SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
JUNE 7, 1999
Date of report (Date of earliest event reported)
SUCCESSORIES, INC.
(Exact Name of Registrant as Specified in its Charter)
ILLINOIS 0-22834 36-3760230
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
2520 DIEHL ROAD
AURORA, ILLINOIS 60504
(Address of Principal Executive Office) (Zip Code)
630/820-7200
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
See attached press release issued by Successories, Inc. on June 7, 1999
(the "Press Release") regarding the completion of a $1,220,000 private placement
by the Company of preferred stock to a group of investors. The information set
forth in the Press Release is incorporated herein by reference.
A copy of the Preferred Stock Purchase Agreement between the Company and
the investors is attached hereto as Exhibit 99.2.
A copy of the Registration Rights Agreement between the Company and the
investors is attached hereto as Exhibit 99.3.
The Certificate of Designation of Series A Convertible Preferred Stock, as
filed with the Secretary of State of the State of Illinois, is attached hereto
as Exhibit 99.4.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS
Exhibit No. Description
- ----------- -----------
99.1 Press Release dated June 7, 1999.
99.2 Preferred Stock Purchase Agreement dated as of May 28, 1999
by and among the Company and the investors.
99.3 Registration Rights Agreement dated as of May 28, 1999 by
and among the Company and the investors.
99.4 Certificate of Designation of Series A Convertible
Preferred Stock.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
SUCCESSORIES, INC.
(Registrant)
Date: 6/9/99 By: /s/ Gary J. Rovansek
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Gary J. Rovansek
President and
Chief Operating Officer
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INDEX TO EXHIBITS
Exhibit No. Description
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99.1 Press Release dated June 7, 1999.
99.2 Preferred Stock Purchase Agreement dated as of May 28, 1999 by
and among the Company and the investors.
99.3 Registration Rights Agreement dated as of May 28, 1999 by and
among the Company and the investors.
99.4 Certificate of Designation of Series A Convertible
Preferred Stock.
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EXHIBIT 99.1
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[SUCCESSORIES LETTERHEAD]
AT SUCCESSORIES AT EDELMAN
Steven D. Kuptsis Alexa Auerbach
(630) 820-7200 200 East Randolph Drive
Chicago, Illinois 60601
(312) 240-3000
FOR IMMEDIATE RELEASE
JUNE 7, 1999
SUCCESSORIES COMPLETES PRIVATE PLACEMENT OF PREFERRED STOCK
Jack Miller to Join Board of Directors as Part of Investment Transaction
AURORA, ILLINOIS, JUNE 7, 1999--SUCCESSORIES (NASDAQ: SCES) announced today that
it has received $1,220,000 in proceeds from the sale of convertible preferred
stock to a group of investors including an entity controlled by Jack Miller. The
convertible preferred stock pays an annual dividend of 8% and is convertible
into the company's common stock at an initial conversion price of $2,425 per
share. The preferred stock also has certain other rights including pre-emptive
rights, voting rights, a liquidation preference and registration rights. As part
of the transaction, Mr. Miller will become a director of the company.
Under the terms of the company's bank credit agreement, $1.0 million of the
proceeds shall be applied against the company's term loan, including a
prepayment against the next three quarterly principal payments of $312,500 each
due through December 1, 1999. Also per the credit agreement, the limitation on
borrowings against eligible inventory, as defined, under the company's revolving
credit loan has been increased from 50% to 54%.
Mr. Miller is President and Chief Executive Officer of Quill Corporation, a
direct marketer of office products that he started from scratch and grew to a
company with annual sales in excess of $720 million. He is the recipient of
numerous industry honors, including a Lifetime Achievement Award from the Direct
Marketing Association. Mr. Miller has also been elected to the Entrepreneurship
Hall of Fame at the University of Illinois at Chicago and is a recipient of the
Ernst & Young Entrepreneur of the Year Award.
"I've always been a fan of the Successories product line, and I'm looking
forward to working with the company to help achieve its goals," commented Mr.
Miller. "Successories has tremendous upside potential in which I expect to
share."
Gary Rovansek, President and Chief Operating Officer of Successories, commented,
"Jack Miller brings to our board considerable expertise in business-to-business
direct marketing, one of the two key segments in our strategy. His commitment is
a vote of confidence in our strategic direction and
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our potential. The proceeds from the preferred stock will be used to reduce debt
and provide additional working capital to fund our growth."
Except for historical information in this release, the matters set forth herein
are forward-looking statements that involve certain risks and uncertainties that
could cause actual results to differ materially from those in the
forward-looking statements. Potential risks and uncertainties include such
factors as the financial strength of the economy, and the retail and catalog
industries in general, the level of consumer spending on motivational-type
products, the competitive pricing environment within the markets that
Successories distributes its products, the level of the company's success in
continuing to control costs and the company's ability to increase certain
margins through economies of scale. An additional risk and uncertainty is the
company's ability to successfully execute the previously announced strategic
changes in its business that include, but are not limited to, the conversion of
company-owned stores to franchise owner-operators and the development and
introduction of successful new products. Investors are also directed to consider
other risks and uncertainties discussed in documents filed by the company with
the Securities and Exchange Commission.
Successories, Inc. designs, manufactures, and markets proprietary and licensed
products for business, personal motivation, and for golf enthusiasts through
multiple distribution channels, including direct mail catalogs, Internet
commerce, specialty retail stores, and seasonal kiosks. The company markets
products under the Successories(R), Winners(R) Collection, The Golf Company from
Gold Digest(TM) and British Links(R) brands. Please visit Successories on the
company's website: www.successories.com.
# # #
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EXHIBIT 99.2
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PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is dated as
of May 28, 1999 and is among Successories, Inc., an Illinois corporation (the
"Company"), and the purchasers listed on Schedule A attached hereto (each,
individually, a "Purchaser" and collectively, the "Purchasers").
W I T N E S S E T H:
WHEREAS, each Purchaser desires to purchase from the Company, and the
Company desires to issue and to sell to each Purchaser, the number of shares of
Series A Convertible Preferred Stock, par value $.01 per share, of the Company
("Preferred Stock") indicated opposite such Purchaser's name on Schedule A (such
503,092 shares, collectively, the "Shares"), upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt, sufficiency and adequacy of which are
hereby acknowledged, the parties hereto, intending legally to be bound, hereby
agree as follows:
1. Definitions. Except as otherwise herein expressly provided herein,
the following terms and phrases shall have the meanings set forth below:
"Affiliate" means, as to any Person (a) any corporation, partnership,
limited liability company, joint venture, trust or individual who or which,
directly or indirectly through one or more intermediaries, is controlled by or
under common control with such Person, or which controls directly or indirectly
through one or more intermediaries, such Person; (b) a trust which has as its
principal beneficiaries such Person or any direct or indirect holder of such
Person, or members of the immediate family of such Person or direct or indirect
holder of such Person; and (c) any members of the immediate family of such
Person or a member of the immediate family of any direct or indirect holder of
such Person. For purposes of this definition, (i) no Person, by virtue of his,
her or its direct or indirect ownership of Shares, shall be deemed to be an
Affiliate of another Person; (ii) the terms "control", "controlled" and "common
control with" mean the ability, whether by the direct or indirect ownership of
voting securities or other equity interest, by contract or otherwise, to elect a
majority of the directors of a corporation, to select the managing partner of a
partnership, or otherwise to select a majority of those Persons exercising
governing authority over an entity; and (iii) the term "immediate family" means
spouses, siblings and lineal descendants of a Person.
"Certificate of Designation" means the Certificate of Designation of
Series A Convertible Preferred Stock, in the form attached hereto as Exhibit A,
setting forth the preferences and rights of the Preferred Stock.
"Financial Statements" means the audited financial statements of the
Company as of and for the year ended January 30, 1999, which financial
statements are included in the Company's
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Annual Report on Form 10-K as filed by the Company with the Securities and
Exchange Commission.
"Intellectual Property" means (a) all inventions, improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all registered and unregistered
trademarks, service marks, trade dress, logos, tradenames, servicenames, and
corporate names, including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all trade secrets, know-how and
confidential business information, (e) all computer software, (f) all other
proprietary rights, and (g) all copies and tangible embodiments thereof.
"Person" means any individual, partnership, limited liability company,
corporation, trust or other entity.
"SEC Filings" means all reports, proxy statements and schedules
required to be filed since January 1, 1998 by the Company with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934, as
amended.
"Securities Act" means the Securities Act of 1933, as amended.
