<PAGE> 1
FOR INFORMATION ONLY
This registration statement has been filed with the Securities and Exchange
Commission but has not yet become effective. Information contained herein is
subject to completion or amendment.
As filed with the Securities and Exchange Commission on November 12, 1996.
--------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
PRE-EFFECTIVE AMENDMENT NO.1
FORM 10/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
-----------------------
CA SHORT COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 56-0526145
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4205 East Dixon Boulevard, Shelby, North Carolina 28150
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (704) 482-9591
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class to Name of each exchange on which
be so registered each class is to be registered
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock ($.01 par value)
(Title of Class)
Total Number of Pages:______
Index to Exhibits at Page: ______
================================================================================
<PAGE> 2
CA SHORT COMPANY
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
ITEM 1. BUSINESS.
The information required by this item is set forth under the captions
"Summary," "Risk Factors," "Management's Discussion and Analysis of Results of
Operations," and "Business" in the Information Statement and is incorporated
herein by reference.
ITEM 2. FINANCIAL INFORMATION.
The information required by this item is set forth under the captions
"Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Information Statement and
is incorporated herein by reference.
ITEM 3. PROPERTIES.
The information required by this item is set forth under the caption
"Business -- Properties" in the Information Statement, and is incorporated
herein by reference.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is set forth under the captions
"Security Ownership of Certain Beneficial Owners and Management" in the
Information Statement, and is incorporated herein by reference.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The information required by this item is set forth under the captions
"Management -- Directors and Executive Officers of the Company" in the
Information Statement, and is incorporated herein by reference.
ITEM 6. EXECUTIVE COMPENSATION.
The information required by this item is set forth under the captions
"Management -- Compensation of Directors," and "Management -- Executive
Compensation" in the Information Statement, and is incorporated herein by
reference.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is set forth under the caption
"Certain Relationships and Related Transactions" in the Information Statement,
and is incorporated herein by reference.
ITEM 8. LEGAL PROCEEDINGS.
None
<PAGE> 3
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS' COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
The information required by this item is set forth under the captions
"Summary -- The Distribution -- Trading Market," "The Distribution -- Trading
Market for Short Common Stock," "Risk Factors -- Absence of Public Market,
Possible Illiquidity of Trading Market, Possible Volatility of Stock Price" and
"Price Range of Pages Common Stock" in the Information Statement, and is
incorporated herein by reference.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The registrant has not sold any of its securities within the past three
years.
ITEM 11. DESCRIPTION OF SECURITIES.
The information required by this item is set forth under the caption
"Description of Capital Stock" in the Information Statement, and is
incorporated herein by reference.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The information required by this item is set forth under the caption
"Indemnification of Officers and Directors" in the Information Statement, and
is incorporated herein by reference.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is set forth under the captions
"Selected Financial Data"; "Pro Forma Financial Data," "CA Short Company
Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Capitalization" in the Information
Statement, and is incorporated herein by reference.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information required by this item is set forth under the caption
"Independent Auditors" in the Information Statement and is incorporated
herein by reference.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
See Index to Financial Statements on Page F-1 of the Information
Statement, which is incorporated herein by reference.
(b) EXHIBITS.
See Exhibit Index.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
CA SHORT COMPANY
By: /s/ S. Robert Davis
-------------------------------
Name: S. Robert Davis
Title: Chairman of the Board
Date: December 17, 1996
<PAGE> 5
[Pages letterhead]
Date: December , 1996
To the Stockholders of Pages, Inc.:
We are pleased to inform you that the Board of Directors of Pages, Inc.
("Pages") has approved a pro rata tax-free (except for cash from the sale of
fractional shares as described below) distribution of the outstanding
shares of common stock of its wholly owned subsidiary, CA Short Company, to
holders of Pages common stock. Each stockholder of Pages will receive one and
one-half shares of CA Short Company common stock for every ten shares of Pages
common stock held at the close of business on December 31, 1996. No fractional
shares will be issued in the distribution; in lieu thereof, The Huntington
National Bank (the Distribution Agent) will aggregate all fractional interests
in shares of CA Short Company common stock, sell such shares in the public
trading market and distribute the net proceeds thereof to the holders of Pages
common stock entitled thereto.
The distribution will occur on December 31, 1996. Holders of Pages common stock
are not required to take any action to participate in the distribution. A
stockholder vote is not required in connection with the distribution and
accordingly, your proxy is not being sought. The enclosed Information Statement
explains the distribution of CA Short Company shares and related transactions
and contains important financial and other information about CA Short Company,
its organization, business, management and other matters. Please read the
Information Statement carefully and keep it for future reference.
The Board of Directors of Pages believes the distribution of common stock of CA
Short Company is in the best interests of Pages and its stockholders. Following
the distribution, management of each company plans to concentrate its attention
and resources on their respective core businesses without regard to the
corporate objectives, policies and investment standards of the other. For
example, CA Short Company will focus on its distinct business while Pages will
increase its focus on expanding its leisure-based children's literature
business.
Sincerely,
S. Robert Davis
Chairman
<PAGE> 6
[CA Short Company letterhead]
Date: December , 1996
To the Stockholders of Pages, Inc.:
The enclosed Information Statement contains important financial and other
information about CA Short Company, the corporation of which you will become a
stockholder if you owned shares of Pages, Inc. common stock at the close of
business on December 31, 1996. CA Short Company creates, markets, and
administers safety, service recognition, and holiday gift awards programs for
businesses. We want to welcome you as an investor and invite you to learn more
about our company.
We at CA Short Company are excited about the future of our company. We look
forward to a long relationship with each of you.
Sincerely,
Charles R. Davis
President
<PAGE> 7
INFORMATION STATEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
SUMMARY . . . . . . . . . . . . . . . . . . . S-1 Merchandise Selection and Brochures . . 16
The Company . . . . . . . . . . . . . . S-1 Sales and Marketing . . . . . . . . . . 16
The Distribution . . . . . . . . . . . . S-1 Growth Strategy . . . . . . . . . . . . 16
Seasonality . . . . . . . . . . . . . . 16
INTRODUCTION . . . . . . . . . . . . . . . . 1 Competition . . . . . . . . . . . . . . 17
Employees . . . . . . . . . . . . . . . 17
THE DISTRIBUTION . . . . . . . . . . . . . . 1 Properties . . . . . . . . . . . . . . . 17
Reasons for the Distribution . . . . . . 1 Financing . . . . . . . . . . . . . . . 17
Manner of Effecting the Distribution;
Fractional Shares . . . . . . . . . . 1 CAPITALIZATION . . . . . . . . . . . . . . . 17
Trading Market for Short Common Stock . 2
Relationship Between Pages and the MANAGEMENT . . . . . . . . . . . . . . . . . 18
Company after the Distribution . . . . 3 Directors and Executive Officers
Certain Federal Income Tax of the Company . . . . . . . . . . . . . 18
Consequences . . . . . . . . . . . . . 3 Compensation of Directors . . . . . . . . 18
Dividends on Short Common Stock . . . . 4 Executive Compensation . . . . . . . . . . . 19
Questions Relating to the Distribution . 5 CA Short Company 1996 Stock Option Plan . 19
Committees of the Board of Directors . . . 19
RISK FACTORS . . . . . . . . . . . . . . . . 5
SECURITY OWNERSHIP OF
UNAUDITED PRO FORMA CERTAIN BENEFICIAL OWNERS
FINANCIAL INFORMATION . . . . . . . . . 7 AND MANAGEMENT . . . . . . . . . . . . . . 19
SELECTED FINANCIAL DATA . . . . . . . . . . . 11 CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS . . . . . . . . . . . 20
MANAGEMENT'S DISCUSSION AND DESCRIPTION OF CAPITAL STOCK . . . . . . . . 20
ANALYSIS OF FINANCIAL CONDITION Authorized Shares . . . . . . . . . . . . 20
AND RESULTS OF OPERATIONS . . . . . . . 12 Common Stock . . . . . . . . . . . . . . . 20
General . . . . . . . . . . . . . . . . 12 Preferred Stock . . . . . . . . . . . . . 21
Liquidity and Capital Revenues . . . . . 12 No Preemptive Rights . . . . . . . . . . . 21
Results of Operations . . . . . . . . . 12 Trading of Short Common Stock . . . . . . 21
Six Months Ended June 30, 1996 Transfer Agent and Registrar . . . . . . . 21
Compared to the Six Months Ended
June 30, 1995 . . . . . . . . . . . . . 12 ANTITAKEOVER EFFECTS OF THE
Year Ended December 31, 1995 COMPANY'S CERTIFICATE . . . . . . . . . . 21
Compared to Year Ended PREFERRED STOCK AND
December 31, 1994 . . . . . . . . . . . 13 ADDITIONAL COMMON STOCK . . . . . . . . . 22
Year Ended December 31, 1994, CONTROL SHARE
Compared to Year Ended ACQUISITION STATUTE . . . . . . . . . . . 22
December 31, 1993 . . . . . . . . . . . 13
Seasonality . . . . . . . . . . . . . . 14 LIABILITY AND INDEMNIFICATION OF
Inflation . . . . . . . . . . . . . . . 14 OFFICERS AND DIRECTORS . . . . . . . . . . 23
BUSINESS . . . . . . . . . . . . . . . . . . 14 PRICE RANGE OF PAGES
General . . . . . . . . . . . . . . . . 14 COMMON STOCK . . . . . . . . . . . . . . . 23
Recognition Programs . . . . . . . . . . 15
INDEPENDENT AUDITORS . . . . . . . . . . . . 24
INDEX TO FINANCIAL STATEMENTS . . . . . . . . F-1
</TABLE>
<PAGE> 8
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form 10 (as the same may be amended or
supplemented from time to time, the "Registration Statement") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") with respect
to the Short Common Stock to be received by Pages stockholders in the
Distribution. This Information Statement does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto, to which reference is hereby made. Statements made in this
Information Statement as to the contents of any contract, agreement or other
document referred to herein are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to such exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
The Registration Statement and the exhibits thereto filed by the Company
with the SEC may be inspected and copied at the public reference facilities of
the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; as well
as at the Regional Offices of the SEC at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such information can be obtained by
mail from the Public Reference Branch of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Electronic registration statements
made through the Electronic Data Gathering, Analysis, and Retrieval system are
publicly available through the Commission's Web site (http://www.sec.gov).
Following the Distribution, the Company will be required to comply with the
reporting requirements of the Exchange Act and will file annual, quarterly and
other reports with the SEC. The Company will also be subject to the proxy
solicitation requirements of the Exchange Act and will furnish audited
financial statements to its stockholders in connection with its annual
stockholders' meeting.
Prior to the Distribution, Pages stockholders with inquiries relating to
the Distribution or the Company should contact Pages, by writing to Pages,
Inc., 801 94th Street North, St. Petersburg, Florida 33702, Attention: S.
Robert Davis, or by telephoning (813) 578-3300. After the Distribution, holders
of Short Common Stock with inquiries relating to the Distribution or their
investment in the Company should contact the Company, by writing to CA Short
Company, 4205 East Dixon Boulevard, Shelby, North Carolina 28150, Attention:
Charles R. Davis, or by telephoning (704) 482-9591.
<PAGE> 9
SUBJECT TO COMPLETION, DATED DECEMBER 17, 1996
INFORMATION STATEMENT FOR INFORMATION ONLY
PRELIMINARY COPY
CA SHORT COMPANY
(A wholly-owned subsidiary of Pages, Inc.)
This Information Statement is being furnished to stockholders of Pages,
Inc., a Delaware corporation ("Pages") in connection with the distribution (the
"Distribution") by Pages to its stockholders of substantially all of the shares
of Common Stock of its wholly owned subsidiary, CA Short Company ("CA Short
Company" or the "Company").
The Distribution will occur on December 31, 1996, to holders of record of
the outstanding shares of common stock of Pages, $.01 par value per share (the
"Pages Common Stock"), at the close of business on December 31, 1996, on the
basis of one and one-half shares of the common stock of CA Short Company, $.01
par value per share (the "Short Common Stock"), for every ten shares of the
common stock of Pages, $.01 par value per share ("Pages Common Stock") held. The
Distribution will result in substantially all of the outstanding shares of Short
Common Stock being distributed to holders of the outstanding shares of Pages
Common Stock on a pro rata basis.
No consideration will be required to be paid by Pages stockholders for the
shares of Short Common Stock to be received by them in the Distribution, nor
will they be required to surrender or exchange shares of Pages common stock to
receive Short Common Stock.
The Short Common Stock will be traded on the "pink sheets" and on the
National Association of Securities Dealers, Inc. OTC Bulletin Board Service.
------------------------
IN REVIEWING THIS INFORMATION STATEMENT, YOU SHOULD
CAREFULLY CONSIDER THE MATTERS DESCRIBED
UNDER THE CAPTION "RISK FACTORS."
NO STOCKHOLDER APPROVAL OF THE DISTRIBUTION IS REQUIRED OR
SOUGHT. WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
INFORMATION STATEMENT.
The date of this Information Statement is ____________, 1996
<PAGE> 10
SUMMARY
This Summary is qualified in its entirety by the more detailed information
appearing elsewhere in this Information Statement, which should be read in its
entirety. Unless the context indicates, or it is specifically indicated
otherwise, the information in this Information Statement gives effect to the
Distribution and assumes that the Distribution has occurred. Certain data
included herein applies to a distribution ratio for the Distribution of one and
one-half shares of Short Common Stock for every ten outstanding shares of Pages
Common Stock, which is the distribution ratio that has been established by the
Board of Directors of Pages. Capitalized terms used but not defined in this
Summary are defined elsewhere in this Information Statement.
---------------
THE COMPANY
The Company creates markets, and administers safety, sales incentive,
service recognition, and holiday gift awards programs for businesses. The
Company markets its awards programs throughout the United States.
Once viewed as a holiday gift business, the recognition awards industry has
been revitalized by the increasing emphasis on improving employee morale. The
Company has been quick to capitalize on this trend by developing a professional
sales approach to large corporate customers, and by offering collections of
quality merchandise in addition to more traditional items of emblematic jewelry
and gifts. The Company customizes its recognition awards to meet each client's
specific management challenge (generally either to recognize, educate or modify
behavior). In a typical program, a client's employee accrues performance
credits toward an award. Upon achieving the specified level of performance, the
employee is entitled to receive an award, which he or she may then select from
attractive brochures prepared by the Company. The client purchases the
merchandise from the Company, which then ships the merchandise either directly
to the client or to the designated recipient. The Company's growth strategy
focuses on increasing year-round sales, broadening geographic markets, and
developing expanded awards programs.
---------------
THE DISTRIBUTION
<TABLE>
<S> <C>
DISTRIBUTING COMPANY . . . . . . . . . . . . Pages publishes, markets, and distributes reasonably priced,
leisure-based children's literature.
DISTRIBUTED COMPANY . . . . . . . . . . . . . CA Short creates, markets, and administers safety, sales incentive,
service recognition, and holiday gift awards programs for businesses.
See "Business."
</TABLE>
S-1
<PAGE> 11
<TABLE>
<S> <C>
THE DISTRIBUTION . . . . . . . . . . . . . . Based on the number of shares of Pages Common Stock outstanding on
September 30, 1996 (and assuming outstanding Pages stock options
are not exercised), Pages estimates that it will distribute
approximately 915,923 shares of Short Common Stock. Pages will
distribute one and one-half shares of Short Common Stock for every
ten shares of Pages Common Stock outstanding as of the Record Date
described below. Immediately following the Distribution, Pages will
not own any shares of Short Common Stock and the holders of Pages
Common Stock on the Record Date will own approximately 915,923
shares of Short Common Stock, which will represent approximately
100% of the outstanding shares of Short Common Stock.
REASONS FOR THE DISTRIBUTION . . . . . . . . The Pages Board of Directors believes that the Distribution will
benefit both the Company's business and Pages' other business and,
therefore, is in the best interests of the stockholders of Pages
for a number of reasons. Among these are: (a) focusing the
management of each company on the core business of each company
without regard to the corporate objectives and policies of the
other company, (b) offering incentives more attractive and
appropriate for the motivation and retention of key employees of
each company, and (c) permitting a more objective evaluation of
each of the companies by the capital markets.
RECORD DATE . . . . . . . . . . . . . . . . . December 31, 1996 (close of business).
DISTRIBUTION DATE . . . . . . . . . . . . . . December 31, 1996.
DISTRIBUTION AGENT . . . . . . . . . . . . . The Huntington National Bank, 41 S. High Street, 11th Floor, Columbus,
Ohio 43216, telephone (800) 225-1242.
FRACTIONAL SHARES . . . . . . . . . . . . . . No fractional shares will be issued in the Distribution; in lieu
thereof, the Distribution Agent will aggregate all fractional
interests in shares of Short Common Stock, sell such shares in the
public trading market and distribute the net proceeds thereof to
the holders of Pages Common Stock entitled thereto. Pages
stockholders receiving cash from the sale of fractional shares
will be taxed upon the receipt of such cash. See "The
Distribution -- Manner of Effecting Distribution: Fractional
Shares."
MANNER OF DISTRIBUTION . . . . . . . . . . . After the Distribution Date, the Distribution Agent will commence
mailing certificates representing shares of Short Common Stock to
holders of record (as of the Record Date) of outstanding shares of
Pages Common Stock. See "The Distribution -- Manner of Effecting
Distribution: Fractional Shares."
</TABLE>
S-2
<PAGE> 12
<TABLE>
<S> <C>
CERTAIN TAX CONSEQUENCES . . . . . . . . . . In general, it is anticipated that Pages, CA Short Company, and the
Pages stockholders should not recognize any taxable gain or income
solely as a result of the Distribution. As a condition of the
Distribution, Pages will receive a tax opinion from Johnson,
Blakely, Pope, Bokor, Ruppel & Burns, P.A., Tampa, Florida, to the
effect that the Company may reasonably report the Distribution of
Short Common Stock to Pages stockholders as a tax-free distribution
for federal income tax purposes. The tax opinion will be subject to
certain qualifications and assumptions, the accuracy of which are
critical to the Distribution qualifying as a tax-free distribution.
See "The Distribution -- Certain Federal Income Tax Consequences of
the Distribution."
TRADING MARKET . . . . . . . . . . . . . . . Although the Company intends to apply for a listing if it becomes
eligible, the Company does not expect to be eligible for listing of
its Common Stock on the Nasdaq Small Cap Market upon completion of
the Distribution. Trading, if any, in the Company's Common Stock
will be conducted in the over-the-counter market on the Nasdaq
Electronic Bulletin Board Service or in what are commonly referred
to as the "pink sheets." See "Risk Factors -- Absence of Public
Market; Possible Illiquidity of Trading Market and Possible
Volatility of Stock Price."
RISK FACTORS . . . . . . . . . . . . . . . . Stockholders should carefully consider each of the matters
discussed under the section entitled "Risk Factors" in this
Information Statement.
DIVIDENDS . . . . . . . . . . . . . . . . . . The CA Short Board of Directors anticipates that the Company will
retain any earnings and will not pay dividends to its stockholders
in the foreseeable future. See "The Distribution -- Dividends on
Short Common Stock."
PRINCIPAL OFFICE OF THE COMPANY . . . . . . . 4205 East Dixon Boulevard, Shelby, North Carolina 28150, telephone
(704) 482-9591.
TRANSFER AGENT AND REGISTRAR FOR
SHORT COMMON STOCK . . . . . . . . . . . . The Huntington National Bank, 41 S. High Street, Columbus, Ohio 43216,
will act as CA Short's Transfer Agent and Registrar for the Short
Common Stock.
</TABLE>
S-3
<PAGE> 13
<TABLE>
<S> <C>
RELATIONSHIP WITH PAGES AFTER
THE DISTRIBUTION . . . . . . . . . . . . . Except for certain matters provided for in the Distribution
Agreement, including the execution and delivery by the Company of a
subordinated promissory note payable to Pages in the principal
amount of $5 million, it is expected that Pages and the Company
will cease to have any material contractual or other relationships
with each other. S. Robert Davis, Chairman of the Board and
President of Pages will continue to be Chairman of the Board of the
Company. Charles R. Davis, a director and the President of the
Company, will continue to be a director of Pages and will be an
Executive Vice President and the Secretary of Pages. See "The
Distribution -- Relationship Between Pages and the Company After
the Distribution."
</TABLE>
---------------
S-4
<PAGE> 14
INFORMATION STATEMENT
FOR THE STOCKHOLDERS OF
CA SHORT COMPANY
---------------
INTRODUCTION
CA Short Company (the "Company") is a Delaware corporation and a subsidiary
of Pages, Inc., a Delaware corporation ("Pages"). Pages is distributing all of
the outstanding shares of common stock, par value $.01 per share (the "Short
Common Stock") of the Company owned by Pages to the holders of the outstanding
shares of common stock, par value $.01 per share (the "Pages Common Stock"), of
Pages (the "Distribution"). Pages currently owns all of the shares of the Short
Common Stock. Immediately after the Distribution, Pages will own no shares of
Short Common Stock and the holders of Pages Common Stock on the Record Date
will own substantially all of the outstanding shares of Short Common Stock.
The business of the Company is the creation, marketing and administration
of safety, sales, incentive, service recognition, and holiday gift awards
programs for businesses. The Company markets its awards programs throughout the
United States, however, its customer base is concentrated in the Southeastern
United States. The executive offices of the Company are located at 4205 East
Dixon Boulevard, Shelby, North Carolina 28150, and its telephone number is
(704) 482-9591.
THE DISTRIBUTION
REASONS FOR THE DISTRIBUTION
The Pages Board of Directors believes that the value and potential of the
publishing business of Pages and the awards program business of the Company may
be better realized as separate public companies and that the Distribution will
benefit both the Company's business and Pages' business and, therefore, is in
the best interests of the stockholders of Pages. The consummation of the
Distribution is contingent upon several matters, including the receipt by the
Pages Board of Directors of the advice of and a fairness opinion from an
investment banking firm. The Distribution is designed to separate the
businesses of Pages and the Company, which have distinctly different products
and services, markets, opportunities, and investment, financial and operating
characteristics so that each can adopt strategies and pursue objectives
appropriate to its specific business. The Distribution will permit the
management of each company to concentrate its attention and resources on the
challenges faced by their respective core businesses without regard to
corporate objectives, policies, and investment standards of the other. In
addition, the Pages Board of Directors believes that, although there can be no
assurance that either Pages or the Company will have access to capital in the
future, the access of both companies to private and the public capital markets
may be enhanced by the Distribution. After the Distribution, each business
could be more objectively evaluated by the capital markets, on the basis of its
individual merits. Separating the companies should allow for increased
executive focus for both Pages and the Company and more effective incentive
programs for key employees of each company. The Distribution should also permit
investors, customers, regulatory agencies and other constituencies to evaluate
the respective businesses of Pages and the Company more effectively.
MANNER OF EFFECTING THE DISTRIBUTION; FRACTIONAL SHARES
The Distribution will be made on the basis of one and one-half shares of
Short Common Stock for every ten shares of Pages Common Stock outstanding on
the Record Date. The Huntington National Bank, as distribution agent (the
"Distribution Agent"), will commence mailing the certificates representing
shares of the Short Common
<PAGE> 15
Stock after the Distribution Date to holders of record of Pages Common Stock on
the Record Date. Brokers and other nominees will have one week following the
Record Date in which to notify the Distribution Agent of their requirements for
stock certificates. It is anticipated that, after the Record Date and prior to
receipt of such stock certificates, holders of shares of the Short Common Stock
will be able to sell their shares on a "when-issued" basis, for settlement
after receipt of such certificates; there can be no assurance, however, that a
"when-issued" market in shares of the Short Common Stock will develop or that
shareholders will be able to sell their shares of Short Common Stock prior to
the receipt of their certificates representing such shares. All shares of Short
Common Stock distributed in the Distribution will be fully paid and
nonassessable and the holders thereof will not have preemptive rights. See
"Description of Capital Stock."
No certificates or scrip representing fractional shares of Short Common
Stock will be issued to Pages stockholders as part of the Distribution. In lieu
of receiving fractional shares, each holder of Pages Common Stock who would
otherwise be entitled to receive a fractional share of Short Common Stock will
receive cash for such fractional interest. On or after the Distribution Date,
but not later than forty-five business days after the Distribution Date (the
"Final Date"), the Distribution Agent will cause all fractional shares of the
Short Common Stock to which Pages stockholders would otherwise be entitled to
be aggregated and the resulting shares sold for the account of such
stockholders. On or before the Final Date, the Distribution Agent will compute
the average price per share of Short Common Stock resulting from all such sales
and will remit to each stockholder of Pages entitled to a fractional share of
Short Common Stock an amount equal to such average price multiplied by his or
her fractional interest (after making appropriate deductions of any amount
required for tax withholding purposes and after deducting an amount equal to
all brokerage charges, commissions, and transfer taxes attributed to such
sale).
An aggregate of approximately 915,293 shares of Short Common Stock is
expected to be distributed in the Distribution to approximately 443 holders of
record, based on the number of shares, and holders of record of shares, of
Pages Common Stock outstanding on September 30, 1996 (assuming that outstanding
Pages employee stock options are not exercised) prior to the Record Date.
