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EXHIBIT 10.24
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT
By and between
SUCCESSORIES, INC.
and
INFINITY INVESTORS LIMITED
and
SEACREST CAPITAL LIMITED,
as Subscribers
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE
SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER REGULATION D ("REGULATION D") PROMULGATED UNDER THE ACT.
THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS,
OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. FURTHERMORE, THE SECURITIES
ARE SUBJECT TO CERTAIN LIMITATIONS ON CONVERSION AND VOTING AS DESCRIBED IN
THAT CERTAIN REGULATION D SECURITIES SUBSCRIPTION AGREEMENT OF THE COMPANY
DATED DECEMBER 17, 1996, A COPY OF WHICH IS ON FILE WITH AND MAY BE OBTAINED
FROM THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.
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THIS REGULATION D SECURITIES SUBSCRIPTION AGREEMENT (the "Agreement" or
the "Subscription Agreement") is executed by each of the undersigned (each a
"Subscriber" and collectively, the "Subscribers") in connection with the
subscription by the Subscribers for Series B Cumulative Convertible Preferred
Stock (the "Preferred Stock") of SUCCESSORIES, INC., an Illinois corporation
(the "Company").
WHEREAS, the Company is offering (the "Offering") for sale pursuant to
Regulation D ("Regulation D") under the United States Securities Act of 1933,
as amended (the "Act") 1, 212 shares of Preferred Stock (the "Preferred
Shares"), with a liquidation preference of $5,000 per share at a purchase price
of $4,125.41 per share, the terms of which are set forth in the form of a
Certificate of Designation of the Preferred Stock attached hereto as Exhibit A
(the "Certificate of Designation"); and
WHEREAS, each Subscriber wishes to subscribe for the Preferred Shares set
forth opposite such Subscriber's name on Schedule 1.1 hereto, in accordance
with the terms and conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. SUBSCRIPTION AND CLOSING; ESCROW
1.1 SUBSCRIPTION. Subject to the terms and conditions of this Agreement,
each Subscriber hereby subscribes for, and the Company hereby agrees to issue
and sell to each such Subscriber, the number of Preferred Shares, and at the
aggregate price set forth, opposite each Subscriber's name as indicated on
Schedule 1.1 to this Agreement. Certificates for the Preferred Shares will be
issued in the names and denominations as indicated on Schedule 1.1.
1.2 CLOSING. Contemporaneous herewith, each Subscriber, the Company, and
Illinois Stock Transfer Company, serving as the transfer agent for the Company
(the "Transfer Agent") shall enter into that certain Transfer Agent Agreement
in the form attached hereto as Exhibit B (the "Transfer Agent Agreement"). As
contemplated therein, the Transfer Agent shall serve as an escrow agent to
facilitate the closing of the subscription referred to above (the "Closing"),
and, thereafter, shall perform the "paying agent" and "book entry" functions
contemplated therein.
1.3 PAYMENT OF PURCHASE PRICE AND DELIVERY OF PREFERRED SHARES. Payment
of the purchase price for the Preferred Shares by the Subscribers, and delivery
of the Preferred Shares by the Company, shall be effected pursuant to the
procedures established in the Transfer Agent Agreement.
1.4 MULTIPLE SUBSCRIBERS. This Agreement may be executed by one or more
Subscribers. In the event that this Agreement pertains to a subscription by a
single Subscriber
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(SUCCESSORIES, INC.)
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only, all references to the "Subscribers" or "each Subscriber" shall be
deemed to refer to such single Subscriber.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY
The Company represents and warrants to and covenants with the Subscribers
as follows:
2.1 ORGANIZATION, GOOD STANDING, AND QUALIFICATION.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Illinois and has all
requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted. The Company is duly qualified
to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on
the business or properties of the Company and its subsidiaries taken as a
whole.
(b) Each subsidiary of the Company is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted.
Each such subsidiary is duly qualified to transact business and is in
good standing in each jurisdiction in which the failure to so qualify
would have a material adverse effect on the business or properties of
such subsidiary.
2.2 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, and the performance of all obligations of the
Company hereunder and the authorization, issuance (or reservation for issuance)
and delivery of the Preferred Shares and the shares of the common stock, par
value $.01 per share (the "Common Stock") of the Company issuable upon
conversion of the Preferred Shares have been taken (such shares of Common Stock
are hereinafter referred to as the "Common Shares", and the Preferred Shares
and Common Shares are hereinafter referred to as the "Securities").
2.3 AGREEMENT. This Agreement has been duly executed and delivered
by the Company and, assuming due authorization, execution and delivery
of this Agreement by each Subscriber, is a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
2.4 CAPITAL STOCK. The Company has an authorized capitalization as set
forth on Schedule 2.4. All outstanding shares of capital stock of the Company
have been duly authorized and are fully paid and non-assessable. Other than as
set forth on Schedule 2.4 or as disclosed in the SEC Reports (as such term is
defined in Section 2.6 below), there are no outstanding options, warrants,
rights, calls, commitments, conversion rights, rights of exchange, plans or
other agreements of any character providing for the purchase, issuance or sale
of any shares of capital stock of the Company.
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2.5 VALID ISSUANCE OF SECURITIES. When issued and delivered in accordance
with the terms of this Agreement, the Preferred Shares will be duly and validly
issued and outstanding, fully paid and non-assessable, free and clear of any
claims or pre-emptive rights, and (assuming the representations and warranties
of the Subscribers herein are true and correct in all material respects) will
have been issued in compliance with all applicable U.S. federal and state
securities law.
2.6 SEC REPORTS; FINANCIAL STATEMENTS. The Company has timely filed all
forms, reports and documents with the Securities and Exchange Commission (the
"Commission") since January 1, 1995, required to be filed by it under the
Securities Exchange Act of 1934, as amended (the "1934 Act") through the date
hereof (collectively, the "SEC Reports"). Such SEC Reports, at the time filed,
complied as to form in all material respects with the requirements of the 1934
Act. None of the SEC Reports, including without limitation any financial
statements or schedules included therein, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading. Except as set forth in Schedule 2.6, there have been no material
adverse changes in the Company's business, properties, results of operations,
condition (financial or otherwise) or prospects since the date of the Company's
most recent Report on Form 10-Q for the quarter ended August 2, 1996, which
have not been disclosed to the Subscribers in writing (either directly by the
Company or by delivery by the Company to the Subscribers). The audited and
unaudited consolidated balance sheets of the Company and its subsidiaries
contained in the SEC Reports, and the related consolidated statements of
income, changes in stockholders' equity and changes in cash flows for the
periods then ended (the consolidated balance sheet of the Company and its
subsidiaries as of February 3, 1996 is hereinafter referred to as the "Balance
Sheet"), including the footnotes thereto, except as indicated therein, have
been prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods indicated, except that the
unaudited financial statements do not contain notes and may be subject to
normal audit adjustments and normal annual adjustments. The Balance Sheet
fairly presents the financial condition of the Company and its subsidiaries at
the date thereof and, except as indicated therein, reflects all claims against
and all debts and liabilities of the Company and its subsidiaries, fixed or
contingent, as at the date thereof and the related statements of income,
stockholders' equity and changes in cash flows fairly present the results of
the operations of the Company and its subsidiaries and the changes in their
financial position for the period indicated. Since February 3, 1996 (the
"Balance Sheet Date"), except as disclosed in the SEC Reports and as set forth
in Schedule 2.6, there has been (x) no material adverse change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in the
results of operations or prospects, of the Company and its subsidiaries,
whether as a result of any legislative or regulatory change, revocation of any
license or rights to do business, fire, explosion, accident, casualty, labor
trouble, flood, drought, riot, storm, condemnation, act of God, public force or
otherwise and (y) no material adverse change in the assets or liabilities, or
in the business or condition, financial or otherwise, or in the results of
operations or prospects, of the Company and its subsidiaries except in the
ordinary course of business; and no fact or condition exists or is contemplated
or threatened which might cause such a change in the future.
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2.7 CURRENT PUBLIC INFORMATION. The Company's common stock is registered
under Section 12(b) or 12(g) of the 1934 Act. The Company has delivered to the
Subscribers copies of the Company's most recent annual report on Form 10-K (the
"Annual Report"), each Quarterly Report on Form 10-Q since the date of its
Annual Report, the most recent proxy statement for its Annual Meeting of
Shareholders, and each interim report on Form 8-K filed by the Company since
the date of its Annual Report. In addition, the Company has delivered to each
Subscriber a draft of the proposed Form 10-Q for the fiscal quarter ended
November 2, 1996.
2.8 NO CONFLICTS. Except as set forth on Schedule 2.8, the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby does not and will not conflict with or result in a breach
by the Company of any of the terms or provisions of, or constitute a default
under, the Certificate of Incorporation or bylaws of the Company, or any
indenture, mortgage, deed of trust or other agreement or instrument to which
the Company is a party or by which it or any of its properties or assets are
bound, or any existing applicable decree, judgment or order of any court,
Federal or State regulatory body, administrative agency or other governmental
body having jurisdiction over the Company or any of its properties or assets.
2.9 COMPLIANCE WITH LAWS. As of the date hereof, the conduct of the
business of the Company complies in all material respects with all statutes,
laws, regulations, ordinances, rules, judgments, orders or decrees applicable
thereto, except for non compliance which would not have a material adverse
effect on the business, properties, condition (financial or otherwise), results
of operations or prospects of the Company (a "Material Adverse Effect"). The
Company has not received notice of any alleged violation of any statute, law,
regulation, ordinance, rule, judgement, order or decree from any governmental
authority, which would have a Material Adverse Effect.
2.10 LITIGATION. Except as disclosed in the SEC Reports, there is no
action, suit or proceeding before or by any court or governmental agency or
body, domestic or foreign, now pending or, to the knowledge of the Company,
threatened, against or affecting the Company, or any of its properties, which
could reasonably be expected to result in any material adverse change in the
business, properties, results of operations, condition (financial or
otherwise), or prospects of the Company, or which could reasonably be expected
to materially and adversely affect the properties or assets of the Company or
which could reasonably be expected to interfere with the Company's ability to
consummate the transactions contemplated by this Agreement.
2.11 DISCLOSURES. There is no fact known to the Company (other than
general economic conditions known to the public generally) that has not
been disclosed in writing to the Subscribers that (a) could reasonably be
expected to have a Material Adverse Effect or (b) except as disclosed on
Schedule 2.8, could reasonably be expected to materially and adversely affect
the ability of the Company to perform its obligations pursuant to this
Agreement and the issuance of the Securities hereunder.
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(SUCCESSORIES, INC.)
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2.12 PRIOR PRIVATE PLACEMENTS. Except as set forth in Schedule 2.12 or in
the SEC Reports, the Company has not issued any shares of its Common Stock (or
securities convertible into or exercisable for shares of Common Stock). The
offer and sale of the Preferred Shares are exempt from registration under
Section 5 of the Act. Neither the Company nor any person acting on its behalf
has taken or will take any action (including, without limitation, any offering
of any securities of the Company under circumstances which would require the
integration of such offering with the offering of the Preferred Shares or the
shares of Common Stock issuable upon conversion thereof) which subject the
offering or issuance or sale of the Preferred Shares (or the shares of Common
Stock issuable upon conversion thereof) to the registration requirements of
Section 5 of the Act.
2.13 COMMISSIONS. Except for a fee which is payable by the Company as
contemplated in the Transfer Agent Agreement to Alpine Capital Partners, Inc.
(Xxxx Xxxxx) for services rendered to the Company not to exceed two and
one-half percent (2.5%) of the aggregate purchase price of the Preferred
Shares, no other person, firm or corporation will be entitled to receive any
brokerage fee, commission or other similar payment from the Company in
connection with the consummation of the transactions contemplated hereby and
the Company shall not make any such payment to any person, firm or corporation
other than Alpine Capital Partners, Inc. (Xxxx Xxxxx).
3. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER; ACCESS TO INFORMATION;
INDEPENDENT INFORMATION; INDEPENDENT INVESTIGATION
Each Subscriber represents and warrants to the Company as follows:
3.1 INDEPENDENT INVESTIGATION. Each Subscriber, in offering to subscribe
for the Securities hereunder, has, prior to the date hereof, been given access
to and the opportunity to examine all books and records of the Company, and all
material contracts and documents of the Company. In making its investment
decision to purchase the Securities, no Subscriber is relying on any oral or
written representations or assurances from the Company or any other person or
any representation of the Company or any other person other than as set forth
in this Agreement, the SEC Reports or in a document executed by a duly
authorized representative of the Company making reference to this Agreement.
Each Subscriber has such experience in business and financial matters that it
is capable of evaluating the risk of its investment and determining the
suitability of its investment. Each Subscriber is a sophisticated investor, as
defined in Rule 506(b)(2)(ii) of Regulation D under the Act, and an "accredited
investor" as defined in Rule 501 of Regulation D under the Act, a copy of which
definition is attached hereto as Exhibit C.
3.2 ECONOMIC RISK. Each Subscriber understands and acknowledges that an
investment in the Securities involves a high degree of risk, including a
possible total loss of investment. Each Subscriber represents that it is able
to bear the economic risk of an investment in the Securities.
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(SUCCESSORIES, INC.)
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3.3 NO GOVERNMENT RECOMMENDATION OR APPROVAL. Each Subscriber understands
that no United States federal or state agency or similar agency of any other
country has passed upon or made any recommendation or endorsement of the
Company, this transaction or the subscription of the Securities.
3.4 NO REGISTRATION. Each Subscriber understands that the Securities have
not been registered under the Act and are being offered and sold pursuant to an
exemption from registration contained in the Act based in part upon the
representations of such Subscriber contained herein. The Common Shares do,
however, carry certain registration rights as set forth in the Registration
Rights Agreement executed by the parties hereto in the form attached hereto as
Exhibit D (the "Registration Rights Agreement").
3.5 NO PUBLIC SOLICITATION. Without conducting any independent
investigation, no Subscriber knows of any public solicitation or advertisement
of an offer in connection with the proposed issuance and sale of the
Securities.
3.6 INVESTMENT INTENT. Each Subscriber is acquiring the Securities for
such Subscriber's own account, for investment and not with a view to
the distribution thereof. Each Subscriber understands that except as set forth
in the Registration Rights Agreement, the Company has no present intention of
registering any such sale of the Securities. Each Subscriber represents and
warrants to the Company that it has made no predetermined arrangements to sell
the Securities (other than the registration provisions contained in the
Registration Rights Agreement, which pertain only to a potential method of
disposing of the Common Shares).
3.7 INCORPORATION AND AUTHORITY. Each Subscriber is domiciled in Nevis,
West Indies. Each Subscriber has the full power and authority to execute,
deliver and perform this Agreement and to perform its obligations hereunder.