2. Sale and Purchase. Subject to the conditions set forth herein, each
Purchaser hereby agrees to purchase from the Company, and the Company hereby
agrees to issue and sell to each Purchaser, the number of Shares indicated on
Schedule A for a purchase price of $2.425 per Share, or an aggregate Purchase
Price of $1,220,000 (the "Purchase Price").
3. The Closing.
(a) The closing of the purchase and sale of the Shares
(the "Closing") shall take place at the offices of Neal, Gerber & Eisenberg, Two
North LaSalle Street, Suite 2200, Chicago, Illinois 60602 simultaneously with
execution of this Agreement. The date of the Closing is sometimes hereinafter
referred to as the "Closing Date."
4. Representations and Warranties of the Company. To induce Purchasers to
enter into this Agreement, the Company represents and warrants to Purchasers as
follows:
(a) Organization; Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois. The Company is duly qualified and in good standing as a foreign
corporation and is licensed or admitted to do business as a foreign corporation
in each jurisdiction wherein the character of the properties owned or held under
lease by it, or the nature of the business conducted by it, makes such
qualification necessary, except where the failure to so qualify would not
reasonably be expected to have a material adverse effect on (i) the Company's
financial condition or results of operations, or (ii) on the ability of the
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Company to consummate the transactions contemplated by this Agreement (a
"Material Adverse Effect").
(b) Authority. The Company has all requisite corporate power and
authority to execute, deliver and perform this Agreement, the Registration
Rights Agreement in the form attached hereto as Exhibit B, and all other
documents contemplated herein (collectively, the "Transaction Documents") to
which the Company is a party and to issue and sell the Shares to Purchasers. The
execution, delivery and performance by the Company of each of the Transaction
Documents, and the issuance of the Shares, have been duly authorized by all
necessary corporate action on the part of the Company.
(c) Enforceability. Each of the Transaction Documents has been
duly and validly authorized, executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such enforcement may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally,
or (ii) general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(d) Capitalization. The authorized capital stock of the
Company consists of (i) 20,000,000 shares of common stock, par value $.01 per
share, of which 6,913,293 shares are validly issued and outstanding, fully paid
and nonassessable, and (ii) 1,000,000 shares of preferred stock, of which (A)
400 shares are designated as Series A Cumulative Convertible Preferred Stock,
none of which are outstanding, (B) 1,212 shares are designated Series B
Cumulative Convertible Preferred Stock, none of which are outstanding, and (C)
503,092 shares will be designated as Preferred Stock, upon effectiveness of the
Certificate of Designation, none of which will be outstanding prior to the
Closing. No other class or series of capital stock of the Company is authorized.
When the Certificate of Designation shall be in full force and effect under the
laws of the State of Illinois and when the Shares have been issued and delivered
in accordance with this Agreement against receipt of the Purchase Price, the
Shares will be validly issued, fully paid and nonassessable. Except as set forth
on Schedule 4(d), attached hereto, and as described in the footnotes to the
Financial Statements, there are no options, warrants, subscriptions, calls,
preemptive or other rights, convertible securities or other agreements or
commitments obligating the Company to issue, transfer, sell, redeem, repurchase
or otherwise acquire any shares of its capital stock or securities.
(e) Consents and Approvals. Except as set forth on Schedule
4(e), attached hereto, the execution, delivery and performance by the Company of
each Transaction Document to which the Company is a party do not require any
consent, approval, authorization or other order of, action by, filing with or
notification to any governmental authority or other Person.
(f) No Conflicts. The execution, delivery and performance by
the Company of each of the Transaction Documents to which the Company is a party
will not, with or without the giving of notice, the passage of time or both,
conflict with, result in a breach of, or constitute a violation or default or
give any third party the right to terminate or accelerate any obligation under,
(i) the Articles of Incorporation of the Company or the By-Laws of the Company,
in each case as
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amended to date; (ii) any agreement or other document or instrument to which the
Company is a party or by which it or any of its assets or properties is bound or
affected, the breach, violation or default of which would reasonably be expected
to have a Material Adverse Effect; or (iii) any federal or state law, statute,
rule, regulation, ordinance, writ, order or judgment to which the Company is
subject or by which it or any of its property is bound or affected.
(g) Financial Statements. The Financial Statements have been
prepared in accordance with generally accepted accounting principles, applied on
a consistent basis throughout the periods involved, and fairly present the
financial position, results of operations and changes in financial position of
the Company for the periods indicated. Since the date of the most recent balance
sheet contained in the Financial Statements, there has been (i) no material
change in the manner in which the books and records of the Company have been
maintained or in any accounting practice or procedure, and (ii) no event or
circumstance has occurred that would reasonably be expected to have a Material
Adverse Effect.
(h) Compliance with Laws. The Company has complied, and is in
compliance, with all laws, rules and regulations of federal, state and local
governments (and all agencies thereof), including, without limitation, laws
relating to environmental protection, hazardous waste, health and safety, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure to so comply, except for any such noncompliance that would not
reasonably be expected to have a Material Adverse Effect.
(i) Taxes. Except as set forth on Schedule 4(i), the Company
has filed, on a timely basis, all required federal, state and local income,
sales, franchise and other tax returns or reports relating to the Company,
accurately reflecting any and all income or other taxes owing to any taxing
authority. There are no tax deficiencies (including penalties and interest) of
any kind assessable against the Company for any taxable periods ending on or
before the date hereof, except for any such deficiency that would not reasonably
be expected to have a Material Adverse Effect.
(j) Absence of Undisclosed Liabilities. Except as set forth on
Schedule 4(j), there are no liabilities, debts, claims or obligations, whether
accrued, absolute, contingent or otherwise, of the Company, except those (i)
reflected or reserved against on the balance sheet included in the Financial
Statements, which reserves have been established on a basis consistent with the
past practices of the Company and in accordance with generally accepted
accounting principles and, to the knowledge of the Company, are sufficient in
all material respects to provide for the liabilities in respect of which they
have been established, or (ii) incurred since January 30, 1999 in the ordinary
course of the business of the Company consistent with the past practice of the
Company, none of which would reasonably be expected to have a Material Adverse
Effect.
(k) Litigation. Except as disclosed in the SEC Filings, the
Company is not (i) subject to any outstanding injunction, judgment, order,
decree, ruling or charge of any judicial or administrative body or agency, or
(ii) a party or, to the best of the Company's knowledge, is threatened to be
made a party to, any action, suit, proceeding, hearing or investigation of, in,
or
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before any court, arbitrator or other body or administrative agency of any
federal, state, local, or foreign jurisdiction that would reasonably be expected
to have a Material Adverse Effect.
(l) Licenses; Permits. Except as set forth on Schedule 4(l),
the Company has obtained all material licenses and permits necessary to conduct
the business of the Company, as now conducted and as currently contemplated to
be conducted, and is not in breach or default of any of such licenses and
permits. All of which licenses and permits are in full force and effect and no
event has occurred and is continuing which would allow any such license or
permit to be revoked or terminated.
(m) SEC Filings. The Company has filed with the Securities and
Exchange Commission (the "SEC"), and has delivered to Purchaser complete and
correct copies of, all SEC Filings. As of their respective dates, the SEC
filings did not contain any untrue statement of a material fact, or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(n) Intellectual Property. The Company has full ownership of,
or the legal right to use, all Intellectual Property that pertains to or is used
in the Company's business (collectively, "Company Intellectual Property") in the
manner in which it is currently used and, to the knowledge of the Company, such
use does not conflict with, misappropriate or infringe, and has not been alleged
to conflict with, misappropriate or infringe, any Intellectual Property rights
or franchises of any Person. To the knowledge of the Company, (i) none of the
Company Intellectual Property is being infringed by any Person, and (ii) the
Company Intellectual Property constitutes all of the Intellectual Property
necessary to enable the Company to lawfully carry on its business as now
conducted and as currently contemplated to be conducted, in either case except
as would not reasonably be expected to have a Material Adverse Effect.
(o) Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
(p) Full Disclosure. The representations, warranties and
statements made by the Company in this Agreement, including the Schedules and
other documents delivered pursuant hereto, do not contain any untrue statement
of a material fact, and, when taken together, do not omit to state any material
fact necessary to make such representations, warranties and statements, in light
of the circumstances under which they are made, not misleading.