Holders of Pages Common Stock on the Record Date will not be required to
pay cash or any other consideration for the shares of the Short Common Stock
received in the Distribution or to surrender or exchange certificates
representing shares of Pages Common Stock in order to receive shares of the
Short Common Stock. The Distribution does not affect the number of, or the
rights attaching to, the outstanding shares of Pages Common Stock.
TRADING MARKET FOR SHORT COMMON STOCK
A "when issued" trading market in the Short Common Stock may develop prior
to the Distribution. A "when issued" trading market occurs when trading in
shares begins prior to the time stock certificates are actually available or
issued.
There has been no public trading market for the Short Common Stock.
Although the Company intends to apply for a listing if it becomes eligible, the
Company does not expect to be eligible for listing of its Common Stock on the
Nasdaq Small Cap Market upon the completion of the Distribution. However, at
least one member of the National Association of Securities Dealers, Inc.
("NASD") has agreed to register as a market maker and to enter quotations of
the Short Common Stock on the NASD OTC Bulletin Board Service and trading may
be conducted in what are commonly referred to as the "pink sheets." There can
be no assurance that an active trading market for the Short Common Stock will
develop after the Distribution. Market making activity may be discontinued at
any time. The prices at which the Short Common Stock will trade cannot be
predicted and may fluctuate significantly. Such prices will be determined in
the marketplace and may be influenced by many factors, including the
performance of the Company, investor expectations for the Company, the trading
volume in Short Common Stock, and general economic and market conditions. See
"Risk Factors -- Absence of Public Market; Possible Illiquidity of Trading
Market and Possible Volatility of Stock Price." Based on the number of record
holders of Pages Common Stock as of September 30, 1996, the Company is expected
to have approximately 443 stockholders of record at the Distribution Date.
There are no outstanding options to purchase Short Common Stock.
2
<PAGE> 16
Shares of the Short Common Stock received by the holders of Pages Common
Stock in the Distribution will be freely transferable, except for shares
received by persons who may be deemed "affiliates" of the Company under the
Securities Act of 1933, as amended (the "Securities Act"). Persons who may be
deemed affiliates of the Company after the Distribution generally include
individuals or entities that control, are controlled by or are under common
control with the Company, and may include the directors, executive officers and
principal stockholders of the Company. Persons who are affiliates of the
Company will be permitted to sell the Short Common Stock only pursuant to an
effective registration statement under the Securities Act or an exemption from
the registration requirements thereunder.
RELATIONSHIP BETWEEN PAGES AND THE COMPANY AFTER THE DISTRIBUTION
For purposes of governing certain of the ongoing relationships between
Pages and the Company after the Distribution and to provide for an orderly
transition to the status of two separate companies, prior to the Distribution,
Pages and the Company will enter into a Distribution Agreement. The form of the
Distribution Agreement summarized in this section is included as an exhibit to
the Company's Registration Statement on Form 10, of which this Information
Statement forms a part, and the following summary is qualified in its entirety
by reference to the Distribution Agreement as filed with the Securities and
Exchange Commission.
The Distribution Agreement will provide, among other things, for
cooperation between Pages and the Company prior to the Distribution, the
indemnification by each party of the other against certain liabilities,
including certain tax liabilities. In addition, the Distribution Agreement will
provide for the execution and delivery by the Company to Pages of a subordinated
debenture in the principal amount of $5 million bearing interest at 7% per annum
payable quarterly, with principal payments of $100,000 each due at the end of
each of the first four years, and a final payment of $4,600,000 due at the end
of the fifth year. The Distribution Agreement also will provide that Pages
and the Company will be granted access to certain records and information in
the possession of the other, and will require the retention by each for a
period of five years following the Distribution of all such information in its
possession.
The Distribution Agreement also will provide for the allocation of certain
taxes. In general, Pages will be responsible for filing all tax returns and
paying all taxes relating to the Company for periods through the Distribution
Date, and the Company will be responsible for filing all such tax returns and
paying all such taxes for period beginning after the Distribution Date. Pages
and the Company will agree to cooperate with one another and to share
information in preparing such tax returns and in dealing with other tax
matters.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
The following discussion sets forth a summary of the material federal
income tax consequences under the Internal Revenue Code of 1986, as amended
(the "Code"), to holders of Pages Common Stock with respect to the receipt of
the Short Common Stock pursuant to the Distribution. The summary is based on
the opinion of Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A. ("Counsel"),
a copy of which is included as exhibit 8 to the Company's Registration
Statement on Form 10, of which this Information Statement is a part. The
discussion may not address all federal income tax consequences that may be
relevant to particular Pages stockholders, e.g., foreign persons, dealers in
securities and persons who received Pages Common Stock in compensatory
transactions. In addition, the discussion does not address any state, local or
foreign tax considerations relative to the Distribution. ACCORDINGLY, ALL
HOLDERS OF PAGES COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS.
Pages has not requested a ruling from the Internal Revenue Service (the
"Service") with respect to the federal income tax consequences of the
Distribution. However, as a condition of the consummation of the Distribution,
Pages will receive an opinion of Counsel that: (i) for federal income tax
purposes, there is a reasonable basis for treating the Distribution as a
transaction qualifying under Section 355 of the Code; and (ii) this discussion
insofar as it relates to the statements of law or legal conclusions is correct
in all material respects.
3
<PAGE> 17
In rendering the tax opinion, Counsel will rely upon certain
representations and covenants made by Pages, certain of its stockholders, and
the Company, including the following: (a) following the Distribution, the
holders of Pages common stock must maintain a substantial continuing ownership
interest in the Short Common Stock they receive in the Distribution; and (b)
the Company and Pages must continue their historic businesses. The tax opinion
will be explicitly conditioned upon the accuracy of such representations and
covenants and upon certain assumptions critical to the Distribution qualifying
as a tax-free spin-off under Section 355 of the Code. The tax opinion does not
bind the Service nor does it preclude the Service from adopting a contrary
position from that taken in the tax opinion. In the event the representations
or assumptions are not accurate or the covenants are breached, then Pages and
the Company will be unable to rely on the tax opinion. Assuming the
Distribution qualifies as a tax-free spin-off under Section 355, the following
tax consequences will result:
(1) No gain or loss will be recognized by or includable in the income of a
holder of Pages Common Stock solely as a result of the receipt of Short Common
Stock pursuant to the Distribution;
(2) No gain or loss will be recognized by Pages or the Company solely as a
result of the Distribution;
(3) The tax basis of Pages Common Stock held by a Pages stockholder
immediately before the Distribution will be apportioned between such Pages
Common Stock and the Short Common Stock received by such stockholder in the
Distribution based upon the relative fair market value of such Pages Common
Stock and Short Common Stock on the Distribution Date; and
(4) Assuming that Pages Common Stock held by a Pages stockholder is held
as a capital asset, the holding period for the Short Common Stock received in
the Distribution will include the period during which such Pages Common Stock
was held.
Notwithstanding the opinion of Counsel referred to above, the application
of Section 355 of the Code to the Distribution is complex and may be subject to
differing interpretation. In particular, the Service may challenge the tax-free
status of the Distribution on the grounds that it lacks an adequate "business
purpose" or that the active business requirement of Section 355(b) of the Code
(which requires the continuation after the Distribution of a business conducted
for at least five years prior to the Distribution) is not satisfied.
Accordingly, there can be no assurance that the Service will not successfully
assert that the Distribution is a taxable event.
If the Distribution does not qualify as a tax-free spin-off under Section
355 of the Code, then: (i) Pages would recognize capital gain equal to the
difference between the fair market value of the Short Common Stock on the
Distribution Date and Pages' tax basis in such stock; (ii) each stockholder
receiving shares of Short Common Stock in the Distribution may be treated as
having received a distribution equal to the value of the Short Common Stock
received which would be taxable as ordinary income to the extent of Pages'
current and accumulated earnings and profits; (iii) the holding period for
determining capital gain treatment of the Short Common Stock received in the
Distribution would commence on the Distribution Date; and (iv) each Stockholder
would have a tax basis in the shares of Short Common Stock received in the
Distribution equal to the fair market value of such shares. Corporate
stockholders may be eligible for a dividends-received deduction (subject to
certain limitations) with respect to the portion of the Distribution
constituting a dividend, and may be subject to the Code's extraordinary
dividend provisions which, if applicable, would require a reduction in such
holder's tax basis in his or her Short Common Stock to the extent of such
deduction.
THE FOREGOING IS A SUMMARY OF MATERIAL FEDERAL INCOME TAX CONSIDERATIONS OF
THE DISTRIBUTION UNDER CURRENT LAW. EACH STOCKHOLDER SHOULD CONSULT HIS OR HER
TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES OF THE DISTRIBUTION TO SUCH
STOCKHOLDER, IN LIGHT OF HIS OR HER PERSONAL CIRCUMSTANCES, INCLUDING THE
APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS.
DIVIDENDS ON SHORT COMMON STOCK
The Company anticipates that future earnings will be used principally to
support operations and to finance continued expansion and, thus, the Company
does not intend to pay cash dividends on the Short Common Stock
4
<PAGE> 18
for the foreseeable future. The payment of cash dividends in the future will be
at the discretion of the Company's Board of Directors and will depend upon such
factors as earnings levels, capital requirements, the Company's financial
condition, and other factors deemed relevant by the Company's Board of
Directors.
QUESTIONS RELATING TO THE DISTRIBUTION
Questions relating to the Distribution or ownership of Common Stock of the
Company should be directed to the President, CA Short Company, 4205 East Dixon
Boulevard, Shelby, North Carolina 28150, telephone (704) 482-9591.
RISK FACTORS
An investment in Short Common Stock involves certain risks, including those
described below, which could adversely affect the value of the Short Common
Stock. Neither Pages nor the Company makes, nor is any other person authorized
to make, any representation as to the future market value of the Short Common
Stock.
DEPENDENCE UPON KEY PERSONNEL
The Company's future success depends to a significant degree upon the
continued service of key senior management personnel, none of whom is bound by
an employment agreement or covered by an insurance policy of which the Company
is the beneficiary. The Company's future success also depends on its continuing
ability to attract, retain and motivate highly qualified, managerial and sales
personnel. Competition for such personnel is intense, and there can be no
assurance that the Company will be able to retain its existing employees or
attract, retain and motivate highly qualified personnel in the future. If the
Company is unable to hire the necessary personnel, its ability to market the
Company's products could be impaired. Such impairment could have a material
adverse effect upon the Company's business, financial condition and results of
operations.
UNCERTAINTY OF TAX CONSEQUENCES
As a condition to the completion of the Distribution, Pages and the Company
will receive an opinion from Johnson, Blakely, Pope, Bokor, Ruppel & Burns,
P.A., to the effect that, Pages and the Company have a reasonable basis for the
position that the Distribution will qualify as a tax-free spin-off under
Section 355 of the Internal Revenue Code. This tax opinion is offered in
reliance on a number of assumptions, covenants and representations made by
Pages, the Company, and certain Pages stockholders, including the following:
(a) following the Distribution, the holders of Pages Common Stock must maintain
a substantial continuing ownership interest in the Short Common Stock they
receive in the Distribution; and (b) the Company must continue its historic
business. These assumptions, representations, and covenants are critical to the
Distribution qualifying as a tax-free spin-off under Section 355 of the
Internal Revenue Code. If any of the representations or covenants are breached
or any of the assumptions are incorrect, then the factual foundation of the tax
opinion would be flawed and it may not be relied upon.
Further, as reflected in the tax opinion, the applicability of Section 355
to the Distribution is complex and may be subject to differing interpretations.
In particular, the Internal Revenue Service may challenge the tax-free status
of the Distribution on the grounds that (a) it lacks an adequate "business
purpose", or (b) that the active business requirement of Section 355(b)1 of the
Code (which requires the continuation after the Distribution of a business
conducted for at least five years prior to the Distribution) is not satisfied.
Accordingly, even if the representations and the covenants are not breached,
there can be no assurance that the Internal Revenue Service will not
successfully challenge the applicability of Section 355 to the Distribution, or
assert that the Distribution fails the requirements of Section 355 on the basis
of facts either existing at the time of the Distribution, or which may arise
after the Distribution Date.
Neither Pages nor the Company has undertaken any obligation to refrain from
any act that may be inconsistent with the Distribution qualifying as a tax-free
distribution under Section 355 or to indemnify each other
5
<PAGE> 19
or Pages stockholders for any tax liability (including interest or penalties)
arising out of an act causing the Distribution to fail to so qualify. See "The
Distribution -- Certain Federal Income Tax Consequences of the Distribution."
ABSENCE OF PUBLIC MARKET; POSSIBLE ILLIQUIDITY OF TRADING MARKET AND POSSIBLE
VOLATILITY OF STOCK PRICE
There has been no previous trading market for Short Common Stock and there
can be no assurance that a public market for the Common Stock will develop or
be sustained after the Distribution. The Company does not expect to be eligible
for listing of its Common Stock on the Nasdaq Small Cap Market upon completion
of the Distribution. Trading, if any, in the Company's Company Stock will be
conducted in the over-the-counter market on the NASD's Electronic Bulletin
Board System or in what are commonly referred to as the "pink sheets." See
"Risk Factors -- Absence of Public Market; Possible Illiquidity of Trading
Market and Possible Volatility of Stock Price." Such trading may cause the
Short Common Stock to be significantly less liquid than common stock or other
securities listed on the Nasdaq National Market or the Nasdaq Small Cap Market.
As a result, an investor may find it difficult to dispose of, or to obtain
accurate quotations as to the price of, the Company's securities. In addition,
the Company's securities may be subjected to so-called "penny stock" rules that
impose additional sales practice and market making requirements on
broker-dealers who sell and/or make a market in such securities. This could
affect the ability or willingness of broker-dealers to sell and/or make a
market in the Company's securities and the ability of holders of the Company's
securities to sell their securities in the secondary market.
There can be no assurances regarding the prices at which the Short Common
Stock will trade before or after the Distribution Date. The market prices for
securities of emerging companies have historically been highly volatile. Future
announcements concerning the Company or its competitors' results, as well as
investor perception of the Company and industry and general economic and market
conditions, may have a significant impact on the market price of Short Common
Stock. In addition, the stock market is subject to price and volume
fluctuations that affect the market prices for companies in general, and small
capitalization companies in particular, and are often unrelated to their
operating performance.
RESTRICTIONS IMPOSED BY THE CREDIT FACILITY
The credit facility to be obtained by the Company upon the consummation of
the Distribution will contain a number of significant covenants that will,
among other things, restrict the ability of the Company to dispose of assets,
merge, incur debt, pay dividends, repurchase or redeem capital stock and
indebtedness, create liens, make capital expenditures and make certain
investments or acquisitions and otherwise restrict corporate activities. In
addition, the credit facility will contain, among other covenants, requirements
that the Company maintain specified financial ratios, including a minimum
capital base, and minimum pre-tax profits from operations. The ability of the
Company to comply with such provisions may be affected by events beyond the
Company's control. The breach of any of these covenants would result in a
default under the credit facility. In the event of any such default, the lender
could elect to declare all amounts borrowed under the credit facility, together
with accrued interest and other fees, to be due and payable. If the
indebtedness under the credit facility were to be accelerated, there can be no
assurance that the assets of the Company would be sufficient to repay such
indebtedness in full. See "Business -- Financing."
THE COMPANY'S DIVIDEND POLICY
In addition to the restrictions contained in the credit facility on the
payment of dividends, the payment and level of cash dividends, if any, by the
Company after the Distribution will be at the discretion of the Company's Board
of Directors, based primarily upon the earnings, cash flow and financial
requirements of its business. The Company currently does not anticipate paying
cash dividends on Company Common Stock in the foreseeable future. The future
dividend policy will be determined on the basis of various factors, including
the Company's results of operations, financial condition, capital requirements,
and investment opportunities. See "Description of Capital Stock -- Dividends on
Common Stock."
6
<PAGE> 20
EFFECTS ON PAGES STOCK
After the Distribution, the Pages Common Stock will continue to be listed
and traded on the Nasdaq National Market. As a result of the Distribution, the
trading prices of Pages Common Stock are expected to be correspondingly lower
than the trading prices of Pages Common Stock immediately prior to the
Distribution. The combined trading prices of Pages Common Stock and Short
Common Stock after the Distribution may be less than, equal to or greater than
the trading prices of Pages Common Stock prior to the Distribution.
CONTINUING CONTROL OF THE COMPANY BY MANAGEMENT
S. Robert Davis, the Chairman of the Board and President of Pages, and the
Chairman of the Board of the Company, and Charles R. Davis, a director of Pages
and the Company, the President of the Company, and the Executive Vice President
and Secretary of Pages, currently own beneficially 1,345,359 and 687,003
shares, respectively, of Pages Common Stock, including options to purchase
43,750 and 43,750 shares, respectively, of Pages Common Stock exercisable within
the next sixty days. If they would exercise all of such options after the
Distribution, their holdings would represent approximately 21.87% and 11.18%,
respectively, of the issued and outstanding Pages Common Stock prior to any
adjustment of their outstanding options as a result of the Distribution. They
will receive their pro rata share of Short Common Stock in the Distribution.
Accordingly, Mr. Robert Davis and Mr. Charles Davis will, after the
Distribution, own 195,241 and 96,487 shares, or 21.33% and 10.54%, respectively,
of the Short Common Stock. As a result of their holdings, they currently exert,
and are likely to continue to exert, significant control over Pages and the
Company.
COMPETITION
The Company's business is highly competitive. Many of the Company's
competitors are significantly larger and better capitalized than the Company.
See "Business -- Competition."
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited Pro Forma Balance Sheet of the Company as of
September 30, 1996 and the Pro Forma Condensed Statements of Operations of the
Company for the year ended December 31, 1995 and the nine months ended
September 30, 1996, present the financial position and results of operations of
the Company assuming the Distribution had been completed as of September 30,
1996 and as of the beginning of 1995, respectively. In the opinion of
management, they include all material adjustments necessary to restate the
Company's historical results. The pro forma adjustments are described in the
accompanying notes to the pro forma financial information which should be read
in conjunction with such unaudited pro forma financial statements. Such pro
forma statements should also be read in conjunction with the Company's
financial statements and notes thereto included elsewhere herein. The following
unaudited pro forma condensed statements of operations do not purport to be
indicative of the actual results of the Company that would have occurred had
the Distribution actually been consummated on January 1, 1995 or of future
results of operations which will be obtained as a result of the consummation of
the Distribution.
7
<PAGE> 21
CA SHORT COMPANY
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(In thousands, except per share data)
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . $22,620 $22,620
Costs and expenses
Costs of goods sold . . . . . . . . . . . . . . . . 13,862 13,862
Selling, general, and administrative . . . . . . . 8,155 30 (a) 8,185
Interest . . . . . . . . . . . . . . . . . . . . . 416 350 (b) 766
Depreciation and amortization . . . . . . . . . . . 363 363
Management fees paid to Pages . . . . . . . . . . . 500 (500)(c) -
------ -------
23,296 23,176
------ -------
Loss from continuing operations . . . . . . . . . . . 676 556
Benefit for income taxes . . . . . . . . . . . . . . (249) 44 (d) (205)
------ -------
Net loss . . . . . . . . . . . . . . . . . . . . . . 427 351
Loss per common share . . . . . . . . . . . . . . . . .38
Weighted average common shares outstanding . . . . . 915,293
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(In thousands, except per share data)
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . $13,694 $13,694
Costs and expenses
Costs of goods sold . . . . . . . . . . . . . . . . 8,396 8,396
Selling, general and administrative . . . . . . . . 5,722 24 (a) 5,746
Interest . . . . . . . . . . . . . . . . . . . . . 58 257 (b) 315
Depreciation and amortization . . . . . . . . . . . 252 252
Management fee paid to PAGES . . . . . . . . . . . 375 (375)(c) -
------ -------
14,803 14,709
Loss from continuing operations . . . . . . . . . . . 1,109 1,015
Benefit for income taxes . . . . . . . . . . . . . . (121) (21)(d) (142)
Net loss . . . . . . . . . . . . . . . . . . . . . . 988 873
Loss per common share . . . . . . . . . . . . . . . . .95
Weighted average common shares outstanding . . . . . 915,293
</TABLE>
8
<PAGE> 22
CA SHORT COMPANY
UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
September 30, Pro Forma
1996 Adjustments Pro Forma
---- ----------- ---------
ASSETS (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 77 - $ 77
Accounts receivable . . . . . . . . . . . . . . . . . 2,169 - 2,169
Inventory . . . . . . . . . . . . . . . . . . . . . . 6,650 - 6,650
Prepaid expenses . . . . . . . . . . . . . . . . . . 944 - 944
-------- ----------
Total current assets . . . . . . . . . . . . . . 9,840 9,840
-------- ----------
Building and equipment:
Buildings . . . . . . . . . . . . . . . . . . . . . . 3,187 - 3,187
Equipment . . . . . . . . . . . . . . . . . . . . . . 1,839 - 1,839
-------- ----------
5,026 - 5,026
Less accumulated depreciation . . . . . . . . . . . . (1,262) - (1,262)
-------- ----------
3,764 - 3,764
Land . . . . . . . . . . . . . . . . . . . . . . . . 212 - 212
-------- ----------
Total property and equipment, net . . . . . . . 3,976 - 3,976
-------- ----------
Other assets:
Cost in excess of net assets acquired . . . . . . . . 1,142 - 1,142
Other . . . . . . . . . . . . . . . . . . . . . . . . 616 - 616
-------- ----------
1,758 - 1,758
-------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . $ 15,574 $ 15,574
======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . $ 658 - $ 658
Short-term debt obligations . . . . . . . . . . . . . 2,448 - 2,448
Accrued liabilities . . . . . . . . . . . . . . . . . 272 - 272
Due to PAGES . . . . . . . . . . . . . . . . . . . . 4,125 (4,125)(e) -
Advance deposits . . . . . . . . . . . . . . . . . . 5,940 - 5,940
-------- ----------
Total current liabilities . . . . . . . . . . . . 13,443 - 9,318
-------- ----------
Deferred tax liability . . . . . . . . . . . . . . . . - - -
Note payable to PAGES . . . . . . . . . . . . . . . . - 5,000 (f) 5,000
-------- --------- ----------
Stockholder's equity:
Common shares . . . . . . . . . . . . . . . . . . . . 34 (25)(g) 9
Capital in excess of par value . . . . . . . . . . . . 4,124 (850)(g) 3,274
Accumulated deficit . . . . . . . . . . . . . . . . . (2,027) - (2,027)
</TABLE>
9
<PAGE> 23
CA SHORT COMPANY
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
The pro forma adjustments to the accompanying financial information as of
and for the nine months ended September 30, 1996, and for the year ended
December 31, 1995, are described below:
a. To reflect the additional stand alone general and administrative
costs associated with the Distribution
b. To reflect the interest expense on the $5,000,000 debt payable
to Pages. Interest on the debt is 7% per annum.
c. To reflect the elimination of the management fees paid to Pages.
d. To record the estimated income tax benefit of pro forma
adjustments at the combined federal, state, and local income tax
rate of 40%.
e. To reflect the elimination of the "Due to Pages" upon entering
into a $5 million subordinated debenture with Pages at the
Distribution.
f. To reflect the debt that will be payable to Pages as a result of
the elimination of the amount due to Pages as of the
Distribution.
g. To reflect the changes in stockholder's equity resulting a) from
the excess of note payable to Pages over the amount due to Pages
that will be eliminated, and b) from the recapitalization of
common stock for the Distribution by way of the elimination of
the 334.91 common shares at $100 par value and the issuance of
the 915,293 common shares at $0.01 par value. These amounts are
($875,000) and $25,000, respectively.
10
<PAGE> 24
SELECTED FINANCIAL DATA
(In thousands, except per share data)
The following table summarizes certain historical financial
information of the Company that has been derived from the financial statements
of the Company for the five years ended December 31, 1995 and the nine month
periods ended September 30, 1996 and September 30, 1995. The historical
financial information may not be indicative of the Company's future performance
as a stand-alone company. The information set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Pro Forma Combined Financial
Information and Notes thereto included elsewhere herein
<TABLE>
<CAPTION>
Ten Months
Period Ended Period Ended Year Ended Year Ended Year Ended Ended Year Ended
September 30 September 30 December 31 December 31 December 31 December 31 February 28,
1996 1995 1995 1994 1993 1992 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues $ 13,695 $ 12,641 $ 22,620 $ 25,158 $ 28,909 $ 17,889 $ 21,405
Costs and expenses 14,804 14,231 23,296 25,635 28,759 17,952 21,475
---------- ---------- ---------- --------- --------- --------- ---------
Income (loss) from continuing
operations before income taxes (1,109) (1,590) (676) (477) 150 (63) (70)
(Provision) benefit for income taxes 121 510 249 193 (57) - -
---------- ---------- ---------- --------- --------- --------- ---------
Income (loss) from continuing
operations (988) (1,080) (427) (284) 93 (63) (70)
---------- ---------- ---------- --------- --------- --------- ---------
Net income (loss) $ (988) $ (1,080) $ (427) $ (284) $ 93 $ (63) $ (70)
========== ========== ========== ========= ========= ========= =========
PRO FORMA PER SHARE DATA:
Income (loss) from continuing
operations $ (1.08) $ - $ (0.47) - - - -
Pro forma weighted average common and
common equivalent shares 915,293 - 915,293 - - - -
CONSOLIDATED BALANCE SHEET DATA:
Working capital $ (1,603) $ (3,288) $ (2,338) $ (1,790) $ (1,810) $ (1,378) $ (796)
Total assets 15,574 16,368 19,512 23,584 22,572 17,034 11,385
Stockholder's equity 2,131 2,467 3,119 3,547 3,831 3,738 3,808
</TABLE>
11
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following is a discussion and analysis of the historical results of
operations and financial condition of the Company and factors affecting the
Company's financial resources. The discussion should be read in conjunction with
the Company's financial statements, including the notes thereto, appearing
elsewhere herein.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity have been cash generated from
operating activities and amounts available under its existing credit
facility. The Company's primary uses of funds consist of financing inventory
and receivables.
