SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 1, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-22834
SUCCESSORIES, INC.
(Exact Name of Registrant as Specified in its Charter)
ILLINOIS 36-3760230
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
919 SPRINGER DRIVE
LOMBARD, ILLINOIS 60148
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (630) 953-8440
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
None None
Securities registered pursuant to Section 12(g) of the Act:
$.01 par value Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. X
The aggregate market value of the $.01 par value Common Stock held by
non-affiliates of the registrant on April 28, 1997, based upon the last
reported sale price on that date on the Nasdaq National Market of $6.25 per
share, was approximately $35,663,000.
Registrant had 5,706,028 shares of $.01 par value Common Stock,
outstanding as of April 15, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its 1997
Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission within 120 days of February 1, 1997 are incorporated by
reference into Part III hereof.
PART I
ITEM 1. BUSINESS
GENERAL
The Company is a direct mail catalog company, specialty retailer and
wholesaler that designs, assembles and markets a diverse range of personal
and business motivational and self-improvement products, many of which are
the Company's own proprietary designs. Successories' products include
distinctive lines of wall decor, desktop art, books, audio tapes,
personalized gifts and awards, greeting cards and mugs. In addition, the
Company sells other motivational products supplied by third parties.
Company personnel create proprietary art work and designs that can be used
in conjunction with a wide variety of products. The Company will also
customize its products to fulfill customers'special needs.
The majority of the Company's sales are derived from proprietary
products that have been internally developed, designed, or customized. All
products are designed to have a positive motivational or self-improvement
theme that can be used to reinforce basic business goals such as customer
service, attitude and teamwork, or to recognize achievement and good
performance, or as customer gifts. The Company's products also appeal to
individuals for both personal and professional motivation, and for gifts.
The Company's products are also purchased by organized sports teams and
individual athletes for motivational or inspirational purposes.
The Company has a wide range of customers, including Fortune 500
companies, mid-sized and small businesses, sole proprietors, entrepreneurs,
sales people, schools, athletic organizations and individuals. The
Company's products are marketed primarily under its SUCCESSORIES trade name
through direct marketing (both catalog and telemarketing), retail sales
(both franchise, co-retailing and Company-owned stores), and wholesale
distribution.
As of February 1, 1997, there were 95 SUCCESSORIES retail stores, 48
of which were Company- owned and 47 were franchised. The Company also
owns and operates one British Links retail store. For the fiscal year
ended February 1, 1997, the Company mailed a total of 11.7 million catalog
pieces. The following table shows the number of Company-owned and
franchised retail locations open at the beginning of the fiscal year, the
number opened and closed during the fiscal year, and the total open at the
end of the fiscal year:
Company-Owned Franchised
Locations Locations
At February 3, 1996 54 43
Opened 8 6
Acquired (British Links) 1 0
Closed (14) (2)
At February 1, 1997 49 47
The operating subsidiaries (the "Subsidiaries") of the Company
commenced operations in 1985 and their original owners included certain
current officers and directors of the Company. In October 1990, Primus
Development Group II Ltd. ("Primus") acquired in excess of 90% of the share
ownership of the Subsidiaries through a share exchange. The Company was
formed as a wholly-owned subsidiary of Primus and, in February 1992, Primus
merged into the Company. In March 1991 and April 1993, the Company
acquired the remaining outstanding shares of the Operating Subsidiaries
through share exchanges.
PRODUCTS
A majority of the Company's sales are derived from proprietary
products which either have been internally developed or designed, or
individually customized. All products are designed to have a positive
motivational or self-improvement theme which can be used in businesses to
reinforce basic business goals such as customer service, attitude and
teamwork, to recognize achievement and good performance and for customer
gifts. The Company's products also appeal to many individuals for both
personal and professional motivation and for gifts.
As of February 1, 1997, the Company offered a total of 3,500 stock-
keeping units ("SKUs"), of which 2,250 are available to the retail stores.
SUCCESSORIES retail stores generally carry an average of 850 SKUs and
kiosks carry an average of 550 SKUs. The Company's SUCCESSORIES catalog
carries approximately 500 SKUs in the 40-page version and 700 SKUs
in its 52-page edition.
The Company's proprietary wall decor product line includes dramatic
photography and other art developed, designed or customized in-house and
printed on high-quality coated paper stock with various motivational
captions. In addition, the Company produces posters with motivational
messages without photography. Company designers give each grouping of wall
decor products a unique uniform overall appearance, including consistent
visual themes, a range of predominant colors and distinctive border design
and lettering, thereby providing each grouping with a Trade Dress.
The prints within each product grouping are also similar in size. Most
framed art comes in a high-quality aluminum frame with an electroplated
high-gloss black finish. High-quality tempered glass is used for safety
reasons to protect against damage.
The Company's wall decor includes framed and unframed lithographs in
various sizes ranging from 16-inch by 20-inch to 24-inch by 30-inch. The
Company's merchandise is categorized into the product "groupings" that
convey a specific theme and Trade Dress.
The Company markets smaller versions (5-inch by 7-inch) of its wall
decor as well as other products designed to be placed on desktops and
countertops. In addition mini-sized framed lithographs and mouse pads are
produced in house. The Company also purchases other merchandise from third
parties. All desktop products contain motivational words and/or
images similar to those used for Wall Decor.
All books and tapes sold by the Company are specifically selected for
their motivational or inspirational content and include those published by
the Company as well as by third parties. The Company markets collections
of motivational or inspirational quotations containing illustrations by
Company artists, and educational books for sales, customer service and
human resource professionals.
The Company offers a wide variety of customized products to its
customers. In-house custom capabilities include hot-stamping,
screen-printing, and engraving for logos and personalized messages.
Etched brass and crystal products are also available. Some of the products
with customized features include employee awards, promotional items and
corporate gifts.
While SUCCESSORIES retail stores typically carry many of the Company's
proprietary products, they also carry a variety of products purchased
from outside vendors.
The Company recently acquired British Links Golf Classics, Inc., a
Dallas, Texas-based catalog company which sells "a tradition of fine golf
gifts, art and collectibles." Although the major product category is
wall decor the Company also sells watches, pens, wall plaques, clocks,
framed prints, chairs, lamps, books, planters, keepsake wooden boxes,
display racks and cabinets, glasses, mugs, jewelry and other related products.
PRODUCT DEVELOPMENT
The Company tries to expand its most popular product lines by offering
one or two new items with each new catalog version and by creating new
product lines that are distinctive in appearance from existing lines.
SALES AND MARKETING
The Company generates revenue through direct marketing, Company-owned
retail stores, franchise stores, wholesale distribution, and licensing
agreements. The Company believes that each one of these channels is an
efficient way to reach a specific segment of the customers. Customers are
categorized as follows:
- corporate buyers including executives, sales managers, human
resource managers and production managers of larger corporations,
- entrepreneurial buyers including small business owners, home
office businesses, sales professionals, and
- consumers who are primarily purchasing the Company's products as
a gift for the end user.
The Company believes that the optimal way to reach its diverse
customer base is to market its products through several distribution
channels. In addition, the Company believes that its different
distribution channels provide numerous benefits in cross-marketing. For
example, retail stores allow potential customers to view, first-hand, the
quality of the product offerings which may lead to future catalog sales.
In addition, retail stores act as a source of new customers for the
Company's catalog mailing list.
For the fiscal year ended February 1, 1997, retail revenues including
Company-owned stores were approximately 34% of total revenues, while
revenues derived from direct mail sales were approximately 49% of total
revenues. Revenues for the fiscal year ended February 1, 1997, from all
other sources (including wholesale revenues, product sales to franchisees,
franchise fees and royalty income) were approximately 17% of the Company's
total revenues.
The Company's revenue base is comprised of a wide range of customers
including Fortune 500 companies, mid-sized and small businesses, corporate
management personnel, athletic and educational organizations and retail
customers. No individual customer accounted for more than 10% of the
Company's net sales during the fiscal year ended February 1, 1997.
The Company emphasizes customer service to achieve its goal of
producing a high level of customer satisfaction. All merchandise sold to
the Company's direct mail and retail customers may be returned promptly
for any reason.
DIRECT MARKETING
Through the use of its SUCCESSORIES catalogs, the Company targets
sales managers, executives of small and medium-sized businesses, meeting
planners, human resource managers, corporate training managers and athletic
coaches who have purchased or shown a willingness to purchase the Company's
products in the past. These customers use the Company's products to
reinforce important work themes, to motivate and recognize employees, and
as gifts at meetings and conventions. In addition, the Company is
constantly prospecting for new customers by mailing its catalogs to
prospective customers which have favorable demographic profiles or purchasing
patterns.
The Company's catalog features the entire line of proprietary products
and some third-party products. The two types of catalogs currently being
mailed are a 52-page version mailed to customers and catalog requesters
and a 40-page version mailed to individuals on rented lists with the objective
to acquire them as new customers.
The Company maintains a large proprietary in-house database. Building
on this foundation, Successories maintains an ongoing prospecting effort by
testing various mailing lists and evaluating people's responsiveness to
the Company's product offerings. When a prospect makes a purchase, they are
promoted to the 52-page catalog using selection criteria based on purchase
history. A group of corporate sales representatives handle larger
corporate accounts through telemarketing. During the fiscal year ended
February 1, 1997, the Company mailed approximately 11.7 million Successories
catalogs.
During 1996, the Company acquired the stock of British Links Golf
Classics, Inc., a Dallas, Texas-based catalog company specializing in golf
wall decor and high-end golf gifts. The Company believes that, due to the
popularity of golf and its acceptance in the business community, the
Company will be able to generate incremental sales of British Links
products to the Company's in-house mailing list of business executives,
entrepreneurs and sales people. British Links produced four digest-size
issues of the British Links catalog with an average number of 64 pages per
issue and mailed approximately two million catalogs during the period
October 1996 through February 1, 1997.
RETAIL SALES
COMPANY-OWNED STORES
The Company's retail locations consist of stores and kiosks primarily
located in shopping malls. The Company's SUCCESSORIES stores were
introduced in early 1991. As of February 1, 1997, the Company owned a
total of 49 retail locations, including 44 stores and 5 kiosks. The
Company's retail stores are located in the District of Columbia, Canada and
the following states:
Arizona Indiana Oklahoma
California Maryland Pennsylvania
Colorado Massachusetts Texas
Florida Michigan Virginia
Georgia Minnesota Wisconsin
Illinois New York
Kiosks are self-contained, 10' by 12' retail displays located in the
center aisle of an enclosed shopping mall where all four sides of the
display are available for showing products and conducting sales. The
center of the kiosk is utilized for storage. Because of the lower costs
associated with establishing, furnishing and stocking such a location,
these types of locations offer a relatively inexpensive way for both the
Company and its franchisees to test mall locations prior to opening a
larger store.
Depending on seasonality, location, size of market and build-out
costs, the Company generally expects a new store to achieve profitability
within twelve months of opening.
Retail Division plans currently call for moderate expansion in the
next fiscal year with focus on profit enhancement at existing company-owned
stores and kiosks, rather than on new store revenues.
In April, 1997, the Company signed a three-year agreement with
Waldenbook Company, Inc., a subsidiary of the Borders Group, Inc., whereby
Successories will add retail kiosks to be owned and operated by Waldenbook.
These kiosks will be open from September through January. The Company
expects approximately 100 of these kiosks to be opened in 1997, the first
year of the agreement.
WHOLESALE DISTRIBUTION
The Company sells products to a number of wholesale customers. In
1996, the Company designed and introduced the WINNERS<reg-trade-mark>
Collection brand for wholesale distribution. Wholesale customers include
other direct marketing distributors and distributors who have acquired
distribution rights for the Company's products in other countries.
The Company licenses some of its proprietary images to third parties
for use in their products for which the Company receives a royalty payment.
These third parties generally market office supply products such as pens,
notebooks and note cubes either through retail stores or through direct
marketing catalog sales.
SALES TO FRANCHISEES
The Company's franchising strategy is to broaden its product
distribution through sales to franchisees. The Company attracts qualified
franchise operators with a low initial franchise fee. The franchisee then
purchases for resale Company manufactured products and products from others
that are Company-approved. Due to the proprietary nature of most of the
Company's products, the Company is the only available source for most products
sold by franchisees. Product sales to franchisees are typically made at a
discount to retail or at product cost plus a certain percentage.
FRANCHISING PROGRAM
The Company has devised a strategy whereby the development of Company-
owned stores is concentrated on major metropolitan areas with a base
population in excess of one million people, while franchise store
development is concentrated in areas with a base population of fewer than
one million people. The Company believes that it can operate Company-owned
stores most efficiently and profitably in areas where it has the ability to
operate multiple units in relatively close proximity. The operation of
several stores in a metropolitan area "cluster" allows the Company to
benefit from management and distribution efficiencies resulting from
providing products and services to several locations at once, as
opposed to providing such services to individual stores. In geographic
areas where the population and demographics suggest a single retail
location rather than several locations in a cluster, the Company may seek to
place a franchisee to act as an owner/operator. As an owner/operator, the
individual franchisee has the ability to service an individual retail
operation more efficiently than the Company by maintaining lower overhead
costs than those required by a single isolated Company-owned store.
Prospective franchisees frequently approach the Company on an
unsolicited basis. Franchisees must meet specific qualification criteria
and are pre-screened to substantiate level of interest and compliance
with certain minimum net worth and liquid asset tests. Prospective
franchisees who meet the initial qualification requirements are invited to
the Company's headquarters for extensive interviews with Company
executives, who must approve all franchisees. Upon approval,
franchisees sign a franchise agreement and pay a franchise fee prior to
participating in the franchise training and orientation program.
The Company provides its franchisees with a comprehensive system of
business training, education, site selection assistance, professional
marketing, promotion and advertising programs and other forms of franchise
support.
FRANCHISE OPERATIONS
All franchisees are required to comply with Company-established
operational policies and procedures relating to, among other things,
quality of service, training, design and decor of stores and trademark
usage. The Company's operations personnel make periodic visits to
franchise stores to ensure that the stores are operating in conformity with
Successories standards. The Company retains the right to receive an
assignment of any leasehold interest and gain possession of the store if
the franchisee fails to comply with the Company's operational policies and
procedures or upon expiration of the franchise agreement.
The Company provides its franchisees with training at both the
Company's headquarters and at Company-owned retail locations focused on the
various aspects of store management including marketing fundamentals,
financial controls and product knowledge. In addition, the Company
provides ongoing employee training to franchisees and their managers, as
well as its own managers.
Various factors are considered in evaluating sites including trade
area demographics, availability and cost of space, location of competitors
and total retail sales in a given enclosed shopping area. The Company
reviews all proposed franchise store locations and reserves the right to
review the lease terms thereof.
FRANCHISE AGREEMENT
The Company attracts qualified franchise operators with a low initial
franchise fee. The franchised store purchases Company products or products
that are Company-approved. Due to the proprietary nature of most of the
Company's products, the Company is the only available source for many
products sold by franchisees. The franchise fee for the first store is
$35,000, and $30,000 for each additional store, payable in full upon
execution of a franchise agreement. Franchisees are responsible for the
costs of leasehold improvements, inventory, furniture, fixtures, decor and
certain other items including initial working capital.
Franchisees currently pay a monthly royalty to the Company of 2% of
franchise gross sales. All franchisees are further required to spend
between $2,000 and $3,000 on grand opening advertising followed by 3% of
monthly gross sales for local advertising and promotion.
The franchise agreements have an initial term of five years with an
option for the franchisee to renew for three additional, successive terms
of five years each. The agreements also provide the Company with the right
to purchase the franchisee's store assets upon termination or expiration of
the franchise agreement, and a right of first refusal if the franchise is
to be sold. The franchisee must obtain the Company's approval in all
instances where there is a sale of the franchise. The franchise agreement
is granted for the operation of a single retail store at a specified
location. The Company reserves certain rights within close proximity to
franchised retail stores to sell products through channels of distribution
distinct from that of a franchised retail business.
MANUFACTURING, ORDER FULFILLMENT AND DISTRIBUTION
The Company's manufacturing operations consist primarily of framing,
product-engraving, hot-stamping and silk screening. The Company mounts and
assembles its framed wall decor in-house and has developed a special
packaging system designed to reduce the risk of breakage in shipping.
Generally, the Company's catalog customers may choose to have their
orders sent via ground shipment, express economy (4 - 6 days), express (2 -
3 days) or next day shipment. The Company's manufacturing operations and
order fulfillment capabilities enable it to accommodate last-minute orders
for a variety of products, and to produce samples of products for existing
and potential customers. These capabilities further enable the Company to
produce and test products before inclusion in the distribution channels.
The Company depends upon outside suppliers for many items such as
mugs, stationary and components for framing, all of which are readily
available from a number of suppliers. In addition, the Company outsources
its film work and printing, although its creative staff works closely with
outside film houses and printers to assure that all work is done to the
Company's specifications and satisfaction.
SEASONALITY
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Seasonality."
COMPETITION
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. Although certain classes of products
offered by the Company such as greeting cards, mugs and books are offered
by many other companies, the Company is not aware of any other company with
established distribution channels that offers a similar range of products
with motivational and self-improvement themes.
The Company competes with other franchisors for qualified franchisees.
The Company's strategy is to attract franchisees with successful business
and management backgrounds. Franchisees are not required to have
experience in the retail industry or with the types of products offered by
the Company.
TRADEMARKS AND SERVICE MARKS
The Company owns a federal registration for the service mark
SUCCESSORIES on the Principal Register of the United States Patent and
Trademark Office ("PTO"). The Company believes the use of the service mark
SUCCESSORIES is important in establishing and maintaining its reputation
and is committed to protecting this service mark by vigorously challenging
any unauthorized use.
Although many of the quotations, photographs and other art work used
by the Company are in the public domain and are not individually
protectable under copyright and trademark laws, the Company continually
endeavors to protect its products by giving them a distinctive trade dress.
EMPLOYEES
As of February 1, 1997, the Company employed 562 persons, 316 of whom
were employed full time. Of this total, 249 were employed at corporate
headquarters in marketing, manufacturing, order fulfillment or
administrative capacities, and 313 were field personnel, store
managers or store personnel. The Company is not a party to any
collective bargaining agreements and has not experienced a strike or work
stoppage. The Company believes that its employee relations are good.
ITEM 2. PROPERTIES
The Company leases all Company stores from various property owners
under terms typical in enclosed mall, strip shopping center or hotel
leases. Lease terms vary from five to ten years for stores,
and six months to one year for kiosks. None of the Company's stores leases
are individually material to the operations of the Company, and the Company
expects that it will be able to renew its leases on satisfactory terms as
they expire.
The Company leases its executive offices and manufacturing/warehouse
space in Lombard, Illinois, under the terms of a lease agreements which
expire May 31, 1997. Its executive offices occupy 29,313 square feet and
its manufacturing/warehouse facilities occupy 92,632 square feet. In July
1996 the Company executed a lease for a new corporate headquarters and
manufacturing/warehouse facility. The lease is for approximately 30,000
square feet of office space and 100,000 square feet of
manufacturing/warehouse space located in Aurora, Illinois. The lease
commences June 1, 1997 for a 12-year term.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings against the Company.
The Company is, however, involved in routine litigation arising in the
ordinary course of its business, and, while the results of the proceedings
cannot be predicted with certainty, the Company believes that the final
outcome of such matters will not have a materially adverse effect on the
Company's consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF REGISTRANT
NAME AGE PRINCIPAL OCCUPATION FOR LAST FIVE YEARS
Arnold M. Anderson 52 Chief Executive Officer, Chairman of the Board and
Director for the Company since June 1995; prior
thereto, Chief Executive Officer, President, Chairman
of the Board and Director for the Company and its
predecessor (Primus) since October 1990; prior thereto,
Chairman and President of the Operating Subsidiaries.
James M. Beltrame 53 Chief Operating Officer and President for the Company
since June 1995, Director for the Company from March
1995, Chief Financial Officer for the Company from
March 1995 to June 1996; prior thereto, Chief Financial
Officer for RTO Enterprises since 1992; prior thereto,
Director, Executive Vice President, Chief Financial
Officer for Restaurant Associates since 1984.
M. Andrew King 39 Vice President and Chief Financial Officer from June
1996; Vice President of Administration and Treasurer
for the Company since 1995; prior thereto, Treasurer
for RTO Enterprises since 1991; prior thereto,
principal owner of Birchwood Financial Group.
Timothy C. Dillon 34 Vice President, General Counsel and Secretary for the
Company since 1993, Director for the Company since
1995; prior thereto, President of First American
Franchise Corporation since 1992; prior thereto,
attorney for Francorp, Inc.
Raymond A. Mackie 57 Vice President of Manufacturing Operations for the
Company since April 1995; prior thereto, Operations
Manager of Ivex Packaging Corporation since 1993; prior
thereto, Vice President of Operations for Hexacomb
Corporation since 1990.
Michael H. McKee 43 Senior Vice President, Creative Director and Director
for the Company and its predecessor since October 1990;
prior thereto, Creative Director of Product Development
and Advertising for the Operating Subsidiaries.
John F. Halpin 43 Senior Vice President, Direct Marketing Division for
the Company since September, 1996; prior thereto, Vice
President of Marketing for Foster & Gallagher, Inc.;
prior thereto, Director of Mail Order Promotions for
Encyclopedia Britannica.
Peter C. Walts 36 Senior Vice President of Business Development for the
Company and its predecessor since October 1990; prior
thereto, held various positions with the Operating
Subsidiaries.
Jill K. Werner 41 Vice President, Retail Division for the Company
since 1996; prior thereto, held various positions
within the Company since 1993; prior thereto,
principal owner of I. M. Petite, Inc., retail
store chain since 1982.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock trades on the NASDAQ National Market under
the symbol SCES.
The following table sets forth the high and low closing bid prices for
the Company's Common Stock as reported by the NASDAQ Stock Market for the
applicable periods shown.
BID PRICE RANGE
Fiscal Year Ended February 3, 1996 HIGH LOW
First Quarter $9.125 $6.25
Second Quarter 7.625 5.625
Third Quarter(Ended
February 3, 1996) 9.25 6.75
Fiscal Year Ended February 1, 1997
First Quarter $9.125 $7.750
Second Quarter 8.375 5.125
Third Quarter 7.625 4.875
Fourth Quarter 8.250 6.375
As of April 15, 1997, the number of holders of record of the Company's
Common Stock was approximately 602, and there were approximately 1,150
beneficial owners of the Company's Common Stock.
On December 17, 1996, the Company sold 1,212 shares of its Series B
Cumulative Convertible Preferred Stock (the "Series B Preferred Stock") to
Infinity Inventors, Ltd., a non-U.S. person ("Infinity"), and Seacrest
Capital Limited, a non-U.S. person ("Seacrest"), for $5,000,000 in cash
in a non-public transaction exempt from registration pursuant to Regulation
D under the Securities Act. Each share has a liquidation preference of $5,000
(the "Liquidation Preference") and a par value of $100 per share. The Series
B Preferred Stock shares are entitled to a dividend at a rate of 4.95% per
annum.
Each share of Series B Preferred Stock is convertible into that number
of shares of Common Stock obtained by dividing the Liquidation Preference
by the lesser of (X) $9.00 and (Y) the average of the closing bid prices
per share of Common Stock on NASDAQ for the five consecutive trading days
immediately preceding the date of determination (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
All outstanding Series B Preferred Stock shall automatically be
converted into Common Stock on December 17, 1998; provided, however, that the
conversion right of a holder of Series B Preferred Stock is limited (subject
to certain exceptions) so that in no instance shall the maximum number of
shares of Common Stock which such holder 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 such
holder; and provided, further, that 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 Series B 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 uultiplied by the Market Price.
For the year ended February 1, 1997, none of the shares of the Series B
Preferred Stock had been converted into common stock of the Company.
On March 31, 1997, subsequent to the year ended February 1, 1997, the
Company paid a cash dividend on preferred stock in the amount of $86,293.
ITEM 6. SELECTED FINANCIAL DATA
The following is selected financial data for the Company and its
subsidiaries for the three years ended April 30, 1995, the nine-month stub
period ended February 3, 1996 and the year ended February 1, 1997. For
discussion purposes, management refers to the stub period of May 1, 1995
through February 3, 1996 as the nine months ended February 3, 1996. Per
share amounts have been adjusted to reflect a 3 for 2 stock split paid
April 12, 1994.
Nine Months
Ended Year Ended
YEARS ENDED APRIL 30 FEBRUARY 3, FEBRUARY 1,
1993 1994 1995 1996 1997
(In thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
Net product sales . $12,478 $28,594 $42,809 $35,484 $56,032
Income (loss) before income taxes
and cumulative effect of change
in accounting principle . . 1,605 3,619 (7,745) (688) (2,347)
Income tax expense (benefit) 580 1,405 -- (1,388) (2,609)
Income (loss) before cumulative effect
of change in accounting
principle . . . . . . . . . . 1,025 2,214 (7,745) 700 262
Cumulative effect of change in accounting
principle for income taxes . . 580 -- -- -- --
Net income (loss) . . . . . . . $1,605 $2,214 ($7,745) 700 $ 262
Earning (loss) per common and
common share equivalent . . . $0.47 $0.50 ($1.60) $0.13 ($.16)
Weighted average number of common
shares and equivalents
outstanding 3,419,000 4,393,000 4,854,000 5,467,000 5,321,000
BALANCE SHEET DATA:
Total assets . . . 7,056 21,790 29,166 32,166 32,680
Long-term debt . . 618 218 8,275 8,528 4,094
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Consolidated Financial Statements and
Notes thereto included elsewhere in this Report.
The Company is a direct mail catalog company, specialty retailer and
wholesaler that designs, assembles and markets a diverse range of
motivational and self-improvement products, many of which are the Company's
own proprietary designs. Its products include distinctive lines of wall
decor, desktop art, books, audio tapes, personalized gifts and awards,
greeting cards and mugs. In addition, the Company sells books, other
motivational products supplied by third parties. In-house designers
create proprietary art work and designs that can be used in conjunction with
a wide variety of products. Company personnel also customize products to
fulfill customers' special need.
The majority of the Company's sales are derived from proprietary products
that have been internally developed, designed, or customized. All products
are designed to have a positive motivational or self-improvement theme which
can be used to reinforce basic business goals such as customer service,
attitude and teamwork, or to recognize achievement and good performance, or
as customer gifts. The Company's products also appeal to individuals for
both personal and professional motivation, and for gifts. They are also
purchased by organized sports teams and individual athletes for
motivational or inspirational purposes.
The Company has a wide range of customers, including corporate buyers
(executives, sales managers, human resource managers, and production
managers of larger corporations), entrepreneurial buyers (small business
owners, home office businesses, and sales professionals), as well as
individual consumers, schools and athletic organizations. The Company's
products are marketed primarily under its SUCCESSORIES and WINNERS
collection trade names through direct marketing (both catalog and
telemarketing), retail sales (both franchise and Company-owned stores), and
wholesale distribution.
Although the Company utilizes multiple distribution channels for its
products, the Company's products have similar purposes and uses in each
channel of distribution and similar opportunities for growth. The
profitability varies among products and distribution channels. The Company
utilizes its facilities interchangeably for each distribution channel.
Furthermore, the marketing channels are directed at a single customer base
located primarily in the United States.
For the twelve months ended February 1, 1997, the nine months ended
February 3, 1996, and the twelve months ended April 30, 1995, retail sales,
direct mail sales and wholesale distribution sales accounted for the
following percentages of the Company's net product sales:
For the 12 Months For the 12 Months For the 9 Months For the 12 Months
Ended Ended Ended Ended
FEBRUARY 1, 1997 FEBRUARY 3, 1996 FEBRUARY 3, 1996 APRIL 30, 1995
Retail 34% 36% 35% 31%
Direct Mail 49% 46% 46% 49%
Wholesale
Distribution* 17% 18% 19% 20%
__________________________________
*Includes sales to franchisees.
The gross profit margins for retail sales attributable to Company-owned
stores is slightly lower than direct marketing sales due to more
non-proprietary products being sold in retail. The gross profit margin for
wholesale sales and sales to franchisees is lower, since these sales are
made primarily at a significant discount from retail price.
During the fiscal year ended April 30, 1994, the Company repurchased
franchise development territories from a number of franchisees. At the
inception of the Company's franchise program, the Successories retail store
concept was in the initial stages and the Company had not fully developed
its plans for the expansion of its retail system. The Company initially
sold franchise development territories to individual franchisees, granting
each franchisee the right to develop multiple retail locations in a cluster
within the defined territory. As this program progressed, however, the
existing franchisees were either unwilling or unable to develop an
acceptable number of retail locations within their respective territories in
the time frame required to take maximum advantage of the opportunity.
As a result, the Company initiated a program to repurchase the existing
franchise development territories that were perceived as being
underdeveloped, and implemented an ongoing strategy to offer franchises
predominantly in areas that would not support the development of multiple
retail locations. During fiscal 1995, the Company completed the repurchase
of those major metropolitan areas that were perceived as being
underdeveloped, including Atlanta, Georgia; Los Angeles, California; and
Denver, Colorado. The Company's franchise agreements do not require the
Company to purchase the franchise and the Company does not expect a
continuing pattern of such repurchases in the future. The Company believes
that the areas subject to franchise development territory agreements that
remain in effect are being adequately developed so as not to require any
immediate additional repurchase efforts.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentage of net product sales and the percentage change versus the prior
period for each line item presented, as taken from the Company's
Consolidated Statements of Operations. The reader should note that the
twelve months ended February 1, 1997 are being compared to the unaudited
results for the 12 months ended February 3, 1996. Furthermore, the results
for the nine months ended February 3, 1996 are compared to unaudited results
for nine months ended January 31, 1995 (dollars in thousands).
12 MONTHS ENDED 1997 VS 1996
FEBRUARY 1, 1997 FEBRUARY 3, 1996 INCREASE(DECREASE)
AMOUNT % AMOUNT % AMOUNT %
Net product sales $56,032 100.0 $46,145 100.0 $ 9,887 21.4
Cost of goods sold 23,557 42.0 19,864 43.0 3,693 18.6
Gross profit 32,475 58.0 26,281 57.0 6,194 23.6
Fees, royalties
& other 1,280 2.2 938 2.0 342 36.5
Gross margin 33,755 60.2 27,219 59.0 6,536 24.0
Operating expenses,
excluding special
charges 31,751 56.7 32,513 70.5 762 2.3
Income (loss) from
operations before
special charges 2,004 3.5 (5,294) (11.5) 7,298 137.9
Special charges 2,701 4.8 0 0.0 2,701 N/A
Loss from operations(697) (1.3) (5,294) (11.5) 4,597 86.8
Other income
(expenses) (1,650) (2.9) (1,283) (2.8) 367 28.6
Loss before taxes (2,347) (4.2) (6,577) (14.3) 4,230 64.3
Income tax benefit(2,609) (4.7) (1,388) (3.1) 1,221 N/A
Net Income (loss) $262 0.5 ($5,189) (11.2) $5,451 105.0
9 MONTHS ENDED 1996 VS. 1995
FEBRUARY 3, 1996 JANUARY 31, 1995 INCREASE(DECREASE)
AMOUNT % AMOUNT % AMOUNT %
Net product sales $35,484 100.0 $32,147 100.0 $ 3,337 10.4
Cost of goods sold 13,310 37.5 14,193 44.2 (883) (6.2)
Gross profit 22,174 62.5 17,954 55.8 4,220 23.5
Fees, royalties
& other 741 2.1 1,143 3.6 (402) (35.2)
Gross margin 22,915 64.6 19,097 59.4 3,818 20.0
Operating expenses,
excluding special
charges 22,724 64.0 20.478 63.7 2,246 11.0
Income (loss) from
operations before
special charges 191 0.6 (1,381) (4.3) 1,572 113.8
Special charges 0 0.0 0 0.0 0 0.0
Income (Loss) from
operations 191 0.6 (1,381) (4.3) 1,572 113.8
Other income
(expenses) (879) (2.5) (475) (1.5) 404 85.1
Income before taxes (688) (1.9) (1,856) (5.8) 1,168 62.9
Income tax benefit (1,388) (3.9) 0 0.0 1,388 N/A
Net Income (loss) $700 2.0 ($1,856) (5.8) $2,556 137.7
TWELVE MONTHS ENDED FEBRUARY 1, 1997 COMPARED TO TWELVE MONTHS ENDED
FEBRUARY 3, 1996
Net product sales for the twelve months ended February 1, 1997
increased 21.4% to $56,032,000 compared to $46,145,000 for the twelve
months ended February 3, 1996. Of the $9,887,000 net product sales
increase, approximately 23% of the increase is attributable to retail sales
and 64% of the increase is attributable to increased direct marketing
sales. Same store sales showed strong improvement with an increase of
$1,345,000 or 9.3% for the twelve months ended February 1, 1997, when
compared to the same period in the prior year. As of February 1, 1997, the
Company owned and operated 49 retail locations, compared to 54 locations as
of February 3, 1996. Franchise locations increased to 47 locations from 43
at February 3, 1996. The number of Direct Mail pieces during the twelve
months ended February 1, 1997, decreased to approximately 11.7 million from
13.8 million pieces mailed for the same period in the prior year.
Cost of sales as a percentage of net sales was 42% for the twelve
months ended February 1, 1997, compared to 43% for the same twelve-month
period ended in the prior year. This improvement is primarily the result
of continuing improvements in labor and overhead and streamlining the
Company's order fulfillment system.
Operating expenses excluding special charges declined as a percentage
of net sales to 56.7% for the twelve months ended February 1, 1997,
compared to 70.5% for the same twelve-month period in the prior year. The
reduction in operating expenses as a percentage of net sales is primarily a
result of improved management practices and cost containment efforts,
coupled with increased sales.
The Company recorded a special charge of $2,701,000 for the twelve
months ended February 1, 1997 which is comprised primarily of: a) reserve
for certain costs associated with the Company's relocation and
consolidation of its manufacturing and distribution facilities and its
business offices into a new facility in Aurora, Illinois; b) reserve for
costs associated with a plan to close up to five Company-owned stores that are
not performing profitably; and, c) write-down of the existing order entry
computer system in anticipation of replacing it during the upcoming fiscal
year.
Interest expense increased from $1,154,000 for the twelve months ended
February 3, 1996, to $1,491,000 for the twelve months ended February 1,
1997, an increase of $337,000 as a result of additional borrowings.
For the twelve months ended February 3, 1996 and February 1, 1997, the
Company has recorded a net tax benefit of $1,388,000 and $2,609,000,
respectively, which relates mainly to the recognition of a portion of
the net deferred tax asset which was generated as a result of net operating
losses incurred in prior periods, as well as the benefit associated with
the loss before taxes in the current period.
At February 1, 1997, net deferred tax assets were $5,375,000 after a
valuation allowance of zero. The Company believes it is more likely than
not that $5,375,000 of the available NOL carryforwards will be utilized
prior to their expiration.
