice. In the event that the Company has not sold the New
Securities within such sixty (60) day period, the Company shall not thereafter
issue or sell any New Securities without first offering such securities to the
Subscribers in the manner provided above. The right of first refusal granted
under this Section shall terminate upon the earlier of: (i) 180 days following
the Closing Date; or (ii) the date upon which the Subscribers cease to own at
least one-third of the Preferred Shares.
8. LIQUIDATED DAMAGES FOR LATE CONVERSION
8.1 LIQUIDATED DAMAGES. As set forth in the Certificate of Designation, the
Company shall use its best efforts to issue and deliver, within three (3) New
York Stock Exchange trading days after a Subscriber has fulfilled all
conditions and submitted a Notice of Conversion duly executed and in proper
form required for conversion as contemplated by the Transfer Agent Agreement
(the "Deadline"), to such Subscriber or any party receiving the Preferred
Shares by transfer from such Subscriber (together with such Subscriber, a
"Holder"), at the address of the Holder set forth in the Notice of Conversion
and in the absence thereof at such address as set forth in the Transfer Agent
Agreement, a certificate or certificates for the number of Common Shares to
which the Holder shall be entitled. The Company understands that a delay in
the issuance of the Common Shares after the Deadline could result in economic
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 10
(SUCCESSORIES, INC.)
<PAGE> 12
loss to the Holder. If for any reason the Company fails to issue the Common
Shares, as compensation to the Holder for such loss, and not as a penalty, the
Company agrees to pay liquidated damages to the Holder for late issuance of
Common Shares upon conversion in accordance with the following schedule (where
"No. Business Days Late" is defined as the number of business days after the
Deadline):
<TABLE>
<CAPTION>
Aggregate
No. Business Days Late Liquidated Damages
---------------------- ------------------------------
(per each Preferred
Share outstanding)
<S> <C>
1 $10
2 $20
3 $30
4 $40
5 $50
6 $60
7 $70
8 $80
9 $90
10 $100
>10 $500 + an additional $20
for each Business Day Late
beyond 20 days
</TABLE>
The Company shall pay the Holder any liquidated damages incurred under this
Section by wire transfer of immediately available funds to an account
designated by Holder upon the earlier to occur of (i) issuance of the Common
Shares to the Holder of the required Common Shares that were not issued, or
(ii) each monthly anniversary of the receipt by the Company of such Holder's
Notice of Conversion. Nothing herein shall waive the Company's obligations to
deliver Common Shares upon a conversion of the Preferred Shares or limit any
Subscriber's right to pursue actual damages for the Company's failure to issue
and deliver Common Shares to such Subscriber in accordance with the terms of
the Certificate of Designation, provided, any actual damages recoverable by any
Subscriber shall be reduced to the extent of any previously paid liquidated
damages hereunder.
8.2 CONVERSION NOTICE. The Company agrees that, in addition to any other
remedies which may be available to the Subscribers, including, but not limited
to the remedies available under Section 8.1, in the event the Company fails for
any reason to effect delivery to a Subscriber of certificates representing
Common Shares on or prior to the Deadline, such Subscriber will be entitled to
revoke the Notice of Conversion by delivering a notice to such effect to the
Company whereupon the Company and the Subscriber shall each be restored to
their respective positions immediately prior to delivery of such Notice of
Conversion.
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 11
(SUCCESSORIES, INC.)
<PAGE> 13
9. CONDITIONS TO CLOSING; DELIVERIES AT CLOSING
9.1 CONDITIONS TO SUBSCRIBERS' OBLIGATIONS TO CLOSE. The obligations
of the Subscribers to purchase the Preferred Shares offered hereunder are
conditioned on the fulfillment or waiver of the following:
(a) the execution and delivery of this Agreement, the Registration
Rights Agreement and the Transfer Agent Agreement by the Company;
(b) the execution and delivery of the Transfer Agent Agreement by
the Transfer Agent;
(c) all the representations and warranties of the Company in this
Agreement as of the date hereof shall be true and correct at the Closing
as if made on such date, and the Company shall have performed all actions
required hereunder;
(d) receipt of the opinion of legal counsel to the Company to the
effect set forth in Section 5.7;
(e) filing of the Certificate of Designation with the Secretary of
State of Illinois;
(f) a waiver or consent of American National Bank and Trust Company
of Chicago to the Company's consummation of, and performance under, this
Agreement and the documents executed in connection herewith; and
(g) a waiver or consent from the holders of the Company's
outstanding Series A Shares substantially in the form attached as Exhibit
E.
9.2 CONDITIONS TO THE COMPANY'S OBLIGATION TO CLOSE. The obligation of
the Company to sell the Preferred Shares offered hereunder are conditioned on
the fulfillment or waiver of the following:
(a) the execution and delivery of this Agreement, the Registration
Rights Agreement and the Transfer Agent Agreement by the Subscribers;
(b) the execution and delivery of the Transfer Agent Agreement by
the Transfer Agent;
(c) all the representations and warranties of each Subscriber made
in this Agreement as of the date hereof shall be true and correct at the
Closing as if made on such date, and each Subscriber shall have performed
all actions required hereunder;
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 12
(SUCCESSORIES, INC.)
<PAGE> 14
(d) a waiver or consent of American National Bank and Trust Company
of Chicago to the Company's consummation of, and performance under, this
Agreement and the documents executed in connection herewith; and
(e) a waiver or consent from the holders of the Company's
outstanding Series A Shares substantially in the form attached as Exhibit
E.
10. EVENTS OF DEFAULT
If one or more of the following events shall occur (each such event,
following the expiration of any cure period associated therewith as hereafter
described being referred to as an "Event of Default"), then the Company shall
be in default of this Agreement:
(a) any of the representations or warranties made by the Company
herein shall be false and misleading in any material respect at the time
made;
(b) the Company shall fail to perform or observe any covenant, term,
provision, condition, agreement or obligation of the Company under this
Agreement, the Registration Rights Agreement, the Certificate of
Designation or the Transfer Agent Agreement (including, without
limitation, the failure to deliver shares of Common Stock upon conversion
of the Preferred Shares in accordance with the terms of the Certificate
of Designation), and such failure shall continue uncured for a period of
seven (7) days after notice from the Subscriber of such failure;
(c) the Company shall (i) admit in writing its inability to pay its
debts as they mature, (ii) make an assignment of a substantial part of
its properties or assets for the benefit or creditors or commence
proceeds for its dissolution; or (iii) apply for or consent to the
appointment of a trustee, liquidator or receiver for it or for a
substantial part of its property or business;
(d) a trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without its
consent and shall not be discharged within thirty (30) days after such
appointment;
(e) any governmental agency or any court of competent jurisdiction
at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or
assets of the Company which shall not be dismissed within thirty (30)
days thereafter;
(f) any money judgment, writ or warrant of attachment, or similar
process, except mechanics and materialmen's liens incurred in the
ordinary course of business, in excess of Five Hundred Thousand Dollars
($500,000) in the aggregate shall be entered or filed against the Company
or any of its properties or other assets and shall remain
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 13
(SUCCESSORIES, INC.)
<PAGE> 15
unvacated, unbonded or unstayed for a period of forty-five (45) days or
in any event later than five (5) days prior to the date of any proposed
sale thereunder;
(g) bankruptcy, reorganization, insolvency or liquidation proceeds
or other proceeds for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed, stayed or bonded
within ninety (90) days after such institution or the Company shall in
any action or answer approve of, consent to, or acquiesce in any
proceedings or admit the material allegations of, or default in answering
a petition filed in any such proceedings;
(h) the Company shall have its Common Stock delisted from NASDAQ for
at at least ten (10) consecutive business days and is unable to obtain a
listing on another nationally recognized securities exchange such as the
NASDAQ SmallCap Market within such ten (10) day period; or
(i) the Company shall have suspended the effectiveness of the
Registration Statement required pursuant to Section 2(a) of the
Registration Rights Agreement for more than an aggregate of sixty (60)
days during the two (2) year period described in Section 2(a)(C) of the
Registration Rights Agreement.
Upon the occurrence of any Event of Default, the Subscriber shall be entitled
to exercise all remedies available at law and/or in equity.
11. LIMITATION ON CONVERSION AND VOTING PRIOR TO DEFAULT
(a) In addition to and not in lieu of the limitations on conversion
set forth in the Certificate of Designation, the conversion right of the
Subscriber set forth in the Certificate of Designation shall be limited,
solely to the extent required, from time to time, such that in no
instance shall the maximum number of shares of Common Stock which the
Subscriber may receive in respect of any conversion of the Preferred
Shares exceed, at any one time, an amount equal to the remainder of (i)
4.99% of the then issued and outstanding shares of Common Stock of the
Company following such conversion, minus (ii) the number of shares of
Common Stock of the Company then owned (beneficially or of record) by the
Subscriber (the foregoing being herein referred to as the "Limitation on
Conversion"). The applicable Subscriber shall certify in each Notice of
Conversion that it is in compliance with the Limitation on Conversion.
(b) Notwithstanding the voting rights granted under the Certificate
of Designation, the voting rights of the Subscriber shall be limited to
the extent necessary such that in no event will the Subscriber be
entitled to vote more than 4.99% of the then issued and outstanding
shares of Common Stock of the Company (the "Voting Limitation").
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 14
(SUCCESSORIES, INC.)
<PAGE> 16
(c) The Limitation on Conversion and Voting Limitation shall not
apply, and shall be of no further force and effect, (i) upon the
occurrence of either (I) a Redemption Transaction (as defined in the
Certificate of Designation) or (II) an automatic conversion on December
17, 1998, or (ii) for at least ten (10) consecutive business days
following the occurrence of any Event of Default described in Section 10
above and for which the Holder has provided written notice thereof and
which is not cured within the greater of the applicable time period
specified in either (I) such written notice of the Subscriber or (II)
Section 10 hereof; provided, however, that in no event will this
provision permit conversion or constitute a grant of voting rights in
excess of the Conversion Limit set forth in Section 4A of the Certificate
of Designation.
12. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois, U.S.A., applicable to agreements made in and
wholly to be performed in that jurisdiction without regards to the choice of
law rules of such state, except for matters arising under the Act or the 1934
Act which matters shall be construed and interpreted in accordance with such
laws. Any action brought to enforce, or otherwise arising out of, this
Agreement shall be heard and determined in either a Federal or state court
sitting in the County of Dallas, State of Texas, U.S.A.
13. ENTIRE AGREEMENT; AMENDMENT
This Agreement, the Registration Rights Agreement, the Transfer Agent
Agreement and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought.
14. NOTICES, ETC.
Any notice, demand or request required or permitted to be given by either
the Company or any Subscriber pursuant to the terms of this Agreement shall be
in writing and shall be deemed given when delivered personally or by facsimile,
with a hard copy to follow by two day courier addressed to the parties at the
addresses of the parties set forth at the end of this Agreement or such other
address as a party may request by notifying the other in writing.
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 15
(SUCCESSORIES, INC.)
<PAGE> 17
15. CONFIDENTIALITY.
The Subscribers will keep confidential all non-public information
regarding the Company that they receive from the Company unless disclosure of
such information is compelled by a court or other administrative body or
otherwise necessary, in the opinion of Subscribers' counsel, to comply with
applicable law. Neither party shall disclose any information regarding any of
the transactions contemplated hereby without the prior consent of the other
party, unless such disclosure is required in filings made with the Commission
16. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument. A
facsimile transmission of a signature hereto shall be valid as if an original
and binding on all parties.
17. SEVERABILITY
In the event that any provision of this Agreement becomes or is declared
by a court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision;
provided that no such severability shall be effective if it materially changes
the economic benefit of this Agreement to any party.
18. TITLES AND SUBTITLES
The titles and subtitles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
19. PARTIES IN INTEREST CITED
This Agreement may not be transferred, assigned, pledged or hypothecated
by any party hereto, other than by operation of law. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective heirs, executors, administrators, successors and permitted assigns.
All representations and warranties of each party hereto shall survive the
Closing contemplated herein for a period of two (2) years. All covenants and
agreements of each party hereto shall survive the Closing for ten (10) years
(or for such shorter time as specifically applicable to the relevant covenant
or agreement).
The undersigned Subscribers acknowledge that this subscription shall not
be effective unless accepted by the Company as indicated below.
[Signature page follows]
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 16
(SUCCESSORIES, INC.)
<PAGE> 18
DATED this ______ day of December, 1996.
INFINITY INVESTORS LIMITED
27 Wellington Road
Cork, Ireland
-----------------------------
Signature
Place of Execution:
Great Britain
SEACREST CAPITAL LIMITED
27 Wellington Road
Cork, Ireland
-----------------------------
Signature
Place of Execution:
Great Britain
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE ____ DAY OF DECEMBER
1996.
SUCCESSORIES, INC.
919 Springer Drive
Lombard, Illinois 60148
By:
----------------------------
Print Name:
--------------------
Title:
-------------------------
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 17
(SUCCESSORIES, INC.)
<PAGE> 19
SCHEDULE 1.1
SUBSCRIBERS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Name Aggregated Number of Aggregate
Liquidation Value Preferred Shares Purchase Price
of Preferred Shares Subscribed For
Subscribed For ($5,000 per Share
Liquidation
Preference)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Infinity Investors Limited $4,850,000 970 US $4,001,650
Seacrest Capital Limited $1,210,000 242 US $ 998,350
- ------------------------------------------------------------------------------------------------
Totals $6,060,606 1,212 US $5,000,000
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 20
SCHEDULE 2.4
<TABLE>
<CAPTION>
<S> <C>
Shares of Common Stock:
Authorized: 20,000,000
Issued/Outstanding: 5,432,388 (as of 12/2/96)
Held in Treasury: -0-
Shares of Preferred Stock:
Authorized: 1,000,000
Issued: 400
Outstanding: 133
Convertible Securities:
Options: 1,469,000
Warrants: 112,000
</TABLE>
Any future issuances of shares of the Company's Common Stock in connection with
(i) the proposed acquisition of British Links by the Company and (ii) options
for the purchase of 125,000 shares of Common Stock to be issued to certain
investors holding subordinated debt of the Company in connection with an
extension of such subordinated debt.
<PAGE> 21
EXHIBIT A
TO REGULATION D
SECURITIES SUBSCRIPTION AGREEMENT
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES B
CONVERTIBLE PREFERRED STOCK OF
SUCCESSORIES, INC.
PURSUANT TO SECTION 6.10 OF THE
ILLINOIS BUSINESS CORPORATION ACT OF 1983, AS AMENDED
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority conferred
upon the Board Directors of this Corporation in accordance with the provisions
of the Articles of Incorporation there is hereby established a series of the
authorized preferred stock of the Corporation, $100 par value per share, which
series shall be designated as "Series B Cumulative Convertible Preferred
Stock," and which shall consist of One Thousand Two Hundred Twelve (1,212)
shares (collectively the "Series B Shares" or singularly, a "Series B Share")
and shall have the following dividend rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and other rights,
qualifications, limitations and restrictions.
1. DIVIDEND RIGHTS
1.1 A. The holder of record of each Series B Share (a "Holder") as of
the Record Date (as defined below) shall be entitled to receive, when, as and if
declared by the Corporation's Board Directors or a duly authorized committee
thereof, on January 1, April 1, July 1 and October 1 of each year (a "Dividend
Payment Date") out of the funds of the Corporation legally available therefor,
cumulative dividends per Series B Share (the "Dividends") in cash equal to the
"Cash Rate" (as hereinafter defined) multiplied by the Liquidation Preference
(as defined in Paragraph 2 and as adjusted pursuant Paragraph 1.1.D below) for
each Quarterly Payment Period (as hereinafter defined) that such Series B Share
is outstanding.
To the extent permitted by applicable law and not prohibited pursuant to the
terms of applicable credit instruments, senior securities or the Articles of
Incorporation, the Board of Directors shall declare Dividends on each Dividend
Payment Date (or, if such day is not a business day, on the next business day
thereafter).
B. A "Quarterly Payment Period" shall mean the three-month period ending
on March 31, June 30, September 30 and December 31 of each year.
CERTIFICATE OF DESIGNATION-PAGE 1
(SUCCESSORIES, INC.)
<PAGE> 22
C. The "Cash Rate" shall mean an annual dividend rate of 4.95% (i.e.,
a quarterly dividend rate of 1.2375%). The Cash Rate shall be referred to as
the "Dividend Rate."