Net working capital deficit increased to $3,603,000 as of September 30, 1996
from $2,338,000 as of December 31, 1995. The increase was primarily attributed
to reductions in trade accounts from collections which exceeded the decrease in
the level of borrowings.
The Company has adopted a growth strategy which will be accomplished
through increased efforts of the Company's existing highly trained sales force
to further expand current market share and by enlarging the existing sales
force in order to expand into new markets.
The Company anticipates that operating cash flows during the next twelve
months, coupled with its ability to borrow under the credit facility, will
cover operating expenditures and meet the short-term debt obligations. The
Company also plans to enter into a $5 million, 7% subordinated debenture with
Pages subsequent to the Distribution in satisfaction of amounts due to Pages by
the Company. Any excess of the amount due to Pages as of the Distribution over
the $5 million subordinated debenture will be recorded as paid in capital. As a
result, the Company's working capital will become significantly positive.
Principal payments will be $100,000 per year for the first five years, $200,000
per year for the second five years with a balloon payment due the tenth year for
the remaining principal balance. Interest will be 7% per annum and the interest
will be payable quarterly. See "Capitalization."
The Company does not anticipate any material expenditures for property and
equipment during the next twelve months.
The Company is aware of no trends or demands, commitments or uncertainties
that will result in, or that management believes are reasonably likely to result
in, the Company's liquidity increasing or decreasing in any material way. The
Company is aware of no legal or other contingencies, the effect of which are
believed by management to be reasonably likely to have a material adverse
effect on the Company's financial statements.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995. Revenues were approximately $13.7 million for the nine
months ended September 30, 1996, compared to $12.6 million for the same period
in 1995 -- an increase of approximately $1.1 million or 9%. The increase in
revenues is principally attributable to maintaining the volume on certain
existing customers coupled with increasing volume from new accounts.
Cost of goods sold for the nine months ended September 30, 1996 was
approximately $8.4 million compared to approximately $7.8 million for the
comparable period in 1995. This 8% increase in cost of goods sold is a result
of an increase in revenues for the nine months ended September 30, 1996.
Selling, general, and administrative expense for the nine months ended
September 30, 1996 was approximately $5.7 million, compared to $5.5 million
for the same period in 1995 -- an increase of 3.6%, or approximately $200,000.
The increase in selling, general, and administrative expense is primarily due
to the Company's expansion and increased focus in sales and marketing.
Interest expense was approximately $58,000 for the nine months ended
September 30, 1996, compared to $286,000 for the nine months ended September
30, 1995 -- a decrease of 79.7% or approximately $228,000. The decrease is due
to a lower level of borrowings. The average outstanding debt for the nine
months ended September 30, 1996 approximated $1.5 million compared to $3.8
million for the nine months ended September 30, 1995. Additionally, the average
interest rate for the nine months ended September 30, 1996 approximated 8.55%
compared to 9.41% for the nine months ended September 30, 1995.
12
<PAGE> 26
Depreciation and amortization expense was approximately $252,000 for the
nine months ended September 30, 1996, compared to $281,000 for the nine months
ended September 30, 1995 -- a decrease of 10% or approximately $29,000. The
decrease in depreciation and amortization expense is principally attributable
to the amortization of the remaining deferred loan costs during 1996.
Income tax benefit was approximately $121,000 for the nine months ended
September 30, 1996, compared to approximately $510,000 for the nine months
ended September 30, 1995. The provisions for income tax benefit were calculated
through the use of normal income tax rates. The Company was able to continue
recognizing an income tax benefit through September 30, 1996, based on the net
deferred tax liabilities that were in existence through that date. However, at
September 30, 1996, the remaining net deferred tax asset, liability is zero
after the establishment of a valuation allowance for the resulting net deferred
tax asset. Recognition of any income tax benefit for future losses will be
subject to the recognition provisions under SFAS No. 109.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994.
Revenues were approximately $22.6 million for the year ended December 31, 1995,
compared to $25.2 million for the year ended December 31, 1994 -- a decrease of
10% or approximately $2.6 million. The decline in revenue was due to a decrease
in volume on certain existing customers coupled with delayed redemption on new
accounts.
Cost of goods sold was approximately $13.9 million for the year ended
December 31, 1995, compared to approximately $15.5 million for the year ended
December 31, 1994 -- a decrease of 10% or approximately $1.6 million. The
decrease in cost of goods sold was attributable to the decrease in revenues. As
a percentage of revenues, cost of goods sold improved to 61.3% in 1995 from
61.7% in 1994. The 0.1% decrease in cost of goods sold is principally
attributable to a change in product mix.
Selling, general, and administrative expense was approximately $8.2 million
for the year ended December 31, 1995, compared to approximately $8.9 million
for the year ended December 31, 1994 -- a decrease of 8% or approximately
$700,000. The decrease in selling, general and administrative expenses was due
to decreased sales and cost reduction efforts implemented by the Company.
Interest expense was approximately $416,000 for the year ended December 31,
1995, compared to $430,000 for the year ended December 31, 1994 -- a decrease
of 3% or $14,000. The decrease was due to lower levels of borrowings. The
average outstanding debt by month in 1995 approximated $3.9 million compared to
$5.9 million for 1994. Additionally, the average interest rate for 1995
approximated 9.3% compared to approximately 7.9% for 1994.
Depreciation and amortization expense was approximately $362,500 for the
year ended December 31, 1995, compared to $297,500 for the year ended December
31, 1994 -- a decrease of 22% or approximately $65,000. The decrease in
depreciation and amortization expense is principally attributable to the
amortization of additional deferred loan costs recorded as a result of certain
credit facility refinancing by Pages, the parent.
Income tax benefit was approximately $248,600 for the year ended December
31, 1995, compared to approximately $193,500 for the year ended December 31,
1994. The provisions for income tax benefit were calculated through the use of
estimated income tax rates based on annualized income.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993.
Revenues were approximately $25.2 million for the year ended December 31, 1994,
compared to $28.9 million for the year ended December 31, 1993 -- a decrease of
12.8% or approximately $3.7 million. The decline in revenue was due to a
decrease in volume on certain existing customers coupled with delayed redemption
on new accounts.
13
<PAGE> 27
Cost of goods sold was approximately $15.5 million for the year ended
December 31, 1994, compared to approximately $19 million for the year ended
December 31, 1993 -- a decrease of 18.4% or approximately $3.5 million. The
decrease in cost of goods sold was attributable to the decrease in revenues. As
a percentage of revenues, cost of goods sold improved to 61.7% in 1994 from
65.6% in 1993. The decrease in cost of goods sold is principally attributable
to a change in product mix.
Selling, general, and administrative expense was approximately $8.9 million
for the year ended December 31, 1994, compared to approximately $8.0 million
for the year ended December 31, 1993 -- an increase of 11% or approximately
$900,000. The increase in selling, general and administrative expenses was due
to a substantial shift from non-commissioned sales to commissioned sales which
accounted for approximately $500,000 of the increase. Additionally, the selling,
general and administrative expenses includes approximately $400,000 of staffing
and marketing costs associated with anticipated fourth quarter sales which did
not materialize.
Interest expense was approximately $430,000 for the year ended December 31,
1994, compared to $252,500 for the year ended December 31, 1993 -- an increase
of 70% or $177,500. The increase was due to higher levels of borrowings. The
average outstanding debt by month in 1994 approximated $5.9 million compared to
$3.5 million for 1993. Additionally, the average interest rate for 1994
approximated 7.9% compared to approximately 7.0% for 1993.
Depreciation and amortization expense was approximately $297,500 for the
year ended December 31, 1994, compared to $265,000 for the year ended December
31, 1993 -- an increase of 48% or approximately $32,500. The increase in
depreciation and amortization expense was primarily due to acquisitions of
office equipment.
Income tax benefit was approximately $193,500 for the year ended December
31, 1994, compared to the income tax provision of approximately $57,000 for the
year ended December 31, 1993. The provisions for income tax benefit were
calculated through the use of estimated income tax rates based on annualized
income.
SEASONALITY
The Company's business is highly seasonal, with approximately one-half of
its revenues and most of its profits recorded in the months of November,
December and January. As a result, the Company's working capital requirements
are highest during November and December when the combination of receivables
and inventory are at peak levels and the Company typically experiences losses
in its second and third quarters.
INFLATION
Although the Company cannot determine the precise effects of inflation,
inflation has an influence on the cost of the Company's products and services,
supplies, salaries, and benefits. The Company attempts to minimize or offset
the effects of inflation through increased sales volumes and sales prices,
improved productivity, alternative sourcing of products and supplies, and
reduction of other costs. The Company generally has been able to offset the
impact of price increases from suppliers by increases in the selling prices of
the Company's products and services.
BUSINESS
GENERAL
The Company was formed as a North Carolina corporation in 1950. Pages
acquired all of the issued and outstanding common stock of the Company in
February, 1990. In November, 1996, the Company reincorporated in the State of
Delaware by merging into Clyde A. Short Incorporated, a Delaware corporation
which was the surviving corporation in the merger and which, in conjunction
with the merger, changed its name to CA Short
14
<PAGE> 28
Company. The Company creates, markets, and administers recognition programs
which address specific needs in employee motivation and recognition. Programs
offered by the Company include safety, service recognition, attendance,
birthday, and corporate holiday gift programs. Virtually every program employs
merchandise (alternatively, jewelry) as the principal incentive for the
reinforcement or modification of employee behavior. The common objective of all
the Company's programs is to reduce client operating costs by increasing
employee productivity.
The Company begins a typical assignment by helping the client to determine
realistic performance goals and to establish an appropriate budget. Next, the
Company selects and recommends to the client an assortment of merchandise
which, in the Company's experience, will serve as an effective incentive to the
client's employees. Upon approval, the Company publishes and distributes all
materials (including appealing, full-color catalogues or brochures) necessary
to communicate the program's benefits. As the client's employees become
eligible to receive awards, the Company processes their requests and, in most
cases, ships the items directly to the employees from the Company's
distribution center in Shelby, North Carolina. The Company then invoices the
client at prices approximating comparable retail, as the merchandise is
shipped.
RECOGNITION PROGRAMS
SAFETY RECOGNITION PROGRAMS. Accidents in the workplace injure thousands of
workers each year and cost billions of dollars in worker's compensation
premiums, health care costs, and lost productivity. The Company's safety
programs are designed to reduce these costs by increasing awareness and
promoting safe work habits. Because each client has its own unique set of
safety concerns, the Company designs each safety program to meet the specific
needs and goals of the client. A typical safety program would grant an award
for accident-free operations over a specified period of time. As a consequence
of the present regulatory environment, clients are placing increasing emphasis
on safety and the Company has received a number of client testimonials
regarding the efficacy of the safety programs it has designed. Safety programs
accounted for approximately 56% of the Company's revenues in each of the last
three fiscal years.
SALES INCENTIVE PROGRAMS. Sales incentive programs are designed to achieve
the client's specific goals, such as gaining market share, launching new
products or services, improving profitability, encouraging early ordering,
opening new territories, or boosting overall sales. When those goals are met,
the responsible employees are provided with awards.
SERVICE RECOGNITION PROGRAMS. Service award programs grant awards based on
years of service with the employer. Service awards are designed to improve
morale, increase productivity, and reduce costly employee turnover by
delivering messages of recognition and strengthening bonds of loyalty between
employees and employers. The Company's experience is that employee recognition
is near the top of the list of motivating factors that create on-the-job
satisfaction. Service award programs accounted for approximately 22% of the
Company's revenues in each of the last three fiscal years.
QUALITY CONTROL PROGRAMS. Quality control programs are designed to create
and increase quality awareness and motivate workers to make a personal
commitment to quality. Participants are rewarded when corporate goals and
objectives are met. Effective programs result in reducing rework and downtime,
retaining existing business, and earning new business through increased
customer satisfaction.
PRODUCTION PROGRAMS. Production programs are designed to motivate workers
by offering incentive awards for achieving corporate production quotas and
goals. By creating increased productivity awareness, thus increasing
production, the client is able to reduce its cost per unit and enhance
profitability.
ATTENDANCE PROGRAMS. The costs incurred by clients resulting from
absenteeism include loss of production, decrease in quality, downtime, extra
wages to replace absent workers, and added administration. Attendance
recognition programs are designed to reduce excessive absenteeism by providing
incentive awards to workers with perfect attendance.
15
<PAGE> 29
BIRTHDAY AND HOLIDAY GIFT PROGRAMS. Although a declining portion of the
Company's incentive/recognition business, many employers continue to have a
long-standing tradition of giving holiday gifts to employees as a way of
thanking them for their commitment and dedication throughout the year. Finding
the right gift has frequently posed a challenge for those responsible for
administration of the program. The Company's gift-giving solution provides
clients with a program that allows employees to select exactly the gift they
want, while eliminating the administrative burden associated with other types
of holiday gift programs. Holiday gift programs accounted for approximately 21%
of the Company's revenues in each of the last three fiscal years.
MERCHANDISE SELECTION AND BROCHURES.
The Company presents the merchandise available for selection by its
clients' employees in a full-color catalog/brochure designed and produced by
the Company's art department. Except for apparel, the selection of which is
limited, the merchandise offered by the Company is similar to that found in a
large retail department store, including consumer electronics, housewares,
hardware, lawn and garden merchandise, sportswear, costume jewelry, and
manufactured fine jewelry. Unlike some of its competitors in the service award
business which manufacture the merchandise offered as awards, the Company has
no "product bias," allowing it to find the most reasonably priced, highest
quality supplier of merchandise for its programs. Merchandise is separated into
over twenty different price levels. This allows the client to select price
levels which fit its budget. The items in each of the price levels selected by
the client are presented to employees in separate brochures corresponding to
the applicable award level. The selection of merchandise within each price
level is carefully chosen to appeal to a wide segment of the industry work
force. Products are grouped by the Company within a particular price level
based on the Company's determination of the relative value of all merchandise
offered by the Company, rather than on the Company's cost of those items. This
results in different markups over the Company's cost for each item.
SALES AND MARKETING.
The Company markets its incentive/recognition awards programs through a
combination of approximately one hundred independent commissioned sales
representatives, sales consultants, telephone sales representatives and by
direct mail, trade show participation, and trade journal advertising. The
Company is evaluating converting some independent sales representative
positions to employee sales positions. The Company employs a "consultative
selling" or "partner" approach to marketing its programs which relieves from
the client much of the design responsibilities associated with the programs.
This often requires personal client contact over extended periods of time. The
Company's proprietary computer software allows its sales consultants to monitor
and administer the programs of its clients, relieving the client from much of
the administrative burden associated with the program. Approximately 10% of the
independent commissioned sales representatives are exclusive to the Company in
all their business activities and 90% are non-exclusive and may represent a
competitor. Sales consultants and telephone sales representatives are Company
employees.
GROWTH STRATEGY.
The Company intends to add additional sales representatives in order to
penetrate geographic markets in the United States outside of the Southeastern
market in which its sales are now concentrated. Many of the Company's clients
participate in only one or two of the programs offered by the Company. As part
of its growth strategy, the Company also intends to expand its awards programs
and actively cross-sell its broad range of programs to its existing clients.
SEASONALITY
The Company's business is highly seasonal, with approximately one-half of
its revenues and most of its profits recorded in the months of November,
December and January. As a result, the Company's working capital requirements
are highest during November and December when the combination of receivables
and inventory are at peak levels, and the Company typically experiences losses
in its second and third quarters. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Seasonality and Quarterly
Data."
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<PAGE> 30
COMPETITION
The incentive/recognition awards business is highly competitive, but
fragmented, with no company dominating the industry. The Company competes on
the basis of customer service, product quality and diversity, and competitive
pricing.
EMPLOYEES
As of September 30, 1996, the Company employed a total of 106 permanent and
35 seasonal persons. None of the Company's employees is represented by a labor
union.
PROPERTIES
The Company owns a 134,000 square foot office and warehouse building
located in Shelby, North Carolina and a 163,700 square foot warehouse located
in Kings Mountain, North Carolina. Both properties are in good condition. The
properties and all other Company assets collateralize its revolving line of
credit facility with a maximum availability of $4,500,000.
FINANCING
The Company has received a proposal from the Huntington National Bank to
provide to it a credit facility in the form of a $4.5 million revolving line of
credit. Under the proposal, borrowings will be limited to the sum of 80% of
accounts receivable less than 90 days old plus 60% of eligible inventory, plus
75% of the appraised value of the Company's real estate located 4205 East Dixon
Boulevard, in Shelby, North Carolina. Eligible inventory is limited to $3.5
million from January through May, and $6.5 million from June through December.
The credit facility will have an expiration date of June 30, 1997 and will bear
interest at the lender's prime rate of interest plus one percent, floating
daily. All business assets of the Company will be pledged as collateral for the
credit facility. The credit facility will also include certain financial
covenants, including covenants that the Company maintain certain financial
ratios including a minimum tangible capital base and a minimum pre-tax profit
from operations. In addition, the credit facility will contain limitations on
capital expenditures, fixed asset sales, loans and/or advances to shareholders
and employees and restrictions on operating leases. The proposal does not
constitute a commitment on the part of the lender. A commitment is subject to
further due diligence by the lender and the completion of the bank's formal
credit approval process. The consummation of the Distribution is contingent
upon, among other things, the receipt of a commitment for a credit facility
acceptable to the Board of Pages.
CAPITALIZATION
The following table sets forth, as of September 30, 1996, the
historical capitalization of the Company and the pro forma capitalization of
the Company to reflect the Distribution. This information should be read in
conjunction with the Company's financial statements and the related notes
thereto included herein.
<TABLE>
<CAPTION>
September 30, 1996
------------------
Actual Pro Forma
------ ---------
<S> <C> <C>
Current liabilities:
Due to Pages . . . . . . . . . . . . . . . . . . . $ 4,124,975 $ --
Note payable to Pages--noncurrent . . . . . . . . . -- 5,000,000
Stockholder's equity:
Common stock, par-value $100 per share
(actual) $.01 per share (pro forma)
334.91 shares authorized, 334.91 shares
issued and outstanding (actual) 915,293
shares issued and outstanding (pro forma) . . . . 33,491 9,152
Capital in excess of par value . . . . . . . . . 4,124,494 3,273,808
Accumulated deficit . . . . . . . . . . . . . . . (2,026,991) (2,026,991)
----------- ----------
Total Stockholder's Equity . . . . . . . . . . 2,130,994 1,255,969
----------- ----------
Total Capitalization . . . . . . . . . . . . . . . . $ 6,255,969 $6,255,969
=========== ==========
</TABLE>
17
<PAGE> 31
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to each person
who is a director or an executive officer of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
S. Robert Davis (1) 58 Chairman of the Board
Charles R. Davis (1) 35 President and Director
Jeffrey A. Ross 29 Chief Financial Officer and Secretary
Robert V. Boylan 33 Executive Vice President of Sales
</TABLE>
(1) S. Robert Davis is the father of Charles R. Davis.
S. ROBERT DAVIS is the Chairman of the Board and President of Pages. Prior
to his election to the Board of Directors of Pages, he served as Assistant to
the President of Pages from January, 1988, to March, 1990, on a part-time
basis. Additionally, during the past five years Mr. Davis has operated several
private businesses involving the developing, sale, and/or leasing of real
estate, but devotes substantially all of his business time to Pages.
CHARLES R. DAVIS Mr. Davis was elected President of the Company in
September, 1992. Mr. Davis is also a Director and the Executive Vice President
and Secretary of Pages. Additionally, during the past five years Mr. Davis has
operated several private businesses involving the developing, sale and/or
leasing of real estate but devotes substantially all of his business time to
the Company.
JEFFREY A. ROSS is a certified public accountant. He joined the Company as
its controller in June, 1993. Mr. Ross was employed as an accountant by a large
public accounting and consulting firm from September, 1989, until June, 1993.
ROBERT V. BOYLAN joined the Company in August, 1996, as Executive Vice
President of Sales. From April 1988 until August 1996, Mr. Boylan managed North
American sales and marketing activities of a large, diversified building
products manufacturer. Mr. Boylan has also served as a contract consultant for
the American Management Association, as well as Beauvestco Consulting,
specializing in sales development, and sales management. Mr. Boylan has also
served as a general partner of a closely held real estate management firm
located in North Carolina.
Executive officers are elected by the Board of Directors and serve until their
successors are duly elected and qualify, subject to earlier removal by the
Board of Directors. Directors are elected at the annual meeting of shareholders
to serve for one year and until their respective successors are duly elected
and qualify, or until their earlier resignation, removal from office, or death.
The remaining directors may fill any vacancy in the Board of Directors for an
unexpired term. The next annual meeting of the Company's shareholders will take
place during 1997.
COMPENSATION OF DIRECTORS
Each director who is not an officer of the Company will receive a fee of
$500 for attendance at each non-telephonic Board meeting, a fee of $250 for
attendance of each telephonic Board meeting, and a fee of $250 for attendance
at each meeting of a Board committee of which he is a member. Directors who are
also officers of the Company will receive no additional compensation for their
services as directors.
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<PAGE> 32
The Company has adopted a Non-Employee Director Stock Option Plan, which
provides for the grant, at the discretion of the Company's Board of Directors,
of options to purchase up to 40,000 shares of Short Common Stock upon such
terms as are determined by the Board in its discretion. No options have been
granted under the Plan.
EXECUTIVE COMPENSATION
The Company's President, Charles R. Davis, was paid a salary of $147,890,
$140,000, and $140,000 in each of the 1995, 1994, and 1993 fiscal years,
respectively. Mr. Davis exercised options to purchase Pages Common Stock during
1995, the difference between the fair market value of the Pages Common Stock
received and the option exercise price of which was $103,389. He did not
receive any other compensation from the Company in those years and he did not
receive any grants of options to purchase Pages Common Stock in those years. He
has not received any Company option grants. Mr. Davis is paid a salary of
$155,000 during fiscal 1996. No other executive officer of the Company received
compensation exceeding $100,000 during fiscal 1995.
CA SHORT COMPANY 1996 STOCK OPTION PLAN
The Company has adopted a 1996 Incentive Stock Option Plan which provides
for the grant, at the discretion of the Board of Directors, of options to
purchase up to 45,000 shares of Short Common Stock to key employees of the
Company. It is intended that options granted under such Plan qualify as
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended. No options have been granted under the Plan.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has no committees of the Board of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Prior to the Distribution, Pages owns all of the outstanding shares of
Short Common Stock. Assuming the completion of the Distribution and that the
Pages stockholders continue to own beneficially on the Record Date the same
number of shares believed by Pages to be owned beneficially by such persons on
September 30, 1996, the following table sets forth certain information with
respect to the beneficial ownership of shares of Short Common Stock that will
be owned beneficially by (i) each person who beneficially owns more than 5% of
the outstanding Short Common Stock, (ii) each director of the Company, (iii)
the President of the Company (the only executive officer of the Company whose
cash and non-cash compensation for services rendered to the Company for the
year ended December 31, 1995, exceeded $100,000) and (iv) directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME AND ADDRESS OWNERSHIP(1) OF CLASS(2)
---------------- ------------ ----------
<S> <C> <C>
S. Robert Davis . . . . . . . . . . . . 1,345,359(3) 21.89%
801 94th Avenue North
St. Petersburg, Florida 33702
Charles R. Davis . . . . . . . . . . . . 687,003(4) 11.18%
4205 East Dixon Boulevard
Shelby, North Carolina 28150
All directors and executive officers
as a group (4 persons) . . . . . . . . . 2,080,712(5) 33.37%
</TABLE>
19
<PAGE> 33
- ----------
(1) Represents sole voting and investment power unless otherwise indicated.
(2) Based on 6,101,955 shares of Pages Common Stock outstanding as of September
30, 1996, plus, as to each person listed, that portion of the 602,800 unissued
shares of Pages Common Stock subject to outstanding options which may be
exercised by such person, and as to all directors and executive officers as a
group, unissued shares of Pages Common Stock as to which the members of such
group have the right to acquire beneficial ownership upon the exercise of stock
options within the next 60 days.
(3) Includes 25,100 shares owned by Mr. Davis' wife as to which Mr. Davis
disclaims beneficial ownership and includes 43,750 shares of Pages Common Stock
as to which Mr. Davis has the right to acquire beneficial ownership upon the
exercise of stock options within the next 60 days.
(4) Includes 781 shares owned by Mr. Davis' wife and 4,474 shares owned by Mr.
Davis' children as to which Mr. Davis disclaims beneficial ownership and
includes 43,750 unissued shares of Pages Common Stock as to which Mr. Davis has
the right to acquire beneficial ownership upon the exercise of stock options
within the next 60 days.