5. Representations and Warranties of Each Purchaser. To induce the
Company to enter into this Agreement, each Purchaser, severally and not jointly
and solely with respect to itself, hereby represents and warrants to the Company
as follows:
(a) Organization; Authority. If Purchaser is a partnership or
a trust, Purchaser duly organized and validly existing under the laws of its
jurisdiction of organization and has all of the necessary partnership or trust
power and authority, as applicable, to execute, deliver and perform each
Transaction Document to which Purchaser is a party. If Purchaser is an
individual, Purchaser
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has full power and legal capacity to execute, deliver and perform each of the
Transaction Documents to which Purchaser is a party. If Purchaser is a
partnership or a trust, the execution, delivery and performance by Purchaser of
each Transaction Document to which Purchaser is a party have been duly
authorized by all necessary partnership or trust action, as applicable, on the
part of Purchaser. Each of the Transaction Documents to which Purchaser is a
party has been duly and validly executed and delivered by Purchaser and
constitutes the valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, except as such enforcement may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally,
or (ii) general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(b) No Conflicts. The execution, delivery and performance by
Purchaser of the Transaction Documents to which Purchaser is a party will not,
with or without the giving of notice, the passage of time or both, conflict
with, result in a material breach of, or constitute a violation or default or
give any Person the right to terminate or accelerate any obligation under (i)
Purchaser's partnership agreement or trust agreement, as applicable (if
Purchaser is a partnership or a trust); (ii) any agreement or other document or
instrument to which Purchaser is a party or by which Purchaser or any of
Purchaser's assets or properties is bound or affected, the breach, violation or
default of which would reasonably be expected to have a material adverse effect
on Purchaser; or (iii) any federal or state law, statute, rule, regulation,
ordinance, writ, order or judgment to which Purchaser is subject or by which
Purchaser or any of Purchaser's property is bound or affected.
(c) Investment Representations.
(i) Purchaser acknowledges that neither the offer nor sale of the
Shares has been registered under the Securities Act or any state
securities laws and that each certificate representing the Shares
shall bear substantially the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION THEREUNDER OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT, AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE UNITED STATES STATE
SECURITIES LAWS."
(ii) Purchaser has sufficient cash and/or available credit
facilities to pay the Purchase Price in accordance with the terms of
this Agreement.
(iii Purchaser acknowledges that:
(A) the Shares must be held indefinitely and Purchaser must
continue to bear the economic risk of the investment in the
Shares unless the offer
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and sale thereof is subsequently registered under the Securities Act or an
exemption from such registration is available;
(B) the Shares cannot be sold or otherwise disposed of
unless such sale or disposition is registered under the
Securities Act and all applicable state securities laws or an
exemption from such registration is available; and
(C) Purchaser is purchasing the Shares solely for its own
account, with the intent of holding each of such securities for
investment, without the intent of participating directly or
indirectly in the distribution of any of such securities, and no
other person or entity will have any direct or indirect interest
in the Shares acquired by Purchaser pursuant to this Agreement.
(iv) Purchaser understands the risks involved in investments in
the Company and in the Shares and that investment in the Shares
involves a risk of loss of Purchaser's entire investment and Purchaser
is able financially to bear the risk thereof and can afford the
complete loss thereof. Purchaser represents that the experience and
knowledge of Purchaser and Purchaser's representatives in financial
and business matters, in general, and in investments such as the
Shares, in particular, is sufficient for Purchaser to be able to
evaluate the merits and risks of investment in such securities.
(v) Purchaser is an "Accredited Investor" (as defined in
Rule 501 of Regulation D promulgated under Section 4(2) of the
Securities Act) and has completed and executed a suitability
questionnaire, in the form of Schedule 5(c) attached hereto,
certifying its basis for such representation.
(vi) Purchaser (A) is familiar with the operation of the Company,
(B) has received and has had adequate opportunity to inspect the
materials provided by the Company and identified on Schedule 5(a)
hereto (collectively, the "Disclosure Materials"), (C) has carefully
reviewed the Disclosure Materials and understands the information
contained therein, and (D) has received adequate information to enable
Purchaser to make an informed decision with respect to Purchaser's
ownership of the Shares.
(vii) Purchaser and Purchaser's advisors have had a reasonable
opportunity to ask questions of and receive information and answers
from a person or persons acting on behalf of the Company concerning
the offering of the Shares and, as Purchaser may deem necessary, to
verify the information contained in the Disclosure Materials, and all
questions have been answered and all such information has been
provided to the full satisfaction of Purchaser.
(viii) No oral or written representations have been made, or oral
or written information furnished to Purchaser or Purchaser's advisors
in connection with the offering of the Shares, which were inconsistent
with the information stated in the Disclosure Materials.
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(ix) Purchaser is not receiving the Shares as a result of any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or
radio, or presented at any seminar or meeting, or any solicitation of
a subscription by a person not previously known to the Purchaser in
connection with investments in securities generally.
(x) Purchaser's overall commitment to investments that are not
readily marketable is not disproportionate to Purchaser's net worth
and Purchaser's holding of the Shares will not cause such overall
commitment to become disproportionate to Purchaser's net worth.
(xi) Purchaser is not relying on the Company with respect to the
economic considerations of Purchaser relating to this investment. In
regard to such considerations, Purchaser has relied on the advice of,
or has consulted with, only Purchaser's own advisors.
(xii) Purchaser recognizes that an investment in the Shares
involves a number of significant risks, including those set forth in
the Disclosure Materials. Purchaser recognizes no federal or state
agency has passed upon the adequacy of the information presented to
Purchaser or made any finding or determination as to the fairness of
this investment.
(xiii) All information which Purchaser has heretofore furnished
and furnishes herewith in writing to the Company, including, without
limitation, the information contained on Schedule 5(c) hereto, and any
other information with respect to Purchaser's financial position and
business experience set forth herein is correct and complete as of the
date of this Agreement, and, if there should be any material change in
such information prior to the Closing Date, Purchaser will immediately
furnish such revised or corrected information to the Company.
(xiv) Purchaser hereby agrees promptly, upon the request of the
Company, to provide such information and execute and deliver such
documents as may be reasonably necessary to comply with any and all
laws and ordinances to which the Company is subject.
(xv) The foregoing representations, warranties and agreements,
together with all other representations and warranties made or given
by Purchaser to the Company in any other written statement or document
delivered in connection with the transactions contemplated hereby,
shall be true and correct in all material respects on and as of the
Closing Date.
(xvi) Purchaser understands that the Company, in issuing and
selling the Shares to Purchaser hereunder, is relying upon the
representations, warranties and covenants made by Purchaser in this
Agreement.
(d) Consents and Approvals. The execution, delivery and performance
by Purchaser of each Transaction Document to which Purchaser is a party do not
require any consent,
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approval, authorization or other order of, action by, filing with or
notification to any governmental authority or other Person.
(e) Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Purchaser.
6. Conditions Precedent to Closing.
(a) Conditions to Purchasers' Obligations. The obligations of each
Purchaser to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions:
(i) the Company shall have delivered to each Purchaser one or
more stock certificates (as may be requested by such Purchaser), duly
executed by the Company, evidencing such Purchaser's ownership of the
Shares purchased by such Purchaser;
(ii) the Company shall have delivered to Purchasers the
Registration Rights Agreement, in the form attached as Exhibit B, duly
executed by the Company;
(iii) the Company shall have received all third party consents
and all authorizations, consents and approvals of governments and
governmental agencies necessary to consummate the transactions
contemplated hereby; and
(iv) the Company's Articles of Incorporation, as amended to
include the Certificate of Designation, shall be in full force and
effect under the laws of the State of Illinois as of the Closing and
shall not have been further amended or modified.
(b) Conditions to the Company's Obligations. The obligation of the
Company to consummate the transactions contemplated by this Agreement shall be
subject to the delivery by Purchasers of (i) the Purchase Price, and (ii) the
Registration Rights Agreement, in the form attached as Exhibit B, duly executed
by Purchasers.
7. Indemnification.
(a) Survival. Each of the representations and warranties contained in
this Agreement shall survive the execution and delivery of this Agreement for a
period of one year.
(b) Purchasers' Right to Indemnification. Subject to the provisions
of this Section 7 and in addition to any other rights and remedies available to
each Purchaser under applicable law, the Company hereby covenants and agrees to
indemnify each Purchaser and its respective Affiliates, employees, agents and
representatives, and all successors, permitted assigns and fiduciaries thereof
(the "Purchaser Indemnified Parties"), and to save and hold each Purchaser
Indemnified Party harmless from and against, any and all liabilities, claims,
causes of action, assessments, losses, costs, damages or expenses (whether or
not arising out of third party claims),
9
<PAGE>
including, without limitation, interest, penalties, reasonable attorneys' fees
and all amounts paid in investigation, defense or settlement of any of the
foregoing (collectively, "Losses") that any Purchaser Indemnified Party may
suffer, sustain or become subject to, resulting from, arising out of or relating
to:
(i) breach of any representation or warranty made by or on
behalf of the Company in any Transaction Document to which the Company
is a party; or
(ii) any nonfulfillment or breach of any covenant or agreement to
be fulfilled by the Company under any Transaction Document to which
the Company is a party.