This Agreement has been duly approved by all necessary action of each
Subscriber, including any necessary shareholder approval, has been executed by
persons duly authorized by each Subscriber, and constitutes a valid and legally
binding obligation of each Subscriber, enforceable in accordance with its
terms.
3.8 NO RELIANCE ON TAX ADVICE. Each Subscriber has reviewed with his, her
or its own tax advisors the foreign, federal, state and local tax consequences
of this investment, where applicable, and the transactions contemplated by this
Agreement. Each Subscriber is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents and
understands that such Subscriber (and not the Company) shall be responsible for
the Subscriber's own income tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
3.9 INDEPENDENT LEGAL ADVICE. Each Subscriber acknowledges that it
has had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his, her or its own legal counsel. Each
Subscriber is relying solely on such counsel and not on any statements or
representations of the Company or any of its agents for legal advice with
respect to this investment or the transactions contemplated by this Agreement,
except for the
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(SUCCESSORIES, INC.)
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representations, warranties and covenants set forth herein and on the
opinion provided for in Section 5.7 hereof.
4. LEGENDS; SUBSEQUENT TRANSFER OF SECURITIES
4.1 LEGENDS. The certificate(s) representing the Preferred Shares shall
bear a legend substantially as set forth on the cover page of this Agreement
and any other legend, if such legend or legends are reasonably required to
comply with state, federal or foreign law.
5. COVENANTS OF THE COMPANY
5.1 ACCOUNTANTS. For as long as any Preferred Shares remain outstanding,
the Company shall, until at least the second anniversary of the date of the
Closing (the "Closing Date"), maintain as its independent auditors an
accounting firm that is authorized to practice before the SEC.
5.2 CORPORATE EXISTENCE AND TAXES. For as long as any Preferred Shares
remain outstanding, the Company shall maintain its corporate existence in good
standing, and shall pay all its taxes when due except for taxes which the
Company disputes in good faith and for which adequate reserves are established
on the Company's books and records.
5.3 RESERVED SHARES AND LISTINGS. For so long as any Preferred Shares
remain outstanding:
(a) the Company will reserve from its authorized but unissued shares
of Common Stock a sufficient number of Common Shares to permit the
conversion in full of the then outstanding Preferred Shares; and
(b) the Company will maintain the listing of its Common Stock on the
NASDAQ stock market; and
(c) until such time as all of the Preferred Shares have been
converted into Common Shares, the Company will not repurchase more than
ten percent (10%) of its Common Stock issued and outstanding on the date
hereof or otherwise enter into any other transaction (including stock
split, recapitalization or other transaction) which would cause a
decrease in the number of its shares of Common Stock issued and
outstanding (other than transactions that similarly decrease the number
of shares of Common Stock into which the Preferred Shares are
convertible); and
(d) the Company will (I) retain the Transfer Agent as the stock
transfer agent of the Company, and (II) if the Transfer Agent voluntarily
or involuntarily fails to so serve, select an independent, unaffiliated
replacement stock transfer agent willing to perform the duties of the
Transfer Agent under the Transfer Agent Agreement.
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5.4 ISSUANCE OF COMMON SHARES. Upon conversion of the Preferred Shares in
accordance with their terms, the Company will, and will use its best lawful
efforts to cause the Transfer Agent to, issue one or more certificates
representing Common Shares in such name or names and in such denominations
specified by a Subscriber in a Notice of Conversion delivered to the Transfer
Agent (with a copy to the Company) pursuant to the procedures specified in the
Certificate of Designation and Transfer Agent Agreement (each, a "Notice of
Conversion").
5.5 COPIES OF INFORMATION. The Company undertakes to furnish each
Subscriber with copies of such other information as may be reasonably requested
by such Subscriber prior to consummation of this Offering. The Company will
provide the Subscribers with copies of all future filings under the 1934 Act
for so long as any Preferred Shares are outstanding.
5.6 COMPLIANCE WITH LAWS. The Company shall comply with all applicable
Federal and state securities laws with respect to the sale of the Securities,
including but not limited to the filing of all reports required to be filed in
connection therewith with the SEC or any stock exchange or the NASDAQ Stock
Market or any other regulatory authority.
5.7 OPINION OF COUNSEL. Each Subscriber shall, prior to the Closing,
receive an opinion letter from counsel to the Company, to the effect that (i)
the Company is duly incorporated and validly existing; (ii) this Agreement, the
issuance of the Preferred Shares, and the issuance of the Common Shares upon
conversion of the Preferred Shares have been duly approved by all required
corporate action, and that both the Preferred Shares and the Common Shares,
upon due issuance, shall be validly issued and outstanding, fully paid and
nonassessable; and (iii) this Agreement, the Transfer Agent Agreement and the
Registration Rights Agreement are each valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of
debtors and rules of laws governing specific performance and other equitable
remedies; except that with respect to the foregoing opinions counsel may add
such qualifications as are consistent with firm practice. The Company further
covenants that it will arrange for issuance of any legal opinions required by
the Company's Transfer Agent in order to ensure that, upon the effectiveness of
a registration statement described in the Transfer Agent Agreement, the Common
Shares may be sold pursuant thereto by each Subscriber with the purchaser
thereof receiving certificates without restrictive legend, which opinion shall
remain effective so long as such registration statement remains in full force
and effect. The applicable Subscriber shall certify to the Transfer Agent that
it has sold the Common Shares pursuant to such registration statement.
5.8 USE OF PROCEEDS. The Company shall use the net proceeds from the sale
of the Preferred Shares for general corporate purposes and shall not use such
proceeds to repurchase any securities (including shares of Common Stock) of the
Company.
5.9 REGISTRATION RIGHTS. The Company will grant the Subscribers the
registration rights covering the Common Shares issuable on conversion of the
Preferred Shares on the terms of the Registration Rights Agreement. In the
event the Registration Statement contemplated by
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the Registration Rights Agreement is not declared effective by the
Commission within the earlier to occur of (i) five (5) business days of the
receipt of any "no review" letter from the Commission (the "No Review Letter")
and (ii) sixty five days (65) following the Closing contemplated herein, and
such effectiveness is not maintained for a consecutive two (2) year period
(subject to the right of the Company to suspend the effectiveness thereof for
not more than an aggregate of 30 days during such two (2) year period), the
Company shall pay to the Subscribers, as liquidated damages and not as a
penalty, an amount equal to one percent (1%) of the aggregate outstanding
principal amount (based on the liquidation preference thereof) of the Preferred
Shares. An additional liquidated damage payment of one-half percent (.05%) of
the aggregate outstanding principal amount of the Preferred Shares (based on
the liquidation preference thereof) shall be payable as liquidated damages in
the event that such Registration Statement is not declared effective by the
Commission (i) for each additional five (5) business days following the receipt
of a No Review Letter and (ii) within ninety (90) days of the Closing
contemplated herein, and such effectiveness is not maintained for a consecutive
two (2) year period (subject to the right of the Company to suspend the
effectiveness thereof for not more than an aggregate of 30 days during such two
(2) year period). Such liquidated damages shall be paid in cash by the Company
to the Subscribers by wire transfer of immediately available funds on the last
day of each calendar month following the event requiring its payment.
6. COVENANTS OF THE SUBSCRIBERS.
6.1 NO SALE IN VIOLATION OF THE ACT. Each Subscriber further covenants that
it will not make any sale, transfer or other disposition of the Securities in
violation of the Act or the rules and regulations of the Commission promulgated
thereunder. Each Subscriber acknowledges and agrees that the Securities may and
will only be resold (a) pursuant to a Registration Statement under the Act; or
(b) pursuant to an exemption from registration under the Act.
7. ISSUANCE OF FURTHER SECURITIES
7.1 RIGHT OF FIRST REFUSAL. The Company hereby grants to the Subscribers
the right of first refusal to purchase all (or any part) of New Securities (as
defined in this Section) that the Company may, from time to time, propose to
sell and issue. "New Securities" shall mean any capital stock of the Company,
whether now authorized or not, and rights, options or warrants to purchase said
capital stock, and debt or equity securities of any type whatsoever that are,
or may become, convertible into said capital stock; provided, however, that the
term "New Securities" does not include securities issued in Excluded
Financings. "Excluded Financings" mean (i) non-convertible debt or
non-convertible preferred stock financings of any type, (ii) public offerings
at the market price of the Common Stock, (iii) private financings at a price,
including conversion price, at least equal to the then-current market price of
the Common Stock (determined as set forth in the Certificate of Designation),
(iv) project financings, (v) bank financings, (vi) the issuance and sale of, or
the grant of options to purchase, shares of Common Stock pursuant to any of the
Company's employee or director stock option, compensation, bonus or incentive
plans, (vii) the issuance or sale of Common Stock and/or warrants for the
acquisition by the Company of operating assets to be owned and operated by the
Company or
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a subsidiary of the Company; (viii) the issuance of shares of Common
Stock pursuant to or in connection with (A) warrants for the purchase of
112,000 shares of Common Stock issued to certain investors holding subordinated
debt of the Company and options for the purchase of 125,000 shares of Common
Stock issued in connection with the extension of the terms of such subordinated
debt; (B) the Company's 1995 Employee Stock Purchase Plan; (C) the Company's
Stock Option Plan; (D) options granted to Xxxxxx X. Xxxxxxxx pursuant to the
terms of that certain Common Stock Option Agreement and that certain Incentive
Stock Option Agreement; (E) options granted to Xxxxx X. Xxxxxxxx pursuant to
the terms of that certain Common Stock Option Agreement and that certain
Incentive Stock Option Agreement; (F) any merger or acquisition entered into by
the Company; and (G) any existing options or warrants disclosed on Schedule 2.4
to this Agreement, and (ix) any other financings pursuant to which securities
of the Company are issued, provided that such securities are not convertible,
exchangeable or exercisable for shares of Common Stock which are either freely
tradeable, or freely tradeable upon effectiveness of a registration statement
which the Company is required to file with the SEC as part of such financing,
in each case within one (1) year of the date hereof. In the event that the
Company proposes to undertake an issuance of New Securities, it shall give the
Subscribers written notice of its intention, describing the type of New
Securities, the price and the general terms upon which the Company proposes to
issue the same. Each Subscriber shall have fifteen (15) days from the date of
receipt of any such notice to agree to purchase all or less than all of the New
Securities for the price and upon the general terms specified in the notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased. If any such Subscriber fails to exercise in full
the right of first refusal within such fifteen (15) day period, then the
Company shall have sixty (60) days thereafter to sell the New Securities
respecting which the Subscribers' rights were not exercised, at a price and
upon general terms no more favorable to the purchasers thereof than specified
in the Company's notice. In the event that the Company has not sold the New
Securities within such sixty (60) day period, the Company shall not thereafter
issue or sell any New Securities without first offering such securities to the
Subscribers in the manner provided above. The right of first refusal granted
under this Section shall terminate upon the earlier of: (i) 180 days following
the Closing Date; or (ii) the date upon which the Subscribers cease to own at
least one-third of the Preferred Shares.
8. LIQUIDATED DAMAGES FOR LATE CONVERSION
8.1 LIQUIDATED DAMAGES. As set forth in the Certificate of Designation, the
Company shall use its best efforts to issue and deliver, within three (3) New
York Stock Exchange trading days after a Subscriber has fulfilled all
conditions and submitted a Notice of Conversion duly executed and in proper
form required for conversion as contemplated by the Transfer Agent Agreement
(the "Deadline"), to such Subscriber or any party receiving the Preferred
Shares by transfer from such Subscriber (together with such Subscriber, a
"Holder"), at the address of the Holder set forth in the Notice of Conversion
and in the absence thereof at such address as set forth in the Transfer Agent
Agreement, a certificate or certificates for the number of Common Shares to
which the Holder shall be entitled. The Company understands that a delay in
the issuance of the Common Shares after the Deadline could result in economic
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 10
(SUCCESSORIES, INC.)
12
loss to the Holder. If for any reason the Company fails to issue the Common
Shares, as compensation to the Holder for such loss, and not as a penalty, the
Company agrees to pay liquidated damages to the Holder for late issuance of
Common Shares upon conversion in accordance with the following schedule (where
"No. Business Days Late" is defined as the number of business days after the
Deadline):
Aggregate
No. Business Days Late Liquidated Damages
---------------------- ------------------------------
(per each Preferred
Share outstanding)
1 $10
2 $20
3 $30
4 $40
5 $50
6 $60
7 $70
8 $80
9 $90
10 $100
>10 $500 + an additional $20
for each Business Day Late
beyond 20 days
The Company shall pay the Holder any liquidated damages incurred under this
Section by wire transfer of immediately available funds to an account
designated by Holder upon the earlier to occur of (i) issuance of the Common
Shares to the Holder of the required Common Shares that were not issued, or
(ii) each monthly anniversary of the receipt by the Company of such Holder's
Notice of Conversion. Nothing herein shall waive the Company's obligations to
deliver Common Shares upon a conversion of the Preferred Shares or limit any
Subscriber's right to pursue actual damages for the Company's failure to issue
and deliver Common Shares to such Subscriber in accordance with the terms of
the Certificate of Designation, provided, any actual damages recoverable by any
Subscriber shall be reduced to the extent of any previously paid liquidated
damages hereunder.
8.2 CONVERSION NOTICE. The Company agrees that, in addition to any other
remedies which may be available to the Subscribers, including, but not limited
to the remedies available under Section 8.1, in the event the Company fails for
any reason to effect delivery to a Subscriber of certificates representing
Common Shares on or prior to the Deadline, such Subscriber will be entitled to
revoke the Notice of Conversion by delivering a notice to such effect to the
Company whereupon the Company and the Subscriber shall each be restored to
their respective positions immediately prior to delivery of such Notice of
Conversion.
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 11
(SUCCESSORIES, INC.)
13
9. CONDITIONS TO CLOSING; DELIVERIES AT CLOSING
9.1 CONDITIONS TO SUBSCRIBERS' OBLIGATIONS TO CLOSE. The obligations
of the Subscribers to purchase the Preferred Shares offered hereunder are
conditioned on the fulfillment or waiver of the following:
(a) the execution and delivery of this Agreement, the Registration
Rights Agreement and the Transfer Agent Agreement by the Company;
(b) the execution and delivery of the Transfer Agent Agreement by
the Transfer Agent;
(c) all the representations and warranties of the Company in this
Agreement as of the date hereof shall be true and correct at the Closing
as if made on such date, and the Company shall have performed all actions
required hereunder;
(d) receipt of the opinion of legal counsel to the Company to the
effect set forth in Section 5.7;
(e) filing of the Certificate of Designation with the Secretary of
State of Illinois;
(f) a waiver or consent of American National Bank and Trust Company
of Chicago to the Company's consummation of, and performance under, this
Agreement and the documents executed in connection herewith; and
(g) a waiver or consent from the holders of the Company's
outstanding Series A Shares substantially in the form attached as Exhibit
E.