(5) The number of shares of common stock beneficially owned by all directors
and executive officers as a group includes all the shares of Pages Common Stock
listed above plus 3,000 shares of Pages Common Stock owned and 25,000 unissued
shares of Pages Common Stock as to which Robert V. Boylan, an executive officer
of the Company, has the right to acquire beneficial ownership upon exercise of
stock options within the next 60 days and 350 shares of Pages Common Stock and
20,000 unissued shares of Pages Common Stock as to which Jeffrey A. Ross, an
executive officer of the Company, has the right to acquire beneficial ownership
upon exercise of stock options within the next 60 days.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pages has provided services to the Company including, but not limited to
services related to administration, transportation, tax services, accounting
and reporting, and management consultation. Pages has also incurred costs
related to the services rendered to the Company by Pages, and also related to
legal services and general corporate expenses which have been allocated to the
Company. Pages has also incurred financing costs to provide non-interest
bearing advances to the Company, which costs approximated $263,000, $263,000,
$450,000, $450,000, and $400,000, respectively based on the prime interest rate
as applied to the average outstanding balance due to Pages during the nine
month periods ended September 30, 1996, and 1995 and during the years ended
December 31, 1995, 1994 and 1993. All of the foregoing have been embodied in
management fees charged by Pages to the Company. Those fees for the nine month
periods ended September 30, 1996, and 1995 and for the years ended December 31,
1995, 1994 and 1993 were in the amounts of $375,000, $375,000, $500,000,
$500,000 and $1,287,019, respectively. The allocation of costs and expenses by
Pages to the Company was based on methods Pages believes are reasonable. The
portion of such costs which CA Short believes will continue to be incurred
after the Distribution is approximately $30,000 per year. The balance of such
costs which are not expected to continue after the Distribution relates to
duplicative management responsibilities for financing and operating activities
and transportation and administration costs which will be eliminated by the
Distribution.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED SHARES
Under the Company's Certificate of Incorporation ("Certificate" or
"Certificate of Incorporation"), the authorized capital stock of the Company
consists of 5,000,000 shares of Short Common Stock, par value $.01 per share,
and 300,000 shares of preferred stock, $.01 par value per share (the "Short
Preferred Stock"). Pages currently owns all outstanding shares of Short Common
Stock. No shares of Short Preferred Stock have been issued. Immediately after
the Distribution, based on the number of shares of Pages Common Stock
outstanding as of September 30, 1996 (and assuming a distribution ratio of one
and one-half shares of Short Common Stock for every ten shares of Pages Common
Stock), approximately 915,293 shares of Short Common Stock and no shares of the
Short Preferred Stock will be issued and outstanding. Pages will own no shares
of Common Stock after the Distribution.
COMMON STOCK
Holders of Short Common Stock are entitled to one vote for each share on
all matters voted on by stockholders. All shares of Short Common Stock to be
distributed will be fully paid and nonassessable. Holders of Short Common Stock
do not have any subscription, redemption or conversion privileges. Subject to
the preferences or other rights of any Short Preferred Stock that may issued
from time to time, holders of common stock are entitled to participate ratably
in dividends on the Short Common Stock as are declared by the Board of
Directors. Holders of Short Common Stock are entitled to share ratably in all
assets available for distribution to stockholders in the event of liquidation
or dissolution of the Company, subject to distribution of the preferential
amount, if any, to be distributed to holders of Short Preferred Stock.
20
<PAGE> 34
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the Board, without
any vote or action by the holders of Short Common Stock, to issue Short
Preferred Stock from time to time in one or more series. The Board is
authorized to determine the number of shares and designation of any series of
Short Preferred Stock and the dividend rights, dividend rate, conversion rights
and terms, voting rights (full or limited, if any), redemption rights and
terms, liquidation preferences and sinking fund terms of any series of Short
Preferred Stock. Issuance of Short Preferred Stock would be subject to the
applicable rules of the NASD or other organizations on whose systems the stock
of the Company may then be quoted or listed. Depending upon the terms of Short
Preferred Stock established by the Board, any or all series of Short Preferred
Stock could have preference over the Short Common Stock with respect to
dividends and other distributions and upon liquidation of the Company. Issuance
of any such shares with voting powers, or issuance of additional shares of
Short Common Stock, would dilute the voting power of the outstanding Short
Common Stock.
NO PREEMPTIVE RIGHTS
No holder of any capital stock of the Company has any preemptive right to
subscribe for or purchase any securities of any class or kind of the Company.
TRADING OF SHORT COMMON STOCK
No current public trading market exists for Short Common Stock, although a
"when issued" market may develop prior to the Distribution Date. Although the
Company intends to apply for a listing if it is eligible, the Company does not
expect to be eligible for listing of its common stock on the Nasdaq Small Cap
Market upon completion of the Distribution. Trading, if any, in the Short
Common Stock will be conducted in the over-the-counter market on the NASD's OTC
Electronic Bulletin Board Service or in what are commonly referred to as the
"pink sheets." The extent of the market for the Short Common Stock and the
prices at which Short Common Stock may trade prior to or after the Distribution
cannot be predicted. See "Risk Factors -- Absence of Public Market; Possible
Illiquidity of Trading Market; Possible Volatility of Stock Price."
Stockholders should refer any questions concerning trading in either Short
Common Stock or Pages Common Stock to their brokers.
Shares of Short Common Stock distributed to stockholders of Pages will be
freely transferable, except for shares received by persons who may be deemed to
be "affiliates" of the Company under the Securities Act. Persons who may be
deemed to be affiliates of the Company after the Distribution generally include
individuals or entities that control, are controlled by or are under common
control with the Company. Affiliates of the Company may sell their Short Common
Stock only pursuant to an effective registration statement under the Securities
Act of 1933, or an exemption from the registration requirements of the
Securities Act.
TRANSFER AGENT AND REGISTRAR
The Huntington National Bank, Columbus, Ohio, will be the transfer agent and
registrar for the Short Common Stock immediately following the Distribution.
ANTITAKEOVER EFFECTS OF THE COMPANY'S CERTIFICATE
Certain of the provisions of the Company's Certificate of Incorporation may
discourage certain types of transactions that may involve an actual or
threatened change of control of the Company and encourage any person who might
seek to acquire control of the Company to negotiate with the Company's Board of
Directors. Management of Pages and the Company believe that generally the
interests of the Company's stockholders would be served best if any change in
control results from negotiations with its Board of the proposed terms, such as
the price to be paid, the form of consideration and the anticipated tax effects
of the transaction.
21
<PAGE> 35
The provisions described herein may reduce the vulnerability of the Company
to an unsolicited proposal for a takeover of the Company that does not
contemplate the acquisition of all its outstanding shares of capital stock at
an adequate price or is otherwise unfair to its stockholders or an unsolicited
proposal for the restructuring or sale of all or part of the Company.
Management of Pages and the Company believe that, as a general rule, such
proposals would not be in the best interests of the Company and its
shareholders. However, to the extent that these provisions do not discourage
takeover attempts, they could make it more difficult to accomplish transactions
that are opposed by the incumbent Board and could deprive stockholders of
opportunities to realize temporary takeover premiums for their shares or other
advantages that large accumulations of stock would provide.
The description below is a summary of material terms and is qualified in
its entirety by reference to the Company's Certificate of Incorporation filed
as an exhibit to the Company's Registration Statement on Form 10 of which this
Information Statement is a part.
PREFERRED STOCK AND ADDITIONAL COMMON STOCK
Under the Company's Certificate of Incorporation, the Board has authority
to provide by resolution for issuance of shares of one or more series of Short
Preferred Stock. The Board is authorized to fix by resolution the terms and
conditions of each series. See "Description of Capital Stock -- Preferred
Stock." The Board also may issue additional shares of authorized but unissued
shares of Short Common Stock.
The Company believes that the availability of Short Preferred Stock will
provide the Company with increased flexibility to facilitate possible future
financings and acquisitions and will allow the Company to better meet other
corporate needs that might arise. The authorized shares of Short Preferred
Stock, as well as authorized but unissued shares of Short Common Stock, will be
available for issuance without the expense and delay of stockholder action,
unless stockholder action is required by applicable law or the rules of the
NASD or other stock exchange or organization on which any class of stock of the
Company may then be quoted or listed.
These provisions give the Board of Directors the power to approve the
issuance of a series of Short Preferred Stock, or additional Short Common
Stock, with terms that could either impede or facilitate the completion of a
merger, tender offer or other takeover attempt. For example, the issuance of
new shares might impede a business combination if the terms of those shares
include series voting rights that would enable a holder to block business
combinations, or the issuance of new shares might facilitate a business
combination if those shares have general voting rights sufficient to cause an
applicable percentage vote required to be satisfied. The Board of Directors of
the Company will make any determination regarding issuance of additional shares
based on its judgment as to the best interest of its stockholders, customers,
employees, or other constituencies.
CONTROL SHARE ACQUISITION STATUTE
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203). Section 203 prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in which the person
became an interested stockholder, unless (i) prior to such time, the Board of
Directors of the corporation approves either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owns
at least 85% of the outstanding voting stock excluding certain shares held by
employee director and employee stock plans, or (iii) at or subsequent to such
time the business combination is approved by the Board of Directors and by the
affirmative vote of at least 66 2/3% of the outstanding voting stock that is
not owned by the interested stockholder. For purposes of Section 203, a
"business combination" includes, among other things, a merger, asset sale or
other transaction resulting in a financial benefit to the interested
stockholder, and an "interested stockholder" is generally a person who,
together with affiliates and associates, owns (or within three years, owned)
15% or more of the Company's voting stock.
22
<PAGE> 36
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145(a) of the Delaware General Corporation Law (the "DGCL")
provides in relevant part that "a corporation shall have power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful." With
respect to derivative actions, Section 145(b) of the DGCL provides in relevant
part that "[a] corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor...[by reason of his service in one of the capacities
specified in the preceding sentence] against expenses (including attorney's
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was bought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper." The Company's Certificate of Incorporation provides for
such indemnification to the fullest extent provided for by the DGCL.
The Company's Certificate of Incorporation provides that no director of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director except as limited
by the DGCL. The Certificate of Incorporation also provides that no amendment
or repeal of such provision shall apply to or have any effect on the right to
indemnification permitted thereunder with respect to claims arising from acts
or omissions occurring in whole or in part before the effective date of such
amendment or repeal whether asserted before or after such amendment or repeal.
The Company's Bylaws provide that the Company shall indemnify to the full
extent authorized by law each of its directors and officers against expenses
incurred in connection with any proceeding arising by reason of the fact that
such person is or was an agent of the corporation.
The Company has entered into indemnification agreements with its directors
and certain of its officers and has received a binder for officer and director
liability insurance in the amount of $3,000,000.
PRICE RANGE OF PAGES COMMON STOCK
The Pages Common Stock is traded on the Nasdaq National Market under the
symbol "PAGZ". The following table sets forth for the periods indicated the
high and low sales prices of the Pages Common Stock as reported by the Nasdaq
National Market.
<TABLE>
<CAPTION>
SALES PRICES
HIGH LOW
---- -----
<S> <C> <C>
CALENDAR YEAR THROUGH SEPTEMBER 30, 1996
Third Quarter.............................. 2 1/2 1 1/4
Second Quarter............................. 3 1
First Quarter.............................. 2 1/8 1 1/8
CALENDAR YEAR ENDING DECEMBER 31, 1995
Fourth Quarter............................. 13 3/4 9 1/2
Third Quarter.............................. 11 7/8 9 5/8
Second Quarter............................. 10 1/4 6
First Quarter.............................. 7 5 7/8
CALENDAR YEAR ENDED DECEMBER 31, 1994
Fourth Quarter............................. 9 3/4 6 1/2
Third Quarter.............................. 7 4
Second Quarter............................. 11 8 1/4
First Quarter.............................. 12 1/4 10 1/4
</TABLE>
On November 12, 1996, Pages announced that it intended to pursue the
spin-off of the Company, subject to certain conditions precedent. On November
11, 1996, the last trading day before the announcement, the Pages Common Stock
traded at prices ranging from a low of $2.125 per share to a high of $2.50 per
share.
23
<PAGE> 37
INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Deloitte & Touche LLP to
audit the Company's financial statements for the year ending December 31, 1996.
The financial statements as of December 31, 1995 and 1994 and for the years
then ended, included in this Information Statement, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein. The financial statements as of December 31, 1993 and for the
year then ended, also included in this Information Statement, have been audited
by Hausser & Taylor, independent auditors, as stated in their report appearing
herein.
On October 28, 1994, Pages dismissed both Hausser & Taylor as its
principal independent accountants and Arthur Andersen as its independent
auditor of its U.K. subsidiary, School Book Fairs Limited. The reports of
Hausser & Taylor on the financial statements for the prior two fiscal years
contained no adverse opinion or disclaimer of opinion and were not qualified
or modified as to uncertainty, audit scope or accounting principles. The
report dated March 25, 1994, of Hausser & Taylor on the 1993 and 1992 financial
statements expressed an unqualified opinion with reliance on the audit report
of Author Andersen regarding their audits of the combined financial statements
of School Book Fairs Limited. The reports of Arthur Andersen on the financial
statements for the prior two fiscal years contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle. The Pages Audit Committee participated in
and approved the decision to change independent accountants.
In connection with the audits of Pages for fiscal years ended December 31,
1992, and 1993 and through October 28, 1994, there were no disagreements with
Hausser & Taylor on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements if
not resolved to the satisfaction of Hausser & Taylor would have caused them to
make reference thereto in their report on the financial statements for such
years.
In connection with the audits of Pages for fiscal years ended December 31,
1992, and 1993 and through October 28, 1994, there were no disagreements with
Arthur Andersen on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of Arthur Andersen would have caused them to make
reference thereto in their report on the financial statements for such years.
During fiscal years ended December 31, 1992, and 1993 and through October
28, 1994, there were no reportable events (as defined in Securities and
Exchange Commission Regulation S-K Item 304(a)(l)(v)) by either Hausser & Taylor
or Arthur Andersen.
Pages received from both Hausser & Taylor and Arthur Andersen letters
addressed to the Securities and Exchange Commission stating that they agree
with statements substantially similar to the foregoing included in Pages' Form
8-K dated November 2, 1994, which was filed with the Securities and Exchange
Commission.
Pages engaged Deloitte & Touche LLP as its new independent accountants as
of October 28, 1994. During the fiscal years ended December 31, 1992, and 1993
and through October 28, 1994, Pages had not consulted with Deloitte & Touche
LLP on items which (i) were or should have been subject to Statement on
Auditing Standards No. 50 or (ii) concerned the subject matter of a
disagreement or reportable event with the former auditors.
24
<PAGE> 38
CLYDE A. SHORT COMPANY
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants..................................................................F-2
Independent Auditors' Report..............................................................................F-3
Statement of Operations...................................................................................F-4
Balance Sheets............................................................................................F-5
Statements of Stockholder's Equity........................................................................F-6
Statements of Cash Flows..................................................................................F-7
Notes to Financial Statements.............................................................................F-8
</TABLE>
F-1
<PAGE> 39
[HAUSSER & TAYLOR LETTERHEAD]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholder
Clyde A. Short Company
We have audited the accompanying statements of operations, cash flows and
stockholder's equity of Clyde A. Short Company for the year ended December 31,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations of Clyde A. Short Company for
the year ended December 31, 1993, in conformity with generally accepted
accounting principles.
/s/ Hausser & Taylor
HAUSSER & TAYLOR
Columbus, Ohio
March 25, 1994
F-2
<PAGE> 40
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Clyde A. Short Company, Inc.
Shelby, North Carolina
We have audited the accompanying balance sheets of Clyde A. Short Company, Inc.
(the "Company") as of December 31, 1995 and 1994, and the related statements of
operations, stockholder's equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1995 and
1994, and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Tampa, Florida
October 11, 1996
F-3
<PAGE> 41
CLYDE A. SHORT COMPANY
STATEMENTS OF OPERATIONS
For the nine month periods ended September 30, 1996 and
1995 and the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
September 30, September 30,
1996 1995 December 31, December 31, December 31,
(Unaudited) (Unaudited) 1995 1994 1993
---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $ 13,694,621 $ 12,641,214 $ 22,620,011 $ 25,157,704 $ 28,909,206
-------------- -------------- -------------- -------------- --------------
Costs and expenses:
Cost of goods sold 8,396,341 7,780,654 13,862,313 15,526,961 18,951,332
Selling, general and administrative 5,722,472 5,509,082 8,155,260 8,880,315 8,003,242
Interest 57,929 285,595 416,189 430,376 252,494
Depreciation and amortization 252,112 281,028 362,523 297,506 265,290
Management fee paid to Pages 375,000 375,000 500,000 500,000 1,287,019
-------------- -------------- -------------- -------------- --------------
14,803,854 14,231,359 23,296,285 25,635,158 28,759,377
-------------- -------------- -------------- -------------- --------------
Income/(loss) from continuing
operations (1,109,233) (1,590,145) (676,274) (477,454) 149,829
(Provision)/benefit for income taxes 120,900 509,700 248,600 193,500 (57,000)
-------------- -------------- -------------- -------------- --------------
NET INCOME/ (LOSS) $ (988,333) $ (1,080,445) $ (427,674) $ (283,954) $ 92,829
-------------- -------------- -------------- -------------- --------------
Proforma income/(loss) per
common share $ (1.08) $ - $ 0.47 - -
-------------- -------------- -------------- -------------- --------------
Proforma weighted average common
and equivalent shares 915,293 - 915,293 - -
-------------- -------------- -------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 42
CLYDE A. SHORT COMPANY
BALANCE SHEETS
September 30, 1996 and December 31, 1995 and 1994
<TABLE>
<CAPTION>
September 30, December 31, December 31,
ASSETS 1996 1995 1994
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Current assets:
Cash $ 76,932 $ 226,678 $ 13,414
Accounts receivable 2,168,752 6,101,629 7,278,185
Inventory 6,649,996 6,780,412 9,709,989
Prepaid expenses 944,210 824,967 875,014
------------- ------------- -------------
Total current assets 9,839,890 13,933,686 17,876,602
------------- ------------- -------------
Building and equipment:
Buildings 3,186,680 3,186,680 3,180,131
Equipment 1,840,095 1,451,760 1,296,633
------------- ------------- -------------
5,026,775 4,638,440 4,476,764
Less accumulated depreciation (1,262,264) (1,037,014) (758,766)
------------- ------------- -------------
3,764,511 3,601,426 3,717,998
Land 211,468 211,468 211,468
------------- ------------- -------------
Total property and equipment, net 3,975,979 3,812,894 3,929,466
------------- ------------- -------------
Other assets:
Cost in excess of net assets acquired, net of
accumulated amortization of $224,902,
$199,280 and $165,116, respectively 1,141,565 1,167,187 1,201,351
Other 616,257 598,256 576,165
------------- ------------- -------------
1,757,822 1,765,443 1,777,516
------------- ------------- -------------
TOTAL ASSETS $ 15,573,691 $ 19,512,023 $ 23,583,584
============= ============= =============
<CAPTION>
September 30, December 31, December 31,
LIABILITIES AND 1996 1995 1994
STOCKHOLDER'S EQUITY ---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Current liabilities:
Accounts payable $ 657,816 $ 1,276,197 $ 3,431,220
Short-term debt obligations 2,447,680 4,827,662 5,016,270
Accrued liabilities 271,983 394,855 391,334
Due to Pages 4,124,975 4,124,975 6,613,372
Advance deposits 5,940,243 5,648,107 4,214,887
------------- ------------- -------------
Total current liabilities 13,442,697 16,271,796 19,667,083
------------- ------------- -------------
Deferred tax liability - 120,900 369,500
------------- ------------- -------------
Commitments and contingencies (note 3) - - -
Stockholder's equity:
Common shares: $100 par value; authorized 33,491 33,491 33,491
334.91 shares; 334.91 issued and outstanding
Capital in excess of par value 4,124,494 4,124,494 4,124,494
Accumulated deficit (2,026,991) (1,038,658) (610,984)
------------- ------------- -------------
Total stockholder's equity 2,130,994 3,119,327 3,547,001
------------- ------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 15,573,691 $ 19,512,023 $ 23,583,584
============= ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 43
CLYDE A. SHORT COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
For the nine month period ended September 30, 1996 (unaudited) and for the
years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Capital in
Common Excess of Accumulated
Shares Stock Par Value Deficit Total
------ ----- --------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance December 31, 1992 $334.91 33,491 $ 4,124,494 $ (419,859) $ 3,738,126
Net Income 92,829 92,829
-------- ----------- ----------- ----------- -----------
Balance December 31, 1993 334.91 33,491 4,124,494 (327,030) 3,830,955
Net loss (283,954) (283,954)
-------- ----------- ----------- ----------- -----------
Balance December 31, 1994 334.91 33,491 4,124,494 (610,984) 3,547,001
Net loss (427,674) (427,674)
-------- ----------- ----------- ----------- -----------
Balance December 31, 1995 334.91 33,491 4,124,494 (1,038,658) 3,119,327
Net loss (988,333) (988,333)
-------- ----------- ----------- ----------- -----------
Balance September 30, 1996 334.91 $ 33,491 $ 4,124,494 $(2,026,991) $ 2,130,994
======== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 44
CLYDE A. SHORT COMPANY
STATEMENTS OF CASH FLOWS
For the nine month periods ended September 30, 1996 and 1995 and for the
years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
September 30, September 30, December 31, December 31, December 31,
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ (988,333) $ (1,080,445) $ (427,674) $ (283,954) $ 92,829
Adjustments to reconcile net (loss)/income
to cash provided by (used in) operating
activities:
Depreciation and amortization 252,112 281,028 362,523 297,506 265,290
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 3,932,877 5,574,813 1,176,556 1,425,658 (2,067,555)
Inventory 130,416 1,759,627 2,929,577 (2,150,382) (2,448,138)
Prepaid expenses and other assets (138,484) (112,207) (22,151) (420,470) (482,085)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities (741,253) (2,853,318) (2,151,502) (196,503) 1,547,200
Advance deposits 292,136 1,217,238 1,433,220 744,191 774,141
Deferred income taxes (120,900) (509,700) (248,600) (193,500) 501,094
------------ ------------ ------------ ------------ ------------
Total adjustments 3,606,904 5,357,481 3,479,623 (493,500) (1,910,053)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
operating activities 2,618,571 4,277,036 3,051,949 (777,454) (1,817,224)
------------ ------------ ------------ ------------ ------------
Cash flows from investing activities:
Payments for purchases of property and
equipment (388,335) (111,382) (161,676) (254,787) (809,364)
------------ ------------ ------------ ------------ ------------
Cash used in investing activities (388,335) (111,382) (161,676) (254,787) (809,364)
------------ ------------ ------------ ------------ ------------
Cash flows from financing activities:
Due to Pages -- (2,488,397) (2,488,397) 2,670,919 28,760
Proceeds from debt obligations 17,433,276 19,737,449 30,982,347 31,842,084 27,642,656
Principal payments on debt (19,813,258) (21,378,260) (31,170,959) (33,571,350) (25,048,672)
------------ ------------ ------------ ------------ ------------
Cash (used in) provided by
financing activities (2,379,982) (4,129,208) (2,677,009) 941,653 2,622,744
------------ ------------ ------------ ------------ ------------
Increase (decrease) in cash (149,746) 36,466 213,264 (90,588) (3,844)
Cash, beginning of year 226,678 13,414 13,414 104,002 107,846
------------ ------------ ------------ ------------ ------------
Cash, end of year $ 76,932 $ 49,860 $ 226,678 $ 13,414 $ 104,002
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE> 45
CLYDE A. SHORT COMPANY
NOTES TO FINANCIAL STATEMENTS
For the nine month periods ended September 30, 1996 and 1995 (unaudited)
and the years ended December 31, 1995, 1994 and 1993
Information pertaining to the nine month periods ended September 30,
1996 and September 30, 1995, the interim financial statements, is unaudited.
The accompanying interim financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair statement of the
results for the interim periods presented. Such adjustments consist solely of
normal recurring accruals. Results for interim periods are not necessarily
indicative of results for a full year. Effective November 12, 1996, Clyde A.
Short Company (the "Company") changed its name to CA Short Company and
reincorporated in the State of Delaware from North Carolina.
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company is engaged in the design, implementation, and fulfillment
of incentive awards and recognition programs for businesses throughout the
United States. The Company's corporate headquarters is located in Shelby,
North Carolina.
BASIS OF PRESENTATION
On February 28, 1990, in a transaction accounted for as a purchase, all
of the outstanding stock of the Company was acquired by Pages, Inc. ("Pages").
These financial statements were prepared under the resulting new basis of
accounting that reflects the fair values of assets acquired and liabilities
assumed.
USE OF MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. The reported amounts of revenues and expenses during the reporting
period may be affected by the estimates and assumptions management is required
to make. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenues from the sale of incentive awards are recognized upon shipment
and delivery of the related merchandise. Revenues from services are
insignificant. Returns from the sales of incentive awards and from services are
insignificant.
ACCOUNTS RECEIVABLE
The Company sells its products to numerous commercial and industrial
customers, across the United States and Canada. The accounts receivable are well
diversified and are expected to be repaid in the normal course of business.