(c) The Company's Right to Indemnification. Subject to the provisions of
this Section 7 and in addition to any other rights and remedies available to the
Company under applicable law, each Purchaser, severally and not jointly, hereby
covenants and agrees to indemnify the Company and all of the Company's
Affiliates, employees, agents and representatives, and all successors, permitted
assigns and fiduciaries thereof (the "Company Indemnified Parties"), and to save
and hold each Company Indemnified Party harmless from and against, any and all
Losses that any Company Indemnified Party may suffer, sustain or become subject
to, resulting from, arising out of or relating to:
(i) breach of any representation or warranty made by such
Purchaser in any Transaction Document to which such Purchaser is a
party; or
(ii) any nonfulfillment or breach of any covenant or agreement to
be fulfilled by such Purchaser under any Transaction Document to which
such Purchaser is a party.
(d) Nothing contained in this Section 7 shall confer any rights upon,
or inure to the benefit of, any third party other than those parties specified
in this Section 7, it being understood that such other parties, to the extent
not actually parties hereto or specified in Section 7, shall not be third party
beneficiaries of any party's obligations hereunder.
8. Miscellaneous.
(a) Expenses. Except as otherwise specified in this Agreement, all
costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
(b) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made) upon the earliest to occur of
(i) receipt, if made by personal service, (ii) two days after delivery to a
reputable overnight courier service, (iii) upon the delivering party's receipt
of a written confirmation of a transmission made by facsimile, or (iv) five days
after being mailed by registered or certified air mail (postage prepaid, return
receipt requested) to the respective parties at
10
<PAGE>
the following addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this Section 8(b)):
if to Purchasers:
BenIda Group LLC
100 Schelter Road
Lincolnshire, Illinois 60069
Attention: Jack Miller
Telecopy: (847) 634-6699
and to:
Attention: Eric Achepohl
Telecopy: (847) 634-9521
and to:
Howard I. Bernstein
6541 N. Kilbourn Ave.
Lincolnwood, Illinois 60646
Telecopy (773)693-6255
with a copy to:
Neal, Gerber & Eisenberg
Two North LaSalle Street, Suite 2200
Chicago, Illinois 60602
Attention: Marshall E. Eisenberg, Esq.
Telecopy: (312) 269-1747
if to the Company:
Successories, Inc.
2520 Diehl Road
Aurora, Illinois 60504
Attention: Gary Rovansek
Telecopy: (630) 820-3003
with a copy to:
Vedder, Price, Kaufman & Kammholz
222 N. LaSalle Street
Chicago, Illinois 60601
Attention: Guy Snyder, Esq.
Telecopy: (312) 609-5005
11
<PAGE>
(c) Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(d) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy,
such provision shall be severed and the remaining provisions hereof shall be
enforced to the extent possible or modified in such a way as to make it
enforceable, and the invalidity, illegality or unenforceability thereof shall
not affect the validity, legality or enforceability of the remaining provisions
of this Agreement.
(e) Entire Agreement. This Agreement, including all of the Exhibits
and Schedules hereto that are incorporated herein by this reference, constitutes
the entire agreement of the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and undertakings, both written and
oral, between any party hereto with respect to the subject matter hereof.
(f) Assignment. This Agreement and the rights and duties hereunder
may not be assigned or assumed by operation of law or otherwise without the
express prior written consent of the other parties, except that the rights and
obligations of either Purchaser hereunder may be assigned to and assumed by any
Affiliate of such Purchaser. This Agreement and all the terms and provisions
hereof shall be binding upon and shall inure to the benefit of the parties
hereto, and their respective heirs, legal representatives, permitted successors
and permitted assigns.
(g) Amendments and Waivers. No amendment of this Agreement
shall be valid unless the same shall be in writing and signed by all parties
hereto. No waiver by any party of any default, misrepresentation or breach
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach hereunder or affect in any way
any rights of any other party arising by virtue of any prior or subsequent such
occurrence.
(h) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of Illinois, without regard
to its principals regarding conflicts of law.
(i) Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[Signature Page Follows]
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Preferred Stock Purchase
Agreement as of the date first above written.
THE COMPANY:
SUCCESSORIES, INC.
By:/s/ Gary J. Rovansek
------------------------------------
Name: Gary J. Rovansek
Title: President and
Chief Operating Officer
PURCHASERS:
JACK MILLER FAMILY LIMITED
PARTNERSHIP #1
By: Jack Miller Trust Dated January 18,
1984, its general partner
By:/s/ Jack Miller
------------------------------------
Jack Miller, trustee of the
general partner
HOWARD I. BERNSTEIN DECLARATION
OF TRUST DATED APRIL 28, 1987
By:/s/ Howard I. Bernstein
------------------------------------
Howard I. Bernstein, trustee
/s/ Eric Achepohl
------------------------------------
Eric Achepohl
13
<PAGE>
SCHEDULE A
PURCHASERS
No. Shares Aggregate
Name/Address of Purchaser Purchased Purchase Price
- ------------------------- --------- --------------
Jack Miller Family Limited Partnership #1 412,371 $1,000,000
c/o BenIda Group LLC
100 Schelter Road
Lincolnshire, Illinois 60069
Howard I. Bernstein Declaration of Trust 82,474 $200,000
Dated April 28, 1987
c/o Howard I. Bernstein, Ltd.
6541 N. Kilbourn Ave.
Lincolnwood, IL 60646
Eric Achepohl 8,274 $20,000
c/o BenIda Group LLC
100 Schelter Road
Lincolnshire, Illinois 60069
<PAGE>
SCHEDULE 5(C)
ACCREDITED INVESTOR STANDARDS
Purchaser is an Accredited Investor because Purchaser is (please check
applicable box and return to the Company):
[] A natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of his or her purchase exceeds
$1,000,000.
[] A natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same level in the current year.
[] A bank as defined in Section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or
fiduciary capacity; a broker or dealer registered pursuant to Section 15
of the Securities Exchange Act of 1934, as amended; an insurance company
as defined in Section 2(13) of the Securities Act; an investment company
registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of such Act; a Small
Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; a plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state
or its political subdivisions, for the benefit of its employees, if such
plan has total assets in excess of $5,000,000; or an employee benefit
plan within the meaning of the Employee Retirement Income Security Act
of 1974 if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a bank, savings
and loan association, insurance company, or registered adviser, or if
the employee benefit plan has total assets in excess of $5,000,000 or,
if a self-directed plan, with investment decisions made solely by
persons that are accredited investors.
[] A private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940.
[] An organization described in section 501(c)(3) of the Internal Revenue
Code, a corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the Shares
offered, with total assets in excess of $5,000,000.
[] A director, executive officer or general partner of the Company.
<PAGE>
[] A trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Shares offered, whose purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii) of
Regulation D promulgated under Section 4(2) of the Securities Act.
[] An entity in which all the equity owners are accredited investors.
IN WITNESS WHEREOF, the undersigned has executed this Schedule and certifies
that it is true and correct as of the date hereof.
[Purchaser]
By:________________________________
Name:
Title:
Date as of May 28, 1999
EXHIBIT 99.3
------------
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is dated as of May 28,
1999 and is among Successories, Inc., an Illinois corporation (the "Company"),
and the Jack Miller Family Limited Partnership #1, the Howard I. Bernstein
Declaration of Trust dated April 28, 1987 and Eric Achepohl (collectively, the
"Stockholders").
W I T N E S S E T H:
WHEREAS, the Stockholders are purchasing from the Company, and the Company
is issuing and selling to the Stockholders, an aggregate of 503,092 shares of
Series A Convertible Preferred Stock, par value $.01 per share ("Preferred
Stock"), of the Company; and
WHEREAS, the Stockholders and the Company desire to set forth the terms and
conditions on which the Company may be obligated to register for sale the shares
of Common Stock issuable to the Stockholders upon conversion of the Preferred
Stock or issued as dividends on or otherwise in respect of the Preferred Stock,
according to the terms thereof.
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt, sufficiency and adequacy of which are
hereby acknowledged, the parties hereto, intending legally to be bound, hereby
agree as follows:
1. Definitions. Except as otherwise herein expressly provided herein, the
following terms and phrases shall have the meanings set forth below:
"Common Stock" means the common stock, par value $.01 per share, of
the Company.