9.2 CONDITIONS TO THE COMPANY'S OBLIGATION TO CLOSE. The obligation of
the Company to sell the Preferred Shares offered hereunder are conditioned on
the fulfillment or waiver of the following:
(a) the execution and delivery of this Agreement, the Registration
Rights Agreement and the Transfer Agent Agreement by the Subscribers;
(b) the execution and delivery of the Transfer Agent Agreement by
the Transfer Agent;
(c) all the representations and warranties of each Subscriber made
in this Agreement as of the date hereof shall be true and correct at the
Closing as if made on such date, and each Subscriber shall have performed
all actions required hereunder;
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 12
(SUCCESSORIES, INC.)
14
(d) a waiver or consent of American National Bank and Trust Company
of Chicago to the Company's consummation of, and performance under, this
Agreement and the documents executed in connection herewith; and
(e) a waiver or consent from the holders of the Company's
outstanding Series A Shares substantially in the form attached as Exhibit
E.
10. EVENTS OF DEFAULT
If one or more of the following events shall occur (each such event,
following the expiration of any cure period associated therewith as hereafter
described being referred to as an "Event of Default"), then the Company shall
be in default of this Agreement:
(a) any of the representations or warranties made by the Company
herein shall be false and misleading in any material respect at the time
made;
(b) the Company shall fail to perform or observe any covenant, term,
provision, condition, agreement or obligation of the Company under this
Agreement, the Registration Rights Agreement, the Certificate of
Designation or the Transfer Agent Agreement (including, without
limitation, the failure to deliver shares of Common Stock upon conversion
of the Preferred Shares in accordance with the terms of the Certificate
of Designation), and such failure shall continue uncured for a period of
seven (7) days after notice from the Subscriber of such failure;
(c) the Company shall (i) admit in writing its inability to pay its
debts as they mature, (ii) make an assignment of a substantial part of
its properties or assets for the benefit or creditors or commence
proceeds for its dissolution; or (iii) apply for or consent to the
appointment of a trustee, liquidator or receiver for it or for a
substantial part of its property or business;
(d) a trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without its
consent and shall not be discharged within thirty (30) days after such
appointment;
(e) any governmental agency or any court of competent jurisdiction
at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or
assets of the Company which shall not be dismissed within thirty (30)
days thereafter;
(f) any money judgment, writ or warrant of attachment, or similar
process, except mechanics and materialmen's liens incurred in the
ordinary course of business, in excess of Five Hundred Thousand Dollars
($500,000) in the aggregate shall be entered or filed against the Company
or any of its properties or other assets and shall remain
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 13
(SUCCESSORIES, INC.)
15
unvacated, unbonded or unstayed for a period of forty-five (45) days or
in any event later than five (5) days prior to the date of any proposed
sale thereunder;
(g) bankruptcy, reorganization, insolvency or liquidation proceeds
or other proceeds for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed, stayed or bonded
within ninety (90) days after such institution or the Company shall in
any action or answer approve of, consent to, or acquiesce in any
proceedings or admit the material allegations of, or default in answering
a petition filed in any such proceedings;
(h) the Company shall have its Common Stock delisted from NASDAQ for
at at least ten (10) consecutive business days and is unable to obtain a
listing on another nationally recognized securities exchange such as the
NASDAQ SmallCap Market within such ten (10) day period; or
(i) the Company shall have suspended the effectiveness of the
Registration Statement required pursuant to Section 2(a) of the
Registration Rights Agreement for more than an aggregate of sixty (60)
days during the two (2) year period described in Section 2(a)(C) of the
Registration Rights Agreement.
Upon the occurrence of any Event of Default, the Subscriber shall be entitled
to exercise all remedies available at law and/or in equity.
11. LIMITATION ON CONVERSION AND VOTING PRIOR TO DEFAULT
(a) In addition to and not in lieu of the limitations on conversion
set forth in the Certificate of Designation, the conversion right of the
Subscriber set forth in the Certificate of Designation shall be limited,
solely to the extent required, from time to time, such that in no
instance shall the maximum number of shares of Common Stock which the
Subscriber may receive in respect of any conversion of the Preferred
Shares exceed, at any one time, an amount equal to the remainder of (i)
4.99% of the then issued and outstanding shares of Common Stock of the
Company following such conversion, minus (ii) the number of shares of
Common Stock of the Company then owned (beneficially or of record) by the
Subscriber (the foregoing being herein referred to as the "Limitation on
Conversion"). The applicable Subscriber shall certify in each Notice of
Conversion that it is in compliance with the Limitation on Conversion.
(b) Notwithstanding the voting rights granted under the Certificate
of Designation, the voting rights of the Subscriber shall be limited to
the extent necessary such that in no event will the Subscriber be
entitled to vote more than 4.99% of the then issued and outstanding
shares of Common Stock of the Company (the "Voting Limitation").
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 14
(SUCCESSORIES, INC.)
16
(c) The Limitation on Conversion and Voting Limitation shall not
apply, and shall be of no further force and effect, (i) upon the
occurrence of either (I) a Redemption Transaction (as defined in the
Certificate of Designation) or (II) an automatic conversion on December
17, 1998, or (ii) for at least ten (10) consecutive business days
following the occurrence of any Event of Default described in Section 10
above and for which the Holder has provided written notice thereof and
which is not cured within the greater of the applicable time period
specified in either (I) such written notice of the Subscriber or (II)
Section 10 hereof; provided, however, that in no event will this
provision permit conversion or constitute a grant of voting rights in
excess of the Conversion Limit set forth in Section 4A of the Certificate
of Designation.
12. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois, U.S.A., applicable to agreements made in and
wholly to be performed in that jurisdiction without regards to the choice of
law rules of such state, except for matters arising under the Act or the 1934
Act which matters shall be construed and interpreted in accordance with such
laws. Any action brought to enforce, or otherwise arising out of, this
Agreement shall be heard and determined in either a Federal or state court
sitting in the County of Dallas, State of Texas, U.S.A.
13. ENTIRE AGREEMENT; AMENDMENT
This Agreement, the Registration Rights Agreement, the Transfer Agent
Agreement and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought.
14. NOTICES, ETC.
Any notice, demand or request required or permitted to be given by either
the Company or any Subscriber pursuant to the terms of this Agreement shall be
in writing and shall be deemed given when delivered personally or by facsimile,
with a hard copy to follow by two day courier addressed to the parties at the
addresses of the parties set forth at the end of this Agreement or such other
address as a party may request by notifying the other in writing.
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 15
(SUCCESSORIES, INC.)
17
15. CONFIDENTIALITY.
The Subscribers will keep confidential all non-public information
regarding the Company that they receive from the Company unless disclosure of
such information is compelled by a court or other administrative body or
otherwise necessary, in the opinion of Subscribers' counsel, to comply with
applicable law. Neither party shall disclose any information regarding any of
the transactions contemplated hereby without the prior consent of the other
party, unless such disclosure is required in filings made with the Commission
16. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument. A
facsimile transmission of a signature hereto shall be valid as if an original
and binding on all parties.
17. SEVERABILITY
In the event that any provision of this Agreement becomes or is declared
by a court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision;
provided that no such severability shall be effective if it materially changes
the economic benefit of this Agreement to any party.
18. TITLES AND SUBTITLES
The titles and subtitles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
19. PARTIES IN INTEREST CITED
This Agreement may not be transferred, assigned, pledged or hypothecated
by any party hereto, other than by operation of law. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective heirs, executors, administrators, successors and permitted assigns.
All representations and warranties of each party hereto shall survive the
Closing contemplated herein for a period of two (2) years. All covenants and
agreements of each party hereto shall survive the Closing for ten (10) years
(or for such shorter time as specifically applicable to the relevant covenant
or agreement).
The undersigned Subscribers acknowledge that this subscription shall not
be effective unless accepted by the Company as indicated below.
[Signature page follows]
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 16
(SUCCESSORIES, INC.)
18
DATED this ______ day of December, 1996.
INFINITY INVESTORS LIMITED
00 Xxxxxxxxxx Xxxx
Xxxx, Xxxxxxx
-----------------------------
Signature
Place of Execution:
Great Britain
SEACREST CAPITAL LIMITED
00 Xxxxxxxxxx Xxxx
Xxxx, Xxxxxxx
-----------------------------
Signature
Place of Execution:
Great Britain
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE ____ DAY OF DECEMBER
1996.
SUCCESSORIES, INC.
000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
By:
----------------------------
Print Name:
--------------------
Title:
-------------------------
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 17
(SUCCESSORIES, INC.)
19
SCHEDULE 1.1
SUBSCRIBERS
------------------------------------------------------------------------------------------------
Name Aggregated Number of Aggregate
Liquidation Value Preferred Shares Purchase Price
of Preferred Shares Subscribed For
Subscribed For ($5,000 per Share
Liquidation
Preference)
------------------------------------------------------------------------------------------------
Infinity Investors Limited $4,850,000 970 US $4,001,650
Seacrest Capital Limited $1,210,000 242 US $ 998,350
------------------------------------------------------------------------------------------------
Totals $6,060,606 1,212 US $5,000,000
------------------------------------------------------------------------------------------------
20
SCHEDULE 2.4
Shares of Common Stock:
Authorized: 20,000,000
Issued/Outstanding: 5,432,388 (as of 12/2/96)
Held in Treasury: -0-
Shares of Preferred Stock:
Authorized: 1,000,000
Issued: 400
Outstanding: 133
Convertible Securities:
Options: 1,469,000
Warrants: 112,000
Any future issuances of shares of the Company's Common Stock in connection with
(i) the proposed acquisition of British Links by the Company and (ii) options
for the purchase of 125,000 shares of Common Stock to be issued to certain
investors holding subordinated debt of the Company in connection with an
extension of such subordinated debt.
21
EXHIBIT A
TO REGULATION D
SECURITIES SUBSCRIPTION AGREEMENT
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES B
CONVERTIBLE PREFERRED STOCK OF
SUCCESSORIES, INC.
PURSUANT TO SECTION 6.10 OF THE
ILLINOIS BUSINESS CORPORATION ACT OF 1983, AS AMENDED
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority conferred
upon the Board Directors of this Corporation in accordance with the provisions
of the Articles of Incorporation there is hereby established a series of the
authorized preferred stock of the Corporation, $100 par value per share, which
series shall be designated as "Series B Cumulative Convertible Preferred
Stock," and which shall consist of One Thousand Two Hundred Twelve (1,212)
shares (collectively the "Series B Shares" or singularly, a "Series B Share")
and shall have the following dividend rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and other rights,
qualifications, limitations and restrictions.
1. DIVIDEND RIGHTS
1.1 A. The holder of record of each Series B Share (a "Holder") as of
the Record Date (as defined below) shall be entitled to receive, when, as and if
declared by the Corporation's Board Directors or a duly authorized committee
thereof, on January 1, April 1, July 1 and October 1 of each year (a "Dividend
Payment Date") out of the funds of the Corporation legally available therefor,
cumulative dividends per Series B Share (the "Dividends") in cash equal to the
"Cash Rate" (as hereinafter defined) multiplied by the Liquidation Preference
(as defined in Paragraph 2 and as adjusted pursuant Paragraph 1.1.D below) for
each Quarterly Payment Period (as hereinafter defined) that such Series B Share
is outstanding.
To the extent permitted by applicable law and not prohibited pursuant to the
terms of applicable credit instruments, senior securities or the Articles of
Incorporation, the Board of Directors shall declare Dividends on each Dividend
Payment Date (or, if such day is not a business day, on the next business day
thereafter).
B. A "Quarterly Payment Period" shall mean the three-month period ending
on March 31, June 30, September 30 and December 31 of each year.
CERTIFICATE OF DESIGNATION-PAGE 1
(SUCCESSORIES, INC.)
22
C. The "Cash Rate" shall mean an annual dividend rate of 4.95% (i.e.,
a quarterly dividend rate of 1.2375%). The Cash Rate shall be referred to as
the "Dividend Rate."
D. Dividends shall accrue (whether or not paid) during each Quarterly
Payment Period from the Dividend Payment Date immediately preceding such
Quarterly Payment Period to the last day of such Quarterly Payment Period,
provided that, for the first Quarterly Payment Period, Dividends shall accrue
commencing as of the date of initial issuance of the Series B Shares and shall
be payable for the Quarterly Payment Period ending March 31, 1997. Dividends
shall be calculated on the basis of a 90-day Quarterly Payment Period and the
actual number of days elapsed. For any Quarterly Payment Period with respect
to which the Dividend is not fully paid in cash on the Dividend Payment Date at
the end of such Quarterly Payment Period, such accrued but unpaid Dividends
shall be added to the Liquidation Preference of the Series B Shares effective
at the beginning of the Quarterly Payment Period next succeeding the Quarterly
Payment Period as to which such Dividends were not paid, and shall thereafter
accrue additional Dividends at the Dividend Rate. During any Quarterly Payment
Period in which a Notice of Conversion (as defined in Paragraph 5.2 below) is
delivered by a Holder, or a Redemption Transaction (as defined in Paragraph
5.4A) occurs, the Corporation may, at its option, pay in cash all Dividends
which have accrued from the end of the immediately preceding Quarterly Payment
Period. Any Dividend payment made on Series B Shares shall be credited against
the earliest accrued but unpaid Dividend which has been added to the
Liquidation Preference of the Series B Shares pursuant to this Paragraph 1.1.D
and shall reduce the Liquidation Preference by the amount of the Dividend paid.
1.2 Dividends, if and when declared on each Series B Share, shall to the
extent permitted by applicable law be declared at least twenty (20) business
days prior to the next Dividend Payment Date for payment on the next Dividend
Payment Date to the Holders of record on the date determined in such
declaration, which date shall in no event be more than fifteen (15) business
days after the date of declaration (the "Record Date"). Dividends shall be
payable on each Dividend Payment Date (or if any such day is not a business
day, the next succeeding business day), except that Dividends for the period
during which a Redemption (as defined in Paragraph 5.1) shall occur shall be
payable on Series B Shares redeemed in accordance with Paragraph 5.2 (unless
otherwise paid on a Dividend Payment Date for a Record Date occurring prior to
a Redemption Date (as defined in Paragraph 5.2)). The Holder of any Series B
Shares which are the subject of a conversion pursuant to Paragraph 4 shall, on
the Conversion Date (as defined in Paragraph 4.G), cease to have any rights
with respect to any accrued Dividends on such Series B Shares which have not
been declared and paid on or before such Conversion Date except to the extent
that such accrued but unpaid Dividends have been added to the Liquidation
Preference of such Shares and except that in the event a conversion of Series B
Shares is effected after a Redemption Notice (as defined in Paragraph 5.2) is
delivered by the Corporation but prior to a Redemption Date, then, to the
extent lawful, the Corporation shall pay to such Holder an amount in cash equal
to all accrued and unpaid Dividends from the last Dividend Payment Date until
the date the converting Holder delivered its notice of conversion pursuant to
Paragraph 4.G.