F-8
<PAGE> 46
INVENTORY
Inventory consists of finished goods which are comprised of general
retail merchandise. Inventory is valued at the lower of cost or market using the
first-in, first-out (FIFO) method.
PREPAID EXPENSES
Prepaid expenses at September 30, 1996 and December 31, 1995 and 1994
include $893,919, $747,233 and $788,047, respectively, of prepaid selling costs
that include costs for commissions paid to salespeople that relate to advance
deposits for the sales of incentive and recognition awards programs. Such costs
are directly attributable to obtaining specific future commitments and are
expensed in the year the related sales occur.
BUILDINGS AND EQUIPMENT
Buildings and equipment are recorded at cost and depreciated over their
estimated useful life on the straight-line method. Estimated useful lives range
from three to thirty-one years. Major repairs and betterments are capitalized;
minor repairs are expensed as incurred. Depreciation expense for the nine month
periods ended September 30, 1996 and 1995 and for the years ended December 31,
1995, 1994 and 1993, totaled $225,250, $205,298, $278,254, $248,480 and
$217,104, respectively.
COST IN EXCESS OF NET ASSETS ACQUIRED AND OTHER ASSETS
Cost in excess of net assets acquired are amortized on a straight line
basis over 40 years. Management periodically evaluates its accounting for cost
in excess of net assets acquired by considering such factors as historical
performance, current operating results and future operating income. At each
balance sheet date, the Company evaluates the realizability of goodwill based
upon expectation of nondiscounted cash flows and operating income. Based upon
its most recent analysis, the Company believes that no material impairment of
goodwill exists at September 30, 1996. Based on this periodic review,
management believes that the carrying value of cost in excess of net assets
acquired is reasonable and the amortization period is appropriate. Amortization
expense on cost in excess of net assets acquired for the nine month periods
ended September 30, 1996 and 1995 and for the years ended December 31, 1995,
1994 and 1993 and totaled $25,622, $25,622, $34,162 and $34,162 and $34,162,
respectively.
Other assets include cash surrender value of life insurance and
deferred loan costs. The deferred loan costs are amortized using the straight
line method over the terms of the related contracts. Amortization expense
totaled $1,240, $50,108, $50,107, $14,864 and $14,024, for the nine month
periods ended September 30, 1996 and 1995 and for the years ended December 31,
1995, 1994 and 1993, respectively.
DUE TO PARENT
Amounts due to parent are net borrowings which occurred in the ordinary
course of business. No interest has been recorded on the outstanding balance
(See Note 6).
ADVANCE DEPOSITS
Advance deposits represents customer prepayments for goods and services
that the Company will deliver in the future. Upon delivery of such goods and
services, advance deposits are recognized as revenues.
F-9
<PAGE> 47
PER SHARE DATA
Per share amounts have been computed based on the weighted average
number of common shares outstanding during the period.
PROFIT SHARING PLANS
The Company has a noncontributory profit sharing retirement plan (the
"Plan"), covering a significant number of employees for which accrued costs are
funded. Company contributions to the Plans are discretionary. There were no
Company contributions for the nine month periods ended September 30, 1996 and
1995 and for the years ended December 31, 1995, 1994 and 1993.
LONG-LIVED ASSETS
FASB has issued SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" which requires
adoption in 1996. The general requirements of SFAS No. 121 apply to the fixed
assets of the Company and require impairment to be considered whenever assets
are disposed of or whenever events or change in circumstances indicate that the
carrying amount of the asset will not be recoverable based on expected future
cash flows of the asset. The Company does not anticipate that the adoption of
SFAS No. 121 will have a material impact on its financial position or results of
operations.
2. DEBT OBLIGATIONS
Debt obligations consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31, December 31,
1996 1995 1994
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Line of credit with interest at prime plus
1 percent; interest payable monthly,
maturing on June 7, 1997, collateralized by substantially
all assets of the Company ($2,552,320 available
at September 30, 1996) $2,447,680 $4,827,622 $5,016,272
</TABLE>
The interest rate for the line as of December 31, 1995 and 1994 was prime + 1/2
percent and prime + 1/2 percent, respectively. As of December 31, 1995, the line
was due in full by June 1, 1996, subject to annual renewals. As of December 31,
1994, the line was due in full by June 1, 1995, subject to annual renewals.
The prime interest rate at September 30, 1996 and December 31, 1995 and 1994,
was 8 1/4, 8 1/2 and 8 1/2 percent, respectively. The carrying amount of the
Company's short term debt obligations approximates fair value.
F-10
<PAGE> 48
On March 27, 1996, the Company's parent, Pages, entered into a $16
million long-term revolving credit facility which replaced the previous multiple
credit lines that totaled $25 million, of which the above debt obligations as of
December 31, 1995 and 1994 represent the Company's portion. The maximum line
amount is calculated, in part, based on Pages eligible borrowing base that
includes inventory and other eligible accounts. The credit agreement contains
certain restrictive provisions for Pages including, among others, maintaining a
minimum tangible net worth, limitation on dividends paid on common stock to
$100,000 annually and certain other restrictions on actions which require lender
pre-approval.
The Company has received a proposal from the same creditor to provide
to it a credit facility in the form of a $4.5 million revolving line of credit.
Under the proposal, borrowings will be limited to the sum of 80% of accounts
receivable less than 90 days old plus 60% of eligible inventory, plus 75% of
the appraised value of the Company's real estate. Eligible inventory is limited
to $3.5 million from January through May, and $6.5 million from June through
December. The credit facility will have an expiration date of June 30, 1997 and
will bear interest at the lender's prime rate of interest plus one percent,
floating daily. All business assets of the Company will be pledged as
collateral for the credit facility. The credit facility will also include
certain financial covenants, including covenants that the Company maintain
certain financial ratios including a minimum tangible capital base and a
minimum net profit from operations. In addition, the credit facility will
contain limitations on capital expenditures, fixed asset sales, loans and/or
advances to shareholders and employees and restrictions on operating leases.
There can be no assurances that the Company will ultimately receive a
commitment from the creditor that will be accepted by the Company.
The Company also plans to enter into a $5 million 7 percent
subordinated debenture with Pages subsequent to the Distribution in
satisfaction of amounts due to Pages by the Company. Any excess of the amount
due to Pages as of the Distribution over the $5 million subordinated debenture
will be recorded as paid in capital. Principal payments will be $100,000 per
year for the first four years, with a balloon payment due at the end of the
fifth year for the remaining principle balance. Interest will be 7 percent
per annum and the interest will be payable quarterly.
3. COMMITMENTS AND CONTINGENCIES
The Company is obligated under various noncancelable operating leases.
Operating leases are principally for office and warehouse facilities, equipment
and vehicles. Rent expense under operating leases amounted to $109,295,
$109,480, $151,608, $76,037 and $102,500, for the six month periods ended
June 30, 1996 and 1995 and for the years ended December 31, 1995, 1994 and
1993, respectively. Future minimum lease payments under leases are as follows:
<TABLE>
<CAPTION>
Year Ended
December 31, Operating
------------ ---------
<S> <C>
1996 $118,418
1997 54,261
1998 8,778
</TABLE>
The Company is also involved in certain legal proceedings in the
ordinary course of its business which, if determined adversely to the Company
would, in the opinion of management, not have a material adverse effect on the
Company or its operations.
4. INCOME TAXES
The Company employs SFAS No. 109, "Accounting for Income Taxes". Under
SFAS No. 109, the liability method is used in accounting for income taxes.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and are measured using
the enacted tax rates and laws that will be in effect when the differences are
expected to reverse. Under SFAS No. 109, if on the basis of available evidence,
it is more likely than not that all or a portion of the deferred tax asset will
not be realized, the asset must be reduced by a valuation allowance. Based on
available evidence, a valuation allowance has been established for an amount of
the asset that more likely than not will not be recognized.
Temporary differences between income for financial reporting purposes
and tax reporting purposes relate primarily to accounting methods for inventory
costs, accrued and prepaid expenses and reserves, and depreciation.
F-11
<PAGE> 49
For the periods presented, the (benefit) provision for income taxes consisted
of the following:
<TABLE>
<CAPTION>
September 30, September 30, December 31, December 31, December 31,
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Current - - - - $ 19,000
------------ ------------ ------------ ------------ ------------
Deferred
Federal $ (102,800) $ (433,300) $ (211,300) $ (164,500) 30,000
State and local (18,100) (76,400) (37,300) (29,000) 8,000
------------ ------------ ------------ ------------ ------------
Net deferred benefit (provision) (120,900) (509,700) (248,600) (193,500) 38,000
------------ ------------ ------------ ------------ ------------
Net (benefit) provision for taxes $ (120,900) $ (509,700) $ (248,600) $ (193,500) $ 57,000
============ ============ ============ ============ ============
</TABLE>
For the periods presented, a reconciliation of income taxes based upon the
application of the federal statutory tax rate is as follows:
<TABLE>
<CAPTION>
September 30, September 30, December 31, December 31, December 31,
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Benefit for taxes at statutory rate $ (343,300) $ (447,300) $ (229,900) $ (162,350) $ 51,000
Change in effective tax rate: -- -- -- (25,100) (9,000)
Goodwill amortization 10,300 10,300 13,650 13,650
State taxes net of federal benefit (60,600) (78,900) (40,550) (28,650) 11,000
Change in valuation allowance 266,500 - - - -
Other 6,200 6,200 8,200 8,950 4,000
------------ ------------ ------------ ------------ ------------
Total (benefit) provision for income taxes $ (120,900) $ (509,700) $ (248,600) $ (193,500) $ 57,000
============ ============ ============ ============ ============
</TABLE>
As of the periods presented, the components of net deferred taxes are as
follows:
<TABLE>
<CAPTION>
September 30, September 30, December 31, December 31,
1996 1995 1995 1994
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Assets;
Inventory costs capitalized for
tax purposes $ 108,400 $ 129,600 $ 100,000 $ 146,100
Accruals and reserves to be
expensed as paid for tax
purposes 73,200 73,200 73,200 45,200
Other 7,700 5,000 5,650 2,950
Net operating loss carryforwards 820,200 654,550 427,600 142,750
Valuation allowance (266,500) - - -
------------ ------------ ------------ ------------
Deferred tax asset 743,000 862,350 606,450 337,000
Liabilities:
Excess of tax over financial
accounting depreciation
and amortization (743,000) (722,150) (727,350) (706,500)
------------ ------------ ------------ ------------
Net deferred tax (liability) $ - $ 140,200 $ (120,900) $ (369,500)
============ ============ ============ ============
</TABLE>
F-12
<PAGE> 50
At December 31, 1995 and 1994, respectively, operating loss
carryforwards of approximately $1,069,000 and $357,000 offset future taxable
income and will expire during the years 2009 through 2010.
5. SUPPLEMENTAL DISCLOSURE FOR CASH FLOW INFORMATION
Cash paid for interest during the six month periods ended June 30, 1996
and 1995 and for the years ended December 31, 1995, 1994 and 1993 aggregated
$84,105, $349,736, $442,638, $366,236 and $253,745 and cash paid for taxes was
$0, $0, $0, $18,000 and $0 respectively.
6. RELATED PARTY TRANSACTIONS
For all periods presented Pages has provided services to and incurred
costs on behalf of the Company. Prior to the Distribution, Pages' management fee
was intended to encompass the element of Pages' financing costs to provide
non-interest bearing advances to the Company. Such element approximated
$263,000, $263,000, $450,000, $450,000 and $400,000, respectively, based on the
prime interest rate as applied to the average outstanding balance due to Pages
during the nine month periods ended September 30, 1996 and 1995 and during the
years ended December 31, 1995, 1994 and 1993. The remaining costs are for
certain services, including, but not limited to, administrative services,
transportation, tax services, accounting and reporting, management consultation,
legal services, and general corporate expenses, which have also been allocated
to the Company. The allocation of costs and expenses for these services were
based on methods that management believes are reasonable. The portion of such
costs which management believes will continue to be incurred subsequent to the
Distribution approximates $30,000. The balance of nonrecurring costs relates to
duplicative management responsibilities for financing and operating activities,
as well as other transportation and administrative costs which will be
eliminated by the Distribution.
Pages allocated general corporate expenses to the Company for the nine
month periods ended September 30, 1996 and 1995 and for the years ended
December 31, 1995, 1994 and 1993 in the amounts of $375,000, $375,000,
$500,000, $500,000 and $1,287,019, respectively.
7. SUBSEQUENT EVENT
The Company has adopted a 1996 Incentive Stock Option Plan which provides
for the grant, at the discretion of the Board of Directors, of options to
purchase up to 45,000 shares of Short Common Stock to key employees of the
Company. It is intended that options granted under such Plan qualify as
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended. No options have been granted under the plan.
The Company has also adopted a Non-Employee Director Stock Option
Plan, which provides for the grant, at the discretion of the Company's Board of
Directors, of options to purchase up to 40,000 shares of Short Common Stock
upon such terms as are determined by the Board in its discretion. No options
have been granted under the Plan.
F-13
<PAGE> 51
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
(2) Agreement and Plan of Merger
3(i).1 Certificate of Incorporation of Clyde A. Short Incorporated+
3(i).2 Certificate of Amendment to Certificate of Incorporation of Clyde A.
Short Incorporated+
3(ii) Bylaws of CA Short Company
4 Form of Stock Certificate
8 Form of Opinion of Johnson, Blakely, Pope, Bokor,
Ruppel & Burns, P.A.
10.1 Form of Distribution Agreement between the Company
and Pages, Inc.
10.2 CA Short Company 1996 Incentive Stock Option Plan
10.3 Form of Subordinated Debenture
10.4 Form of Security Agreement
10.5* Huntington Loan Documents
10.6 CA Short Company Non-Employee Director Stock Option Plan
23** Consent of Johnson, Blakely, Pope, Bokor,
Ruppel & Burns, P.A.
27 Financial Data Schedule+
99 Fairness Opinion of Recca & Company, Inc.
*To be filed by amendment.
**Included in Exhibit 8.
+ Previously filed.
<PAGE> 1
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Merger Agreement"), made as of
November 11, 1996, by and between Clyde A. Short Company, a North Carolina
corporation ("Short"), and CA Short Company, a Delaware corporation and a
wholly-owned subsidiary of Short ("CASI") (Short and CASI together referred to
as the Constituent Corporations").
WITNESSETH:
WHEREAS, Short is a corporation duly organized and existing under the
laws of the State of North Carolina;
WHEREAS, CASI is a corporation duly organized and existing under the
laws of the State of Delaware and is a wholly-owned subsidiary of Short:
WHEREAS, the Boards of Directors of the Constituent Corporations deem
it advisable and in the best interests of their respective corporations and
their shareholders that Short be merged with and into CASI, with CASI being the
surviving corporation (the "Merger");
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved this Merger Agreement by resolutions duly adopted by their respective
Boards of Directors in accordance with the laws of their respective
jurisdictions of incorporation; and
WHEREAS, the Constituent Corporations desire to adopt this Merger
Agreement as a plan of reorganization pursuant to the provisions of Section 368
of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements, and in accordance with applicable laws, the parties hereto agree as
follows:
1. SURVIVING CORPORATION. At the Effective Time (as hereinafter
defined), Short shall be merged with and into CASI, with CASI being the
surviving corporation (the "Surviving Corporation") of the Merger. At the
Effective Time, the corporate existence of Short shall cease, and the
Surviving Corporation, to the extent permitted by applicable law, shall
succeed to all the business, properties, assets and liabilities of the
Constituent Corporations.
2. AUTHORIZED SHARES. The authorized capital stock of the Surviving
Corporation consists of 5,000,000 shares of Common Stock, $.01 par value
("Surviving Corporation Common Stock"), and 300,000 shares of Preferred Stock,
$.01 par value ("Surviving Corporation Preferred Stock").
<PAGE> 2
3. CERTIFICATE OF INCORPORATION AND BYLAWS.
(a) The certificate of incorporation of CASI as in effect at
the Effective Time shall be the certificate of incorporation of the Surviving
Corporation from and after the Effective Time.
(b) The bylaws of CASI as in effect at the Effective Time
shall be the bylaws of the Surviving Corporation from and after the Effective
Time.
4. DIRECTORS AND OFFICERS.
(a) The directors of Short immediately prior to the Effective
Time shall be the directors of the Surviving Corporation, to hold office in
accordance with the bylaws of the Surviving Corporation until their successors
are duly appointed or elected and qualified.
(b) The officers of Short immediately prior to the Effective
Time shall be the officers of the Surviving Corporation to hold office in
accordance with the bylaws of the Surviving Corporation until their successors
are duly appointed or elected and qualified.
5. PRINCIPAL OFFICE. The principal office of the Surviving
Corporation in the State of Delaware shall be at Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware 19801.
6. CONSENT TO SERVICE OF PROCESS. The Surviving Corporation
hereby consents to be sued and served with process in the State of North
Carolina in any proceeding in the State of North Carolina, and the Surviving
Corporation hereby irrevocably appoints CT Corporation System, 225 Hillsborough
Street, Raleigh, North Carolina 27603, as its agent to accept service of process
in any such proceeding in the State of North Carolina to enforce against the
Constituent Corporations any obligation of Short and the rights of dissenting
shareholders of Short.
7. APPOINTMENT OF STATUTORY AGENT. It is desired that the
Surviving Corporation transact business in the State of North Carolina as a
foreign corporation from and after the Effective Date. The Surviving Corporation
hereby constitutes and appoints, as the statutory and designated agent of the
Surviving Corporation upon whom process, notice or demand against the Surviving
Corporation may be served within the State of North Carolina, CT Corporation
System, 225 Hillsborough Street, Raleigh, North Carolina 27603.
8. CORPORATE PURPOSES. The purposes for which the Surviving
Corporation is formed are to engage in any lawful act or activity for which
corporations may be formed under the general corporation law of
Delaware.
9. TERMS OF MERGER.
(a) At the Effective Time, each issued and outstanding share
of common stock, $100 par value ("Common Stock"), of Short shall, automatically
and without further act of either of the Constituent Corporations or of any
holder thereof, be extinguished and converted into one issued
2
<PAGE> 3
outstanding, fully paid and nonassessable share of Surviving Corporation Common
Stock. At the Effective Time, each issued share of Common Stock held in the
treasury of Short prior to the Effective Time shall, automatically and without
further act of either of the Constituent Corporations, be extinguished and
converted into one issued, outstanding, fully paid, nonassessable share of
Surviving Corporation Common Stock, held in the treasury of the Surviving
Corporation. The holder of each share so extinguished and converted (of record
on the shareholder records of Short at the Effective Time) shall be recorded on
the books of the Surviving Corporation as the holder of the number of shares of
Surviving Corporation Common Stock which such holder is entitled to receive; and
each certificate theretofore representing one or more shares of Common Stock
shall be deemed, for all corporate purposes, to evidence ownership of the same
number of shares of Surviving Corporation Common Stock which the holder of such
certificate is entitled to receive.
(b) Each person who, as a result of the Merger, holds one or
more certificates which theretofore represented one or more shares of Common
Stock may surrender any such certificate to the Surviving Corporation (or to any
agent designated for such purpose by the Surviving Corporation), and upon such
surrender, the Surviving Corporation shall, within a reasonable time, deliver to
such person in substitution and exchange therefor one or more certificates
evidencing the number of shares of Surviving Corporation Common Stock which such
person is entitled to receive in accordance with the terms of this Merger
Agreement in substitution for the number of shares of Common Stock, theretofore
represented by each certificate so surrendered; provided, however, that such
holders shall not be required to surrender any such certificates until such
certificates would normally be surrendered for transfer on the books of the
issuing corporation in the ordinary course of business.
(c) At and after the Effective Time, all of the issued and
outstanding shares of Common Stock of CASI held immediately prior to the
Effective Time shall be canceled and cease to exist, without any consideration
being payable therefor.
(d) At the Effective Time, each option to purchase shares of
Common Stock, outstanding immediately prior to the Effective Time shall
automatically and without further act of either of the Constituent Corporations,
become an option to purchase shares of Common Stock of the Surviving
Corporation, subject to the same terms and conditions and at the same option
price applicable to each such option immediately prior to the Effective Time.
10. TERMINATION AND ABANDONMENT. At any time prior to the
Effective Time and for any reason, this Merger Agreement may be terminated and
abandoned by the Board of Directors of either of the Constituent Corporations,
without notice of such action to the other Constituent Corporation,
notwithstanding approval of this Merger Agreement by the shareholders of one or
both of the Constituent Corporations.
11. AMENDMENT. At any time prior to the Effective Time, this
Merger Agreement may be amended, either before or after shareholder approval, by
an agreement in writing executed in the same manner as this Merger Agreement,
after due authorization of such action by the Boards of Directors of the
Constituent Corporations; provided, however, that this Merger
3
<PAGE> 4
Agreement may not be amended after shareholder approval if such amendment would
(A) alter or change the amount or kind of shares to be received by the
shareholders of either of the Constituent Corporations in the Merger, (B) alter
or change any term of the Certificate of Incorporation of the corporation which
will be the Surviving Corporation, (C) alter or change any of the terms and
conditions of this Merger Agreement if such alteration or change would adversely
affect the shareholders of either of the Constituent Corporations, or (D)
violate applicable law.
12. EFFECTIVE TIME OF MERGER. The Effective Time of the
Merger shall be 10:00 AM Eastern Time, November 12, 1996 (the "Effective Time").
CLYDE A. SHORT COMPANY
By: /s/ Charles R. Davis
-----------------------------
Charles R. Davis, President
By: /s/ Jeffrey A. Ross
-----------------------------
Jeffrey A. Ross, Secretary
CA SHORT COMPANY
By: /s/ Charles R. Davis
-----------------------------
Charles R. Davis, President
By: /s/ Jeffrey A. Ross
-----------------------------
Jeffrey A. Ross, Secretary
4
<PAGE> 5
CERTIFICATE OF ASSISTANT SECRETARY
OF
CLYDE A. SHORT COMPANY
I, Jeffrey A. Ross, the Secretary of Clyde A. Short Company, hereby
certify that the Agreement and Plan of Merger to which this certificate is
attached, after having been first duly signed on behalf of the corporation by
the President and Secretary under the corporate seal of said corporation, was
duly approved and adopted at a meeting of the shareholders of Clyde A. Short
Company held on November 8, 1996 by the holder of all of the outstanding shares
entitled to vote thereon.
WITNESS my hand and seal of said Jeffrey A. Ross this 8th day of
November, 1996.
/s/ Jeffrey A. Ross
-----------------------------
Secretary
CERTIFICATE OF SECRETARY
OF
CA SHORT COMPANY
I, Jeffrey A. Ross, the Secretary of CA Short Company, hereby certify
that the Agreement and Plan of Merger to which this certificate is attached,
after having been first duly signed on behalf of the corporation by the
President and Secretary under the corporate seal of said corporation, was duly
approved and adopted by the sole director of said corporation pursuant to
Subsection (f) of Section 251 of the Delaware General Corporation Law prior to
the issuance of any shares of stock of said corporation.
WITNESS my hand and seal of said Jeffrey A. Ross this 8th day of
November, 1996.
/s/ Jeffrey A. Ross
-----------------------------
Secretary
5
<PAGE> 1
EXHIBIT 3(ii)
BYLAWS
OF
CA SHORT COMPANY
ARTICLE I
STOCKHOLDERS
SECTION 1. Place of Stockholders' Meetings. All meetings of the
stockholders of the Corporation shall be held at such place or places, within or
outside the State of Delaware, as may be fixed by the Board of Directors from
time to time or as shall be specified in the respective notices thereof.
SECTION 2. Date, Hour and Purpose of Annual Meetings of Stockholders.
Annual Meetings of Stockholders shall be held on such day and at such time as
the Directors may determine from time to time by resolution, at which meeting
the stockholders shall elect, by a plurality of the votes cast at such election,
a Board of Directors, and transact such other business as may properly be
brought before the meeting. If for any reason a Board of Directors shall not be
elected at the Annual Meeting of Stockholders, or if it appears that such Annual
Meeting is not held on such date as may be fixed by the Directors in accordance
with the provisions of the Bylaws, then in either such event the Directors shall
cause the election to be held as soon thereafter as convenient.
SECTION 3. Special Meetings of Stockholders. Special
meetings of the stockholders entitled to vote may be called by the Chairman of
the Board, the President or any Vice-President, the Secretary or by the Board
of Directors.
SECTION 4. Notice of Meetings of Stockholders. Except as otherwise
expressly required or permitted by the laws of Delaware, not less than ten days
nor more than sixty days before the date of every stockholders' meeting the
Secretary shall give to each stockholder of record entitled to vote at such
meeting written notice stating the place, day and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called. Such notice, if mailed, shall be deemed to be given when deposited in
the United States mail, with postage thereon prepaid, addressed to the
stockholder at the post office address for notices to such stockholder as it
appears on the records of the Corporation.
An Affidavit of the Secretary or an Assisting Secretary or of a
transfer agent of the Corporation that the notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
<PAGE> 2
SECTION 5. Quorum of Stockholders.
(a) Unless otherwise provided by the laws of Delaware, at any meeting
of the stockholders the presence in person or by proxy of stockholders entitled
to case a majority of the votes thereat shall constitute a quorum.