"Short-Form Registration Statement" means a registration statement on
Form S-3, or any other registration form under the Securities Act subsequently
adopted by the Securities and Exchange Commission (the "SEC"), that permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
"Holder" means each Stockholder and any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 12 hereof.
"Register", "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"Registrable Securities" means (a) the Common Stock issued or
issuable upon conversion of the Preferred Stock, and (b) any Common Stock issued
as (or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, such Preferred Stock or
<PAGE>
Common Stock; provided, however, that Registrable Securities shall cease to be
treated as "Registrable Securities" hereunder if and when such shares of
Registrable Securities (i) have been transferred by a Holder in a transaction in
which such Holder's rights hereunder are not assigned to the transferee, (ii)
have been sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, or (iii) have been sold, to a
transferee who is not a Holder subject to Rule 144 promulgated under the
Securities Act with respect to such shares, in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act so that,
upon consummation of such sale, all transfer restrictions and restrictive
legends with respect thereto were removed.
"Registrable Securities then outstanding" means the number of shares
of Common Stock outstanding which are, and the number of shares of Common Stock
issuable pursuant to then exercisable or convertible securities which are,
Registrable Securities.
"Securities Act" means the Securities Act of 1933, as amended.
2. Demand Registration.
(a) If the Company shall receive, at any time after May 28, 2000, a
written request from the Holders of a majority of the Preferred Stock that the
Company file a registration statement under the Securities Act covering the
registration of Registrable Securities, then the Company shall (i) within 10
days of the receipt thereof, give written notice of such request to all Holders
and, (ii) subject to the limitations of Section 2(b), use its best efforts to
effect as soon as practicable, and in any event within 120 days of the receipt
of such request, the registration under the Securities Act of all Registrable
Securities which the Holders request to be registered within 20 days after the
mailing of the written notice by the Company described in foregoing clause (i);
provided, however, that the Company shall not be obligated to take any action to
effect any such registration pursuant to this Section 2(a):
(A) during the six-month period after the effective date of any
previously filed registration statement pertaining to securities of
the Company (other than a registration on Form S-4 or Form S-8 or an
exchange offering solely to the Company's existing stockholders);
(B) after the Company has effected one such registration
pursuant to this Section 2(a), and such registration has been
declared or ordered effective; or
(C) if the Company shall furnish to such Holders a certificate
signed by the Chairman of the Board of the Company certifying that,
in the good faith judgment of the Board of Directors, it would be
seriously detrimental to the Company or its stockholders for a
registration statement to be filed at such time, in which event the
Company's obligation to use its best efforts to register, qualify or
comply under this Section 2 shall be deferred for a period not to
exceed 90 days from the date of receipt of written request from the
Holders; provided, however, that the Company shall not invoke this
provision more than once in any 18-month period.
2
<PAGE>
(b) If the Holders initiating the registration request hereunder (the
"Initiating Holders") intend to distribute the Registrable Securities covered by
their request by means of an underwriting, they shall so advise the Company as a
part of their written request for registration and the Company shall include
such information in the written notice referred to in Section 2(a)(i). The right
of any Holder to include Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company, as provided in Section 4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 2, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Company shall so
advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the underwriting shall be allocated among all Holders
thereof, including the Initiating Holders, in proportion (as nearly as
practicable) to the amount of Registrable Securities of the Company owned by
each Holder. In any event, the Holders shall have the first right to include all
of their shares in the offering before any other shares.
3. Piggyback Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock or
other securities under the Securities Act in connection with the public offering
of such securities (other than a registration on Form S-4 or Form S-8 or an
exchange offering solely to the Company's existing stockholders), the Company
shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within 20 days after
receipt of written notice from the Company, the Company shall, subject to the
provisions of Section 8, cause to be registered under the Securities Act all of
the Registrable Securities that each such Holder has requested to be registered.
4. Obligations of the Company. Whenever required under this Agreement
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective until the earlier of the date the
Registrable Securities are sold or for 12 months.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
3
<PAGE>
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement; provided that such underwriting agreement
shall not provide for indemnification or contribution obligations on the part of
the Holders greater than the obligations set forth in Section 9(b).
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Agreement, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Agreement, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities, and (ii) if such offering is being
underwritten, a letter dated such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters.
5. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2, 3 and 11
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
4
<PAGE>
6. Expenses of Demand Registration. All expenses incurred in connection
with the registration, filing or qualification pursuant to Section 2, including
all registration, filing and qualification fees, printers' and accounting fees
but excluding underwriting discounts and commissions, shall be borne by the
Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 2 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered (in which case all
participating Holders shall bear such expenses), unless the Holders of a
majority of the Registrable Securities agree to forfeit their right to a demand
registration pursuant to Section 2; provided, further, that if at the time of
such withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the Holders
at the time of their request, then the Holders shall not be required to pay any
of such expenses and shall retain their rights pursuant to Section 2.
7. Expenses of Piggyback Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 3 for each Holder, including all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto but excluding underwriting discounts and commissions and fees and
expenses of legal counsel for the selling Holders relating to Registrable
Securities.
8. Underwriting Requirements. In connection with any offering initiated
by the Company for the underwritten sale of shares being issued and sold by the
Company, the Company shall not be required under Section 3 to include any of the
Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it, and then only in such quantity as will not, in the opinion of the
underwriters, jeopardize the success of the offering by the Company; provided,
that such underwriting agreement shall not provide for indemnification or
contribution obligations on the part of the Holders greater than the obligations
set forth in Section 9(b). If the total amount of securities, including
Registrable Securities, requested by stockholders of the Company to be included
in such offering exceeds the amount of securities, sold other than by the
Company, that the underwriters reasonably believe is compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be included therein
owned by each selling stockholder or in such other proportions as shall mutually
be agreed to by such selling stockholders; provided that the Holders shall have
the first right to include all of their shares in the offering before any shares
held by other selling stockholders). For purposes of apportionment, any selling
stockholder which is a Holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and stockholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder", and any pro rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder," as defined in this sentence.
5
<PAGE>
9. Indemnification. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Securities Exchange
Act of 1934, amended (the "Exchange Act"), and their respective officers,
directors, partners, agents, employees and successors, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will pay to
each such Holder, underwriter or controlling person, as incurred, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this Section 9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information regarding any Holder furnished expressly
for use in connection with such registration by such Holder.
(b) To the extent permitted by law, each selling Holder,
severally and not jointly, will indemnify and hold harmless the Company, each of
its directors, each of its officers who has signed the registration statement,
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter, any other Holder selling securities in such
registration statement, and their respective officers, directors, partners,
agents, employees and successors and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information regarding such Holder furnished by any
Holder (or by any representative of the Holders) expressly for use in connection
with such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this Section 9(b), in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 9(b) shall not apply to amounts
paid in settlement of any such loss, claim,
6
<PAGE>
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld. Notwithstanding
the foregoing, in no event shall any indemnity under this Section 9(b) exceed
the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. In the event any
indemnified party elects to retain its own counsel for reasons other than the
differing interests described in the foregoing proviso, such indemnified party
shall be solely responsible for the fees and expenses of such counsel. If the
indemnified party fails to deliver written notice to the indemnifying party
within a reasonable time after the indemnified party's receipt of notice of the
commencement of any such action, the indemnifying party's liability under this
Section 9 shall be reduced to the extent such failure to notify was prejudicial
to the indemnifying party's ability to defend such action, but the omission to
so deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 9.
(d) If the indemnification provided for in Section 9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and Holders under this
Section 9 shall survive, for the applicable statute of limitations, the
completion of any offering of Registrable Securities in a registration statement
under this Agreement.
7
<PAGE>
10. Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Short-Form Registration Statement,
the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144;
(b) take such action as is necessary to enable the Holders to
utilize a Short-Form Registration Statement for the sale of their Registrable
Securities;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144,
the Securities Act and the Exchange Act, or that it qualifies as a registrant
whose securities may be resold pursuant to a Short-Form Registration Statement,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Holder of any rule or
regulation of the SEC which permits the selling of any such securities without
registration or pursuant to such form.
11. Short-Form Registration.
(a) If, at any time after May 28, 2000, the Company shall
receive a written request from the Holders of at least twenty-five percent (25%)
of the Preferred Stock that the Company effect a registration on a Short-Form
Registration Statement with respect to all or a part of the Registrable
Securities owned by such Holders, the Company will:
(i) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders;
and
(ii) use its best efforts to effect such registration and all
such qualifications and compliances as may be so requested and as
would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are
specified in such request, together with all or such portion of the
Registrable Securities of any other Holder or Holders joining in
such request as are specified in a written request given within 15
days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this
Section 11: (A) if Form S-3 is not available for such offering by
the Holders; (B) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of the Company
stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and
its
8
<PAGE>
stockholders for a Short-Form Registration Statement to be effected
at such time, in which event the Company shall have the right to
defer the filing of such Short-Form Registration Statement for a
period of not more than 90 days after receipt of the request of the
Holder or Holders under this Section 11; provided, however, that the
Company shall not invoke this provision more than once in any
18-month period; or (C) if the Company has already effected one
registration on a Short-Form Registration Statement for the Holders
pursuant to this Section 11.