CERTIFICATE OF DESIGNATION-PAGE 2
(SUCCESSORIES, INC.)
23
1.3 So long as any Series B Shares are outstanding, the Corporation shall
not declare, pay or set aside for payment any dividend (other than in shares of
Junior Stock (as hereinafter defined)) or other distribution in respect of its
Junior Stock, or call for redemption, redeem, purchase or otherwise acquire for
any consideration (other than shares of its Junior Stock) any shares of its
Junior Stock, any warrants, rights, calls or options exercisable for any shares
of Junior Stock unless all dividends accumulated and unpaid with respect to the
Series B Shares are simultaneously declared and paid. "Junior Stock" means
Common Stock (as hereinafter defined) or any other series of preferred stock of
the Corporation which ranks junior to or on a parity with (as determined
pursuant to Paragraph 6) the Series B Shares, other than the Series A Shares
(as defined in Paragraph 6 hereof). "Common Stock" means the common stock, par
value $.01 per share, of the Corporation and any share of successor or
replacement stock.
1.4 Each Holder shall be entitled to participate with the holders of Common
Stock equally and ratably (on the basis of the number of shares of Common Stock
such Holder would then own if it then converted its Series B Shares pursuant to
Paragraph 4) in any subscription rights or other similar rights to acquire
securities or property of the Corporation granted to any holder of Common
Stock.
2. RIGHTS ON LIQUIDATION AND RANKING
2.1 In the event of the liquidation, dissolution, winding-up or sale or
other disposition of all or substantially all of the assets of the Corporation,
whether voluntary or involuntary ("Liquidation"), the Holder of a Series B
Share shall be entitled to receive with respect to such Series B Share, after
the satisfaction of all distributions to holders of other series of preferred
stock, if any, which are required (at the direction of the holder thereof or
otherwise) to be redeemed prior to or in connection with the consummation of
such Liquidation or which are expressly senior in liquidation preference to the
Series B Shares including any series of preferred stock which is mandatorily
redeemable (collectively, the "Senior Payments") but before any distribution is
made to or set aside for the holders of Common Stock or any other series of
preferred stock of the Corporation, if any, which are not then required to be
redeemed or which are junior in liquidation preference to the Series B Shares,
cash or any other assets of the Corporation in an amount (or having a fair
market value) equal to Five Thousand Dollars ($5,000) per share (the
"Liquidation Preference") plus all accrued but unpaid Dividends which have been
added to the Liquidation Preference of such shares pursuant to Paragraph 1.1.D
up to the date of the final distribution in Liquidation. If, after the
satisfaction of all Senior Payments, the assets of the Corporation available
for distribution to Holders shall be insufficient to permit the payment in full
of the amount due the Holders pursuant to this Paragraph 2, then the entire
assets of the Corporation available for distribution to Holders after the
satisfaction of all Senior Payments shall be distributed pari passu among the
Holders and the holders of other series of preferred stock which are not junior
in liquidation preferences to the Series B Shares, if any, in accordance with
their respective liquidation preferences. The fair market value of any assets
of the Corporation and the proportion of cash and other assets distributed by
the Corporation to the Holders of the Series B Shares shall be reasonably
determined in good faith
CERTIFICATE OF DESIGNATION-PAGE 3
(SUCCESSORIES, INC.)
24
by the Board of Directors. A merger or consolidation of the Corporation with
another corporation (or other business entity) or a voluntary sale of all or
substantially all of the assets of the Corporation principally in exchange for
stock and/or securities of another corporation (all referred to as a "Merger")
shall not be deemed a Liquidation if such Merger does not occur as part of a
proceeding under Title 11 of the United States Code or any federal or state
law for the protection of creditors or relief of debtors.
2.2 With regard to rights to receive distributions upon Liquidation of the
Corporation and dividends, the Series B Shares shall rank senior to the Common
Stock and any other equity securities of the Corporation that by their terms
are not made senior to or on a parity with the Series B Shares as to such
rights.
3. VOTING RIGHTS
3.1 Except as otherwise provided in Paragraphs 3.2 and 3.3 below, each
Holder shall have the same voting rights as a holder of the number of shares of
Common Stock which such Holder would then own if it then converted its Series B
Shares pursuant to Paragraph 4.
3.2 So long as any of the Series B Shares are outstanding the Corporation
will not, without the affirmative vote or consent of the Holders of at least
eighty percent (80%) of the Series B Shares at the time outstanding, given in
person or by proxy, either in writing or by a resolution adopted at a meeting
called for such purpose, with the Holders of the Series B Shares voting or
consenting separately as a class:
A. amend, alter or repeal any of the provisions of the
Corporation's Articles of Incorporation or Bylaws or the resolution
providing for the issue of the Series B Shares or pass any stockholder
resolution, including such action effected by merger or similar
transaction in which the Corporation is the surviving corporation, if
such amendment or resolution would affect adversely the preferences,
special rights or powers of the Series B Shares except if such action is
otherwise permitted under the other provisions of this Paragraph 3.2;
B. increase or decrease (other than by redemption or conversion)
the total number of authorized Series B Shares;
C. issue any capital stock which ranks senior to or on a parity
with the Series B Shares with respect to rights to receive distributions
upon liquidation, dissolution, or winding up of the Corporation or with
respect to dividends; or
D. enter into a Merger in which the Corporation is not the
surviving corporation; provided, however, that the provisions of this
subparagraph D shall not be applicable to any such Merger if the
authorized capital stock of the surviving corporation immediately
after such Merger shall include only classes
CERTIFICATE OF DESIGNATION-PAGE 4
(SUCCESSORIES, INC.)
25
or series of stock for which no such consent or vote would have
been required pursuant to Paragraph 3.2 if such class or series had
been authorized by the Corporation immediately prior to such Merger
or which have the same rights, preferences and limitations and
authorized amount as a class or series of stock of the Corporation
authorized prior to such Merger and continuing as an authorized
class or series at the time thereof.
A Merger of the Corporation, or similar Merger in which the
holders of its capital stock receive all cash shall not be deemed to
adversely affect the preferences, special rights or powers of the Series B
Shares. The authorization or issuance of any other series of preferred stock
if such other series ranks junior to the Series B Shares with respect to rights
to receive distributions upon liquidation, dissolution or winding up of the
Corporation or with respect to dividends, shall not be deemed to adversely
affect the preferences, special rights or powers of the Series B Shares.
3.3 In the event of an issuance by means of a stock split, reverse
split or stock dividend or other similar event or reclassification of
shares of Common Stock outstanding, the voting rights of the Series B Shares
shall be fairly and equitably (in the judgment of the Board of Directors of the
Corporation) adjusted at the same time and in the same manner as the adjustment
is made in the rights of the Common Stock in order to maintain the same voting
rights as the Series B Shares had on the date of issuance.
3.4 Copies of all notices sent to the holders of Common Stock
shall be simultaneously sent to each Holder.
4. CONVERSION RIGHTS - COMMON STOCK
A. NUMBER OF SERIES B SHARES. Each Series B Share shall be
convertible, at the option of the Holder thereof, at any time and from
time to time into that number of shares of Common Stock, obtained by dividing
the Liquidation Preference (including any Dividends added to Liquidation
Preference pursuant to Paragraph 1.1.D) of such Series B Share by the
"Conversion Price" determined in accordance with Paragraph 4.B as follows: (i)
606 of the Series B Shares shall be convertible commencing February 16, 1997,
and (ii) 606 of the Series B Shares shall be convertible commencing March 18,
1997. Notwithstanding the foregoing, each Series B Share outstanding on
December 17, 1998 shall automatically be converted into Common Stock on such
date at the Conversion Price and December 17, 1998 shall be deemed the
Conversion Date with respect to such conversion without the requirement of the
delivery of a Notice of Conversion provided, such automatic conversion shall
not occur if, at such time, the Corporation is in default of any of its
obligations hereunder which has not been cured within seven (7) days after
receipt of written Notice from a Holder of the event creating such default.
Furthermore, the Company shall not be obligated to honor any Notice of
Conversion (or any automatic conversion on December 17, 1998) for any Series B
Shares delivered by the Holders, if after giving effect to the issuance of
Shares of Common Stock in connection therewith the Company would not be in
compliance with applicable National Association of Securities Dealers
CERTIFICATE OF DESIGNATION-PAGE 5
(SUCCESSORIES, INC.)
26
("NASD") corporate governance rules (the "Conversion Limit"). In such
case, the number of Series B Shares which cannot be converted solely as a
result of the Conversion Limit shall be redeemed by the Corporation and the
Holders shall be entitled to receive cash in exchange therefor in an amount
equal to the number of shares of Common Stock that would have been issued upon
such conversion multiplied by the Market Price (as defined in Paragraph 4.J.
below) on the date of such conversion, pursuant to the redemption provisions of
Paragraph 4.N. below.
B. CONVERSION PRICE. The Conversion Price shall be equal to the lesser of
(x) $9.00 (the "Fixed Price") and (y) the "Market Price" of the Common Stock
(as defined in Paragraph 4.J below). The Conversion Price is also subject to
adjustment from time to time pursuant to Paragraph 4.D. Notwithstanding the
foregoing, the Conversion Price shall be increased by an amount equal to the
formula I=(C-(1.25*F))/2, where:
I=Increase in Conversion Price,
C=Market Price of the Common Stock, and
F=Fixed Price;
provided, that such formula will only operate to increase the Conversation
Price and not as a decrease thereto.
C. CONVERSION AND REDEMPTION. In case any Series B Share is called for
redemption, the right to convert such Series B Share shall terminate with
respect to all Series B Shares for which a Notice of Conversion (as defined in
Paragraph 4.F below) shall not have previously been delivered to the Transfer
Agent (as hereafter defined) pursuant to the procedures described in Paragraph
5.2 below at the close of business on the date which is three (3) business days
preceding the Redemption Date (as defined in Paragraph 5.1 below); provided
that no default by the Corporation in the payment of the applicable Redemption
Price (as defined in Paragraph 5.1) shall have occurred and be continuing.
D. ADJUSTMENT OF CONVERSION PRICE AND RATIO FOR CONVERSION. Except as
otherwise provided herein (i) the Fixed Price and (ii) the Market Price (if any
of the events specified in clauses (a) or (b) below occurs following the
delivery of a Conversion Notice which specifies that the Conversion Price is
equal to the Market Price) shall each be subject to adjustment from time to
time only as follows:
(a) In case the Corporation shall (1) take a record of the
holders of Common Stock for the purpose of entitling them to
receive a dividend payable in shares of Common Stock, (2) subdivide
(by stock split, merger, consolidation or otherwise) the
outstanding shares of Common Stock into a greater number of shares,
(3) combine (by reverse stock split, merger, consolidation or
otherwise) the outstanding shares of Common Stock into a smaller
number of shares or (4) increase or decrease the number of shares
of outstanding Common Stock by reclassification of its Common
Stock, then the Conversion Price (then in effect)
CERTIFICATE OF DESIGNATION-PAGE 6
(SUCCESSORIES, INC.)
27
shall be adjusted so that each Holder shall thereafter be
entitled upon the conversion of each Series B Share held by him to
receive for such Series B Share the number of shares of Common
Stock which he would have owned and/or have been entitled to
receive upon the occurrence of an event or record date described
above had the Series B Share been converted immediately prior to
the happening of the event, the adjustment to the Conversion Price
to become effective immediately after (x) the record date (in the
case of a dividend) or (y) the day upon which such subdivision or
combination shall become effective and the Conversion Limit shall
be correspondingly adjusted.
(b) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Common Stock property, including
securities, but excluding: (x) any dividend or distribution paid in
Common Stock; or (y) any dividend or distribution paid in cash out
of the surplus of the Corporation (provided that such distribution
shall not reduce stockholders' equity below the sum of the
aggregate Liquidation Preference of the Series B Shares then
outstanding and the aggregate Liquidation Preference of all other
shares ranking senior or pari passu to the Series B Shares), then
the Conversion Price shall be adjusted by multiplying (a) the
Conversion Price in effect immediately prior to the close of
business on the date fixed for the determination of stockholders
entitled to receive the distribution by (b) a fraction, the
numerator of which is the excess of the Market Price (as defined in
Paragraph 4.J) for that date over the fair market value on that
date (as reasonably determined in good faith by the Board of
Directors, whose determination shall be conclusive) of the property
so distributed per share of Common Stock, and the denominator of
which is the Market Price for that date. The adjustment shall
become effective immediately prior to the opening of business on
the day following the date fixed for the determination of
stockholders entitled to receive the distribution.
(c) In case the Corporation shall sell or issue shares of
Common Stock or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock, excluding shares of Common Stock
issued or reserved for issuance by the Corporation in the following
situations:
(i) in any transaction described in clause (a) or (b)
above;
(ii) pursuant to any plan providing for the reinvestment
of dividends or interest payable on securities of the
Corporation, and the investment of additional optional
amounts with respect to such plan, in shares of Common Stock
in any such case at a price per share of not less than 95% of
the Market Price per share of Common Stock, or pursuant to
any employee benefit plan or program of the Corporation as to
which
CERTIFICATE OF DESIGNATION-PAGE 7
(SUCCESSORIES, INC.)
28
a binding commitment existed as of the date of initial
issuance of the Series B Shares;
(iii) shares of Common Stock issued upon conversion of
the Series B Shares, or Series A Shares, or upon conversion,
exercise or exchange of rights, options, warrants or
convertible or exchangeable securities outstanding or as to
which a binding commitment existed as of the date of initial
issuance of the Series B Shares, or Series A Shares; or
(iv) shares of Common Stock issued pursuant to or in
connection with (A) warrants for the purchase of 112,000
shares of the Corporation's Common Stock issued to certain
investors holding subordinated debt of the Corporation and
options for the purchase of 125,000 shares of the
Corporation's Common Stock issued in connection with the
extension of the terms of such subordinated debt; (B) the
Corporation's 1995 Employee Stock Purchase Plan (together
with any increases thereto or replacements thereof); (C) the
Corporation's Stock Option Plan (together with any increases
thereto or replacements thereof); (D) options granted to
Xxxxxx X. Xxxxxxxx pursuant to the terms of that certain
Common Stock Option Agreement and that certain Incentive
Stock Option Agreement; (E) options granted to Xxxxx X.