(b) At any meeting of the stockholders at which a quorum shall be
present, the holders of a majority of shares representing votes entitled to be
cast, which holders are present in person or by proxy, may adjourn the meeting
from time to time until a quorum shall be present. Notice of any adjourned
meeting other than announcement at the meeting shall not be required to be
given, except as provided in paragraph (d) below and except where expressly
required by law.
(c) At any adjourned meeting at which a quorum shall be represent, any
business may be transacted which might have been transacted at the meeting
originally called, but only those stockholders entitled to vote at the meeting
as originally noticed shall be entitled to vote at any adjournment or
adjournments thereof, unless a new record date is fixed by the Board of
Directors.
(d) If an adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjournment meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the adjourned meeting.
SECTION 6. Chairman and Secretary of Meeting. The Chairman, or in his
absence, the President, or in his absence, any Vice-President, shall preside at
meetings of the stockholders. The Secretary shall act as secretary of the
meeting, or in his absence an Assistant Secretary shall act, or if neither is
present, then the presiding officer shall appoint a person to act as secretary
of the meeting.
SECTION 7. Voting by Stockholders. Except as may be otherwise provided
by the Certificate of Incorporation or by these Bylaws, at every meeting of the
stockholders each stockholder shall be entitled to one vote for each share of
stock standing in his name on the books of the Corporation on the record date
for the meeting. All elections and questions shall be decided by the vote of a
majority in interest of the stockholders present in person or represented by
proxy and entitled to vote at the meeting, except as otherwise permitted or
required by the laws of Delaware, the Certificate of Incorporation or these
Bylaws.
SECTION 8. Proxies. Any stockholder entitled to vote at
any meeting of stockholders may vote either in person or by his
attorney-in-fact. Every proxy shall be in writing, subscribed by the
stockholder or his duly authorized attorney-in-fact, but need not be dated,
sealed, witnessed or acknowledged.
SECTION 9. List of Stockholders.
(a) At least ten days before every meeting of stockholders, the
Secretary shall prepare or case to be prepared a complete list of the
stockholders entitled to vote at the meeting,
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arranged, in alphabetical order and showing the address of each stockholder and
the number of shares registered in the name of each stockholder.
(b) During ordinary business hours, for a period of at least ten days
prior to the meeting, such list shall be open to examination by any stockholder
for any purpose germane to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
(c) The list shall also be produced and kept at the time and place of
the meeting during the whole time of the meeting, and it may be inspected by any
stockholder who is present.
(d) The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
Section or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
ARTICLE II
DIRECTORS
SECTION 1. Powers of Directors. The property, business and affairs of
the Corporation shall be managed by its Board of Directors, which may exercise
all the powers of the Corporation except such as are by the laws of Delaware or
the Certificate of Incorporation or these Bylaws required to be exercised or
done by the stockholders.
SECTION 2. Number, Method of Election, Terms of Office Directors. The
number of Directors which shall constitute the whole Board of Directors shall be
such as from time to time shall be determined by resolution of the Board of
Directors, but the number shall not be less than three provided that the tenure
of a Director shall not be affected by any decrease in the number of Directors
so made by the Board. Each Director shall hold office until his successor is
elected and qualified, provided however that a Director may resign at any time.
SECTION 3. Vacancies on Board of Directors.
(a) Any Director may resign his office at any time by delivering his
resignation in writing to the Chairman or the President or the Secretary. It
will take effect at the time specified therein, or if no time is specified, it
will be effective at the time of its receipt by the Corporation. The acceptance
of a resignation shall not be necessary to make it effective, unless expressly
so provided in the resignation.
(b) Any vacancy or newly created Directorship resulting from any
increase in the authorized number of Directors may be filled by vote of a
majority of the Directors then in office, though less than a quorum, and any
Director so chosen shall hold office until the next annual
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election of Directors by the stockholders and until his successor is duly
elected and qualified, or until his earlier resignation or removal.
SECTION 4. Meetings of the Board of Directors.
(a) The Board of Directors may hold their meetings, both regular and
special, either within or outside the State of Delaware.
(b) Regularly scheduled meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by resolution of the Board of Directors.
(c) The first meeting of each newly elected Board of Directors except
the initial Board of Directors shall be held as soon as practicable after the
Annual Meeting of the stockholders for the election of officers and the
transaction of such other business as may come before it.
(d) Special meetings of the Board of Directors shall be held whenever
called by direction of the Chairman or the President or at the request of
Directors constituting one-third of the number of Directors then in office, but
not less than two Directors.
(e) The Secretary shall give notice to each Director of any meeting of
the Board of Directors except for regularly scheduled meetings by mailing the
same at lease two days before the meeting or by telegraphing or delivering the
same not later than the day before the meeting. Such notice need not include a
statement of the business to be transacted at, or the purpose of, any such
meeting. Any and all business may be transacted at any meeting of the Board of
Directors. No notice of any adjourned meeting need by given. No notice to or
waiver by any Director shall be required with respect to any meeting at which
the Director is present.
SECTION 5. Quorum and Action. One-third of the entire Board of
Directors, but in no event less than two Directors, shall constitute a quorum
for the transaction of business; but if there shall be less than a quorum at any
meeting of the Board, a majority of those present may adjourn the meeting from
time to time. Unless otherwise provided by the laws of Delaware, the Certificate
of Incorporation or these Bylaws, the act of a majority of the Directors present
at any meeting at which a quorum is present shall be the act of the Board of
Directors.
SECTION 6. Presiding Officer and Secretary of Meeting. The Chairman or,
in his absence, a member of the Board of Directors selected by the members
present, shall preside at meetings of the Board. The Secretary shall act as
secretary of the meeting, but in his absence the presiding officers shall
appoint a secretary of the meeting.
SECTION 7. Action of Consent Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the records of the Board or committee.
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SECTION 8. Executive Committee. The Board of Directors may appoint from
among its members and from time to time may fill vacancies in an Executive
Committee to serve during the pleasure of the Board. The Executive Committee
shall consist of three members, or such greater number of members as the Board
of Directors may by resolution from time to time fix. One of the such members
shall be the Chairman of the Board, who shall be the presiding officer of the
Committee. During the intervals between the meetings of the Board, the Executive
Committee shall possess and may exercise all of the powers of the Board in the
management of the business and affairs of the Corporation conferred by these
Bylaws or otherwise. The Committee shall keep a record of all its proceedings
and report the same to the Board. A majority of the members of the Committee
shall constitute a quorum. The act of a majority of the members of the Committee
present at any meeting at which a quorum is present shall be the act of the
Committee.
SECTION 9. Other Committees. The Board of Directors may also appoint
from among its members such other committees of one or more Directors as it may
from time to time deem desirable, and may delegate to such committees such
powers of the Board as it may consider appropriate.
SECTION 10. Compensation of Directors. Directors shall receive such
reasonable compensation for their service on the Board of Directors or any
committees thereof, whether in the form of salary or a fixed fee for attendance
at meetings, or both, with expenses, if any, as the Board of Directors may from
time to time determine. Nothing herein contained shall be construed to preclude
any Director from serving in any other capacity and receiving compensation
therefor.
ARTICLE III
OFFICERS
SECTION I. Executive Officers of the Corporation. The Board of
Directors shall elect a Chairman of the Board, a President, a Secretary and a
Treasurer and, in its discretion, such number of Vice Presidents and such other
executive officers as the Board may from time to time determine, none of whom
need be a member of the Board except the Chairman of the Board. Any two offices
except those of President and a Vice President or President and Secretary may be
filled by the same person.
SECTION 2. Additional Officers. The Board of Directors may appoint
additional Vice Presidents, Assistant Secretaries, Assistant Treasurers and such
other officers and agents as it shall deem necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
SECTION 3. Salaries. The salaries of all officers and
agents of the Corporation specially appointed by the Board shall be fixed by
the Board of Directors.
SECTION 4. Term, Removal and Vacancies. The officers of the Corporation
shall hold office until their respective successors are chosen and qualify. Any
officer elected or appointed by
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the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise shall be filled by the
Board of Directors.
SECTION 5. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Board of Directors and of the stockholders and
shall be a Chief Executive Officer of the Corporation. He shall have general
charge and supervision of the business of the Corporation and shall exercise and
perform all the duties incident to the office of Chief Executive Officer. He
shall have direct supervision of the officers and shall also exercise and
perform such powers and duties as may be assigned to him by the Board of
Directors. In the absence or disability of the Chairman of the Board: (a) the
President shall preside at all meetings of the Board of Directors and of the
stockholders, and (b) the powers and duties of the Chairman of the Board shall
be exercised by the President until such authority is altered by action of the
Board of Directors. The Chairman of the Board shall present to the Annual
Meeting of Stockholders a report of the business of the preceding fiscal year.
SECTION 6. President. The President shall have such powers and perform
such duties as are provided in these Bylaws or as may be delegated to him by the
Chairman of the Board, and shall perform such other duties as may from time to
time be assigned to him by the Board of Directors. In the absence of the
Chairman of the Board, the President shall preside at all meeting of the Board
of Directors and the stockholders.
SECTION 7. Powers and Duties of Vice-Presidents. Any Vice-President
designated by the Board of Directors shall, in the absence, disability, or
inability to act of the president, perform all duties and exercise all the
powers of the President and shall perform such other duties as the Board may
from time to time prescribe. Each Vice-President shall have such other powers
and shall perform such other duties as may be assigned to him by the Board.
SECTION 8. Powers and Duties of Treasurer and Assistant Treasurers:
(a) The Treasurer shall have the care and custody of all the funds and
securities of the Corporation except as may be otherwise ordered by the Board of
Directors, and shall cause such funds to be deposited to the credit of the
Corporation in such bands or depositories as may be designated by the Board of
Directors, the Chairman, the President or the Treasurer, and shall cause such
securities to be placed in safekeeping in such manner as may be designated by
the Board of Directors, the Chairman, the President or the Treasurer.
(b) The Treasurer, or an Assistant Treasurer, or such other person or
persons as may be designated for such purpose by the Board of Directors, the
Chairman, the President or the Treasurer, may endorse in the name and on behalf
of the Corporation all instruments for the payment of money, bills of lading,
warehouse receipts, insurance policies and other commercial documents requiring
such endorsement.
(c) The Treasurer, or an Assistant Treasurer, or such other person or
persons as may be designated for such purpose by the Board of Directors, the
Chairman, the President or the
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Treasurer, may sign all receipts and vouchers for payments made to the
Corporation; he shall render a statement of the cash account of the Corporation
to the Board of Directors as often as it shall require the same; he shall enter
regularly in books to be kept by him for that purpose full and accurate
accounts of all moneys received an paid by him on account of the Corporation
and of all securities received and delivered by the Corporation.
(d) Each Assistant Treasurer shall perform such duties as may from time
to time by assigned to him by the Treasurer or by the Board of Directors. In the
event of the absence of the Treasurer or his incapacity or inability to act,
then any Assistant Treasurer may perform any of the duties and may exercise any
of the powers of the Treasurer.
SECTION 9. Powers and Duties of Secretary and Assistant Secretaries.
(a) The Secretary shall attend all meetings of the Board, all meetings
of the stockholders, and shall keep the minutes of all proceedings of the
stockholders and the board of Directors in proper books provided for that
purpose. The Secretary shall attend to the giving and serving of all notices of
the corporation in accordance with the provisions of the Bylaws and as required
by the laws of Delaware. The Secretary may, with the President, a Vice-President
or other authorized officer, sign all contracts and other documents in the name
of the Corporation. He shall perform such other duties as may be prescribed in
these Bylaws or assigned to him and all other acts incident to the position of
Secretary.
(b) Each Assistant Secretary shall perform such duties as may from time
to time by assigned to him by the Secretary or by the Board of Directors. In the
event of the absence of the Secretary or his incapacity or inability to act,
then any assistant Secretary may perform any of the duties and may exercise any
of the powers of the Secretary.
(c) In no case shall the Secretary or any Assistant Secretary, without
the express authorization and direction of the Board of Directors, have any
responsibility for, or any duty or authority with respect to, the withholding or
payment of any federal, state or local taxes of the Corporation, or the
preparation or filing of any tax return.
ARTICLE IV
CAPITAL STOCK
SECTION 1. Stock Certificates.
(a) Every holder of stock in the Corporation shall be entitled to have
a certificate signed in the name of the Corporation by the Chairman or the
President or a Vice-President, and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary, certifying the number of shares owned
by him.
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(b) If such a certificate is countersigned by a transfer agent other
than the Corporation or its employee, or by a registrar other than the
Corporation or its employee, the signatures of the officers of the Corporation
may be facsimiles and, if permitted by Delaware law, any other signature on the
certificate may be a facsimile.
(c) In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer before such
certificate is issued, it may issued by the Corporation with the same effect as
if he were such officer at the date of issue.
(d) Certificates of stock shall be issued in such form not inconsistent
with the Certificate of Incorporation as shall be approved by the Board of
Directors. They shall be numbered and registered in the order in which they are
issued. No certificate shall be issued until fully paid.
SECTION 2. Record Ownership. A record of the name and address of the
holder of each certificate, the number of shares represented thereby, and the
date of issue thereof shall be made on the Corporation's books. The Corporation
shall be entitled to treat the holder of record of any share of stock as the
holder in fact hereof, and accordingly shall not be bound to recognize any
equitable or other claim to or interest in any share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
required by the laws of Delaware.
SECTION 3. Transfer of Record Ownership. Transfers of stock shall be
made on the books of the Corporation only by direction of the person named in
the certificate or his attorney, lawfully constituted in writing, and only upon
the surrender of the certificate therefor and a written assignment of the shares
evidenced thereby. Whenever any transfer of stock shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer if, when the certificates are presented to the Corporation for
transfer, both the transferor and transferee request the Corporation to do so.
SECTION 4. Lost, Stolen or Destroyed Certificates. Certificates
representing shares of the stock of the Corporation shall be issued in place of
any certificate alleged to have been lost, stolen or destroyed in such manner an
don such terms and conditions as the Board of Directors from time to time may
authorize.
SECTION 5. Transfer Agent, Registrar, Rules Respecting Certificates.
The Corporation shall maintain one or more transfer offices or agencies where
stock of the Corporation shall be transferable. The Corporation shall also
maintain one or more registry offices where such stock shall be registered. The
Board of Directors may make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of stock certificates.
SECTION 6. Fixing Record Date for Determination of Stockholders of
Record. The Board of Directors may fix in advance a date as the record date for
the purpose of determining the stockholders entitled to notice of, or to vote
at, any meeting of the stockholders or any adjournment thereof, or the
stockholders entitled to receive payment of any dividend or other
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distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or to express
consent to corporate action in writing without a meeting, or in order to make a
determination of the stockholders for the purpose of any other lawful action.
Such record date in any case shall not be more than sixty days nor less than
ten days before the date of a meeting of the stockholders, nor more than sixty
days prior to any other action requiring such determination of the
stockholders. A determination of stockholders of record entitled to notice or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
ARTICLE V
SECURITIES HELD BY THE CORPORATION
SECTION 1. Voting. Unless the Board of Directors shall otherwise order,
the Chairman, the President, any Vice-President or the Treasurer shall have full
power and authority on behalf of the Corporation to attend, act and vote at any
meeting of the stockholders of any corporation in which the Corporation may hold
stock and at such meeting to exercise any or all rights and powers incident to
the ownership of such stock, and to execute on behalf of the Corporation a proxy
or proxies empowering another or others to act as aforesaid. The Board of
Directors from time to time may confer like powers upon any other person or
persons.
Section 2. General Authorization to Transfer Securities Held by
the Corporation.
(a) Any of the following officers, to-wit: the Chairman, the President
, any Vice-President, the Treasurer, the Secretary or any Assistant Secretary of
the Corporation shall be and are hereby authorized and empowered to transfer,
convert, endorse, sell, assign, set over and deliver any and all shares of
stock, bonds, debentures, notes, subscription warrants, stock purchase warrants,
evidences of indebtedness, or other securities now or hereafter standing in the
name of or owned by the Corporation, and to make, execute and deliver under the
seal of the Corporation any and all written instruments of assignments and
transfer necessary or proper to effectuate the authority hereby conferred.
(b) Whenever there shall be annexed to any instrument of assignment and
transfer executed, pursuant to and in accordance with the foregoing paragraph
(a), a certificate of the Secretary or an Assistant Secretary of the Corporation
in office at the date of such certificate setting forth the provisions hereof
and stating that they are in full force and effect and setting forth the names
of persons who are then officers of the Corporation, then all persons to who
such instrument and annexed certificate shall thereafter be entitled, without
further inquiry or investigation and regardless of the date of such certificate,
to assume and to act in reliance upon the assumption that the shares of stock or
other securities named in such instrument were theretofore duly and properly
transferred, endorsed, sold, assigned, set over and delivered by the
Corporation, and that with respect to such securities the authority of these
provisions of the Bylaws and of such officers is still in full force and effect.
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ARTICLE VII
GENERAL PROVISIONS
SECTION 1. Signatures of Officers. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate. The signature of any officer upon any of the foregoing instruments
may be a facsimile whenever authorized by the Board.
SECTION 2. Fiscal Year. The fiscal year of the Corporation
shall end on December 31 unless otherwise fixed by resolution of the Board of
Directors.
SECTION 3. Seal. The Corporation may, but need not, have a corporate
seal, which seal shall have inscribed thereon the name of the Corporation, the
year of its incorporation and the words "Corporate Seal, Delaware." Said seal
may be used for causing it or a facsimile thereof to be impressed, affixed or
otherwise reproduced.
ARTICLE VIII
WAIVER OF OR DISPENSING WITH NOTICE
Whenever any notice of the time, place or purpose of any meeting of the
stockholders, Directors or a committee is required to be given under the laws of
Delaware, the Certificate of Incorporation or these Bylaws, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the holding thereof, or actual attendance at the meeting in person, or
in the case of the stockholders, by his attorney-in-fact, shall be deemed
equivalent to the giving of such notice to such persons. No notice need by given
to any person with whom communication is made unlawful by any law of the United
States or any rule, regulation, proclamation or executive order issued under any
such law.
ARTICLE IX
AMENDMENT OF BYLAWS
These Bylaws, or any of them, may from time to time be supplemented,
amended or repealed by the Board of Directors, or by the vote of a majority in
interest of the stockholders represented and entitled to vote at any meeting at
which a quorum is present.
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ARTICLE X
INDEMNIFICATION
SECTION 1. Each person who was or is made a party to or is threatened
to be made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a Director or officer of the Corporation or is or was
serving at the request of the Corporation as a Director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefits plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
Director, officer, employee or agent shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior to
such amendment), against all expense, liability and loss (including attorney's
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to
be paid in settlement) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as to a person who
has ceased to be a Director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators; provided, however,
that, except as provided in Subsection (b) of this Article, the Corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part hereof) initiated by such person only if such proceeding (or
part thereof) was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred in this Article shall be a
contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a Director or officer in his
or her capacity as a Director or officer (and not in any other capacity in which
service was or is rendered by such person while a Director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such Director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
Director or officer is not entitled to be indemnified under this Article or
otherwise. The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of Directors and officers.
SECTION 2. If a claim under Subsection (a) of this Article is not paid
in full by the Corporation within thirty days after a written claim has been
received by the Corporation, the claimant may at any time hereafter bring suit
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of
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its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the standards
of conduct which make it permissible under the Delaware General Corporation Law
for the Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
SECTION 3. The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Article shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of this Certificate of
Incorporation, by-law, agreement, vote of stockholders or disinterested
Directors or otherwise.
SECTION 4. The Corporation may maintain insurance, at is expense, to
protect itself and any Director, officer, employee or agent of the Corporation
or another Corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
SECTION 5. As used in this Article, references to "the Corporation"
shall include, in addition to the resulting or surviving corporation, any
constituent corporation absorbed in a consolidation or merger which, if its
separate existence had continued , would have had power and authority to
indemnify its Directors, officers, employees and agents, so that any person who
is or was a Director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a Director, officer, employee or agent of another corporation, partnership,
joint venture, trust, or other enterprise, shall stand in the same position
under the provisions of this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
SECTION 6. If this Article or any portion hereof shall have invalidated
on any ground by a court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each Director, officer, employee and agent of the
Corporation as to expenses (including attorney's fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, including a grand jury
proceeding and an action by the Corporation, to the fullest extent permitted (i)
by any applicable portion of this Article that shall not have been invalidated
or (ii) by any other applicable law.
Dated November 12, 1996
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Exhibit 4
CA SHORT COMPANY
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
[LOGO] CA SHORT [LOGO]
LIFE HAS ITS AWARDS
CUSIP 124770 10 8
THIS CERTIFIES THAT IS THE REGISTERED HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK $.01 PAR VALUE OF CA SHORT
COMPANY TRANSFERABLE ONLY ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF
IN PERSON OR BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE
PROPERLY ENDORSED. THIS CERTIFICATE IS NOT VALID UNLESS COUNTERSIGNED AND
REGISTERED BY THE TRANSFER AGENT AND REGISTRAR.
DATED:
/s/ Jeffrey A. Ross /s/ Charles R. Davis
- -------------------------------- -----------------------------
Jeffrey A. Ross, Secretary [LOGO] Charles R. Davis, President
<PAGE> 2
CA SHORT COMPANY
The Company will furnish to any shareholder, upon request and without charge, a
full or summary statement of the designations, preferences, limitations, and
relative rights of the shares of each class authorized to be issued, and the
variations in the relative rights and preferences between (1) the shares of
Common and Preferred Stock, (2) any classes of Preferred Stock and (3) any
series within classes of Preferred Stock, so far as the same have been fixed
and determined and in addition, with respect to the Preferred Stock, in the
resolution or resolutions providing for the issue of Preferred Stock adopted
from time to time by the board of directors, without the necessity of any
action by the shareholders.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM -as tenants in common UNIF GIFT MIN ACT -___________Custodian______________
TEN ENT -as tenants by the entireties (Cust.) (Minor)
JT TEN -as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act______________________________
in common (State)
Additional abbreviations may also be used though not in the above list
</TABLE>
FOR VALUE RECEIVED, ______________________HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE:
______________________
| |
|____________________|__________________________________________________________
________________________________________________________________________________
(NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPE WRITTEN)
________________________________________________________________________________
____________ Shares of the Capital Stock represented by the within Certificate
and do hereby irrevocably constitute and appoint _____________________________
Attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated ________________
--------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT,
OR ANY CHANGE WHATEVER.
SIGNATURE GUARANTEE
___________________________________________
<PAGE> 1
EXHIBIT 8
[LETTERHEAD]
December 31, 1996
Pages, Inc.
801 94th Street North
St. Petersburg, FL 33702
Ladies and Gentlemen:
You have requested our opinion regarding the federal income tax
consequences of the distribution by Pages, Inc., a Delaware corporation
("Pages") of approximately one hundred percent of the outstanding capital stock
of CA Short Company, a wholly-owned subsidiary of Pages Incorporated in
Delaware ("CA Short"), to the holders of outstanding shares of common stock of
Pages (the "Distribution"). Specifically, you have requested our opinion whether
for federal income tax purposes any income, gain or loss will be recognized by
Pages, CA Short, or the Pages stockholders solely as a result of such
Distribution.
Subject to the qualifications and limitations described below, it is
our opinion that:
1. For federal income tax purposes, there is a reasonable basis
for treating the Distribution as a transaction qualifying under Section 355 of
the Code; and
2. The discussion entitled "Certain Federal Income Tax
Consequences" in the Prospectus constituting a part of the Registration
Statement on Form 10 (the "Registration Statement") insofar as it relates to
the statements of law or legal conclusions is correct in all material respects.
In connection with rendering this opinion, we have examined (or will
examine on or prior to the date of the Distribution) and are relying upon
(without any independent investigation or review thereof) the truth and
accuracy, at all relevant times, of the statements, covenants, representations
and warranties contained in the following documents:
1. The Registration Statement (including Exhibits thereto);
<PAGE> 2
[LETTERHEAD]
Pages, Inc
December 31, 1996
Page 2
2. The Distribution Agreement between Pages and CA Short to
be entered into by Pages and CA Short as of the Distribution
Date;
3. The Officer's Certificate from Pages and CA Short to
Johnson, Blakely, Pope, Bokor, Ruppel Burns, P.A.
dated December 31, 1996; and
4. Such other instruments and documents related to the
Distribution as we deem necessary or appropriate.