D. Dividends shall accrue (whether or not paid) during each Quarterly
Payment Period from the Dividend Payment Date immediately preceding such
Quarterly Payment Period to the last day of such Quarterly Payment Period,
provided that, for the first Quarterly Payment Period, Dividends shall accrue
commencing as of the date of initial issuance of the Series B Shares and shall
be payable for the Quarterly Payment Period ending March 31, 1997. Dividends
shall be calculated on the basis of a 90-day Quarterly Payment Period and the
actual number of days elapsed. For any Quarterly Payment Period with respect
to which the Dividend is not fully paid in cash on the Dividend Payment Date at
the end of such Quarterly Payment Period, such accrued but unpaid Dividends
shall be added to the Liquidation Preference of the Series B Shares effective
at the beginning of the Quarterly Payment Period next succeeding the Quarterly
Payment Period as to which such Dividends were not paid, and shall thereafter
accrue additional Dividends at the Dividend Rate. During any Quarterly Payment
Period in which a Notice of Conversion (as defined in Paragraph 5.2 below) is
delivered by a Holder, or a Redemption Transaction (as defined in Paragraph
5.4A) occurs, the Corporation may, at its option, pay in cash all Dividends
which have accrued from the end of the immediately preceding Quarterly Payment
Period. Any Dividend payment made on Series B Shares shall be credited against
the earliest accrued but unpaid Dividend which has been added to the
Liquidation Preference of the Series B Shares pursuant to this Paragraph 1.1.D
and shall reduce the Liquidation Preference by the amount of the Dividend paid.
1.2 Dividends, if and when declared on each Series B Share, shall to the
extent permitted by applicable law be declared at least twenty (20) business
days prior to the next Dividend Payment Date for payment on the next Dividend
Payment Date to the Holders of record on the date determined in such
declaration, which date shall in no event be more than fifteen (15) business
days after the date of declaration (the "Record Date"). Dividends shall be
payable on each Dividend Payment Date (or if any such day is not a business
day, the next succeeding business day), except that Dividends for the period
during which a Redemption (as defined in Paragraph 5.1) shall occur shall be
payable on Series B Shares redeemed in accordance with Paragraph 5.2 (unless
otherwise paid on a Dividend Payment Date for a Record Date occurring prior to
a Redemption Date (as defined in Paragraph 5.2)). The Holder of any Series B
Shares which are the subject of a conversion pursuant to Paragraph 4 shall, on
the Conversion Date (as defined in Paragraph 4.G), cease to have any rights
with respect to any accrued Dividends on such Series B Shares which have not
been declared and paid on or before such Conversion Date except to the extent
that such accrued but unpaid Dividends have been added to the Liquidation
Preference of such Shares and except that in the event a conversion of Series B
Shares is effected after a Redemption Notice (as defined in Paragraph 5.2) is
delivered by the Corporation but prior to a Redemption Date, then, to the
extent lawful, the Corporation shall pay to such Holder an amount in cash equal
to all accrued and unpaid Dividends from the last Dividend Payment Date until
the date the converting Holder delivered its notice of conversion pursuant to
Paragraph 4.G.
CERTIFICATE OF DESIGNATION-PAGE 2
(SUCCESSORIES, INC.)
<PAGE> 23
1.3 So long as any Series B Shares are outstanding, the Corporation shall
not declare, pay or set aside for payment any dividend (other than in shares of
Junior Stock (as hereinafter defined)) or other distribution in respect of its
Junior Stock, or call for redemption, redeem, purchase or otherwise acquire for
any consideration (other than shares of its Junior Stock) any shares of its
Junior Stock, any warrants, rights, calls or options exercisable for any shares
of Junior Stock unless all dividends accumulated and unpaid with respect to the
Series B Shares are simultaneously declared and paid. "Junior Stock" means
Common Stock (as hereinafter defined) or any other series of preferred stock of
the Corporation which ranks junior to or on a parity with (as determined
pursuant to Paragraph 6) the Series B Shares, other than the Series A Shares
(as defined in Paragraph 6 hereof). "Common Stock" means the common stock, par
value $.01 per share, of the Corporation and any share of successor or
replacement stock.
1.4 Each Holder shall be entitled to participate with the holders of Common
Stock equally and ratably (on the basis of the number of shares of Common Stock
such Holder would then own if it then converted its Series B Shares pursuant to
Paragraph 4) in any subscription rights or other similar rights to acquire
securities or property of the Corporation granted to any holder of Common
Stock.
2. RIGHTS ON LIQUIDATION AND RANKING
2.1 In the event of the liquidation, dissolution, winding-up or sale or
other disposition of all or substantially all of the assets of the Corporation,
whether voluntary or involuntary ("Liquidation"), the Holder of a Series B
Share shall be entitled to receive with respect to such Series B Share, after
the satisfaction of all distributions to holders of other series of preferred
stock, if any, which are required (at the direction of the holder thereof or
otherwise) to be redeemed prior to or in connection with the consummation of
such Liquidation or which are expressly senior in liquidation preference to the
Series B Shares including any series of preferred stock which is mandatorily
redeemable (collectively, the "Senior Payments") but before any distribution is
made to or set aside for the holders of Common Stock or any other series of
preferred stock of the Corporation, if any, which are not then required to be
redeemed or which are junior in liquidation preference to the Series B Shares,
cash or any other assets of the Corporation in an amount (or having a fair
market value) equal to Five Thousand Dollars ($5,000) per share (the
"Liquidation Preference") plus all accrued but unpaid Dividends which have been
added to the Liquidation Preference of such shares pursuant to Paragraph 1.1.D
up to the date of the final distribution in Liquidation. If, after the
satisfaction of all Senior Payments, the assets of the Corporation available
for distribution to Holders shall be insufficient to permit the payment in full
of the amount due the Holders pursuant to this Paragraph 2, then the entire
assets of the Corporation available for distribution to Holders after the
satisfaction of all Senior Payments shall be distributed pari passu among the
Holders and the holders of other series of preferred stock which are not junior
in liquidation preferences to the Series B Shares, if any, in accordance with
their respective liquidation preferences. The fair market value of any assets
of the Corporation and the proportion of cash and other assets distributed by
the Corporation to the Holders of the Series B Shares shall be reasonably
determined in good faith
CERTIFICATE OF DESIGNATION-PAGE 3
(SUCCESSORIES, INC.)
<PAGE> 24
by the Board of Directors. A merger or consolidation of the Corporation with
another corporation (or other business entity) or a voluntary sale of all or
substantially all of the assets of the Corporation principally in exchange for
stock and/or securities of another corporation (all referred to as a "Merger")
shall not be deemed a Liquidation if such Merger does not occur as part of a
proceeding under Title 11 of the United States Code or any federal or state
law for the protection of creditors or relief of debtors.
2.2 With regard to rights to receive distributions upon Liquidation of the
Corporation and dividends, the Series B Shares shall rank senior to the Common
Stock and any other equity securities of the Corporation that by their terms
are not made senior to or on a parity with the Series B Shares as to such
rights.
3. VOTING RIGHTS
3.1 Except as otherwise provided in Paragraphs 3.2 and 3.3 below, each
Holder shall have the same voting rights as a holder of the number of shares of
Common Stock which such Holder would then own if it then converted its Series B
Shares pursuant to Paragraph 4.
3.2 So long as any of the Series B Shares are outstanding the Corporation
will not, without the affirmative vote or consent of the Holders of at least
eighty percent (80%) of the Series B Shares at the time outstanding, given in
person or by proxy, either in writing or by a resolution adopted at a meeting
called for such purpose, with the Holders of the Series B Shares voting or
consenting separately as a class:
A. amend, alter or repeal any of the provisions of the
Corporation's Articles of Incorporation or Bylaws or the resolution
providing for the issue of the Series B Shares or pass any stockholder
resolution, including such action effected by merger or similar
transaction in which the Corporation is the surviving corporation, if
such amendment or resolution would affect adversely the preferences,
special rights or powers of the Series B Shares except if such action is
otherwise permitted under the other provisions of this Paragraph 3.2;
B. increase or decrease (other than by redemption or conversion)
the total number of authorized Series B Shares;
C. issue any capital stock which ranks senior to or on a parity
with the Series B Shares with respect to rights to receive distributions
upon liquidation, dissolution, or winding up of the Corporation or with
respect to dividends; or
D. enter into a Merger in which the Corporation is not the
surviving corporation; provided, however, that the provisions of this
subparagraph D shall not be applicable to any such Merger if the
authorized capital stock of the surviving corporation immediately
after such Merger shall include only classes
CERTIFICATE OF DESIGNATION-PAGE 4
(SUCCESSORIES, INC.)
<PAGE> 25
or series of stock for which no such consent or vote would have
been required pursuant to Paragraph 3.2 if such class or series had
been authorized by the Corporation immediately prior to such Merger
or which have the same rights, preferences and limitations and
authorized amount as a class or series of stock of the Corporation
authorized prior to such Merger and continuing as an authorized
class or series at the time thereof.
A Merger of the Corporation, or similar Merger in which the
holders of its capital stock receive all cash shall not be deemed to
adversely affect the preferences, special rights or powers of the Series B
Shares. The authorization or issuance of any other series of preferred stock
if such other series ranks junior to the Series B Shares with respect to rights
to receive distributions upon liquidation, dissolution or winding up of the
Corporation or with respect to dividends, shall not be deemed to adversely
affect the preferences, special rights or powers of the Series B Shares.
3.3 In the event of an issuance by means of a stock split, reverse
split or stock dividend or other similar event or reclassification of
shares of Common Stock outstanding, the voting rights of the Series B Shares
shall be fairly and equitably (in the judgment of the Board of Directors of the
Corporation) adjusted at the same time and in the same manner as the adjustment
is made in the rights of the Common Stock in order to maintain the same voting
rights as the Series B Shares had on the date of issuance.
3.4 Copies of all notices sent to the holders of Common Stock
shall be simultaneously sent to each Holder.
4. CONVERSION RIGHTS - COMMON STOCK
A. NUMBER OF SERIES B SHARES. Each Series B Share shall be
convertible, at the option of the Holder thereof, at any time and from
time to time into that number of shares of Common Stock, obtained by dividing
the Liquidation Preference (including any Dividends added to Liquidation
Preference pursuant to Paragraph 1.1.D) of such Series B Share by the
"Conversion Price" determined in accordance with Paragraph 4.B as follows: (i)
606 of the Series B Shares shall be convertible commencing February 16, 1997,
and (ii) 606 of the Series B Shares shall be convertible commencing March 18,
1997. Notwithstanding the foregoing, each Series B Share outstanding on
December 17, 1998 shall automatically be converted into Common Stock on such
date at the Conversion Price and December 17, 1998 shall be deemed the
Conversion Date with respect to such conversion without the requirement of the
delivery of a Notice of Conversion provided, such automatic conversion shall
not occur if, at such time, the Corporation is in default of any of its
obligations hereunder which has not been cured within seven (7) days after
receipt of written Notice from a Holder of the event creating such default.
Furthermore, the Company shall not be obligated to honor any Notice of
Conversion (or any automatic conversion on December 17, 1998) for any Series B
Shares delivered by the Holders, if after giving effect to the issuance of
Shares of Common Stock in connection therewith the Company would not be in
compliance with applicable National Association of Securities Dealers
CERTIFICATE OF DESIGNATION-PAGE 5
(SUCCESSORIES, INC.)
<PAGE> 26
("NASD") corporate governance rules (the "Conversion Limit"). In such
case, the number of Series B Shares which cannot be converted solely as a
result of the Conversion Limit shall be redeemed by the Corporation and the
Holders shall be entitled to receive cash in exchange therefor in an amount
equal to the number of shares of Common Stock that would have been issued upon
such conversion multiplied by the Market Price (as defined in Paragraph 4.J.
below) on the date of such conversion, pursuant to the redemption provisions of
Paragraph 4.N. below.
B. CONVERSION PRICE. The Conversion Price shall be equal to the lesser of
(x) $9.00 (the "Fixed Price") and (y) the "Market Price" of the Common Stock
(as defined in Paragraph 4.J below). The Conversion Price is also subject to
adjustment from time to time pursuant to Paragraph 4.D. Notwithstanding the
foregoing, the Conversion Price shall be increased by an amount equal to the
formula I=(C-(1.25*F))/2, where:
I=Increase in Conversion Price,
C=Market Price of the Common Stock, and
F=Fixed Price;
provided, that such formula will only operate to increase the Conversation
Price and not as a decrease thereto.
C. CONVERSION AND REDEMPTION. In case any Series B Share is called for
redemption, the right to convert such Series B Share shall terminate with
respect to all Series B Shares for which a Notice of Conversion (as defined in
Paragraph 4.F below) shall not have previously been delivered to the Transfer
Agent (as hereafter defined) pursuant to the procedures described in Paragraph
5.2 below at the close of business on the date which is three (3) business days
preceding the Redemption Date (as defined in Paragraph 5.1 below); provided
that no default by the Corporation in the payment of the applicable Redemption
Price (as defined in Paragraph 5.1) shall have occurred and be continuing.
D. ADJUSTMENT OF CONVERSION PRICE AND RATIO FOR CONVERSION. Except as
otherwise provided herein (i) the Fixed Price and (ii) the Market Price (if any
of the events specified in clauses (a) or (b) below occurs following the
delivery of a Conversion Notice which specifies that the Conversion Price is
equal to the Market Price) shall each be subject to adjustment from time to
time only as follows:
(a) In case the Corporation shall (1) take a record of the
holders of Common Stock for the purpose of entitling them to
receive a dividend payable in shares of Common Stock, (2) subdivide
(by stock split, merger, consolidation or otherwise) the
outstanding shares of Common Stock into a greater number of shares,
(3) combine (by reverse stock split, merger, consolidation or
otherwise) the outstanding shares of Common Stock into a smaller
number of shares or (4) increase or decrease the number of shares
of outstanding Common Stock by reclassification of its Common
Stock, then the Conversion Price (then in effect)
CERTIFICATE OF DESIGNATION-PAGE 6
(SUCCESSORIES, INC.)
<PAGE> 27
shall be adjusted so that each Holder shall thereafter be
entitled upon the conversion of each Series B Share held by him to
receive for such Series B Share the number of shares of Common
Stock which he would have owned and/or have been entitled to
receive upon the occurrence of an event or record date described
above had the Series B Share been converted immediately prior to
the happening of the event, the adjustment to the Conversion Price
to become effective immediately after (x) the record date (in the
case of a dividend) or (y) the day upon which such subdivision or
combination shall become effective and the Conversion Limit shall
be correspondingly adjusted.
(b) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Common Stock property, including
securities, but excluding: (x) any dividend or distribution paid in
Common Stock; or (y) any dividend or distribution paid in cash out
of the surplus of the Corporation (provided that such distribution
shall not reduce stockholders' equity below the sum of the
aggregate Liquidation Preference of the Series B Shares then
outstanding and the aggregate Liquidation Preference of all other
shares ranking senior or pari passu to the Series B Shares), then
the Conversion Price shall be adjusted by multiplying (a) the
Conversion Price in effect immediately prior to the close of
business on the date fixed for the determination of stockholders
entitled to receive the distribution by (b) a fraction, the
numerator of which is the excess of the Market Price (as defined in
Paragraph 4.J) for that date over the fair market value on that
date (as reasonably determined in good faith by the Board of
Directors, whose determination shall be conclusive) of the property
so distributed per share of Common Stock, and the denominator of
which is the Market Price for that date. The adjustment shall
become effective immediately prior to the opening of business on
the day following the date fixed for the determination of
stockholders entitled to receive the distribution.
(c) In case the Corporation shall sell or issue shares of
Common Stock or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock, excluding shares of Common Stock
issued or reserved for issuance by the Corporation in the following
situations:
(i) in any transaction described in clause (a) or (b)
above;
(ii) pursuant to any plan providing for the reinvestment
of dividends or interest payable on securities of the
Corporation, and the investment of additional optional
amounts with respect to such plan, in shares of Common Stock
in any such case at a price per share of not less than 95% of
the Market Price per share of Common Stock, or pursuant to
any employee benefit plan or program of the Corporation as to
which
CERTIFICATE OF DESIGNATION-PAGE 7
(SUCCESSORIES, INC.)
<PAGE> 28
a binding commitment existed as of the date of initial
issuance of the Series B Shares;
(iii) shares of Common Stock issued upon conversion of
the Series B Shares, or Series A Shares, or upon conversion,
exercise or exchange of rights, options, warrants or
convertible or exchangeable securities outstanding or as to
which a binding commitment existed as of the date of initial
issuance of the Series B Shares, or Series A Shares; or
(iv) shares of Common Stock issued pursuant to or in
connection with (A) warrants for the purchase of 112,000
shares of the Corporation's Common Stock issued to certain
investors holding subordinated debt of the Corporation and
options for the purchase of 125,000 shares of the
Corporation's Common Stock issued in connection with the
extension of the terms of such subordinated debt; (B) the
Corporation's 1995 Employee Stock Purchase Plan (together
with any increases thereto or replacements thereof); (C) the
Corporation's Stock Option Plan (together with any increases
thereto or replacements thereof); (D) options granted to
Arnold M. Anderson pursuant to the terms of that certain
Common Stock Option Agreement and that certain Incentive
Stock Option Agreement; (E) options granted to James M.