Xxxxxxxx pursuant to the terms of that certain Common Stock
Option Agreement and that certain Incentive Stock Option
Agreement; (F) any merger or acquisition entered into by the
Corporation; and (G) any options or warrants existing as of
the date hereof;
and the price per share (determined in the case of rights, options,
warrants or convertible or exchangeable securities as the quotient
of (x) the aggregate consideration received or receivable by the
Corporation upon the sale and issuance of such rights, options,
warrants or convertible or exchangeable securities plus the total
consideration payable to the Corporation upon such exercise or
conversion divided by (y) the total number of shares of Common
Stock covered by such rights, options, warrants or convertible or
exchangeable securities) is lower than the Market Price on the date
of such initial sale and issuance, then the Conversion Price in
effect immediately prior to such issuance shall upon such issuance
be reduced to the price determined by multiplying such Conversion
Price by a fraction, the numerator of which shall be an amount
equal to the sum of (A) the number of shares of Common Stock
outstanding on a fully-diluted basis immediately prior to such
issuance multiplied by the Market Price in effect immediately prior
to such issuance plus (B) the consideration, if any, received by
the Corporation upon such issuance, and the denominator of which
shall be the product of (A) the Market Price in effect immediately
prior to such issuance and (B) the total number of shares of Common
Stock outstanding on a fully diluted basis, immediately after such
issuance.
CERTIFICATE OF DESIGNATION-PAGE 8
(SUCCESSORIES, INC.)
29
(d) In case the Corporation shall distribute to the holders of
its Common Stock evidences of its indebtedness or assets (excluding
Dividends or distributions made out of current or retained earnings
or rights or warrants to subscribe other than as referred to in
subparagraph (c) above), then in each such case the number of
shares of Common Stock into which each Series B Share shall
thereafter be convertible shall be determined by multiplying the
number of shares of Common Stock into which such Series B Shares
was theretofore convertible by a fraction, of which the numerator
shall be the current Market Price per share of Common Stock on the
date of such distribution, and the denominator of which shall be
the current Market Price per share of Common Stock, less the excess
of the then fair market value (as reasonably determined by the
Board of Directors of the Corporation) of the assets, evidence of
indebtedness, subscription rights or warrants so distributed (the
"Distributed Property") over the aggregate consideration receivable
by the Corporation, if any, for the Distributed Property, as
applicable to one share of Common Stock. Such adjustment shall be
made whenever any such distribution is made (unless an adjustment
is made pursuant to subparagraph (a), (b) or (c) above, in which
case such subparagraphs shall apply), but shall also be effective
retroactively as to Series B Shares converted after the record date
for the determination of stockholders entitled to receive such
distribution and before the date such distribution is made.
(e) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1 % of such price; provided that any adjustments which by
reason of this clause (e) are not required to be made shall be
carried forward and taken into account in a subsequent adjustment.
All calculations shall be made to the nearest cent or the nearest
one-hundredth of a share, as the case may be.
(f) If the adjustment provided for in subparagraphs (b), (c)
or (d) above would cause the Series B Shares to be convertible in
the aggregate into a number of shares of Common Stock which exceeds
the Conversion Limit, then the Corporation shall not engage in any
such transaction without the affirmative vote or consent of the
Holders of at least eighty percent (80%) of the Series B Shares at
the time outstanding.
E. CONVERSION UPON REORGANIZATION. In case the Corporation shall effect a
reorganization, reclassification of its Common Stock (other than a subdivision
or combination described in clause (a) of Paragraph 4.D) or Merger, and
pursuant to any such reorganization, reclassification or Merger, any assets or
securities of the Corporation, any successor or transferee corporation or any
affiliate thereof or cash is received by or distributed to the holders of
Common Stock, then each Holder shall have the right thereafter to convert each
Series B Share held by such Holder into the kind and amount of shares or
assets, securities or cash receivable as a result of consummation of such
transaction by a holder of the number of shares of Common Stock into which such
Series B Share might have been converted immediately prior
CERTIFICATE OF DESIGNATION-PAGE 9
(SUCCESSORIES, INC.)
30
to such transaction and shall have no other conversion rights nor shall
there be any adjustment to the Conversion Price; in any such event effective
provision shall be made in the certificate of incorporation of the successor or
transferee corporation or otherwise, so that the provisions set forth herein
for the protection of the conversion rights of the Series B Shares shall
thereafter be applicable, as nearly as reasonably may be, to any such other
securities, cash and assets deliverable upon conversion of the Series B Shares
or other convertible stock or securities received by the Holders in place
thereof, and any such successor or transferee corporation shall expressly
assume the obligation to deliver, upon the exercise of the conversion
privilege, such other securities, cash or assets as the Holders of the Series B
Shares, or other convertible stock or securities received by the Holders in
place thereof, shall be entitled to receive pursuant to the provisions hereof,
and to make provision for the protection of the conversion right as above
provided. In case securities other than Common Stock, cash or assets shall be
issuable, payable or deliverable by the Corporation upon conversion as
aforesaid, then all references in this Paragraph 4.E shall be deemed to apply,
so far as appropriate and as nearly as may be, to such other securities, cash
or assets.
F. CONVERSION METHOD. Any Holder of Series B Shares may, at any time
prior to the close of business on the date which is two (2) business days prior
to the Redemption Date for such Series B Shares, exercise the conversion rights
as to such Series B Shares by delivering to the Corporation during regular
business hours, care of the then transfer agent (the "Transfer Agent") for the
Corporation, a notice requesting conversion on a specified date and the number
of Series B Shares that the Holder elects to convert (a "Notice of
Conversion"). The Notice of Conversion shall also state the names and
addresses of the persons to whom certificates for shares of Common Stock shall
be issued, the denominations of such certificates and reasonable delivery
instructions with respect thereto. Each conversion shall be deemed to have
been effected immediately on the close of business on the date such Notice of
Conversion (the "Conversion Date") is received by the Transfer Agent (including
receipt via facsimile). The person in whose name any certificate for shares of
Common Stock is issuable upon the conversion shall be deemed to have become the
holder of record of the Common Stock at such time. If the stock transfer books
of the Corporation are closed on the Conversion Date, the Conversion Date for
purposes of determining record ownership shall be the next succeeding day on
which the stock transfer books are open (and the conversion shall be deemed to
have been effected immediately prior to the close of business on that day), but
in all cases the conversion shall be at the Conversion Price in effect on the
Conversion Date specified in the notice of conversion. As promptly as
practicable after the Conversion Date but in any event within three (3) Trading
Days (as defined below) of the receipt of the Notice of Conversion, the
Corporation shall cause the Transfer Agent to issue and deliver to such Holder,
at the expense of the Corporation and in accordance with such Holder's delivery
instructions, a certificate or certificates for the number of full shares of
Common Stock to which such Holder is entitled and cash with respect to any
fractional interest in a share of Common Stock as provided in Paragraph 4.G
below (which shall be promptly deposited by the Corporation with the Transfer
Agent for delivery to the Holder).
CERTIFICATE OF DESIGNATION-PAGE 10
(SUCCESSORIES, INC.)
31
G. FRACTIONAL SHARES OF COMMON STOCK. No fractional shares of Common
Stock or scrip shall be issued upon conversion of Series B Shares. If more
than one Series B Share shall be surrendered for conversion at any one time by
the same Holder, the number of full shares of Common Stock issuable upon
conversion of such Series B Shares shall be computed on the basis of the
aggregate number of Series B Shares so surrendered. Instead of any fractional
shares of Common Stock which otherwise would be issuable upon conversion of any
Series B Shares, the Corporation shall pay a cash adjustment in respect of such
fractional interest based upon the Conversion Price in effect at the close of
business on the last business day prior to the Conversion Date.
H. TAXES. All shares of Common Stock issued upon conversion of Series B
Shares will be validly issued, fully paid and nonassessable. The Corporation
shall pay any and all documentary stamp or similar issue or transfer taxes that
may be payable in respect of any issue or delivery of shares of Common Stock on
conversion of Series B Shares pursuant hereto. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the Series B Shares so converted were registered, and
no such issue or delivery shall be made unless and until the person requesting
such transfer has paid to the Corporation the amount of any such tax or has
established to the satisfaction of the Corporation that such tax has been paid
or that no such tax is payable.
I. SURRENDERED SERIES B SHARES. All certificates representing Series B
Shares converted or redeemed shall be appropriately canceled on the books of
the Corporation and the Series B Shares so converted or redeemed represented by
such certificates shall be restored to the status of authorized but unissued
Series B Shares.
J. MARKET PRICE. The term "Market Price" on any day shall mean the
average of the closing bid prices per share of Common Stock on the National
Association of Securities Dealers Inc. Automated Quotation System as reported
by Xxxxxxxx, X.X. (the "NASDAQ System"), or on such exchange as the Common
Stock is then traded, in each case, for the five (5) consecutive Trading Days
immediately preceding the date of determination. A "Trading Day" is a business
day in which the principal market on which the Common Stock is traded is open
for trading for at least four hours. If at the time of any computation pursuant
to this paragraph the Common Stock is not then traded on any trading market,
the "Market Price" for the purposes hereof shall be the fair value as
reasonably determined in good faith by the Board of Directors of the
Corporation.
K. AVAILABLE COMMON STOCK. The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of Series B Shares, such
number of shares of Common Stock as shall from time to time be sufficient to
effect a conversion of all outstanding Series B Shares under Paragraph 4.A, as
such number may from time to time be adjusted pursuant to Paragraph 4.D, and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding Series B
Shares, the Corporation shall
CERTIFICATE OF DESIGNATION-PAGE 11
(SUCCESSORIES, INC.)
32
promptly take such corporate action as may, in the opinion of its
counsel and subject to any necessary approval of its stockholders, be necessary
to increase its authorized but unissued shares of Common Stock to such number
of shares as shall be sufficient for such purpose.
L. NOTICE TO HOLDERS. In the event (i) the Corporation shall declare a
dividend or other distribution on the Common Stock other than regular cash
dividends declared in the ordinary course or dividends or other distributions
payable in Common Stock, (ii) the Common Stock is subdivided, combined or
reclassified, (iii) of a Merger, (iv) of a Liquidation, or (v) the Corporation
offers for subscription pro rata to holders of Common Stock any additional
shares of stock of any class or series or other rights, then the Corporation
shall mail to each Holder at the Holder's address as it appears in the stock
records of the Corporation, promptly and in any event at least 15 days prior to
the date described in clause (a) below, a notice stating (a) the date for the
determination of holders of Common Stock entitled to receive the distribution,
subscription rights or the consideration in the Merger or Liquidation, or (b)
the date of determination as to which shares of Common Stock will be affected
by a subdivision, combination, reclassification, (c) a brief statement of the
facts requiring such notice, and (d) if applicable, that the Conversion Price
shall be adjusted in accordance with this Paragraph 4. Upon any adjustment in
the Conversion Price, the Corporation shall mail to each Holder at the Holder's
address as it appears in the stock records of the Corporation a notice setting
forth the adjusted Conversion Price and the method of calculation thereof,
provided that, if such address is outside of the United States, then such
notice shall be sent by facsimile transmission (if such Holder shall have
provided a facsimile number).
M. CONCLUSIVE DETERMINATION. Whenever the Fixed Price is adjusted as
herein provided, the Corporation shall promptly file with the Transfer Agent a
certificate of a firm of independent public accountants regularly employed by
the Corporation setting forth the adjusted Fixed Price, along with a brief
statement of the facts requiring the adjustment and the manner of computing the
adjustment, which certificate shall be conclusive evidence of the correctness
of the adjustment, absent manifest error.
N. CONVERSION LIMIT EXCEPTION MECHANISM. If, at any time, the aggregate
number of shares of Common Stock into which the outstanding Series B Shares may
be converted exceeds the Conversion Limit then in effect:
(i) the Corporation shall deliver a notice to that effect to
the Holders and the Transfer Agent; and
(ii) each Holder may elect to convert the Series B Shares for
up to its prorata portion of the unconverted portion of the
Conversion Limit and cause the Corporation to redeem the
unconverted portion of all (but not less than all) of the remaining
outstanding Series B Shares for consideration specified in
Paragraph 4.A. hereof.
CERTIFICATE OF DESIGNATION-PAGE 12
(SUCCESSORIES, INC.)
33
5. REDEMPTION RIGHTS
5.1 VOLUNTARY REDEMPTION. The Corporation may, at any time commencing
April 17, 1997 (but not prior thereto), at its option redeem (a "Redemption")
for cash at the Redemption Price, from funds legally available therefor, all or
any portion of the outstanding Series B Shares (for which a Notice of
Conversion has not been delivered two (2) business days prior to the Redemption
Date. The Redemption Price shall be the Liquidation Preference of each Series
B Share plus all accrued but unpaid Dividends thereon through the Redemption
Date.
5.2 NOTICE OF REDEMPTION. If the Corporation elects to redeem any or
all Series B Shares pursuant to a Redemption, the Corporation shall (a) give
two (2) business days' prior written notice of such Redemption to the Transfer
Agent and each Holder of Series B Shares to be redeemed at its address as it
appears on the stock records of the Corporation by deposit thereof in class
U.S. mail, postage prepaid, and, in the case of a Holder with an address
outside of the United State Redemption Notice shall be sent by facsimile
transmission (if such Holder shall have provided a facsimile number), and (b)
either set aside, apart from its other funds, or provide written evidence
reasonably satisfactory to each Holder of the Corporation's ability to fund the
Redemption Price, an amount equal to the Redemption Price of all Series B
Shares subject to Redemption at that time for the benefit of all Holders of
Series B Shares subject to Redemption, and the Series B Shares then subject to
Redemption and not otherwise converted prior to the Redemption Date in
accordance with Paragraph 4 shall, on the date which is twenty (20) business
days after the deposit of Redemption Notice in accordance with clause (a) of
this sentence (the "Redemption Date"), cease to outstanding and the rights of
the Holders and owners thereof shall be limited to payment of the Redemption
Price thereof. The Corporation shall deposit with the Transfer Agent for
delivery to each Holder of a Series B Share the Redemption Price thereof within
one (1) business day prior to the Redemption Date. Should any Holder not
receive payment of any amounts due on Redemption of its Series B Shares by
reason of the Corporation's failure to make payment at the times prescribed
above for any reason, the Corporation shall pay to the applicable Holder on
demand (x) interest on the sums not paid when due at an annual rate equal to
two percent in excess of the "Prime Rate" that is then in effect or announced
by Citibank, N.A. or its successor, compounding at the end of each thirty (30)
days, until the applicable Holder is paid in full and (y) all costs of
collection, including but not limited to attorneys' fees and costs, whether or
not suit or other formal proceedings are instituted. The Redemption Price
shall (in the discretion of the Board of Directors of the Corporation) be
adjusted to take into account any stock split or other similar change in the
Series B Shares.