(b) In the event the Holders request registration on a
Short-Form Registration Statement pursuant to Section 11 and the Company
believes, upon written advice of its investment bankers (which written advice
shall be provided to such Holders) that, due to the number of shares for which
Holders have requested registration, an underwritten offering is advisable, the
Holders shall elect to either (i) participate in an underwritten offering, or
(ii) reduce the number of shares requested to be registered and utilize a
Short-Form Registration Statement. Subject to the foregoing, the Company shall
file a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders and use its best efforts to keep such
registration statement effective until the earlier of (A) the date that all of
the registered Registrable Securities are sold, or (B) for one year. All
expenses incurred in connection with a registration requested pursuant to
Section 11, including all registration, filing, qualification, printer's and
accounting fees, but excluding any underwriters' discounts and commissions and
fees and expenses of legal counsel retained by the Holders, shall be borne by
the Company. Any registration effected pursuant to this Section 11 shall not be
counted as a demand for registration or as a registration effected pursuant to
Section 2 or Section 3, respectively.
12. Assignment of Registration Rights. The rights of any Holder to
cause the Company to register Registrable Securities pursuant to this Agreement
may be assigned by such Holder to: any member of such Holder's immediate family;
any stockholder, partner or member of such Holder; any corporation, partnership,
limited liability company, joint venture, trust or individual who or which,
directly or indirectly through one or more intermediaries, is controlled by or
under common control with such Holder or which controls, directly or indirectly
through one or more intermediaries, such Holder; or any trust for the benefit
of, or partnership, corporation, limited liability company or other entity owned
or controlled by, any of the foregoing. For purposes of this Section 12, the
terms "control", "controlled" and "common control with" mean the ability,
whether by the direct or indirect ownership of voting securities or other equity
interest, by contract or otherwise, to elect a majority of the directors of a
corporation, to select the managing partner of a partnership, or otherwise to
select a majority of those persons exercising governing authority over an
entity.
13. Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of at least a majority of the then outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company that would (a) allow such holder or prospective
holder to include such securities in any registration subject to the terms of
this Agreement unless, under the terms of such agreement, such holder or
prospective holder may include such securities
9
<PAGE>
in any such registration only to the extent that the inclusion of such
securities will not reduce the amount of the Registrable Securities of the
Holders being registered, or (b) give such holder or prospective holder any
registration rights the terms of which are as favorable or more favorable than
the registration rights granted to the Holders hereunder.
14. Remedies. Any Holder having rights under any provision of this
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties agree and acknowledge that
money damages may not be an adequate remedy for any breach of the provisions of
this Agreement and, accordingly, in addition to all other remedies available to
any Holder having rights under any provision of this Agreement, any such Holder
may, in his/its sole discretion, apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief in
order to enforce, or prevent any violation of, the provisions of this Agreement.
The Company agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate and to waive any requirement for the
posting of a bond in connection with such remedy.
15. Miscellaneous.
(a) Board Nominee. For so long as any shares of the Preferred
Stock remains outstanding, the Company shall use its best efforts to nominate
Jack Miller, or another individual designated by the majority of the outstanding
Preferred Stock, for election to the Board of Directors of the Company and shall
take all actions necessary and use all reasonable endeavors (including obtaining
the consent of the officers, directors, significant stockholders and affiliates
of the Company) to ensure Mr. Miller's or such designee's election to the Board
of Directors.
(b) Expenses. Except as otherwise specified in this Agreement,
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made) upon the earliest to occur of
(i) receipt, if made by personal service, (ii) two days after delivery to a
reputable overnight courier service, (iii) upon the delivering party's receipt
of a written confirmation of a transmission made by facsimile, or (iv) five days
after being mailed by registered or certified air mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 8(c)):
10
<PAGE>
if to the Stockholders:
BenIda Group LLC
100 Schelter Road
Lincolnshire, Illinois 60069
Attention: Jack Miller
Telecopy: (847) 634-6699
and
Attention: Eric Achepohl
Telecopy: (847) 634-9521
and to:
Howard I. Bernstein
6541 N. Kilbourn Ave.
Lincolnwood, Illinois 60646
Telecopy (773) 693-6255
with a copy to:
Neal, Gerber & Eisenberg
Two North LaSalle Street, Suite 2200
Chicago, Illinois 60602
Attention: Marshall E. Eisenberg, Esq.
Telecopy: (312) 269-1747
if to the Company:
Successories, Inc.
2520 Diehl Road
Aurora, Illinois 60504
Attention: Gary Rovansek
Telecopy: (630) 820-3003
with a copy to:
Vedder, Price, Kaufman & Kammholz
222 N. LaSalle Street
Chicago, Illinois 60601
Attention: Guy Snyder, Esq.
Telecopy: (312) 609-5005
11
<PAGE>
(d) Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(e) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, such provision shall be severed and the remaining provisions
hereof shall be enforced to the extent possible or modified in such a way as to
make it enforceable, and the invalidity, illegality or unenforceability thereof
shall not affect the validity, legality or enforceability of the remaining
provisions of this Agreement.
(f) Entire Agreement. This Agreement, including all of the
Exhibits and Schedules hereto that are incorporated herein by this reference,
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and undertakings, both
written and oral, between any party hereto with respect to the subject matter
hereof.
(g) Amendments and Waivers. No amendment of this Agreement
shall be valid unless the same shall be in writing and signed by all parties
hereto. No waiver by any party of any default, misrepresentation or breach
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach hereunder or affect in any way
any rights of any other party arising by virtue of any prior or subsequent such
occurrence.
(h) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Illinois,
without regard to its principals regarding conflicts of law.
(i) Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
(j) Assignment. This Agreement and all the terms and
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto, and their respective heirs, legal representatives, permitted
successors and permitted assigns. Except as expressly provided herein, no party
may assign its rights or obligations under this Agreement without the prior
written consent of the other party.
[Signature Page Follows]
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
THE COMPANY:
SUCCESSORIES, INC.
By:/s/ Gary J. Rovansek
------------------------------------
Name: Gary J. Rovansek
Title: President
and Chief Operating Officer
STOCKHOLDERS:
JACK MILLER FAMILY LIMITED
PARTNERSHIP #1
By: Jack Miller Trust Dated January 18,
1984, its general partner
By:/s/ Jack Miller
------------------------------------
Jack Miller, trustee of the
general partner
HOWARD I. BERNSTEIN DECLARATION
OF TRUST DATED APRIL 28, 1987
By:/s/ Howard I. Bernstein
------------------------------------
Howard I. Bernstein, trustee
/s/ Eric Achepohl
------------------------------------
Eric Achepohl
13
EXHIBIT 99.4
------------
CERTIFICATE OF DESIGNATION OF
SERIES A CONVERTIBLE PREFERRED
STOCK OF SUCCESSORIES, INC.
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority conferred
upon the Board of Directors of Successories, Inc., an Illinois corporation (the
"Company"), pursuant to its Articles of Incorporation, as amended, and in
accordance with the Illinois Business Corporation Act of 1983, as amended, the
Company's Board of Directors has adopted resolutions creating a series of its
Preferred Stock, par value $.01 per share, designated as Series A Convertible
Preferred Stock, with the preferences, privileges and relative participating,
optional or other special rights set forth herein.
1. Designation; Number. The total number of shares of Preferred Stock
which the Company has authority to issue is 1,000,000 shares of Preferred Stock,
par value $.01 per share, of which 503,092 are designated as Series A
Convertible Preferred Stock (the "Series A Preferred Stock").
2. Dividends.
(a) Rate of Dividends. The holders of outstanding Series A
Preferred Stock shall be entitled to receive, out of any funds legally available
therefor, cumulative dividends at the rate of eight percent (8%) of the purchase
price per share per annum commencing on the date of issuance. Dividends on the
Series A Preferred Stock shall be payable in preference to payment of any
dividend on Common Stock or other capital stock of the Company. Accrued and
unpaid dividends on the Series A Preferred Stock shall be paid (i) on April 30,
July 31, October 31 and January 31 of each year, commencing on July 31, 2000,
for each three-month period then ending, to the holders of record as they appear
on the books and records of the Company 10 days preceding each payment date, and
(ii) on the date certificates representing Common Stock of the Company are
required to be delivered following any conversion of Series A Preferred Stock
pursuant to Section 4.