Beltrame pursuant to the terms of that certain Common Stock
Option Agreement and that certain Incentive Stock Option
Agreement; (F) any merger or acquisition entered into by the
Corporation; and (G) any options or warrants existing as of
the date hereof;
and the price per share (determined in the case of rights, options,
warrants or convertible or exchangeable securities as the quotient
of (x) the aggregate consideration received or receivable by the
Corporation upon the sale and issuance of such rights, options,
warrants or convertible or exchangeable securities plus the total
consideration payable to the Corporation upon such exercise or
conversion divided by (y) the total number of shares of Common
Stock covered by such rights, options, warrants or convertible or
exchangeable securities) is lower than the Market Price on the date
of such initial sale and issuance, then the Conversion Price in
effect immediately prior to such issuance shall upon such issuance
be reduced to the price determined by multiplying such Conversion
Price by a fraction, the numerator of which shall be an amount
equal to the sum of (A) the number of shares of Common Stock
outstanding on a fully-diluted basis immediately prior to such
issuance multiplied by the Market Price in effect immediately prior
to such issuance plus (B) the consideration, if any, received by
the Corporation upon such issuance, and the denominator of which
shall be the product of (A) the Market Price in effect immediately
prior to such issuance and (B) the total number of shares of Common
Stock outstanding on a fully diluted basis, immediately after such
issuance.
CERTIFICATE OF DESIGNATION-PAGE 8
(SUCCESSORIES, INC.)
<PAGE> 29
(d) In case the Corporation shall distribute to the holders of
its Common Stock evidences of its indebtedness or assets (excluding
Dividends or distributions made out of current or retained earnings
or rights or warrants to subscribe other than as referred to in
subparagraph (c) above), then in each such case the number of
shares of Common Stock into which each Series B Share shall
thereafter be convertible shall be determined by multiplying the
number of shares of Common Stock into which such Series B Shares
was theretofore convertible by a fraction, of which the numerator
shall be the current Market Price per share of Common Stock on the
date of such distribution, and the denominator of which shall be
the current Market Price per share of Common Stock, less the excess
of the then fair market value (as reasonably determined by the
Board of Directors of the Corporation) of the assets, evidence of
indebtedness, subscription rights or warrants so distributed (the
"Distributed Property") over the aggregate consideration receivable
by the Corporation, if any, for the Distributed Property, as
applicable to one share of Common Stock. Such adjustment shall be
made whenever any such distribution is made (unless an adjustment
is made pursuant to subparagraph (a), (b) or (c) above, in which
case such subparagraphs shall apply), but shall also be effective
retroactively as to Series B Shares converted after the record date
for the determination of stockholders entitled to receive such
distribution and before the date such distribution is made.
(e) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1 % of such price; provided that any adjustments which by
reason of this clause (e) are not required to be made shall be
carried forward and taken into account in a subsequent adjustment.
All calculations shall be made to the nearest cent or the nearest
one-hundredth of a share, as the case may be.
(f) If the adjustment provided for in subparagraphs (b), (c)
or (d) above would cause the Series B Shares to be convertible in
the aggregate into a number of shares of Common Stock which exceeds
the Conversion Limit, then the Corporation shall not engage in any
such transaction without the affirmative vote or consent of the
Holders of at least eighty percent (80%) of the Series B Shares at
the time outstanding.
E. CONVERSION UPON REORGANIZATION. In case the Corporation shall effect a
reorganization, reclassification of its Common Stock (other than a subdivision
or combination described in clause (a) of Paragraph 4.D) or Merger, and
pursuant to any such reorganization, reclassification or Merger, any assets or
securities of the Corporation, any successor or transferee corporation or any
affiliate thereof or cash is received by or distributed to the holders of
Common Stock, then each Holder shall have the right thereafter to convert each
Series B Share held by such Holder into the kind and amount of shares or
assets, securities or cash receivable as a result of consummation of such
transaction by a holder of the number of shares of Common Stock into which such
Series B Share might have been converted immediately prior
CERTIFICATE OF DESIGNATION-PAGE 9
(SUCCESSORIES, INC.)
<PAGE> 30
to such transaction and shall have no other conversion rights nor shall
there be any adjustment to the Conversion Price; in any such event effective
provision shall be made in the certificate of incorporation of the successor or
transferee corporation or otherwise, so that the provisions set forth herein
for the protection of the conversion rights of the Series B Shares shall
thereafter be applicable, as nearly as reasonably may be, to any such other
securities, cash and assets deliverable upon conversion of the Series B Shares
or other convertible stock or securities received by the Holders in place
thereof, and any such successor or transferee corporation shall expressly
assume the obligation to deliver, upon the exercise of the conversion
privilege, such other securities, cash or assets as the Holders of the Series B
Shares, or other convertible stock or securities received by the Holders in
place thereof, shall be entitled to receive pursuant to the provisions hereof,
and to make provision for the protection of the conversion right as above
provided. In case securities other than Common Stock, cash or assets shall be
issuable, payable or deliverable by the Corporation upon conversion as
aforesaid, then all references in this Paragraph 4.E shall be deemed to apply,
so far as appropriate and as nearly as may be, to such other securities, cash
or assets.
F. CONVERSION METHOD. Any Holder of Series B Shares may, at any time
prior to the close of business on the date which is two (2) business days prior
to the Redemption Date for such Series B Shares, exercise the conversion rights
as to such Series B Shares by delivering to the Corporation during regular
business hours, care of the then transfer agent (the "Transfer Agent") for the
Corporation, a notice requesting conversion on a specified date and the number
of Series B Shares that the Holder elects to convert (a "Notice of
Conversion"). The Notice of Conversion shall also state the names and
addresses of the persons to whom certificates for shares of Common Stock shall
be issued, the denominations of such certificates and reasonable delivery
instructions with respect thereto. Each conversion shall be deemed to have
been effected immediately on the close of business on the date such Notice of
Conversion (the "Conversion Date") is received by the Transfer Agent (including
receipt via facsimile). The person in whose name any certificate for shares of
Common Stock is issuable upon the conversion shall be deemed to have become the
holder of record of the Common Stock at such time. If the stock transfer books
of the Corporation are closed on the Conversion Date, the Conversion Date for
purposes of determining record ownership shall be the next succeeding day on
which the stock transfer books are open (and the conversion shall be deemed to
have been effected immediately prior to the close of business on that day), but
in all cases the conversion shall be at the Conversion Price in effect on the
Conversion Date specified in the notice of conversion. As promptly as
practicable after the Conversion Date but in any event within three (3) Trading
Days (as defined below) of the receipt of the Notice of Conversion, the
Corporation shall cause the Transfer Agent to issue and deliver to such Holder,
at the expense of the Corporation and in accordance with such Holder's delivery
instructions, a certificate or certificates for the number of full shares of
Common Stock to which such Holder is entitled and cash with respect to any
fractional interest in a share of Common Stock as provided in Paragraph 4.G
below (which shall be promptly deposited by the Corporation with the Transfer
Agent for delivery to the Holder).
CERTIFICATE OF DESIGNATION-PAGE 10
(SUCCESSORIES, INC.)
<PAGE> 31
G. FRACTIONAL SHARES OF COMMON STOCK. No fractional shares of Common
Stock or scrip shall be issued upon conversion of Series B Shares. If more
than one Series B Share shall be surrendered for conversion at any one time by
the same Holder, the number of full shares of Common Stock issuable upon
conversion of such Series B Shares shall be computed on the basis of the
aggregate number of Series B Shares so surrendered. Instead of any fractional
shares of Common Stock which otherwise would be issuable upon conversion of any
Series B Shares, the Corporation shall pay a cash adjustment in respect of such
fractional interest based upon the Conversion Price in effect at the close of
business on the last business day prior to the Conversion Date.
H. TAXES. All shares of Common Stock issued upon conversion of Series B
Shares will be validly issued, fully paid and nonassessable. The Corporation
shall pay any and all documentary stamp or similar issue or transfer taxes that
may be payable in respect of any issue or delivery of shares of Common Stock on
conversion of Series B Shares pursuant hereto. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the Series B Shares so converted were registered, and
no such issue or delivery shall be made unless and until the person requesting
such transfer has paid to the Corporation the amount of any such tax or has
established to the satisfaction of the Corporation that such tax has been paid
or that no such tax is payable.
I. SURRENDERED SERIES B SHARES. All certificates representing Series B
Shares converted or redeemed shall be appropriately canceled on the books of
the Corporation and the Series B Shares so converted or redeemed represented by
such certificates shall be restored to the status of authorized but unissued
Series B Shares.
J. MARKET PRICE. The term "Market Price" on any day shall mean the
average of the closing bid prices per share of Common Stock on the National
Association of Securities Dealers Inc. Automated Quotation System as reported
by Blomberg, L.P. (the "NASDAQ System"), or on such exchange as the Common
Stock is then traded, in each case, for the five (5) consecutive Trading Days
immediately preceding the date of determination. A "Trading Day" is a business
day in which the principal market on which the Common Stock is traded is open
for trading for at least four hours. If at the time of any computation pursuant
to this paragraph the Common Stock is not then traded on any trading market,
the "Market Price" for the purposes hereof shall be the fair value as
reasonably determined in good faith by the Board of Directors of the
Corporation.
K. AVAILABLE COMMON STOCK. The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of Series B Shares, such
number of shares of Common Stock as shall from time to time be sufficient to
effect a conversion of all outstanding Series B Shares under Paragraph 4.A, as
such number may from time to time be adjusted pursuant to Paragraph 4.D, and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding Series B
Shares, the Corporation shall
CERTIFICATE OF DESIGNATION-PAGE 11
(SUCCESSORIES, INC.)
<PAGE> 32
promptly take such corporate action as may, in the opinion of its
counsel and subject to any necessary approval of its stockholders, be necessary
to increase its authorized but unissued shares of Common Stock to such number
of shares as shall be sufficient for such purpose.
L. NOTICE TO HOLDERS. In the event (i) the Corporation shall declare a
dividend or other distribution on the Common Stock other than regular cash
dividends declared in the ordinary course or dividends or other distributions
payable in Common Stock, (ii) the Common Stock is subdivided, combined or
reclassified, (iii) of a Merger, (iv) of a Liquidation, or (v) the Corporation
offers for subscription pro rata to holders of Common Stock any additional
shares of stock of any class or series or other rights, then the Corporation
shall mail to each Holder at the Holder's address as it appears in the stock
records of the Corporation, promptly and in any event at least 15 days prior to
the date described in clause (a) below, a notice stating (a) the date for the
determination of holders of Common Stock entitled to receive the distribution,
subscription rights or the consideration in the Merger or Liquidation, or (b)
the date of determination as to which shares of Common Stock will be affected
by a subdivision, combination, reclassification, (c) a brief statement of the
facts requiring such notice, and (d) if applicable, that the Conversion Price
shall be adjusted in accordance with this Paragraph 4. Upon any adjustment in
the Conversion Price, the Corporation shall mail to each Holder at the Holder's
address as it appears in the stock records of the Corporation a notice setting
forth the adjusted Conversion Price and the method of calculation thereof,
provided that, if such address is outside of the United States, then such
notice shall be sent by facsimile transmission (if such Holder shall have
provided a facsimile number).
M. CONCLUSIVE DETERMINATION. Whenever the Fixed Price is adjusted as
herein provided, the Corporation shall promptly file with the Transfer Agent a
certificate of a firm of independent public accountants regularly employed by
the Corporation setting forth the adjusted Fixed Price, along with a brief
statement of the facts requiring the adjustment and the manner of computing the
adjustment, which certificate shall be conclusive evidence of the correctness
of the adjustment, absent manifest error.
N. CONVERSION LIMIT EXCEPTION MECHANISM. If, at any time, the aggregate
number of shares of Common Stock into which the outstanding Series B Shares may
be converted exceeds the Conversion Limit then in effect:
(i) the Corporation shall deliver a notice to that effect to
the Holders and the Transfer Agent; and
(ii) each Holder may elect to convert the Series B Shares for
up to its prorata portion of the unconverted portion of the
Conversion Limit and cause the Corporation to redeem the
unconverted portion of all (but not less than all) of the remaining
outstanding Series B Shares for consideration specified in
Paragraph 4.A. hereof.
CERTIFICATE OF DESIGNATION-PAGE 12
(SUCCESSORIES, INC.)
<PAGE> 33
5. REDEMPTION RIGHTS
5.1 VOLUNTARY REDEMPTION. The Corporation may, at any time commencing
April 17, 1997 (but not prior thereto), at its option redeem (a "Redemption")
for cash at the Redemption Price, from funds legally available therefor, all or
any portion of the outstanding Series B Shares (for which a Notice of
Conversion has not been delivered two (2) business days prior to the Redemption
Date. The Redemption Price shall be the Liquidation Preference of each Series
B Share plus all accrued but unpaid Dividends thereon through the Redemption
Date.
5.2 NOTICE OF REDEMPTION. If the Corporation elects to redeem any or
all Series B Shares pursuant to a Redemption, the Corporation shall (a) give
two (2) business days' prior written notice of such Redemption to the Transfer
Agent and each Holder of Series B Shares to be redeemed at its address as it
appears on the stock records of the Corporation by deposit thereof in class
U.S. mail, postage prepaid, and, in the case of a Holder with an address
outside of the United State Redemption Notice shall be sent by facsimile
transmission (if such Holder shall have provided a facsimile number), and (b)
either set aside, apart from its other funds, or provide written evidence
reasonably satisfactory to each Holder of the Corporation's ability to fund the
Redemption Price, an amount equal to the Redemption Price of all Series B
Shares subject to Redemption at that time for the benefit of all Holders of
Series B Shares subject to Redemption, and the Series B Shares then subject to
Redemption and not otherwise converted prior to the Redemption Date in
accordance with Paragraph 4 shall, on the date which is twenty (20) business
days after the deposit of Redemption Notice in accordance with clause (a) of
this sentence (the "Redemption Date"), cease to outstanding and the rights of
the Holders and owners thereof shall be limited to payment of the Redemption
Price thereof. The Corporation shall deposit with the Transfer Agent for
delivery to each Holder of a Series B Share the Redemption Price thereof within
one (1) business day prior to the Redemption Date. Should any Holder not
receive payment of any amounts due on Redemption of its Series B Shares by
reason of the Corporation's failure to make payment at the times prescribed
above for any reason, the Corporation shall pay to the applicable Holder on
demand (x) interest on the sums not paid when due at an annual rate equal to
two percent in excess of the "Prime Rate" that is then in effect or announced
by Citibank, N.A. or its successor, compounding at the end of each thirty (30)
days, until the applicable Holder is paid in full and (y) all costs of
collection, including but not limited to attorneys' fees and costs, whether or
not suit or other formal proceedings are instituted. The Redemption Price
shall (in the discretion of the Board of Directors of the Corporation) be
adjusted to take into account any stock split or other similar change in the
Series B Shares.
5.3 SELECTION OF SHARES. The Corporation shall select the Series B
Shares to be redeemed in a Redemption in which not all Series B Shares are to
be redeemed so that the Series B Shares of each Holder selected for Redemption
shall bear the same proportion to the total Series B Shares owned by that
Holder the proportion of all Series B Shares selected for Redemption bears to
the total of all then outstanding Series B Shares, but adjusted as determined
by the Board of Directors to avoid the redemption of fractional Series B
Shares. Should any Series B Shares required to be redeemed under the terms
hereof not be redeemed solely by
CERTIFICATE OF DESIGNATION-PAGE 13
(SUCCESSORIES, INC.)
<PAGE> 34
reason of limitations imposed by law, the applicable Series B Shares
shall be redeemed on the earliest possible date thereafter that the applicable
Series B Shares may be redeemed to the maximum extent permitted by law. Except
as set forth above, the Board of Directors shall prescribe the manner in which
any Redemption shall be effected. Any monies deposited with the Transfer Agent
by the Corporation for the holders of Series B Shares subject to Redemption
which shall not be claimed at the end of one (1) year after the first service
of the applicable Redemption Notice shall be released and repaid to the
Corporation but shall be paid to the Holder of the applicable Series B Shares
so long as submission of its shares occurs within five (5) years after the
first service of the applicable Redemption Notice.
5.4 MANDATORY REDEMPTION.
A. REDEMPTION ON HOLDER'S OPTION. In the event the Corporation enters
into (I) a transaction or series of transactions to sell all or substantially
all of its assets, or (II) any consolidation of the Corporation with, or merger
of the Corporation into, any other Person, or any merger of another Person into
the Corporation (each, a "Material Corporate Transaction") (other than a merger
(x) which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of common stock or (y) which is effected
solely to change the jurisdiction of incorporation of the Corporation and
results in a reclassification, conversion or exchange of outstanding shares of
Common Stock solely into shares of Common Stock), together with any Change of
Control as hereafter defined, the occurrence of a conversion limitation event
described in Paragraph 4.N and any redemption effected by the Corporation
pursuant to Paragraph 5.1, being a "Redemption Transaction"), the Corporation
shall provide at least two (2) days advance written notice of the proposed
consummation thereof (the latter of the date pursuant to which a Material
Corporate Transaction is effected or thirty (30) days after providing such
notice is referred to herein as the "Effective Date of Redemption"). The right
to convert each Series B Share shall terminate with respect to all Series B
Shares for which a Notice of Conversion shall not have previously been
delivered to the Transfer Agent pursuant to the procedures described in
Paragraph 4F above at the close of business on the date which is three business
days prior to the Effective Date of Redemption. On the Effective Date of
Redemption, the Corporation shall redeem all remaining Series B Shares for the
Redemption Price and the Corporation shall deposit the Redemption Price for all
outstanding Series B Shares with the Transfer Agent for the benefit of the
respective holders of the Series B Shares not previously redeemed.