5.3 SELECTION OF SHARES. The Corporation shall select the Series B
Shares to be redeemed in a Redemption in which not all Series B Shares are to
be redeemed so that the Series B Shares of each Holder selected for Redemption
shall bear the same proportion to the total Series B Shares owned by that
Holder the proportion of all Series B Shares selected for Redemption bears to
the total of all then outstanding Series B Shares, but adjusted as determined
by the Board of Directors to avoid the redemption of fractional Series B
Shares. Should any Series B Shares required to be redeemed under the terms
hereof not be redeemed solely by
CERTIFICATE OF DESIGNATION-PAGE 13
(SUCCESSORIES, INC.)
34
reason of limitations imposed by law, the applicable Series B Shares
shall be redeemed on the earliest possible date thereafter that the applicable
Series B Shares may be redeemed to the maximum extent permitted by law. Except
as set forth above, the Board of Directors shall prescribe the manner in which
any Redemption shall be effected. Any monies deposited with the Transfer Agent
by the Corporation for the holders of Series B Shares subject to Redemption
which shall not be claimed at the end of one (1) year after the first service
of the applicable Redemption Notice shall be released and repaid to the
Corporation but shall be paid to the Holder of the applicable Series B Shares
so long as submission of its shares occurs within five (5) years after the
first service of the applicable Redemption Notice.
5.4 MANDATORY REDEMPTION.
A. REDEMPTION ON HOLDER'S OPTION. In the event the Corporation enters
into (I) a transaction or series of transactions to sell all or substantially
all of its assets, or (II) any consolidation of the Corporation with, or merger
of the Corporation into, any other Person, or any merger of another Person into
the Corporation (each, a "Material Corporate Transaction") (other than a merger
(x) which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of common stock or (y) which is effected
solely to change the jurisdiction of incorporation of the Corporation and
results in a reclassification, conversion or exchange of outstanding shares of
Common Stock solely into shares of Common Stock), together with any Change of
Control as hereafter defined, the occurrence of a conversion limitation event
described in Paragraph 4.N and any redemption effected by the Corporation
pursuant to Paragraph 5.1, being a "Redemption Transaction"), the Corporation
shall provide at least two (2) days advance written notice of the proposed
consummation thereof (the latter of the date pursuant to which a Material
Corporate Transaction is effected or thirty (30) days after providing such
notice is referred to herein as the "Effective Date of Redemption"). The right
to convert each Series B Share shall terminate with respect to all Series B
Shares for which a Notice of Conversion shall not have previously been
delivered to the Transfer Agent pursuant to the procedures described in
Paragraph 4F above at the close of business on the date which is three business
days prior to the Effective Date of Redemption. On the Effective Date of
Redemption, the Corporation shall redeem all remaining Series B Shares for the
Redemption Price and the Corporation shall deposit the Redemption Price for all
outstanding Series B Shares with the Transfer Agent for the benefit of the
respective holders of the Series B Shares not previously redeemed.
Simultaneously, the Corporation shall deposit irrevocable instruction and
authority to the Transfer Agent to pay in cash the Redemption Price to the
Holders of the Series B Shares.
B. REDEMPTION ON CHANGE OF CONTROL. In the event of a Change of Control
(as hereinafter defined), the Series B Shares shall be redeemed in full at the
option of each Holder upon written notice provided to the Corporation by such
Holder at any time following such Change of Control for cash at the Redemption
Price. For purposes of this Section 5.4.B, Change of Control shall be deemed
to have occurred at such time as:
(i) any person (other than the Corporation, any subsidiary of
the Corporation or any employee benefit plan of the Corporation)
("Person") is or
CERTIFICATE OF DESIGNATION-PAGE 14
(SUCCESSORIES, INC.)
35
becomes the beneficial owner, directly or
indirectly, through a purchase, merger or other acquisition or
transaction or series of transactions, of shares of capital stock
of the Corporation entitling such Person to exercise 50% or more of
the total voting power of all shares of capital stock of the
Corporation entitled to vote generally in the election of
directors; or
(ii) a change in the Board of Directors of the Corporation in
which the individuals who constituted the Board of Directors of the
Corporation at the beginning of the two-year period immediately
preceding such change (together with any other director whose
election by the Board of Directors of the Corporation or whose
nomination for election by the shareholders of the Corporation was
approved by a vote of at least a majority of the directors then in
office either who were directors at the beginning of such period or
whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
directors then in office.
Upon receipt by the Corporation of any such notice from a Holder, such notice
shall be treated as a Redemption Notice for all of such Series B Shares held by
such Holder, and the procedures set forth in Section 5.2 shall be applicable
thereto.
6. RANKING OF STOCK OF THE CORPORATION
For purposes of this resolution, any stock of any class or classes of
the Corporation shall be deemed to rank:
A. Prior to the Series B Shares and Series A Shares, either as to
dividends or upon liquidation, if the holders of such class or classes shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in preference or priority to the Holders;
B. On a parity with the Series B Shares and Series A Shares, either as
to dividends or upon liquidation, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share or sinking and fund
provisions, if any, are different from those of the Series B Shares or Series A
Shares, if the holders of such stock shall be entitled to the receipt of
dividends or of amounts distributable upon dissolution, liquidation or winding
up of the Corporation, as the case may be, in proportion to their respective
dividend rates or liquidation prices without preference or priority, one over
the other, as between the holders of such stock and the Holders, and
C. Junior to the Series B Shares and Series A Shares, either as to
dividends or upon liquidation, if such class shall be Common Stock or if the
Holders of the Series A Shares or the Series B Shares shall be entitled to
receipt of dividends or of amounts distributable upon dissolution, liquidation,
winding up of the Corporation, or upon redemption as the case may be, in
preference or priority to the holders of shares of such class or classes. The
Series
CERTIFICATE OF DESIGNATION-PAGE 15
(SUCCESSORIES, INC.)
36
B Shares shall rank pari passu in all right of payment (including
Dividends, redemption and liquidation rights) with the four hundred (400)
shares of Series A Cumulative Convertible Preferred Stock of the Corporation
issued September 16, 1996 (the "Series A Shares").
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of the Corporation are each authorized to
do or cause to be done all such acts or things and to make, execute and deliver
or cause to be made, executed and delivered all such agreements, documents,
instruments and certificates in the name and on behalf of the Corporation or
otherwise as they deem necessary, desirable or appropriate to execute or carry
out the purpose and intent of the foregoing resolutions.
CERTIFICATE OF DESIGNATION - PAGE 16
(SUCCESSORIES, INC.)
37
EXHIBIT B
TRANSFER AGENT AGREEMENT
THIS TRANSFER AGENT AGREEMENT (this "Agreement"), dated December 17, 1996,
between SUCCESSORIES, INC., an Illinois corporation (the "Company"), SEACREST
CAPITAL LIMITED ("Seacrest"), a Nevis West Indies corporation, INFINITY
INVESTORS LIMITED, a Nevis West Indies corporation ("Infinity"), FAIRWAY
CAPITAL LIMITED, a Nevis West Indies corporation ("Fairway") (Infinity,
Seacrest and Fairway are collectively being referred to as the "Holders") and
ILLINOIS STOCK TRANSFER COMPANY (the "Transfer Agent").
R E C I T A L S:
WHEREAS, pursuant to that certain Regulation D Securities Subscription
Agreement dated the date hereof (the "Subscription Agreement") by and among the
Company and the Holders, the Company agreed to issue to the Holders an
aggregate of 1,212 shares of Series B Cumulative Convertible Preferred Stock
(the "Preferred Shares"), with the preferences, rights and designations set
forth in the Certificate of Designation of the Company (as such term is defined
in the Subscription Agreement); and
WHEREAS, the Company and the Holders have agreed to enter into this
Agreement with the Transfer Agent to provide for (i) the closing of the
issuance of the Preferred Shares and (ii) a "book entry" system of accounting
for the Preferred Shares; and
WHEREAS, the Transfer Agent is willing to (i) serve as an escrow agent to
facilitate the closing under the Subscription Agreement, (ii) hold the
Preferred Shares on behalf of the Holders, and (iii) establish a book entry
system of accounting for the Preferred Shares, on the terms hereafter
described.
NOW, THEREFORE, in consideration of the foregoing, the parties hereby
agree as follows:
1. CLOSINGS. The Transfer Agent hereby agrees to act as an escrow agent
to facilitate the Closings as follows:
(a) On the date hereof, the Holders shall wire transfer to an account
designated by the Transfer Agent $5,000,000 in the aggregate (the "Purchase
Price"), and the Company shall deliver to the Transfer Agent the Preferred
Shares in the names of the Holders and in the amounts as set forth on Schedule
1 hereto;
TRANSFER AGENT AGREEMENT - PAGE 1
(SUCCESSORIES, INC.)
38
(b) Immediately following such deliveries, together with a delivery from
the Company to the Transfer Agent of a fully executed copy of the Subscription
Agreement, the Transfer Agent shall wire transfer the Purchase Price, less the
Consulting Fee (as hereafter defined), to the Company pursuant to wire
transaction instructions as provided by the Company. The Company hereby
directs the Transfer Agent to disburse by check $125,000 of the Purchase Price
(the "Consulting Fee") to Alpine Capital Partners, Inc. (Xxxx Xxxxx) (the
"Consultant") in consideration of certain services provided by the Consultant
to the Company at 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000; and
(c) The Transfer Agent shall hold the Preferred Shares for the benefit of
the Holders, as hereafter described.
2. OWNERSHIP OF PREFERRED SHARES. Record and beneficial ownership of the
Preferred Shares shall remain in the name of the Holders (unless and until
transferred pursuant to the terms thereof, with written notice thereof to the
Transfer Agent). Any transfer or purported transfer of the Preferred Shares
(1) not made pursuant to the terms of the Preferred Shares or (2) properly
noticed to the Transfer Agent shall be null and void ab initio and shall not be
given effect thereto by the Transfer Agent.
3. PAYING AGENT. The Transfer Agent shall act as paying agent for the
Preferred Shares. Accordingly, all payments of dividends or redemption amounts
required of the Company related to the Preferred Shares as described in the
Certificate of Designation shall be made to the Transfer Agent for the account
and benefit of the holders of such Preferred Shares as registered on the books
of the Transfer Agent (each, a "Registered Holder"). Upon the receipt of any
such payment of dividends or redemption amounts, in cash, the Transfer Agent
shall promptly wire transfer such sum to the account of the Registered Holders
as follows:
INFINITY
Citibank, New York
ABA 021 000 089
Credit: Bear Xxxxxxx
Account No. 0925-3186
Further Credit: Infinity Investors Ltd.
Account No. 102-05092
TRANSFER AGENT AGREEMENT - PAGE 2
(SUCCESSORIES, INC.)
00
XXXXXXXX
Xxxxxxxx, Xxx Xxxx
XXX 021 000 089
Credit: Bear Xxxxxxx
Account No. 0925-3186
Further Credit: Seacrest Capital Ltd.
Account No. 483-91296
ALL OTHER REGISTERED HOLDERS
Such account as is reflected on the books of the Transfer Agent.
4. ACCOUNTING AGENT. The Transfer Agent shall act as the accounting agent
of the Company and the Registered Holders and shall establish and maintain a
book entry system of accounting for the Preferred Shares (the "Accounting
Ledger") crediting (reducing) the outstanding Liquidation Preference (as such
term is defined in the Certificate of Designation) by all (i) payments in cash
made by the Company to the Transfer Agent as paying agent as required pursuant
to Section 3 above, and (ii) by the appropriate amount upon delivery of
Converted Stock to the applicable Registered Holder following receipt of a
Notice of Conversion (as each such term is defined in Section 5 below). At
such time as the balance of the Liquidation Preference for the Preferred Shares
as reflected on the Accounting Ledger is zero following the procedures
described in this Agreement, the Transfer Agent shall return such Preferred
Shares to the Company marked "Cancelled".
5. ISSUANCE OF CONVERTED SHARES. The Company and the Holders hereby agree
that any "Notice of Conversion" deliverable by any Registered Holder under
Paragraph 4.F "CONVERSION METHOD" of the Certificate of Designation shall be
delivered to the Transfer Agent in lieu of delivery to the Company. Upon
receipt by the Transfer Agent of any such Notice of Conversion (including a
Notice of Conversion delivered by facsimile) (each a "Notice of Conversion")
from any Registered Holder the Company hereby irrevocably directs the Transfer
Agent to:
(a) immediately deliver a copy of the Notice of Conversion to the Company,
by facsimile, which shall set forth the number of shares of common stock of the
Company (the "Converted Stock") to be issued to such Registered Holder in
connection therewith; and
(b) issue the "appropriate number" (as described in Section 6 below) of
shares of Converted Stock directly to the applicable Registered Holder, within
two (2) business days of the date of receipt of the Notice of Conversion.
TRANSFER AGENT AGREEMENT - PAGE 3
(SUCCESSORIES, INC.)
40
Reference is hereby made to that certain Registration Rights Agreement appended
to the Subscription Agreement as Exhibit D. At such time as a Registration
Statement as contemplated therein has been declared effective by the Securities
and Exchange Commission covering the resale of the Converted Shares, the
Company shall cause its legal counsel to deliver to the Transfer Agent an
opinion certifying that the Converted Shares may be sold by the Registered
Holder pursuant to such Registration Statement with the purchaser thereof
receiving certificates without restrictive legend, which opinion shall remain
effective so long as such Registration Statement remains in full force and
effect. Upon any such sale, the Registered Holder shall certify to the
Transfer Agent that such shares have been sold pursuant to such Registration
Statement. In the event that, at any time, the Registration Statement ceases
to be effective, the Company or its legal counsel shall immediately deliver
written notice thereof to the Transfer Agent and its Registered Holders stating
that the opinion of the Company's legal counsel may no longer be relied upon by
the Transfer Agent (unless and until any new Registration Statement is so
declared effective with an accompanying opinion to that effect of the Company's
legal counsel).