In rendering the opinion, we have been advised of (and are relying
upon) the following representations:
1. Neither Pages nor CA Short is or will be under the
jurisdiction of a court in a Title II or similar case within the meaning of
section 368(a)(3) (A) of the Code;
2. Each of Pages and CA Short and the Pages shareholders will
pay their own expenses, if any, incurred in connection with the Distribution;
3. There is no current plan or intention on the part of CA
Short to dispose of any of its assets, if any, incurred in connection with the
Distribution;
4. After the Distribution, the officers of Pages and CA Short
will not be the same. A majority of the members of each board will not be
members of the other board;
5. Immediately following the Distribution, Pages and CA
Short will each continue the conduct of their respective active businesses,
independently and with their own employees;
6. Other than indebtedness evidenced by a subordinated
debenture in the principal amount of $5,000,000 to be delivered by CA Short to
Pages, there will be no indebtedness between Pages or its affiliates and CA
Short or its affiliates immediately after the Distribution. Any indebtedness
between CA Short and Pages incurred after the Distribution will be incurred in
the ordinary course of business;
7. Pages and CA Short are not investment companies as defined
in sections 368(a)(2)(F)(iii) and (iv) of the Code;
8. The financial information contained in Pages' most recent
Form 10-K and Form 10-Q and in the CA Short Registration Statement is
representative of the respective business operations of Pages and CA Short, and
there have been no substantial operational changes since the date thereof;
<PAGE> 3
[LETTERHEAD]
Pages, Inc
December 31, 1996
Page 3
9. There is no current plan or intent to (i) liquidate Pages, (ii) to
merge Pages with another corporation, or (iii) to sell or otherwise dispose of
the assets of Pages subsequent to the Distribution, except in the ordinary
course of business;
10. No part of the CA Short Stock to be distributed by Pages in the
Distribution will be received by a Pages shareholder as a creditor or employee
or in any capacity other than that of a shareholder of Pages;
11. There is no plan or intention by any shareholder who owns 5% or
more of the stock of Pages, and the management of Pages, to the best knowledge
of the management of Pages, the Pages shareholders have no current plan or
intent to sell, exchange, transfer by gift, or otherwise dispose of, subsequent
to the Distribution, any of their Pages common stock held as of the date of
Distribution or any of their CA Short Stock to be received in the Distribution;
12. Payments made in connection with any and all continuing
transactions between Pages and CA Short will be for fair market value based
upon terms and conditions arrived at by the parties bargaining at arm's length;
13. The stock of CA Short has been continuously owned by Pages for the
five-year period ending on the date of Distribution, and CA Short has
continuously conducted its business throughout such five-year period with no
substantial change in its type of business or method of conducting its business;
14. The distribution of stock of CA Short is being carried out for the
business purposes described in the Registration Statement. The distribution of
the stock of CA Short is motivated, in whole or substantial part, by one or
more of these corporate business purposes; and
15. No income items, including accounts receivable or any item
resulting from a sale, exchange or disposition of property, that would have
resulted in income to Pages, and no items of expense will be transferred to CA
Short if Pages has earned the right to receive the income or could claim a
deduction for the expense under the accrual or similar method of accounting.
In addition to the representations set forth above, this opinion is
subject to the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment
regarding the application of federal income tax laws arising under the Code,
existing judicial decisions, administrative regulations and published rulings
and procedures. Our opinion is not binding upon the Internal Revenue Service or
the courts, and the Internal Revenue Service is not precluded from successfully
asserting a contrary position. The application of Section 355 of the Code to the
<PAGE> 4
[LETTERHEAD]
Pages, Inc
December 31, 1996
Page 4
Distribution is complex and may be subject to differing interpretation.
Accordingly, even if the representations, statements, covenants and warranties
upon which we have relied in rendering this opinion are not breached, there can
be no assurance that the Internal Revenue Service will not successfully
challenge the applicability of Section 355 to the Distribution or assert that
the Distribution fails to satisfy all of the requirements of Section 355. In
particular, the Service may challenge the tax-free status of the Distribution on
the grounds that it lacks an adequate "business purpose" or that the active
business requirement of Section 355(b) of the Code (which requires the
continuation after the Distribution of a business conducted for at least five
years prior to the Distribution) is not satisfied.
2. This opinion addresses only the specific tax consequences set forth
above, and does not address any other federal, state, local or foreign tax
consequences that may result from the Distribution or any other transaction
(including any transaction undertaken in connection with the Distribution). In
particular, we express no opinion regarding the survival and/or availability,
after the Distribution, of any of the federal income tax attributes or elections
of Pages or CA Short.
3. No opinion is expressed as to any transaction other than the
Distribution or to any transaction whatsoever, including the Distribution, if
all the transactions described in the CA Short Registration Statement are not
consummated in accordance with the terms thereof and without departure from any
material provision thereof or if all of the representations, warranties,
statements and assumptions upon which we have relied are not true and accurate
at all relevant times. In the event any one of the statements, representations,
warranties or assumptions upon which we have relied to issue this opinion is
incorrect, our opinion might be adversely affected and, therefore, may not be
relied upon.
4. This opinion is intended solely for your benefit. It may not be
relied upon for any other purpose or by any other person or entity, and may not
be made available to any other person or entity without our prior written
consent. We hereby consent to the inclusion of this opinion as an exhibit in the
CA Short Registration Statement and to the references to our name therein in the
discussions entitled "The Distribution Certain Federal Income Tax Consequences
of the Distribution" or in the summary thereof.
Very truly yours,
JOHNSON, BLAKELY, POPE, BOKOR,
RUPPEL & BURNS, P.A.
<PAGE> 1
EXHIBIT 10.1
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (the "Agreement"), is made as of the 31st
day of December, 1996, between PAGES, INC., a Delaware Corporation
("Pages"), and CA SHORT COMPANY, a Delaware Corporation ("CA Short").
BACKGROUND STATEMENTS:
A. Pages is the holder of all the issued and outstanding shares of
capital stock of CA Short.
B. It is the intention of Pages to distribute approximately all of the
currently issued and outstanding capital stock of CA Short held by it to the
stockholders of Pages.
C. Pages and CA Short have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
such distribution and to set forth other agreements that will govern certain
other matters following such distribution.
In consideration of the mutual covenants and agreements made herein,
the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 GENERAL. As used in this Agreement and the Exhibits hereto, the
following terms shall have the following meanings:
ACTION: any action, suit arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
AFFILIATE: a legal entity or association which, directly or
indirectly, is controlled by, is in control of, or under common control with
the legal entity or association with reference to which the term "affiliate" is
used.
ASSUMED LIABILITIES: all liabilities arising from the conduct or
operation of the CA Short Business or the ownership, or use of assets in
connection therewith whether arising before, on or after the Distribution Date,
including without limitation, CA Short employee benefit plans and the
Liabilities set forth or referred to in the audited financial statements of CA
Short included within the Form 10.
<PAGE> 2
CA SHORT BUSINESS: the business involving the creation, marketing and
administration of safety, sales incentive, service recognition, and holiday
gift awards programs for businesses.
CODE: the Internal Revenue Code of 1986, as amended, or, as the
context may require, the Internal Revenue Code applicable to the
pre-Distribution year in question.
COMMISSION: the Securities and Exchange Commission.
DETERMINATION: means a "determination" as defined by Section 1313(a)
of the Code.
DISTRIBUTION: the distribution to holders of Pages Common Stock of all
of the shares of Short Common Stock owned by Pages.
DISTRIBUTION AGENT: The Huntington National Bank as distribution agent
appointed by Pages to assist in the distribution of copies for the Information
Statement and to distribute certificates for shares of Short Common Stock
pursuant to the Distribution.
DISTRIBUTION DATE: the date of effecting the Distribution, which shall
occur on the Record Date.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended.
FORM 10: the registration statement on Form 10 to be filed by CA Short
with the Commission to effect the registration of Short Common Stock pursuant to
the Exchange Act, as such registration statement may be amended from time to
time.
INCOME TAXES: means all Taxes based upon or measured by income.
INFORMATION STATEMENT: the information statement, constituting a part
of the Form 10, in the form to be distributed to the holders of Pages Common
Stock as of the Record Date in connection with the Distribution, and as it may
be amended or supplemented subsequent to such dissemination.
IRS: means the Internal Revenue Service.
LIABILITIES: any and all claims, debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising (unless otherwise
specified in this Agreement), including all costs and expenses relating thereto,
and those debts, liabilities and obligations arising under any law, rule,
regulation, Action, threatened Action, order or consent decree of any
governmental entity or any award of any arbitration of any kind, and those
arising under any contract, commitment or undertaking.
PAGES BUSINESS: the business involving the publishing and distribution
of children's leisure-based literature.
PAGES COMMON STOCK: the shares of common stock, par value $.01 per
share, of Pages.
PAGES LIABILITIES: all of (i) the Liabilities of Pages under this
Agreement, and (ii) the Liabilities of Pages, whether arising before, on or
after the Distribution Date.
RECORD DATE: the close of business on December 31, 1996.
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<PAGE> 3
RETURN: means returns, reports and forms required to be filed with
respect to Taxes.
SHORT COMMON STOCK: the shares of common stock, par value $.01 per
share, of CA Short.
SHORT LIABILITIES: all of (i) the Liabilities of CA Short under this
Agreement, (ii) the Assumed Liabilities, and (iii) the Liabilities arising out
of any of the documents or instruments executed and delivered by CA Short
pursuant to the transactions contemplated hereby.
TAXES: means all taxes (whether federal, state, local or foreign)
based upon or measured by income and any other tax whatsoever, including,
without limitation, gross receipts, profits, sales, use, occupation, value
added, ad valorem, transfer, franchise, capital stock, net worth, withholding,
payroll, employment, excise, or property taxes, together with any interest or
penalties imposed with respect thereto.
TAXING AUTHORITY: means governmental authority, domestic or foreign,
having jurisdiction over the assessment, determination, collection, or other
imposition of taxes.
TAX LAWS: means the Code, federal, state, county, local, or foreign
laws relating to Taxes and any regulations or official administrative
pronouncements released thereunder.
ARTICLE II
THE DISTRIBUTION
2.01 COOPERATION PRIOR TO THE DISTRIBUTION.
(a) Subject to the provisions of Section 2.02, Pages and CA
Short shall prepare, and CA Short shall file with the Commission, the Form 10
which shall include the Information Statement. Pages and CA Short shall use
reasonable efforts to cause the Form 10 to become effective under the
Exchange Act. Pages and CA Short shall prepare, and Pages shall mail to the
holders of Pages Common Stock as of the Record Date, the Information Statement,
which shall set forth appropriate disclosure concerning CA Short, the
Distribution and any other appropriate matters.
(b) CA Short shall use its reasonable best efforts to cause at
least one securities broker to agree to act as a market maker for the Short
Common Stock on the NASD OTC Electronic Bulletin Board Service.
(c) In addition to the Activities specifically provided for
elsewhere herein, each of Pages and CA Short will use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things reasonably necessary, proper or advisable under applicable
laws, regulations and agreements to consummate and make effective the
transactions contemplated by this Agreement.
2.02 PAGES BOARD ACTION; CONDITIONS PRECEDENT TO THE DISTRIBUTION.
Pages' Board of Directors shall, in its discretion, establish the Record Date
and the Distribution Date and any
3
<PAGE> 4
appropriate procedures in connection with the Distribution. In no event shall
the Distribution occur unless the following conditions shall, unless waived by
Pages, have been satisfied:
(a) Pages' Board of Directors shall have finally approved the
Distribution;
(b) the Distribution shall be payable in accordance with applicable
law and all necessary regulatory approvals shall have been received;
(c) the Form 10 shall have become effective under the Exchange Act;
(d) Pages shall have received a favorable response to its request to
the Commission for "no-action" and "interpretative" positions with respect to
the Distribution;
(e) Pages shall have received the opinion in form and substance
acceptable to it of Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A. (the
"Tax Opinion") to the effect that there is a reasonable basis for treating the
Distribution as a transaction qualifying under Section 355 of the Internal
Revenue Code the Distribution will be a tax-free spin-off under the Code;
(f) CA Short shall have executed and delivered to Pages a subordinated
promissory note in the principal amount of $5,000,000 payable to Pages bearing
interest at the rate of 7% per annum, payable as described in the Form 10;
(g) Pages' lender shall have consented to the Distribution CA Short;
(h) CA Short shall have received a commitment for a credit facility in
the minimum amount of $4.5 million upon terms acceptable to Pages' Board of
Directors;
(i) Pages Board of Directors shall have received a fairness opinion
with respect to the Distribution from an investment banking firm;
(j) CA Short shall have obtained insurance (or binders therefor)
providing coverage to CA Short and its directors and officers for Director and
Officer Liability matters reasonably satisfactory to CA Short; and
(k) no preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental
regulatory or administrative agency or commission and no statute, rule,
regulation or executive order promulgated by any governmental authority shall
be in effect which would make illegal or otherwise prevent the Distribution.
2.03 THE DISTRIBUTION. On the Distribution Date, subject to the
conditions set forth in this Agreement, Pages shall deliver to the Distribution
Agent a certificate or certificates representing all of the Short Common Stock
then held by Pages, endorsed in blank, and shall instruct the Distribution
Agent, except as otherwise provided in Section 2.04, to distribute to each
holder of record of Pages Common Stock on the Record Date a certificate or
certificates representing one and one half shares of Short Common Stock for each
ten shares of Pages
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<PAGE> 5
Common Stock so held. CA Short agrees to provide all certificates for shares
of CA Short Common Stock that the Distribution Agent shall require in order to
effect the Distribution.
2.04 SALE OF FRACTIONAL SHARES. The Distribution Agent shall not
distribute any fractional share of Short Common Stock ("Fractional Share") to
any holder of Pages Common Stock. The Distribution Agent shall aggregate all
such Fractional Shares and sell them in an orderly manner after the Distribution
Date in the open market and, after completion of such sales and within
forty-five (45) trading days after the Distribution Date, distribute a pro rata
portion of the proceeds from such sales, based upon the average gross selling
price of all such Short Common Stock, less appropriate deductions of any amount
required for tax withholding purposes and a pro rata portion of the aggregate
brokerage charges, commissions and transfer taxes payable in connection with
such sales, to each holder of Pages Common Stock who would otherwise have
received a Fractional Share.
2.05 FEES AND EXPENSES OF DISTRIBUTION AGENT. The fees and expenses of
the Distribution Agent shall be paid by Pages.
2.06 COOPERATION AFTER THE DISTRIBUTION. CA Short shall use its
reasonable best efforts to ensure that the representations of CA Short set
forth in the Tax Opinion are true and correct and continue after the
Distribution to be true and correct.
ARTICLE III
TRANSITION ARRANGEMENTS
3.01 CONDUCT OF CA SHORT BUSINESS PENDING DISTRIBUTION. Prior to the
Distribution Date, CA Short shall not, without the prior consent in writing of
Pages, make any public announcement or issue any press release regarding the
Distribution and each of Pages and CA Short shall use its best efforts not to
take any action which may prejudice or delay the consummation of the
Distribution.
3.02 SUBORDINATED NOTE. On the Distribution Date, CA Short shall
execute and deliver to Pages a Subordinated Note in the principal amount of
$5,000,000 and Security Agreement as described in the Form 10.
ARTICLE IV
INDEMNIFICATION
4.01 CA SHORT INDEMNIFICATION OF PAGES. On and after the Distribution
Date, CA Short shall indemnify, defend and hold harmless Pages and each of its
directors, officers and Affiliates other than CA Short (the "Pages Indemnitees")
from and against any and all damage, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and reasonable
attorney's fees and expenses in connection with any and all Actions or
threatened Actions) (collectively, "Indemnifiable Losses") incurred or suffered
by any of the Pages Indemnitees and arising out of, or due to the failure of CA
Short to pay, perform or otherwise discharge, any of the Short Liabilities.
5
<PAGE> 6
4.02 PAGES INDEMNIFICATION OF CA SHORT. On and after the Distribution
Date, Pages shall indemnify, defend and hold harmless CA Short and each of its
directors, officers and Affiliates other than Pages (the "Short Indemnitees")
from and against any and all Indemnifiable Losses incurred or suffered by any of
the Short Indemnitees and arising out of, or due to the failure of Pages to pay,
perform or otherwise discharge, any of the Pages Liabilities.
4.03 CA SHORT RELEASE OF CLAIMS AGAINST PAGES INDEMNITIES. Except as
otherwise provided in this Agreement, CA Short hereby releases, effective upon
the Distribution Date, the Pages Indemnitees from and against any claim that CA
Short may have against any such Pages Indemnitee which relates to events,
actions or omissions taken or occurring prior to the distribution Date;
provided, however, that the foregoing release shall not apply to Pages'
obligations to satisfy any of the Pages Liabilities.
ARTICLE V
INDEMNIFICATION PROCEDURES
5.01 NOTICE AND PAYMENT OF CLAIMS. If any Pages Indemnitee or Short
Indemnitee (the "Indemnified Party") determines that it is or may be entitled to
indemnification by any party (the "Indemnifying Party") under Article IV (other
than in connection with any Action or claim subject to Section 5.02), the
Indemnified Party shall deliver to the Indemnifying Party a written notice
specifying, to the extent reasonably practicable, the basis for its claim for
indemnification and the amount for which the Indemnified Party believes it is
entitled to be indemnified. After the Indemnifying Party shall have been
notified of the amount for which the Indemnified Party seeks indemnification,
the Indemnifying Party shall, within thirty (30) days after receipt of such
notice, pay the Indemnified Party such amount in cash or other immediately
available funds unless the Indemnifying Party objects to the claim for
indemnification or the amount thereof. If the Indemnifying Party does not give
the Indemnified Party written notice objecting to such claim and setting forth
the grounds therefor within the same 30-day period, the Indemnifying Party shall
be deemed to have acknowledged its liability for such claim and the Indemnified
Party may exercise any and all of is rights under applicable law to collect such
amount.
5.02 NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS. Promptly following the
earlier of (a) receipt of notice of the commencement by a third party of any
Action against or otherwise involving any Indemnified Party or (b) receipt of
information from a third party alleging the existence of a claim against an
Indemnified Party, in either case, with respect to which indemnification may be
sought pursuant to this Agreement (a "Third-Party Claim"), the Indemnified Party
shall give the Indemnifying Party written notice thereof. The failure of the
Indemnified Party to give notice as provided in this Section 5.02 shall not
relieve the Indemnifying Party of its obligations under this Agreement, except
to the extent that the Indemnifying Party is prejudiced by such failure to give
notice. Within 30 days after receipt of such notice, the Indemnifying Party may
(a) by giving written notice thereof to the Indemnified Party, acknowledge
liability for and at its option elect to assume the defense of such Third-Party
Claim at its sole cost and expense or (b) object to the claim of indemnification
set forth in the notice delivered by the Indemnified Party pursuant to the first
sentence of this Section 5.02; provided that if the Indemnifying Party does not
within the same 30 day period give the Indemnified Party
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written notice objecting to such claim and setting forth the grounds therefor,
the Indemnifying Party shall be deemed to have acknowledged its liability for
such Third-Party Claim. Any contest of a Third-Party Claim as to which the
Indemnifying Party has elected to assume the defense shall be conducted by
attorneys employed by the Indemnifying Party and reasonably satisfactory to the
Indemnified Party; provided that the Indemnified party shall have the right to
participate in such proceedings and to be represented by attorneys of its own
choosing at the Indemnified Party's sole cost and expense. If the Indemnifying
Party assumes the defense of a Third-Party Claim, the Indemnifying Party may
settle or compromise the claim without the prior written consent of the
Indemnified Party; provided that the Indemnifying Party may not agree to any
such settlement pursuant to which any such remedy or relief, other than
monetary damages for which the Indemnifying Party shall be responsible
hereunder, shall be applied to or against the Indemnified Party, without the
prior written consent of the Indemnified Party, which consent shall not be
unreasonably withheld. Notwithstanding anything in this Article V to the
contrary, such Indemnifying Party shall not waive its attorney-client privilege
in connection with such Third-Party Claim without the prior written consent of
the Indemnified Party. If the Indemnifying Party does not assume the defense of
a Third-Party Claim for which it has acknowledged liability of indemnification
under Article IV, the Indemnified Party may require the Indemnifying Party to
reimburse it on a current basis for its reasonable expenses of investigation,
reasonable attorney's fees and reasonable out-of-pocket expenses incurred in
defending against such Third-Party Claim and the Indemnifying Party shall be
bound by the result obtained with respect thereto by the Indemnified Party;
provided that the Indemnifying Party shall not be liable for any settlement
effected without its consent, which consent shall not be unreasonably withheld.
The Indemnifying Party shall pay to the Indemnified Party in cash the amount
for which the Indemnified Party is entitled to be indemnified (if any) within
fifteen (15) days after the final resolution of such third-Party Claim (whether
by the final nonappealable judgment of a court of competent jurisdiction or
otherwise) or, in the case of any Third-Party Claim as to which the
Indemnifying Party has not acknowledged liability, within fifteen (15) days
after such Indemnifying Party's objection has been resolved by settlement,
compromise or the final nonappealable judgment of a court of competent
jurisdiction.
ARTICLE VI
ACCESS TO INFORMATION AND SERVICES
6.01 PROVISION OF CORPORATE RECORDS. Upon CA Short's request, Pages
shall arrange as soon as practicable following the Distribution Date for the
delivery to CA Short of existing CA Short corporate records in the possession of
Pages, together with all active agreements and any active litigation files
relating to the CA Short Businesses, except to the extent such items are already
in the possession of CA Short. Such records shall be the property of CA Short,
but shall be available to Pages for review and duplication until Pages shall
notify CA Short in writing that such records are no longer of use to Pages.
6.02 ACCESS TO INFORMATION. From and after the Distribution Date, Pages
shall afford to CA Short and its authorized accountants, counsel and other
designated representatives reasonable access (including using reasonable efforts
to give access to persons or firms possessing information) and duplicating
rights during normal business hours to all records, books, contracts,
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<PAGE> 8
instruments, computer data and other data and information (collectively,
"Information") within Pages' possession relating to the CA Short Business,
insofar as such access is reasonably required by CA Short. CA Short shall afford
to Pages and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) and duplicating rights during
normal business hours to Information within CA Short's possession relating to
the Pages Business, insofar as such access is reasonably required by Pages.
Information may be requested under this Article VI for, without limitation,
audit, accounting, claims, litigation and tax purposes, as well as for purposes
of fulfilling disclosure and reporting obligations and for performing the
transactions contemplated in this Agreement.
6.03 SECURITIES FILINGS. For a period of five years following the
Distribution Date, each of Pages and CA Short shall provide to the other,
promptly following such time at which such documents shall be filed with the
Commission, copies of all documents which shall be publicly filed with the
Commission pursuant to the periodic and interim reporting requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder.
6.04 PROVISION OF SERVICES. Following the Distribution Date, each party
upon written request, shall make available to the other party, during normal
business hours and in a manner that will not unreasonably interfere with such
party's business, its financial, tax, accounting, legal, employee benefits and
similar staff services (collectively "Services") whenever and to the extent that
they may be reasonably required in connection with the preparation of tax
return, audits, claims, litigation or administration of employee benefit plans,
and otherwise to assist in effecting an orderly transition following the
Distribution.
6.05 PRODUCTION OF WITNESSES. At all times from and after the
Distribution Date, each of Pages and CA Short shall use reasonable efforts to
make available to the other, upon written request, its officers, directors,
employees and agents as witnesses to the extent that such persons may reasonably
be required in connection with legal, administrative or other proceedings in
which the requesting party may from time to time be involved.
6.06 REIMBURSEMENT. A party providing Information or Services to the
other party under this Article VI shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payments for such
amounts, relating to supplies, disbursements and other out-of-pocket expenses,
as may be reasonably incurred in providing such information or services.
6.07 RETENTION OF RECORDS. For the period of five (5) years following
the Distribution Date, each of Pages and CA Short shall retain all information
relating to the other, except as otherwise required by law or except to the
extent that such information is in the public domain or in the possession of the
other party; provided, however, after the expiration of such retention period,
such information shall not be destroyed or otherwise disposed of at any time,
unless, prior to such destruction or disposal (a) the party proposing to destroy
or otherwise dispose of such information provide not less than ninety (90) days
prior written notice to the other, specifying in reasonable detail the
information proposed to be destroyed or disposed of and (b) if a recipient of
such notice shall request in writing prior to the scheduled date for such
destruction or disposal that any of the information proposed to be destroyed or
disposed of be delivered to such
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requesting party, the party proposing the destruction or disposal shall
promptly arrange for the delivery of such of the information as was requested,
at the expense of the party requesting such information.
6.08 CONFIDENTIALITY. Subject to any contrary requirement of law and
the right of each party to enforce its rights hereunder in any legal action,
each party shall keep strictly confidential and cause its employees and agents
to keep strictly confidential any information of or concerning the other party
which it or any of its agents or employees may acquire pursuant to, or in the
course of performing its obligations under any provisions of this Agreement;
provided, however, that such obligation to maintain confidentiality shall not
apply to information which (i) at the time of disclosure was in the public
domain, not as a result of improper acts by the receiving party, (ii) was
already independently in the possession of the receiving party at the rime of
disclosure or (iii) is received by the receiving party from a third party who
did not receive such information from the disclosing party under an obligation
or confidentiality.
ARTICLE VII
TAX MATTERS
7.01 TAX INDEMNIFICATION BY PAGES. Pages shall indemnify and hold CA
Short and any successor corporation thereto or Affiliate thereof harmless from
and against the following Taxes arising from or attributable to the business or
operations of CA Short or Pages or their respective Affiliates:
(a) any and all Taxes arising in or attributable to any
taxable period ending (or deemed, pursuant to Section 7.03, to end) on or before
the Distribution Date except for Taxes of CA Short which are not yet due and
payable as of the Distribution Date and are provided for in the financial
statements of CA Short; and
(b) any several liability of such Pages and CA Short under
Treasury Regulations Section 1.1502 - 6 or under any comparable or similar
provisions under state, local or foreign laws or regulations for periods ending
on or prior to the Distribution Date.