Simultaneously, the Corporation shall deposit irrevocable instruction and
authority to the Transfer Agent to pay in cash the Redemption Price to the
Holders of the Series B Shares.
B. REDEMPTION ON CHANGE OF CONTROL. In the event of a Change of Control
(as hereinafter defined), the Series B Shares shall be redeemed in full at the
option of each Holder upon written notice provided to the Corporation by such
Holder at any time following such Change of Control for cash at the Redemption
Price. For purposes of this Section 5.4.B, Change of Control shall be deemed
to have occurred at such time as:
(i) any person (other than the Corporation, any subsidiary of
the Corporation or any employee benefit plan of the Corporation)
("Person") is or
CERTIFICATE OF DESIGNATION-PAGE 14
(SUCCESSORIES, INC.)
<PAGE> 35
becomes the beneficial owner, directly or
indirectly, through a purchase, merger or other acquisition or
transaction or series of transactions, of shares of capital stock
of the Corporation entitling such Person to exercise 50% or more of
the total voting power of all shares of capital stock of the
Corporation entitled to vote generally in the election of
directors; or
(ii) a change in the Board of Directors of the Corporation in
which the individuals who constituted the Board of Directors of the
Corporation at the beginning of the two-year period immediately
preceding such change (together with any other director whose
election by the Board of Directors of the Corporation or whose
nomination for election by the shareholders of the Corporation was
approved by a vote of at least a majority of the directors then in
office either who were directors at the beginning of such period or
whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
directors then in office.
Upon receipt by the Corporation of any such notice from a Holder, such notice
shall be treated as a Redemption Notice for all of such Series B Shares held by
such Holder, and the procedures set forth in Section 5.2 shall be applicable
thereto.
6. RANKING OF STOCK OF THE CORPORATION
For purposes of this resolution, any stock of any class or classes of
the Corporation shall be deemed to rank:
A. Prior to the Series B Shares and Series A Shares, either as to
dividends or upon liquidation, if the holders of such class or classes shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in preference or priority to the Holders;
B. On a parity with the Series B Shares and Series A Shares, either as
to dividends or upon liquidation, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share or sinking and fund
provisions, if any, are different from those of the Series B Shares or Series A
Shares, if the holders of such stock shall be entitled to the receipt of
dividends or of amounts distributable upon dissolution, liquidation or winding
up of the Corporation, as the case may be, in proportion to their respective
dividend rates or liquidation prices without preference or priority, one over
the other, as between the holders of such stock and the Holders, and
C. Junior to the Series B Shares and Series A Shares, either as to
dividends or upon liquidation, if such class shall be Common Stock or if the
Holders of the Series A Shares or the Series B Shares shall be entitled to
receipt of dividends or of amounts distributable upon dissolution, liquidation,
winding up of the Corporation, or upon redemption as the case may be, in
preference or priority to the holders of shares of such class or classes. The
Series
CERTIFICATE OF DESIGNATION-PAGE 15
(SUCCESSORIES, INC.)
<PAGE> 36
B Shares shall rank pari passu in all right of payment (including
Dividends, redemption and liquidation rights) with the four hundred (400)
shares of Series A Cumulative Convertible Preferred Stock of the Corporation
issued September 16, 1996 (the "Series A Shares").
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of the Corporation are each authorized to
do or cause to be done all such acts or things and to make, execute and deliver
or cause to be made, executed and delivered all such agreements, documents,
instruments and certificates in the name and on behalf of the Corporation or
otherwise as they deem necessary, desirable or appropriate to execute or carry
out the purpose and intent of the foregoing resolutions.
CERTIFICATE OF DESIGNATION - PAGE 16
(SUCCESSORIES, INC.)
<PAGE> 37
EXHIBIT B
TRANSFER AGENT AGREEMENT
THIS TRANSFER AGENT AGREEMENT (this "Agreement"), dated December 17, 1996,
between SUCCESSORIES, INC., an Illinois corporation (the "Company"), SEACREST
CAPITAL LIMITED ("Seacrest"), a Nevis West Indies corporation, INFINITY
INVESTORS LIMITED, a Nevis West Indies corporation ("Infinity"), FAIRWAY
CAPITAL LIMITED, a Nevis West Indies corporation ("Fairway") (Infinity,
Seacrest and Fairway are collectively being referred to as the "Holders") and
ILLINOIS STOCK TRANSFER COMPANY (the "Transfer Agent").
R E C I T A L S:
WHEREAS, pursuant to that certain Regulation D Securities Subscription
Agreement dated the date hereof (the "Subscription Agreement") by and among the
Company and the Holders, the Company agreed to issue to the Holders an
aggregate of 1,212 shares of Series B Cumulative Convertible Preferred Stock
(the "Preferred Shares"), with the preferences, rights and designations set
forth in the Certificate of Designation of the Company (as such term is defined
in the Subscription Agreement); and
WHEREAS, the Company and the Holders have agreed to enter into this
Agreement with the Transfer Agent to provide for (i) the closing of the
issuance of the Preferred Shares and (ii) a "book entry" system of accounting
for the Preferred Shares; and
WHEREAS, the Transfer Agent is willing to (i) serve as an escrow agent to
facilitate the closing under the Subscription Agreement, (ii) hold the
Preferred Shares on behalf of the Holders, and (iii) establish a book entry
system of accounting for the Preferred Shares, on the terms hereafter
described.
NOW, THEREFORE, in consideration of the foregoing, the parties hereby
agree as follows:
1. CLOSINGS. The Transfer Agent hereby agrees to act as an escrow agent
to facilitate the Closings as follows:
(a) On the date hereof, the Holders shall wire transfer to an account
designated by the Transfer Agent $5,000,000 in the aggregate (the "Purchase
Price"), and the Company shall deliver to the Transfer Agent the Preferred
Shares in the names of the Holders and in the amounts as set forth on Schedule
1 hereto;
TRANSFER AGENT AGREEMENT - PAGE 1
(SUCCESSORIES, INC.)
<PAGE> 38
(b) Immediately following such deliveries, together with a delivery from
the Company to the Transfer Agent of a fully executed copy of the Subscription
Agreement, the Transfer Agent shall wire transfer the Purchase Price, less the
Consulting Fee (as hereafter defined), to the Company pursuant to wire
transaction instructions as provided by the Company. The Company hereby
directs the Transfer Agent to disburse by check $125,000 of the Purchase Price
(the "Consulting Fee") to Alpine Capital Partners, Inc. (Evan Bines) (the
"Consultant") in consideration of certain services provided by the Consultant
to the Company at 645 Fifth Avenue, 17th Floor, New York, New York 10021; and
(c) The Transfer Agent shall hold the Preferred Shares for the benefit of
the Holders, as hereafter described.
2. OWNERSHIP OF PREFERRED SHARES. Record and beneficial ownership of the
Preferred Shares shall remain in the name of the Holders (unless and until
transferred pursuant to the terms thereof, with written notice thereof to the
Transfer Agent). Any transfer or purported transfer of the Preferred Shares
(1) not made pursuant to the terms of the Preferred Shares or (2) properly
noticed to the Transfer Agent shall be null and void ab initio and shall not be
given effect thereto by the Transfer Agent.
3. PAYING AGENT. The Transfer Agent shall act as paying agent for the
Preferred Shares. Accordingly, all payments of dividends or redemption amounts
required of the Company related to the Preferred Shares as described in the
Certificate of Designation shall be made to the Transfer Agent for the account
and benefit of the holders of such Preferred Shares as registered on the books
of the Transfer Agent (each, a "Registered Holder"). Upon the receipt of any
such payment of dividends or redemption amounts, in cash, the Transfer Agent
shall promptly wire transfer such sum to the account of the Registered Holders
as follows:
INFINITY
Citibank, New York
ABA 021 000 089
Credit: Bear Stearns
Account No. 0925-3186
Further Credit: Infinity Investors Ltd.
Account No. 102-05092
TRANSFER AGENT AGREEMENT - PAGE 2
(SUCCESSORIES, INC.)
<PAGE> 39
SEACREST
Citibank, New York
ABA 021 000 089
Credit: Bear Stearns
Account No. 0925-3186
Further Credit: Seacrest Capital Ltd.
Account No. 483-91296
ALL OTHER REGISTERED HOLDERS
Such account as is reflected on the books of the Transfer Agent.
4. ACCOUNTING AGENT. The Transfer Agent shall act as the accounting agent
of the Company and the Registered Holders and shall establish and maintain a
book entry system of accounting for the Preferred Shares (the "Accounting
Ledger") crediting (reducing) the outstanding Liquidation Preference (as such
term is defined in the Certificate of Designation) by all (i) payments in cash
made by the Company to the Transfer Agent as paying agent as required pursuant
to Section 3 above, and (ii) by the appropriate amount upon delivery of
Converted Stock to the applicable Registered Holder following receipt of a
Notice of Conversion (as each such term is defined in Section 5 below). At
such time as the balance of the Liquidation Preference for the Preferred Shares
as reflected on the Accounting Ledger is zero following the procedures
described in this Agreement, the Transfer Agent shall return such Preferred
Shares to the Company marked "Cancelled".
5. ISSUANCE OF CONVERTED SHARES. The Company and the Holders hereby agree
that any "Notice of Conversion" deliverable by any Registered Holder under
Paragraph 4.F "CONVERSION METHOD" of the Certificate of Designation shall be
delivered to the Transfer Agent in lieu of delivery to the Company. Upon
receipt by the Transfer Agent of any such Notice of Conversion (including a
Notice of Conversion delivered by facsimile) (each a "Notice of Conversion")
from any Registered Holder the Company hereby irrevocably directs the Transfer
Agent to:
(a) immediately deliver a copy of the Notice of Conversion to the Company,
by facsimile, which shall set forth the number of shares of common stock of the
Company (the "Converted Stock") to be issued to such Registered Holder in
connection therewith; and
(b) issue the "appropriate number" (as described in Section 6 below) of
shares of Converted Stock directly to the applicable Registered Holder, within
two (2) business days of the date of receipt of the Notice of Conversion.
TRANSFER AGENT AGREEMENT - PAGE 3
(SUCCESSORIES, INC.)
<PAGE> 40
Reference is hereby made to that certain Registration Rights Agreement appended
to the Subscription Agreement as Exhibit D. At such time as a Registration
Statement as contemplated therein has been declared effective by the Securities
and Exchange Commission covering the resale of the Converted Shares, the
Company shall cause its legal counsel to deliver to the Transfer Agent an
opinion certifying that the Converted Shares may be sold by the Registered
Holder pursuant to such Registration Statement with the purchaser thereof
receiving certificates without restrictive legend, which opinion shall remain
effective so long as such Registration Statement remains in full force and
effect. Upon any such sale, the Registered Holder shall certify to the
Transfer Agent that such shares have been sold pursuant to such Registration
Statement. In the event that, at any time, the Registration Statement ceases
to be effective, the Company or its legal counsel shall immediately deliver
written notice thereof to the Transfer Agent and its Registered Holders stating
that the opinion of the Company's legal counsel may no longer be relied upon by
the Transfer Agent (unless and until any new Registration Statement is so
declared effective with an accompanying opinion to that effect of the Company's
legal counsel).
6. DISPUTE AS TO NUMBER OF CONVERTED SHARES TO BE ISSUED. In the event
the Company disputes the number of shares of Converted Stock to be issued by
the Company to a Registered Holder pursuant to a Notice of Conversion claimed
by the Registered Holder, by virtue of the conversion price or other
information set forth in such Notice of Conversion, the Company nevertheless
directs the Transfer Agent to issue to the applicable Registered Holder a
number of shares of Converted Stock equal to the lesser of the number of shares
set forth in the Notice of Conversion or the number of shares the Company,
using good faith efforts, notifies the Transfer Agent should be delivered
(provided such notice is presented by the Company to the Transfer Agent, with a
copy to the Registered Holder delivering the Notice of Conversion, within two
(2) business days of the receipt of the Notice of Conversion by the Transfer
Agent). As to the remaining disputed number of shares, the Transfer Agent
shall submit the dispute within one (1) business day to the Transfer Agent's
customary outside legal counsel ("Counsel") for determination. The Company and
the Holders hereby authorize the Counsel to resolve any such dispute and notify
the Company, the applicable Registered Holder and the Transfer Agent of the
result as soon as possible. The Company irrevocably directs the Transfer Agent
to issue to the Registered Holder any additional shares of Converted Stock
which the Registered Holder is entitled, based upon the Counsel's
determination. The Transfer Agent is authorized to rely on the Counsel's
results upon receipt of the same. Any such issuance shall relieve the Transfer
Agent and the Counsel of any liability to the Company or the Registered Holder,
as applicable, but such calculation shall not be binding upon either the
Registered Holder or the Company, each of which preserves all rights to dispute
against the other the number of Converted Shares issuable with respect to any
Notice of Conversion.
TRANSFER AGENT AGREEMENT - PAGE 4
(SUCCESSORIES, INC.)
<PAGE> 41
7. TERMINATION. This Agreement shall terminate promptly upon the earlier
to occur of (1) written demand by all of the Registered Holders of their
respective Preferred Shares or (2) no Liquidation Preference remains with
respect to any of the Preferred Shares.
8. FEES. The Company hereby agrees to pay the Transfer Agent for all
services rendered hereunder.
9. NOTICES. Any notice or demand to be given or that may be given under
this Agreement shall be in writing and shall be (a) delivered by hand, or (b)
delivered through or by expedited mail or package service, or (c) transmitted
by telecopy, in each case with personal delivery acknowledged, addressed to the
parties as follows:
As to the Company: 919 Springer Drive
Lombard, Illinois 60148
Telephone: 630-953-8440
Fax: 630-953-0014
Attn: President
As to any Holder: 27 Wellington Road
Cork, Ireland
Telephone: 011-44-171-355-4975
Fax: 011-44-175-355-2051
Attn: James Loughran
With a copy to: HW Finance, L.L.C.
1601 Elm Street
4000 Thanksgiving Tower
Dallas, Texas 75201
Telephone: 214-720-1600
Fax: 214-720-1662
Attn: Barrett Wissman
As to any other As set forth on the books of
Registered Holder: the Transfer Agent.
As to the Transfer
Agent 223 West Jackson Blvd.
Suite 1210
Chicago, Illinois 60606
Telephone: (312) 427-2953
Fax: (312) 427-2953
TRANSFER AGENT AGREEMENT - PAGE 5
(SUCCESSORIES, INC.)
<PAGE> 42
10. NONCONTRAVENTION. The Company agrees that it will not at any time
take any action or undertake any activity that would in any way impede,
restrict or limit the right and ability of the Registered Holders to convert
the Preferred Shares into shares of Converted Stock pursuant to the terms and
provisions of this Agreement. Accordingly, the Company agrees that the
instructions and procedures set forth above in this Agreement constitute
irrevocable instructions, directions and authorizations to the Transfer Agent
and that the Transfer Agent is authorized to disregard any written or oral
communication received by it from the Company or otherwise that could in any
way be construed to constitute an authorization or direction for the Transfer
Agent to act contrary to, or to not faithfully comply with, the irrevocable
instruction, direction and authorization set forth herein. Each of the
Registered Holders is an intended third party beneficiary of these irrevocable
instructions.
11. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
the Transfer Agent, each officer, director, employee and agent of the Transfer
Agent, and each person, if any, who controls the Transfer Agent within the
meaning of the Securities Act of 1933, as amended (the "Act") or the Securities
Exchange Act of 1934, as amended (the "Exchange Act") against any losses,
claims, damages, or liabilities, joint or several, to which it, they or any of
them, or such controlling person, may become subject, under the Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
performance by the Transfer Agent of its duties pursuant to the Agreement; and
will reimburse the Transfer Agent, and each officer, director, employee and
agent of the Transfer Agent, and each such controlling person for any legal or
other expenses reasonably incurred by it or any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any case if such
loss, claim, damage or liability arises out of or is based upon any action not
taken in good faith, or any action or omission that constitutes gross
negligence or willful misconduct.
Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the Company under this Section,
notify in writing the Company of the commencement thereof, and failure so to
notify the Company will relieve the Company from any liability under this
Section as to the particular item for which indemnification is then being
sought but not from any other liability which it may have to any indemnified
party. In case any such action is brought against any indemnified party, and
it notifies the Company of the commencement thereof, the Company will be
entitled to assume the defense thereof, with counsel who shall be to the
reasonable satisfaction of such indemnified party. The Company shall not be
liable to any such indemnified party on account of any settlement of any claim
of action effected without the consent of the Company.
TRANSFER AGENT AGREEMENT - PAGE 6
(SUCCESSORIES, INC.)
<PAGE> 43
12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, without giving effect to
conflicts of law rules of such jurisdiction.
13. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, constitutes the full
and entire understanding of the parties with respect to the subject matter
hereof. Neither this Agreement nor any term hereof may be amended, waived,
discharged, or terminated other than by a written instrument signed by the
party against whom enforcement of any such amendment, waiver, discharge or
termination is sought.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by facsimile signature.