To the extent that the NOL carryforwards and existing deductible
temporary differences are not offset by existing taxable temporary
differences reversing within the carryforward period, approximately
$13,500,000 of the remaining net operating loss carryforwards is expected
to be realized by achieving future profitable operations, based on the
following:
1. Significantly improved operating earnings during the prior fiscal
year, excluding the impact of certain one-time special charges.
Continued improvement is anticipated in future years.
2. Significant cost containment efforts continued to intensify in
the prior fiscal year and included head count reductions,
improved inventory management, reduced capital expenditures and
hiring freezes for most of the year and enhanced control over
catalog-related expenses.
3. Future cost containment efforts will continue into the next
fiscal year and include closing under-performing stores, scaling
back or eliminating certain under-performing catalogs, reducing
the number of prospecting catalogs to be sent, and the
relocating and consolidating of the Company's corporate,
manufacturing and distribution facilities.
The NOLs do not begin to expire until the year 2005.
As indicated above, realization of the recorded net tax benefit of
$5,375,000 is dependent upon generating sufficient taxable income prior to
expiration of the NOL carryforwards. Although realization is not assured,
the Company believes that it is more likely than not that the recorded
benefit will be realized. However, the amount of such realization could be
either increased or reduced in the near term if estimates of future taxable
income during the carryforward period are changed.
The Company reported a net income of $262,000 for the twelve months
ended February 1, 1997 compared to a net loss of $5,189,000 for the twelve
months ended February 3, 1996.
NINE MONTHS ENDED FEBRUARY 3, 1996 COMPARED TO NINE MONTHS ENDED
JANUARY 31, 1995
Net product sales for the nine months ended February 3, 1996 increased
10.4% to $35,484,000 compared to $32,147,000 for the nine months ended
January 31, 1995. Of the $3,337,000 net product sales increase,
approximately 30% of the increase is attributable to retail sales and 58%
of the increase is attributable to increased direct marketing sales. Same
store sales were basically flat with a modest increase of $35,000 or 0.4%
for the nine months ended February 3, 1996, when compared to the same time
period in the prior year. As of February 3, 1996, the Company operated 54
retail locations compared to 50 locations as of January 31, 1995.
Franchise locations decreased to 43 locations from 46 at January 31, 1995.
The number of Direct Mail pieces during the nine months ended February 3,
1996, increased to approximately 10.3 million from 9.8 million pieces
mailed for the same period in the prior year.
Cost of sales as a percentage of net sales was 37.5% for the nine
months ended February 3, 1996, compared to 44.2% for the same nine-month
period ended in the prior year. The decrease in the cost of goods sold
percentage from 1996 to the prior year is primarily the result of
improvements in labor and overhead, as well as streamlining that has
occurred in the Company's order fulfillment system.
Operating expenses were basically flat as a percentage of net sales at
64.0% for the nine months ended February 3, 1996, compared to 63.7% for the
same nine-month period in the prior year. The improvements made in the
nine months ended February 3, 1996, due to cost reduction programs
implemented by the new management team, are somewhat masked due to one-time
costs associated with significant organizational changes (i.e., severance,
etc.).
Interest expense increased from $334,000 for the nine months ended
January 31, 1995 to $866,000 for the nine months ended February 3, 1996, an
increase of $532,000. This increase reflects additional borrowings over the
prior period , as well as $120,000 of fees paid in association with the
amendments to the existing term loan.
Income tax expense for the nine months ended January 31, 1995, was
zero as the Company had incurred a net loss. For the nine months ended
February 3, 1996, the Company has recorded a net tax benefit of $1,388,000
which relates to the recognition of a portion of the net deferred tax asset
which was generated as a result of net operating losses incurred in prior
periods.
At April 30, 1995, the Company had determined, based upon evidence
then available, that a valuation allowance of $3,897,000 was required
against net deferred tax assets at that date due to the uncertainty as to
whether the benefits of net operating loss (NOL) carryforwards would be
realized. At that date, such valuation allowance reduced net deferred tax
assets to zero. At February 3, 1996, net deferred assets were $1,600,000
after a valuation allowance of $2,635,000. The Company believes that it is
more likely than not that $1,600,000 of the available NOL carryforwards
will be utilized prior to their expiration.
To the extent that the NOL carryforwards and existing deductible
temporary differences are not offset by existing taxable temporary
differences reversing within the carryforward period, $1,600,000 of the
remaining net operating loss carryforwards is expected to be realized by
achieving future profitable operations based on the following:
1. During the period May 1, 1995 through February 3, 1996, the
Company launched a turnaround strategy to improve performance by
implementing a cost reduction program and enhancing asset
utilization. Specifically, this strategy included: (a) a
corporate office restructuring that resulted in head count
reductions; (b) efforts to increase recipients of the Company
catalog; (c) implementation of more sophisticated systems to
better track marketing efforts and enhance inventory management;
(d) utilization of outside consultants to assist in the
development of a more efficient process flow; and, (e)
implementation of improved budgeting, forecasting and performance
monitoring techniques.
2. The improved budgetary, forecasting and performance monitoring
techniques have permitted the Company to more accurately project
future results of operations and to better understand the
sensitivity of various factors of both revenues and costs.
3. While pre-tax operations for the period ended February 3, 1996
resulted in a pre-tax loss of $688,000, the Company believes that
operations for the period would have been profitable had they not
been adversely affected by the neccessary implementation of the
strategy described above which resulted in significant non-recurring
charges. These improved results for the period ended February 3,
1996 compare with a net loss of $7,745,000 for the year ended
April 30, 1995.
The NOLs do not begin to expire until the year 2005.
As indicated above, realization of the recorded net tax benefit of
$1,600,000 is dependent on generating sufficient taxable income prior to
expiration of the NOL carryforwards. Although realization is not assured,
the Company believes that it is more likely than not that the recorded
benefit will be realized. However, the amount of such realization could be
either increased or reduced in the near term if estimates of future taxable
income during the carryforward period are changed.
The Company reported a net income of $700,000 for the nine months
ended February 3, 1996 compared to a net loss of $1,856,000 for the nine
months ended January 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Net cash of $2,283,000 was used in the Company's operating activities
for the twelve months ended February 1, 1997, compared to $74,000 for
fiscal 1996 and $5,170,000 in fiscal 1995. The increase in cash used
during the most recent period, when compared to the prior period, is
primarily the result of the reducing accounts payable by $4.3 million from
$6.6 million at February 3, 1996 down to $2.3 million at February 1, 1997.
During fiscal years 1994 and 1995, the Company provided financing
arrangements to certain of its franchisees. As of February 1, 1997,
$72,000 was due from franchisees in the form of notes receivable, compared
to $252,000 due at February 3, 1996. The Company has no plans to provide
financing to any of its franchisees in the future.
The Company's allowance for doubtful accounts and sales returns
decreased from $719,000 as of April 30, 1995 to $500,000 as of February 3,
1996. The allowance remained basically flat at $506,000 as of February 1,
1997. The decrease from 1995 to February 3, 1996 reflects improved
processes implemented by the Company's financial management, which has
resulted in fewer accounts that involve credit risk. Furthermore, the
Company has implemented new collection procedures that have reduced the
overall aging (past due status) of accounts receivable.
For the year ended February 1, 1997, net cash used in investing
activities was $1,125,000 compared to $1,679,000 for the nine months ended
February 3, 1996 and $6,036,000 in fiscal 1995. The capital expenditures
for the twelve months ended February 1, 1997 were primarily for new retail
stores, as well as for manufacturing and data processing equipment and
systems. Also in the current fiscal year, the Company purchased the stock
of British Links Golf Classics, Inc. for $1,260,000 which is comprised of a
combination of cash, Successories stock and promissory notes. (See Note 3
in the Notes to Consolidated Financial Statements.) The Company expects
moderate expansion of its retail stores during the coming fiscal year.
Net cash provided by financing activities during the twelve months
ended February 1, 1997, was $2,178,000, compared to $1,805,000 for the nine
months ended February 3, 1996 and $11,478,000 in fiscal 1995. At February
1, 1997, options for 982,000 shares were outstanding, of which 469,000 were
exercisable. These options were issued at exercise prices equal to the
fair market value of the underlying common stock at the date of grant. A
portion of such options are below current market value and a portion of
such options are above current market value.
During the twelve months ended February 1, 1997, the Company issued
Series A and B preferred stock. Net proceeds were $6,382,000 and were used
to pay down existing debt and accounts payable. (See Note 15 in the Notes
to Consolidated Financial Statements)
On January 12, 1995, the Company sold 150,000 shares of common stock
for $13.2825 per share, or an aggregate of $1,992,375 in an off-shore
transaction to a non-U.S. person pursuant to Regulation S under the
Securities Act. Regulation S is a safe harbor exemption from registration
under the Securities Act for sales of securities that occur outside the
U.S. The proceeds of the sale were used for working capital to fund
product inventories for the holiday season.
On October 25, 1994, the Company entered into a credit facility with
its bank. The facility was comprised of two revolving lines of credit: a
$7,500,000 Fixed Asset Revolving Loan (the Fixed Asset Loan), and a
$7,500,000 Revolving Credit Loan (the Working Capital Loan). Both
facilities were unsecured.
The Fixed Asset Loan was to expire on October 25, 1996, at which time
it was to convert to a fully amortizing three-year term loan. At the
option of the Company, the Fixed Asset Loan bore interest at LIBOR reserve
adjusted rate ("LIBOR") plus 1.75%, or the prime rate plus 0.25%. The
purpose of the Fixed Asset Loan was to fund the purchase of leasehold
improvements related to the opening of additional retail locations.
The Working Capital Loan was to expire on October 25, 1996. At the
option of the Company, the Working Capital Loan bore interest at LIBOR plus
1.50%, or the prime rate. The purpose of the Working Capital Loan was to
fund general working capital requirements.
Under its credit facility, the Company was required to maintain
certain financial ratios and levels of net worth and, among other things,
future indebtedness, dividends and capital expenditures were restricted.
As of April 30, 1995, the Company was in default of several covenants
contained in its credit facility. As a result, on May 31, 1995, the
Company and its bank executed an Agreement ("the Forbearance Agreement")
which revised the covenants set forth in the original credit facility and
which restricted advances on the Company's Working Capital Loan to
$500,000. The Forbearance Agreement expired on July 31, 1995, and was
replaced by an Amended and Restated Credit Agreement ("the Credit
Agreement").
The Credit Agreement was comprised of a $10.0 million Term Loan ("the
Term Loan") and a $3.0 million Revolving Loan ("the Revolving Loan"). Both
facilities are secured by all assets of the Company. As of July 31, 1995,
amounts due to the bank under the original Loan Agreement were converted to
the Term Loan.
On September 25, 1995, an amendment ("the Amendment") was made to the
Credit Agreement that lowered the borrowing base associated with the
Revolving Loan. The Amendment: (1) reduced the borrowing base for
inventory to $6.0 million from $7.0 million; (2) reduced the borrowing base
for Accounts Receivable from $1.55 million to $1.0 million; and (3) fixed
the predetermined borrowing limit at $2.0 million.
In November 1995, the Company negotiated a total amount of additional
financing of $1.5 million. This amount was raised, in various
installments, principally from management (Mac Anderson and James
M. Beltrame), significant shareholders, and various members of the Board of
Directors. The total principal amount carried an annual interest rate of
10% and matured November 1, 1996. The $1.5 million of principal also
contained warrants to purchase 120,000 shares of common stock at a price of
$4.725. The warrants were granted to each lender on a specified pro rata
basis. The Company extended the maturity date for $1,250,000 of the
original amount financed through November 11, 1997. The annual interest
rate for the extended financing remains at 10%. The Company granted
125,000 options on a pro rata basis to each lender participating in the
extended financing.
The Company reduced the Term Loan by $1 million as of January 31,
1996, as required by the Credit Agreement. The remaining $9 million
matured May 1, 1996. The Term Loan bears interest at the prime rate plus
1.0%.
The Revolving Loan expired on January 1, 1996.
On February 7, 1996, an amendment (the "Second Amendment") was made to
the Credit Agreement to reestablish the Revolving Loan which had expired on
January 1, 1996. The Revolving Loan allowed the Company to borrow up to
$2.5 million, subject to certain borrowing base restrictions. Mr. Anderson
and Mr. Beltrame severally guaranteed one million dollars of the Revolving
Loan.
On May 1, 1996, an amendment (the "Third Amendment") was made to the
Credit Agreement to extend the maturity date of both the Revolving Loan and
Term Loan to May 1, 1997. The Agreement to extend the Term Loan maturity
date includes a provision requiring a monthly principal payment of $75,000
effective June 1, 1996.
On December 16, 1996, the Credit Agreement (the "Fourth Amendment")
was amended to change the borrowing limitations under the Revolving Loan to
20% of Eligible Retail Inventory with all other borrowing base calculations
remaining unchanged. The amendment also ratified the Company's acquisition
of British Links Golf Classics, Inc.
On December 17, 1996, the Credit Agreement was further amended (the
"Fifth Amendment") to reflect the payment by the Company of $4,000,000 on
the $8,475,000 Term Loan and the bank's agreement to increase the Company's
Revolving Loan to a maximum of $4,000,000. The interest rate for both
credit facilities was set at the Prime Rate in effect from time to time
plus one percent. The maturity date for the Term Loan and Revolving Loan
were extended to May 1, 1998. The amendment also requires the Company to
remit monthly principal and interest payments on the Term Loan in the
amount of $94,808.
On January 30, 1997, the Credit Agreement was further amended (the
"Sixth Amendment") to allow for the execution of a standby letter of credit
by the Company which was previously restricted by the terms of the Credit
Agreement. The ability to issue a standby letter of credit was required by
the Company in order to provide adequate security in connection with the
Company's construction and lease of a new corporate headquarters and
manufacturing facility.
The Company believes that internally-generated funds and the credit
facilities will be sufficient to meet its current operating needs and to
fund anticipated capital expenditures in fiscal year ending January 31,
1998.
The funding for the relocation to the new facility as well as related
leasehold improvements of approximately $2,000,000 and the purchase of a
new computer system will be obtained by using the available $4,000,000 on
the Revolving Loan and any remainder will be obtained through operating
income of the Company.
SEASONALITY
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 operating 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. The
Company's cash requirements generally reach a seasonal peak in October to
finance increased inventory levels needed to meet third and fourth quarter
sales demand.
INFLATION
The Company does not believe that inflation has had a material impact
on its operations.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-K and the documents incorporated by reference herein contain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Such forward-looking statements
may be deemed to include, among other things, statements relating to
anticipated financial performance, management's long-term performance goals,
programs to reduce the Company's costs and enhance asset utilization, the
potential realization of benefits from net operating loss carryforwards prior
to their expiration, the Company's generation of funds sufficient to meet its
current operating needs and to fund anticipated capital expenditures, as well
as statements relating to the Company's operational and growth strategies.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance
that such expectations will prove to be accurate, and actual results could
differ materially from those addressed in forward-looking statements
contained in this From 10-K or in any document incorporated by reference
herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Index to Financial Statement Schedules on page F-1. Such
Financial Statements and Schedules are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
Information regarding the above will be included under the caption,
"Election of Directors," in the Company's definitive proxy statement for
its 1997 annual meeting of stockholders, which will be filed with the
Securities and Exchange Commission within 120 days after February 1, 1997,
and is incorporated herein by reference. Information regarding executive
officers of the Company is included under a separate caption in Part I
hereof, and is incorporated herein by reference, in accordance with General
Instruction G(3) to Form 10-K, and Instruction 3, Item 401(b) of Regulation
S-K.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding the above will be included under the caption,
"Compensation and Other Transactions with Management," in the Company's
definitive proxy statement for its 1997 annual meeting of stockholders,
which will be filed with the Securities and Exchange Commission within 120
days after February 1, 1997, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding the above will be included under the caption,
"Security Ownership," in the Company's definitive proxy statement for its
1997 annual meeting of stockholders, which will be filed with the
Securities and Exchange Commission within 120 days after February 1, 1997,
and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding the above will be included under the caption,
"Compensation and Other Transactions with Management," in the Company's
definitive proxy statement for its 1997 annual meeting of stockholders,
which will be filed with the Securities and Exchange Commission within 120
days after February 1, 1997, and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. See Index to Financial Statements
2. Financial Statement Schedules are incorporated herein by
reference. Such Financial Statements and Schedules are
incorporated herein by reference.
3. See Index to Exhibits immediately following the signature
page.
(b) There were no reports on Form 8-K filed during the quarter ended
February 1, 1997.
(c) See Index to Exhibits immediately following the signature page.
(d) See Index to Financial Statements and Financial Schedules on page
F-1.
ITEM 14(A). INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
PAGE
(1) Financial Statements:
Report of Independent Accountants....................F-2 & F-3
Consolidated Balance Sheets................................F-4
Consolidated Statements of Operations......................F-5
Consolidated Statements of Changes in Shareholders' Equity.F-6
Consolidated Statements of Cash Flows......................F-7
Notes to Consolidated Financial Statements.................F-8
(2) Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
All other schedules called for under Regulation S-X are not submitted
because they are not applicable, or not required, or because the required
information is not material or is included in the financial statements or
notes thereto.
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and the Stockholders of
Successories, Inc.
We have audited the accompanying consolidated balance sheet of
Successories, Inc. (an Illinois corporation) and subsidiaries as of
February 1, 1997, and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for the year then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Successories, Inc. and subsidiaries as of February 1, 1997, and the results
of its operations and its cash flows for the year then ended in conformity
with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule on Page
S-1 is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 18, 1997
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and the Stockholders
of Successories, Inc.
In our opinion, the accompanying consolidated balance sheet at February 3,
1996 and the related consolidated statements of operations, of cash flows
and of changes in stockholders' equity for the period May 1, 1995 through
February 3, 1996 and for the year ended April 30, 1995 of Successories,
Inc. present fairly, in all material respects, the financial position,
results of operations and cash flows of Successors, Inc. and its
subsidiaries as of February 3, 1996 and for the period May 1, 1995 through
February 3, 1996 and for the year ended April 30, 1995, in conformity with
generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above. We have not audited the
consolidated financial statements of Successories, Inc. for any period
subsequent to February 3, 1996.
PRICE WATERHOUSE LLP
Chicago, Illinois
April 26, 1996, except as to the
pro forma information for the period
May 1, 1995 through February 3, 1996
presented in Note 10, the date of
which is April 18, 1997
SUCCESSORIES, INC.
CONSOLIDATED BALANCE SHEETS
February 1, February 3,
ASSETS 1997 1996
Current assets:
Cash $ -0- $ 1,230,000
Accounts and notes receivable, net 4,157,000 3,296,000
Inventories, net 8,970,000 9,088,000
Prepaid catalog expenses 2,006,000 3,725,000
Other prepaid expenses 1,180,000 1,067,000
Total current assets 16,313,000 18,406,000
Property and equipment, net of accumulated
depreciation and amortization 8,000,000 10,615,000
Notes receivable, net 301,000 471,000
Deposits 378,000 173,000
Deferred income taxes 5,375,000 1,600,000
Intangible and other assets net of accumulated
amortization of $1,065,000 and $925,000 2,313,000 901,000
Total assets $32,680,000 $32,166,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $2,215,000 $ 1,882,000
Accounts payable 2,318,000 6,652,000
Reserve for stores to be closed 420,000 --
Reserve for relocation-related expenses 497,000 --
Other accrued expenses 747,000 1,487,000
Total current liabilities 6,197,000 10,021,000
Long-term debt 4,094,000 8,528,000
Total liabilities 10,291,000 18,549,000
Minority interests in consolidated
subsidiaries 509,000 583,000
Commitments and contingencies
Mandatorily redeemable Series B
Preferred stock - 5,472,000 --
$100 par value, 1212 shares authorized and outstanding
Stockholders' equity:
Common stock $.01 par - 20,000,000
shares authorized; 5,703,000 and
5,208,000 shares issued and
outstanding, respectively 57,000 52,000
Common stock warrants 370,000 370,000
Additional paid-in capital 20,362,000 16,301,000
Accumulated deficit (4,345,000) (3,481,000)
Foreign currency translation adjustment (36,000) (208,000)
Total stockholders' equity 16,408,000 13,034,000
Total liabilities and stockholders' equity $32,680,000 $32,166,000
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
SUCCESSORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Period May 1, 1995
Year Ended through Year Ended
FEBRUARY 1,1997 FEBRUARY 3, 1996 APRIL 30, 1995
Net product sales $56,032,000 $35,484,000 $42,809,000
Cost of goods sold 23,557,000 13,310,000 20,748,000
Gross profit on product 32,475,000 22,174,000 22,061,000
Fees, royalties and
other income 1,280,000 741,000 1,340,000
Gross margin 33,755,000 22,915,000 23,401,000
Operating expenses,
excluding special charges 31,751,000 22,724,000 30,267,000
Special Charges 2,701,000 - -
Income(loss) from
operations (697,000) 191,000 (6,866,000)
Other income (expense):
Minority interests in
subsidiaries (184,000) (100,000) (181,000)
Interest Income 19,000 48,000 49,000
Interest expense (1,491,000) (866,000) (622,000)
Other 6,000 39,000 (125,000)
Total other expense (1,650,000) (879,000) (879,000)
Loss before income
taxes (2,347,000) (688,000) (7,745,000)
Income tax benefit (2,609,000) (1,388,000) -
Net income(loss) $ 262,000 $ 700,000 ($7,745,000)
Earnings (loss) per common and
common equivalent share ($ .16) $ .13 ($ 1.60)
The accompanying notes to consolidated financial statements
are an integral part of these statements.
SUCCESSORIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Foreign
Additional Currency Total
COMMON STOCK Paid-In Accumulated Translation Stockholders'
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT WARRANTS EQUITY
Balance at
April 30,
1994 4,735,000 $48,000 $12,859,000 $3,564,000 ($28,000) $16,443,000
Net loss (7,745,000) (7,745,000)
Foreign currency
translation
adjustment (29,000) (29,000)
Common stock transactions:
Sales of
common
shares 158,000 1,000 2,033,000 2,034,000
Exercise of
stock
options 224,000 2,000 919,000 921,000
Balance at
April 30,
1995 5,117,000 51,000 15,811,000 (4,181,000) (57,000) $11,624,000
Net income 700,000 700,000
Foreign currency
translation
adjustment (151,000) (151,000)
Issuance of warrants $378,000 378,000
Common stock transactions:
Sales of common
shares 79,000 1,000 433,000 434,000
Exercise of stock
options and
warrants 12,000 - 57,000 (8,000) 50,000
Balance at
February 3,
1996 5,208,000 52,000 16,301,000 (3,481,000) (208,000) 370,000 13,034,000
Net Income 262,000 262,000
Foreign
currency translation
adjustment 172,000 172,000
Preferred stock transactions:
Preferred stock
dividends (33,000) (33,000)
Accretion of
Preferred stock
discount (1,093,000) (1,093,000)
Common stock
transactions:
British Links
acquisi-
tion 91,000 1,000 499,000 500,000
Sales of common
shares 65,000 1,000 313,000 314,000
Conversion of Series A
pref-
erred
shares 301,000 3,000 1,997,000 2,000,000
Tax benefit of stock
options exercised 1,050,000 1,050,000
Exercise of
stock
options 38,000 0 202,000 202,000
Balance at
February 1,
1997 5,703,000 $57,000 $20,362,000 ($4,345,000)($36,000)$370,000$16,408,000
The accompanying notes to consolidated financial statements
are an integral part of these statements.
SUCCESSORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period May 1, 1995
Year Ended through Year Ended
FEBRUARY 1, 1997 FEBRUARY 3,1996 APRIL 30, 1995
Cash flows provided by
(used in) operating activities:
Net income (loss) $ 262,000 $ 700,000 ($7,745,000)
Adjustments to reconcile
net income (loss) to
net cash used in operating
activities net of effects of
purchase transaction:
Depreciation & amortization
expense 3,527,000 1,388,000 1,471,000
Deferred income taxes (2,656,000) (1,600,000) --
1,133,000 488,000 (6,274,000)
Changes in operating assets and
liabilities:
Accounts and notes receivable (853,000) 485,000 239,000
Inventories 428,000 (735,000) (1,633,000)
Prepaid catalog expense 1,844,000 (1,166,000) (314,000)
Other prepaid expenses (113,000) 420,000 (732,000)
Accounts payable (4,617,000) 380,000 3,166,000
Reserve for stores to be closed 420,000 -- --
Reserve for relocation-related
expenses 497,000 -- --
Accrued expenses 689,000 271,000 366,000
Other (1,711,000) (217,000) 11,000
Net cash used in operating
activities (2,283,000) (74,000) (5,170.000)
Cash flows from investing activities:
Net cash paid in acquisitions (360,000) - (126,000)
Purchase of property and equipment (765,000) (1,679,000) (5,910,000)
Net cash used in investing
activities (1,125,000) (1,679,000) (6,036,000)
Cash flows from financing activities:
Proceeds from issuing
common stock, net 314,000 434,000 2,034,000
Proceeds from issuing Series A and B
preferred stock, net 6,382,000 -- --
Proceeds from exercise of stock
options and warrants 202,000 57,000 922,000
Preferred stock dividends (11,000) -- --
Proceeds from debt borrowings 2,500,000 4,551,000 14,972,000
Repayments of debt (7,209,000) (3,237,000) (6,450,000)
Net cash provided by financing
activities 2,178,000 1,805,000 11,478,000
Net increase (decrease) in cash (1,230,000) 52,000 272,000
Cash at beginning of period 1,230,000 1,178,000 906,000
Cash at end of period $ 0 $1,230,000 $1,178,000
The accompanying notes to consolidated financial statements
are an integral part of these statements.
SUCCESSORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE BUSINESS:
Successories, Inc. (formerly Celex Group, Inc.), a holding company, and
its subsidiaries, Celebrating Excellence Inc., Celebrating Excellence of
Illinois, Inc., Celex Successories, Inc., Successories DFW Joint Venture,
Successories Minnesota Joint Venture and Successories of Illinois, Inc.,
(collectively, the "Company") is in the business of creating and marketing
proprietary and purchased products for personal and business motivation.
The Company considers itself a single line of business with products that
are marketed primarily under its SUCCESSORIES, WINNERS collection and
BRITISH LINKS trade names through direct marketing (both catalog and
telemarketing), retail sales (both franchise and Company-owned stores), and
wholesale distribution. The Company operates a chain of Successories
retail stores located primarily throughout the United States. A portion of
the Company's sales are made through the extension of credit. Accounts
receivable from credit sales are generally unsecured.
The Company also operates a franchising program whereby it sells franchises
to market the Celebrating Excellence line of products under the
Successories trademark. Notes receivable from franchisees, when accepted,
are secured by the personal guarantee of the franchisee as well as by the
assets of the franchise store.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CHANGE IN REPORTING PERIODS AND YEAR END
Effective May 1, 1995, the Company changed its reporting period to a 4-5-4
week format. In addition, the Company changed its year end from April 30 to
the Saturday closest to January 31 (i.e., February 1, 1997 and February 3,
1996). The change was made to conform with retail industry reporting
practices.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of all
subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation. The financial results of franchise
operations have not been reflected in the Company's financial statements.
REVENUE RECOGNITION
Net revenues include retail, direct mail and wholesale activities.
Retail sales include sales at Company-owned stores, net of returns and
allowances. Wholesale and direct mail revenues, as well as product
sales to franchisees, are generally recognized at the time orders are
shipped.
The Company recognizes initial franchise fee revenue when all material
services or conditions relating to the sale of a franchise have been
substantially performed or satisfied; generally coincident with the retail
store opening. No deferred revenue was recorded as of February 1, 1997 or
February 3, 1996.
The Company's franchise agreements generally require franchisees to remit
royalty payments of 2% of gross revenues derived from proprietary product
sales. The Company records this income as earned.
ACCOUNTS AND NOTES RECEIVABLE, NET
These receivables include $198,000 and $519,000 of notes receivable at
February 1, 1997 and February 3, 1996, respectively. Accounts and notes
receivable are net of an allowance for doubtful accounts and sales returns
of $506,000 and $500,000 at February 1, 1997 and February 3, 1996,
respectively. As of February 1, 1997 and February 3, 1996, approximately
17% and 32%, respectively, of accounts and notes receivable were due from
Successories franchisees.
INVENTORIES, NET
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
PREPAID CATALOG EXPENSES
Prepaid catalog expenses consist primarily of catalog and related
production and mailing costs. The Company changed its amortization period
for catalog costs effective February 1, 1995. The effect of this change in
estimate increased amortization expense for the year ended April 30, 1995
by $702,000 and decreased net income by $702,000 ($0.14 per share).
Effective May 1, 1995, the Company adopted SOP 93-7, "Reporting on
Advertising Costs," which outlines the accounting for direct marketing
advertising costs. The Company expenses the production costs of
advertising as incurred, except for direct-response advertising which is
capitalized and amortized over its expected period of future benefit.
Direct-response advertising consists primarily of mail order catalogs for
the Company's products. The capitalized costs of such advertising are
amortized over the twelve-month period following the date the catalog was
mailed based upon historical patterns of catalog response. The adoption of
this new accounting policy did not have a material effect on the Company's
financial statements.
At February 1, 1997 and February 3, 1996, $2,006,000 and $3,725,000,
respectively, of advertising was reported as assets.
Advertising expense was $11,062,000, $7,353,000, and $11,471,000,
respectively, for the year ended February 1, 1997, the period May 1, 1995
through February 3, 1996 and the year ended April 30, 1995, respectively.
OTHER PREPAID EXPENSES
Prepaid licensing cost is being capitalized and amortized over a three-year
period. Historically, this cost has been amortized over a two-year period.
The change in the amortization period was made to better approximate the
product lifecycle. This change resulted in an increase in income of
approximately $48,000 during the year ended February 1, 1997.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost with depreciation and
amortization provided for on a straight-line basis over the estimated useful
lives (ranging from 3 to 15 years) of the related assets. Leasehold
improvements are amortized on a straight-line basis over the lesser of the
useful life of the improvement or the term of the lease. Major renewals
and betterments are capitalized and maintenance and repair costs are
charged to expense as incurred.
During the year ended February 4, 1996, the Company adopted Financial
Accounting Standards Board Statement No. 121 (FAS 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed
Of." The Company recorded special charges of approximately $1,689,000 for
the year ended February 1, 1997, to write down certain assets to their fair
value. These assets included the order entry computer system which the
Company plans to replace during 1997 and certain leasehold improvements in
relation to the relocation to the Company's new manufacturing/warehouse
facility.
INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Under this Standard, a deferred tax asset or liability is
determined at each balance sheet date by applying rates contained in
currently enacted tax laws to amounts that result from temporary
differences in the financial statement and tax basis of assets and
liabilities. Valuation allowances are provided to reduce net deferred tax
assets to amounts for which realization is assessed as more likely than
not.
INTANGIBLE AND OTHER ASSETS
Intangible and other assets consist principally of costs in excess of the
fair value of net assets acquired in the purchase of certain businesses
(Note 3) and the repurchase of certain distribution rights. Such amounts
are being amortized on a straight line basis over 60 months to 480 months.
Such assets are periodically reviewed to determine recoverability by
comparing their carrying value with expected future cash flows.
ACCOUNTS PAYABLE
Checks outstanding, net of approximately $67,000 at February 1, 1997, are
included in Accounts Payable.
RESERVE FOR STORES TO BE CLOSED
Represents a reserve account established for certain costs to be incurred
in connection with plans to close up to five under-performing stores during
the fiscal year ended January 31, 1998.
RESERVE FOR RELOCATION-RELATED EXPENSES
Represents a reserve account established for certain costs associated with
relocating and consolidating the Company's office, manufacturing and
warehouse facilities into a new facility in Aurora, Illinois.
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common and common equivalent shares are computed by
dividing net income (loss) less preferred stock dividends by the weighted
average number of common shares outstanding during each period presented,
including common share equivalents arising from the assumed exercise of
stock options and warrants. Common stock equivalents have been excluded
from the calculation of earnings per common share for the year ended April
30, 1995 because of their anti-dilutive effect.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's foreign subsidiaries are
maintained in local currency. For financial reporting purposes, their
balance sheets are translated at current rates of exchange at the balance
sheet dates and their statements of operations are translated at average
rates of exchange in effect during the reporting period. The cumulative
effects of translation adjustments for the balance sheet are reflected as a
separate component of shareholders' equity. Gains and losses resulting
from foreign exchange transactions are recorded in the results of
operations of the period in which they occur. Such amounts were not
significant in any period presented.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of receivables, accounts payable and accruals
approximate their fair values because of their short term maturities. The
carrying amount of long term debt is also assumed to approximate its fair
value because such debt bears interest at floating rates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year presentation.
NOTE 3 - ACQUISITIONS:
The Company purchased all of the stock of British Links Golf Classics, Inc.
on October 1, 1996 for approximately $1,260,000 which is comprised of a
combination of cash, Successories stock and promissory notes. The
promissory notes issued by the Company are subordinate to all other debt.
British Links Golf Classics, Inc. is a Dallas, Texas-based catalog company
which sells golf wall decor and high-end golf gifts.
On October 15, 1995, the Company repurchased the 20% minority interest in
Celex Successories, Inc. from its joint venture partner bringing the
Company's ownership to 100%. The purchase price of approximately $106,000
was settled through assignment of certain joint venture assets and
forgiveness of indebtedness owed by the partner.
On October 30, 1995, the Company purchased certain assets and assumed
certain liabilities of a franchisee who operated a Successories retail
location in Florida. The purchase price of approximately $128,000 was
settled through the assignment of certain assets and the forgiveness of
indebtedness owed by the franchisee.
During the year ended April 30, 1995, the Company purchased certain assets
and assumed certain liabilities of franchisees who operated Successories
retail locations in Washington D.C., Philadelphia, Pennsylvania and Salt
Lake City, Utah. The aggregate purchase price for these acquisitions was
$299,000, including cash of $126,000 and forgiveness of debt of $173,000.
In addition, the Company agreed to pay a royalty to the former owner of the
Washington D.C. franchise equal to 10% of the first $625,000 of gross sales
within a specific territory and 3% of gross sales, for the period of 36
months thereafter, within the same specific territory.
All of the aforementioned acquisitions were accounted for as purchases and
accordingly, the acquired assets and liabilities have been recorded at
their estimated fair values at the acquisition date.
The results of operations of the acquired businesses are included in the
accompanying financial statements from the respective dates of acquisition.
The acquired businesses did not materially impact the consolidated
financial position or results of operations for the periods presented. In
the aggregate, the businesses acquired represent less than 10% of the
Company's consolidated assets and income from operations and the investment
in the acquired businesses is less than 10% of total Company assets as of
February 1, 1997 and February 3, 1996, respectively.