6. DISPUTE AS TO NUMBER OF CONVERTED SHARES TO BE ISSUED. In the event
the Company disputes the number of shares of Converted Stock to be issued by
the Company to a Registered Holder pursuant to a Notice of Conversion claimed
by the Registered Holder, by virtue of the conversion price or other
information set forth in such Notice of Conversion, the Company nevertheless
directs the Transfer Agent to issue to the applicable Registered Holder a
number of shares of Converted Stock equal to the lesser of the number of shares
set forth in the Notice of Conversion or the number of shares the Company,
using good faith efforts, notifies the Transfer Agent should be delivered
(provided such notice is presented by the Company to the Transfer Agent, with a
copy to the Registered Holder delivering the Notice of Conversion, within two
(2) business days of the receipt of the Notice of Conversion by the Transfer
Agent). As to the remaining disputed number of shares, the Transfer Agent
shall submit the dispute within one (1) business day to the Transfer Agent's
customary outside legal counsel ("Counsel") for determination. The Company and
the Holders hereby authorize the Counsel to resolve any such dispute and notify
the Company, the applicable Registered Holder and the Transfer Agent of the
result as soon as possible. The Company irrevocably directs the Transfer Agent
to issue to the Registered Holder any additional shares of Converted Stock
which the Registered Holder is entitled, based upon the Counsel's
determination. The Transfer Agent is authorized to rely on the Counsel's
results upon receipt of the same. Any such issuance shall relieve the Transfer
Agent and the Counsel of any liability to the Company or the Registered Holder,
as applicable, but such calculation shall not be binding upon either the
Registered Holder or the Company, each of which preserves all rights to dispute
against the other the number of Converted Shares issuable with respect to any
Notice of Conversion.
TRANSFER AGENT AGREEMENT - PAGE 4
(SUCCESSORIES, INC.)
41
7. TERMINATION. This Agreement shall terminate promptly upon the earlier
to occur of (1) written demand by all of the Registered Holders of their
respective Preferred Shares or (2) no Liquidation Preference remains with
respect to any of the Preferred Shares.
8. FEES. The Company hereby agrees to pay the Transfer Agent for all
services rendered hereunder.
9. NOTICES. Any notice or demand to be given or that may be given under
this Agreement shall be in writing and shall be (a) delivered by hand, or (b)
delivered through or by expedited mail or package service, or (c) transmitted
by telecopy, in each case with personal delivery acknowledged, addressed to the
parties as follows:
As to the Company: 000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Fax: 000-000-0000
Attn: President
As to any Holder: 00 Xxxxxxxxxx Xxxx
Xxxx, Xxxxxxx
Telephone: 000-00-000-000-0000
Fax: 000-00-000-000-0000
Attn: Xxxxx Xxxxxxxx
With a copy to: HW Finance, L.L.C.
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Fax: 000-000-0000
Attn: Xxxxxxx Xxxxxxx
As to any other As set forth on the books of
Registered Holder: the Transfer Agent.
As to the Transfer
Agent 000 Xxxx Xxxxxxx Xxxx.
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
TRANSFER AGENT AGREEMENT - PAGE 5
(SUCCESSORIES, INC.)
42
10. NONCONTRAVENTION. The Company agrees that it will not at any time
take any action or undertake any activity that would in any way impede,
restrict or limit the right and ability of the Registered Holders to convert
the Preferred Shares into shares of Converted Stock pursuant to the terms and
provisions of this Agreement. Accordingly, the Company agrees that the
instructions and procedures set forth above in this Agreement constitute
irrevocable instructions, directions and authorizations to the Transfer Agent
and that the Transfer Agent is authorized to disregard any written or oral
communication received by it from the Company or otherwise that could in any
way be construed to constitute an authorization or direction for the Transfer
Agent to act contrary to, or to not faithfully comply with, the irrevocable
instruction, direction and authorization set forth herein. Each of the
Registered Holders is an intended third party beneficiary of these irrevocable
instructions.
11. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
the Transfer Agent, each officer, director, employee and agent of the Transfer
Agent, and each person, if any, who controls the Transfer Agent within the
meaning of the Securities Act of 1933, as amended (the "Act") or the Securities
Exchange Act of 1934, as amended (the "Exchange Act") against any losses,
claims, damages, or liabilities, joint or several, to which it, they or any of
them, or such controlling person, may become subject, under the Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
performance by the Transfer Agent of its duties pursuant to the Agreement; and
will reimburse the Transfer Agent, and each officer, director, employee and
agent of the Transfer Agent, and each such controlling person for any legal or
other expenses reasonably incurred by it or any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any case if such
loss, claim, damage or liability arises out of or is based upon any action not
taken in good faith, or any action or omission that constitutes gross
negligence or willful misconduct.
Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the Company under this Section,
notify in writing the Company of the commencement thereof, and failure so to
notify the Company will relieve the Company from any liability under this
Section as to the particular item for which indemnification is then being
sought but not from any other liability which it may have to any indemnified
party. In case any such action is brought against any indemnified party, and
it notifies the Company of the commencement thereof, the Company will be
entitled to assume the defense thereof, with counsel who shall be to the
reasonable satisfaction of such indemnified party. The Company shall not be
liable to any such indemnified party on account of any settlement of any claim
of action effected without the consent of the Company.
TRANSFER AGENT AGREEMENT - PAGE 6
(SUCCESSORIES, INC.)
43
12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, without giving effect to
conflicts of law rules of such jurisdiction.
13. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, constitutes the full
and entire understanding of the parties with respect to the subject matter
hereof. Neither this Agreement nor any term hereof may be amended, waived,
discharged, or terminated other than by a written instrument signed by the
party against whom enforcement of any such amendment, waiver, discharge or
termination is sought.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by facsimile signature.
TRANSFER AGENT AGREEMENT - PAGE 7
(SUCCESSORIES, INC.)
44
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the date first above written.
SUCCESSORIES, INC.
By:
-------------------------------
Title:
---------------------------
INFINITY INVESTORS LIMITED
By:
-------------------------------
Title:
---------------------------
SEACREST CAPITAL LIMITED
By:
-------------------------------
Title:
---------------------------
ILLINOIS STOCK TRANSFER COMPANY
By:
-------------------------------
Title:
---------------------------
TRANSFER AGENT AGREEMENT - PAGE 8
(SUCCESSORIES, INC.)
45
SCHEDULE 1
Number of Preferred
Shares ($5,000
Liquidation Value Liquidation Purchase Price of
Shares of Preferred Shares Preference) Preferred Shares
-------------------- ------------------- -------------------- -----------------
Infinity Investors
Limited $4,850,000 970 $4,001,650
Seacrest Capital
Limited $1,210,000 242 $998,350
Total $6,060,606 1,212 $5,000,000
TRANSFER AGENT AGREEMENT - PAGE 9
(SUCCESSORIES, INC.)
46
EXHIBIT C
DEFINITION OF "ACCREDITED INVESTOR"
Pursuant to Rule 501 (a) of Regulation D, the term "Accredited Investor" shall
mean any person who comes within any of the following categories, or who the
issuer reasonably believes comes within any of the following categories, at the
time of the sale of the Securities to that person:
1. Any bank as defined in Section 3(a)(2) of the Securities Act of 1933,
as amended (the "Act"), or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Act whether acting in
its individual or fiduciary capacity; any broker dealer registered
pursuant to Section 15 of the Securities Exchange Act of 1934; any
insurance company as defined in Section 2(13) of the Act; any investment
company registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of that Act; any Small
Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state
or its political subdivisions, for the benefit of its employees, if such
plan has total assets in excess of $5,000,000; any employee benefit plan
within the meaning of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined
in Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if
the employee benefit plan has total assets in excess of $5,000,000, or,
if a self-directed plan, with investment decisions made solely by persons
that are accredited investors;
2. Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
3. Any organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000;
4. Any director, executive officer, or general partner of the issuer of
the securities being offered or sold, or any director, executive officer,
or general partner of a general partner of that issuer;
5. Any natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of his purchase exceeds $1,000,000;
6. Any natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that person's
spouse in excess of $300,000
DEFINITION OF ACCREDITED INVESTOR - PAGE 1
47
in each of those years and has a reasonable expectation of reaching the
same income level in the current year;
7. Any trust with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities offered, whose purchase
is directed by a sophisticated person as described in Rule 506(b)(2)(ii);
and
8. Any entity in which all of the equity owners are accredited investors.
DEFINITION OF ACCREDITED INVESTOR - PAGE 2
48
EXHIBIT D
TO REGULATION D
SECURITIES SUBSCRIPTION AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
December 17, 1996, by and among SUCCESSORIES, INC, an Illinois corporation (the
"Company"), and INFINITY INVESTORS LIMITED, a Nevis West Indies corporation
("Infinity"), SEACREST CAPITAL LIMITED, a Nevis West Indies corporation
("Seacrest") and FAIRWAY CAPITAL LIMITED, a Nevis West Indies corporation
("Fairway") (Infinity, Seacrest and Fairway being singularly referred to as an
"Investor" and collectively as the "Investors").
R E C I T A L S:
WHEREAS, pursuant to a Subscription Agreement (the "Subscription
Agreement"), by and between the Company and the Investors, the Company have
agreed to sell and the Investors has agreed to purchase an aggregate of 1,212
shares of the Company's Series B Cumulative Convertible Preferred Stock (the
"Preferred Stock") convertible into shares of the Company's common stock, par
value $.01 per share (the "Common Stock"); and
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Investors' agreement to enter into the Subscription Agreement, the Company has
agreed to provide the Investors with certain registration rights with respect
to the shares of Common Stock into which the Preferred Stock may be converted
from time to time (the "Shares");
NOW THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Agreement and this
Registration Rights Agreement, the Company and the Investors agree as follows:
AGREEMENT:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Company's Common Stock, par value $.01 per
share.
REGISTRATION RIGHTS AGREEMENT-PAGE 1
(SUCCESSORIES, INC.)
49
"Initiating Holders" shall mean holders of more than 50% of the
outstanding shares of Preferred Stock.
"Other Registrable Shares" shall mean those shares of Common Stock
heretofore or hereafter issued pursuant to one or more agreements granting the
purchasers of such securities the right to have the Company register such
securities or include such securities in any other registration of the
Company's equity securities.
"Registrable Shares" shall mean (i) the Shares, and (ii) any Common Stock
of the Company issued or issuable in respect of the Shares or upon any stock
split, stock dividend, recapitalization or similar event; provided, however,
that Registrable Shares or other securities shall no longer be treated as
Registrable Shares if (A) they have been sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction, (B)
they have been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect thereto are removed upon
consummation of such sale, or (C) the Shares are available for sale under the
Securities Act (including Rule 144), in the opinion of counsel to the Company,
without compliance with the registration and prospectus delivery requirements
of the Securities Act so that all transfer restrictions and restrictive legends
with respect thereto may be removed upon the consummation of such sale.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Section 2 hereof, including, without limitation all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, reasonable fees and
disbursements (not to exceed $10,000) of one counsel for all the selling
holders of Registrable Shares for a limited "due diligence" examination of the
Company incident to such registration (but excluding the compensation of
regular employees of the Company, which shall be paid in any event by the
Company, and excluding all underwriting discounts and selling commissions
applicable to the sale of the Registrable Shares).
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Shares and all fees and
disbursements of one counsel for the selling holders of Registrable Shares
(other than the fees and disbursements of such counsel included in Registration
Expenses).
REGISTRATION RIGHTS AGREEMENT-PAGE 2
(SUCCESSORIES, INC.)
50
2. REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. The Investors hereby request that the
Company effect a registration with respect to all of the Registrable
Shares held by such Investors. The Company hereby agrees (A) that within
twenty (20) days of the date hereof, it shall cause to be filed a
Registration Statement on Form S-3 under the Securities Act (or such
other form as is then appropriate for use by the Company under the
Securities Act) and (B) to use its best efforts to cause such
registration statement to be declared effective by the Commission
(including, without limitation, undertaking the actions described in
Section 4), no later than the earlier of (x) five (5) days after the
Company receives a "no review" letter from said Commission, or (y) sixty
five (65) days following the date hereof; all as may be so requested by
the Initiating Holders so as to permit or facilitate the sale and
distribution of all or such portion of such Registrable Shares as are
specified in such request, together with all or such portion of the
Registrable Shares of any holder or holders of Registrable Shares joining
in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
(C) to cause such Registration Statement to remain effective for a period
of two (2) years (subject to the right of the Company to suspend the
effectiveness thereof for not more than an aggregate of thirty (30) days
at no cost to the Company and for an additional thirty (30) days provided
the Company pays liquidated damages to the Investors that hold
Registrable Shares which are included in the Registration Statement and
which have not been sold by such Investors (the "Suspended Shares"), as
compensation to the holders of the Suspended Shares, and not as a
penalty, an amount equal to one-half percent (.05%) of the product of the
number of Suspended Shares multiplied by the Market Price (as defined in
Paragraph 4.J of the Certificate of Designation for the Preferred Stock)
of such Suspended Shares/divided by thirty (30) for each additional day
the Company suspends the effectiveness thereof beyond the first thirty
(30) days during such two (2) year period). Such liquidated damages
shall be paid in cash by the Company to the holders of the Suspended
Shares by wire transfer of immediately available funds on the last day of
each calendar month following the event requiring its payment.
The registration statement filed pursuant to the request of the
Initiating Holders (the "Registration Statement") may, subject to the
provisions of Section 2(b) below, include Other Registrable Shares, other
securities of the Company which are held by officers or directors of the
Company or which are held by other holders of registration rights, and
may include securities of the Company being sold for the account of the
Company.
(b) UNDERWRITING. If the Initiating Holders intend to distribute
the Registrable Shares covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request
made pursuant to Section 2 and the Company shall include such information
in the written notice referred to in Section 2(a)(i) above. The right of
any holder of Registrable Shares to registration pursuant to Section 2
shall be
REGISTRATION RIGHTS AGREEMENT-PAGE 3
(SUCCESSORIES, INC.)
51
conditioned upon such holder's participation in such underwriting and
the inclusion of such holder's Registrable Shares in such underwriting
(unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such holder with respect to such participation and
inclusion) to the extent provided herein. A holder of Registrable Shares
may elect to include in such underwriting all or a part of the
Registrable Shares it holds.
(i) If the Company shall request inclusion in any registration
pursuant to Section 2 of securities being sold for its own account,
or if officers or directors of the Company holding other securities
of the Company or other holders of registration rights, shall
request inclusion in any registration pursuant to Section 2, the
Initiating Holders shall, on behalf of all holders of Registrable
Shares, offer to include Other Registrable Shares and the
securities of the Company, such officers and directors and such
other holders of registration rights in the underwriting and may
condition such offer on their acceptance of the further applicable
provisions of this Agreement. The Company shall (together with all
holders of Registrable Shares, officers and directors, other
holders of registration rights and holders of Other Registrable
Shares proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary
form with the underwriter or representative of the underwriters
selected for such underwriting by the Company, which underwriter(s)
shall be reasonably acceptable to a majority in interest of the
Initiating Holders.