(b) Payment in Common Stock. In lieu of payment in cash, at
the option of the Company or, upon written notice delivered to the Company, of
the holders of a majority of the Series A Preferred Stock, the Company shall pay
dividends on the Series A Preferred Stock in shares of Common Stock that have an
aggregate Fair Market Value (as defined herein) equal to the aggregate dividends
payable. "Fair Market Value" means the average of the last reported sales price
of the Common Stock on the Nasdaq Stock Market or on any national or regional
securities exchange on which the Common Stock is listed or admitted to unlisted
trading privileges, as reported for each of the 10 consecutive trading days
ending on the 10th trading date prior to any dividend payment date.
<PAGE>
3. Liquidation Preference.
(a) Series A Preferred Stock Preference. In the event of any
liquidation, dissolution or winding up of the Company, either voluntary or
involuntary, the holders of Series A Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Company in respect of the Common Stock or other capital
stock of the Company, the amount of $2.425 per share (subject to adjustment as
provided in Section 4(e)) (the "Purchase Price") for each share of Series A
Preferred Stock then held by them and, in addition, an amount equal to all
accrued but unpaid dividends on the Series A Preferred Stock. After payment or
setting apart of payment has been made to the holders of Series A Preferred
Stock of the full preferential amounts so payable to them, the holders of Common
Stock and other capital stock shall be entitled to receive pro rata the
remaining assets of the Company. If the assets and funds available for
distribution to the holders of the Series A Preferred Stock are insufficient to
permit the payment to such holders of their full preferential amount, then the
entire assets and funds of the Company legally available for distribution shall
be distributed among the holders of Series A Preferred Stock in proportion to
the number of shares of Series A Preferred Stock held by each such holder.
(b) Triggering Events. For purposes of this Section 3, a
liquidation of the Company shall be deemed to include, without limitation, the
following events: (i) a reorganization or merger of the Company with or into any
other corporation or entity (other than a consolidation or merger in which the
Company is the continuing entity and which does not result in any adverse change
in the rights, preferences or privileges of the Common Stock); (ii) a sale of
all or substantially all of the assets of the Company; or (iii) a change in the
majority of the Board of Directors, occurring during any 13-month period
commencing on May 28, 1999, that was not approved by a majority of the directors
serving on May 28, 1999 or by a majority of those subsequently elected directors
whose election or nomination for election was approved by a majority of the
directors then serving on the Board of Directors.
4. Conversion.
(a) Optional Conversion. Each share of Series A Preferred
Stock shall be convertible, at any time at the option of the holder thereof,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Purchase Price by the Conversion Price (as defined
below) in effect at the time of conversion. The Conversion Price for the Series
A Preferred Stock initially shall equal $2.425, subject to adjustment as
provided in Section 4(e). The ratio of the Purchase Price divided by the
Conversion Price in effect at any specified time is hereinafter referred to as
the "Conversion Ratio."
(b) Automatic Conversion. Each share of Series A Preferred
Stock automatically, without action on the part of the Company or the holder
thereof, shall be converted into shares of Common Stock, at the then effective
Conversion Ratio, in the event that the closing sales price of the Common Stock
equals or exceeds $10.00 per share for 30 consecutive trading days commencing on
or after May 29, 2000. Any such automatic conversion shall be deemed to have
occurred as of the close of trading on the 30th such consecutive trading day.
2
<PAGE>
(c) Mechanics of Conversion. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into full shares of Common
Stock and to receive certificates therefor, he shall surrender the certificates
representing the converted Series A Preferred Stock, duly endorsed, at the
office of the Company or of any transfer agent for the Series A Preferred Stock,
and shall give written notice to the Company that such holder elects to convert
the same; provided, however, that in the event of an automatic conversion
pursuant to Section 4(b), the outstanding shares of Series A Preferred Stock
shall be converted automatically without any further action by the holders of
such shares and whether or not the certificates representing such shares are
surrendered to the Company or its transfer agent; provided further that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such automatic conversion unless the certificates
evidencing such shares of Series A Preferred Stock are either delivered to the
Company or its transfer agent as provided above, or the holder notifies the
Company or its transfer agent that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with such certificates. The
Company shall, as soon as practicable after such delivery, but in no event more
than five business days later, issue and deliver to such holder a certificate
for the number of shares of Common Stock to which the holder shall be entitled
and a check payable to the holder in the amount of any cash amounts payable as
the result of a conversion into fractional shares of Common Stock. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of surrender of the shares of Series A Preferred Stock to
be converted or, in the case of automatic conversion, on the 30th consecutive
trading day, and the persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holders of such shares of Common Stock on such date.
(d) Fractional Shares. In lieu of any fractional shares to
which the holder of Series A Preferred Stock otherwise would be entitled, the
Company shall pay cash equal to such fraction multiplied by the average of the
last reported sales price of the Common Stock on the Nasdaq Stock Market, or on
any national or regional securities exchange on which the Common Stock is listed
or admitted to unlisted trading privileges, as reported for each of the 10
consecutive trading days ending on the trading date immediately prior to the
conversion date. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares of
Series A Preferred Stock of each holder at the time converting into Common Stock
and the number of shares of Common Stock issuable upon such aggregate
conversion.
(e) Adjustment of Conversion Price. The Conversion Price shall
be subject to adjustment from time to time as follows:
(i) If the number of shares of Common Stock outstanding at any
time after the date hereof is increased by a stock dividend payable
in shares of Common Stock, or by a subdivision or split-up of shares
of Common Stock, then on the date such dividend is made or such
change is effective, the Conversion Price shall be appropriately
decreased so that the number of shares of Common Stock issuable on
conversion of any shares of Series A Preferred Stock shall be
increased in proportion to such increase in the number of shares of
Common Stock outstanding.
3
<PAGE>
(ii) If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination of the
outstanding shares of Common Stock, then on the effective date of
such combination, the Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on
conversion of any shares of Series A Preferred Stock shall be
decreased in proportion to such decrease in the number of shares of
Common Stock outstanding.
(iii) In case the Company shall declare a cash dividend upon its
Common Stock payable otherwise than out of retained earnings or
shall distribute to holders of its Common Stock shares of its
capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the Company or
other persons, assets (excluding cash dividends) or options or
rights (excluding options to purchase and rights to subscribe for
Common Stock or other securities of the Company convertible into or
exchangeable for Common Stock), then, in each such case, the holders
of the Series A Preferred Stock shall, concurrent with the
distribution to holders of Common Stock, receive a like distribution
based upon the number of shares of Common Stock into which such
Series A Preferred Stock is then convertible.
(iv) In case any capital reorganization or any reclassification
of the stock of the Company (other than as a result of a stock
dividend or subdivision, split-up or combination of shares), or the
consolidation or merger of the Company with or into another person
(other than a consolidation or merger in which the Company is the
continuing entity and which does not result in any adverse change in
the rights, preferences or privileges of the Common Stock) is
effected at any time after the date hereof, each share of Series A
Preferred Stock shall, after such reorganization, reclassification,
consolidation, merger, sale or other disposition, be convertible
into the kind and number of shares of stock or other securities or
property of the Company or otherwise to which such holder would have
been entitled if, immediately prior to such reorganization,
reclassification, consolidation, merger, sale or other disposition,
such holder had converted such share of Series A Preferred Stock
into Common Stock. The provisions of this clause (iv) shall
similarly apply to successive reorganizations, reclassification,
consolidations, mergers, sales or other dispositions.
(v) If, after May 28, 1999, the Company issues or sells (or in
accordance with Section 4(e)(vi)(A) below is deemed to have issued
or sold) any shares of Common Stock for a consideration per share
less than the Conversion Price in effect immediately prior to such
issuance or sale, then the Conversion Price in effect immediately
prior to such issuance or sale forthwith shall be adjusted, to
prevent dilution of the conversion rights granted under this Section
4, to an amount equal to the quotient obtained by dividing:
(A) an amount equal to (1) the product of the Conversion
Price in effect immediately prior to such issuance or sale
multiplied by the total number of shares of Common Stock
outstanding immediately prior to such issuance or sale, on a
fully diluted basis (including any shares deemed to have been
issued pursuant to Section 4(e)(vi)(A) below), plus (2) the
consideration received (or deemed to be
4
<PAGE>
received, in accordance with Section 4(e)(vi)(A) below) by the
Company upon such issuance or sale, by:
(B) the number of shares of Common Stock outstanding, on a
fully diluted basis (including shares of Common Stock deemed to
have been issued pursuant to Section 4(e)(vi)(A) below),
immediately after such issuance or sale.