NOTE 4 - INVENTORIES:
Inventories are comprised of the following:
February 1, February 3,
1997 1996
Finished goods $4,057,000 $5,706,000
Raw materials 5,081,000 3,533,000
9,138,000 9,239,000
Less - Reserve for
obsolescence (168,000) (151,000)
$8,970,000 $9,088,000
NOTE 5 - PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
February 1, February 3,
1997 1996
Furniture and equipment $ 8,052,000 $ 7,253,000
Leasehold improvements 7,096,000 7,097,000
Vehicles 92,000 92,000
15,240,000 14,442,000
Less - Accumulated depreciation
and amortization (7,240,000) (3,827,000)
$ 8,000,000 $10,615,000
NOTE 6 - DEBT:
Debt consists of the following:
February 1, February 3,
1997 1996
Line of credit facilities $4,495,000 $9,000,000
Subordinated notes (unsecured),
less discount of $0 and $308,334 at
February 1, 1997 & February 3, 1996,
respectively 1,250,000 1,192,000
Subordinated notes payable
(unsecured) 400,000 -
Capital lease obligations 146,000 183,000
Other 18,000 35,000
6,309,000 10,410,000
Less - Current portion (2,215,000) (1,882,000)
$4,094,000 $8,528,000
As of April 30, 1995, the Company was in default of several covenants
contained in the credit facility which was in effect at that date. As a
result, on May 31, 1995, the Company and its bank executed a Forbearance
Agreement, which expired on July 31, 1995 and was replaced by an Amended
and Restated Credit Agreement (the "Credit Agreement").
The Credit Agreement was comprised of a $10.0 million Term Loan (the "Term
Loan") and a $3.0 million Revolving Loan (the "Revolving Loan"). Both
facilities are secured by all assets of the Company. As of July 31, 1995,
the $9,150,000 amount then due to the bank under the original credit
facility was converted to the Term Loan and additional borrowings of
$850,000 were made. As required, the Company reduced the Term Loan by
$1,000,000 as of January 31, 1996. The remaining $9,000,000 matured on May
1, 1996.
Borrowings under the Revolving Loan were limited to the lesser of a
predetermined borrowing base related to specified percentages of eligible
receivables and inventory, or a predetermined amount. On September 25,
1995, an amendment (the "Amendment") was made to the Credit Agreement that
lowered the borrowing base associated with the Revolving Loan. Borrowing
capability under the Revolving Loan expired on January 1, 1996 and all
borrowings under that loan, aggregating approximately $1,977,000, were
repaid prior to that date.
On February 7, 1996, the Credit Agreement was further amended to
reestablish borrowing capabilities through May 1, 1996 under the Revolving
Loan to the lesser of (a) 75% of eligible receivables and 15% of eligible
inventory, or (b) $2,500,000. Two officers of the company severally
guaranteed borrowings under the loan up to an aggregate amount of
$1,000,000.
Subsequently, the bank further agreed to extend the maturity date of
borrowing capability under both the Term Loan and Revolving Loan to May 1,
1997. In return: (a) the Company agreed to make repayments of borrowings
under the Term Loan of $75,000 per month commencing June 1, 1996; (b) the
borrowing capabilities under the Revolving Loan were amended to 50% to 70%
of eligible receivables and 5% to 40% of eligible inventory depending upon
various categories of such assets as specified in the amendment and are
subject to unlimited change at the discretion of the bank; and, (c) the
Company agreed to use their best efforts to obtain by September 16, 1996, a
minimum of $10,000,000 in the form of either (i) a contribution of equity
capital and/or (ii) subordinated debt which would not become payable until
all bank loans were repaid and would not mature earlier than August 1,
1997. The use of any such proceeds would require the bank's written
consent. No change was made in interest rates or with respect to the
officers' guarantees. Accordingly, $600,000 of borrowings under the Term
Loan have been classified as a current liability in the consolidated
balance sheet at February 3, 1996.
Under the Credit Agreement, as amended, among other things, future
indebtedness, dividends and capital expenditures are restricted.
On December 16, 1996, the Credit Agreement was amended to change the
borrowing capabilities under the Revolving Loan to 20% of Eligible Retail
Inventory with all other borrowing base calculations remaining unchanged.
The amendment also ratified the Company's acquisition of British Links Golf
Classics, Inc.
On December 17, 1996, the Credit Agreement was further amended to reflect
the payment by the Company of $4,000,000 on the $8,475,000 Term Loan and
the bank's agreement to increase the Company's Revolving Loan to a maximum
of $4,000,000. The interest rate for both credit facilities was set at the
Prime Rate in effect from time to time plus one percent. The maturity date
for the Term Loan and the Revolving Loan was extended to May 1, 1998. The
amendment also requires the Company to remit monthly principal and interest
payments on the Term Loan in the amount of $94,808. At February 1, 1997,
there were no borrowings on the Revolving Loan.
On January 30, 1997, the Credit Agreement was further amended to allow for
the execution of a standby letter of credit by the Company which was
previously restricted by the terms of the Credit Agreement. The ability to
issue a standby letter of credit was required by the Company in order to
provide security in the amount of $500,000 in connection with the Company's
construction and lease and building of a new corporate headquarters and
manufacturing facility.
Interest on borrowings under the original credit facility that was in
effect at April 30, 1995 was at LIBOR reserve adjusted rate ("LIBOR") plus
1.5% to 1.75% (7.56% to 7.81% at that date). Under the credit agreement
effective July 31, 1995, borrowings under the Term Loan, at the option of
the Company, bore interest at LIBOR plus 2.50%, or the prime rate plus
0.25%. Interest on borrowing under the Revolving Loan were at LIBOR plus
2.25%, or the prime rate. Further, there was a fee of 0.5% on the
Revolving Loan commitment. Effective with the September 25, 1995
amendment, interest on the Term Loan was at the prime rate plus 1.0% and on
the Revolving Loan was at the prime rate plus 0.75%. Effective with the
December 17, 1996 amendment, interest on the Term Loan and on the Revolving
Loan was at the prime rate plus 1.0%.
On November 10, 1995, the Company borrowed $1,500,000 from certain
investors (including senior executives and members of the Board of
Directors). The related subordinated notes were originally due on November
1, 1996, and bear interest at 10%. Concurrent with these borrowings,
warrants for the purchase of 120,000 shares of the Company's common stock
were issued to the investors (Note 10).
The warrants were valued at $378,000, which amount was recorded as a credit
to stockholders' equity with a contra-reduction of the subordinated notes.
The notes as so discounted are being accredited to the $1,500,000 principal
balance over the term of the notes by charges to income.
The Company extended the maturity date for $1,250,000 of the original
amount financed to November 11, 1997. The interest rate for the extended
financing remains at 10%. The Company granted 125,000 options on a pro
rata basis to each lender participating in the extended financing.
On October 1, 1996, as part of the British Links acquisition, the Company
executed a promissory note aggregating $400,000. $100,000 is due May 1,
1997 and October 1, 1997, and $200,000 is due October 1, 1998. Interest is
at 8.25%.
The weighted average interest rate on borrowings outstanding as of February
1, 1997 and February 3, 1996 was 9.2% and 8.8%, respectively.
Aggregate future maturities of long-term debt, excluding capital lease
obligations, are as follows:
FISCAL YEAR ENDING
January 31, 1998 $ 2,215,000
January 30, 1999 3,948,000
$ 6,163,000
NOTE 7 - INCOME TAXES:
The consolidated provisions for income taxes consist of the following:
May 1, 1995
Year Ended through Year Ended
FEBRUARY 1, 1997 FEBRUARY 3, 1996 APRIL 30, 1995
Current provision:
Federal $ - 212,000 ($40,000)
State 47,000 - (20,000)
Foreign - - -
Deferred income tax
provision (2,656,000) (1,600,000) 60,000
($2,609,000) ($1,388,000) $ 0
Deferred tax assets (liabilities) are comprised of the following:
February 1, February 3,
1997 1996
Deferred tax assets:
Accounts receivable $ 197,000 $ 195,000
Inventories 95,000 99,000
Prepaid expenses 1,272,000 -
Loss carryforwards 5,204,000 5,559,000
Total deferred tax assets 6,768,000 5,853,000
Deferred tax liabilities:
Prepaid expenses (1,126,000) (1,612,000)
Depreciation (267,000) (6,000)
Total deferred tax liabilities (1,393,000) (1,618,000)
Net deferred tax assets 5,375,000 4,235,000
Valuation allowance - (2,635,000)
$5,375,000 $1,600,000
At April 30, 1995, the Company had determined, based upon evidence then
available, that a valuation allowance of $3,897,000 was required against
net deferred tax assets at that date due to the uncertainty as to whether
the benefits of net operating loss (NOL) carryforwards would be realized.
At that date such valuation allowance reduced net deferred tax assets to
zero. At February 3, 1996, net deferred assets were $1,600,000 after a
valuation allowance of $2,635,000. At February 1, 1997, net deferred
assets were $5,375,000. Although realization is not assured, the Company
believes that it is more likely than not that the $5,375,000 deferred tax
asset will be realized. Realization of the recorded net tax benefit is
largely dependent on generating sufficient taxable income prior to
expiration of the NOL carryforwards. However, the amount of such
realization could be either increased or reduced in the near term if
estimates of future taxable income during the carryforward period are
changed.
To the extent that the NOL carryforwards and existing deductible temporary
differences are not offset by existing taxable temporary differences
reversing within the carryforward period, approximately $13,500,000 of the
remaining net operating loss carryforwards is expected to be realized by
achieving future profitable operations, based on the following:
1. Significantly improved operating earnings during the prior fiscal
year, excluding the impact of certain one-time special charges.
Continued improvement is anticipated in the in future years.
2. Significant cost containment efforts continued to intensify in the
prior fiscal year and included head count reductions, improved
inventory management, reduced capital expenditures and hiring freezes
for most of the year and enhanced control over catalog-related
expenses.
3. Future cost containment efforts will continue in the next fiscal
year and include closing of under-performing stores, scaling back or
eliminating certain under-performing catalogs reducing the number of
prospecting catalogs to be sent, costly new customer prospecting will
be more focused and efficient, and relocating and consolidating the
Company's corporate, manufacturing and distribution facilities.
The provision for income taxes differs from the U.S. statutory federal
income tax rate as follows:
May 1, 1995
Year Ended through Year Ended
FEBRUARY 1, 1997 FEBRUARY 3, 1996 APRIL 30, 1995
Statutory U.S. rate (34.0%) (34.0%) (34.0%)
State income taxes (5.0) (5.0) (5.0)
Adjustment to prior year taxes - 30.7 -
Other, primarily
permanent items 5.6 12.1 1.4
Recognition of prior year
tax benefit (77.8) (205.3) -
Valuation allowance - 37.6
(111.2%) (201.5%) 0.0%
The Company files a consolidated income tax return. For tax return
purposes the Company has NOL carryforwards of approximately $13,500,000 at
February 1, 1997. There were no taxes available for recovery in the
statutory carryback period. Unused net operating losses expire in various
amounts during fiscal years 2005 through 2012. A portion of the NOL
carryforwards relates to deductions arising from the exercise of non-
qualified stock options. Accordingly, approximately $1,050,000 is
attributable to such stock option deductions, the benefit of which has been
credited to additional paid in capital for the year ended February 1, 1997.
NOTE 8 - RELATED PARTIES:
On April 26, 1994, the Company entered into a joint venture agreement with
a principal shareholder of the Company to operate a retail location under
the name Successories DFW Joint Venture. The Company sold area
distribution rights for Dallas, Texas to the principal shareholder for
$250,000. The principal shareholder contributed the area distribution
rights to the joint venture in exchange for a 40% interest. The Company
contributed certain property and equipment with a recorded value of
$100,000 in exchange for a 60% interest. Successories DFW Joint Venture
has been included in the accompanying consolidated financial statements
from the date of acquisition.
During the year ended February 1, 1997 the Company loaned a franchise owned
by the daughter of an outside director $77,000 related to the operation of
a retail location in Glendale, California.
A member of the Company's Board of Directors who is also a shareholder
served as a consultant to the Company on various tax matters. Fees paid to
his firm for said services during the year ended April 30, 1995, the period
May 1 through February 3, 1996 and the year ended February 1, 1997 were
$51,000, $72,000 and $141,000, respectively.
A member of the Company's Board of Directors who is also a shareholder
serves as legal counsel to the Company. Fees paid to the law firm in which
he is a partner for said services during the year ended April 30, 1995, the
period May 1, 1995 through February 3, 1996 and the year ended February 1,
1997 were $589,000, $237,000, and $262,000, respectively.
NOTE 9 - SUPPLEMENTAL CASH FLOW INFORMATION:
Supplemental disclosures to the consolidated statements of cash flows are
as follows:
May 1, 1995
Year Ended through Year Ended
FEBRUARY 1, 1997 FEBRUARY 3, 1996 APRIL 30, 1995
Cash paid during the
period for:
Income taxes $11,250 $ - $ 266,000
Interest 1,277,000 737,000 534,000
In connection with acquisitions, liabilities were assumed as follows:
May 1, 1995
Year Ended through Year Ended
FEBRUARY 1, 1997 FEBRUARY 3, 1996 APRIL 30, 1995
Fair value of assets
acquired $1,710,000 $225,000 $210,000
Notes issued (400,000)
Net cash paid (360,000) - (126,000)
Common shares issued (500,000) - -
Liabilities assumed $450,000 $225,000 $ 84,000
NOTE 10 - STOCK-BASED COMPENSATION PLANS:
The Company has a stock option plan, the Celex Group, Inc. Stock Option
Plan ("the Option Plan"), and an employee stock purchase plan. The Company
accounts for these plans under APB Opinion No. 25, under which no
compensation cost has been recognized in the financial statements. Had
compensation cost for the stock purchase plan and for stock options awarded
under this plan been determined consistent with FASB Statement No. 123, the
Company's net income and earnings per share would have been reduced to the
following pro forma amounts:
Period
May 1, 1995
Year Ended through
FEBRUARY 1, 1997 FEBRUARY 3, 1996
Net Income (Loss): As Reported $262,000 $700,000
Pro Forma (389,000) 523,000
EPS: As Reported ($.16) $.13
Pro Forma ($.28) $.10
Because the Statement 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in
future years. Furthermore, management cannot attest to the reliability of the
pro forma compensation to predict future pro forma compensation except that
it is in full compliance with the FASB Statement No. 123.
The Company may grant options for up to 1,450,000 shares under the Option
Plan. The Company has granted options on 1,309,000 shares under the plan
through February 1, 1997. Under the Option Plan, the option exercise price
equals the stock's market price on date of grant. Options granted under
these plans vest after five years and expire after ten years.
During fiscal 1994, the Company initiated a non-compensatory Employee Stock
Purchase Plan ("the Plan"). The Company intends that the Plan shall
qualify as an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code. Generally, the Plan provides for qualifying
employees to elect to have a percentage of their compensation used to
purchase common stock of the Company.
During the year ended February 1, 1997, 65,000 shares of the Company's
stock were purchased at prices ranging from $4.78 and $6.69. During the
period May 1, 1995 through February 3, 1996, 87,123 shares were purchased
at prices ranging from $5.31 to $7.43. During the year ended April 30,
1995, 25,000 shares were purchased at prices ranging from $8.75 to $21.75.
A summary of the status of the Option Plan and the Stock Purchase Plan
("the Plans") for the year ended February 1, 1997, for the period May 1,
1995 through February 3, 1996 and the year ended April 30, 1995 and changes
during the years then ended is presented in the table and narrative below:
For the For the Period For the
Year Ended May 1, 1995 to Year Ended
FEBRUARY 1, 1997 FEBRUARY 3, 1996 APRIL 30, 1995
Weighted Weighted Weighted
Average Average Average
SHARES EX PRICE SHARES EX PRICE SHARES EX PRICE
Outstanding at beginning
of year 821,250 $5.02 717,000 $4.72 866,250 $4.37
Granted 385,000 6.95 135,250 6.83 82,500 8.60
Exercised (192,500) 1.90 (3,750) 5.33 (193,000) 4.43
Forfeited (32,000) 6.22 (27,250) 6.03 (38,750) 6.53
Expired 0 0 0
Cancelled 0 0 0
Outstanding at
end of year 981,750 6.22 821,250 5.02 717,000 4.72
Exercisable at
end of year 468,950 6.23 448,000 4.07 424,250 3.77
Weighted average
fair value
of options
granted $5.39 $5.30 N/A
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions used
for the nine option grants in 1995: weighted average risk-free interest
rate of 6.30; expected dividend yields of 0.00 percent; expected life of
10.0 years; weighted average expected volatility of 103.10 percent.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions used
for the fourteen option grants in 1996: weighted average risk-free
interest rate of 6.24; expected dividend yields of 0.00 percent; expected
life of 10.0 years; weighted average expected volatility of 98.36 percent.
NOTE 11 - EMPLOYMENT AGREEMENTS:
The Company has employment agreements with certain individuals requiring
minimum aggregate annual payments of $658,000. The employment agreements
are for a three-year term.
NOTE 12 - LEASES AND LEASE COMMITMENTS:
OFFICE SPACE
The Company occupies office, manufacturing and warehouse space under terms
of a lease agreement which expires on May 31, 1997. In July, 1996, the
Company signed a build-to-suit lease agreement with a 12-year term for a
new facility. The Company pays all operating expenses and real estate
taxes, building maintenance and repair, and fire and insurance premium
costs in excess of stipulated amounts.
In addition, the Company leases its retail store locations under operating
leases having terms which are month-to-month or non-cancelable and expire
at varying times through fiscal year 2005. The Company is responsible for
its proportionate share of real estate taxes and maintenance in addition to
insurance for the leased facilities. In addition, certain leases require
rent payments equal to a percentage of sales in excess of predetermined
levels.
Annual future minimum payments under operating leases with noncancelable
terms in excess of one year are as follows:
Office & Retail
FISCAL YEAR ENDING WAREHOUSE LOCATIONS TOTAL
January 31, 1998 $843,000 $1,816,000 $2,659,000
January 30, 1999 759,000 1,478,000 2,237,000
January 29, 2000 759,000 1,401,000 2,160,000
February 3, 2001 760,000 1,146,000 1,906,000
February 2, 2002 760,000 1,068,000 1,828,000
Thereafter 5,633,000 2,522,000 8,155,000
$9,514,000 $9,431,000 $18,945,000
Rental expense recorded during the year ended February 1, 1997, the period
May 1, 1995 through February 3, 1996 and for the year ended April 30, 1995,
for all operating leases aggregated approximately $3,360,000, $3,270,000
and $2,657,000, respectively.
In connection with the Company's relocation plan, commitments of
approximately $1 million have been made primarily relating to fixed assets
and relocation expenses, which will be financed using the available
$4,000,000 on the Revolving Loan and any remainder, if necessary, will be
financed with operating income of the Company.
CAPITAL LEASE OBLIGATIONS
The Company acquired various items of equipment under lease arrangements
which are being accounted for as capital leases. Equipment under capital
leases has been recorded as property and equipment with a cost of
approximately $758,000 and $694,000 at February 1, 1997 and February 3,
1996, respectively, and accumulated depreciation of $621,000 and $516,000
at those dates.
The future minimum lease payments under all capitalized leases together
with the present value of the net minimum lease payments are as follows:
FISCAL YEAR ENDING
January 31, 1998 $ 99,000
January 30, 1999 30,000
January 29, 2000 12,000
February 3, 2001 9,000
February 2, 2002 9,000
Total minimum lease payments 159,000
Less amount representing interest (13,000)
Present value of minimum lease payments $146,000
NOTE 13 - RETAIL STORES, FRANCHISING COMMITMENTS AND OBLIGATIONS:
Changes in Company-owned and franchised stores were as follows:
COMPANY-OWNED STORES FRANCHISED STORES
May 1, 1995 May 1, 1995
Year Ended through Year Ended Year Ended through Year Ended
February 1, February 1, April 30, February 1, February 3, April 30,
1997 1996 1995 1997 1996 1995
Beginning
of the
period 54 51 35 43 42 28
Opened 8 6 32 6 8 33
Acquired
(British
Links) 1 0 0 0 0 0
Closed (14) (3) (16) (2) (7) (19)
End of
Period 49 54 51 47 43 42
Franchise fee revenues approximated $51,000, $135,000 and $884,000 for the
year ended February 1, 1997, the period May 1, 1995 through February 3,
1996 and for the year ended April 30, 1995, respectively.
The Company is obligated in accordance with the terms of each franchisee's
respective franchise agreement to provide certain services, such as
training, pre-opening assistance, site selection, advertising and
promotion.
NOTE 14 - LEGAL MATTERS:
In the ordinary course of conducting its business, the Company becomes
involved in various lawsuits related to its business. The Company does not
believe that the ultimate resolution of these matters will be material to
its business, financial position or results of operations.
NOTE 15 - PREFERRED STOCK:
On September 16, 1996, the Company issued 400 shares of Series A Cumulative
Convertible Preferred Stock with a liquidation preference of $5,000 per
share and a par value of $100 per share in an off-shore transaction to a
non-U.S. person pursuant to Regulation S under the United States Securities
Act of 1933, as amended. Regulation S is a safe harbor exemption from
registration under the Securities Act for sales of securities that occur
outside the U.S. The 400 shares of Series A Cumulative Convertible
Preferred Stock were converted into $2,000,000 of Common Stock during
the year.
On December 17, 1996, the Company issued 1,212 shares of Series B $100 par
Cumulative Convertible Preferred Stock in a transaction exempt from
registration pursuant to Regulation D under the Securities Act. Each share
has a liquidation preference of $5,000 and a par value of $100 per share.
The Series B Cumulative Convertible Preferred Stock is convertible into
common stock as follows:
(i) 50% of the shares are convertible into $3,030,000 of common stock
on the 61st day following the closing of the transaction;
(ii) 100% of the shares are convertible into $6,060,000 of common stock
on the 91st day following the closing of the transaction.
The convertible preferred shares are entitled to a dividend at a rate of
4.95% per annum.
In the event that the Company enters into a transaction to sell assets or
any consolidation or in the event of a change in control, the Company is
required to redeem the Series B Preferred Stock.
For the year ended February 1, 1997, none of the shares of the Series B
Cumulative Convertible Preferred stock have been converted into Common
Stock. The accretion discount relating to Series A and Series B Preferred
Stock for the year was $1,093,000.
NOTE 16 - EARNINGS (LOSS) PER SHARE:
May 1, 1995
Year Ended through Year Ended
FEBRUARY 1, 1997 FEBRUARY 3, 1996 APRIL 30, 1995
Net Income (Loss): $262,000 $700,000 ($7,745,000)
Preferred stock
dividends (1,093,000) -- --
Earnings (loss) attributable
to common shareholders (831,000) 700,000 (7,745,000)
Weighted average number
of common equivalent
shares outstanding 5,321,000 5,467,000 4,854,000
Earnings (loss) per common
and common equivalent
share ($.16) $.13 ($1.60)
NOTE 17 - SPECIAL CHARGES:
The Company recorded a special charge of $2,701,000 for the twelve months
ended February 1, 1997 which is comprised primarily of: a) reserve for
certain costs associated with the Company's relocation and consolidation of
its manufacturing operations and business offices into a new manufacturing
and distribution facility in Aurora, Illinois; b) costs associated with a
plan to close five Company-owned stores that were not performing
profitably; and, c) write-down of the existing order entry computer system
in anticipation of replacing it during the upcoming fiscal year.
NOTE 18 - 401(K) PLAN:
The Company has a 401(K) Retirement Savings Plan ("the Plan") in which
full-time employees who have completed one year of service are eligible to
participate in the Plan. Enrollment is open on the January 1st or July 1st
immediately following one year of service. The Company is required to
match $.20 on the dollar on the first 6% of deferral.
The Company contributions to the Plan were approximately $30,000 and
$37,000 for the year ended February 1, 1997, and the period May 1, 1995
through February 3, 1996, respectively.
NOTE 19 - QUARTERLY INFORMATION (UNAUDITED):
For the For the For the
Year Ended 9 Months Ended Year Ended
FEBRUARY 1, 1997 FEBRUARY 3, 1996 APRIL 30, 1995
FIRST QUARTER
Net sales $11,608,000 N/A $7,776,000
Gross profit 7,060,000 5,260,000
Net earnings (loss) (838,000) 216,000
Earnings (loss) per
Common share ($0.16) 0.04
SECOND QUARTER
Net sales 11,528,000 $ 9,817,000 9,992,000
Gross profit 6,514,000 5,658,000 6,886,000
Net earnings (loss) (808,000) (1,294,000) 825,000
Earnings (loss) per
Common share (0.15) (0.25) 0.16
THIRD QUARTER
Net sales 14,223,000 10,816,000 14,379,000
Gross profit 7,819,000 6,384,000 5,807,000
Net earnings (loss) 23,000 (596,000) (2,898,000)
Earnings (loss) per
Common share 0.005 (0.12) (0.61)
FOURTH QUARTER
Net sales 18,673,000 14,851,000 10,662,000
Gross profit 11,082,000 10,132,000 4,108,000
Net earnings (loss) 1,885,000 2,590,000 (5,888,000)
Earnings per
Common share (loss) 0.14 0.48 (1.21)
- F23 -
SUCCESSORIES, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Balance at Charged Charged Balance
beginning to costs to other (1) at end of
OF PERIOD AND EXPENSES ACCOUNTS DEDUCTIONS PERIOD
DESCRIPTION
FEBRUARY 1, 1997
Allowance for
doubtful accounts 221,346 246,243 0 271,792 195,797
Reserve for sales
returns 278,719 244,467 0 213,277 309,909
Reserve for obsolescence
and shrinkage 151,419 31,022 0 14,117 168,324
FEBRUARY 3, 1996
Allowance for
doubtful Accounts 488,705 (144,750) 0 122,609 221,346
Reserve for sales
returns 230,295 894,332 0 845,908 278,719
Reserve for
obsolescence and
shrinkage 250,000 0 0 98,581 151,419
APRIL 30, 1995
Allowance for doubtful
accounts 352,500 425,404 0 289,199 488,705
Reserve for sales
returns 35,000 937,845 0 742,550 230,295
Reserve for obsolescence
and shrinkage 100,000 150,000 0 0 250,000
(1) Bad debt write-offs less recoveries
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SUCCESSORIES, INC.
Date: May 2, 1997 By: /S/ ARNOLD M.ANDERSON
Arnold M. Anderson
Chief Executive Officer and Chairman of
the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE DATE
/S/ ARNOLD M. ANDERSON May 2, 1997
Arnold M. Anderson
Chief Executive Officer, Chairman of the Board and Director
(Principal Executive Officer)
/S/ JAMES M. BELTRAME May 2, 1997
James M. Beltrame
President, Chief Operating Officer and Director
/S/ M. ANDREW KING
May 2, 1997
Vice President Finance and Administration, Chief Financial Officer
(Principal Financial and Accounting Officer)
/S/ MICHAEL H. MCKEE May 2, 1997
Michael H. McKee
Senior Vice President, Creative Department and Director
/S/ TIMOTHY C. DILLON May 2, 1997
Timothy C. Dillon
Vice President, General Counsel, Secretary and Director
/S/ MERVYN C. PHILLIPS, JR. May 2, 1997
Mervyn C. Phillips, Jr.
Director
/S/ MICHAEL SINGLETARY May 2, 1997
Michael Singletary
Director
/S/ C. JOSEPH LABONTE May 2, 1997
C. Joseph LaBonte
Director
/S/ SEAMAS T. COYLE May 2, 1997
Seamas T. Coyle
Director
/S/ GUY E. SNYDER May 2, 1997
Guy E. Snyder
Director
/S/ STEVEN B. LARRICK May 2, 1997
Steven B. Larrick
Director
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
3.1 Articles of Incorporation of Registrant (1)
3.2 Articles of Amendment to the Company's Articles of Incorporation
changing the Company's name to Successories, Inc. (2)
3.3 Certificate of Designation creating the Company's Series A
Cumulative Convertible Preferred Stock (2)
3.4 Certificate of Designation creating the Company's Series B
Cumulative Convertible Preferred Stock (2)
3.5 By-laws of Registrant (1)
4.1 Specimen Common Stock Certificate (1)
4.2 Specimen Series A Cumulative Convertible Preferred Stock
Certificate (2)
4.3 Specimen Series B Cumulative Convertible Preferred Stock
Certificate (2)
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 (1)
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 Company with Messrs.
James M. Beltrame, Seamas T. Coyle, Timothy C. Dillon,
C. Joseph LaBonte, Steven B. Larrick, Michael H. McKee,
Mervyn C. Phillips, Jr., Michael Singletary, Guy E. Snyder
and Peter C. Walts
10.12 First Amendment to the Credit Agreement between
the Company and NBD Bank dated as of September 25,
1995 (8)
10.13 Second Amendment to the Credit Agreement between
the Company and NBD Bank dated as of February 7,
1996 (9)
10.14 Form of Subordinated Note, Common Stock Purchase Warrant
and Subordination Agreement relating to issuance of $1,500,000
Subordinated Notes and Warrants to purchase 120,000 shares of
the Company's Common Stock (9)
10.15 Common Stock Option Agreement granted to
Arnold M. Anderson and Incentive Stock Option
Agreement granted to Arnold M. Anderson (9)
10.16 Common Stock Option Agreement granted to
James M. Beltrame and Incentive Stock Option
Agreement granted to James M. Beltrame (9)
10.17 Third Amendment to the Credit Agreement between the
Company and NBD Bank dated as of May 2, 1996 (9)
10.18 Employment Agreement with Arnold M. Anderson dated
March 1, 1996 (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 Golf Classics,
Inc.,
David J. Houston and Michael McArthur dated October 1, 1996 (11)
10.23 Regulations D Securities Subscription Agreement among Successories,
Inc., Infinity Investors Limited and Seacrest Capital Limited
dated December 17, 1996 (2)
10.24 Registration Rights Agreement dated as of December 17, 1996, by
and among Successories, Inc., Infinity Investors Limited and
Seacrest Capital Limited (2)
10.25 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 (2)
10.26 Fourth Amendment to the Credit Agreement between the
Company and American National Bank & Trust Company of
Chicago dated as of December 16, 1996 (filed herewith)
10.27 Fifth Amendment to the Credit Agreement between the
Company and American National Bank & Trust Company
of Chicago dated as of December 17, 1996 (filed herewith)
10.28 Sixth Amendment to the Credit Agreement between the
Company and American National Bank & Trust Company
of Chicago dated as of January 30, 1997 (filed herewith)
21.1 Subsidiaries (4)
23.1 Consent of Arthur Anderson LLP(filed herewith)
23.2 Consent of Price Waterhouse LLP (filed herewith)
27.1 Financial Data Schedule (filed herewith)
__________
(1) Previously filed with Registration Statement on Form SB-2, No. 33-67530C
filed on August 17, 1993, and incorporated herein by reference.
(2) Previously filed with Registration Statement on Form S-3, No. 333-19313,
and incorporated herein by reference.
(3) Previously filed with Post-effective Amendment Number 1 to the
Registration Statement on Form SB-2, No. 33-67530C filed on January 19,
1994, and incorporated herein by reference.
(4) Previously filed with 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 dated June 7, 1995,
reporting Date of Event May 26, 1995, and incorporated herein by
reference.
(7) Previously filed with the Company's 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.
FIFTH GENERAL RELEASE
This Fifth General Release (the "Release") is made as of the ___ day
of December, 1996 by and among Successories, Inc., an Illinois corporation
(f/k/a Celex Group, Inc.) ("Successories, Inc."), Celebrating Excellence,
Inc., an Illinois corporation ("Celebrating Excellence"), and Successories
of Illinois, Inc., an Illinois corporation ("Successories") (Successories,
Inc., Celebrating Excellence and Successories are collectively, the
"Companies" and each individually a "Company"), British Links Acquisition
Corp., an Illinois corporation, B.L.G.C., Inc., a Texas corporation, Arnold
M. Anderson, Celex Successories Inc. and James M. Beltrame (collectively,
the "Guarantors" and each individually a "Guarantor"), and American
National Bank and Trust Company of Chicago, a national banking association,
assignee of NBD Bank, an Illinois banking corporation (the "Bank").
W I T N E S S E T H :
WHEREAS, the Companies and the Bank have entered into that certain
Amended and Restated Credit Agreement, dated as of July 31, 1995 (as
amended, modified, extended or supplemented from time to time, the "Credit
Agreement");
WHEREAS, the Guarantors have each entered into guaranties of the
Credit Agreement and the Notes issued pursuant thereto;
WHEREAS, pursuant to that certain Waiver No. 9, Consent No. 1 and
Fourth Amendment to Amended and Restated Credit Agreement (the
"Amendment"), of even date herewith, entered into by the Companies and the
Bank, the Bank and the Companies have agreed to amend in certain respects
the Credit Agreement;
WHEREAS, pursuant to the Amendment the Bank is willing to waive
certain Events of Default arising under the Credit Agreement and to furnish
a consent required under the Security Agreement, dated July 31, 1995, by
and between Successories, Inc. and the Bank (the "Successories, Inc.
Security Agreement") in consideration for, among other things, a general
release of liability, as more particularly described herein, given in favor
of the Bank and certain other parties by the Companies and various other
parties described herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the undersigned parties agree as
follows:
I. DEFINITIONS.
Capitalized terms used herein but not defined herein shall have the
meaning ascribed thereto in the Credit Agreement.
II. GENERAL RELEASE.
1. In consideration for the Bank's agreement to waive the Events of
Default under the Credit Agreement and extend certain consents under the
Successories, Inc. Security Agreement, each as more particularly described
in the Amendment, and for other good and valuable consideration, each
Company and each Guarantor, for: (i) itself, (ii) any parent, or
subsidiary thereof, (iii) any partnership or joint venture of which any
Company or any Guarantor (or any affiliate thereof) is a partner, (iv) any
parent, affiliate or subsidiary thereof or any partnership or joint venture
of which such person or entity (or any parent, affiliate or subsidiary
thereof) is a partner, and (v) the respective partners, officers,
directors, shareholders, heirs, legal representatives, legatees, successors
and assigns of all of the foregoing persons and entities, hereby release
and forever discharge Bank, their past, present and future shareholders,
successors, assigns, their respective heirs, legal representatives,
legatees, successors and assigns, of and from all actions, claims, demands,
damages, debts, losses, liabilities, indebtedness, causes of action either
at law or in equity and obligations of whatever kind or nature, whether
known or unknown, direct or indirect, new or existing, by reason of any
matter, cause or thing whatsoever from the beginning of the world to the
date hereof arising out of the claims asserted or which could have been
asserted by any Company or any Guarantor, as a borrower or a guarantor, in
connection with the Credit Agreement, any other loans or financial
accommodations to any Company or any Guarantor, any indebtedness evidenced
thereby and any other loan or security documents entered into pursuant
thereto.