TRANSFER AGENT AGREEMENT - PAGE 7
(SUCCESSORIES, INC.)
<PAGE> 44
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the date first above written.
SUCCESSORIES, INC.
By:
-------------------------------
Title:
---------------------------
INFINITY INVESTORS LIMITED
By:
-------------------------------
Title:
---------------------------
SEACREST CAPITAL LIMITED
By:
-------------------------------
Title:
---------------------------
ILLINOIS STOCK TRANSFER COMPANY
By:
-------------------------------
Title:
---------------------------
TRANSFER AGENT AGREEMENT - PAGE 8
(SUCCESSORIES, INC.)
<PAGE> 45
SCHEDULE 1
<TABLE>
<CAPTION>
Number of Preferred
Shares ($5,000
Liquidation Value Liquidation Purchase Price of
Shares of Preferred Shares Preference) Preferred Shares
- -------------------- ------------------- -------------------- -----------------
<S> <C> <C> <C>
Infinity Investors
Limited $4,850,000 970 $4,001,650
Seacrest Capital
Limited $1,210,000 242 $998,350
Total $6,060,606 1,212 $5,000,000
</TABLE>
TRANSFER AGENT AGREEMENT - PAGE 9
(SUCCESSORIES, INC.)
<PAGE> 46
EXHIBIT C
DEFINITION OF "ACCREDITED INVESTOR"
Pursuant to Rule 501 (a) of Regulation D, the term "Accredited Investor" shall
mean any person who comes within any of the following categories, or who the
issuer reasonably believes comes within any of the following categories, at the
time of the sale of the Securities to that person:
1. Any bank as defined in Section 3(a)(2) of the Securities Act of 1933,
as amended (the "Act"), or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Act whether acting in
its individual or fiduciary capacity; any broker dealer registered
pursuant to Section 15 of the Securities Exchange Act of 1934; any
insurance company as defined in Section 2(13) of the Act; any investment
company registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of that Act; any Small
Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state
or its political subdivisions, for the benefit of its employees, if such
plan has total assets in excess of $5,000,000; any employee benefit plan
within the meaning of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined
in Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if
the employee benefit plan has total assets in excess of $5,000,000, or,
if a self-directed plan, with investment decisions made solely by persons
that are accredited investors;
2. Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
3. Any organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000;
4. Any director, executive officer, or general partner of the issuer of
the securities being offered or sold, or any director, executive officer,
or general partner of a general partner of that issuer;
5. Any natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of his purchase exceeds $1,000,000;
6. Any natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that person's
spouse in excess of $300,000
DEFINITION OF ACCREDITED INVESTOR - PAGE 1
<PAGE> 47
in each of those years and has a reasonable expectation of reaching the
same income level in the current year;
7. Any trust with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities offered, whose purchase
is directed by a sophisticated person as described in Rule 506(b)(2)(ii);
and
8. Any entity in which all of the equity owners are accredited investors.
DEFINITION OF ACCREDITED INVESTOR - PAGE 2
<PAGE> 48
EXHIBIT D
TO REGULATION D
SECURITIES SUBSCRIPTION AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
December 17, 1996, by and among SUCCESSORIES, INC, an Illinois corporation (the
"Company"), and INFINITY INVESTORS LIMITED, a Nevis West Indies corporation
("Infinity"), SEACREST CAPITAL LIMITED, a Nevis West Indies corporation
("Seacrest") and FAIRWAY CAPITAL LIMITED, a Nevis West Indies corporation
("Fairway") (Infinity, Seacrest and Fairway being singularly referred to as an
"Investor" and collectively as the "Investors").
R E C I T A L S:
WHEREAS, pursuant to a Subscription Agreement (the "Subscription
Agreement"), by and between the Company and the Investors, the Company have
agreed to sell and the Investors has agreed to purchase an aggregate of 1,212
shares of the Company's Series B Cumulative Convertible Preferred Stock (the
"Preferred Stock") convertible into shares of the Company's common stock, par
value $.01 per share (the "Common Stock"); and
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Investors' agreement to enter into the Subscription Agreement, the Company has
agreed to provide the Investors with certain registration rights with respect
to the shares of Common Stock into which the Preferred Stock may be converted
from time to time (the "Shares");
NOW THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Agreement and this
Registration Rights Agreement, the Company and the Investors agree as follows:
AGREEMENT:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Company's Common Stock, par value $.01 per
share.
REGISTRATION RIGHTS AGREEMENT-PAGE 1
(SUCCESSORIES, INC.)
<PAGE> 49
"Initiating Holders" shall mean holders of more than 50% of the
outstanding shares of Preferred Stock.
"Other Registrable Shares" shall mean those shares of Common Stock
heretofore or hereafter issued pursuant to one or more agreements granting the
purchasers of such securities the right to have the Company register such
securities or include such securities in any other registration of the
Company's equity securities.
"Registrable Shares" shall mean (i) the Shares, and (ii) any Common Stock
of the Company issued or issuable in respect of the Shares or upon any stock
split, stock dividend, recapitalization or similar event; provided, however,
that Registrable Shares or other securities shall no longer be treated as
Registrable Shares if (A) they have been sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction, (B)
they have been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect thereto are removed upon
consummation of such sale, or (C) the Shares are available for sale under the
Securities Act (including Rule 144), in the opinion of counsel to the Company,
without compliance with the registration and prospectus delivery requirements
of the Securities Act so that all transfer restrictions and restrictive legends
with respect thereto may be removed upon the consummation of such sale.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Section 2 hereof, including, without limitation all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, reasonable fees and
disbursements (not to exceed $10,000) of one counsel for all the selling
holders of Registrable Shares for a limited "due diligence" examination of the
Company incident to such registration (but excluding the compensation of
regular employees of the Company, which shall be paid in any event by the
Company, and excluding all underwriting discounts and selling commissions
applicable to the sale of the Registrable Shares).
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Shares and all fees and
disbursements of one counsel for the selling holders of Registrable Shares
(other than the fees and disbursements of such counsel included in Registration
Expenses).
REGISTRATION RIGHTS AGREEMENT-PAGE 2
(SUCCESSORIES, INC.)
<PAGE> 50
2. REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. The Investors hereby request that the
Company effect a registration with respect to all of the Registrable
Shares held by such Investors. The Company hereby agrees (A) that within
twenty (20) days of the date hereof, it shall cause to be filed a
Registration Statement on Form S-3 under the Securities Act (or such
other form as is then appropriate for use by the Company under the
Securities Act) and (B) to use its best efforts to cause such
registration statement to be declared effective by the Commission
(including, without limitation, undertaking the actions described in
Section 4), no later than the earlier of (x) five (5) days after the
Company receives a "no review" letter from said Commission, or (y) sixty
five (65) days following the date hereof; all as may be so requested by
the Initiating Holders so as to permit or facilitate the sale and
distribution of all or such portion of such Registrable Shares as are
specified in such request, together with all or such portion of the
Registrable Shares of any holder or holders of Registrable Shares joining
in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
(C) to cause such Registration Statement to remain effective for a period
of two (2) years (subject to the right of the Company to suspend the
effectiveness thereof for not more than an aggregate of thirty (30) days
at no cost to the Company and for an additional thirty (30) days provided
the Company pays liquidated damages to the Investors that hold
Registrable Shares which are included in the Registration Statement and
which have not been sold by such Investors (the "Suspended Shares"), as
compensation to the holders of the Suspended Shares, and not as a
penalty, an amount equal to one-half percent (.05%) of the product of the
number of Suspended Shares multiplied by the Market Price (as defined in
Paragraph 4.J of the Certificate of Designation for the Preferred Stock)
of such Suspended Shares/divided by thirty (30) for each additional day
the Company suspends the effectiveness thereof beyond the first thirty
(30) days during such two (2) year period). Such liquidated damages
shall be paid in cash by the Company to the holders of the Suspended
Shares by wire transfer of immediately available funds on the last day of
each calendar month following the event requiring its payment.
The registration statement filed pursuant to the request of the
Initiating Holders (the "Registration Statement") may, subject to the
provisions of Section 2(b) below, include Other Registrable Shares, other
securities of the Company which are held by officers or directors of the
Company or which are held by other holders of registration rights, and
may include securities of the Company being sold for the account of the
Company.
(b) UNDERWRITING. If the Initiating Holders intend to distribute
the Registrable Shares covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request
made pursuant to Section 2 and the Company shall include such information
in the written notice referred to in Section 2(a)(i) above. The right of
any holder of Registrable Shares to registration pursuant to Section 2
shall be
REGISTRATION RIGHTS AGREEMENT-PAGE 3
(SUCCESSORIES, INC.)
<PAGE> 51
conditioned upon such holder's participation in such underwriting and
the inclusion of such holder's Registrable Shares in such underwriting
(unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such holder with respect to such participation and
inclusion) to the extent provided herein. A holder of Registrable Shares
may elect to include in such underwriting all or a part of the
Registrable Shares it holds.
(i) If the Company shall request inclusion in any registration
pursuant to Section 2 of securities being sold for its own account,
or if officers or directors of the Company holding other securities
of the Company or other holders of registration rights, shall
request inclusion in any registration pursuant to Section 2, the
Initiating Holders shall, on behalf of all holders of Registrable
Shares, offer to include Other Registrable Shares and the
securities of the Company, such officers and directors and such
other holders of registration rights in the underwriting and may
condition such offer on their acceptance of the further applicable
provisions of this Agreement. The Company shall (together with all
holders of Registrable Shares, officers and directors, other
holders of registration rights and holders of Other Registrable
Shares proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary
form with the underwriter or representative of the underwriters
selected for such underwriting by the Company, which underwriter(s)
shall be reasonably acceptable to a majority in interest of the
Initiating Holders.
(ii) Notwithstanding any other provision of this Section 2, if
the representative of the underwriters advises the Company in
writing that marketing factors require a limitation on the number
of shares to be underwritten, the Company shall so advise all
holders of Registrable Shares and other shareholders whose
securities would otherwise be underwritten pursuant to such
registration, and the number of Registrable Shares and other
securities that may be included in the registration and
underwriting shall be allocated in the following manner: the
securities to be offered by the Company and the securities of the
Company held by officers and directors of the Company (other than
Registrable Shares) shall be excluded from such registration and
underwriting to the extent required by such limitation, and, if a
limitation on the number of shares is still required, the Other
Registrable Shares shall be excluded pro rata with Registrable
Shares, unless another method of determining such exclusion is
specified in the agreements governing the Other Registrable Shares,
according to the relative number of Other Registrable Shares
requested to be included in such registration and underwriting,
from such registration and underwriting to the extent required by
such limitation, and, if a limitation on the number of shares is
still required, the number of Registrable Shares that may be
included in the registration and underwriting shall be allocated
among all holders of Registrable Shares in proportion, as nearly as
practicable, to the respective amounts of Registrable Shares which
they had requested to be included in such registration at the time
of filing the registration statement. No Registrable Shares or any
other securities
REGISTRATION RIGHTS AGREEMENT-PAGE 4
(SUCCESSORIES, INC.)
<PAGE> 52
excluded from the underwriting by reason of the underwriter's
marketing limitation shall also be included in such registration.
(iii) If the Company or any officer, director or holder of
Registrable Shares or Other Registrable Shares who has requested
inclusion in such registration and underwriting as provided above
disapproves of the terms of the underwriting, such person may elect
to withdraw therefrom by written notice to the Company, the
underwriter and the Initiating Holders. The securities so
withdrawn shall also be withdrawn from registration.
3. EXPENSES OF REGISTRATION. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification or
compliance of the Registrable Shares pursuant to this Agreement. All Selling
Expenses shall be borne by the holders of the securities so registered pro rata
on the basis of the number of their shares so registered (except for the fees
and disbursements of counsel to the Investors).
4. REGISTRATION PROCEDURES. Pursuant to this Agreement, the Company
will keep each holder of Registrable Shares advised in writing as to
the initiation of a registration under this Agreement and as to the completion
thereof. At its expense, the Company will:
(a) Use reasonable efforts to keep such registration effective for a
period of two (2) years (subject to the right of the Company to suspend
the effectiveness thereof for not more than an aggregate of thirty (30)
days during such two (2) year period) or until the holder or holders of
Registrable Shares have completed the distribution described in the
registration statement relating thereto or until the securities
registered cease to be Registrable Shares, whichever first occurs;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents
incidental thereto, including any amendment of or supplement to the
prospectus, as a holder of Registrable Shares from time to time may
reasonably request;
(d) use reasonable efforts to (i) register and qualify the
Registrable Shares covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as the Investors who
hold a majority in interest of the Registrable Shares being offered
reasonably request, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements, (iii)
take such other actions as may be necessary to maintain such
registrations and qualifications in effect until such date set forth in
clause (a) above and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Shares for sale in such
jurisdictions;
REGISTRATION RIGHTS AGREEMENT-PAGE 5
(SUCCESSORIES, INC.)
<PAGE> 53
provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to (I) qualify to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (II) subject itself to general,
taxation in any such jurisdiction, (III) file a general consent to
service of process in any such jurisdiction, (IV) provide any
undertakings that cause more than nominal expense or burden to the
Company or (V) make any change in its charter or by-laws, which in each
case the Board of Directors of the Company determines to be contrary to
the best interests of the Company and its stockholders;
(e) in the event Investors who hold a majority in interest of the
Registrable Shares being offered in the offering select underwriters for
the offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with
the managing underwriter of such offering;
(f) as promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and use its
best efforts promptly to prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and
deliver a number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request;
(g) as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Shares being sold (or, in the
event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of
effectiveness of the Registration Statement at the earliest possible
time;
(h) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of
the Registrable Shares being sold to review the Registration Statement
and all amendments and supplements thereto a reasonable period of time
prior to their filing with the Commission, and shall not file any
document in a form to which such counsel reasonably objects;
(i) make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal
quarter next following the effective date of the Registration Statement;
REGISTRATION RIGHTS AGREEMENT-PAGE 6
(SUCCESSORIES, INC.)
<PAGE> 54
(j) at the request of the Investors who hold a majority in interest
of the Registrable Shares being sold, furnish on the date that
Registrable Shares are delivered to an underwriter for sale in connection
with the Registration Statement (i) a letter, dated such date, from the
Company's independent certified public accountants in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the
underwriters; and (ii) an opinion, dated such date, from counsel
representing the Company for purposes of such Registration Statement, in
form and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors;
(k) make available for inspection by any Investor, any underwriter
participating in any disposition pursuant to the Registration Statement,
and any attorney, accountant or other agent retained by any such Investor
or underwriter (collectively, the "Inspectors"), all pertinent financial
and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary
to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of
such due diligence; provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are
so notified, unless (i) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration
Statement, (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court or government body of competent
jurisdiction or (iii) the information in such Records has been made
generally available to the public other than by disclosure in violation
of this or any other agreement. The Company shall not be required to
disclose any confidential information in such Records to any Inspector
until and unless such Inspector shall have entered into confidentiality
agreements (in form and substance satisfactory to the Company) with the
Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure
of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential. The Company shall hold in confidence and
shall not make any disclosure of information concerning an Investor
provided to the Company pursuant to Section 4(e) hereof unless (i)
disclosure of such information is necessary to comply with federal or
state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body
of competent jurisdiction or (iv) such information has been made
generally available to the public other than by disclosure in violation
of this or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is
sought in or by a court or governmental body of
REGISTRATION RIGHTS AGREEMENT-PAGE 7
(SUCCESSORIES, INC.)
<PAGE> 55
competent jurisdiction or through other means, give prompt
notice to such Investor, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, such
information;
(l) use its best efforts either to (i) cause all the Registrable
Shares covered by the Registration Statement to be listed on a national
securities exchange and on each additional national securities exchange
on which similar securities issued by the, Company are then listed, if
any, if the listing of such Registrable Shares is then permitted under
the rules of such exchange or (ii) secure designation of all the
Registrable Shares covered by the Registration Statement as a National
Association of Securities Dealers Automated Quotations System ("NASDAQ")
"national market system security" within the meaning of Rule 11Aa2-1 of
the Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") , and the quotation of the Registrable Shares on the
NASDAQ National Market or, if, despite the Company's best efforts to
satisfy the preceding clause (i) or (ii) , the Company is unsuccessful in
satisfying the preceding clause (i) or (ii) , to secure listing on a
national securities exchange or NASDAQ authorization and quotation for
such Registrable Shares and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with
respect to such Registrable Shares;
(m) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Shares not later than the effective date of
the Registration Statement;
(n) cooperate with the Investors who hold Registrable Shares being
offered and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Shares sold
pursuant to the Registration Statement and enable such certificates to be
in such denominations or amounts as the case may be, as the managing
underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request; and
(o) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Shares pursuant
to the Registration Statement.
5. INDEMNIFICATION.
(a) The Company will indemnify each holder of Registrable Shares, each of
its officers, directors and partners, and each person controlling such holder
of Registrable Shares, with respect to which registration has been effected
pursuant to this Agreement, and each underwriter, if any and each person who
controls any underwriter, and their respective counsel against all claims,
losses, damages and liabilities (or actions, proceedings or settlements in
REGISTRATION RIGHTS AGREEMENT-PAGE 8
(SUCCESSORIES, INC.)