(ii) Notwithstanding any other provision of this Section 2, if
the representative of the underwriters advises the Company in
writing that marketing factors require a limitation on the number
of shares to be underwritten, the Company shall so advise all
holders of Registrable Shares and other shareholders whose
securities would otherwise be underwritten pursuant to such
registration, and the number of Registrable Shares and other
securities that may be included in the registration and
underwriting shall be allocated in the following manner: the
securities to be offered by the Company and the securities of the
Company held by officers and directors of the Company (other than
Registrable Shares) shall be excluded from such registration and
underwriting to the extent required by such limitation, and, if a
limitation on the number of shares is still required, the Other
Registrable Shares shall be excluded pro rata with Registrable
Shares, unless another method of determining such exclusion is
specified in the agreements governing the Other Registrable Shares,
according to the relative number of Other Registrable Shares
requested to be included in such registration and underwriting,
from such registration and underwriting to the extent required by
such limitation, and, if a limitation on the number of shares is
still required, the number of Registrable Shares that may be
included in the registration and underwriting shall be allocated
among all holders of Registrable Shares in proportion, as nearly as
practicable, to the respective amounts of Registrable Shares which
they had requested to be included in such registration at the time
of filing the registration statement. No Registrable Shares or any
other securities
REGISTRATION RIGHTS AGREEMENT-PAGE 4
(SUCCESSORIES, INC.)
52
excluded from the underwriting by reason of the underwriter's
marketing limitation shall also be included in such registration.
(iii) If the Company or any officer, director or holder of
Registrable Shares or Other Registrable Shares who has requested
inclusion in such registration and underwriting as provided above
disapproves of the terms of the underwriting, such person may elect
to withdraw therefrom by written notice to the Company, the
underwriter and the Initiating Holders. The securities so
withdrawn shall also be withdrawn from registration.
3. EXPENSES OF REGISTRATION. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification or
compliance of the Registrable Shares pursuant to this Agreement. All Selling
Expenses shall be borne by the holders of the securities so registered pro rata
on the basis of the number of their shares so registered (except for the fees
and disbursements of counsel to the Investors).
4. REGISTRATION PROCEDURES. Pursuant to this Agreement, the Company
will keep each holder of Registrable Shares advised in writing as to
the initiation of a registration under this Agreement and as to the completion
thereof. At its expense, the Company will:
(a) Use reasonable efforts to keep such registration effective for a
period of two (2) years (subject to the right of the Company to suspend
the effectiveness thereof for not more than an aggregate of thirty (30)
days during such two (2) year period) or until the holder or holders of
Registrable Shares have completed the distribution described in the
registration statement relating thereto or until the securities
registered cease to be Registrable Shares, whichever first occurs;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents
incidental thereto, including any amendment of or supplement to the
prospectus, as a holder of Registrable Shares from time to time may
reasonably request;
(d) use reasonable efforts to (i) register and qualify the
Registrable Shares covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as the Investors who
hold a majority in interest of the Registrable Shares being offered
reasonably request, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements, (iii)
take such other actions as may be necessary to maintain such
registrations and qualifications in effect until such date set forth in
clause (a) above and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Shares for sale in such
jurisdictions;
REGISTRATION RIGHTS AGREEMENT-PAGE 5
(SUCCESSORIES, INC.)
53
provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to (I) qualify to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (II) subject itself to general,
taxation in any such jurisdiction, (III) file a general consent to
service of process in any such jurisdiction, (IV) provide any
undertakings that cause more than nominal expense or burden to the
Company or (V) make any change in its charter or by-laws, which in each
case the Board of Directors of the Company determines to be contrary to
the best interests of the Company and its stockholders;
(e) in the event Investors who hold a majority in interest of the
Registrable Shares being offered in the offering select underwriters for
the offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with
the managing underwriter of such offering;
(f) as promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and use its
best efforts promptly to prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and
deliver a number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request;
(g) as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Shares being sold (or, in the
event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of
effectiveness of the Registration Statement at the earliest possible
time;
(h) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of
the Registrable Shares being sold to review the Registration Statement
and all amendments and supplements thereto a reasonable period of time
prior to their filing with the Commission, and shall not file any
document in a form to which such counsel reasonably objects;
(i) make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal
quarter next following the effective date of the Registration Statement;
REGISTRATION RIGHTS AGREEMENT-PAGE 6
(SUCCESSORIES, INC.)
54
(j) at the request of the Investors who hold a majority in interest
of the Registrable Shares being sold, furnish on the date that
Registrable Shares are delivered to an underwriter for sale in connection
with the Registration Statement (i) a letter, dated such date, from the
Company's independent certified public accountants in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the
underwriters; and (ii) an opinion, dated such date, from counsel
representing the Company for purposes of such Registration Statement, in
form and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors;
(k) make available for inspection by any Investor, any underwriter
participating in any disposition pursuant to the Registration Statement,
and any attorney, accountant or other agent retained by any such Investor
or underwriter (collectively, the "Inspectors"), all pertinent financial
and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary
to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of
such due diligence; provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are
so notified, unless (i) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration
Statement, (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court or government body of competent
jurisdiction or (iii) the information in such Records has been made
generally available to the public other than by disclosure in violation
of this or any other agreement. The Company shall not be required to
disclose any confidential information in such Records to any Inspector
until and unless such Inspector shall have entered into confidentiality
agreements (in form and substance satisfactory to the Company) with the
Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure
of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential. The Company shall hold in confidence and
shall not make any disclosure of information concerning an Investor
provided to the Company pursuant to Section 4(e) hereof unless (i)
disclosure of such information is necessary to comply with federal or
state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body
of competent jurisdiction or (iv) such information has been made
generally available to the public other than by disclosure in violation
of this or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is
sought in or by a court or governmental body of
REGISTRATION RIGHTS AGREEMENT-PAGE 7
(SUCCESSORIES, INC.)
55
competent jurisdiction or through other means, give prompt
notice to such Investor, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, such
information;
(l) use its best efforts either to (i) cause all the Registrable
Shares covered by the Registration Statement to be listed on a national
securities exchange and on each additional national securities exchange
on which similar securities issued by the, Company are then listed, if
any, if the listing of such Registrable Shares is then permitted under
the rules of such exchange or (ii) secure designation of all the
Registrable Shares covered by the Registration Statement as a National
Association of Securities Dealers Automated Quotations System ("NASDAQ")
"national market system security" within the meaning of Rule 11Aa2-1 of
the Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") , and the quotation of the Registrable Shares on the
NASDAQ National Market or, if, despite the Company's best efforts to
satisfy the preceding clause (i) or (ii) , the Company is unsuccessful in
satisfying the preceding clause (i) or (ii) , to secure listing on a
national securities exchange or NASDAQ authorization and quotation for
such Registrable Shares and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with
respect to such Registrable Shares;
(m) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Shares not later than the effective date of
the Registration Statement;
(n) cooperate with the Investors who hold Registrable Shares being
offered and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Shares sold
pursuant to the Registration Statement and enable such certificates to be
in such denominations or amounts as the case may be, as the managing
underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request; and
(o) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Shares pursuant
to the Registration Statement.
5. INDEMNIFICATION.
(a) The Company will indemnify each holder of Registrable Shares, each of
its officers, directors and partners, and each person controlling such holder
of Registrable Shares, with respect to which registration has been effected
pursuant to this Agreement, and each underwriter, if any and each person who
controls any underwriter, and their respective counsel against all claims,
losses, damages and liabilities (or actions, proceedings or settlements in
REGISTRATION RIGHTS AGREEMENT-PAGE 8
(SUCCESSORIES, INC.)
56
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, or other
document incident to any such registration, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company in connection with any such registration
and will reimburse each such holder of Registrable Shares, each of its
officers, directors and partners, and each person controlling such holder of
Registrable Shares, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses as they are reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided, however, that the indemnity contained in
this Section 5(a) shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability or action if such settlement is effected without
the consent of the Company; and provided further that the Company shall not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such holder
of Registrable Shares or underwriter and stated to be specifically for use
therein. The foregoing indemnity agreement is further subject to the condition
that insofar as it relates to any untrue statement, alleged untrue statement,
omission or alleged omission made in a preliminary prospectus, such indemnity
agreement shall not inure to the benefit of the foregoing indemnified parties
if copies of a final prospectus correcting the misstatement, or alleged
misstatement, omission or alleged omission upon which such loss, liability,
claim or damage is based is timely delivered to such indemnified party and a
copy thereof was not furnished to the person asserting the loss, liability,
claim or damage.
(b) Each holder of Registrable Shares will, if Registrable Shares held by
it are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers and each
underwriter, if any, of the Company's securities covered by such a Registration
Statement, each person who controls the Company or such underwriter within the
meaning of the Securities Act and the rules and regulations thereunder, each
other such holder of Registrable Shares and each of its officers, directors and
partners, and each person controlling such holder of Registrable Shares, and
their respective counsel (collectively, the "Company, Underwriters and
Counsel") against all claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact relating to
such Holder contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein relating to such holder
or necessary to make the statements therein relating to such holder not
misleading or any violation by such holder of any rule or regulation
promulgated under the Securities Act applicable to such holder and relating to
action or inaction required of such holder in connection with any such
registration; and will reimburse the Company, such holders of Registrable
Shares, directors, officers, partners, persons, underwriters or control persons
for any legal or any other expense reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or
REGISTRATION RIGHTS AGREEMENT-PAGE 9
(SUCCESSORIES, INC.)
57
alleged omission) relating to such holder is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such holder
of Registrable Shares and stated to be specifically for use therein; provided,
however, that such indemnification obligations shall not apply if the Company
modifies or changes to a material extent written information furnished by such
Holder. Each holder of Registrable Shares will, if Registrable Shares held by
it are included in the securities as to which such registration is being
effected, indemnify the Company, Underwriters and Counsel against all claims,
losses, damages and liabilities (or actions, proceedings or settlements in
respect thereof), arising out of or based on any sale of Registrable Shares
made by such holder following receipt by such holder of written notice from the
Company, Underwriters or Counsel that the registration statement filed with
respect to such Registrable Shares contains an untrue statement of material
fact or omits to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(c) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 5 to the fullest extent permitted by law; provided, however, that
(a) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 5, (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Shares who was
not guilty of such fraudulent misrepresentation and (c) contribution by any
seller of Registrable Shares shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Shares.
(d) Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld or delayed), and the
Indemnified Party may participate in such defense at such Indemnified Party's
expense. No Indemnifying Party, in the defense of any such claim or
litigation, shall except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.
6. AGREEMENTS OF HOLDERS OF REGISTRABLE SHARES. Each holder of
Registrable Shares shall furnish to the Company such information regarding such
holder of Registrable
REGISTRATION RIGHTS AGREEMENT-PAGE 10
(SUCCESSORIES, INC.)
58
Shares and the distribution proposed by such holder of Registrable
Shares as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration referred to in this
Agreement.
7. REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the Commission that may at any time permit
the Investors to sell securities of the Company to the public without
registration and without imposing restrictions arising under the federal
securities laws on the purchases thereof ("Rule 144") the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the Commission in a timely manner, all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Shares, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and
documents so filed by the Company and (iii) such other information as may
be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
8. MISCELLANEOUS.
A. GOVERNING LAW. This agreement shall be governed by and construed
in accordance with the laws of the State of Illinois without giving effect to
conflict of laws of such jurisdiction.
B. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
C. ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
D. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class
mail, postage prepaid, or delivered by hand or by messenger or courier delivery
service, addressed (a) if to an Investor at 00 Xxxxxxxxxx Xxxx, Xxxx, Xxxxxxx,
Attention: Xxxxx X'Xxxxx, with a copy to HW Finance, L.L.C, 4000 Thanksgiving
Tower, 0000 Xxx Xxxxxx, Xxxxxx, Xxxxx 00000, Attention: Xxxxxxx X. Xxxxxxx, or
at such other address as such Investor shall have furnished to the Company in
writing, or (b) if to the Company at 000 Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx
00000, Attn:
REGISTRATION RIGHTS AGREEMENT-PAGE 11
(SUCCESSORIES, INC.)
59
President, or at such other address as the Company shall have furnished
to each Investor and each such other holder in writing.
E. DELAYS OR OMISSIONS. No delay or omission to exercise any right, power
or remedy accruing to any holder of any Registrable Shares, upon any breach or
default of the Company under this Agreement, shall impair any such right, power
or remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach
or default thereunder occurring, nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default thereafter occurring.
Any waiver, permit, consent or approval of any kind or character on the part
of any holder of any breach or default under this Agreement, or any waiver on
the part of any party of any provisions of conditions of this Agreement, must
be in writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement, or by law or
otherwise afforded to any holder, shall be cumulative and not alternative.
F. COUNTERPARTS. This agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
G. SEVERABILITY. In the case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
H. AMENDMENTS. The provisions of this Agreement may be amended at any
time and from time to time, and particular provisions of this Agreement may be
waived, with and only with an agreement or consent in writing signed by the
Company and by the Investors currently holding fifty percent (50%) of the
Registrable Shares as of the date of such amendment or waiver.
I. TERMINATION OF REGISTRATION RIGHTS. This Agreement shall terminate at
such time as there ceases to be at least 50 shares of Preferred Stock.
REGISTRATION RIGHTS AGREEMENT-PAGE 12
(SUCCESSORIES, INC.)
60
The foregoing Registration Rights Agreement is hereby executed as of the
date first above written.
COMPANY: INVESTORS:
SUCCESSORIES, INC. INFINITY INVESTORS LIMITED
By: By:
--------------------- ----------------------------
Name: Name:
------------------- ---------------------------
Title: Title:
------------------ --------------------------
SEACREST CAPITAL LIMITED
By:
----------------------------
Name:
---------------------------
Title:
--------------------------
REGISTRATION RIGHTS AGREEMENT-PAGE 13
(SUCCESSORIES, INC.)
61
EXHIBIT E
SEACREST CAPITAL LIMITED
FAIRWAY CAPITAL LIMITED
00 Xxxxxxxxxx Xxxx
Xxxx, Xxxxxxx
December 17, 1996
VIA TELEFAX - 630/953-0014
Successories, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Re: Waiver of Rights Under Series A Cumulative Preferred Stock
(the "Series A Shares")
Gentlemen:
Reference is hereby made to the Regulation S Securities Subscription
Agreement ("Agreement") dated September 18, 1996 among Seacrest Capital Limited
("Seacrest"), Fairway Capital Limited ("Fairway") and Successories, Inc. (the
"Company").
This will confirm the agreement of each of Seacrest and Fairway to waive
all rights each may have under Section 7.1 of the Agreement, and under
Paragraph 4D of the Certificate of Designation (as defined in the Agreement),
in connection with the proposed issuance as of the date hereof of 1,212 shares
of Series B Cumulative Preferred Stock (the "Series B Shares") of the Company
to Seacrest and Infinity Investors Limited. The undersigned are the holders of
at least 80% of the Series A Shares outstanding as of the date hereof and
hereby consent to the issuance of the Series B Shares.
SEACREST CAPITAL LIMITED FAIRWAY CAPITAL LIMITED
By: By:
------------------------ -----------------------
Title: Title:
------------------------ --------------------