2. In further consideration for the Bank's waiver and consent
described in the Amendment, each of the undersigned Companies and
Guarantors for: (i) itself, (ii) any parent, affiliate or subsidiary
thereof, (iii) any partnership or joint venture of which any Company or any
Guarantor (or any affiliate thereof) is a partner, (iv) any person or
entity owning the beneficial interest in any trust, any parent, affiliate
or subsidiary thereof or any partnership or joint venture of which such
person or entity (or any parent, affiliate or subsidiary thereof) is a
partner, and (v) the respective partners, officers, directors,
shareholders, heirs, legal representatives, legatees, successors and
assigns of all of the foregoing persons and entities, warrant, represent
and acknowledge that they have no defenses to the payment of, nor any right
to set off against, all or any of the obligations to Bank set forth in this
Release and in the notes or guaranties executed prior or pursuant hereto,
nor any counterclaims or other actions against Bank of any kind whatsoever
directly or indirectly or derivatively related thereto except to the extent
the foregoing may not be waived under applicable law.
3. It is acknowledged that each Company and each Guarantor, has read
this general release provision and consulted counsel before executing this
Release and that each Company and each Guarantor has relied upon its own
judgment and that of its counsel in executing same and has not relied on or
been induced by any representation, statement or act by any other party
referenced herein which is not referred to in this Release; that each
Company and each Guarantor enters into this Release voluntarily, with full
knowledge of its significance; and that this general release is in all
respects complete and final.
4. If any term or provision of this general release or the
application thereof to any person, entity or circumstance shall, to any
extent, be held invalid and/or unenforceable by a court of competent
jurisdiction, the remainder of this general release, or the application of
such term or provisions to persons, entities or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
thereby, and each term and provision of the general release shall be valid
and be enforced to the fullest extent permitted by law.
5. This Section II shall survive the termination of the Credit
Agreement and payment of all the indebtedness evidenced thereby or issued
pursuant thereto.
III. RATIFICATION AND AFFIRMATION.
The Credit Agreement and all guaranties thereof, together with all
other loan and security documents executed pursuant to the Credit
Agreement, is hereby ratified and affirmed and shall in all other respects
remain in full force and effect. Except as expressly provided herein,
nothing contained in this Release shall be construed as a waiver of any
existing Event of Default and the Bank reserves all rights and remedies
under the Credit Agreement and under applicable law.
IV. REPRESENTATIONS AND WARRANTIES.
Each Company hereby ratifies and affirms all the representations and
warranties contained in the Credit Agreement as true, complete and accurate
as of the date of this Release. Each Company, together with Celex
Successories Inc., B.L.G.C., Inc. and British Links Acquisition Corp.,
further represents and warrants that the Board of Directors of each
Company, of Celex Successories Inc., B.L.G.C., Inc. and British Links
Acquisition Corp. have approved the execution and delivery of this Release.
V. MISCELLANEOUS.
The provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective legal representatives,
successors and assigns. This instrument has been made and executed and
delivered in the State of Illinois and shall be governed by and construed
in accordance with the internal laws of the State of Illinois without
regard to conflicts of laws principles. This Release may be executed and
delivered in several counterparts with the intention that all such
counterparts, when taken together, shall constitute one and the same
instrument. One or more counterparts of this Release may be delivered by
facsimile, with the intention that delivery by such means shall have the
same effect as delivery of an original counterpart thereof. The section
headings contained in this Release are for convenience of reference only
and in no way shall modify any of the terms or provisions hereof.
IN WITNESS WHEREOF, the parties have entered into this Release as of
the day and year first above written.
SUCCESSORIES, INC.
By: __________________________
Its:__________________________
CELEBRATING EXCELLENCE, INC.
By: __________________________
Its:__________________________
SUCCESSORIES OF ILLINOIS, INC.
By: __________________________
Its:__________________________
CELEX SUCCESSORIES INC.
By: __________________________
Its:__________________________
_____________________________
Arnold M. Anderson
_____________________________
James M. Beltrame
BRITISH LINKS ACQUISITION CORP.
By: __________________________
Its: __________________________
B.L.G.C., INC.
By: __________________________
Its: __________________________
SIXTH GENERAL RELEASE
This Sixth General Release (the "Release") is made as of the 17th day
of December, 1996 by and among Successories, Inc., an Illinois corporation
(f/k/a Celex Group, Inc.) ("Successories, Inc."), Celebrating Excellence,
Inc., an Illinois corporation ("Celebrating Excellence"), and Successories
of Illinois, Inc., an Illinois corporation ("Successories") (Successories,
Inc., Celebrating Excellence and Successories are collectively, the
"Companies" and each individually a "Company"), British Links Acquisition
Corp., an Illinois corporation, B.L.G.C., Inc., a Texas corporation and
Celex Successories Inc. (collectively, the "Guarantors" and each
individually a "Guarantor"), for the benefit of American National Bank and
Trust Company of Chicago, a national banking association, assignee of NBD
Bank, an Illinois banking corporation (the "Bank").
W I T N E S S E T H :
WHEREAS, the Companies and the Bank have entered into that certain
Amended and Restated Credit Agreement, dated as of July 31, 1995 (as
amended, modified, extended or supplemented from time to time, the "Credit
Agreement");
WHEREAS, the Guarantors have each entered into guaranties of the
Credit Agreement and the Notes issued pursuant thereto;
WHEREAS, pursuant to that certain Waiver No. 10 and Fifth Amendment to
Amended and Restated Credit Agreement (the "Amendment"), of even date
herewith, entered into by the Companies and the Bank, the Bank and the
Companies have agreed to amend in certain respects the Credit Agreement and
waive certain Events of Default thereunder;
WHEREAS, the Bank is willing to enter into the Amendment in
consideration for, among other things, a general release of liability, as
more particularly described herein, given in favor of the Bank and certain
other parties by the Companies and various other parties described herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the undersigned parties agree as
follows:
VI. DEFINITIONS.
Capitalized terms used herein but not defined herein shall have the
meaning ascribed thereto in the Credit Agreement.
VII. GENERAL RELEASE.
1. In consideration for the Bank's agreement to waive the Events of
Default under the Credit Agreement and extend certain consents under the
Successories, Inc. Security Agreement, each as more particularly described
in the Amendment, and for other good and valuable consideration, each
Company and each Guarantor, for: (i) itself, (ii) any parent, or
subsidiary thereof, (iii) any partnership or joint venture of which any
Company or any Guarantor (or any affiliate thereof) is a partner, (iv) any
parent, affiliate or subsidiary thereof or any partnership or joint venture
of which such person or entity (or any parent, affiliate or subsidiary
thereof) is a partner, and (v) the respective partners, officers,
directors, shareholders, heirs, legal representatives, legatees, successors
and assigns of all of the foregoing persons and entities, hereby release
and forever discharge Bank, their past, present and future shareholders,
successors, assigns, their respective heirs, legal representatives,
legatees, successors and assigns, of and from all actions, claims, demands,
damages, debts, losses, liabilities, indebtedness, causes of action either
at law or in equity and obligations of whatever kind or nature, whether
known or unknown, direct or indirect, new or existing, by reason of any
matter, cause or thing whatsoever from the beginning of the world to the
date hereof arising out of the claims asserted or which could have been
asserted by any Company or any Guarantor, as a borrower or a guarantor, in
connection with the Credit Agreement, any other loans or financial
accommodations to any Company or any Guarantor, any indebtedness evidenced
thereby and any other loan or security documents entered into pursuant
thereto.
2. In further consideration for the Bank's waiver and consent
described in the Amendment, each of the undersigned Companies and
Guarantors for: (i) itself, (ii) any parent, affiliate or subsidiary
thereof, (iii) any partnership or joint venture of which any Company or any
Guarantor (or any affiliate thereof) is a partner, (iv) any person or
entity owning the beneficial interest in any trust, any parent, affiliate
or subsidiary thereof or any partnership or joint venture of which such
person or entity (or any parent, affiliate or subsidiary thereof) is a
partner, and (v) the respective partners, officers, directors,
shareholders, heirs, legal representatives, legatees, successors and
assigns of all of the foregoing persons and entities, warrant, represent
and acknowledge that they have no defenses to the payment of, nor any right
to set off against, all or any of the obligations to Bank set forth in this
Release and in the notes or guaranties executed prior or pursuant hereto,
nor any counterclaims or other actions against Bank of any kind whatsoever
directly or indirectly or derivatively related thereto except to the extent
the foregoing may not be waived under applicable law.
3. It is acknowledged that each Company and each Guarantor, has read
this general release provision and consulted counsel before executing this
Release and that each Company and each Guarantor has relied upon its own
judgment and that of its counsel in executing same and has not relied on or
been induced by any representation, statement or act by any other party
referenced herein which is not referred to in this Release; that each
Company and each Guarantor enters into this Release voluntarily, with full
knowledge of its significance; and that this general release is in all
respects complete and final.
4. If any term or provision of this general release or the
application thereof to any person, entity or circumstance shall, to any
extent, be held invalid and/or unenforceable by a court of competent
jurisdiction, the remainder of this general release, or the application of
such term or provisions to persons, entities or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
thereby, and each term and provision of the general release shall be valid
and be enforced to the fullest extent permitted by law.
5. This Section II shall survive the termination of the Credit
Agreement and payment of all the indebtedness evidenced thereby or issued
pursuant thereto.
VIII. RATIFICATION AND AFFIRMATION.
The Credit Agreement and all guaranties thereof, together with all
other loan and security documents executed pursuant to the Credit
Agreement, is hereby ratified and affirmed and shall in all other respects
remain in full force and effect. Except as expressly provided herein,
nothing contained in this Release shall be construed as a waiver of any
existing Event of Default and the Bank reserves all rights and remedies
under the Credit Agreement and under applicable law.
IX. REPRESENTATIONS AND WARRANTIES.
Each Company hereby ratifies and affirms all the representations and
warranties contained in the Credit Agreement as true, complete and accurate
as of the date of this Release. Each Company, together with Celex
Successories Inc., B.L.G.C., Inc. and British Links Acquisition Corp.,
further represents and warrants that the Board of Directors of each
Company, of Celex Successories Inc., B.L.G.C., Inc. and British Links
Acquisition Corp. have approved the execution and delivery of this Release.
X. MISCELLANEOUS.
The provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective legal representatives,
successors and assigns. This instrument has been made and executed and
delivered in the State of Illinois and shall be governed by and construed
in accordance with the internal laws of the State of Illinois without
regard to conflicts of laws principles. This Release may be executed and
delivered in several counterparts with the intention that all such
counterparts, when taken together, shall constitute one and the same
instrument. One or more counterparts of this Release may be delivered by
facsimile, with the intention that delivery by such means shall have the
same effect as delivery of an original counterpart thereof. The section
headings contained in this Release are for convenience of reference only
and in no way shall modify any of the terms or provisions hereof.
IN WITNESS WHEREOF, the parties have entered into this Release as of
the day and year first above written.
SUCCESSORIES, INC.
By: __________________________
Its:__________________________
CELEBRATING EXCELLENCE, INC.
By: __________________________
Its:__________________________
SUCCESSORIES OF ILLINOIS, INC.
By: __________________________
Its:__________________________
CELEX SUCCESSORIES INC.
By: __________________________
Its:__________________________
BRITISH LINKS ACQUISITION CORP.
By: __________________________
Its: __________________________
B.L.G.C., INC.
By: __________________________
Its: __________________________
GUARANTY
WHEREAS, Successories, Inc. (f/k/a Celex Group, Inc.), an Illinois
corporation, Celebrating Excellence, Inc., an Illinois corporation and
Successories of Illinois, Inc., an Illinois corporation each having
principal offices located at 919 Springer Drive, Lombard, Illinois
(COLLECTIVELY HEREINAFTER REFERRED TO AS THE "DEBTOR"), desires or may
desire at some time and/or from time to time to obtain financial
accommodations from American National Bank and Trust Company of Chicago, a
national banking association (HEREINAFTER REFERRED TO AS THE "BANK"); and
WHEREAS, the undersigned guarantor is a corporation desiring to induce
the Bank, at its option, at any time, or from time to time, to extend
financial accommodations to Debtor and the undersigned benefits from such
financial accommodations (SAID UNDERSIGNED CORPORATION SEVERALLY
HEREINAFTER REFERRED TO AS THE "UNDERSIGNED").
NOW, THEREFORE FOR VALUE RECEIVED, and in consideration of advances,
credit or other financial accommodations heretofore, now or that hereafter
at any time be extended to the Debtor by the Bank, the undersigned (JOINTLY
AND SEVERALLY IF THERE BE MORE THAN ONE GUARANTOR) hereby unconditionally
guarantees, irrespective of the validity, regularity or enforceability of
any instrument, writing or agreement relating to or the subject of any such
financial accommodation, and whether or not due or to become due before or
after any bankruptcy or insolvency proceeding involving the Debtor or would
have become due but for Debtor's bankruptcy proceeding, the full and prompt
payment to the Bank at maturity, whether by acceleration or otherwise, and
at all times thereafter of any and all indebtedness, obligations and
liabilities of every kind and nature of the Debtor to the Bank (INCLUDING
ALL INDEBTEDNESS, OBLIGATIONS AND LIABILITIES OF PARTNERSHIPS, CREATED OR
ARISING WHILE THE DEBTOR MAY HAVE BEEN OR MAY BE A MEMBER THEREOF),
howsoever evidenced, whether now existing or hereafter created or arising,
directly or indirectly, primary or secondary, absolute or contingent, due
or to become due, or joint or several, and howsoever owned, held or
acquired, whether through discount, overdraft, purchase, direct loan or as
collateral, or otherwise, and the prompt, full and faithful performance and
discharge by the Debtor of each and every of the terms, conditions,
agreements, representations and warranties on the part of the Debtor
contained in any agreement, or in any modification or addenda thereto or
substitution thereof in connection with any advance, credit or financial
accommodation afforded by the Bank to the Debtor, together with interest
thereon; and the undersigned further agrees to pay all reasonable expenses
legal and/or otherwise, (INCLUDING COURT COSTS AND REASONABLE ATTORNEYS'
FEES), paid or incurred by the Bank in endeavoring to collect the
indebtedness, or any part thereof, or in enforcing this guaranty or in
defending any suit based on any act of commission or omission of the Bank
with respect to the indebtedness, collateral, or this guaranty or in
connection with any recovery claim hereinbelow defined (hereinafter
collectively called the "indebtedness").
In the case of dissolution, liquidation or insolvency (HOWSOEVER
EVIDENCED) of the Debtor or any of the undersigned, or in case any
bankruptcy, reorganization, debt arrangement or other proceeding under any
bankruptcy or insolvency law, or any dissolution, liquidation or
receivership proceeding, is instituted by or, against the Debtor, or the
undersigned, or the inability of the Debtor or the undersigned to pay debts
as they mature, or in case of the assignment by the Debtor or the
undersigned for the benefit of creditors, then upon the occurrence of any
such event, all indebtedness then existing shall at the option of the Bank,
without notice to anyone, immediately become due or accrued and be payable
from the undersigned (OR ANY THEREOF IF MORE THAN ONE GUARANTOR).
All payments received from the Debtor, or on account of the
indebtedness from whatsoever source, shall be taken and applied by the Bank
toward the payment of such of the indebtedness, and in such order of
application as the Bank may in its sole discretion from time to time elect,
and this guaranty shall apply to and secure any ultimate balance that shall
remain owing to the Bank. The Bank shall have the exclusive right to
determine how, when and what application of payments and credits, if any,
whether derived from the Debtor or any other source shall be made on the
indebtedness, and such determination shall be conclusive upon the
undersigned.
This guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect with
respect to each guarantor until written notice by United States registered
or certified mail, of its discontinuance as to such guarantor, or of the
dissolution of such guarantor, shall have been actually received by the
Bank and also until all indebtedness created or existing before receipt of
such notice shall have been fully paid. In case of any such
discontinuance, or dissolution of any guarantor or guarantors and notice
thereof to the Bank, this guarantee shall nevertheless continue and remain
in force against the other guarantor or guarantors until discontinued as to
such other guarantor or guarantors as hereinbefore provided. No
compromise, settlement, release or discharge of, or indulgence with respect
to, or failure, neglect or omission to enforce or exercise any right
against, any one or more guarantors or the fact that at any time or from
time to time, all the indebtedness may have been paid in full, shall
release or discharge the undersigned.
The liability hereunder shall nowise be affected or impaired by any of
the following, any or all of which may be done or omitted by the Bank in
its sole discretion without notice to anyone and irrespective of whether
the indebtedness shall be increased or decreased thereby (AND SAID BANK IS
HEREBY EXPRESSLY AUTHORIZED AT ITS SOLE DISCRETION TO MAKE FROM TIME TO
TIME, WITHOUT NOTICE TO ANYONE) any sale, pledge, surrender, compromise,
settlement, exchange, release, renewal, extension, modification, election
with respect to any collateral under Section 1111 or any other provision or
section of the Bankruptcy Code now existing or hereinafter amended; or
other disposition of or with respect to any of said indebtedness or any
security or collateral therefor, whether or not such disposition is
commercially reasonable or accomplished in a commercially reasonable
manner, and such liability shall be nowise affected or impaired by any
acceptance by the Bank of any security for, or other guarantors or obligors
of any of the indebtedness, or by any forbearance or indulgence by the Bank
in the collection of, or any failure, neglect or omission on its part to
realize upon any thereof, or to enforce any claims against any person or
persons primarily or secondarily liable thereon, or upon any collateral or
security therefor, or to enforce any lien upon or right of appropriation of
any moneys, credits or property of the Debtor in the possession or control
of the Bank, or by any application of payments or credits on the
indebtedness. Any act of commission or omission of any kind or at any time
upon the part of the Bank with respect to any matter whatsoever shall not
in any manner whatsoever affect or impair this guaranty nor the liability
thereunder. The undersigned hereby consents to all acts of commission or
omission of the Bank hereinabove set forth.
In order to hold the undersigned (OR ANY THEREOF IF THERE BE MORE THAN
ONE GUARANTOR) liable hereunder and to enforce this guaranty, there shall
be no obligation on the part of the Bank at any time to resort for payment
to the Debtor, or to any other guarantor, or any person, firm or
corporation liable for the indebtedness, or to any collateral, security,
property, liens or other rights or remedies of the Bank in respect to the
indebtedness or any part thereof all of which is hereby expressly waived by
the undersigned.
All diligence in collection, and all presentment for payment, demand,
protest and/or notice, as to any and everyone, of protest, dishonor,
default or nonpayment, and notice of the creation and existence of any and
all of the indebtedness, and of any security therefor, and of the
acceptance of this guaranty, or extensions of credit or indulgences
hereunder or of any other matters or things whatsoever relating hereto are
expressly waived.
The granting of additional credit from time to time by the Bank to the
Debtor in excess of the amount extended to the Debtor at the time this
guaranty is executed by the undersigned, without notice to the undersigned,
is hereby expressly authorized and shall nowise affect or impair this
guaranty.
Any and all moneys, credits or other property belonging to the
undersigned (OR ANY THEREOF IF THERE BE MORE THAN ONE GUARANTOR) in transit
to, or in the possession or under the control of Bank, or any agent or
bailee of Bank, may, without notice and opportunity to be heard, be
appropriated and applied against the liability of the undersigned
hereunder. The undersigned does hereby assign and transfer to the Bank any
and all cash, negotiable instruments, documents of title, chattel paper,
securities, certificates of deposit, deposit accounts, other cash
equivalents and other assets of the undersigned in transit to, or in the
possession or control of Bank, or any agent or bailee of Bank, for any
purpose and apply the same on any or all of the indebtedness. THE
UNDERSIGNED WAIVES EVERY DEFENSE, COUNTERCLAIM OR SETOFF WHICH THE
UNDERSIGNED MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY BANK IN
ENFORCING THIS GUARANTY, INCLUDING, WITHOUT LIMITATION, EVERY DEFENSE,
COUNTERCLAIM OR SETOFF WHICH THE UNDERSIGNED MAY NOW HAVE, OR HEREAFTER MAY
HAVE, AGAINST THE DEBTOR OR ANY OTHER PARTY LIABLE TO THE BANK IN ANY
MANNER. As further security, any and all debts and liabilities now or
hereafter arising and owing to any of the undersigned by the Debtor, or any
other party liable to the Bank are hereby subordinated to the Bank's claims
and are hereby assigned to the Bank. The undersigned ratifies and confirms
whatever Bank may do pursuant to the terms hereof and with respect to any
collateral for the indebtedness, and agrees that Bank shall not be liable
for any error of judgment or mistakes of fact or law.
To secure payment of the indebtedness, the undersigned grants to Bank
a security interest in all property of the undersigned delivered currently
herewith or now or at any time hereafter in the possession or control of
the Bank, and all proceeds of all such property and that the indebtedness
shall be secured pursuant to that certain Security Agreement, of even date
herewith, entered into by the undersigned and the Bank. The undersigned
agrees that the Bank shall have the rights and remedies of a secured party
under the Uniform Commercial Code of Illinois with respect to all of the
aforesaid property, including, without limitation thereof, the right to
sell or otherwise dispose of any or all of such property. The Bank may
without notice to anyone, apply or set off any balances, credits, deposits,
accounts, moneys or other indebtedness at any time credited by or due from
the Bank to any of the undersigned against the amounts due hereunder. Any
notification of intended deposition of any property required by law shall
be deemed reasonably and properly given if given at least five (5) calendar
days before such deposition.
Should a claim ("RECOVERY CLAIM") be made upon the Bank at any time
for recovery of any amount received by the Bank in payment of the
indebtedness (WHETHER RECEIVED FROM THE DEBTOR, THE UNDERSIGNED PURSUANT
HERETO, OR OTHERWISE) and should the Bank repay all or part of said amount
by reason of (1) any judgment, decree, or other of any court or
administrative body having jurisdiction over the Bank or any of its
property; or (2) any settlement or compromise of any such Recovery Claim
effected by the Bank with the claimant (INCLUDING THE DEBTOR), the
undersigned shall remain jointly and severally liable to the Bank for the
amount so repaid to the same extent as if such amount had never originally
been received by the Bank, notwithstanding any termination hereof or the
return of this document to any of the undersigned or the cancellation of
any note or other instrument evidencing any of the indebtedness.
In the event the Bank shall sell, assign or transfer the indebtedness,
or any part thereof, or grant participations therein, each and every
immediate or remote successive assignee, transferee, holder of or
participant therein, of all or any part of the indebtedness shall have the
right to enforce this guaranty by suit or otherwise for the benefit of such
assignee, transferee holder or participant, as fully as if such assigned,
transferee holder or participant were herein by name specifically given
such rights, powers and benefits; but the Bank shall have a unimpaired,
prior and superior right to enforce this guaranty for its benefit as to so
much of the indebtedness as it has not sold, assigned or transferred.
No release or discharge of any one or more of the undersigned (IF
THERE BE MORE THAN ONE GUARANTOR), or of any other person, whether
primarily or secondarily liable for and obligated with respect to the
indebtedness, or the institution of bankruptcy, receivership, insolvency,
reorganization, dissolution or liquidation proceedings by or against any
such guarantor or person, or the entry of any restraining or other order in
any such proceeding, shall release or discharge the undersigned or any
other guarantor of the indebtedness, or any other person, firm or
corporation liable to the Bank for the indebtedness, unless and until all
of the indebtedness shall have been fully paid.
No delay on the part of the Bank in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise
by the Bank of any right or remedy shall preclude other or further exercise
thereof, or the exercise of any other right or remedy; nor shall any
modification or waiver of any of the provisions of this guaranty be binding
upon the Bank except as expressly set forth in a writing duly signed and
delivered on behalf of the Bank. No action of the Bank permitted hereunder
shall in any way affect or impair the rights of the Bank and the obligation
of the undersigned under this guaranty.
This guaranty has been delivered at Chicago, Illinois, and shall be
construed according to the laws of the State of Illinois, in which State it
shall be performed by the undersigned. All actions arising directly or
indirectly as a result of a consequence of this guaranty shall be
instituted and litigated only in courts having situs in the City of
Chicago, Illinois, and the undersigned hereby consents to the jurisdiction
of any State or Federal Court located and having its situs in said city.
Wherever possible each provision of this guaranty shall be interpreted
in such manner as to the effective and valid under applicable law, but if
any provision of this guaranty shall be prohibited by or invalid under such
law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this guaranty.
It is agreed that the undersigned's liability hereunder is several and
is independent of any other guaranties at any time in effect with respect
to all or any part of the Debtor's indebtedness to the Bank, and that the
undersigned's liability hereunder may be enforced regardless of the
existence of any such guaranties.
This guaranty, and each and every part hereof, shall be binding upon
the undersigned (JOINTLY AND SEVERALLY IF THERE BE MORE THAN ONE GUARANTOR)
and upon the heirs, legal representatives, successors and assigns of the
undersigned, and shall inure to the benefit of the Bank, its successors and
assigns.
The undersigned represents that it is a corporation duly organized,
existing and in good standing under the laws of the state of Texas, and
that the execution and delivery of this guaranty and the performance of the
obligations it imposes are within its corporate powers, have been duly
authorized by all necessary action of its board of directors, and do not
contravene the terms of its Articles of Incorporation or bylaws. The
undersigned represents that the execution and delivery of this guaranty and
the performance of the obligations it imposes (i) do not violate any law
and do not conflict with any agreement by which it is bound, (ii) that no
consent or approval of any governmental authority or any third party is
required in connection with the execution or delivery of this guaranty or
the performance of the obligations it imposes, (iii) there are no actions,
suits or proceedings pending, or to the best of the undersigned's knowledge
threatened against the undersigned before any court or governmental
department, commission, board, bureau agency or instrumentality, domestic
or foreign, which, if determined adversely would have a material adverse
effect on the assets, business or financial condition of the undersigned
and (iv) that this guaranty is a valid and binding agreement, enforceable
according to its terms. The undersigned represents that all balance
sheets, profit and loss statements, and other information, if any,
furnished to the Bank are accurate and fairly reflect the financial
condition of the organizations and persons to which they apply on their
effective dates, including contingent liabilities of every type, which
financial condition has not changed materially and adversely since those
dates. The undersigned further represents that it has good and marketable
title to all of its property and assets, free and clear of any security
interests, mortgages, liens or other encumbrances other than those in favor
of the Bank.
UNTIL THE INDEBTEDNESS HAS BEEN DISCHARGED AND PAID IN FULL AND ALL
COMMITMENTS TO LEND THEREUNDER TERMINATED, THE UNDERSIGNED HEREBY
SUBORDINATES IN RIGHT OF PAYMENT TO THE PRIOR PAYMENT OF THE INDEBTEDNESS
TO THE BANK ANY RIGHTS THE UNDERSIGNED MAY HAVE OR ACQUIRE BY WAY OF
SUBROGATION UNDER THIS GUARANTY BY ANY PAYMENT MADE HEREUNDER AND ANY RIGHT
OF REIMBURSEMENT OR CONTRIBUTION AGAINST THE DEBTOR WHICH THE UNDERSIGNED
MAY HAVE IN CONNECTION WITH THE PAYMENT OF THE INDEBTEDNESS, INTEREST AND
FEES AND EXPENSES BY THE UNDERSIGNED TO THE BANK.
THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING (i) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN
CONNECTION WITH THIS GUARANTY OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED IN CONNECTION HEREWITH, OR (ii) ARISING FROM ANY
DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS GUARANTY, AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
SIGNED AND SEALED by the undersigned at Chicago, Illinois, as of the
____ day of December, 1996.
B.L.G.C., Inc.
By:_______________________________
Its:_______________________________
GUARANTY
WHEREAS, Successories, Inc. (f/k/a Celex
Group, Inc.), an Illinois corporation, Celebrating Excellence, Inc., an
Illinois corporation and Successories of Illinois, Inc., an Illinois
corporation each having principal offices located at 919 Springer Drive,
Lombard, Illinois (COLLECTIVELY HEREINAFTER REFERRED TO AS THE "DEBTOR"),
desires or may desire at some time and/or from time to time to obtain
financial accommodations from American National Bank and Trust Company of
Chicago, a national banking association (HEREINAFTER REFERRED TO AS THE
"BANK"); and
WHEREAS, the undersigned guarantor is a corporation desiring to induce
the Bank, at its option, at any time, or from time to time, to extend
financial accommodations to Debtor and the undersigned benefits from such
financial accommodations (SAID UNDERSIGNED CORPORATION SEVERALLY
HEREINAFTER REFERRED TO AS THE "UNDERSIGNED").
NOW, THEREFORE FOR VALUE RECEIVED, and in consideration of advances,
credit or other financial accommodations heretofore, now or that hereafter
at any time be extended to the Debtor by the Bank, the undersigned (JOINTLY
AND SEVERALLY IF THERE BE MORE THAN ONE GUARANTOR) hereby unconditionally
guarantees, irrespective of the validity, regularity or enforceability of
any instrument, writing or agreement relating to or the subject of any such
financial accommodation, and whether or not due or to become due before or
after any bankruptcy or insolvency proceeding involving the Debtor or would
have become due but for Debtor's bankruptcy proceeding, the full and prompt
payment to the Bank at maturity, whether by acceleration or otherwise, and
at all times thereafter of any and all indebtedness, obligations and
liabilities of every kind and nature of the Debtor to the Bank (INCLUDING
ALL INDEBTEDNESS, OBLIGATIONS AND LIABILITIES OF PARTNERSHIPS, CREATED OR
ARISING WHILE THE DEBTOR MAY HAVE BEEN OR MAY BE A MEMBER THEREOF),
howsoever evidenced, whether now existing or hereafter created or arising,
directly or indirectly, primary or secondary, absolute or contingent, due
or to become due, or joint or several, and howsoever owned, held or
acquired, whether through discount, overdraft, purchase, direct loan or as
collateral, or otherwise, and the prompt, full and faithful performance and
discharge by the Debtor of each and every of the terms, conditions,
agreements, representations and warranties on the part of the Debtor
contained in any agreement, or in any modification or addenda thereto or
substitution thereof in connection with any advance, credit or financial
accommodation afforded by the Bank to the Debtor, together with interest
thereon; and the undersigned further agrees to pay all reasonable expenses
legal and/or otherwise, (INCLUDING COURT COSTS AND REASONABLE ATTORNEYS'
FEES), paid or incurred by the Bank in endeavoring to collect the
indebtedness, or any part thereof, or in enforcing this guaranty or in
defending any suit based on any act of commission or omission of the Bank
with respect to the indebtedness, collateral, or this guaranty or in
connection with any recovery claim hereinbelow defined (hereinafter
collectively called the "indebtedness").
In the case of dissolution, liquidation or insolvency (HOWSOEVER
EVIDENCED) of the Debtor or any of the undersigned, or in case any
bankruptcy, reorganization, debt arrangement or other proceeding under any
bankruptcy or insolvency law, or any dissolution, liquidation or
receivership proceeding, is instituted by or, against the Debtor, or the
undersigned, or the inability of the Debtor or the undersigned to pay debts
as they mature, or in case of the assignment by the Debtor or the
undersigned for the benefit of creditors, then upon the occurrence of any
such event, all indebtedness then existing shall at the option of the Bank,
without notice to anyone, immediately become due or accrued and be payable
from the undersigned (OR ANY THEREOF IF MORE THAN ONE GUARANTOR).
All payments received from the Debtor, or on account of the
indebtedness from whatsoever source, shall be taken and applied by the Bank
toward the payment of such of the indebtedness, and in such order of
application as the Bank may in its sole discretion from time to time elect,
and this guaranty shall apply to and secure any ultimate balance that shall
remain owing to the Bank. The Bank shall have the exclusive right to
determine how, when and what application of payments and credits, if any,
whether derived from the Debtor or any other source shall be made on the
indebtedness, and such determination shall be conclusive upon the
undersigned.
This guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect with
respect to each guarantor until written notice by United States registered
or certified mail, of its discontinuance as to such guarantor, or of the
dissolution of such guarantor, shall have been actually received by the
Bank and also until all indebtedness created or existing before receipt of
such notice shall have been fully paid. In case of any such discontinuance
or dissolution of any guarantor or guarantors and notice thereof to the
Bank, this guarantee shall nevertheless continue and remain in force
against the other guarantor or guarantors until discontinued as to such
other guarantor or guarantors as hereinbefore provided. No compromise,
settlement, release or discharge of, or indulgence with respect to, or
failure, neglect or omission to enforce or exercise any right against, any
one or more guarantors or the fact that at any time or from time to time,
all the indebtedness may have been paid in full, shall release or discharge
the undersigned.
The liability hereunder shall nowise be affected or impaired by any of
the following, any or all of which may be done or omitted by the Bank in
its sole discretion without notice to anyone and irrespective of whether
the indebtedness shall be increased or decreased thereby (AND SAID BANK IS
HEREBY EXPRESSLY AUTHORIZED AT ITS SOLE DISCRETION TO MAKE FROM TIME TO
TIME, WITHOUT NOTICE TO ANYONE) any sale, pledge, surrender, compromise,
settlement, exchange, release, renewal, extension, modification, election
with respect to any collateral under Section 1111 or any other provision or
section of the Bankruptcy Code now existing or hereinafter amended; or
other disposition of or with respect to any of said indebtedness or any
security or collateral therefor, whether or not such disposition is
commercially reasonable or accomplished in a commercially reasonable
manner, and such liability shall be nowise affected or impaired by any
acceptance by the Bank of any security for, or other guarantors or obligors
of any of the indebtedness, or by any forbearance or indulgence by the Bank
in the collection of, or any failure, neglect or omission on its part to
realize upon any thereof, or to enforce any claims against any person or
persons primarily or secondarily liable thereon, or upon any collateral or
security therefor, or to enforce any lien upon or right of appropriation of
any moneys, credits or property of the Debtor in the possession or control
of the Bank, or by any application of payments or credits on the
indebtedness. Any act of commission or omission of any kind or at any time
upon the part of the Bank with respect to any matter whatsoever shall not
in any manner whatsoever affect or impair this guaranty nor the liability
thereunder. The undersigned hereby consents to all acts of commission or
omission of the Bank hereinabove set forth.
In order to hold the undersigned (OR ANY THEREOF IF THERE BE MORE THAN
ONE GUARANTOR) liable hereunder and to enforce this guaranty, there shall
be no obligation on the part of the Bank at any time to resort for payment
to the Debtor, or to any other guarantor, or any person, firm or
corporation liable for the indebtedness, or to any collateral, security,
property, liens or other rights or remedies of the Bank in respect to the
indebtedness or any part thereof all of which is hereby expressly waived by
the undersigned.
All diligence in collection, and all presentment for payment, demand,
protest and/or notice, as to any and everyone, of protest, dishonor,
default or nonpayment, and notice of the creation and existence of any and
all of the indebtedness, and of any security therefor, and of the
acceptance of this guaranty, or extensions of credit or indulgences
hereunder or of any other matters or things whatsoever relating hereto are
expressly waived.
The granting of additional credit from time to time by the Bank to the
Debtor in excess of the amount extended to the Debtor at the time this
guaranty is executed by the undersigned, without notice to the undersigned,
is hereby expressly authorized and shall nowise affect or impair this
guaranty.