<PAGE> 56
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, or other
document incident to any such registration, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company in connection with any such registration
and will reimburse each such holder of Registrable Shares, each of its
officers, directors and partners, and each person controlling such holder of
Registrable Shares, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses as they are reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided, however, that the indemnity contained in
this Section 5(a) shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability or action if such settlement is effected without
the consent of the Company; and provided further that the Company shall not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such holder
of Registrable Shares or underwriter and stated to be specifically for use
therein. The foregoing indemnity agreement is further subject to the condition
that insofar as it relates to any untrue statement, alleged untrue statement,
omission or alleged omission made in a preliminary prospectus, such indemnity
agreement shall not inure to the benefit of the foregoing indemnified parties
if copies of a final prospectus correcting the misstatement, or alleged
misstatement, omission or alleged omission upon which such loss, liability,
claim or damage is based is timely delivered to such indemnified party and a
copy thereof was not furnished to the person asserting the loss, liability,
claim or damage.
(b) Each holder of Registrable Shares will, if Registrable Shares held by
it are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers and each
underwriter, if any, of the Company's securities covered by such a Registration
Statement, each person who controls the Company or such underwriter within the
meaning of the Securities Act and the rules and regulations thereunder, each
other such holder of Registrable Shares and each of its officers, directors and
partners, and each person controlling such holder of Registrable Shares, and
their respective counsel (collectively, the "Company, Underwriters and
Counsel") against all claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact relating to
such Holder contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein relating to such holder
or necessary to make the statements therein relating to such holder not
misleading or any violation by such holder of any rule or regulation
promulgated under the Securities Act applicable to such holder and relating to
action or inaction required of such holder in connection with any such
registration; and will reimburse the Company, such holders of Registrable
Shares, directors, officers, partners, persons, underwriters or control persons
for any legal or any other expense reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or
REGISTRATION RIGHTS AGREEMENT-PAGE 9
(SUCCESSORIES, INC.)
<PAGE> 57
alleged omission) relating to such holder is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such holder
of Registrable Shares and stated to be specifically for use therein; provided,
however, that such indemnification obligations shall not apply if the Company
modifies or changes to a material extent written information furnished by such
Holder. Each holder of Registrable Shares will, if Registrable Shares held by
it are included in the securities as to which such registration is being
effected, indemnify the Company, Underwriters and Counsel against all claims,
losses, damages and liabilities (or actions, proceedings or settlements in
respect thereof), arising out of or based on any sale of Registrable Shares
made by such holder following receipt by such holder of written notice from the
Company, Underwriters or Counsel that the registration statement filed with
respect to such Registrable Shares contains an untrue statement of material
fact or omits to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(c) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 5 to the fullest extent permitted by law; provided, however, that
(a) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 5, (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Shares who was
not guilty of such fraudulent misrepresentation and (c) contribution by any
seller of Registrable Shares shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Shares.
(d) Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld or delayed), and the
Indemnified Party may participate in such defense at such Indemnified Party's
expense. No Indemnifying Party, in the defense of any such claim or
litigation, shall except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.
6. AGREEMENTS OF HOLDERS OF REGISTRABLE SHARES. Each holder of
Registrable Shares shall furnish to the Company such information regarding such
holder of Registrable
REGISTRATION RIGHTS AGREEMENT-PAGE 10
(SUCCESSORIES, INC.)
<PAGE> 58
Shares and the distribution proposed by such holder of Registrable
Shares as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration referred to in this
Agreement.
7. REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the Commission that may at any time permit
the Investors to sell securities of the Company to the public without
registration and without imposing restrictions arising under the federal
securities laws on the purchases thereof ("Rule 144") the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the Commission in a timely manner, all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Shares, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and
documents so filed by the Company and (iii) such other information as may
be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
8. MISCELLANEOUS.
A. GOVERNING LAW. This agreement shall be governed by and construed
in accordance with the laws of the State of Illinois without giving effect to
conflict of laws of such jurisdiction.
B. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
C. ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
D. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class
mail, postage prepaid, or delivered by hand or by messenger or courier delivery
service, addressed (a) if to an Investor at 27 Wellington Road, Cork, Ireland,
Attention: James O'Brien, with a copy to HW Finance, L.L.C, 4000 Thanksgiving
Tower, 1601 Elm Street, Dallas, Texas 75204, Attention: Barrett N. Wissman, or
at such other address as such Investor shall have furnished to the Company in
writing, or (b) if to the Company at 919 Springer Drive, Lombard, Illinois
60148, Attn:
REGISTRATION RIGHTS AGREEMENT-PAGE 11
(SUCCESSORIES, INC.)
<PAGE> 59
President, or at such other address as the Company shall have furnished
to each Investor and each such other holder in writing.
E. DELAYS OR OMISSIONS. No delay or omission to exercise any right, power
or remedy accruing to any holder of any Registrable Shares, upon any breach or
default of the Company under this Agreement, shall impair any such right, power
or remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach
or default thereunder occurring, nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default thereafter occurring.
Any waiver, permit, consent or approval of any kind or character on the part
of any holder of any breach or default under this Agreement, or any waiver on
the part of any party of any provisions of conditions of this Agreement, must
be in writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement, or by law or
otherwise afforded to any holder, shall be cumulative and not alternative.
F. COUNTERPARTS. This agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
G. SEVERABILITY. In the case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
H. AMENDMENTS. The provisions of this Agreement may be amended at any
time and from time to time, and particular provisions of this Agreement may be
waived, with and only with an agreement or consent in writing signed by the
Company and by the Investors currently holding fifty percent (50%) of the
Registrable Shares as of the date of such amendment or waiver.
I. TERMINATION OF REGISTRATION RIGHTS. This Agreement shall terminate at
such time as there ceases to be at least 50 shares of Preferred Stock.
REGISTRATION RIGHTS AGREEMENT-PAGE 12
(SUCCESSORIES, INC.)
<PAGE> 60
The foregoing Registration Rights Agreement is hereby executed as of the
date first above written.
COMPANY: INVESTORS:
SUCCESSORIES, INC. INFINITY INVESTORS LIMITED
By: By:
--------------------- ----------------------------
Name: Name:
------------------- ---------------------------
Title: Title:
------------------ --------------------------
SEACREST CAPITAL LIMITED
By:
----------------------------
Name:
---------------------------
Title:
--------------------------
REGISTRATION RIGHTS AGREEMENT-PAGE 13
(SUCCESSORIES, INC.)
<PAGE> 61
EXHIBIT E
SEACREST CAPITAL LIMITED
FAIRWAY CAPITAL LIMITED
27 Wellington Road
Cork, Ireland
December 17, 1996
VIA TELEFAX - 630/953-0014
Successories, Inc.
919 Springer Drive
Lombard, Illinois 60148
Re: Waiver of Rights Under Series A Cumulative Preferred Stock
(the "Series A Shares")
Gentlemen:
Reference is hereby made to the Regulation S Securities Subscription
Agreement ("Agreement") dated September 18, 1996 among Seacrest Capital Limited
("Seacrest"), Fairway Capital Limited ("Fairway") and Successories, Inc. (the
"Company").
This will confirm the agreement of each of Seacrest and Fairway to waive
all rights each may have under Section 7.1 of the Agreement, and under
Paragraph 4D of the Certificate of Designation (as defined in the Agreement),
in connection with the proposed issuance as of the date hereof of 1,212 shares
of Series B Cumulative Preferred Stock (the "Series B Shares") of the Company
to Seacrest and Infinity Investors Limited. The undersigned are the holders of
at least 80% of the Series A Shares outstanding as of the date hereof and
hereby consent to the issuance of the Series B Shares.
SEACREST CAPITAL LIMITED FAIRWAY CAPITAL LIMITED
By: By:
- ------------------------ -----------------------
Title: Title:
- ------------------------ --------------------
<PAGE> 1
EXHIBIT 10.25
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
NOR UNDER ANY APPLICABLE STATE SECURITIES LAW. THE HOLDER HEREOF HAS
REPRESENTED TO THE ISSUER THAT THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO THE DISTRIBUTION OR RESALE THEREOF, AND THIS NOTE MAY NOT BE
TRANSFERRED IN THE ABSENCE OF AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER
HEREOF INDICATING THAT THE PROPOSED TRANSFER WILL NOT BE IN VIOLATION OF THE
REGISTRATION REQUIREMENTS OF SUCH SECURITIES ACT.
SUBORDINATED NOTE (UNSECURED)
RIGHTS OF THE HOLDER TO RECEIVE PAYMENT ARE SUBJECT AND SUBORDINATE TO THE
PRIOR PAYMENT OF ALL OBLIGATIONS OF THE MAKER TO NBD BANK, PURSUANT TO THE
TERMS OF A SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH.
$100,000.00 Lombard, Illinois
____________, 1996
FOR VALUE RECEIVED, SUCCESSORIES, INC., an Illinois corporation (herein
sometimes called "Maker" and sometimes called "Debtor"), hereby promises to pay
to the order of
("Lender") in the manner provided hereinafter, the principal sum of ONE HUNDRED
THOUSAND and 00/100 DOLLARS ($100,000.00), with interest accruing thereon from
and after the disbursement of the loan evidenced hereby at the rate of ten
percent (10%) per annum, payable as follows:
(a) The entire outstanding principal balance and accrued but unpaid
interest thereon shall be due and payable November 1, 1997 (the "Maturity
Date") unless earlier due and payable by reason of the acceleration of the
maturity of this Note.
(b) From and after the occurrence of (i) any default in the payment of
interest or principal when due in accordance with the terms hereof, (ii) or
any other default under this Note, or (iii) the Maturity Date (as
hereinafter defined) of this Note, whether by acceleration or otherwise,
interest shall accrue on the amount of the principal balance outstanding
hereunder at the Default Rate. The Default Rate shall be Twelve percent
(12%) per annum, and interest accruing at the Default Rate shall be payable
on demand.
Interest on this Note shall be calculated on the basis of a 360-day year,
a 30-day month and the actual number of days elapsed in any portion of a month
for which interest may be due.
Prior to the occurrence of any default, all payments received on account
of the indebtedness evidenced by this Note shall be first applied to accrued
interest due on the outstanding principal balance, with the remainder, if any,
to be applied to the outstanding principal balance.
<PAGE> 2
The Maker shall have the right to prepay all or any portion of the
principal balance or accrued interest due hereunder from time to time and at
any time, without penalty.
Upon written request of the Lender to Maker, all payments made on account
of the indebtedness evidenced by this Note shall be made in certified funds.
Said payments and prepayments are to be made at such place as the legal holder
of this Note may from time to time in writing appoint and, in the absence of
such appointment, then at the address set forth for notices in or near the
penultimate paragraph of this Note.
This Note is one of an issue of Notes (herein collectively called the
"Notes") identical hereto (except for payee and principal amount) issued this
date by Maker in the aggregate principal amount of $ .
It is agreed that a default in the payment of interest or principal when
due in accordance with the terms hereof shall constitute an event of default.
Upon the occurrence of an event of default or a change of control with
respect to the Maker (as hereinafter defined), or at any time thereafter, at
the election of the holder or holders hereof and without notice to Maker, the
principal sum remaining unpaid hereon, together with accrued interest thereon,
shall become at once due and payable, and Lender may proceed to exercise any
rights and remedies against Maker or with respect to this Note which Lender may
have at law, in equity or otherwise. For purposes of this paragraph, a change
of control shall mean the following: (i) a sale or transfer of all or
substantially all the assets of Maker except to an affiliated person or entity,
(ii) a merger or consolidation of the Maker with a non-affiliated entity, or
(iii) a sale, exchange or other transfer or more than fifty percent of the
common stock of the Maker.
The remedies of Lender as provided herein shall be cumulative and
concurrent and may be pursued singularly, successively or together, at the sole
discretion of Lender, and may be exercised as often as occasion therefor shall
arise. Failure of Lender, for any period of time or on more than one occasion,
to exercise its option to accelerate the Maturity Date of this Note shall not
constitute a waiver of the right to exercise the same at any time thereafter or
in the event of any subsequent default. No act of omission or commission of
Lender, including specifically any failure to exercise any right, remedy or
recourse, shall be deemed to be a waiver or release of the same; any such
waiver or release is to be effected only through a written document executed by
Lender and then only to the extent specifically recited therein. A waiver or
release with reference to any one event shall not be construed as a waiver or
release of any subsequent event or as a bar to any subsequent exercise of
Lender's rights or remedies hereunder. Except as otherwise specifically
required herein, notice of the exercise of any right or remedy granted to
Lender by this Note is not required to be given.
If: (i) this Note is placed in the hands of an attorney for collection or
enforcement or is collected or enforced through any legal proceeding; (ii) if
an attorney is retained to represent Lender in any bankruptcy, reorganization,
receivership, or other proceedings affecting creditors' rights and involving a
claim under this Note, or any Loan Document; or (iii) if an attorney is
retained to
2
<PAGE> 3
represent Lender in any other proceedings whatsoever in connection with this
Note, then Maker shall pay to Lender all reasonable attorneys' fees, costs and
expenses incurred in connection therewith, in addition to all other amounts due
hereunder.
From and after the occurrence of a default, Lender is expressly authorized
to apply payments made under this Note as Lender may elect against any or all
amounts, or portions thereof, then due and payable hereunder the outstanding
principal balance due under this Note, the unpaid and accrued interest due
under this Note, or any combination of the foregoing.
Maker and any and all others who are now or may become liable for all or
part of the obligations of Maker under this Note (all of the foregoing being
referred to collectively herein as "Obligors") agree to be jointly and
severally bound hereby and jointly and severally: (i) waive and renounce any
and all redemption and exemption rights and the benefit of all valuation and
appraisement privileges against the indebtedness evidenced by this Note or by
any extension or renewal hereof; (ii) waive presentment and demand for payment,
notices of nonpayment and of dishonor, protest of dishonor, and notice of
protest; (iii) waive all notices in connection with the delivery and acceptance
hereof and all other notices in connection with the performance, default, or
enforcement of the payment hereof or hereunder; (iv) waive any and all lack of
diligence and delays in the enforcement of the payment hereof; (v) agree that
the liability of each of Obligors shall be unconditional and without regard to
the liability of any other person or entity for the payment hereof, and shall
not in any manner be affected by any indulgence or forbearance granted or
consented to by Lender to any of them with respect hereto; (vi) consent to any
and all extensions of time, renewals, waivers, or modifications that may be
granted by Lender with respect to the payment or other provisions hereof, and
to the release of any security at any time given for the payment hereof, or any
part thereof, with or without substitution, and to the release of any person or
entity liable for the payment hereof; and (vii) consent to the addition of any
and all other makers, indorsers and other obligors for the payment hereof, and
to the acceptance of any and all other security for the payment hereof, and
agree that the addition of any such obligors or security shall not affect the
liability of any of Obligors for the payment hereof.
Time is of the essence hereof.
Maker agrees that: (i) this instrument and the rights and obligations of
all parties hereunder shall be governed by and construed under the substantive
laws of the State of Illinois, without reference to the conflict of laws
principles of such state; (ii) the obligation evidenced by this Note is an
exempted transaction under the Truth In Lending Act, 15 U.S.C. Section 1601, et
seq.; (iii) said obligation constitutes a business loan within the purview of
815 ILCS 205/4; (iv) the proceeds of the indebtedness evidenced by this Note
will not be used for the purchase of registered equity securities within the
purview of Regulation "U" issued by the Board of Governors of the Federal
Reserve System; and (v) upon the Maturity Date, Lender shall not have any
obligation to refinance the indebtedness evidenced by this Note or to extend
further credit to Maker.
The parties hereto intend and believe that each provision in this Note
comports with all applicable law. However, if any provision in this Note is
found by a court of law to be in violation of any applicable law, and if such
court should declare such provision of this Note to be unlawful, void or
unenforceable as written, then it is the intent of all parties hereto that such
provision shall be given full force and effect to the fullest possible extent
that it is legal, valid and enforceable, that the remainder of this Note shall
be construed as if such unlawful, void or unenforceable provision were not
contained therein, and that the rights, obligations and interests of the Maker
and the holder
3
<PAGE> 4
hereof under the remainder of this Note shall continue in full force and effect;
provided, however, that if any provision of this Note which is found to be in
violation of any applicable law concerns the imposition of interest hereunder,
the rights, obligations and interests of Maker and Lender with respect to the
imposition of interest hereunder shall be governed and controlled by the
provisions of the following paragraph.