(vi) For purposes of any adjustment of the Conversion Price
pursuant to this Section 4(e), the following provisions shall be
applicable:
(A) Convertible Securities. If the Company grants any
options, warrants, convertible securities having rights to
subscribe for or to purchase shares of Common Stock, or any
other securities convertible into or exchangeable for Common
Stock (collectively, "Convertible Securities"), then (x) the
maximum number of shares of Common Stock issuable upon the
exercise or conversion of such Convertible Securities shall be
deemed to have been issued and sold by the Company on the date
such Convertible Securities are granted or issued, and (y) the
"consideration per share" for such Convertible Securities shall
equal the consideration received by the Company for any such
Convertible Securities, plus the minimum aggregate amount of
additional consideration payable to the Company upon the
exercise or conversion of all such Convertible Securities. Upon
the expiration of or the termination of any right to convert or
exchange any Convertible Securities, in each case without the
exercise or conversion of such Convertible Securities, the
Conversion Price then in effect shall be adjusted, at the time
of such expiration or termination, to the Conversion Price that
would have been in effect had the adjustment made upon grant or
issuance of the Convertible Securities been made upon the basis
of the issuance or sale of only those shares of Common Stock
actually issued upon the exercise or conversion of such
Convertible Securities.
(B) Calculation of Consideration Received. If any Common
Stock or Convertible Securities are issued or granted, or deemed
to have been issued or granted, (x) for cash, then the aggregate
consideration received by the Company therefor shall be deemed
to equal the gross amount of cash received by the Company
therefor, (y) for consideration other than cash (and other than
securities), then the aggregate consideration received by the
Company therefor shall be deemed to equal the fair value of such
consideration as of the date of receipt, as determined by the
Board of Directors of the Company, in good faith, and reported
to the holders of Series A Preferred Stock in writing, or (z)
for consideration consisting of securities, then the
consideration received by the Company therefor shall be based
upon the average of the last reported sales price of such
securities on the Nasdaq Stock Market, or on any national or
regional securities exchange on which such securities are listed
or admitted to unlisted trading privileges, as reported for each
of the 10 consecutive trading days ending on the 10th trading
date prior to the Company's receipt of the securities, or (if
such securities are not so listed or admitted) the last reported
sales price reported by the National Association of Securities
Dealers, Inc.
5
<PAGE>
Automated Quotations, Inc., or (if such securities are not so
listed or quoted) at such price determined by the Board of
Directors of the Company, in good faith, and reported to the
holders of Series A Preferred Stock in writing.
(C) Integrated Transactions. In case any Convertible
Securities are issued in connection with the issue or sale of
other securities of the Company, together comprising one
integrated transaction in which no specific consideration is
allocated to such Convertible Securities by the parties thereto,
the Convertible Securities will be deemed to have been issued
without consideration.
(D) Reacquired Shares. The Common Stock deemed to be
outstanding at any given time shall not include any shares owned
or held by or for the account of the Company or any subsidiary
of the Company.
(vii) Exempt Issues. Notwithstanding any other provision hereof,
no adjustment to the Conversion Price shall be made pursuant to this
Section 4 on account of the issuance of shares of Common Stock (A)
in respect of rights granted pursuant to Successories, Inc.'s Stock
Option Plan or Employee Stock Purchase Plan, each as currently in
effect or as amended with approval of the stockholders of the
Company; (B) in respect of stock options or warrants outstanding as
of May 28, 1999; (C) upon the conversion of any shares of Series A
Preferred Stock; or (D) pursuant to the 1999 Senior Management Bonus
Plan in effect for the Company's 1999 fiscal year.
(f) Minimal Adjustments. All calculations under this Section 4
shall be made to the nearest cent or to the nearest one hundredth (1/100) of a
share, as the case may be. No adjustment in the Conversion Price need be made if
such adjustment would result in a change in the Conversion Price of less than
$0.01. Any adjustment of less than $0.01 that is not made shall be carried
forward and shall be made at the time of and together with any subsequent
adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or
more in the Conversion Price.
(g) No Impairment. The Company will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Series A Preferred Stock against
impairment.
(h) Certificate as to Adjustments. Upon the occurrence of each
adjustment of the Conversion Price pursuant to this Section 4, the Company shall
prepare and furnish to each holder of Series A Preferred Stock a certificate
signed by the Chief Financial Officer of the Company setting forth such
adjustment and showing in detail the facts upon which such adjustment is based.
(i) Notices of Record Date. In the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who
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are entitled to receive any dividend or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property or to receive any other right, the Company
shall mail to each holder of Series A Preferred Stock, at least 20 days prior to
such record date, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution or right and the amount
and character of such dividend, distribution or right.
(j) Notices. Any notice required by the provisions of this
Section 4 to be given to any holder of Series A Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at such holder's address appearing on the Company's books.
(k) Reservation of Common Stock. The Company, at all times,
shall reserve and keep available, out of its authorized and unissued capital
stock and solely for the purpose of effecting the conversion of Series A
Preferred Stock, such number of shares of Common Stock that is sufficient to
effect the conversion of all shares of Series A Preferred Stock from time to
time outstanding. If necessary to comply with this Section 4(k), the Company
shall increase the authorized amount of its Common Stock in accordance with
Illinois law.
5. Voting Rights.
(a) General. The holder of a share of Series A Preferred Stock
shall be entitled to notice of any shareholders' meeting in accordance with the
bylaws of the Company and shall vote with holders of the Common Stock upon the
election of directors and upon any other matter submitted to a vote of
shareholders, except those matters required by law to be submitted to a class
vote and except as otherwise set forth herein. The holder of each share of
Series A Preferred Stock shall be entitled to that number of votes equal to the
number of shares of Common Stock into which each share of Series A Preferred
Stock could be converted on the record date for the vote or consent of
shareholders. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares of Series A Preferred Stock held by each holder) shall be disregarded.
(b) Right to Elect Director. In addition to the voting rights
set forth in Section 5(a), the holders of the Series A Preferred Stock, voting
separately as a single class, shall be entitled to nominate and to elect one
person to the Board of Directors of the Company.
(c) Protective Provisions. In addition to any other class vote
that may be required by law or as provided herein, so long as any shares of
Series A Preferred Stock are outstanding, the Company shall not, without first
obtaining the affirmative vote of the holders of at least a majority of the then
outstanding shares of Series A Preferred Stock:
(i) effect any amendment to the Articles of Incorporation of the
Company that would change the authorized number of shares of Series
A Preferred Stock or the rights, preferences and privileges of the
Series A Preferred Stock;
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(ii) create any class or series of shares of capital stock
having dividend, liquidation or other rights or preferences equal or
superior to those of the Series A Preferred Stock; or
(iii) enter into any line of business that is not directly
related to sales of the Company's core motivational and
self-improvement products by direct marketing, through
internet/e-commerce sales and through franchised retail stores.
6. Preemptive Rights. In the event the Company proposes to issue
additional shares of Common Stock, Convertible Securities (other than
Convertible Securities described in Section 4(e)(vii)) or other capital stock
for sale, the Company first shall offer to sell such Common Stock, Convertible
Securities or other capital stock to the holders of the Series A Preferred
Stock, on a pro rata basis (i.e., based on the number of shares of common stock
into which the Series A Preferred Stock then is convertible, plus the number of
shares of Common Stock issued as dividends pursuant to Section 2(b), relative to
the total number of shares of Common Stock outstanding computed on a fully
diluted basis), at a price equal to the offering price of such additional shares
of Common Stock, Convertible Securities or other capital stock. Any such shares
not subscribed for by the holders of the Series A Preferred Stock within 10 days
after receipt from the Company of the written offer to sell may be sold by the
Company to any other purchaser at a price not less than the price offered to the
holders of Series A Preferred Stock.
7. No Reissuance of Series A Preferred Stock. No shares of Series A
Preferred Stock acquired by the Company by reason of conversion or otherwise
shall be reissued, and all such shares shall be cancelled, retired and
eliminated from the shares that the Company shall be authorized to issue.
IN WITNESS WHEREOF, Successories, Inc. has caused this Certificate of
Designation to be duly executed by its President and Chief Operating Officer, a
duly authorized officer, as of May 26, 1999.
SUCCESSORIES, INC.
By: /s/ Gary J. Rovansek
-------------------------------
Name: Gary J. Rovansek
Title: President and
Chief Operating Officer
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