Any and all moneys, credits or other property belonging to the
undersigned (OR ANY THEREOF IF THERE BE MORE THAN ONE GUARANTOR) in transit
to, or in the possession or under the control of Bank, or any agent or
bailee of Bank, may, without notice and opportunity to be heard, be
appropriated and applied against the liability of the undersigned
hereunder. The undersigned does hereby assign and transfer to the Bank any
and all cash, negotiable instruments, documents of title, chattel paper,
securities, certificates of deposit, deposit accounts, other cash
equivalents and other assets of the undersigned in transit to, or in the
possession or control of Bank, or any agent or bailee of Bank, for any
purpose and apply the same on any or all of the indebtedness. THE
UNDERSIGNED WAIVES EVERY DEFENSE, COUNTERCLAIM OR SETOFF WHICH THE
UNDERSIGNED MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY BANK IN
ENFORCING THIS GUARANTY, INCLUDING, WITHOUT LIMITATION, EVERY DEFENSE,
COUNTERCLAIM OR SETOFF WHICH THE UNDERSIGNED MAY NOW HAVE, OR HEREAFTER MAY
HAVE, AGAINST THE DEBTOR OR ANY OTHER PARTY LIABLE TO THE BANK IN ANY
MANNER. As further security, any and all debts and liabilities now or
hereafter arising and owing to any of the undersigned by the Debtor, or any
other party liable to the Bank are hereby subordinated to the Bank's claims
and are hereby assigned to the Bank. The undersigned ratifies and confirms
whatever Bank may do pursuant to the terms hereof and with respect to any
collateral for the indebtedness, and agrees that Bank shall not be liable
for any error of judgment or mistakes of fact or law.
To secure payment of the indebtedness, the undersigned grants to Bank
a security interest in all property of the undersigned delivered currently
herewith or now or at any time hereafter in the possession or control of
the Bank, and all proceeds of all such property and that the indebtedness
shall be secured pursuant to that certain Security Agreement, of even date
herewith, entered into by the undersigned and the Bank. The undersigned
agrees that the Bank shall have the rights and remedies of a secured party
under the Uniform Commercial Code of Illinois with respect to all of the
aforesaid property, including, without limitation thereof, the right to
sell or otherwise dispose of any or all of such property. The Bank may
without notice to anyone, apply or set off any balances, credits, deposits,
accounts, moneys or other indebtedness at any time credited by or due from
the Bank to any of the undersigned against the amounts due hereunder. Any
notification of intended deposition of any property required by law shall
be deemed reasonably and properly given if given at least five (5) calendar
days before such deposition.
Should a claim ("RECOVERY CLAIM") be made upon the Bank at any time
for recovery of any amount received by the Bank in payment of the
indebtedness (WHETHER RECEIVED FROM THE DEBTOR, THE UNDERSIGNED PURSUANT
HERETO, OR OTHERWISE) and should the Bank repay all or part of said amount
by reason of (1) any judgment, decree, or other of any court or
administrative body having jurisdiction over the Bank or any of its
property; or (2) any settlement or compromise of any such Recovery Claim
effected by the Bank with the claimant (INCLUDING THE DEBTOR), the
undersigned shall remain jointly and severally liable to the Bank for the
amount so repaid to the same extent as if such amount had never originally
been received by the Bank, notwithstanding any termination hereof or the
return of this document to any of the undersigned or the cancellation of
any note or other instrument evidencing any of the indebtedness.
In the event the Bank shall sell, assign or transfer the indebtedness,
or any part thereof, or grant participations therein, each and every
immediate or remote successive assignee, transferee, holder of or
participant therein, of all or any part of the indebtedness shall have the
right to enforce this guaranty by suit or otherwise for the benefit of such
assignee, transferee holder or participant, as fully as if such assigned,
transferee holder or participant were herein by name specifically given
such rights, powers and benefits; but the Bank shall have a unimpaired,
prior and superior right to enforce this guaranty for its benefit as to so
much of the indebtedness as it has not sold, assigned or transferred.
No release or discharge of any one or more of the undersigned (IF
THERE BE MORE THAN ONE GUARANTOR), or of any other person, whether
primarily or secondarily liable for and obligated with respect to the
indebtedness, or the institution of bankruptcy, receivership, insolvency,
reorganization, dissolution or liquidation proceedings by or against any
such guarantor or person, or the entry of any restraining or other order in
any such proceeding, shall release or discharge the undersigned or any
other guarantor of the indebtedness, or any other person, firm or
corporation liable to the Bank for the indebtedness, unless and until all
of the indebtedness shall have been fully paid.
No delay on the part of the Bank in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise
by the Bank of any right or remedy shall preclude other or further exercise
thereof, or the exercise of any other right or remedy; nor shall any
modification or waiver of any of the provisions of this guaranty be binding
upon the Bank except as expressly set forth in a writing duly signed and
delivered on behalf of the Bank. No action of the Bank permitted hereunder
shall in any way affect or impair the rights of the Bank and the obligation
of the undersigned under this guaranty.
This guaranty has been delivered at Chicago, Illinois, and shall be
construed according to the laws of the State of Illinois, in which State it
shall be performed by the undersigned. All actions arising directly or
indirectly as a result of a consequence of this guaranty shall be
instituted and litigated only in courts having situs in the City of
Chicago, Illinois, and the undersigned hereby consents to the jurisdiction
of any State or Federal Court located and having its situs in said city.
Wherever possible each provision of this guaranty shall be interpreted
in such manner as to the effective and valid under applicable law, but if
any provision of this guaranty shall be prohibited by or invalid under such
law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this guaranty.
It is agreed that the undersigned's liability hereunder is several and
is independent of any other guaranties at any time in effect with respect
to all or any part of the Debtor's indebtedness to the Bank, and that the
undersigned's liability hereunder may be enforced regardless of the
existence of any such guaranties.
This guaranty, and each and every part hereof, shall be binding upon
the undersigned (JOINTLY AND SEVERALLY IF THERE BE MORE THAN ONE GUARANTOR)
and upon the heirs, legal representatives, successors and assigns of the
undersigned, and shall inure to the benefit of the Bank, its successors and
assigns.
The undersigned represents that it is a corporation duly organized,
existing and in good standing under the laws of the state of Illinois, and
that the execution and delivery of this guaranty and the performance of the
obligations it imposes are within its corporate powers, have been duly
authorized by all necessary action of its board of directors, and do not
contravene the terms of its Articles of Incorporation or bylaws. The
undersigned represents that the execution and delivery of this guaranty and
the performance of the obligations it imposes (i) do not violate any law
and do not conflict with any agreement by which it is bound, (ii) that no
consent or approval of any governmental authority or any third party is
required in connection with the execution or delivery of this guaranty or
the performance of the obligations it imposes, (iii) there are no actions,
suits or proceedings pending, or to the best of the undersigned's knowledge
threatened against the undersigned before any court or governmental
department, commission, board, bureau agency or instrumentality, domestic
or foreign, which, if determined adversely would have a material adverse
effect on the assets, business or financial condition of the undersigned
and (iv) that this guaranty is a valid and binding agreement, enforceable
according to its terms. The undersigned represents that all balance
sheets, profit and loss statements, and other information, if any,
furnished to the Bank are accurate and fairly reflect the financial
condition of the organizations and persons to which they apply on their
effective dates, including contingent liabilities of every type, which
financial condition has not changed materially and adversely since those
dates. The undersigned further represents that it has good and marketable
title to all of its property and assets, free and clear of any security
interests, mortgages, liens or other encumbrances other than those in favor
of the Bank.
UNTIL THE INDEBTEDNESS HAS BEEN DISCHARGED AND PAID IN FULL AND ALL
COMMITMENTS TO LEND THEREUNDER TERMINATED, THE UNDERSIGNED HEREBY
SUBORDINATES IN RIGHT OF PAYMENT TO THE PRIOR PAYMENT OF THE INDEBTEDNESS
TO THE BANK ANY RIGHTS THE UNDERSIGNED MAY HAVE OR ACQUIRE BY WAY OF
SUBROGATION UNDER THIS GUARANTY BY ANY PAYMENT MADE HEREUNDER AND ANY RIGHT
OF REIMBURSEMENT OR CONTRIBUTION AGAINST THE DEBTOR WHICH THE UNDERSIGNED
MAY HAVE IN CONNECTION WITH THE PAYMENT OF THE INDEBTEDNESS, INTEREST AND
FEES AND EXPENSES BY THE UNDERSIGNED TO THE BANK.
THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING (i) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN
CONNECTION WITH THIS GUARANTY OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED IN CONNECTION HEREWITH, OR (ii) ARISING FROM ANY
DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS GUARANTY, AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
SIGNED AND SEALED by the undersigned at Chicago, Illinois, as of the
____ day of December, 1996.
BRITISH LINKS ACQUISITION CORP.
By:_______________________________
Its:_______________________________
OFFICER'S CERTIFICATE AS TO
NO DEFAULT AND RELATED MATTERS
I, Arnold M. Anderson, as the duly elected Chief Executive
Officer and Chairman of the Board of Directors of Successories, Inc. (f/k/a
Celex Group, Inc.), Celebrating Excellence, Inc. and Successories of
Illinois, Inc. (collectively, the "Companies"), on behalf of such
Companies as such officer, to induce American National Bank and Trust
Company of Chicago ("Bank") to extend financial accommodations pursuant to
that certain Amended and Restated Credit Agreement (the "Credit Agreement")
dated as of July 31, 1995 as amended by that certain First Amendment
to Credit Agreement, dated September 25, 1995, that certain Second
Amendment to Credit Agreement, dated February 7, 1996, that certain Third
Amendment to Credit Agreement, dated May 1, 1996, and that certain
Waiver No. 9, Consent No. 1 and Fourth Amendment to Amended and Restated
Credit Agreement, of even date herewith, in each case among the Companies
and Bank do hereby certify on behalf of the Companies to Bank that, as of
the date hereof:
(i) There exists no Default or Event of Default under the
Credit Agreement or the Security Documents (as that term is
defined in the Credit Agreement); and
(ii) The representations and warranties of the Companies set
forth in the Credit Agreement and the Security Documents are
true and correct in all material respects.
Dated as of the ___ day of December, 1996.
_____________________________________
OFFICER'S CERTIFICATE AS TO
NO DEFAULT AND RELATED MATTERS
I, Arnold M. Anderson, as the duly elected Chief Executive
Officer and Chairman of the Board of Directors of Successories, Inc. (f/k/a
Celex Group, Inc.), Celebrating Excellence, Inc. and Successories of
Illinois, Inc. (collectively, the "Companies"), on behalf of such
Companies as such officer, to induce American National Bank and Trust
Company of Chicago ("Bank") to extend financial accommodations pursuant to
that certain Amended and Restated Credit Agreement (the "Credit Agreement")
dated as of July 31, 1995 as amended by that certain First Amendment
to Credit Agreement, dated September 25, 1995, that certain Second
Amendment to Credit Agreement, dated February 7, 1996, that certain Third
Amendment to Credit Agreement, dated May 1, 1996, that certain Waiver No. 9,
Consent No. 1 and Fourth Amendment to Amended and Restated Credit
Agreement, dated December 16, 1996, and that certain Fifth Amendment to
Amended and Restated Credit Agreement, of even date herewith, in each case
among the Companies and Bank do hereby certify on behalf of the Companies
to Bank that, as of the date hereof:
(i) There exists no Default or Event of Default under the
Credit Agreement or the Security Documents (as that term is defined in the
Credit Agreement); and
(ii) The representations and warranties of the Companies set
forth in the Credit Agreement and the Security Documents are true and correct
in all material respects.
Dated as of the 17th day of December, 1996.
_____________________________________
OFFICER'S CERTIFICATE AS TO
NO DEFAULT AND RELATED MATTERS
I, James M. Beltrame, as the duly elected President and Chief
Operating Officer of Successories, Inc. (f/k/a Celex Group, Inc.),
Celebrating Excellence, Inc. and Successories of Illinois, Inc.
(collectively, the "Companies"), on behalf of such Companies as such officer,
to induce American National Bank and Trust Company of Chicago ("Bank")
to extend financial accommodations pursuant to that certain Amended
and Restated Credit Agreement (the "Credit Agreement") dated as of
July 31, 1995 as amended by that certain First Amendment to Credit
Agreement, dated September 25, 1995, that certain Second Amendment to Credit
Agreement, dated February 7, 1996, that certain Third Amendment to Credit
Agreement, dated May 1, 1996, that certain Waiver No. 9, Consent No. 1 and
Fourth Amendment to Amended and Restated Credit Agreement, dated
December 16, 1996 and that certain Fifth Amendment to Amended and Restated
Credit Agreement, of even date herewith, in each case among the Companies
and Bank do hereby certify on behalf of the Companies to Bank that, as of
the date hereof:
(i) There exists no Default or Event of Default under the
Credit Agreement or the Security Documents (as that term is defined in the
Credit Agreement); and
(ii) The representations and warranties of the Companies set
forth in the Credit Agreement and the Security Documents are true and
correct in all material respects.
Dated as of the 17th day of December, 1996.
_____________________________________
OFFICER'S CERTIFICATE AS TO
NO DEFAULT AND RELATED MATTERS
I, James M. Beltrame, as the duly elected President and Chief
Operating Officer of Successories, Inc. (f/k/a Celex Group, Inc.),
Celebrating Excellence, Inc. and Successories of Illinois, Inc.
(collectively, the "Companies"), on behalf of such Companies as such officer,
to induce American National Bank and Trust Company of Chicago ("Bank")
to extend financial accommodations pursuant to that certain Amended
and Restated Credit Agreement (the "Credit Agreement") dated as of
July 31, 1995 as amended by that certain First Amendment to Credit
Agreement, dated September 25, 1995, that certain Second Amendment to Credit
Agreement, dated February 7, 1996, that certain Third Amendment to Credit
Agreement, dated May 1, 1996, and that certain Waiver No. 9, Consent
No. 1 and Fourth Amendment to Amended and Restated Credit Agreement,
of even date herewith, in each case among the Companies and Bank do hereby
certify on behalf of the Companies to Bank that, as of the date hereof:
(i) There exists no Default or Event of Default under the
Credit Agreement or the Security Documents (as that term is defined in the
Credit Agreement); and
(ii) The representations and warranties of the Companies set
forth in the Credit Agreement and the Security Documents are true and
correct in all material respects.
Dated as of the ___ day of December, 1996.
_____________________________________
PLEDGE AGREEMENT
(Subsidiary Stock)
THIS PLEDGE AGREEMENT dated as of
December __, 1996 (this "Pledge Agreement"), given by Successories, Inc.
(f/k/a Celex Group, Inc.), an Illinois corporation (the "Company"), in
favor of American National Bank and Trust Company of Chicago, a national
banking association (the "Bank").
W I T N E S S E T H:
WHEREAS, the Company has entered into an Amended and Restated
Credit Agreement, dated as of July 31, 1995 (as amended, extended,
modified or supplemented from time to time, the "Credit Agreement"), with
the Bank pursuant to which the Bank may make loans to the Company; and
WHEREAS, as a condition to the Bank's advances to the Company
under the Credit Agreement, the Company is required, among other
things, to pledge to the Bank and grant a first-priority security interest
to the Bank in and to 100% of the issued and outstanding capital stock
of, among other things, British Links Acquisition Corp., an Illinois
corporation and B.L.G.C., Inc., a Texas corporation (collectively the
"Pledged Subsidiaries" and each individually a "Pledged Subsidiary").
NOW, THEREFORE, for value received and pursuant to the Credit
Agreement, the Company hereby grants a first-priority security interest
in and to, and herewith delivers to the Bank stock certificates
representing, 100% of the issued and outstanding capital stock of the Pledged
Subsidiaries (said shares of stock, together with any other shares and
securities from time to time receivable or otherwise distributed in
respect of or in exchange for any or all of such shares, being called
the "Pledged Stock"), to secure, (a) the payment of all obligations of
the Company to the Bank for principal and interest thereon under the
Credit Agreement, (b) the Amended and Restated Revolving Note, dated as of
May 1, 1996, in the original principal amount of $2,500,000; (c) the Amended
and Restated Term Note, dated as of May 1, 1996, in the original
principal amount of $9,000,000; (d) the performance of the covenants
herein contained and any monies expended by the Bank in connection
therewith; (e) the payment of all obligations and the performance
of all covenants of the Company under the Credit Agreement, Collateral
Assignment of Partnership Interest, dated as of October 25, 1994, the
Security Agreement, dated as of July 31, 1995, the Trademark Security
Agreement dated July 31, 1995, the Copyright Security Agreement, dated
July 31, 1995 and any other documents, agreements or instruments between
the Company and the Bank given in connection therewith; and (f) any and all
other indebtedness, obligations and liabilities of any kind of the Company
to the Bank, now or hereafter existing, direct or indirect
(including, without limitation, any participation interest acquired by the
bank in any such indebtedness, obligations or liabilities of the Company to
any other person), absolute or contingent, joint and/or several, secured or
unsecured, arising by operation of law or otherwise, and whether incurred
by the Company as principal, surety, endorser, guarantor, accommodation
party or otherwise (all of the aforesaid indebtedness, obligations and
liabilities of the Company being herein called the "Secured Obligations",
and all of the documents, agreements and instruments between the Company
and the Bank evidencing or securing the repayment of, or otherwise
pertaining to the Secured Obligations being herein collectively called the
"Operative Documents").
The Company further represents and warrants to, and agrees with,
the Bank as follows:
1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants that the Pledged Stock is represented by the stock certificate or
certificates described below, and that such stock certificate or
certificates, accompanied by an instrument of assignment or transfer duly
executed in blank by the Company as the owner named in such stock
certificate or certificates, have been delivered to the Bank by the Company:
DESCRIPTION OF STOCK CERTIFICATE
______ shares of common stock of British Links Acquisition Corp.
represented by certificate nos. _______________; and ______ shares of
common stock of B.L.G.C., Inc. represented by certificate nos.
__________________. The Company further represents and warrants that the
Pledged Stock is duly authorized and validly issued, fully paid and
nonassessable and constitutes all of the issued and outstanding shares of,
respectively, British Links Acquisition Corp. and B.L.G.C., Inc. and that
the Company is the legal and beneficial owner of the Pledged Stock, free
and clear of all liens other than the lien of Bank hereunder, with full
right and power to deliver, pledge and assign the Pledged Stock to the
Bank hereunder, and that the pledge of the Pledged Stock pursuant to
this Pledge Agreement creates in favor of the Bank a valid and perfected
first priority security interest in the Pledged Stock enforceable against the
Company and all third parties and securing the payment of the Secured
Obligations. Without limiting the foregoing, the Company hereby
incorporates by reference all the representations and warranties
contained in Article IV of the Credit Agreement.
2. TITLE; STOCK RIGHTS, DIVIDENDS, ETC. The Company will warrant
and defend the Bank's title to the Pledged Stock, and the liens therein
created, against all claims of all persons, and will maintain and preserve
such security interest. It is understood and agreed that the collateral
hereunder includes any stock rights, stock dividends, liquidating
dividends, new securities, payments, distributions and proceeds (including
cash dividends and sale proceeds) and other property to which the Company may
become entitled by reason of the ownership of the Pledged Stock during the
existence of this Pledge Agreement, and any such property received by the
Company shall be held in trust and forthwith delivered to the Bank to be
held hereunder in accordance with the terms of this Pledge Agreement.
3. REGISTRATION RIGHTS. If any Pledged Subsidiary at any time or
from time to time proposes to register any of its securities under the
Securities Act of 1933, or any analogous foreign law, the Company will at
each such time give notice to the Bank of the Pledged Subsidiary's intentions
so to do. Upon the request of the Bank, given thirty (30) days after receipt
of such notice, the Company will cause all Pledged Stock to be included in
the registration statement proposed to be filed, all to the extent requisite
to permit the public sale or other public disposition of such Pledged Stock
so registered by the holders thereof. The costs and expenses of all such
registrations and qualifications under said Act or any analogous foreign
law shall be paid by the Company or the Pledged Subsidiary, except that
underwriting discounts and commissions in respect of any Pledged Stock
sold pursuant to any such registration statement shall be borne by the
sellers thereof. As expeditiously as possible after the effective date of
any such registration statement, the Company will deliver in exchange for
any certificates representing shares of Pledged Stock so registered pursuant
to such registration, which bear any restrictive legend, new Pledged Stock
certificates not bearing such legend or any similar legend. In the event
of any such registration, the Company hereby agrees to indemnify and hold
harmless the Bank as pledgee of the Pledged Stock against any losses,
claims, damages or liabilities to which the Bank may become subject to the
extent that such losses, claims, damages or liabilities arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in any such registration statement, and any
preliminary prospectus or filed prospectus, or in any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact or required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Bank for any legal or other expenses reasonably incurred by the
Bank in connection with investigating or defending any such loss, claim,
damage or liability. The indemnifications contained in this paragraph
shall include each person, if any, who controls the Bank.
4. EVENTS OF DEFAULT; REMEDIES.
(a) Upon the occurrence of any Event of Default under the
Credit Agreement, the Bank shall have all of the rights and
remedies provided by law and/or by this Pledge Agreement,
including but not limited to all of the rights and remedies
of a secured party under the Illinois Uniform Commercial Code,
and the Company hereby authorizes the Bank to sell all or any
part of the Pledged Stock at public or private sale and to
apply the proceeds of such sale to the costs and expenses
thereof (including the reasonable attorneys' fees and
disbursements incurred by the Bank) and then to the payment of
the other Secured Obligations as set forth below. Any
requirement of reasonable notice shall be met if the Bank sends
such notice to the Company, by registered or certified mail,
at least 5 days prior to the date of sale, disposition or
other event giving rise to the required notice. The Bank may
be the purchaser at any such sale. The Company expressly
authorizes such sale or sales of the Pledged Stock in advance
of and to the exclusion of any sale or sales of or other
realization upon any other collateral securing indebtedness or
other obligations owed to the Bank. The Bank shall be under
no obligation to preserve rights against prior parties.
(b) The Company hereby waives as to the Bank any right of
subrogation or marshalling of such stock and other
collateral for indebtedness or other obligations owed to the
Bank. To this end, the Company hereby expressly agrees that
any such collateral or other security of the Company or any
other party which the Bank may hold, or which may come to
it or its possession, may be dealt with in all respects
and particulars as though this Pledge Agreement were not in
existence. The Company agrees and acknowledges that because
of applicable securities laws, the Bank may not be able to
effect a public sale of the Pledged Stock and sales at a
private sale may be on terms less favorable than if such
securities were sold at a public sale and may be at a price
less favorable than a public sale. The Company agrees that
all such private sales made under the foregoing
circumstances conducted reasonably and in good faith by
the Bank shall be deemed to have been made in a commercially
reasonable manner.
5. ADDITIONAL REMEDIES; IRREVOCABLE PROXY.
(a) Upon the occurrence of any default under the Operative
Documents, the Bank shall have also the right to vote the
Pledged Stock on all questions after giving notice to
the Company of its election to exercise such rights. In the
absence of any such default, the Company shall have the right
to vote the Pledged Stock on all questions, PROVIDED that
voting by the Company of the Pledged Stock shall be in
conformity with performance of the obligations of the Company
under the Operative Documents. The Pledgor hereby irrevocably
constitutes American National Bank and Trust Company of
Chicago as its true and lawful attorney to execute a
voting proxy in respect of the pledged stock of Celex
Successories Inc.
(b) Whenever a default under any Operative Document has occurred,
the Bank may transfer into its name, or into the name of its
nominee or nominees, any or all of the Pledged Stock and, as
provided above, may vote any or all of the Pledged Stock
(whether or not so transferred) and may otherwise act with
respect thereto as though it were the outright owner
thereof, the Company hereby irrevocably constituting and
appointing the Bank as the proxy and attorney-in-fact of the
Company, with full power of substitution, to do so.
(c) Following a default under any Operative Document, it is
acknowledged that the Bank may vote the Pledged Stock to
remove the directors and officers of any Pledged Subsidiary or
any of them, and to elect new directors and officers of the
Pledged Subsidiary, who thereafter shall manage the affairs
of the Pledged Subsidiary, operate its properties and carry on
its business and otherwise take any action with respect to
the business, properties and affairs of the Pledged Subsidiary
which such new directors shall deem necessary or appropriate,
including, but not limited to, the maintenance, repair,
renewal or alteration of any or all of the properties of the
Pledged Subsidiary, the leasing, subleasing, sale or other
disposition of any or all of such properties, the borrowing of
money on the credit of the Pledged Subsidiary, and the
employment of attorneys, agents or other employees deemed
by such new directors to be necessary for the proper
operation, conduct, winding up or liquidation of the
business, properties and affairs of the Pledged Subsidiary,
and all revenues from the operation, conduct, winding up or
liquidation of the business, properties and affairs of the
Pledged Subsidiary after the payment of expenses thereof shall
be applied to the payment of the Secured Obligations.
(d) The Company agrees that the proxy granted in this paragraph 5
is coupled with an interest and is and shall be both valid and
irrevocable so long as the Pledged Stock is subject to this
Pledge Agreement. The Company further acknowledges that the
term of said proxy may exceed three years from the date hereof.
6. REMEDIES CUMULATIVE. No right or remedy conferred upon or
reserved to the Bank under any Operative Document is intended to be
exclusive of any other right or remedy, and every right and remedy shall be
cumulative in addition to every other right or remedy given hereunder
or now or hereafter existing under any applicable law. Every right and
remedy of the Bank under any Operative Document or under applicable law
may be exercised from time to time and as often as may be deemed expedient by
the Bank. To the extent that it lawfully may, the Company agrees that it
will not at any time insist upon, plead, or in any manner whatever claim
or take any benefit or advantage of any applicable present or future stay,
extension or moratorium law, which may effect observance or performance of
any provisions of any Operative Document; nor will it claim, take or
insist upon any benefit or advantage of any present or future law providing
for the valuation or appraisal of any security for its obligations under any
Operative Document prior to any sale or sales thereof which may be made
under or by virtue of any instrument governing the same; nor will it, after
any such sale or sales, claim or exercise any right, under any applicable
law to redeem any portion of such security so sold.
7. EXPENSES. The Company agrees to pay and reimburse the Bank for
and indemnify and hold it harmless against all reasonable costs, expenses,
state, local, federal or foreign taxes and fees (including reasonable
attorneys' fees and disbursements) and any liability incurred in connection
with the administration and enforcement of this Pledge Agreement,including
without limitation the assignment, transfer and delivery of the Pledged
Stock to the Company pursuant to paragraph 5. Such undertaking of the
Company shall survive the termination of this Pledge Agreement.
8. TERMINATION. This Pledge Agreement shall terminate upon payment in
full and the performance and satisfaction of all Secured Obligations, and
upon such termination the Bank shall assign, transfer and deliver without
recourse and without warranty the Pledged Stock to the Company (and any
property received in respect thereof) as has not theretofore been sold or
otherwise applied pursuant to the provisions of this Pledge Agreement.
9. GOVERNING LAW. This Pledge Agreement is a contract made under, and
the rights and obligations of the parties hereunder shall be governed by and
construed in accordance with, the laws of the State of Illinois
applicable to contracts made and to be performed entirely within such State.
The Company agrees that any legal action or proceeding with respect to this
Pledge Agreement may be brought in any court of the State of Illinois or
in any court of the United States sitting in Illinois and the Company hereby
submits to and accepts generally and unconditionally the jurisdiction of
those courts with respect to its person and property, and irrevocably
consents to the service of process in connection with any such action or
proceeding by personal delivery to the Company or by the mailing thereof by
registered or certified mail, postage prepaid, at the address set forth in
Section 7.2 of the Credit Agreement.
10. WAIVER OF JURY TRIAL. THE BANK AND THE COMPANY, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY
HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
PLEDGE AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS PLEDGE AGREEMENT OR ANY COURSE OF
CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER
OF THEM. NEITHER THE BANK NOR THE COMPANY SHALL SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN
WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN
ANY RESPECT OR RELINQUISHED BY EITHER THE BANK OR THE COMPANY EXCEPT BY A
WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
IN WITNESS WHEREOF, the Company has caused this Pledge Agreement to
be duly executed as of the day and year first above written.
SUCCESSORIES, INC. (f/k/a Celex Group, Inc.),
an Illinois corporation
By____________________________
Its_________________________
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of December __, 1996 (this
"Security Agreement"), is entered into by British Links Acquisition Corp.,
an Illinois corporation (the "Company"), in favor of American National Bank
and Trust Company of Chicago, a national banking association (the "Bank").
WITNESSETH:
Pursuant to that certain Amended and Restated Credit Agreement,
dated July 31, 1995, by and among Successories, Inc. (f/k/a Celex
Group, Inc.) an Illinois corporation, Successories of Illinois, Inc., an
Illinois corporation, and Celebrating Excellence, Inc., an Illinois
corporation (collectively the "Borrowers") and the Bank (as amended,
extended, modified or supplemented from time to time, the "Credit
Agreement"), the Bank shall extend credit to the Borrowers for the
Borrowers' general corporate purposes supported by, among other things, the
Company's Guaranty, of even date herewith entered into in favor of the Bank
(the "Guaranty") the obligations under which Guaranty shall be secured by
all of the Company's personal property. The Company is desirous of
granting to Bank a security interest in all of the Company's personal
property of whatsoever nature.
To induce the Bank to extend credit, from which the Company
benefits, the Company has agreed to grant to the Bank the security interests
hereinafter set forth and to enter into the agreements hereinafter set
forth. Capitalized terms appearing herein without definition shall have
the meaning ascribed thereto in the Credit Agreement.
NOW, THEREFORE, to secure the payment of (a) all sums owing under
the Guaranty; (b) that certain Amended and Restated Revolving Note, in
the original principal amount of $2,500,000 dated as of May 1, 1996 and
that certain Amended and Restated Term Note in the original principal amount
of $9,000,000, dated as of May 1, 1996, in each case evidencing the
Borrowers' obligations to the Bank for monies lent to the Borrowers
(collectively, as amended, extended, modified or supplemented from
time to time, the "Notes"), (c) the performance of the covenants herein
contained and any monies expended by the Bank in connection
therewith, (d) the payment of all obligations and performance of all
covenants of the Company under any other documents, agreements or
instruments between the Company and the Bank given in connection therewith,
and (e) any and all other indebtedness, obligations and liabilities of any
kind of the Company to the Bank, now or hereafter existing, direct or
indirect (including without limitation any participation interest acquired
by the Bank in any such indebtedness, obligations or liabilities of the
Company to any other person), absolute or contingent, joint and/or several,
secured or unsecured, arising by operation of law or otherwise, and whether
incurred by the Company as principal, surety, endorser, guarantor,
accommodation party or otherwise (all of the aforesaid indebtedness,
obligations and liabilities of the Company being herein called the "Secured
Obligations", and all of the documents, agreements and instruments between
the Company and the Bank evidencing or securing the repayment of, or
otherwise pertaining to the Secured Obligations being herein collectively
called the "Operative Documents"), for value received and pursuant to the
Notes and the Credit Agreement, the Company hereby grants, assigns and
transfers to the Bank a first-priority security interest in and to the
following described property whether now owned or existing or hereafter
acquired or arising and wherever located (all of which is herein
collectively called the "Collateral"):
All of the Company's right, title and interest in, to and under
the following, wherever located, whether now or hereafter acquired or
arising, together with all replacements therefor, and all proceeds (including
insurance proceeds) and products thereof: all (1) Receivables,
(2) Inventory, (3) Equipment and (4) Business Records in each case as more
particularly described below:
The term "Receivables" means all the following classifications of
collateral (as the following terms are defined in the Illinois Uniform
Commercial Code as such Code is in effect on the date hereof) of the
Company, whether now existing or arising in the future: accounts,
general intangibles, chattel paper, documents, instruments (including
without limitation all contract rights, all accounts receivable, all monies
and claims for money due or to become due Company, and all other
obligations of any kind at any time owing to Company, and further including
without limitation all state and federal tax refunds, pension refunds,
deposit accounts, all franchises, patents, trademarks, service marks, trade
names and copyrights, all royalties or like payments pursuant thereto, all
licenses thereof and the goodwill related thereto, the Company's interest
in any lease of real or personal property, and all proceeds of insurance
applicable to any of the foregoing) and all proceeds of the foregoing, as
well as all security which Company has for any of these Receivables, and
all of Company's rights to any goods or other property sold or leased
which may be represented by such Receivables.
The term "Inventory" means all inventory as that term is defined in
the Illinois Uniform Commercial Code as such Code is in effect on the
date hereof, including, without limitation, all goods intended for sale or
lease by Company, or to be furnished by Company under contracts of sale or
service, all raw materials, goods in process, finished goods, materials and
supplies of every nature used or useable in connection with the
manufacture, packing, shipping, advertising, selling, leasing or
furnishing of such goods, and shall also include all documents evidencing or
representing the same, and all proceeds of such collateral. Bank's security
interest in Inventory will continue through all stages of manufacture and
will, without further act, attach to raw materials, to goods in process,
to the finished goods, to the Receivables or other proceeds resulting
from the sale or other disposition of Inventory, to all such Inventory as
may be returned to Company by its customers, and all proceeds of insurance
arising from loss or damage to any Inventory.
The term "Equipment" means all equipment, fixtures,
chattels, machinery, furniture and like personal property owned by
Company, now or in the future, bought for or used by Company in
Company's business, or in which Company obtains rights of any kind,
including rights under any lease, whether a true lease or a lease
intended as security, and wherever such collateral is located, including
without limitation all such collateral located. The Equipment also
includes, but is not limited to, all accessories, machinery parts and
appurtenances attached, kept, used or intended for use in connection with
any equipment and fixtures and all apparatus, tools, supplies, materials,
blue prints, books, records and plans.
The term "Business Records" means all of Company's books of accounts,
ledgers, computer software, computer printouts and other computerized records
and cabinets in which there are reflected or maintained the Receivables or
Inventory in which the Bank has a security interest, or which relate
to any other security the Bank may hold from Company and all supporting
evidence and documents relating to such security in the form of written
applications, credit information, account cards, payment records,
correspondence, delivery and installation certificates, invoice copies,
delivery receipts, notes and other evidences of indebtedness,
insurance certificates and the like.
11. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. The
Company further represents, warrants, covenants, and agrees with the Bank as
follows:
a) OWNERSHIP OF COLLATERAL; SECURITY INTEREST PRIORITY At
the time any Collateral becomes subject to a security
interest of the Bank hereunder, unless the Bank shall
otherwise consent, the Company shall be deemed to have
represented and warranted that (i) the Company is the lawful
owner of such Collateral and has the right and authority to
subject the same to the security interest of the Bank; (ii)
except as expressly permitted by the Credit Agreement, none
of the Collateral is subject to any lien other than
that in favor of the Bank and there is no effective
financing statement covering any of the Collateral on file in
any public office, other than in favor of the Bank. This
Security Agreement creates in favor of the Bank a valid and
perfected first-priority security interest in the Collateral
enforceable against the Company and all third parties and
securing the payment of the Secured Obligations and all
filings and other actions necessary or desirable to create,
preserve or perfect such security interests have been duly
taken.
b) FINANCIAL STATEMENTS. All financial statements, balance
sheets, earning statements and valuations of Collateral and
other financial data which have been furnished in connection
herewith do fairly represent the financial condition of
Company and the value of the Collateral at the time of any
disbursement hereunder.
c) LOCATION OF OFFICES AND COLLATERAL. The Company's chief
executive office and chief place of business and the office
where the Company keeps its records concerning its accounts,
contract rights, chattel paper, instruments, general
intangibles and other obligations arising out of or in
connection with the sale or lease of goods or the rendering
of services or otherwise ("Receivables"), and all originals
of all Leases and other chattel paper which evidence
Receivables, are located in the State of Illinois, County of
DuPage at 919 Springer Drive, Lombard, Illinois 60148. The
Company will provide the Bank with prior written notice of
any proposed change in the location of its chief executive
office and will not change the location of its chief
executive office without the prior written consent of the
Bank. The Company's only other offices and facilities are at
the locations set forth in Schedule 1(d)(i) hereto. The
Company will provide the Bank with prior written notice of
any change in the locations of its other offices and the
facilities. The tax identification number of the Company is
_________________. The name of the Company is British Links
Acquisition Corp., and the Company operates under no other
names. The Company shall not change its name without the
prior written consent of the Bank, except that the Company
may change its name to "British Links Golf Classics, Inc."
with ten (10) days advance written notice to the Bank and
shall promptly furnish the Bank with a copy of the amendment
to the Company's Articles of Incorporation related to such
name change, certified by the Secretary of State of Illinois.
All Collateral consisting of inventory is, and will be,
located at the locations listed on Schedule 1(d)(ii)
hereto, and at no other locations without the prior written
consent of the Bank. All Collateral consisting of fixtures,
machinery or equipment, is, and will be, located at
the locations listed on Schedule 1(d)(iii) hereto, and at no
other locations without the prior written consent of the
Bank. If the Collateral described in clauses (ii) or
(iii) is kept at leased locations or warehoused, the Company
has obtained appropriate landlord's lien waivers or
appropriate warehousemen's notices have been sent, each
satisfactory to the Bank, unless waived by the Bank.
d) LIENS, ETC. Except as expressly permitted by the Credit
Agreement, the Company will keep the Collateral free at
all times from any and all liens, security interests or
encumbrances (including, without limitation, liens, security
interests and encumbrances junior to the Bank) other than
those consented to in writing by the Bank. The Company will
not, without the prior written consent of the Bank, sell or
lease, or permit or suffer to be sold or leased, any of the
Collateral except inventory sold in the ordinary course of
the Company's business. The Bank, its agents or attorneys
may at any and all reasonable times inspect the Collateral
and for such purpose may enter upon any and all premises
where the Collateral is or might be kept or located.
e) INSURANCE. The Company shall require that all tangible
Collateral be insured at all times against loss by theft,
fire and other casualties. Said insurance shall be issued by
a company satisfactory to the Bank and shall be in amounts
sufficient to protect the Bank against any and all loss or
damage to the Collateral. The policy or policies which
evidence said insurance shall be delivered to the Bank, shall
contain a loss payable clause in favor of the Bank, shall
name the Bank as an additional insured, as its interest
may appear, shall not permit amendment, cancellation or
termination without giving the Bank at least 30 days prior
written notice thereof, and shall otherwise be in form and
substance satisfactory to the Bank. Reimbursement under any
liability insurance maintained by the Company pursuant to
this paragraph 1(e) may be paid directly to the person who
shall have incurred liability covered by such insurance.
In case of any loss involving loss to tangible Collateral when
the next succeeding sentence is not applicable, the Company
shall make or cause to be made the necessary repairs to or
replacements of such tangible Collateral and any proceeds of
insurance maintained by the Company pursuant to this
paragraph 1(e) shall be paid to the Company as reimbursement
for the costs of such repairs or replacements. Upon the
occurrence and during the continuance of an Event of Default
or the actual or constructive total loss of any tangible
Collateral, all insurance payments in respect of such
tangible Collateral shall be paid to and applied by the Bank
as specified in paragraph 3.
f) TAXES, ETC. The Company will pay promptly, and within
the time that they can be paid without interest or penalty,
any taxes, assessments and similar imposts and charges, not
being contested in good faith, which are now or hereafter
may become a lien, charge or encumbrance upon any of the
Collateral. If the Company fails to pay any such taxes,
assessments or other imposts or charges in accordance
with this Section, the Bank shall have the option to do so
and the Company agrees to repay forthwith all amounts so
expended by the Bank with interest at the rate provided
for in the Notes on overdue principal. The Bank, in
making any payment hereby authorized relating to the
Collateral, taxes and assessments thereon, the
Equipment, and/or any encumbrance or lien, may make such
payment according to any bill, statement or estimate without
inquiry into the validity of any such tax, assessment, sale,
forfeiture, tax lien, title or claim thereof, validity or
amount of any claim or lien which may be asserted and, in
connection with the rental, operation or management of
the Collateral or the payment of such costs and expenses,
may do so in such amounts and to such persons as Bank may
deem appropriate and may enter into such contracts
therefor as it may deem appropriate or may perform the same
itself.
g) FURTHER ASSURANCES. The Company will do all acts and things
and will execute all financing statements and writings
requested by the Bank to establish, maintain and continue
a perfected and valid security interest of the Bank in the
Collateral, and will promptly on demand pay all reasonable
costs and expenses of filing and recording all instruments,
including the costs of any searches deemed necessary by the
Bank to establish and determine the validity and the
priority of the Bank's security interests. The Company
hereby appoints the Bank as its attorney-in-fact for the
purpose of performing any of the acts required or
permitted by this Subsection (g), and such power of attorney
shall be irrevocable and coupled with an interest.
h) MAINTENANCE OF TANGIBLE COLLATERAL. The Company will
maintain and preserve, or require each lessee to maintain
and preserve, the tangible Collateral in the same condition,
repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual,
and shall forthwith, or, in the case of any loss or damage to
any of the tangible Collateral as quickly as practicable
after the occurrence thereof, make or cause to be made all
repairs, replacements, and other improvements made in
connection therewith which are necessary or desirable to such
end.
i) SPECIAL RIGHTS REGARDING ACCOUNTS RECEIVABLE. Upon an
occurrence of an event of default, the Bank or any of its
agents may, at any time from time to time in its sole
discretion, notify the Company's account debtors of the
security interest of the Bank in the Collateral and/or
direct such account debtors that all payments in connection
with such Leases and the Collateral be made directly to
the Bank in the Bank's name. As used herein, the term
"account debtors" shall include, without limitation, any
customer, franchisee, or any lessee under any lease. If
the Bank or any of its agents shall collect such
obligations directly from the Company's account debtors, the
Bank or any of its agents shall have the right to resolve
any disputes relating to account receivable directly with the
Company's account debtors in such manner and on such terms as
the Bank or any of its agents shall deem appropriate.
The Company directs and authorizes any and all of its present
and future account debtors to comply with requests for
information from the Bank, the Bank's designees and agents
and/or auditors, relating to any and all business
transactions between the Company and the Company's account
debtors. The Company further directs and authorizes all of
its account debtors upon receiving a notice or request
sent by the Bank or the Bank's agents or designees to pay
directly to the Bank any and all sums of money or proceeds
now or hereafter owing by the Company's account debtors
to the Company, and any such payment shall act as a discharge
of any debt of such account debtor to the Company in the same
manner as if such payment had been made directly to the
Company. The Company agrees to take any and all action as
the Bank may request to assist the Bank in exercising the
rights described in this Section. The Bank shall have the
right, but not the duty to lease, operate and manage the
Equipment and any accessories thereon and pay operating costs
and expenses, including management fees, of every kind and
nature in connection therewith, so that the Equipment shall
be operational and usable for its intended purposes.
12. EVENTS OF DEFAULT. An event of default hereunder shall include the
occurrence of any of:
a) The occurrence of any Event of Default under the
Guaranty, the Notes or the Credit Agreement.
b) Material default or breach by the Company of any of
its representations, warranties, covenants or agreements set
forth herein.
c) The entry or execution of a levy, by execution or other
legal process, judgment lien or tax lien upon the interest in
property of the Company or any guarantor of the Secured
Obligations ("Guarantor") unless contested in good faith by
appropriate proceedings, the effect of which is to stay
enforcement thereof.
d) The adjudication of the Company or any Guarantor as an
involuntary bankrupt, or the entry of a decree or order
approving as properly filed a petition or answer
filed against the Company or any Guarantor seeking
reorganization of the Company or any Guarantor under the
Federal Bankruptcy Laws or any state insolvency or
bankruptcy law, as now or hereafter amended, if such
proceeding is instituted against the Company or any Guarantor
and is being contested by the Company or any Guarantor, as
the case may be, in good faith by appropriate proceedings,
such proceedings shall remain undismissed or unstayed for a
period of sixty (60) days.
e) The filing of any petition by the Company or any Guarantor to
declare the Company or any Guarantor bankrupt or to
delay, reduce or modify the Company's or any Guarantor's
debts or obligations, or seeking or proposing the entry of an
order for relief under Title 11 of the United States Code, as
the same may be from time to time amended.
f) The filing of an admission by the Company or any Guarantor
of the jurisdiction of the Court and the material allegations
contained in any petition in bankruptcy or any petition
pursuant to or purporting to be pursuant to the Federal
Bankruptcy Laws or any state or insolvency or bankruptcy
law, as now or hereafter amended or the institution by the
Company or any Guarantor of any proceedings or his consent to
the institution of any proceedings for any relief of such
party under any bankruptcy or insolvency laws or any
laws relating to the relief of debtors, readjustment of
indebtedness, reorganization, arrangements, composition or
extension.
g) The execution and delivery by the Company or any Guarantor of
any assignment for the benefit of creditors or the
application for a consent to the appointment of a receiver or
custodian for such party or any of the property of such party.
h) The entry of a decree or order appointing a receiver or
custodian of the property of the Company or any Guarantor.
13. REMEDIES. Upon the occurrence of any such event of default, the
Bank shall have and may exercise any one or more of the rights and remedies
provided to it under this Security Agreement or any of the other Operative
Documents or provided by law, including but not limited to all of the
rights and remedies of a secured party under the Illinois Uniform
Commercial Code, and the Company hereby agrees to assemble the
Collateral and make it available to the Bank at a place to be designated by
the Bank which is reasonably convenient to both parties, authorizes the Bank
to take possession of the Collateral with or without demand and with or
without process of law and to sell and dispose of the same at public or
private sale and to apply the proceeds of such sale to the costs and expenses
thereof (including attorneys' fees and disbursements, incurred by the Bank)
and then to the payment of the indebtedness and satisfaction of other Secured
Obligations. Any requirement of reasonable notice shall be met if the Bank
sends such notice to the Company, by registered or certified mail, at least
five (5) days prior to the date of sale, disposition or other event
giving rise to a required notice. The Bank may be the purchaser at any such
sale. The Company expressly authorizes such sale or sales of the Collateral
in advance of and to the exclusion of any sale or sales of or other
realization upon any other collateral securing the Secured Obligations. The
Bank shall have no obligation to preserve rights against prior parties. The
Company hereby waives as to the Bank any right of subrogation or marshalling
of such Collateral and any other collateral for the Secured Obligations. To
this end, the Company hereby expressly agrees that any such collateral or
other security of the Company or any other party which the Bank may
hold, or which may come to any of them or any of their possession, may be
dealt with in all respects and particulars as though this Security Agreement
were not in existence. The parties hereto further agree that public sale
of the Collateral by auction conducted in any county in which any
Collateral is located or in which the Bank or the Company does business after
advertisement of the time and place thereof shall, among other manners of
public and private sale, be deemed to be a commercially reasonable
disposition of the Collateral. The Company shall be liable for any
deficiency remaining after disposition of the Collateral.
14. SPECIAL REMEDIES CONCERNING CERTAIN COLLATERAL.
a) Upon the occurrence of any event of default, the Company
shall, if requested to do so in writing, and to the extent
so requested (i) take all reasonable measures to collect and
enforce payment of all amounts due the Company on account
of, in payment of, or in connection with, any of the
Collateral, (ii) hold all payments in the form received by
the Company as trustee for the Bank, without commingling
with any funds belonging to the Company, and (iii) forthwith
deliver all such payments to the Bank with endorsement to the
Bank's order of any checks or similar instruments.
b) Upon the occurrence of any event of default, the Company
shall, if requested to do so, and to the extent so requested,
notify all account debtors and other persons with
obligations to the Company on account of or in connection
with any of the Collateral of the security interest of the
Bank in the Collateral and direct such account debtors and
other persons that all payments in connection with the
Collateral be made directly to the Bank. The Bank itself may,
upon the occurrence of an event of default, so notify and
direct any such account debtor or other person that such
payments are to be made directly to the Bank.
c) Upon the occurrence of any event of default, for purposes
of assisting the Bank in exercising its rights and
remedies provided to it under this Security Agreement, the
Company (i) hereby irrevocably constitutes and appoints the
Bank its true and lawful attorney, for it and in its name,
place and stead, to collect, demand, receive, sue for,
compromise, and give good and sufficient releases for,
any monies due or to become due on account of, in payment of,
or in connection with the Collateral, (ii) hereby irrevocably
authorizes the Bank to endorse the name of the Company
upon any checks, drafts, or similar items which are
received in payment of, or in connection with any of the
Collateral, and to do all things necessary in order to
reduce the same to money, (iii) with respect to any
Collateral, hereby irrevocably assents to all extensions
or postponements of the time of payment thereof or any other
indulgence in connection therewith, to each substitution,
exchange or release of Collateral, to the addition or release
of any party primarily or secondarily liable, to the
acceptance of partial payments thereon and the settlement,
compromise or adjustment (including adjustment of insurance
payments) thereof, all in such manner and at such time or
times as the Bank shall deem advisable, and (iv) hereby
irrevocably authorizes the Bank to notify the post office
authorities to change the address for delivery of the
Company's mail to an address designated by the Bank, and the
Bank may receive, open and dispose of all mail addressed to
the Company for the purpose of collecting proceeds of
collateral or other monies that may be applied by the Bank
against the Secured Obligations and all mail unrelated to
such collections shall be turned over to the Company by the
Bank within a reasonable time of receipt of same.
Notwithstanding any other provisions of this Security
Agreement, it is expressly understood and agreed that the Bank
shall have no duty or obligation to make any demand or to
make any inquiry as to the nature or sufficiency of any
payments received by it or to present or file any claim or
take any other action to collect or enforce the payment of
any amounts due or to become due on account of or in
connection with any of the Collateral.
15. REMEDIES CUMULATIVE. No right or remedy conferred upon or
reserved to the Bank under any Operative Document is intended to be
exclusive of any other right or remedy, and every right and remedy shall
be cumulative in addition to every other right or remedy given
hereunder or now or hereafter existing under any applicable law. Every right
and remedy of the Bank under any Operative Document or under applicable law
may be exercised from time to time and as is often as may be deemed expedient
by the Bank. To the extent that it lawfully may, the Company agrees
that it will not at any time insist upon, plead, or in any manner whatever
claim or take any benefit or advantage of any applicable present or
future stay, extension or moratorium law, which may affect observance or
performance of any provisions of any Operative Document; nor will it claim,
take or insist upon any benefit or advantage of any present or future law
providing for the valuation or appraisal of any security for its obligations
under any Operative Document prior to any sale or sales thereof which may be
made under or by virtue of any instrument governing the same; nor will it,
after any such sale or sales, claim or exercise any right, under any
applicable law to redeem any portion of such security so sold.
16. CONDUCT NO WAIVER. No waiver of default shall be effective
unless in writing executed by the Bank and waiver of any default or
forbearance on the part of the Bank in enforcing any of its rights under
this Security Agreement shall not operate as a waiver of any other default or
of the same default on a future occasion or of such right.
17. GOVERNING LAW AND JURISDICTION; DEFINITIONS. This Security
Agreement is a contract made under, and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with, the
laws of the State of Illinois applicable to contracts made and to be
performed entirely within such State. The Company agrees that any legal
action or proceeding against it with respect to any of its obligations under
this Security Agreement may be brought in any state or federal court located
in the State of Illinois, as the Bank in its sole discretion may elect. By
the execution and delivery of this Security Agreement, the Company
submits to and accepts, with regard to any such action or proceeding, for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of those courts. The Company waives any claim that the
State of Illinois is not a convenient forum or the proper venue for any such
suit, action or proceeding. Unless otherwise defined herein, terms used
in Article 9 of the Uniform Commercial Code in the State of Illinois are
used herein as therein defined on the date hereof. The headings of the
various subdivisions hereof are for convenience of reference only and shall
in no way modify any of the terms or provisions hereof.
18. NOTICES. All notices, demands, requests, consents and other
communications hereunder shall be in writing and shall be delivered or sent
to the Company at 919 Springer Drive, Lombard, Illinois 60148, Facsimile
(630) 953-0014, Attention: James Beltrame; to the Bank at American National
Bank and Trust Company of Chicago, 33 North LaSalle Street, Chicago,
Illinois, 60690, Facsimile (312) 661-5906; or to such other address as may
be designated by the Company or the Bank and its counsel by notice to the
other party. All notices shall be deemed to have been given at the time
of actual delivery thereof to such address, or if sent by the Bank to
the Company by certified or registered mail, postage prepaid, to such
address, on the fifth day after mailing.
19. RIGHTS NOT CONSTRUED AS DUTIES. The Bank neither assumes
nor shall it have any duty of performance or other responsibility under
any contracts in which the Bank has or obtains a security interest
hereunder. If the Company fails to perform any agreement contained
herein, the Bank may but is in no way obligated to itself perform, or
cause performance of, such agreement, and the expenses of the Bank incurred
in connection therewith shall be payable by the Company under paragraph 12.
The powers conferred on the Bank hereunder are solely to protect its
interests in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in
its possession and accounting for monies actually received by it hereunder,
the Bank shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
20. AMENDMENTS. None of the terms and provisions of this
Security Agreement may be modified or amended in any way except by an
instrument in writing executed by each of the parties hereto.
21. SEVERABILITY. If any one or more provisions of this Security
Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected, impaired or prejudiced
thereby.
22. EXPENSES.
a) The Company agrees to indemnify the Bank from and against
any and all claims, losses and liabilities growing out of or
resulting from this Security Agreement (including, without
limitation, enforcement of this Security Agreement), except
claims, losses or liabilities resulting from the Bank's gross
negligence or willful misconduct.
b) The Company will, upon demand, pay to the Bank an amount of
any and all reasonable expenses, including the reasonable fees
and disbursements of its counsel and of any experts and
agents, which the Bank may incur in connection with (i) any
amendment, modification or supplement to this Security
Agreement, or any costs incurred by the Bank reasonably
necessary to obtain and preserve the Bank's perfected
security interest in all Collateral secured hereby, (ii) the
custody, preservation, use or operation of, or the sale of,
collection from or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the
rights of the Bank hereunder, or (iv) the failure of the
Company to perform or observe any of the provisions hereof.
The Company will reimburse the Bank for all expenses,
including attorneys' fees and disbursements incurred by the
Bank in seeking to collect the indebtedness and other
obligations secured hereby or any part thereof, in
enforcing performance of the Company's obligations under the
Operative Documents, in defending the Bank's security
interests and the priority thereof, or in pursuing any of the
Bank's rights or remedies hereunder or under the Operative
Documents.
23. SUCCESSORS AND ASSIGNS; TERMINATION. This Security Agreement
shall create a continuing security interest in the Collateral and shall
(a) remain in full force and effect until full payment and performance of
the Secured Obligations (b) be binding upon the Company, its successors and
assigns and (c) inure, together with the rights and remedies of the Bank
hereunder, to the benefit of the Bank and its successors, transferees and
assigns. Upon the full payment and performance of the Secured Obligations
the security interests granted hereby shall terminate and all rights to the
Collateral shall revert to the Company. Upon any such termination, the Bank
will, at the Company's expense, execute and deliver to the Company such
documents as the Company shall reasonably request to evidence such
termination.
24. WAIVER OF JURY TRIAL. THE BANK AND THE COMPANY, AFTER CONSULTING
OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A
TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
SECURITY AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS SECURITY AGREEMENT OR ANY COURSE OF
CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER
OF THEM. NEITHER THE BANK NOR THE COMPANY SHALL SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN
WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN
ANY RESPECT OR RELINQUISHED BY EITHER THE BANK OR THE COMPANY EXCEPT
BY A WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
IN WITNESS WHEREOF, the Company has caused this Security Agreement to
be duly executed as of the day and year first set forth above.
BRITISH LINKS ACQUISITION CORP.
By:____________________________
Its:___________________________
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By:____________________________
Its:___________________________
SCHEDULE 1(d)(i) TO SECURITY AGREEMENT
LIST OF OTHER OFFICE AND FACILITY LOCATIONS
Type of Office OR FACILITY
ADDRESS
CITY COUNTY STATE
SCHEDULE 1(d)(ii) TO SECURITY AGREEMENT
LIST OF INVENTORY LOCATIONS
If Leased or Warehoused,
Name and Address of
ADDRESS
CITY
COUNTY
STATE
LESSOR/WAREHOUSEMAN
SCHEDULE 1(d)(iii) TO SECURITY AGREEMENT
List of Fixtures, Machinery
AND EQUIPMENT LOCATIONS
Legal Description,
Record Owner and
Tax Parcel No. (if
fixtures are at THIS LOCATION)
ADDRESS
CITY
COUNTY
STATE
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of December ___, 1996 (this
"Security Agreement"), is entered into by B.L.G.C., Inc., a Texas
corporation, (the "Company"), in favor of American National Bank and Trust
Company of Chicago, a national banking association (the "Bank").
WITNESSETH:
Pursuant to that certain Amended and Restated Credit Agreement,
dated July 31, 1995, by and among Successories, Inc. (f/k/a Celex
Group, Inc.) an Illinois corporation, Successories of Illinois, Inc., an
Illinois corporation, and Celebrating Excellence, Inc., an Illinois
corporation (collectively the "Borrowers") and the Bank (as amended,
extended, modified or supplemented from time to time, the "Credit
Agreement"), the Bank shall extend credit to the Borrowers for the
Borrowers' general corporate purposes supported by, among other things, the
Company's Guaranty, of even date herewith entered into in favor of the Bank
(the "Guaranty") the obligations under which Guaranty shall be secured by
all of the Company's personal property. The Company is desirous of
granting to Bank a security interest in all of the Company's personal
property of whatsoever nature.
To induce the Bank to extend credit, from which the Company
benefits, the Company has agreed to grant to the Bank the security interests
hereinafter set forth and to enter into the agreements hereinafter set
forth. Capitalized terms appearing herein without definition shall have
the meaning ascribed thereto in the Credit Agreement.
25. NOW, THEREFORE, to secure the payment of (a) all sums owing under
the Guaranty; (b) that certain Amended and Restated Revolving Note, in
the original principal amount of $2,500,000 dated as of May 1, 1996 and
that certain Amended and Restated Term Note in the original principal amount
of $9,000,000, dated as of May 1, 1996, in each case evidencing the
Borrowers' obligations to the Bank for monies lent to the Borrowers
(collectively, as amended, extended, modified or supplemented from
time to time, the "Notes"), (c) the performance of the covenants herein
contained and any monies expended by the Bank in connection
therewith, (d) the payment of all obligations and performance of all
covenants of the Company under any other documents, agreements or
instruments between the Company and the Bank given in connection therewith,
and (e) any and all other indebtedness, obligations and liabilities of any
kind of the Company to the Bank, now or hereafter existing, direct or
indirect (including without limitation any participation interest acquired
by the Bank in any such indebtedness, obligations or liabilities of the
Company to any other person), absolute or contingent, joint and/or several,
secured or unsecured, arising by operation of law or otherwise, and whether
incurred by the Company as principal, surety, endorser, guarantor,
accommodation party or otherwise (all of the aforesaid indebtedness,
obligations and liabilities of the Company being herein called the "Secured
Obligations", and all of the documents, agreements and instruments between
the Company and the Bank evidencing or securing the repayment of, or
otherwise pertaining to the Secured Obligations being herein collectively
called the "Operative Documents"), for value received and pursuant to the
Notes and the Credit Agreement, the Company hereby grants, assigns and
transfers to the Bank a first-priority security interest in and to the
following described property whether now owned or existing or hereafter
acquired or arising and wherever located (all of which is herein
collectively called the "Collateral"):
All of the Company's right, title and interest in, to and under
the following, wherever located, whether now or hereafter acquired or
arising, together with all replacements therefor, and all proceeds (including
insurance proceeds) and products thereof: all (1) Receivables, (2)
Inventory, (3) Equipment and (4) Business Records in each case as more
particularly described below:
The term "Receivables" means all the following classifications of
collateral (as the following terms are defined in the Illinois Uniform
Commercial Code as such Code is in effect on the date hereof) of the
Company, whether now existing or arising in the future: accounts,
general intangibles, chattel paper, documents, instruments (including
without limitation all contract rights, all accounts receivable, all monies
and claims for money due or to become due Company, and all other
obligations of any kind at any time owing to Company, and further including
without limitation all state and federal tax refunds, pension refunds,
deposit accounts, all franchises, patents, trademarks, service marks, trade
names and copyrights, all royalties or like payments pursuant thereto, all
licenses thereof and the goodwill related thereto, the Company's interest
in any lease of real or personal property, and all proceeds of insurance
applicable to any of the foregoing) and all proceeds of the foregoing, as
well as all security which Company has for any of these Receivables, and
all of Company's rights to any goods or other property sold or leased
which may be represented by such Receivables.
The term "Inventory" means all inventory as that term is defined in the
Illinois Uniform Commercial Code as such Code is in effect on the date
hereof, including, without limitation, all goods intended for sale or lease
by Company, or to be furnished by Company under contracts of sale or
service, all raw materials, goods in process, finished goods, materials and
supplies of every nature used or useable in connection with the
manufacture, packing, shipping, advertising, selling, leasing or
furnishing of such goods, and shall also include all documents evidencing or
representing the same, and all proceeds of such collateral. Bank's security
interest in Inventory will continue through all stages of manufacture and
will, without further act, attach to raw materials, to goods in process,
to the finished goods, to the Receivables or other proceeds resulting
from the sale or other disposition of Inventory, to all such Inventory as
may be returned to Company by its customers, and all proceeds of insurance
arising from loss or damage to any Inventory.
The term "Equipment" means all equipment, fixtures,
chattels, machinery, furniture and like personal property owned by
Company, now or in the future, bought for or used by Company in
Company's business, or in which Company obtains rights of any kind,
including rights under any lease, whether a true lease or a lease
intended as security, and wherever such collateral is located, including
without limitation all such collateral located. The Equipment also
includes, but is not limited to, all accessories, machinery parts and
appurtenances attached, kept, used or intended for use in connection with
any equipment and fixtures and all apparatus, tools, supplies, materials,
blue prints, books, records and plans.
The term "Business Records" means all of Company's books of accounts,
ledgers, computer software, computer printouts and other computerized records
and cabinets in which there are reflected or maintained the Receivables or
Inventory in which the Bank has a security interest, or which relate
to any other security the Bank may hold from Company and all supporting
evidence and documents relating to such security in the form of written
applications, credit information, account cards, payment records,
correspondence, delivery and installation certificates, invoice copies,
delivery receipts, notes and other evidences of indebtedness,
insurance certificates and the like.
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. The Company
further represents, warrants, covenants, and agrees with the Bank as follows:
a) OWNERSHIP OF COLLATERAL; SECURITY INTEREST PRIORITY At
the time any Collateral becomes subject to a security interest of the Bank
hereunder, unless the Bank shall otherwise consent, the Company shall be
deemed to have represented and warranted that (i) the Company is the lawful
owner of such Collateral and has the right and authority to subject the same
to the security interest of the Bank; (ii) except as expressly permitted by
the Credit Agreement, none of the Collateral is subject to any lien
other than that in favor of the Bank and there is no effective
financing statement covering any of the Collateral on file in any public
office, other than in favor of the Bank. This Security Agreement creates
in favor of the Bank a valid and perfected first-priority security interest
in the Collateral enforceable against the Company and all third parties
and securing the payment of the Secured Obligations and all filings and
other actions necessary or desirable to create, preserve or perfect such
security interests have been duly taken.
b) FINANCIAL STATEMENTS. All financial statements, balance
sheets, earning statements and valuations of Collateral and other financial
data which have been furnished in connection herewith do fairly represent the
financial condition of Company and the value of the Collateral at the time of
any disbursement hereunder.
c) LOCATION OF OFFICES AND COLLATERAL. The Company's chief
executive office and chief place of business and the office where the Company
keeps its records concerning its accounts, contract rights, chattel paper,
instruments, general intangibles and other obligations arising out of
or in connection with the sale or lease of goods or the rendering of
services or otherwise ("Receivables"), and all originals of all Leases
and other chattel paper which evidence Receivables, are located in the
State of Illinois, County of DuPage at 919 Springer Drive, Lombard, Illinois
60148. The Company will provide the Bank with prior written notice of any
proposed change in the location of its chief executive office and will not
change the location of its chief executive office without the prior written
consent of the Bank. The Company's only other offices and facilities are at
the locations set forth in Schedule 1(d)(i) hereto. The Company will
provide the Bank with prior written notice of any change in the locations
of its other offices and the facilities. The tax identification number of
the Company is _________________. The name of the Company is B.L.G.C.,
Inc., and the Company operates under no other names. The Company shall not
change its name without the prior written consent of the Bank. All
Collateral consisting of inventory is, and will be, located at the locations
listed on Schedule 1(d)(ii) hereto, and at no other locations without the
prior written consent of the Bank. All Collateral consisting of fixtures,
machinery or equipment, is, and will be, located at the locations listed on
Schedule 1(d)(iii) hereto, and at no other locations without the prior
written consent of the Bank. If the Collateral described in clauses (ii) or
(iii) is kept at leased locations or warehoused, the Company has
obtained appropriate landlord's lien waivers or appropriate warehousemen's
notices have been sent, each satisfactory to the Bank, unless waived by the
Bank.
d) LIENS, ETC. Except as expressly permitted by the Credit
Agreement, the Company will keep the Collateral free at all times from any
and all liens, security interests or encumbrances (including, without
limitation, liens, security interests and encumbrances junior to the Bank)
other than those consented to in writing by the Bank. The Company will not,
without the prior written consent of the Bank, sell or lease, or permit or
suffer to be sold or leased, any of the Collateral except inventory sold in
the ordinary course of the Company's business. The Bank, its agents or
attorneys may at any and all reasonable times inspect the Collateral and for
such purpose may enter upon any and all premises where the Collateral is
or might be kept or located.
e) INSURANCE. The Company shall require that all tangible
Collateral be insured at all times against loss by theft, fire and other
casualties. Said insurance shall be issued by a company satisfactory to the
Bank and shall be in amounts sufficient to protect the Bank against
any and all loss or damage to the Collateral. The policy or policies which
evidence said insurance shall be delivered to the Bank, shall contain a
loss payable clause in favor of the Bank, shall name the Bank as an
additional insured, as its interest may appear, shall not permit amendment,
cancellation or termination without giving the Bank at least 30 days
prior written notice thereof, and shall otherwise be in form and substance
satisfactory to the Bank. Reimbursement under any liability insurance
maintained by the Company pursuant to this paragraph 1(e) may be paid
directly to the person who shall have incurred liability covered by such
insurance. In case of any loss involving loss to tangible Collateral when
the next succeeding sentence is not applicable, the Company shall make or
cause to be made the necessary repairs to or replacements of such tangible
Collateral and any proceeds of insurance maintained by the Company pursuant
to this paragraph 1(e) shall be paid to the Company as reimbursement for the
costs of such repairs or replacements. Upon the occurrence and during the
continuance of an Event of Default or the actual or constructive total loss
of any tangible Collateral, all insurance payments in respect of such
tangible Collateral shall be paid to and applied by the Bank as specified in
paragraph 3.
f) TAXES, ETC. The Company will pay promptly, and within the
time that they can be paid without interest or penalty, any taxes,
assessments and similar imposts and charges, not being contested in good
faith, which are now or hereafter may become a lien, charge or encumbrance
upon any of the Collateral. If the Company fails to pay any such taxes,
assessments or other imposts or charges in accordance with this Section, the
Bank shall have the option to do so and the Company agrees to repay
forthwith all amounts so expended by the Bank with interest at the rate
provided for in the Notes on overdue principal. The Bank, in making any
payment hereby authorized relating to the Collateral, taxes and
assessments thereon, the Equipment, and/or any encumbrance or lien, may
make such payment according to any bill, statement or estimate without
inquiry into the validity of any such tax, assessment, sale, forfeiture,
tax lien, title or claim thereof, validity or amount of any claim or
lien which may be asserted and, in connection with the rental, operation
or management of the Collateral or the payment of such costs and expenses,
may do so in such amounts and to such persons as Bank may deem
appropriate and may enter into such contracts therefor as it may deem
appropriate or may perform the same itself.
g) FURTHER ASSURANCES. The Company will do all acts and things
and will execute all financing statements and writings requested by the Bank
to establish, maintain and continue a perfected and valid security
interest of the Bank in the Collateral, and will promptly on demand pay all
reasonable costs and expenses of filing and recording all instruments,
including the costs of any searches deemed necessary by the Bank to
establish and determine the validity and the priority of the Bank's security
interests. The Company hereby appoints the Bank as its attorney-in-fact
for the purpose of performing any of the acts required or permitted by this
Subsection (g), and such power of attorney shall be irrevocable and coupled
with an interest.
h) MAINTENANCE OF TANGIBLE COLLATERAL. The Company will maintain
and preserve, or require each lessee to maintain and preserve, the tangible
Collateral in the same condition, repair and working order as when new,
ordinary wear and tear excepted, and in accordance with any manufacturer's
manual, and shall forthwith, or, in the case of any loss or damage to
any of the tangible Collateral as quickly as practicable after the occurrence
thereof, make or cause to be made all repairs, replacements, and other
improvements made in connection therewith which are necessary or desirable to
such end.
i) SPECIAL RIGHTS REGARDING ACCOUNTS RECEIVABLE. Upon an
occurrence of an event of default, the Bank or any of its agents may, at any
time from time to time in its sole discretion, notify the Company's
account debtors of the security interest of the Bank in the Collateral
and/or direct such account debtors that all payments in connection with
such Leases and the Collateral be made directly to the Bank in the
Bank's name. As used herein, the term "account debtors" shall include,
without limitation, any customer, franchisee, or any lessee under any
lease. If the Bank or any of its agents shall collect such obligations
directly from the Company's account debtors, the Bank or any of its agents
shall have the right to resolve any disputes relating to account receivable
directly with the Company's account debtors in such manner and on such terms
as the Bank or any of its agents shall deem appropriate. The Company directs
and authorizes any and all of its present and future account debtors to
comply with requests for information from the Bank, the Bank's designees and
agents and/or auditors, relating to any and all business transactions
between the Company and the Company's account debtors. The Company further
directs and authorizes all of its account debtors upon receiving a notice
or request sent by the Bank or the Bank's agents or designees to pay directly
to the Bank any and all sums of money or proceeds now or hereafter owing
by the Company's account debtors to the Company, and any such payment shall
act as a discharge of any debt of such account debtor to the Company in
the same manner as if such payment had been made directly to the Company.