It being the intention of Lender and Maker to comply with the laws of the
State of Illinois with regard to the rate of interest charged hereunder, it is
agreed that, notwithstanding any provision to the contrary in this Note no such
provision, including without limitation any provision of this Note providing
for the payment of interest or other charges and any provision of the Loan
Documents providing for the payment of interest, fees, costs or other charges,
shall require the payment or permit the collection of any amount ("Excess
Interest") in excess of the maximum amount of interest permitted by law to be
charged for the use or detention, or the forbearance in the collection, of all
or any portion of the indebtedness evidenced by this Note. If any Excess
Interest is provided for, or is adjudicated to be provided for, in this Note
then in such event:
(a) the provisions of this paragraph shall govern and control;
(b) neither Maker nor any of the other Obligors shall be obligated
to pay any Excess Interest;
(c) any Excess Interest that Lender may have received hereunder
shall, at the option of Lender, be (i) applied as a credit against the
then outstanding principal balance due under this Note, accrued and
unpaid interest thereon not to exceed the maximum amount permitted by
law, or both, (ii) refunded to the payor thereof, or (iii) any
combination of the foregoing;
(d) the applicable interest rate or rates shall be automatically
subject to reduction to the maximum lawful rate allowed to be contracted
for in writing under the applicable usury laws of the aforesaid State,
and this Note shall be deemed to have been, and shall be, reformed and
modified to reflect such reduction in such interest rate or rates; and
(e) neither Maker nor any of the other Obligors shall have any
action or remedy against Lender for any damages whatsoever or any defense
to enforcement of the Note arising out of the payment or collection of
any Excess Interest.
Upon any endorsement, assignment, or other transfer of this Note by Lender
or by operation of law, the term "Lender," as used herein, shall mean such
endorsee, assignee, or other transferee or successor to Lender then becoming
the holder of this Note. This Note shall inure to the benefit of Lender and
its successors and assigns and shall be binding upon the undersigned and its
successors and assigns. The terms "Maker" and "Obligors," as used herein,
shall include the respective successors, assigns, legal and personal
representatives, executors, administrators, devisees, legatees and heirs of
Maker and any other Obligors.
4
<PAGE> 5
The relationship of Lender to Debtor is that of lender to borrower, and
nothing contained in this Note or the other Loan Documents shall cause there to
be a partnership or joint venture between Lender and Debtor.
Any notice, demand or other communication which any party may desire or
may be required to give to any other party shall be in writing, and shall be
deemed given if and when personally delivered, or on the second business day
after being deposited in United States registered or certified mail, postage
prepaid, addressed to a party at its address set forth below, or to such other
address as the party to receive such notice may have designated to all other
parties by notice in accordance herewith:
If to Lender:
________________________________
________________________________
________________________________
If to Maker: Successories, Inc.
919 Springer Drive
Lombard, IL 60148
Attention: Mr. James Beltrame, President
IN WITNESS WHEREOF, the undersigned has through its duly authorized
officers executed this Note as of the day and year first above written.
SUCCESSORIES, INC.
BY:________________________________
TITLE:___________________________
ATTEST:
____________________________
TITLE:______________________
5
<PAGE> 6
THIS OPTION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, NOR UNDER ANY APPLICABLE STATE SECURITIES LAW. THE HOLDER HEREOF HAS
REPRESENTED TO THE ISSUER THAT THIS Option HAS BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO THE DISTRIBUTION OR RESALE THEREOF AND THIS Option MAY NOT
BE TRANSFERRED IN THE ABSENCE OF AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER HEREOF INDICATING THAT THE PROPOSED TRANSFER WILL NOT BE IN VIOLATION OF
THE REGISTRATION REQUIREMENTS OF SUCH SECURITIES ACT.
COMMON STOCK OPTION AGREEMENT
OF
SUCCESSORIES, INC.
---------------
TRANSFERABILITY AND EXERCISABILITY
RESTRICTED AS HEREIN PROVIDED
---------------
VOID 5 YEARS FROM THE DATE HEREOF
THIS IS TO CERTIFY THAT, for value received, , or assigns,
is entitled to purchase from SUCCESSORIES, INC., an Illinois corporation
(hereinafter called the "COMPANY"), at the Exercise Price (as defined below)
per share at any time after the date hereof and up to and including 5:00 P.M.
on October 31, 2001 TEN THOUSAND (10,000) shares of common stock, $.01 par
value per share, of the Company, all subject to the provisions and on the terms
and conditions hereinafter set forth. The term, "Exercise Price", shall mean
$6.875 per share. "AGGREGATE OPTION PRICE" shall refer to the said number of
shares originally purchasable hereunder multiplied by the original Exercise
Price, and the Aggregate Option Price shall not be subject to adjustment. The
said price per share is, however, subject to adjustment as hereinafter provided
and is herein sometimes referred to as the "PER SHARE OPTION PRICE", and the
said number of shares purchasable hereunder is likewise subject to adjustment
as hereinafter provided. The shares of Common Stock deliverable or delivered
upon exercise hereof are hereinafter referred to as "Option Shares."
This Option is one of several identical COMMON STOCK Option AGREEMENTS
(hereinafter collectively called the "OPTIONS") issued or to be issued in
connection with the issuance and sale by the Company of Subordinated Notes in
the anticipated aggregate principal amount of $ on or about
the date hereof (the total aggregate amount of such notes is subject to the
Company's discretion). The Company's common stock, $.01 par value per share,
is hereinafter called the "COMMON STOCK".
1. Subject to the conditions hereinafter set forth, this Option may be
exercised in whole at
<PAGE> 7
any time after the date of the original issuance hereof or in part from time to
time thereafter by the holder hereof, by the surrender of this Option (with the
subscription form at the end hereof duly executed) at the principal office of
the Company, 919 Springer Drive, Lombard, Illinois 60148, within the period
above named and upon payment to the Company of the Aggregate Option Price (or
the proportionate part thereof if exercised in part) for the shares so
purchased in funds current in Chicago, Illinois. If this Option be exercised
in respect of less than all of the shares of said Common Stock at the time
purchasable hereunder, the holder hereof shall be entitled to receive a new
Option covering the number of shares in respect of which this Option shall not
have been exercised and setting forth the remaining Aggregate Option Price
applicable to such shares; provided, however, that this Option and all rights
and Options hereunder shall expire at the close of business on the date set
forth on the first page hereof, and shall be null and void if and to the extent
the Option shall not have been exercised before it expires.
2. In case at any time or from time to time, as the result of any dividend
(other than a cash dividend) or any split-off, spin-off, stock split,
reclassification, recapitalization or similar corporate rearrangement, the
holders of Common Stock (or any other stock or securities into which the Common
Stock shall have been converted) shall have received, or upon the taking of any
record shall have become entitled to receive, in addition to such Common Stock
(or such other stock or securities) and without payment therefor, any
additional Common Stock or other stock or securities or property (including
cash other than cash received by way of dividend), then in each such case, the
holder of this Option upon the exercise hereof will be entitled to receive the
number of shares of Common Stock (adjusted as herein provided) then being
purchased and paid for in accordance with the terms hereof and, in addition and
without further payment, shall be entitled to receive the additional Common
Stock or other stock or securities or property which such holder would have
held on the date of such exercise if, from the date hereof to and including
such date, he had been the holder of record of the number of shares of Common
Stock then being purchased and paid for and had retained all such additional
Common Stock or other stock or securities or property receivable in respect of
such shares.
3. In case at any time, by reason of any recapitalization or
reclassification of the capital stock of the Company, the consolidation or
merger of the Company with another corporation, or the sale of all or
substantially all of its assets to another corporation, the holders of Common
Stock shall have received or shall have become entitled to receive any other
stock, securities or property (including cash) in lieu of or in substitution
for such Common Stock or any part thereof (including without limitation Common
Stock upon a reverse stock split), then the holder of this Option, upon the
exercise hereof, shall be entitled to receive, in lieu of the shares
theretofore purchasable hereunder, such stock or other securities or other
property to which the holder hereof would have been entitled upon the
consummation of such recapitalization, reclassification, consolidation, merger
or sale, if such holder had exercised this Option immediately prior thereto,
and, in any such case, the provisions of this Option shall thereafter be
applicable to the shares of stock or other securities or other property
thereafter deliverable upon the exercise of this Option without any diminution
in the Aggregate Option Price.
4. If, prior to the expiration of this Option, the Board of Directors of
the Company shall declare any dividend on its Common Stock, or in the case of
any capital reorganization or reclassification of Common Stock of the Company,
or in the case of consolidation or merger of the Company with or into another
corporation, or in the case of the sale of all or substantially all of the
assets of the Company, the Company shall cause notice of the date fixed by the
Board of Directors for the taking of the record
2
<PAGE> 8
of stockholders entitled to participate in such dividend or the relevant date
upon which such capital reorganization, reclassification, consolidation, merger
or sale will take place to be mailed to the holder hereof not less than 15 days
prior to the record date or such relevant date thus fixed at the address of the
holder of the Option appearing on the books of the Company, and shall specify
the amount of such dividends and whether the same is to be paid in cash or
otherwise, and in the case of any other of the events above described shall
briefly describe the relevant event, matter or action.
5. The Company will not by any amendment of its Certificate of
Incorporation, or through reorganization, consolidation, merger, dissolution,
or sale of assets, or by any other voluntary act or deed, avoid or seek to
avoid the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by the Company, but will at
all times in good faith assist, in so far as it is able, in the carrying out of
all provisions of this Option and in the taking of all other action which may
be necessary in order to protect the rights of the holder hereof against
dilution. Without limiting the generality of the foregoing, the Company agrees
that it will not increase the par value of shares of Common Stock above the per
share Option Price then in effect, and that, before taking any action which
would cause an adjustment reducing the per share Option Price hereunder below
the then par value of the shares of Common Stock issuable upon the exercise of
this Option, the Company will take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of such Common Stock at the
per share Option Price as so adjusted.
6. In each case of an adjustment in the number of, or the character of,
the shares of stock or other securities or property issuable on the exercise of
this Option, or in the per share Option Price, the Company, shall, at the
Company's expense, compute the adjustments in accordance with the provisions of
this Option and prepare a letter setting forth the adjustment and showing in
detail the facts upon which such adjustment is based. The Company will
forthwith mail a copy of each such letter to the holders of Options. In the
event that the holder of this Option shall disagree with the Company's
computation, the holder may by written notice to the Company require the
Company to cause independent certified public accountants of nationally
recognized standing selected by the Company (who may be the regular auditors of
the Company), to make the computations and mail the letter described in this
paragraph. The expense of such accountants shall be borne by the Company;
provided, however, that if the computation of such accounts is identical with
that of the Company, the Company shall have a right to recover the expense of
such accountants from the holder who required the recomputation.
7. All notices and other communications from the Company to the holder of
this Option shall be mailed by first class registered or certified mail,
postage prepaid, to the address furnished to the Company in writing by the last
holder of this Option who shall have furnished an address to the Company in
writing, or if the Company shall not have been so furnished with an address, to
the last address of such holder known to the Company.
8. The Company will at all times reserve and keep available out of its
authorized capital stock, solely for issuance upon the exercise of this Option,
such number of shares of Common Stock and other securities as from time to time
shall be issuable upon the exercise of this Option.
3
<PAGE> 9
9. The Company stipulates that the remedies at law of the holder of this
Option in the event of any default by the Company in the performance of or
compliance with any of the terms or conditions hereof are not and will not be
adequate, and that the same may be specifically enforced.
10. Fractional shares shall not be issued upon the exercise of this Option
but in any case where the holder hereof would, except for the provisions of
this paragraph, be entitled under the terms hereof to receive a fractional
share upon the complete exercise of this Option, the Company shall, upon the
exercise of this Option for the largest number of whole shares then called for,
pay a sum in cash equal to the excess of the market value of such fractional
share (determined in such manner as may be prescribed in good faith by the
Board of Directors of the Company, which determination in the absence of fraud
or gross negligence shall be final and conclusive) over the proportional part
of the per share Option Price represented by such fractional share.
11. The Company covenants and agrees that the shares of Common Stock
represented by each and every certificate for its Common Stock to be delivered
on the exercise of this Option as herein provided shall, at the time of such
delivery, be validly issued and outstanding and be fully paid and
nonassessable. The Company further covenants and agrees that it will pay when
due and payable any and all federal and state original issue taxes which may be
payable in respect of the issue of this Option or of any stock or certificates
upon the exercise of this Option pursuant to the provisions hereof. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the transfer and delivery of stock
certificates in a name other than that of the holder of this Option presented
for exercise, and any such tax shall be paid by such holder at the time of
presentation.
12. The right to exercise this Option shall not be suspended during any
period while the stock transfer books of the Company for its Common Stock may
be closed. The Company shall not be required, however, to deliver certificates
of its Common Stock upon the exercise of this Option while such books are duly
closed for any purpose, but the Company may postpone the delivery of the
certificates for such shares of Common Stock until the opening of such books,
and they shall, in such case, be delivered forthwith upon the opening thereof,
or as soon as practicable thereafter.
13. In case any Option shall be mutilated, lost, stolen, or destroyed, the
Company may issue a new Option of like date, tenor and denomination and deliver
the same in exchange and substitution for and upon surrender and cancellation
of any mutilated Option, or in lieu of any Option lost, stolen or destroyed,
upon receipt of evidence satisfactory to the Company of the loss, theft or
destruction of such Option, or upon receipt of indemnity satisfactory to the
Company.
14. This Option does not confer upon the holder hereof any right to vote
or to consent or to receive notice as a stockholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
stockholder.
15. By acceptance of this Option the holder hereof represents to the
Company that this Option is being acquired for investment for the account of
the holder hereof and not with a view to distribution or resale hereof and that
no person other than the holder hereof will acquire any interest herein as a
result of the acquisition of the Option by the holder hereof. This Option has
not been registered under the Securities Act of 1933, as amended (the
"Securities Act").
16. The holder hereof further represents that he will not exercise the
Option except for the purpose of acquiring Common Stock for investment for the
account of the holder hereof and not with
4
<PAGE> 10
a view to distribution or resale of such Common Stock, unless a registration
statement under the Securities Act is then in effect with respect to such
Common Stock or an exemption from the registration requirements of the
Securities Act is then applicable to such Common Stock.
17. Except with respect to a transfer to an affiliate as defined in Rule
144 under the Securities Act, this Option and the Common Stock issuable upon
exercise of this Option may not be transferred unless previously transferred
(or, with respect to the Common Stock, issued) at a time when such security was
registered under the Securities Act or unless a registration statement under
the Securities Act is then in effect with respect to the transfer of such
Option and Common Stock or unless the holder thereof has first presented to the
Company a written opinion of counsel satisfactory to the Company indicating
that the proposed transfer will not be in violation of any of the provisions of
the Securities Act or the rules or regulations promulgated thereunder, and an
agreement to indemnify the Company against all liabilities, costs or expenses
which might result from said proposed transfer should he in fact violate the
provisions of such Securities Act, or any of the rules or regulations
promulgated thereunder, requiring such registration.
18. Unless this Option has been transferred, and unless the Common Stock
issuable upon exercise of this Option has been issued or later transferred at a
time when such security was registered under the Securities Act or unless a
registration statement under the Securities Act is then in effect with respect
to the transfer of such Option or with respect to the issuance or transfer of
such Common Stock, each Option and each certificate representing shares of such
Common Stock shall bear on the face thereof the following legend:
"(This Option) (the shares of stock represented by this certificate)
has (have) not been registered under the Securities Act of 1933, as
amended, or under any applicable state securities law. The holder hereof
has represented to the issuer that (this Option) (such shares of stock) has
(have) been acquired by him for investment and not with a view to the
distribution or resale thereof and (this Option) (such shares of stock) may
not be transferred in the absence of an opinion of counsel satisfactory to
the issuer hereof indicating that the proposed transfer will not be in
violation of the registration requirements of such Securities Act.";
and the transfer agent (if other than the Company) for the Options and Common
Stock will be directed by the Company not to effect any transfer thereof in
violation of the terms hereof.
19. If at any time, the Company proposes to register any shares of its
Common Stock under the Securities Act, the Company shall give to all registered
holders of Options or Option Shares written notice of its intention in that
regard and use its best efforts to effect the registration under such act, if
such registration is permissible, of such Option Shares as may be specified by
written notice from any of such holders delivered to the Company within 20 days
after such notice is given (which notice shall be deemed to have been given
upon the deposit thereof in first-class or express U.S. mail, postage pre-paid,
addressed to each holder at the address of such holder as shown in the books of
the Company), provided, however, that (i) the Company shall not be required to
give such notice with respect to, or to include such Option Shares in, any such
registration which is primarily (A) a registration of a stock Option plan or
other employee benefit plan or of securities issued or issuable pursuant to any
such plan, or (B) a registration of securities proposed to be issued in
exchange for securities or assets of, or in connection with a merger or
consolidation with, another corporation, and (ii) if the registration is in
5
<PAGE> 11
connection with an underwritten public offering, Option Shares which (A) the
managing underwriter determines will materially impair the marketability of the
securities being registered or (B) the holder thereof decides not to include in
the offering, shall not be registered.
20. The costs and expenses of such registration, including but not limited
to legal fees, special audit fees, printing expenses, filing fees, fees and
expenses relating to qualifications under state securities or blue sky laws and
the premiums for insurance, if any, incurred by the Company in connection
therewith, shall be borne entirely by the Company; provided, however, that any
holders participating in such registration shall bear their own underwriting
discounts and commissions and the fees and expenses of their own counsel or
accountants in connection with any such registration.