The Company agrees to take any and all action as the Bank may request to
assist the Bank in exercising the rights described in this Section. The
Bank shall have the right, but not the duty to lease, operate and manage the
Equipment and any accessories thereon and pay operating costs and expenses,
including management fees, of every kind and nature in connection therewith,
so that the Equipment shall be operational and usable for its intended
purposes.
26. EVENTS OF DEFAULT. An event of default hereunder shall include
the occurrence of any of:
a) The occurrence of any Event of Default under the
Guaranty, the Notes or the Credit Agreement.
b) Material default or breach by the Company of any of
its representations, warranties, covenants or agreements set
forth herein.
c) The entry or execution of a levy, by execution or other
legal process, judgment lien or tax lien upon the interest
in property of the Company or any guarantor of the Secured
Obligations ("Guarantor") unless contested in good faith by
appropriate proceedings, the effect of which is to stay
enforcement thereof.
d) The adjudication of the Company or any Guarantor as an
involuntary bankrupt, or the entry of a decree or order
approving as properly filed a petition or answer
filed against the Company or any Guarantor seeking
reorganization of the Company or any Guarantor under the
Federal Bankruptcy Laws or any state insolvency or
bankruptcy law, as now or hereafter amended, if such
proceeding is instituted against the Company or any Guarantor
and is being contested by the Company or any Guarantor, as
the case may be, in good faith by appropriate proceedings,
such proceedings shall remain undismissed or unstayed
for a period of sixty (60) days.
e) The filing of any petition by the Company or any Guarantor
to declare the Company or any Guarantor bankrupt or to
delay, reduce or modify the Company's or any Guarantor's
debts or obligations, or seeking or proposing the entry of
an order for relief under Title 11 of the United States Code,
as the same may be from time to time amended.
f) The filing of an admission by the Company or any Guarantor
of the jurisdiction of the Court and the material allegations
contained in any petition in bankruptcy or any petition
pursuant to or purporting to be pursuant to the Federal
Bankruptcy Laws or any state or insolvency or bankruptcy
law, as now or hereafter amended or the institution by the
Company or any Guarantor of any proceedings or his consent
to the institution of any proceedings for any relief of
such party under any bankruptcy or insolvency laws or
any laws relating to the relief of debtors, readjustment
of indebtedness, reorganization, arrangements, composition
or extension.
g) The execution and delivery by the Company or any Guarantor of
any assignment for the benefit of creditors or the
application for a consent to the appointment of a receiver or
custodian for such party or any of the property of such party.
h) The entry of a decree or order appointing a receiver or
custodian of the property of the Company or any Guarantor.
27. REMEDIES. Upon the occurrence of any such event of default, the
Bank shall have and may exercise any one or more of the rights and remedies
provided to it under this Security Agreement or any of the other Operative
Documents or provided by law, including but not limited to all of the
rights and remedies of a secured party under the Illinois Uniform
Commercial Code, and the Company hereby agrees to assemble the
Collateral and make it available to the Bank at a place to be designated by
the Bank which is reasonably convenient to both parties, authorizes the Bank
to take possession of the Collateral with or without demand and with or
without process of law and to sell and dispose of the same at public or
private sale and to apply the proceeds of such sale to the costs and expenses
thereof (including attorneys' fees and disbursements, incurred by the Bank)
and then to the payment of the indebtedness and satisfaction of other Secured
Obligations. Any requirement of reasonable notice shall be met if the Bank
sends such notice to the Company, by registered or certified mail, at least
five (5) days prior to the date of sale, disposition or other event
giving rise to a required notice. The Bank may be the purchaser at any such
sale. The Company expressly authorizes such sale or sales of the Collateral
in advance of and to the exclusion of any sale or sales of or other
realization upon any other collateral securing the Secured Obligations. The
Bank shall have no obligation to preserve rights against prior parties. The
Company hereby waives as to the Bank any right of subrogation or marshalling
of such Collateral and any other collateral for the Secured Obligations. To
this end, the Company hereby expressly agrees that any such collateral or
other security of the Company or any other party which the Bank may
hold, or which may come to any of them or any of their possession, may be
dealt with in all respects and particulars as though this Security Agreement
were not in existence. The parties hereto further agree that public sale of
the Collateral by auction conducted in any county in which any Collateral
is located or in which the Bank or the Company does business after
advertisement of the time and place thereof shall, among other manners of
public and private sale, be deemed to be a commercially reasonable
disposition of the Collateral. The Company shall be liable for any
deficiency remaining after disposition of the Collateral.
28. SPECIAL REMEDIES CONCERNING CERTAIN COLLATERAL.
a) Upon the occurrence of any event of default, the Company
shall, if requested to do so in writing, and to the
extent so requested (i) take all reasonable measures to
collect and enforce payment of all amounts due the
Company on account of, in payment of, or in connection
with, any of the Collateral, (ii) hold all payments in the
form received by the Company as trustee for the Bank,
without commingling with any funds belonging to the
Company, and (iii) forthwith deliver all such payments to
the Bank with endorsement to the Bank's order of any checks
or similar instruments.
b) Upon the occurrence of any event of default, the Company
shall, if requested to do so, and to the extent so
requested, notify all account debtors and other persons
with obligations to the Company on account of or in
connection with any of the Collateral of the security
interest of the Bank in the Collateral and direct such
account debtors and other persons that all payments in
connection with the Collateral be made directly to the
Bank. The Bank itself may, upon the occurrence of an event
of default, so notify and direct any such account debtor
or other person that such payments are to be made directly
to the Bank.
c) Upon the occurrence of any event of default, for
purposes of assisting the Bank in exercising its rights
and remedies provided to it under this Security Agreement,
the Company (i) hereby irrevocably constitutes and appoints
the Bank its true and lawful attorney, for it and in its
name, place and stead, to collect, demand, receive,
sue for, compromise, and give good and sufficient
releases for, any monies due or to become due on account
of, in payment of, or in connection with the Collateral,
(ii) hereby irrevocably authorizes the Bank to endorse
the name of the Company upon any checks, drafts, or
similar items which are received in payment of, or in
connection with any of the Collateral, and to do all
things necessary in order to reduce the same to money,
(iii) with respect to any Collateral, hereby irrevocably
assents to all extensions or postponements of the time of
payment thereof or any other indulgence in connection
therewith, to each substitution, exchange or release of
Collateral, to the addition or release of any party
primarily or secondarily liable, to the acceptance of
partial payments thereon and the settlement, compromise or
adjustment (including adjustment of insurance payments)
thereof, all in such manner and at such time or times
as the Bank shall deem advisable, and (iv) hereby
irrevocably authorizes the Bank to notify the post office
authorities to change the address for delivery of the
Company's mail to an address designated by the Bank, and
the Bank may receive, open and dispose of all mail addressed
to the Company for the purpose of collecting proceeds of
collateral or other monies that may be applied by the Bank
against the Secured Obligations and all mail unrelated to
such collections shall be turned over to the Company by the
Bank within a reasonable time of receipt of same.
Notwithstanding any other provisions of this Security
Agreement, it is expressly understood and agreed that the
Bank shall have no duty or obligation to make any demand
or to make any inquiry as to the nature or sufficiency of
any payments received by it or to present or file any claim
or take any other action to collect or enforce the payment
of any amounts due or to become due on account of or in
connection with any of the Collateral.
29. REMEDIES CUMULATIVE. No right or remedy conferred upon or
reserved to the Bank under any Operative Document is intended to be
exclusive of any other right or remedy, and every right and remedy shall
be cumulative in addition to every other right or remedy given
hereunder or now or hereafter existing under any applicable law. Every right
and remedy of the Bank under any Operative Document or under applicable law
may be exercised from time to time and as is often as may be deemed expedient
by the Bank. To the extent that it lawfully may, the Company agrees
that it will not at any time insist upon, plead, or in any manner whatever
claim or take any benefit or advantage of any applicable present or
future stay, extension or moratorium law, which may affect observance or
performance of any provisions of any Operative Document; nor will it claim,
take or insist upon any benefit or advantage of any present or future law
providing for the valuation or appraisal of any security for its obligations
under any Operative Document prior to any sale or sales thereof which may be
made under or by virtue of any instrument governing the same; nor will it,
after any such sale or sales, claim or exercise any right, under any
applicable law to redeem any portion of such security so sold.
30. CONDUCT NO WAIVER. No waiver of default shall be effective
unless in writing executed by the Bank and waiver of any default or
forbearance on the part of the Bank in enforcing any of its rights under
this Security Agreement shall not operate as a waiver of any other default or
of the same default on a future occasion or of such right.
31. GOVERNING LAW AND JURISDICTION; DEFINITIONS. This Security
Agreement is a contract made under, and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with, the
laws of the State of Illinois applicable to contracts made and to be
performed entirely within such State. The Company agrees that any legal
action or proceeding against it with respect to any of its obligations under
this Security Agreement may be brought in any state or federal court located
in the State of Illinois, as the Bank in its sole discretion may elect. By
the execution and delivery of this Security Agreement, the Company
submits to and accepts, with regard to any such action or proceeding, for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of those courts. The Company waives any claim that the
State of Illinois is not a convenient forum or the proper venue for any such
suit, action or proceeding. Unless otherwise defined herein, terms used
in Article 9 of the Uniform Commercial Code in the State of Illinois are
used herein as therein defined on the date hereof. The headings of the
various subdivisions hereof are for convenience of reference only and shall
in no way modify any of the terms or provisions hereof.
32. NOTICES. All notices, demands, requests, consents and other
communications hereunder shall be in writing and shall be delivered or sent
to the Company at 919 Springer Drive, Lombard, Illinois 60148, Facsimile
(630) 953-0014, Attention: James Beltrame; to the Bank at American National
Bank and Trust Company of Chicago, 33 North LaSalle Street, Chicago,
Illinois, 60690, Facsimile (312) 661-5906; or to such other address as may
be designated by the Company or the Bank and its counsel by notice to the
other party. All notices shall be deemed to have been given at the time
of actual delivery thereof to such address, or if sent by the Bank to
the Company by certified or registered mail, postage prepaid, to such
address, on the fifth day after mailing.
33. RIGHTS NOT CONSTRUED AS DUTIES. The Bank neither assumes
nor shall it have any duty of performance or other responsibility under
any contracts in which the Bank has or obtains a security interest
hereunder. If the Company fails to perform any agreement contained
herein, the Bank may but is in no way obligated to itself perform, or
cause performance of, such agreement, and the expenses of the Bank incurred
in connection therewith shall be payable by the Company under paragraph 12.
The powers conferred on the Bank hereunder are solely to protect its
interests in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in
its possession and accounting for monies actually received by it hereunder,
the Bank shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
34. AMENDMENTS. None of the terms and provisions of this
Security Agreement may be modified or amended in any way except by an
instrument in writing executed by each of the parties hereto.
35. SEVERABILITY. If any one or more provisions of this Security
Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected, impaired or prejudiced
thereby.
36. EXPENSES.
a) The Company agrees to indemnify the Bank from and against
any and all claims, losses and liabilities growing out of or
resulting from this Security Agreement (including, without
limitation, enforcement of this Security Agreement), except
claims, losses or liabilities resulting from the Bank's gross
negligence or willful misconduct.
b) The Company will, upon demand, pay to the Bank an amount of
any and all reasonable expenses, including the reasonable fees
and disbursements of its counsel and of any experts and
agents, which the Bank may incur in connection with (i) any
amendment, modification or supplement to this Security
Agreement, or any costs incurred by the Bank reasonably
necessary to obtain and preserve the Bank's perfected
security interest in all Collateral secured hereby, (ii) the
custody, preservation, use or operation of, or the sale of,
collection from or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the
rights of the Bank hereunder, or (iv) the failure of the
Company to perform or observe any of the provisions hereof.
The Company will reimburse the Bank for all expenses,
including attorneys' fees and disbursements incurred by the
Bank in seeking to collect the indebtedness and other
obligations secured hereby or any part thereof,
in enforcing performance of the Company's obligations under
the Operative Documents, in defending the Bank's security
interests and the priority thereof, or in pursuing any of the
Bank's rights or remedies hereunder or under the Operative
Documents.
37. SUCCESSORS AND ASSIGNS; TERMINATION. This Security Agreement
shall create a continuing security interest in the Collateral and shall
(a) remain in full force and effect until full payment and performance of
the Secured Obligations (b) be binding upon the Company, its successors and
assigns and (c) inure, together with the rights and remedies of the Bank
hereunder, to the benefit of the Bank and its successors, transferees and
assigns. Upon the full payment and performance of the Secured Obligations
the security interests granted hereby shall terminate and all rights to the
Collateral shall revert to the Company. Upon any such termination, the Bank
will, at the Company's expense, execute and deliver to the Company such
documents as the Company shall reasonably request to evidence such
termination.
38. WAIVER OF JURY TRIAL. THE BANK AND THE COMPANY, AFTER CONSULTING
OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A
TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
SECURITY AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS SECURITY AGREEMENT OR ANY COURSE OF
CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER
OF THEM. NEITHER THE BANK NOR THE COMPANY SHALL SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN
WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN
ANY RESPECT OR RELINQUISHED BY EITHER THE BANK OR THE COMPANY EXCEPT
BY A WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
IN WITNESS WHEREOF, the Company has caused this Security Agreement to be
duly executed as of the day and year first set forth above.
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By:____________________________
Its:___________________________
B.L.G.C., INC.
By:____________________________
Its:___________________________
SCHEDULE 1(d)(i) TO SECURITY AGREEMENT
LIST OF OTHER OFFICE AND FACILITY LOCATIONS
Type of Office
OR FACILITY
ADDRESS
CITY COUNTY STATE
SCHEDULE 1(d)(ii) TO SECURITY AGREEMENT
LIST OF INVENTORY LOCATIONS
If Leased or
Warehoused, Name
as Address of
ADDRESS
CITY COUNTY STATE
LESSOR/WAREHOUSEMAN
SCHEDULE 1(d)(iii) TO SECURITY AGREEMENT
List of Fixtures, Machinery
AND EQUIPMENT LOCATIONS
Legal Description,
Record Owner and
Tax Parcel No. (if
fixtures are at
ADDRESS
CITY COUNTY STATE THIS LOCATION)
9
AMENDED AND RESTATED REVOLVING NOTE
$4,000,000 December 17, 1996
Chicago, Illinois
FOR VALUE RECEIVED, Successories, Inc. (f/k/a Celex Group, Inc.), an
Illinois corporation, Celebrating Excellence, Inc., an Illinois corporation,
and Successories of Illinois, Inc., an Illinois corporation (collectively,
the "Companies" and each individually a "Company"), hereby jointly and
severally promise to pay to the order of American National Bank and
Trust Company of Chicago, successor in interest to NBD Bank, an Illinois
state banking corporation (the "Bank"), at the principal banking office of
the Bank in lawful money of the United States of America and
in immediately available funds, the principal sum of Four Million
Dollars ($4,000,000), or such lesser principal amount as is advanced by
the Bank and recorded in the books and records of the Bank, on the
Termination Date; and to pay interest on the unpaid principal balance
hereof from time to time outstanding, in like money and funds, for the
period from the date hereof until the Revolving Loans evidenced hereby
shall be paid in full, at the rates per annum and on the dates provided in
the Credit Agreement referred to below.
The Bank is hereby authorized by the Companies to record on its books
and records, the date, amount and type of each Revolving Loan, the amount
of each payment or prepayment of principal thereon and the other
information provided for in such books and records, as the case may be,
shall constitute prima facie evidence of the information so recorded,
PROVIDED, HOWEVER, that any failure by the Bank to record any such
information shall not relieve the Companies of their obligation to repay
the outstanding principal amount of such Revolving Loans, all accrued
interest thereon and any amount payable with respect thereto in accordance
with the terms of this Revolving Note and the Credit Agreement.
Each Company and each endorser or guarantor hereof waives demand,
presentment, protest, diligence, notice of dishonor and any other formality
in connection with this Amended and Restated Revolving Note. Should the
indebtedness evidenced by this Amended and Restated Revolving Note or any
part thereof be collected in any proceeding or be placed in the hands of
attorneys for collection, the Companies agree to jointly and severally pay,
in addition to the principal, interest and other sums due and payable
hereon, all costs of collecting this Amended and Restated Revolving Note,
including attorneys' fees and expenses.
This Amended and Restated Revolving Note evidences one or more
Revolving Loans made under an Amended and Restated Credit Agreement, dated
as of July 31, 1995 (as the same may be amended, extended, modified or
supplemented from time to time, the "Credit Agreement"), by and among the
Companies and the Bank, to which reference is hereby made for a statement
of the circumstances under which this Amended and Restated Revolving Note
is subject to prepayment and under which its due date may be accelerated.
Capitalized terms used but not defined in this Amended and Restated
Revolving Note shall have the respective meanings assigned to them in the
Credit Agreement.
This Amended and Restated Revolving Note is secured and supported by
the Security Agreements and the Security Documents and all other grants of
security or guaranties entered into by the Companies or any other person.
This Amended and Restated Revolving Note shall amend and restate in
its entirety that certain Amended and Restated Revolving Note, dated as of
May 1, 1996, in the original principal amount of $2,500,000 payable by the
Companies to the order of the Bank, and all terms, conditions and
obligations contained therein, and has been entered into in replacement and
substitution and not in repayment thereof, and all Loans and other
obligations contained therein shall continue on the date hereof, and shall
remain in full force and effect, as re-evidenced hereby. Nothing contained
herein shall be construed as a novation of any such Loans or other
obligations.
This Amended and Restated Revolving Note is made under, and shall be
governed by and construed in accordance with, the internal laws of the
State of Illinois applicable to contracts made and to be performed entirely
within such State and without giving effect to choice of law principles of
such State.
NO COMPANY OR ANY ASSIGNEE OR SUCCESSOR OF A COMPANY, SHALL SEEK A
JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER
LITIGATION PROCEDURE BASED UPON, OR ARISING OUT OF THIS AMENDED AND
RESTATED REVOLVING NOTE, ANY RELATED INSTRUMENT, OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN ANY COMPANY AND THE BANK. IF THE SUBJECT MATTER OF
ANY SUCH LITIGATION IS ONE IN WHICH THE WAIVER OF A JURY TRIAL IS
PROHIBITED, IF AT ALL, UNDER THE CONTROLLING LAW OF THE APPLICABLE
JURISDICTION, BY CONSTITUTIONAL OR STATUTORY PROVISION, NO COMPANY WILL
PRESENT AS A DEFENSE OR COUNTERCLAIM IN SUCH LITIGATION ANY CLAIM WHICH
WOULD REDUCE OR OFFSET ANY AMOUNT OR RIGHT CLAIMED UNDER THE PROVISIONS OF
THIS AMENDED AND RESTATED REVOLVING NOTE. NO COMPANY WILL SEEK TO
CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY HAS BEEN WAIVED, WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS AMENDED AND RESTATED REVOLVING NOTE HAVE BEEN FULLY
DISCUSSED BY THE PARTIES TO THE CREDIT AGREEMENT, AND THESE PROVISIONS
SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR
REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL
NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE BANK IN ENTERING INTO THE LOAN DOCUMENTATION ENTERED
INTO PURSUANT TO THIS AMENDED AND RESTATED REVOLVING NOTE.
SUCCESSORIES, INC.,
an Illinois corporation
By: _____________________________
Its: ____________________________
CELEBRATING EXCELLENCE, INC., an Illinois
corporation
By: _____________________________
Its: ____________________________
SUCCESSORIES OF ILLINOIS, INC., an Illinois
corporation
By: _____________________________
Its: ____________________________
AMENDED AND RESTATED TERM NOTE
$4,475,000 December 17, 1996
Chicago, Illinois
FOR VALUE RECEIVED, Successories, Inc. (f/k/a Celex Group, Inc.), an
Illinois corporation, Celebrating Excellence, Inc., an Illinois corporation
and Successories of Illinois, Inc., an Illinois corporation (collectively,
the "Companies" and each individually a "Company"), hereby jointly and
severally promise to pay to the order of American National Bank and Trust
Company of Chicago, a national banking association, successor in interest
to NBD BANK, an Illinois state banking corporation (the "Bank"), at its
principal banking office in Chicago, Illinois, in lawful money of the
United States and in immediately available funds, the principal sum of Four
Million Four Hundred Seventy Five Thousand Dollars ($4,475,000), in
seventeen monthly installments consisting of sixteen equal monthly
installments of Ninety Four Thousand Eight Hundred Eight Dollars ($94,808),
which shall be applied first to any interest accrued hereon and then to any
principal balance hereof commencing January 1, 1997 through and including
April 1, 1998 and a final payment of the entire remaining principal balance
hereof on May 1, 1998 (the "Maturity Date"), when the entire outstanding
principal amount of the Term Loan evidenced hereby, and all accrued
interest thereon, shall be due and payable; and to pay interest on the
unpaid principal balance hereof from time to time outstanding, in like
money and funds, for the period from the date hereof until such Term Loan
evidenced hereby shall be paid in full, at the rates per annum and on the
dates as provided in the Credit Agreement referred to below.
The Bank is hereby authorized by the undersigned to record on its
books and records, the date and amount of each payment or prepayment on
this Amended and Restated Term Note, which books and records shall
constitute presumptive evidence of the information so noted, provided that
failure by the Bank to make any such notation shall not relieve the
Companies of their obligation to pay the outstanding principal amount
hereof, all interest thereon and any amount payable with respect hereto in
accordance with the terms hereof and the Credit Agreement.
Each Company, and each endorser or guarantor hereof, hereby waives
presentment, protest, diligence, notice of dishonor, and any other
formality in connection with this Amended and Restated Term Note. Should
the indebtedness evidenced by this Amended and Restated Term Note or any
part thereof be collected in any proceeding or be placed in the hands of
attorneys for collection, the Companies agree to pay, in addition to the
principal balance hereof any and all accrued and unpaid interest thereon
and other sums due and payable hereon, all costs of collecting this Amended
and Restated Term Note and realizing upon any security therefor, including
reasonable attorneys' fees and expenses.
This Amended and Restated Term Note evidences a Term Loan made under
an Amended and Restated Secured Credit Agreement dated as of July 31, 1995
(as amended, extended, modified or supplemented, the "Credit Agreement"),
among the Companies and the Bank, to which reference is hereby made for a
statement of the circumstances under which this Amended and Restated Term
Note is subject to prepayment and the terms under which it may be prepaid
and under which its due date may be accelerated. Capitalized terms used
but not defined in this Amended and Restated Term Note shall have the
respective meanings assigned to them in the Credit Agreement.
This Amended and Restated Term Note is secured and supported by the
Security Agreements and the Security Documents and all other grants of
security or guaranties entered into by the Companies or any other person.
This Amended and Restated Term Note shall amend and restate in its
entirety that certain Term Note, dated May 1, 1996, in the original
principal amount of $9,000,000 payable by the Companies to the order of the
Bank, and all terms, conditions and obligations contained therein, and has
been entered into in replacement and substitution and not in repayment
thereof, and all Loans and other obligations contained therein shall
continue on the date hereof and shall remain in full force and effect, as
re-evidenced hereby. Nothing contained herein shall be construed as a
novation of any such Loans or other obligations.
This Amended and Restated Term Note is made under, and shall be
governed by and construed in accordance with, the laws of the State of
Illinois applicable to contracts made and to be performed entirely within
such State and without giving effect to choice of law principles of such
State.
NO COMPANY OR ANY ASSIGNEE OR SUCCESSOR OF A COMPANY, SHALL SEEK A
JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER
LITIGATION PROCEDURE BASED UPON, OR ARISING OUT OF THIS AMENDED AND
RESTATED TERM NOTE, ANY RELATED INSTRUMENT, OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN ANY COMPANY AND THE BANK. IF THE SUBJECT MATTER OF
ANY SUCH LITIGATION IS ONE IN WHICH THE WAIVER OF A JURY TRIAL IS
PROHIBITED, IF AT ALL, UNDER THE CONTROLLING LAW OF THE APPLICABLE
JURISDICTION, BY CONSTITUTIONAL OR STATUTORY PROVISION, NO COMPANY WILL
PRESENT AS A DEFENSE OR COUNTERCLAIM IN SUCH LITIGATION ANY CLAIM WHICH
WOULD REDUCE OR OFFSET ANY AMOUNT OR RIGHT CLAIMED UNDER THE PROVISIONS OF
THIS AMENDED AND RESTATED TERM NOTE. NO COMPANY WILL SEEK TO CONSOLIDATE
ANY SUCH ACTION, IN WHICH A JURY HAS BEEN WAIVED, WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS
AMENDED AND RESTATED TERM NOTE HAVE BEEN FULLY DISCUSSED BY THE PARTIES TO
THE CREDIT AGREEMENT, AND THESE PROVISIONS SHALL BE SUBJECT TO NO
EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY
OTHER PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
BANK IN ENTERING INTO THE LOAN DOCUMENTATION ENTERED INTO PURSUANT TO THIS
AMENDED AND RESTATED TERM NOTE.
SUCCESSORIES, INC.,
an Illinois corporation
By: _____________________________
Its: ____________________________
CELEBRATING EXCELLENCE, INC.,
an Illinois corporation
By: _____________________________
Its: ____________________________
SUCCESSORIES OF ILLINOIS, INC.,
an Illinois corporation
By: _____________________________
Its: ____________________________
WAIVER NO. 9, CONSENT NO. 1
AND
FOURTH AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT
This Waiver No. 9, Consent No. 1 and Fourth Amendment to Amended and
Restated Credit Agreement (the "Amendment") is made as of the ___ day of
December,
1996 by and among Successories, Inc., an Illinois corporation (f/k/a Celex
Group, Inc.) ("Successories, Inc."), Celebrating Excellence, Inc., an
Illinois corporation ("Celebrating Excellence") and Successories of
Illinois, Inc., an Illinois corporation ("Successories") (Successories,
Inc., Celebrating Excellence and Successories are collectively the
"Companies" and each individually a "Company"), each having an address of
919 Springer Drive, Lombard, Illinois 60148 and American National Bank and
Trust Company of Chicago, a national banking association, assignee of NBD
Bank, an Illinois banking corporation (the "Bank"), having an address of 33
North LaSalle Street, Chicago, Illinois 60690.
W I T N E S S E T H :
WHEREAS, the Companies and the Bank have entered into that certain
Amended and Restated Credit Agreement, dated as of July 31, 1995 (as
amended, modified, extended or supplemented from time to time, the "Credit
Agreement");
WHEREAS, the Companies and the Bank desire to amend the Credit
Agreement in certain respects, waive certain Events of Default thereunder
and extend certain consents, as provided herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the undersigned parties agree as
follows:
I. DEFINITIONS.
Capitalized terms used herein but not defined herein shall have the
meaning ascribed thereto in the Credit Agreement, as amended hereby.
II. AMENDMENTS TO CREDIT AGREEMENT.
The Credit Agreement is hereby amended as follows:
a)The following new definitions are hereby added to Section 1.1,
appearing in alphabetical order therein, as follows:
"ELIGIBLE ACTIVE RETAIL INVENTORY" SHALL MEAN ANY ELIGIBLE
FINISHED GOODS INVENTORY LOCATED AT SUCCESSORIES' STORES.
"CONVERTIBLE PREFERRED STOCK" SHALL MEAN SUCCESSORIES, INC.'S
CONVERTIBLE PREFERRED STOCK ISSUED ON THE TERMS SET FORTH IN SCHEDULE
5.10 HERETO.
a.The definitions of "Eligible Finished Goods Inventory," "Eligible
Inactive Inventory", and "Eligible Raw Materials Inventory" shall be
deleted and replaced in their entirety as follows:
"ELIGIBLE FINISHED GOODS INVENTORY" SHALL MEAN ANY ELIGIBLE
INVENTORY THAT CONSTITUTES FINISHED GOODS INVENTORY AVAILABLE FOR SALE
TO CUSTOMERS AND LOCATED AT A COMPANY'S FACILITIES IN LOMBARD,
ILLINOIS.
"ELIGIBLE INACTIVE INVENTORY" SHALL MEAN ANY ELIGIBLE INVENTORY
LOCATED AT A COMPANY'S FACILITIES IN LOMBARD, ILLINOIS, THE ONGOING
PRODUCTION OF WHICH HAS BEEN DISCONTINUED OR DISCOUNTED, BUT IS
OTHERWISE SALEABLE IN THE ORDINARY COURSE OF BUSINESS.
"ELIGIBLE RAW MATERIALS INVENTORY" SHALL MEAN ANY ELIGIBLE
INVENTORY LOCATED AT A COMPANY'S FACILITIES IN LOMBARD, ILLINOIS THAT
IS RAW MATERIALS TO BE USED FOR PRODUCTION OF ANY COMPANY'S INVENTORY.
a)Section 2.2(a) is amended to add the following line at the bottom
of the table described as "Eligible Inventory" therein:
ELIGIBLE RETAIL INVENTORY 20%
b)Page 2 of Exhibit D is deleted in its entirety and replaced by
the form of Borrowing Base Certificate appearing as Schedule I to this
Amendment.
c)Section 5.9 is amended to delete the phrase "which, during the
effectiveness of this Agreement exceeds, individually on in the aggregate,
$500,000," appearing on the seventh and eighth lines thereof.
d)Section 5.10 is amended to insert the following phrase between
the word "issued," and the word "and" contained in the fifth line thereof:
EXCEPT IF NO DEFAULT OR EVENT OF DEFAULT SHALL HAVE OCCURRED,
SUCCESSORIES, INC. MAY PAY CASH DIVIDENDS ON 400 SHARES OF THE
CONVERTIBLE PREFERRED STOCK NOT IN EXCESS OF $105,000 PER ANNUM
e)Section 5.15 is deleted in its entirety and replaced as follows:
5.15 INDEBTEDNESS. (A) NO COMPANY OR ANY SUBSIDIARY SHALL CREATE,
INCUR, ASSUME OR IN ANY MANNER BECOME LIABLE IN RESPECT OF, OR SUFFER
TO EXIST, ANY INDEBTEDNESS OTHER THAN:
(I) THE LOANS;
(II) THE INDEBTEDNESS DESCRIBED IN THE CONSOLIDATED
FINANCIAL STATEMENTS OF SUCCESSORIES, INC. AND ITS
SUBSIDIARIES AT THE FISCAL YEAR ENDED FEBRUARY 3, 1996,
HAVING THE SAME TERMS AS THOSE EXISTING ON THE DATE OF
THIS AGREEMENT;
(III) SUBORDINATED DEBT (AS THAT TERM IS DEFINED IN
SECTION 5.21(A) HEREOF) EXISTING ON THE DATE HEREOF;
AND
(IV) INDEBTEDNESS IN A PRINCIPAL AMOUNT NOT IN EXCESS
OF $400,000 SUBORDINATED IN RIGHT OF PAYMENT TO THE
BANK, WHICH SHALL (A) PROHIBIT THE HOLDER THEREOF FROM
RECEIVING ANY PAYMENT OF PRINCIPAL THEREON (INCLUDING,
WITHOUT LIMITATION, THE PAYMENT OF PRINCIPAL UPON
NORMAL MATURITY THEREOF) AT ALL TIMES UNTIL THE LOANS
HAVE BEEN REPAID IN FULL AND THE COMMITMENT TERMINATED,
(B) WHICH SHALL, SUBJECT TO THE RESTRICTIONS OF THE
FOREGOING CLAUSE (A) MATURE NOT EARLIER THAN AUGUST 1,
1997 AND (C) WHICH SHALL PERMIT PAYMENT OF INTEREST
THEREON ONLY SO LONG AS NO DEFAULT OR EVENT OF DEFAULT
HAS OCCURRED AND CONTAINING SUCH OTHER TERMS IN FORM
AND SUBSTANCE SATISFACTORY TO THE BANK AND ISSUED
PURSUANT TO THE TRANSACTIONS DESCRIBED IN THAT CERTAIN
AGREEMENT AND PLAN OF MERGER, DATED AS OF OCTOBER 1,
1996 BY AND AMONG SUCCESSORIES, INC., BRITISH LINKS
ACQUISITION CORP., A WHOLLY-OWNED SUBSIDIARY OF
SUCCESSORIES, INC., BRITISH LINKS GOLF CLASSICS, INC.,
DAVID J. HOUSTON AND MICHAEL MCARTHUR AND THAT CERTAIN
MERGER AGREEMENT, DATED AS OF OCTOBER 1, 1996, BY AND
AMONG SUCCESSORIES, INC., B.L.G.C. ACQUISITION CORP.,
B.L.G.C., INC., DAVID J. HOUSTON AND MICHAEL MCARTHUR,
WHEREIN, BY MERGER, BRITISH LINKS ACQUISITION CORP. AND
B.L.G.C., INC. WHICH, AFTER GIVING EFFECT TO SUCH
TRANSACTION, SHALL EACH BE WHOLLY-OWNED SUBSIDIARIES OF
SUCCESSORIES, INC. SHALL SUCCEED TO ALL THE ASSETS AND
BUSINESS OF, RESPECTIVELY, BRITISH LINKS GOLF
CLASSICS, INC. AND B.L.G.C., INC. (THE "BRITISH LINKS
ACQUISITION").
f)THE COMPANIES ACKNOWLEDGE THAT NO PAYMENT OF PRINCIPAL IN EXCESS
OF $300,000 MAY BE MADE ON ANY SUBORDINATED DEBT (AS THAT TERM IS
DEFINED IN SECTION 5.21(A) HEREOF) UNTIL ALL LOANS HAVE BEEN REPAID
IN FULL AND THE COMMITMENT TERMINATED.
g)A new Section 5.23 is hereby added, as follows:
5.23 LOCK BOX. THE COMPANIES HEREBY RATIFY AND AFFIRM
ALL UNDERTAKINGS DESCRIBED IN THAT CERTAIN DOMINION OF
FUNDS AGREEMENT, DATED AS OF JULY 31, 1995, BY AND AMONG
THE COMPANIES AND THE BANK. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, EACH COMPANY SHALL DIRECT
ALL CUSTOMERS TO MAKE ALL PAYMENTS IN CONNECTION ALL
OBLIGATIONS TO BANK DIRECTLY TO AN ACCOUNT OR ACCOUNTS
MAINTAINED BY BANK TITLED IN BANK'S NAME (EACH A
"COLLECTION ACCOUNT"), WHICH ACCOUNT SHALL BE A NON-
INTEREST BEARING ACCOUNT OVER WHICH BANK ALONE SHALL
HAVE THE POWER OF APPLICATION AND WITHDRAWAL. THE
AMOUNTS DEPOSITED IN SUCH COLLECTION ACCOUNT ARE THE
SOLE AND EXCLUSIVE PROPERTY OF BANK. EACH COMPANY SHALL
(A) PROMPTLY COLLECT AND ENFORCE PAYMENT OF ALL AMOUNTS
DUE EACH COMPANY ON ACCOUNT OF AND IN PAYMENT OF, OR IN
CONNECTION WITH, ANY OF THE RECEIVABLES OR INVENTORY, OR
IN CONNECTION WITH THE SALE OR LEASE OF ANY OTHER
PROPERTY OF ANY COMPANY (B) HOLD ALL CHECKS, DRAFTS,
CASH AND OTHER REMITTANCES IN PAYMENT OF OR ON ACCOUNT
OF ANY OF THE RECEIVABLES OR INVENTORY OR IN CONNECTION
WITH THE SALE OR LEASE OF ANY OTHER PROPERTY OF ANY
COMPANY IN THE FORM RECEIVED BY EACH COMPANY AS TRUSTEE
FOR THE BANK WITHOUT COMMINGLING WITH ANY OTHER FUNDS OR
PROPERTY, AND (C) IMMEDIATELY DELIVER THE SAME TO THE
COLLECTION ACCOUNT (OR PURSUANT TO OTHER INSTRUCTIONS OF
BANK) WITH ENDORSEMENT TO BANK'S ORDER, ACCOMPANIED BY A
REMITTANCE REPORT IN THE FORM SPECIFIED BY BANK. ALL
SUCH CHECKS, DRAFTS, CASH AND OTHER REMITTANCES SO
RECEIVED BY BANK SHALL BE CREDITED TO THE COLLECTION
ACCOUNT AND SHALL BE APPLIED TO THE INDEBTEDNESS AS BANK
MAY DETERMINE IN ITS SOLE DISCRETION. EACH COMPANY
SHALL DIRECT ALL CUSTOMERS TO REMIT ALL PAYMENTS ON
RECEIVABLES TO A LOCK BOX, OR LOCK BOXES ESTABLISHED
WITH BANK (EACH A "LOCK BOX"), THE PROCEEDS OF WHICH
SHALL BE DEPOSITED IN A COLLECTION ACCOUNT.
h)The following sentence is added to the end of Section 5.17:
ON OR BEFORE MAY 31, 1997, INVENTORY OWNED BY B.L.G.C., INC. AND
BRITISH LINKS ACQUISITION CORP. SHALL BE EITHER KEPT AT THE SAME
LOCATIONS AS THE COMPANIES MAINTAIN INVENTORY IN THE STATE OF
ILLINOIS OR THE BANK SHALL HAVE RECEIVED AN EXECUTED LANDLORD
WAIVER IN THE FORM REQUIRED BY THIS SECTION 5.17 WITH RESPECT TO
ANY OTHER LOCATION OR LOCATIONS FOR SUCH INVENTORY.
a.A new Schedule 5.10 is added to the Credit Agreement in the form of
Schedule II to this Amendment.
b.By reason of the change of corporate name of "Celex Group, Inc." to
"Successories, Inc." all references to "Celex", "Celex Group, Inc." or
terms of like import contained in the Credit Agreement, the Notes, the
Security Agreements, Security Documents or any other loan as security
documents related thereto shall mean and be references to Successories,
Inc., an Illinois corporation. By reason of the purchase of the Loans
by American National Bank and Trust Company of Chicago from NBD Bank,
all references in the Credit Agreement, the Notes, the Security
Agreements, Security Documents or any other loan or security documents
related thereto to "NBD Bank" shall mean and be references to "American
National Bank and Trust Company of Chicago".
III. WAIVERS
The Bank hereby waives the Event of Default arising under Section
6.1(c) of the Credit Agreement arising solely from the British Links
Acquisition, in violation of Section 5.9 of the Credit Agreement.
IV. CONSENTS
The Bank hereby consents, pursuant to Section 1(d) of the Security
Agreement, dated as of July 31, 1995, by and between Successories, Inc. and
the Bank, to the change of corporate name of "Celex Group, Inc." to
"Successories, Inc.".
V. RATIFICATION AND AFFIRMATION.
The Credit Agreement, as amended hereby, all exhibits, annexes and
schedules thereto, together with all other loan documents, Security
Agreements and Security Documents executed pursuant to the Credit
Agreement, are hereby ratified and affirmed and shall in all other respects
remain in full force and effect. Except as expressly provided herein,
nothing contained in this Amendment shall be construed as a waiver of any
existing or hereafter arising Default or Event of Default and the Bank
reserves all rights and remedies under the Credit Agreement, the Security
Agreements, the Security Documents and under applicable law.
VI. REPRESENTATIONS AND WARRANTIES.
a)Each Company hereby ratifies and affirms all the representations and
warranties contained in the Credit Agreement as true, complete and accurate
as of the date of this Amendment. With respect to representations and
warranties contained in Section 4.11 of the Credit Agreement as to
ownership and other matters pertaining to Subsidiaries, such
representations and warranties, together with the information contained in
Schedule 4.11 to the Credit Agreement, are hereby supplemented by the
information pertaining to B.L.G.C., Inc. and British Links Acquisition
Corp. contained in Schedule II to this Agreement.
b)Each Company represents and warrants that upon completion of the
British Links Acquisition, British Links Acquisition Corp. shall succeed to
all right, title and interest in and to all assets and properties of
British Links Golf Classics, Inc. and at such time British Links
Acquisition Corp. and B.L.G.C., Inc. shall collectively own, free and clear
of any competing lien or security interest, inventory and accounts
receivable having a fair saleable value of not less than $300,000, all of
which inventory shall be located at and kept in Dallas, Texas and
Successories, Inc. shall own all of the issued and outstanding capital
stock of British Links Acquisition Corp. and B.L.G.C., Inc. free and clear
of all liens and security interests other than those of the Bank.
c)Each Company represents and warrants that Successories, Inc. has
received $1,580,000 in consideration for the issuance of 400 shares of
Convertible Preferred Stock and such Convertible Preferred Stock has been
validly issued, is fully paid and non assessable and has been issued on the
terms described in Schedule III to this Amendment.
VII. CONDITIONS.
Unless waived in writing by the Bank, the effectiveness of this
Amendment is conditioned upon:
d)Each Company's representations and warranties contained herein being
true and correct in all material respects on and as of the date hereof.
e)This Amendment shall have been executed and delivered by the Bank
and each Company and acknowledged by each Guarantor.
f)The Bank and its counsel shall have received copies of all
documentation related to the British Links Acquisition including any merger
agreement applicable thereto and copies of any notes, debentures,
subordination agreements or other evidence of or agreements governing the
issuance of any Indebtedness pursuant thereto.
g)Successories, Inc. shall have entered into UCC-3 name change
amendments giving effect to the change of its corporate name from "Celex
Group, Inc." to "Successories, Inc." and UCC-1 financing statements having
the debtor name "Successories, Inc.", in each case which UCC-3 amendments
and UCC-1 financing statements shall be filed in all locations where
financing statements presently appear of record against the name "Celex
Group, Inc." together with any such additional jurisdictions where
Successories, Inc. maintains property or assets.
h)Each Company, together with Celex Successories Inc., B.L.G.C.,
Inc.,British Links Acquisition Corp., Arnold M. Anderson and James M.
Beltrame, shall have entered into that certain Fifth General Release, in
form and substance acceptable to the Bank.
i)The Companies shall have paid in full all legal bills submitted
prior to the date hereof by Dickinson, Wright, Moon, Van Dusen & Freeman
and McCarthy Tetrault; together with estimated out-of-pocket expenses
associated with any amendment or assignment of any existing financing
statements or any new financing statement, any amendment or assignment of
the Copyright Security Agreement or the Trademark Security Agreement, the
filing thereof, and any UCC searches or any other reasonable expenses
related thereto.
j)Each of British Links Acquisition Corp. and B.L.G.C., Inc. shall
have entered into a Guaranty of all obligations contained in the Credit
Agreement and the Notes, a Security Agreement securing said Guaranty
granting a first priority security interest to the Bank in all of its
assets and UCC-1 financing statements, filed with the Secretaries of State
of Illinois, Texas and such other jurisdictions and locations deemed
necessary by the Bank to perfect the Bank's security interest in all the
assets of B.L.G.C., Inc. and British Links Acquisition Corp.; Successories,
Inc. shall have further entered into a Pledge Agreement, in favor of the
Bank, pledging its interest in all the issued and outstanding capital stock
of B.L.G.C., Inc. and British Links Acquisition Corp., together with
necessary stock powers accompanied by originals of all certificates for
such pledged shares (all of the foregoing documents described in this
Section VII g) are collectively hereinafter referred to as the "British
Links Security Documents").
k)Each Company, B.L.G.C., Inc., and British Links Acquisition Corp.
shall have delivered to the Bank a certificate of recent date of the
appropriate government official certifying as to the corporate existence of
each such Company, B.L.G.C., Inc. and British Links Acquisition Corp.
l)Each Company, B.L.G.C., Inc., British Links Acquisition Corp. and
Celex Successories Inc. shall have delivered to the Bank a certified copy
of resolutions of the board of directors of each Company, B.L.G.C., Inc.,
British Links Acquisition Corp. and Celex Successories Inc. authorizing the
execution and delivery of this Amendment or the British Links Security
Documents, as the case may be, and all documentation related thereto,
together with a certificate of the Secretary or Assistant Secretary of each
Company, B.L.G.C., Inc., British Links Acquisition Corp. and Celex
Successories Inc. certifying the officers of each Company, B.L.G.C., Inc.,
British Links Acquisition Corp. and Celex Successories Inc. and including
the original signatures of each such officer and certifying that there has
been no amendment to the bylaws or articles/certificate of incorporation of
each such Company and Celex Successories Inc. since May 1, 1996, or if such
amendment has occurred, attaching a copy of same and certifying the
accuracy thereof and in the case of B.L.G.C., Inc. and British Links
Acquisition Corp., certifying and attaching true and complete copies of
articles of incorporation and bylaws.
m)The President and Chief Executive Officer of each Company shall have
delivered an officer's certificate to the Bank certifying the accuracy of
all the representations and warranties contained herein and certifying that
no Default or Event of Default exists under the Credit Agreement.
n)Each Company shall have entered into documentation in the Bank's
prescribed forms giving effect to the provisions of Section 5.23 of the
Credit Agreement and all customers of the Companies shall be notified and
directed to remit all future payments to the Lock Box.
o)The Bank shall have received the legal opinion of Timothy Dillon, as
to matters contained herein, in the form requested by the Bank.
p)The Companies shall have obtained agreements for in excess of
$300,000 of Subordinated Debt to extend the maturity date of such
Subordinated Debt to a date on or after August 1, 1997, copies of which
agreements shall be furnished to the Bank.
VIII. MISCELLANEOUS.
The provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective legal representatives,
successors and assigns. This instrument has been made and executed and
delivered in the State of Illinois and shall be governed by and construed
in accordance with the internal laws of the State of Illinois without
regard to conflicts of laws principles. This Amendment may be executed and
delivered in several counterparts with the intention that all such
counterparts, when taken together, shall constitute one and the same
instrument. One or more counterparts of this Amendment may be delivered by
facsimile, with the intention that delivery by such means shall have the
same effect as delivery of an original counterpart thereof. The section
headings contained in this Amendment are for convenience of reference only
and in no way shall modify any of the terms or provisions hereof.
IN WITNESS WHEREOF, the parties have entered into this Amendment as of
the day and year first above written.
CELEBRATING EXCELLENCE, INC. AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By: _____________________________ By: __________________________
Its: ____________________________ Its: _________________________
SUCCESSORIES OF ILLINOIS, INC. SUCCESSORIES, INC. (f/k/a Celex
Group, Inc.)
By: ______________________________ By: _____________________________
Its: _____________________________ Its: ____________________________
ACKNOWLEDGEMENTS
The undersigned, each being a Guarantor of the obligations described
in the Credit Agreement, hereby each acknowledge and agree to the terms of
the foregoing Waiver No. 9, Consent No. 1 and Fourth Amendment to Credit
Agreement and hereby further acknowledge for the benefit of the Bank, that
such obligations remain in full force and effect.
CELEBRATING EXCELLENCE, INC.
By: ____________________________
Its:_____________________________
SUCCESSORIES OF ILLINOIS, INC.
By: ____________________________
Its:_____________________________
SUCCESSORIES, INC. (f/k/a Celex
Group, Inc.)
By: ____________________________
Its:_____________________________
_______________________________
Arnold M. Anderson
_______________________________
James M. Beltrame
CELEX SUCCESSORIES INC.
By: ____________________________
Its:_____________________________
B.L.G.C., INC.
By: ____________________________
Its:_____________________________
BRITISH LINKS ACQUISITION CORP.
By: _____________________________
Its: _____________________________
SCHEDULE I
BORROWING BASE CERTIFICATE
OF SUCCESSORIES, INC., CELEBRATING EXCELLENCE, INC.
AND SUCCESSORIES OF ILLINOIS, INC.
FOR THE MONTH OF ___________, 19__.
(OOO OMITTED)
I.Borrowing Base Calculations
Borrowing Base
A. Accounts Receivable
1. Gross Accounts Receivable $__________
2. Less: Receivables Over 90 days (__________)
3. Less: Receivables from Affiliates (__________)
4. Less: 10% Taint (__________)
5. Less: Foreign Receivables (__________)
6. Less: Skymall Receivables (__________)
7. Less: Milligan/Masters Receivables (__________)
8. Less: Other Ineligible Receivables (__________)
9. Total Eligible Receivables
Consisting of:
a) Eligible Franchise Receivables X 50% ___________
b) Eligible Direct Marketing Receivables X 70% ___________
c) Eligible Franklin Quest Receivables X 50% ___________
d) Eligible Retail Receivables X 70% ___________
e) Eligible Wholesale Receivables X 70% ___________
10. Total Eligible Receivables Borrowing Base
(9a)-e)) $__________
B. Inventory
1. Gross Inventory $__________
2. Less: Canadian/Foreign Inventory (__________)
3. Less: Joint Venture Inventory (__________)
4. Less: Other Ineligible Inventory (__________)
5. Total Inventory
Consisting of:
a) Eligible Finished Goods Inventory X 40% ___________
b) Eligible Raw Materials Inventory X 40% ___________
c) Eligible Inactive Inventory X 5% ___________
d) Eligible Retail Inventory x 20% ___________
6. Total Eligible Inventory Borrower Base
(5a)-d)) $__________
C. Borrowing Base Total (A10 + B6) __________
II.Compliance
A. Maximum Amount of Facility $2,500
B. Total Borrowing Base (from I-C) __________
C. Lesser of II-A or II-B __________
D. Total Revolving Loans Outstanding __________
E. Excess Availability (Overadvance)
(II-C minus II-D)
SCHEDULE II
SUPPLEMENT TO SCHEDULE 4.11 TO
CREDIT AGREEMENT AS TO
OWNERSHIP OF BRITISH LINKS ACQUISITION CORP.
AND B.L.G.C., INC.
Class of Total Issued and Shares Owned by
SUBSIDIARY CAPITAL STOCK PAR VALUE OUTSTANDING SHARES SUCCESSORIES, INC.
British Links Common
Acquisition Corp.
B.L.G.C., Inc. Common
SCHEDULE III
FORM OF CERTIFICATE OF
DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES A CONVERTIBLE PREFERRED
STOCK OF SUCCESSORIES, INC.
WAIVER NO. 10 AND FIFTH AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT
This Waiver No. 10 and Fifth Amendment to Amended and Restated Credit
Agreement (the "Amendment") is made as of the 17th day of December, 1996 by
and among Successories, Inc., an Illinois corporation (f/k/a Celex Group,
Inc.) ("Successories, Inc."), Celebrating Excellence, Inc., an Illinois
corporation ("Celebrating Excellence") and Successories of Illinois, Inc.,
an Illinois corporation ("Successories") (Successories, Inc., Celebrating
Excellence and Successories are collectively the "Companies" and each
individually a "Company"), each having an address of 919 Springer Drive,
Lombard, Illinois 60148 and American National Bank and Trust Company of
Chicago, a national banking association, assignee of NBD Bank, an Illinois
banking corporation (the "Bank"), having an address of 33 North LaSalle
Street, Chicago, Illinois 60690.
W I T N E S S E T H :
WHEREAS, the Companies and the Bank have entered into that certain
Amended and Restated Credit Agreement, dated as of July 31, 1995 (as
amended, modified, extended or supplemented from time to time, the "Credit
Agreement");
WHEREAS, the Companies and the Bank desire to amend the Credit
Agreement in certain respects, as provided herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the undersigned parties agree as
follows:
I. DEFINITIONS.
Capitalized terms used herein but not defined herein shall have the
meaning ascribed thereto in the Credit Agreement, as amended hereby.
II. AMENDMENTS TO CREDIT AGREEMENT.
The Credit Agreement is hereby amended as follows:
q)The following new definitions are hereby added to Section 1.1,
appearing in alphabetical order therein, as follows:
"CASH FLOW" OF ANY PERSON SHALL MEAN THAT PERSON'S EARNINGS
BEFORE INTEREST AND TAXES PLUS (I) DEPRECIATION, AMORTIZATION AND
OTHER "NON-CASH EXPENSE ITEMS" LESS (II) CAPITAL EXPENDITURES NOT
REFLECTED AS A CURRENT EXPENSE ON THAT PERSON'S INCOME STATEMENT, IN
EACH CASE PREPARED ON A CONSOLIDATED BASIS IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
"INFINITY CONVERTIBLE PREFERRED STOCK" SHALL MEAN SUCCESSORIES,
INC.'S SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK ISSUED ON THE
TERMS SET FORTH IN SCHEDULE 5.10 HERETO.
"SUBORDINATED DEBT" SHALL MEAN DEBT SUBORDINATED IN RIGHT OF
PAYMENT TO THE BANK WHICH, EXCEPT AS EXPRESSLY PERMITTED BY THIS
AGREEMENT, SHALL PROHIBIT THE HOLDER THEREOF FROM RECEIVING ANY
PAYMENT OF PRINCIPAL THEREON AT ALL TIMES UNTIL ALL OF THE LOANS HAVE
BEEN REPAID IN FULL AND THE COMMITMENT TERMINATED, AND WHICH SHALL
PERMIT THE PAYMENT OF INTEREST THEREON ONLY SO LONG AS NO DEFAULT OR
EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING AND CONTAINING SUCH
OTHER TERMS SATISFACTORY TO THE BANK.
a.The definitions of "Convertible Preferred Stock", "Floating
Rate", "Maturity Date" and "Termination Date" shall be deleted and replaced
in their entirety as follows:
"CONVERTIBLE PREFERRED STOCK" SHALL MEAN SUCCESSORIES,
INC.'S SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK ISSUED ON THE
TERMS SET FORTH ON SCHEDULE 5.10 HERETO.
"FLOATING RATE" SHALL MEAN THE PER ANNUM RATE EQUAL TO THE PRIME
RATE IN EFFECT FROM TIME TO TIME PLUS ONE PERCENT (1.0%).
"MATURITY DATE" SHALL MEAN WITH RESPECT TO THE TERM LOAN, MAY 1,
1998.
"TERMINATION DATE" SHALL MEAN MAY 1, 1998.
a)Section 2.1 is deleted in its entirety and replaced as
follows:
AS OF DECEMBER __, 1996, THE PRINCIPAL AMOUNT OF THE TERM
LOAN SHALL EQUAL $4,475,000 AND SUCH TERM LOAN SHALL BE RE-
EVIDENCED BY THE AMENDED AND RESTATED TERM NOTE APPEARING AS
EXHIBIT A-2 HERETO.
d) Section 2.2(a) is amended (i) to delete reference to the
number "$2,500,000" contained therein and to replace said reference with
the number "$4,000,000", (ii) to delete reference to "Eligible Inactive
Inventory . . . 5%", and (iii) to delete all entries under the table
entitled "Eligible Receivables" contained therein and replace said
references with the phrase "Eligible Receivables . . . . . 70%".
e) Exhibit A-1 is deleted in its entirety and replaced by the form
of Amended and Restated Revolving Note appearing as Schedule I to this
Amendment; Exhibit A-2 is deleted in its entirety and replaced by the form
of Amended and Restated Term Note appearing as Schedule II to this
Amendment; and Exhibit D is deleted in its entirety and replaced by the
form of Borrowing Base Certificate appearing as Schedule III to this
Amendment.
f) Section 3.1(a) is deleted in its entirety and replaced as
follows:
(A) UNLESS EARLIER PAYMENT IS REQUIRED UNDER THIS
AGREEMENT (I) THE COMPANIES SHALL JOINTLY AND SEVERALLY
PAY TO THE BANK ON THE TERMINATION DATE THE ENTIRE
PRINCIPAL SUM OF THE REVOLVING LOANS AND (II) THE
COMPANIES SHALL JOINTLY AND SEVERALLY PAY TO THE BANK
THE TERM LOAN IN EQUAL MONTHLY PAYMENTS OF $94,808,
WHICH SHALL FIRST BE APPLIED TO ACCRUED INTEREST
THEREON AND NEXT APPLIED TO ANY OUTSTANDING PRINCIPAL
BALANCE THEREON THROUGH AND INCLUDING APRIL 1, 1998 AND
A FINAL INSTALLMENT OF THE ENTIRE REMAINING PRINCIPAL
BALANCE ON THE MATURITY DATE.
g) Section 5.10 is deleted in its entirety and replaced as
follows:
NO COMPANY WILL PAY OR DECLARE ANY DIVIDENDS OR MAKE OR DECLARE ANY
OTHER DISTRIBUTIONS (EXCEPT FOR DIVIDENDS AND DISTRIBUTIONS IN STOCK
OF ANY COMPANY) ON OR IN RESPECT OF ITS CAPITAL STOCK OF ANY SERIES
OR CLASS, WHETHER NOW OR HEREAFTER AUTHORIZED OR ISSUED, EXCEPT IF NO
DEFAULT OR EVENT OF DEFAULT SHALL HAVE OCCURRED AND IS CONTINUING,
SUCCESSORIES, INC. MAY DECLARE OR PAY CASH DIVIDENDS ON 400 SHARES OF
THE CONVERTIBLE PREFERRED STOCK NOT IN EXCESS OF $110,600 PER ANNUM
AND MAY DECLARE OR PAY CASH DIVIDENDS ON 1212 SHARES OF THE INFINITY
PREFERRED STOCK NOT IN EXCESS OF $299,970 PER ANNUM, AND WILL NOT
PURCHASE, RETIRE, REDEEM OR OTHERWISE DIRECTLY OR INDIRECTLY ACQUIRE
ANY SUCH CAPITAL STOCK (EXCEPT FOR PURCHASES, RETIREMENTS,
REDEMPTIONS OR OTHER ACQUISITIONS MADE OUT OF THE PROCEEDS OF OR IN
EXCHANGE FOR A SUBSTANTIALLY CONCURRENT ISSUANCE OF ADDITIONAL
CAPITAL STOCK OF ANY COMPANY).
h) Section 5.15(a)(iv) is amended to delete clause (B)
thereof and replace said clause as follows:
(B) SUBJECT TO PERMITTED REPAYMENTS ALLOWED BY SECTION 5.15(B)
HEREOF, MATURE NOT EARLIER THAN AUGUST 1, 1998,
i) Section 5.15(a)(iii) is hereby amended to delete
the parenthetical phrase "(as that term is defined in Section 5.21(a)
hereof)" contained therein.
j) Section 5.15(b) is deleted in its entirety and replaced as
follows:
b)THE COMPANIES ACKNOWLEDGE THAT NO PAYMENT OF PRINCIPAL IN EXCESS
OF $300,000 MAY BE MADE AT ANY TIME ON ANY SUBORDINATED DEBT UNTIL
ALL LOANS HAVE BEEN REPAID IN FULL AND THE COMMITMENT TERMINATED;
PROVIDED, HOWEVER, THAT THE COMPANIES MAY REPAY SUBORDINATED DEBT
IN EXCESS OF SUCH AMOUNT WITHIN 60 DAYS OF THE FILING OF
SUCCESSORIES, INC.'S FISCAL THIRD QUARTER FORM 10Q WITH THE SEC, TO
THE EXTENT OF CASH FLOW IN EXCESS OF ONE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($1,500,000) FOR THE PRECEDING TEN FISCAL MONTHS
AS PRESENTED ON THE FINANCIAL STATEMENTS CONTAINED IN SUCH FORM
10Q, FOR THE FIRST NINE FISCAL MONTHS, AND ON THE COMPANIES'
INTERNALLY PREPARED FINANCIAL STATEMENTS FOR THE TENTH FISCAL MONTH
(WHICH INTERNALLY PREPARED FINANCIAL STATEMENTS SHALL BE REASONABLY
APPROVED BY THE BANK), IF NO DEFAULT OR EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING AT THE TIME OF SUCH PAYMENT.
k) Schedule 5.10 is supplemented by the addition of the information
contained on Schedule IV to this Amendment.
l) Section 5.21 of the Credit Agreement is deleted in its entirety.
m) With respect to the provisions of Section 5.23 of the Credit
Agreement requiring the creation and maintenance of certain Lock Box
arrangements, the parties hereto agree to defer the required effectiveness
of such provisions to February 1, 1997; provided that the Companies may, at
their discretion, implement such arrangements prior to such date, if
desired.
III. WAIVER
The Bank hereby waives any Event of Default arising under Section 6.1(c) of
the Credit Agreement arising solely by reason of the Companies' failure to
comply with any provision of Section 5.21 of the Credit Agreement.
IV. RATIFICATION AND AFFIRMATION.
The Credit Agreement, as amended hereby, all exhibits, annexes and
schedules thereto, together with all other loan documents, Security
Agreements and Security Documents executed pursuant to the Credit
Agreement, are hereby ratified and affirmed and shall in all other respects
remain in full force and effect. Except as expressly provided herein,
nothing contained in this Amendment shall be construed as a waiver of any
existing or hereafter arising Default or Event of Default and the Bank
reserves all rights and remedies under the Credit Agreement, the Security
Agreements, the Security Documents and under applicable law.
V. REPRESENTATIONS AND WARRANTIES.
c)Each Company hereby ratifies and affirms all the representations and
warranties contained in the Credit Agreement as true, complete and accurate
as of the date of this Amendment except as expressly modified or amended by
this Amendment.
d)Successories, Inc. represents and warrants that Successories, Inc.
has received $5,000,000 in consideration for the issuance of the Infinity
Convertible Preferred Stock and such Infinity Convertible Preferred Stock
has been validly issued, is fully paid and non assessable and has been
issued on the terms described in Schedule IV to this Amendment.
VI. CONDITIONS.
Unless waived in writing by the Bank, the effectiveness of this
Amendment is conditioned upon:
e)Each Company's representations and warranties contained herein being
true and correct in all material respects on and as of the date hereof.
f)This Amendment shall have been executed and delivered by the Bank
and each Company and acknowledged by each Guarantor.
g)The Bank and its counsel shall have received copies of all
documentation related to the purchase and sale of the Infinity Convertible
Preferred Stock.
h)Each Company, together with Celex Successories Inc., B.L.G.C., Inc.
and British Links Acquisition Corp., shall have entered into that certain
Sixth General Release, in form and substance acceptable to the Bank.
i)Each Company, B.L.G.C., Inc., and British Links Acquisition Corp.
shall have delivered to the Bank a certificate of recent date of the
appropriate government official certifying as to the corporate existence of
each such Company, B.L.G.C., Inc. and British Links Acquisition Corp.
j)Each Company, B.L.G.C., Inc., British Links Acquisition Corp. and
Celex Successories Inc. shall have delivered to the Bank a certified copy
of resolutions of the board of directors of each Company, B.L.G.C., Inc.,
British Links Acquisition Corp. and Celex Successories Inc. authorizing the
execution and delivery of this Amendment and all documentation related
thereto, together with a certificate of the Secretary or Assistant
Secretary of each Company, B.L.G.C., Inc., British Links Acquisition Corp.
and Celex Successories Inc. certifying the officers of each Company,
B.L.G.C., Inc., British Links Acquisition Corp. and Celex Successories Inc.
and including the original signatures of each such officer and certifying
that there has been no amendment to the bylaws or articles/certificate of
incorporation of each such Company and Celex Successories Inc. since
December 16, 1996, or if such amendment has occurred, attaching a copy of
same and certifying the accuracy thereof.
k)The President and Chief Executive Officer of each Company shall have
delivered an officer's certificate to the Bank certifying the accuracy of
all the representations and warranties contained herein and certifying that
no Default or Event of Default exists under the Credit Agreement.
l)The Bank shall have received the legal opinion of Timothy Dillon, as
to matters contained herein, in the form requested by the Bank.
m)The Bank shall have received a credit extension fee of $42,375.
j) The Bank shall have received $4,000,000 in repayment of the Term
Loans and after giving effect to such repayment, the outstanding principal
balance of the Term Loan shall equal $4,475,000.
VII. RELEASE OF GUARANTY Upon the effectiveness of this Amendment, the
Bank hereby releases and forever discharges each of Arnold M. Anderson and
James M. Beltrame from all liability solely arising under that certain
Guaranty, dated February 7, 1996, entered into by Arnold M. Anderson in
favor of the Bank and under that certain Guaranty, dated February 7, 1996,
entered into by James M. Beltrame in favor of the Bank, each such Guaranty
and all of the obligations thereunder being forever discharged and released
and the original Guaranty instruments shall be marked "cancelled" and
returned to each such released Guarantor within a reasonable time after the
execution and delivery of this Amendment.
VIII. MISCELLANEOUS.
The provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective legal representatives,
successors and assigns. This instrument has been made and executed and
delivered in the State of Illinois and shall be governed by and construed
in accordance with the internal laws of the State of Illinois without
regard to conflicts of laws principles. This Amendment may be executed and
delivered in several counterparts with the intention that all such
counterparts, when taken together, shall constitute one and the same
instrument. One or more counterparts of this Amendment may be delivered by
facsimile, with the intention that delivery by such means shall have the
same effect as delivery of an original counterpart thereof. The section
headings contained in this Amendment are for convenience of reference only
and in no way shall modify any of the terms or provisions hereof.
This Amendment shall be effective on and as the date first above
written.
[The remainder of this page has been left blank intentionally]
IN WITNESS WHEREOF, the parties have entered into this Amendment as of
the day and year first above written.
CELEBRATING EXCELLENCE, INC. AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By: _____________________________ By: __________________________
Its: ____________________________ Its: _________________________
SUCCESSORIES OF ILLINOIS, INC. SUCCESSORIES, INC. (f/k/a Celex
Group, Inc.)
By: ______________________________ By: _____________________________
Its: _____________________________ Its: ____________________________
ACKNOWLEDGEMENTS
The undersigned, each being a Guarantor of the obligations described
in the Credit Agreement, hereby each acknowledge and agree to the terms of
the foregoing Fifth Amendment to Credit Agreement and hereby further
acknowledge for the benefit of the Bank, that such obligations remain in
full force and effect.
CELEBRATING EXCELLENCE, INC.
By: ____________________________
Its:_____________________________
SUCCESSORIES OF ILLINOIS, INC.
By: ____________________________
Its:_____________________________
SUCCESSORIES, INC. (f/k/a Celex
Group, Inc.)
By: ____________________________
Its:_____________________________
CELEX SUCCESSORIES INC.
By: ____________________________
Its:_____________________________
B.L.G.C., INC.
By: ____________________________
Its:_____________________________
BRITISH LINKS ACQUISITION CORP.
By: _____________________________
Its: _____________________________
SCHEDULE III
BORROWING BASE CERTIFICATE
OF SUCCESSORIES, INC., CELEBRATING EXCELLENCE, INC.
AND SUCCESSORIES OF ILLINOIS, INC.
FOR THE MONTH OF ___________, 19__.
(OOO OMITTED)
I.Borrowing Base Calculations Borrowing Base
A. Accounts Receivable
1. Gross Accounts Receivable $__________
2. Less: Receivables Over 90 days (__________)
3. Less: Receivables from Affiliates (__________)
4. Less: 10% Taint (__________)
5. Less: Foreign Receivables (__________)
6. Less: Skymall Receivables (__________)
7. Less: Milligan/Masters Receivables (__________)
8. Less: Other Ineligible Receivables (__________)
9. Total Eligible Receivables x 70% $__________
B. Inventory
1. Gross Inventory $__________
2. Less: Canadian/Foreign Inventory (__________)
3. Less: Joint Venture Inventory (__________)
4. Less: Other Ineligible Inventory (__________)
5. Total Inventory
Consisting of:
a) Eligible Finished Goods Inventory X 40% ___________
b) Eligible Raw Materials Inventory X 40% ___________
c) Eligible Retail Inventory x 20% ___________
6. Total Eligible Inventory Borrower Base
(5a)-c)) $__________
C. Borrowing Base Total (A90 + B6) __________
II.Compliance
A. Maximum Amount of Facility $4,000
B. Total Borrowing Base (from I-C) __________
C. Lesser of II-A or II-B __________
D. Total Revolving Loans Outstanding __________
E. Excess Availability (Overadvance)
(II-C minus II-D)
SCHEDULE IV
FORM OF CERTIFICATE OF
DESIGNATION, PREFERENCES AND RIGHTS OF
INFINITY CONVERTIBLE PREFERRED
STOCK OF SUCCESSORIES, INC.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> Feb-01-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 4,663,000
<ALLOWANCES> (506,000)
<INVENTORY> 8,970,000
<CURRENT-ASSETS> 16,313,000
<PP&E> 15,240,000
<DEPRECIATION> (7,240,000)
<TOTAL-ASSETS> 32,680,000
<CURRENT-LIABILITIES> 6,197,000
<BONDS> 0
5,472,000
0
<COMMON> 57,000
<OTHER-SE> 16,351,000
<TOTAL-LIABILITY-AND-EQUITY> 32,680,000
<SALES> 56,032,000
<TOTAL-REVENUES> 57,312,000
<CGS> 23,557,000
<TOTAL-COSTS> 58,009,000
<OTHER-EXPENSES> 159,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,491,000
<INCOME-PRETAX> (2,347,000)
<INCOME-TAX> (2,609,000)
<INCOME-CONTINUING> 262,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 262,000
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
Consent of Independent Accountants
We Hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-73510 and 33-77464) of Successories, Inc. of
our report dated April 26, 1996 appearing on page F-3 of this Annual Report on
Form 10-K.
PRICE WATERHOUSE LLP
Chicago, Illinois
April 30, 1997
Consent Of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation
of our report included in this form 10K, into the Company's previously filed
Registration Statements on Form S-8 (registration nos. 33-73510 and
33-77464).
ARTHUR ANDERSON LLP
Chicago, Illinois
April 30, 1997