21. The Company shall, at its expense, also take reasonable measures to
qualify the Option Shares included in any registration statement pursuant
hereto for sale under applicable blue sky laws.
22. Upon the exercise of registration rights pursuant hereto, each holder
agrees to supply the Company with such information as may be required by the
Company to register or qualify such Option Shares.
23. In the event of any registration of securities pursuant hereto, the
Company shall indemnify each holder of securities subject to such registration,
its officers, directors and general partners and each person, if any, who
controls such holder within the meaning of Section 15 of the Securities Act
against all losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus (and as amended or supplemented) relating
to such registration, or caused by omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they are made
unless such statement or omission made in reliance upon and in conformity with
information furnished in writing by such holder to the Company expressly for
use in such registration statement or prospectus.
24. The registration rights granted to the Purchaser pursuant hereto shall
also be for the benefit of, and enforceable by, any subsequent holder hereof or
of Option Shares, whether or not any express assignment of such rights to any
such subsequent holder is made.
IN WITNESS WHEREOF, CELEX GROUP, INC. has through its duly authorized
officers executed this Option this ___ day of__________________ , 1995.
CELEX GROUP, INC.
BY:____________________________
TITLE:______________________
ATTEST:
6
<PAGE> 12
BY:________________________
TITLE:__________________
7
<PAGE> 13
FORM OF SUBSCRIPTION
(TO BE SIGNED ONLY UPON EXERCISE OF OPTION)
TO CELEX GROUP, INC.
The undersigned, the holder of the within Option, hereby irrevocably
elects to exercise the purchase right represented by said Option for, and to
purchase thereunder _________ shares of Common Stock of CELEX GROUP, INC. and
herewith makes payment of $_______ therefor, and requests that the certificates
for such shares be issued in the name of, _______________________
________________________, and be delivered to ___________________
________________________, whose address is ______________________
_________________________________.
DATED:
__________________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Option.)
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY UPON TRANSFER OF OPTION)
FOR VALUE RECEIVED and in accordance with the provisions hereof
restricting the transferability of the within Option, the undersigned hereby
sells, assigns and transfers unto _____________________________ the right
represented by the within Option to purchase the shares of the Common Stock of
CELEX GROUP, INC., to which the within Option relates, and appoints
______________________________ attorney to transfer said right on the books of
CELEX GROUP, INC. with full power of substitution in the premises.
DATED:
__________________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Option.)
In the Presence of:
_____________________________________
8
<PAGE> 14
SUBORDINATION AGREEMENT
DATED:__________________ , 1996
NBD BANK ("Lender") and the undersigned creditor ("Junior Creditor") of
Successories, Inc., Celebrating Excellence, Inc. and Successories of Illinois,
Inc. (collectively "Borrower") agree to the following:
1. Borrower is now indebted to Junior Creditor and may be indebted to Junior
Creditor for other and further loans and advances in the future (all of which
are referred to as the "Indebtedness").
2. Junior Creditor represents that the Indebtedness has not been
previously assigned to or subordinated in favor of any other person or entity.
3. Junior Creditor is entering to this Agreement:
a. to induce Lender to grant credit pursuant to that certain
Amended and Restated Credit Agreement as of July 31, 1995 as amended
by that certain First Amendment to Credit Agreement, dated September
25, 1995, entered into by the Borrower and the Bank (as so amended,
the "Credit Agreement");
b. to induce Lender to continue its present lending arrangement
with Borrower pursuant to the Credit Agreement;
c. in consideration of any of Borrower's obligations to Lender,
now existing or arising in the future.
4. The Indebtedness is hereby subordinated to any present or future
indebtedness, obligations or liabilities of Borrower (and, in addition, of
Borrower as a Debtor-in-Possession under any bankruptcy act or code, state or
federal law, common law or equitable doctrine and of any trustee, receiver or
other party appointed for Borrower under any such laws, doctrine or proceedings)
to Lender, including any indebtedness, obligations or liabilities evidenced by
the Credit Agreement or any Note issued pursuant thereto, and including interest
accrued or to be accrued (including post-bankruptcy petition interest, whether
or not Lender shall be entitled to same), absolute or contingent obligations and
obligations acquired by purchase or otherwise as well as all reasonable
collection costs and attorneys' fees incurred by Lender in enforcing its rights
against Borrower (the "Obligations").
5. Junior Creditor hereby expressly and unconditionally subordinates to
Lender any and all right, title, liens, security interests and mortgages which
such Junior Creditor may presently have or which it may hereafter acquire from
Borrower in property of the Borrower, whether now owned or hereafter created or
acquired and wherever located. Junior Creditor agrees that all liens, security
interests and mortgages granted in favor of Junior Creditor in property, of the
Borrower are and shall be junior in right of priority to and subordinate to any
and all liens, security interests and mortgages Lender, its successors or
assigns have or may have in the same property. The priorities provided for in
this Agreement shall apply:
<PAGE> 15
a. without regard to the time or order of attachment,
perfection, filing or recording of the mortgages, security interests
and other liens to secure the obligations of the Borrower, or the
failure to give notice of the acquisition or expected acquisition of
any such mortgage, security interest or lien;
b. notwithstanding anything to the contrary in the provisions
of the United States Bankruptcy Code or the Uniform Commercial Code in
any relevant state of the United States or the laws of the State of
Illinois or any other relevant state, which relate to the priority of
liens, security interests or mortgages;
c. with respect to all obligations of the Borrower to Junior
Creditor, and of the Borrower to the Lender, whenever made, created or
acquired; and
d. notwithstanding the lapse of perfection of Lender's liens or
security interests or Lender's failure to perfect its liens or
security interests.
Junior Creditor also agrees to execute any other documents or financing
statements reasonably required by Lender to effectuate the terms and provisions
of this Agreement.
6. Junior Creditor hereby represents and warrants to Lender as follows:
a. Attached hereto is a true, correct and accurate original of
the note evidencing the Indebtedness, which has not been modified and
is in full force and effect. There are no other agreements or
understandings relating to the Indebtedness between Borrower and
Junior Creditor;
b. Junior Creditor has no mortgage, lien, security interest or
other charge or encumbrance in or upon any of Borrower's property,
whether real, personal or mixed, as security for the Indebtedness; and
c. This Agreement has been duly executed and delivered by
Junior Creditor, and is the valid and binding obligation of Junior
Creditor, enforceable against him in accordance with its terms, except
as may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
7. Unless Borrower defaults under the Credit Agreement or any Note issued
pursuant thereto given to Lender by Borrower or unless an event occurs which,
with the passage of time or with notice, would become an event of default under
the Credit Agreement or any such Note, and Lender gives notice of the same to
Junior Creditor, Junior Creditor may receive interest payments from Borrower on
account of the Indebtedness. However, upon receipt of such notice of default,
Junior Creditor agrees not to ask for, demand, sue for, take or receive payment,
whether by setoff or otherwise, on account of the Indebtedness or take or
receive security for any part of the Indebtedness, until all Obligations to
Lender have been fully paid to Lender. Any payments received by Junior Creditor
on account of the Indebtedness after receiving such notice from Lender will be
held by Junior Creditor in trust for Lender and will be immediately turned over
to Lender to be credited against the Obligations.
2
<PAGE> 16
8. At all times Obligations are owing to Lender, and until all the Credit
Agreement has expired or otherwise terminated, Junior Creditor agrees that he
will not accept prepayments of the Indebtedness or any payments on the
Indebtedness other than payments in accordance with the original terms of the
Indebtedness, without acceleration.
9. If Borrower defaults on the Indebtedness, the Junior Creditor shall
give Lender written notice of the default. However, regardless of Borrower's
default on the Indebtedness, Junior Creditor will not seek to foreclose or
otherwise realize upon any security for the Indebtedness. Junior Creditor shall
have no right to foreclose or otherwise realize on any security, until and
unless all Obligations have been fully paid and discharged and the Credit
Agreement expired or otherwise terminated. Junior Creditor will not accept any
additional collateral security for the payment of the Indebtedness or any other
obligation of Borrower to Junior Creditor, or obtain a mortgage, lien, security
interest or other charge or encumbrance of any nature whatsoever against
Borrower's property, whether now owned or hereafter acquired.
10. Upon any distribution of any of Borrower's assets, whether by reason
of sale, reorganization, liquidation, dissolution, arrangement, bankruptcy,
receivership, assignment for the benefit of creditors, foreclosure or otherwise,
Lender shall be entitled to receive payment in full of the Obligations prior to
the payment of all or any part of the Indebtedness. To enable Lender to assert
and enforce its rights under this Agreement or upon any default under the Credit
Agreement or default under any Note issued pursuant thereto given to Lender by
Borrower, Lender or any person Lender may designate is appointed agent and
attorney-in-fact for Junior Creditor. This appointment is coupled with an
interest and is irrevocable so long as any Obligations remain unpaid or the
Credit Agreement remains in effect. Lender or any person it may designate will
have full power to act in the place of Junior Creditor, including, in the event
of any proceeding in bankruptcy, general assignment for the benefit of
creditors, equitable receivership or other reorganization or insolvency
proceeding affecting Borrower or its properties, the right to make, present,
file and vote proofs of claim(s) against Borrower on account of any part of the
Indebtedness as Lender may deem advisable and to receive and collect any and all
dividends or other payments made on the Indebtedness, and to apply such funds to
the balance due on the Obligations. To secure payment and performance of the
Credit Agreement, Junior Creditor hereby assigns to the Lender and grants it a
security interest in the Indebtedness, any instruments now or later evidencing
the Indebtedness, and any property, real or personal, now or later securing the
Indebtedness. Borrower shall notify the Lender within three (3) days after the
creation of any Indebtedness that arises after the execution of this Agreement.
Such additional Indebtedness shall be evidenced by a note or notes. Junior
Creditor shall endorse and deliver said note or notes to Lender as additional
collateral for the Credit Agreement. Junior Creditor will execute and deliver to
the Lender any further assignments of its interest the Lender may request.
11. While this Agreement remains in effect, Junior Creditor will not,
without Lender's prior written consent, (a) assign or subordinate in favor of
any other person or entity, any part of the Indebtedness or any right, claim or
interest in the Indebtedness, or (b) commence or join with any other creditor in
commencing any bankruptcy, reorganization or insolvency proceeding against
Borrower, or (c) amend, cancel or discharge the Indebtedness, except upon
payment in full to Lender pursuant to the
3
<PAGE> 17
terms of this Agreement.
12. Lender may at any time, in its sole discretion, renew or extend the
time of payment of any part of the Obligations, amend, modify, extend or
supplement the Credit Agreement or any agreement evidencing or securing the
Obligations, increase the outstanding principal amount of the Obligations, waive
or release any collateral that may be held as security, release any guarantor of
the Obligations, and enter into any agreements with Borrower which Lender may
deem desirable, without notice to or further assent from Junior Creditor and
without in any way affecting Lender's rights under this Agreement, except that
Junior Creditor shall be entitled to receive written notice of any default that
Lender has declared against Borrower. This Agreement shall remain in full force
and effect notwithstanding any lack of validity or enforceability of the Credit
Agreement or any other agreement or instrument evidencing or securing the
Obligations, and notwithstanding any other circumstance that might otherwise
constitute a defense to, or a discharge of, Borrower or Junior Creditor.
13. Lender is hereby authorized to demand specific performance of the
provisions of this Agreement and Junior Creditor hereby irrevocably waives any
defense based on adequacy of a remedy at law that might be asserted to the
remedy of specific performance. Junior Creditor hereby acknowledges that the
provisions of this Section 13 shall be enforceable at all times, whether before
or after the commencement of proceedings described in Section 10 hereof, and
whether such proceedings shall have been commenced with respect to Borrower or
Junior Creditor.
14. Junior Creditor will type, write or otherwise conspicuously imprint on
each note, document or other instrument evidencing or related to the
Indebtedness the following legend:
RIGHTS OF THE HOLDER TO RECEIVE PAYMENT ARE SUBJECT AND SUBORDINATE TO
THE PRIOR PAYMENT OF ALL OBLIGATIONS OF THE MAKER TO NBD BANK, PURSUANT
TO THE TERMS OF A SUBORDINATION AGREEMENT DATED AS OF________________,
1995.
15. This Agreement shall remain in effect and shall be a continuing
subordination until all Obligations to Lender from Borrower are paid in full and
the Credit Agreement has expired or otherwise terminated.
16. Junior Creditor further agrees that if at any time Borrower's payment
or payment(s) to Lender or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, rescinded and/or required
to be repaid by Lender to a trustee, receiver or any other party under any
bankruptcy act or code, state or federal law, common law or equitable doctrine,
then to the extent of any sum not finally retained by Lender, the Junior
Creditor's obligations to Lender shall be reinstated and this Agreement shall
remain in full force and effect (or be reinstated) until full and final payment
shall have been made to Lender. If any action or proceeding seeking such
repayment is pending or, in Lender's sole judgment, threatened, this Agreement
shall remain in full force and effect notwithstanding that Borrower may not then
be obligated to Lender and notwithstanding the expiration or other termination
of the Credit Agreement. Junior Creditor agrees to hold in trust for Lender and
promptly remit to Lender any payment(s) received by Junior Creditor after such
invalidated, rescinded or returned payment(s), above described, were originally
made.
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<PAGE> 18
17. Junior Creditor, on his own behalf and on behalf of his successors and
permitted assigns, hereby expressly waives all rights, if any, to require a
marshalling of assets by Lender or to require that Lender first resort to some
or any portion of any collateral security Borrower's obligations to Lender
before foreclosing upon, selling or otherwise realizing on any other portion
thereof.
18. This Agreement shall inure to the benefit of Lender, its parent,
subsidiary or affiliated corporation(s), and any of Lender's successors and
assigns, and shall be binding on Junior Creditor, and Junior Creditor's heirs,
executors, administrators, personal representatives, successors and assigns.
Lender may assign or otherwise transfer all or any portion of the Obligations,
or grant any participation therein to any other person or entity, and such other
person or entity shall thereupon become vested with all the rights in respect
thereof granted Lender herein or otherwise.
19. In the event that there is an express conflict between the terms and
provisions of the Credit Agreement and of this Agreement, the terms and
conditions of this Agreement shall govern and control. In the event that there
is an express conflict between the terms and provisions of the agreements
between Junior Creditor and Borrower relating to the Indebtedness and of this
Agreement, the terms and conditions of this Agreement shall govern and control.
20. Except where the context otherwise requires, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter.
21. This Agreement constitutes the entire understanding of Junior Creditor
and Lender regarding the subject matter provided for in this Agreement. This
Agreement may only be modified, amended or supplemented by a writing signed by
Junior Creditor and Lender.
22. Junior Creditor agrees to pay, upon demand, to Lender the amount of
any and all expenses incurred by Lender including, without limitation,
attorneys' fees, which Lender may incur in connection with the exercise or
enforcement of any of its rights, remedies or interests hereunder.
23. All notices and other communications hereunder shall be in writing and
shall be delivered or sent to the party to be notified at the address stated
beneath such party's signature line contained below, or to such other address as
may be designated by such party to the other parties hereto. All such notices
and other communications shall be deemed to have been given at the time of
actual delivery thereof to such address, or if sent by certified or registered
mail, postage prepaid, to such address, on the third day after the date of
mailing.
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<PAGE> 19
24. This Agreement shall be governed by and construed according to the
internal laws of the State of Illinois
SIGNATURE AND ADDRESS OF JUNIOR CREDITOR(S)
_________________________
Address:
_________________________
_________________________
_________________________
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<PAGE> 20
BORROWER'S ACKNOWLEDGEMENT
Successories, Inc., Celebrating Excellence, Inc. and Successories of
Illinois, Inc. (collectively, the "Borrower"), on _____________________ ,
1995, acknowledges receiving notice of the attached Subordination Agreement
between Lender and the listed creditor of Borrower and agrees to be bound by
all the terms, provisions and conditions of the Subordination Agreement. The
Borrower further agrees that unless Lender's written consent is received, it
will not repay any part of the present or any future indebtedness (the
"Indebtedness"), issue any note or other instrument evidencing the Indebtedness
or grant any collateral security for the Indebtedness, except as expressly
permitted by the terms of the Subordination Agreement.
SUCCESSORIES, INC. CELEBRATING EXCELLENCE, INC.
BY:__________________________________ BY:__________________________________
ITS:_________________________________ ITS:_________________________________
ACCEPTED:
NBD BANK SUCCESSORIES OF ILLINOIS, INC.
BY:_________________________________ BY:__________________________________
ITS:________________________________ ITS:_________________________________
7
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 21.1
SUBSIDIARIES
Name Jurisdiction of Incorporation Ownership %
- ---- ----------------------------- -----------
<S> <C> <C>
Celebrating Excellence, Inc. Illinois 100%
Successories of Illinois, Inc. Illinois 100%
Celex Successories, Inc. Dominion of Canada 100%
British Links Acquisition
Corporation Illinois 100%
B.L.G.C., Inc. Texas 100%
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated April 26, 1996 appearing on page F2 of the Celex Group, Inc. Annual
Report on Form 10-K for period ended February 3, 1996. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
Price Waterhouse LLP
Chicago, Illinois
January 2, 1997