7.02 TAX INDEMNITY BY CA SHORT. CA Short shall indemnify and hold Pages
and any successor corporations thereto and any Affiliates (other than Pages)
thereof harmless from and against the following Taxes arising from or
attributable to the CA Short Business: (a) any and all Taxes arising in or
attributable to any taxable period beginning (or deemed, pursuant to Section
7.03, to begin) after the Distribution Date, due or payable by CA Short or by
Pages; (b) Taxes arising in or attributable to any taxable period ending (or
deemed pursuant to Section 7.03, to end) on or before the Distribution Date to
the extent provided for in the financial statements of CA Short and not yet due
and payable as of the Distribution Date. CA Short shall not be obligated
hereunder to indemnify Pages in the event that the Distribution does not
constitute a tax-free spin-off under Section 355 of the Internal Revenue Code.
7.03 ALLOCATION OF CERTAIN TAXES:
(a) CA Short and Pages agree that if CA Short or Pages are
permitted but not required under applicable foreign, state or local tax laws to
treat the Distribution Date as the last day of a taxable
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period, CA Short and Pages shall treat such day as the last day of a taxable
period. CA Short and Pages agree that they will treat CA Short as if such
entity ceased to be part of Pages' affiliated group, within the meaning of
Section 1504 of the Code, as of the close of business on the Distribution Date.
(b) Any Taxes for a taxable period beginning before the
Distribution Date and ending after the Distribution Date with respect to CA
Short shall be paid by Pages or CA Short, and the Taxes for such period shall be
apportioned for purposes of Section 7.01 and Section 7.02 between Pages and CA
Short based on the portion of such period ending on the Distribution Date and
the portion of such period beginning on the day following the Distribution Date,
and for purposes of this Agreement, each portion of such period shall be deemed
to be a taxable period (whether or not it is in fact a taxable period).
7.04 FILING RESPONSIBILITY.
(a) Pages shall prepare and file or shall cause CA Short to
prepare and file the following Returns with respect to CA Short:
(i) all Returns relating to Taxes for any
taxable period ending on or before the
Distribution Date other than Returns for
Taxes referred to in Section 7.03(b), and
(ii) all other Returns required to be filed
(taking into account extensions) on or
before the Distribution Date.
(b) CA Short shall, subject to the provisions of Section
7.04(c), prepare and file all other Returns with respect to CA Short required to
be filed (taking into account extensions) after the Distribution Date.
(c) With respect to any Return for taxable periods beginning
before the Distribution Date and ending after the Distribution Date, CA Short
shall consult with Pages concerning each such Return and report all items with
respect to the period ending on the Distribution Date in accordance with the
instructions of Pages, unless otherwise agreed by Pages and CA Short. CA Short
shall provide Pages with a copy of each proposed Return at least thirty (30)
days prior to the filing of such Return, and Pages may provide comments to CA
Short, which comments shall be delivered to CA Short within fifteen (15) days
after receiving such copies from CA Short.
7.05 REFUNDS AND CARRYBACKS.
(a) Pages shall be entitled to an amount equal to any refunds
or credits of Taxes attributable to taxable periods (or portions thereof,
determined in accordance with Section 7.03(b)) ending on or before the
Distribution Date, other than any such refunds or credits provided for in the
financial statements of CA Short.
(b) CA Short shall be entitled to any refunds or credits of
Taxes attributable to taxable periods (or portions thereof, determined in
accordance with Section 7.03(b)) beginning on or after the Distribution Date or
provided for in the financial statements of CA Short.
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(c) CA Short agrees that, with respect to any Tax, CA Short
shall not carry back any item of loss, deduction or credit which arises in any
taxable period ending after the Distribution Date ("subsequent loss") into any
taxable period ending on or before the Distribution Date. If a subsequent loss
with respect to any Tax is carried back into any taxable period ending on or
before the Distribution Date, Pages shall be entitled to any refund or credit of
Taxes realized as a result thereof.
7.06 COOPERATION AND EXCHANGE OF INFORMATION.
(a) CA Short and Pages and their respective Affiliates shall
cooperate in the preparation of all Returns relating in whole or in part to
taxable periods ending on or before or including the Distribution Date that are
required to be filed after such date. Such cooperation shall include, but not be
limited to, furnishing prior years' Returns or return preparation packages
illustrating previous reporting practices or containing historical information
relevant to the preparation of such Returns, and furnishing such other
information within such party's possession requested by the party filing such
Returns as is relevant to their preparation. In the case of any state, local or
foreign joint, consolidated, combined, unitary or group relief system Returns,
such cooperation shall also relate to any other taxable periods in which one
party could reasonably require the assistance of the other party in obtaining
any necessary information.
(b) Pages shall have the right, at its own expense, to control
any audit or examination by any Taxing Authority ("Tax Audit"), initiate any
claim for refund, contest, resolve and defend against any assessment, notice of
deficiency, or other adjustment or proposed adjustment relating to any and all
Taxes for any taxable period ending on or before the Distribution Date with
respect to CA Short. CA Short shall have the right, at its own expense, to
control any other Tax Audit, initiate any other claim for refund, and contest,
resolve and defend against any other assessment, notice of deficiency, or other
adjustment or proposed adjustment relating to Taxes with respect to CA Short,
provided that, with respect to any state, local and foreign Taxes for any
taxable period beginning before the Distribution Date and ending after the
Distribution Date, CA Short or Pages, as the case may be, shall keep the other
party duly informed and shall consult with each other with respect to the
resolution of any issue that would adversely affect the other party, and not
settle any such issue, without the consent of the affected party, which consent
shall not unreasonably be withheld.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.01 ASSUMPTIONS OF ALL ASSUMED LIABILITIES. Pages agrees to obtain
consents, permits and authorizations necessary to permit CA Short to assume, and
CA Short agrees to assume from Pages, any Assumed Liability which has not been
assumed by CA Short by the Distribution Date.
8.02 COLLECTION OF ACCOUNTS. After the Distribution Date, Pages agrees
promptly to transfer or deliver to CA Short any cash or other property received
directly or indirectly after the Distribution Date by Pages in respect of any CA
Short accounts receivable.
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8.03 EXPENSES. Except as specifically provided in this Agreement, all
internal costs and expenses incurred in connection with the preparation,
execution, delivery and implementation of this Agreement and with the
consummation of the transactions contemplated by this Agreement (collectively,
the "Distribution Costs and Expenses") shall be paid by the party incurring such
costs and expenses. Except as specifically provided in this Agreement, all
out-of-pocket Distribution Costs and Expenses (including transfer taxes and the
fees and expenses of all counsel, accountants and financial and other advisors)
shall be paid by Pages, it being agreed such Distribution Costs and expenses are
properly costs and expenses of Pages. Without limiting the foregoing sentence,
it is understood and agreed that Pages shall pay the legal, filing, accounting,
printing and other accountable and out-of-pocket expenditures in connection with
the preparation, printing and fling of the Form 10-SB.
8.04 ADDITIONAL ASSURANCES. Pages and CA Short agree to cooperate with
respect to the implementation of this Agreement and to execute such further
documents and instruments as may be necessary to confirm the transactions
contemplated hereby. Pages and CA Short agree that they will not take any action
inconsistent with the facts and representations set forth in the "no-action
letter" request filed with the Commission in connection with the Distribution or
the conditions of the "no-action letter" received from the Commission in
connection with the Distribution and will use their best efforts to cause the
facts to remain true and correct, to satisfy such conditions and to maintain the
effectiveness of such letter and, if either Pages or CA Short shall take any
such inconsistent action, or fail to use such best efforts, it will indemnify
the other party for any expense or Liability incurred as a consequent thereof.
ARTICLE IX
MISCELLANEOUS
9.01 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Florida.
9.02 CONSTRUCTION. Each provision of this Agreement shall be
interpreted in a manner to be effective and valid to the fullest extent
permissible under applicable law. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions of
this Agreement which shall remain in full force and effect.
9.03 ARBITRATION. Any controversy regarding, connected with or arising
from this Agreement, shall be settled by informal, speedy and binding
arbitration in Pinellas County, Florida. The conduct of the arbitration shall be
governed by Florida Arbitration Code.
9.04 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement.
9.05 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement and other
agreements and documents referred to herein, shall constitute the entire
agreement between the parties with respect to the subject matter hereof and
shall supersede all previous negotiations, commitments and writings with respect
to such subject matter.
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9.06 TERMINATION. This Agreement may be terminated and the Distribution
abandoned at any time prior to the Distribution Date by and in the sole
discretion of Pages without the approval of CA Short. In the event of such
termination, no party shall have any liability of any kind to any other party.
9.07 EXHIBITS. Exhibits to this Agreement shall be deemed to be an
integral part hereof, and schedules or exhibits to such Exhibits shall be deemed
to be an integral part thereof.
9.08 AMENDMENTS; WAIVERS. This Agreement may be amended or modified
only in writing executed on behalf of Pages and CA Short. No waiver shall
operate to waive any further or future act and no failure to object of
forbearance shall operate as a waiver.
9.09 NOTICES. Notices hereunder shall be effective if given in writing
and delivered or mailed, postage prepaid, by registered or certified mail to:
Pages, Inc.
801 94th Street North
St. Petersburg, FL 33702
Attn: S. Robert Davis
or to:
CA Short Company
4205 East Dixon Boulevard
Shelby, NC 28150
Attn: Charles R. Davis
9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns, provided that this Agreement and the rights and obligations
contained herein or in any exhibit or schedule hereto shall not be assignable,
in whole or in part, without the prior written consent of the other party and
any attempt to effect any such assignment without such consent shall be void.
13
<PAGE> 14
SIGNATURE PAGE TO
DISTRIBUTION AGREEMENT
BETWEEN
PAGES, INC. AND CA SHORT COMPANY
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PAGES, INC.
By:
------------------------------
S. Robert Davis as President
CA SHORT COMPANY
By:
------------------------------
Charles R. Davis as President
14
<PAGE> 1
EXHIBIT 10.2
CA SHORT COMPANY
1996 INCENTIVE STOCK OPTION PLAN
1. PURPOSE. The purpose of the CA Short Company Incentive Stock Option
Plan (the "Plan") is to provide a means by which CA Short Company (the
"Corporation"), through the grant of stock options to eligible employees, may
attract and retain able employees and motivate such employees to exert their
best efforts on behalf of the Corporation and any subsidiary corporation of the
Corporation. For the purposes of the Plan, the term "Subsidiary Corporation"
means a subsidiary corporation as defined by Section 425(f) of the Internal
Revenue Code of 1986, as amended (the "Code"). It is intended that the options
issued under the Plan will qualify as incentive stock options under Section 422
of the Code.
2. SHARES SUBJECT TO THE PLAN. Subject to the provisions of Section
5(g) of the Plan, 45,000 shares of the common stock of the Corporation shall be
reserved and may be optioned under the Plan. The reserved shares may be
authorized and unissued shares or treasury shares of the Corporation or any
combination of both as determined by the Board of Directors of the Corporation.
If an option granted under the Plan ceases to be exercisable in whole or in
part, the shares representing such option shall be available under the Plan for
the grant of options in the future.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board of Directors of the Corporation (the "Board"). Subject to and not
inconsistent with the provisions of the Plan, the Board shall have complete
authority in its discretion to interpret all provisions of the Plan consistently
with the law, to prescribe the form of the instrument evidencing any option
granted under the Plan, to adopt, amend, and rescind general and special rules
and regulations for the administration of the Plan, and to make all other
determinations necessary or advisable for the administration of the Plan.
4. ELIGIBILITY AND GRANT OF OPTIONS UNDER THE PLAN. Options may be
granted at such times, in such amounts, and, to the extent not inconsistent
with the Plan, on such terms as the Board shall determine subject to the
following:
(a) ELIGIBILITY. Options may be granted to such employees,
including officers and directors who are also employees, of the Corporation or
of a Subsidiary Corporation that the Board deems to be key employees who, in the
judgment of the Board, are considered important to the future of the Corporation
or a Subsidiary Corporation.
(b) TEN PERCENT SHAREHOLDERS. No option may be granted to any
such eligible employee who at the time of such grant owns stock possessing more
than 10% of the total combined voting power of aft classes of stock of the
Corporation or of any Subsidiary Corporation (a " 10 Percent Shareholder")
unless at the time such option is granted the option price is at least 110 % of
the fair market value of the stock and such option by its terms is not
exercisable after the expiation of five years after the date such option is
granted.
<PAGE> 2
(c) LIMITATIONS. The aggregate fair market value of the stock,
determined at the time an option for the stock is granted, for which options are
exercisable for the first time by an optionee during any calendar year, under
all the incentive stock option plans of the Corporation and of any Subsidiary
Corporation, may not exceed $100,000. All options under the Plan shall be
granted within 10 years after the date the Plan is adopted, or the date the Plan
is approved by the Corporation's shareholders, whichever is earlier.
5. TERMS AND CONDITIONS OF OPTIONS GRANTED UNDER THE PLAN. Each option
granted under the Plan shall be evidenced by an agreement, in a form determined
by the Board, which agreement shall set forth, among other things, the number of
shares of the Corporation's common stock subject to the option and the price to
be paid upon exercise of the option. Such agreement shall be subject to the
following express terms and conditions, and such other terms and conditions as
the Board may deem appropriate:
(A) OPTION PERIOD. Each option agreement shall specify the
period for which the option thereunder is granted and sham provide that the
option shall expire at the end of such period. The period during which an option
may be exercised may not exceed 10 years from the date of the grant of the
option or five years in the case of a 10 Percent Shareholder.
(B) EXERCISE OF OPTION.
(I) BY AN OPTIONEE DURING CONTINUOUS EMPLOYMENT. An
optionee may not exercise any part of an option granted under the Plan unless
the optionee has been in the continuous employment of the Corporation or of a
Subsidiary Corporation at all times from the date of the grant of the option
until the date three months prior to the date of exercise, except as provided
below. Such employment must be at least one year before an option can be
exercised. The Board may prescribe a longer time period before an option may be
exercised by an optionee. The option agreement may provide for exercise in
installments of the option granted.
(II) EXERCISE IN THE EVENT OF DEATH OR TERMINATION
OF EMPLOYMENT.
(A) If an optionee shall die (i) while an
employee of the Corporation or a Subsidiary Corporation, or (ii) within three
months after termination of his employment with the Corporation or a Subsidiary
Corporation because of his disability, the vesting of his options shall
accelerate so they become exercisable on the date of his death and his options
may be exercised by the person or persons to whom the optionee's right under
the option pass by will or applicable law, or if no such person has such right,
by his executors or administrators, at any time, or from time to time, but not
later than the expiration date specified in Section 5(a) or two years after the
optionee's death, whichever date is earlier.
(B) If an optionee's employment by
the Corporation or a Subsidiary Corporation shall terminate because of his
disability and such optionee remains living for at least three months following
such termination, the vesting of his options shall accelerate so they become
exercisable at the date of the termination of his employment, and he may
exercise his
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options at any time or from time to time, but not later than the expiration
date specified in Section 5(a) or one year after termination of employment,
whichever date is earlier.
(C) If an optionee's employment
shall terminate by reason of his retirement in accordance with the terms of the
Corporation's tax-qualified retirement plans, if any, or with the consent of
the Board or involuntarily other than "for cause," the vesting of his options
shall accelerate so they become exercisable, and he may exercise his options
until the expiration date specified in Section 5(a) or three months after
termination of employment, whichever date is earlier. For this purpose,
termination "for cause" shall mean termination of employment by reason of the
optionee's commission of a felony, fraud, or willful misconduct which had
resulted, or is likely to result, in substantial and material damage to the
Corporation or a Subsidiary Corporation, all as the Board, in its sole
discretion, may determine.
(D) If an optionee's employment
shall terminate voluntarily or involuntarily "for cause," all right to exercise
his options shall terminate at the date of such termination of employment.
(III) EXERCISE IN THE EVENT OF A CHANGE IN
CONTROL OR OTHER EVENTS. Optionees may exercise their options prior to the
stated exercise date (a) during a period in which a tender offer is pending
which would result in a Change of Control, as defined below, of the Company,
(b) during a 30-day period following a Change of Control, and (c) during a
30-day period following (i) a vote by shareholders of the Company approving a
dissolution or liquidation of the Company, (ii) a sale or other disposition by
the Company of all or substantially all of its assets, or (iii) a merger or
reorganization in which the Company would not survive as an independent
publicly-held company.
For purposes of this Paragraph 5(b)(iii),
the term "Change of Control" shall mean the acquisition by any person, entity,
or group (a such term is defined in the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the securities and Exchange
Commission adopted thereunder) of common stock of the Corporation in a
transaction or series of transactions that result in such person, entity, or
group owning beneficially 50% or more of the outstanding common stock of the
Corporation. Provided, however, a merger or consolidation of the Corporation
with another corporation is not a Change of Control if the shareholders of the
Corporation receive in such merger or consolidation shares of voting common
stock in the resulting or surviving corporation that is registered under the
Securities Exchange Act of 1934, as amended, and that is either listed for
trading on a national securities exchange or is the subject of bid and asked
quotations in an automated quotation system (such as NASDAQ) operated by a
national securities association.
(C) OPTION PRICE. The option price per share
shall be determined by the Board at the time an option is granted and shall be
not less than 100% of the fair market value (110 % in the case of a 10 Percent
Shareholder) of a share of the common stock of the Corporation on the date of
the grant as determined in good faith by the Board. Fair market value at the
time of payment shall be determined without regard to any restriction other
than a restriction that, by its terms, will never lapse.
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<PAGE> 4
(D) PAYMENT OF PURCHASE PRICE UPON EXERCISE. Each
option shall provide that the purchase price of the shares for which an option
may be exercised shall be paid to the Corporation at the time of exercise
either in cash or with stock of the Corporation held by the optionee for more
than six months and having a fair market value equal to the purchase price.
(E) NONTRANSFERABILITY. No option granted under the
Plan shall be transferable other than by a will of an optionee or by the laws
of descent and distribution. During his lifetime, an option shall be
exercisable only by an optionee or by the optionee's attorney-in-fact or
conservator, unless such exercise by the attorney-in-fact or conservator of the
optionee would disqualify the option as an incentive stock option under Section
422 of the Code.
(F) INVESTMENT REPRESENTATION. The shares of stock
to be issued upon the exercise of all or any portion of any option granted
under the Plan shall be issued on the condition that the optionee represents
that the purchase of stock upon such exercise shall be for investment purposes
and not with a view to resale, distribution, offering, transferring,
mortgaging, pledging, hypothecating, or otherwise disposing of any such stock
under the circumstances which would constitute a public offering or
distribution under the Securities Act of 1933 (the "Act") or the securities
laws of any state. No shares of stock shall be issued upon the exercise of any
option unless the Corporation shall have received from the optionee a written
statement satisfactory to legal counsel for the Corporation containing the
above representations, granting a right of first refusal of the Corporation to
purchase such shares in the event of a proposed transfer or disposition of such
shares, stating that certificates representing such shares may bear a legend
restricting their transfer, and stating that the Corporation's transfer agent
or agents may be given instructions to stop transfer of any certificate bearing
such legend. Such representation and restrictions provided for herein shall not
be required if (i) an effective registration statement for such shares under
the Act and any applicable state laws has been filed with the Securities and
Exchange Commission ("SEC") and with the appropriate agency or commission of
any state whose laws apply to the transaction, or (ii) an opinion of counsel
satisfactory to the Corporation has been delivered to the Corporation to the
effect that registration is not required under the Act or under the applicable
securities laws of any state. In the event the Corporation proposes to register
any of its securities under the Act, as amended, or any applicable state laws,
it shall notify each optionee who shall have purchased shares of stock upon the
exercise of all or of any portion of any option granted under the Plan, and if
such optionee desires of registering any of such shares of stock held by him,
he shall notify the Corporation within 30 days after receiving such notice and
shall thereafter be entitled to have the Corporation include such shares in
such registration upon payment by him to the Corporation of his pro rata share
of the cost of such registration.
(G) ADJUSTMENTS IN EVENT OF CHANGE IN COMMON STOCK.
Notwithstanding any other provision of the Plan, in the event after the
Effective Date of any change in the outstanding common stock of the Corporation
by reason of any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination, or exchange of shares, rights offering to
purchase the common stock at a price substantially below fair market value, or
of any similar change affecting the common stock, the number and kind of shares
which
4
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thereafter may be optioned and sold under the Plan and the number and kind of
shares which thereafter may be optioned and sold under the Plan and the number
and kind of shares subject to option in outstanding option agreements and the
purchase price per share thereof shall be appropriately adjusted consistent
with such change in such manner as the Board may deem equitable to prevent
substantial dilution or enlargement of the rights granted to, or available for,
an optionee under the Plan.
(H) NO RIGHTS AS A SHAREHOLDER. No optionee shall
have any rights as a shareholder with respect to any shares subject to his
option prior to the date of issuance to him of a certificate or certificates
for such shares.
(I) NO RIGHTS TO CONTINUED EMPLOYMENT. The Plan and
any option granted under the Plan shall neither confer upon any optionee any
right with respect to continuance of employment by the Corporation or by any
subsidiary of the Corporation, nor shall it interfere in any way with the right
of his employer to terminate his employment at any time.
6. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the grant and
exercise of options under the Plan, and the obligation of the Corporation to
sell and deliver shares under such options shall be subject to all applicable
federal and state laws, rules, and regulations and to such approvals by any
government or regulatory agency as may be required. The Corporation shall not be
required to issue or deliver any certificates for shares of common stock prior
to the completion of any registration or qualification of such shares under any
federal or state law, or any ruling or regulation of any government body which
the Corporation shall, in its sole discretion, determine to be necessary or
advisable.
7. AMENDMENT AND DISCONTINUANCE. The Board may amend (including,
without limitation, amend the Plan in order for options granted under the Plan
to qualify as "Incentive Stock Options" under Section 422 of the Code or to
conform with changes in any applicable laws or regulations), suspend, or
discontinue the Plan; provided, however, that, subject to the provisions of
Section 5(g), no action of the Board may without shareholder approval (a)
increase the number of shares reserved for options pursuant to Section 2, (b)
permit the grant. of any option at an option price less than the price
determined in accordance with Section 5(c), (c) shorten the period provided for
in Section 5(b)(i) which must elapse between the date of the grant of an option
and the date on which any part of an option may be exercised by an optionee, or
(d) permit the granting of options which expire beyond the period provided for
in Section 5(a). Without the written consent of an optionee, no amendment or
suspension of the Plan shall alter or impair any option previously granted to
him under the Plan.
8. EFFECTIVE DATE. The effective date of the Plan shall be November 11,
1996, subject to the approval by shareholders of the Corporation holding not
less than a majority of the total votes cast on the proposal. Notwithstanding
the foregoing, if the Plan is approved by the Board of Directors prior to such
meeting, options may be granted by the Board as provided by the terns of the
Plan subject to such subsequent shareholder approval.
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9. NAME OF THE PLAN. The Plan shall be known as the CA Short Company
1996 Incentive Stock Option Plan.
10. EFFECT OF THE PLAN ON OTHER STOCK PLANS. The adoption of the Plan
shall have no effect on awards made or to be made pursuant to other stock plans
covering employees of the Corporation, a Subsidiary Corporation, a Parent
corporation, or any predecessors or successors thereto.
11. COMPLIANCE WITH SEC REGULATIONS. It is the Corporation's intent
that the Plan comply in all respects with Rule 16b-3 of the Act, and any
regulations promulgated thereunder. If any provision of the Plan is later found
not to be in compliance with the Rule, the provision shall be deemed null and
void. All grants and exercises of stock options under the Plan shall be executed
in accordance with the requirements of Section 16 of the Act and any regulations
promulgated thereunder. To the extent that any of the provisions contained
herein do not conform with Rule 16b-3 of the Act or any amendments thereto or
any successor regulation, then the Board may make such modifications so as to
conform the Plan and any stock options granted thereunder to the Rules
requirements.
12. VALIDITY. In the event that any provision of the Plan or any
related agreement is held to be invalid, void or unenforceable, the same shall
not affect, in any respect whatsoever, the validity of any other provision of
the Plan or any related agreement.
13. INUREMENT OF RIGHTS AND OBLIGATIONS. The rights and obligations
under the Plan and any related agreement shall inure to the benefit of, and
shall be binding upon the Corporation, its successors and assigns, and the
Corporation's employees and their beneficiaries.
14. TITLES. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of the Plan.
15. GOVERNING LAW. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the laws under the State of
Delaware.
16. ARBITRATION. Any claim, dispute or other matter in question of any
kind relating to the Plan shall be settled by arbitration in accordance with the
Rules of the American Arbitration Association. Notice of demand for arbitration
shall be made in writing to the opposing party and to the American Arbitration
Association within a reasonable time after the claim, dispute or other matter in
question has arisen. In no event shall a demand for arbitration be made after
the date when the applicable statute of limitations would bar the institution of
a legal or equitable proceeding based on such claim, dispute or other matter in
question. The decision of the arbitrators shall be final and may be enforced in
any court of confident jurisdiction.
Dated: November 12, 1996
6
<PAGE> 1
EXHIBIT 10.3
SUBORDINATED DEBENTURE
$5,000,000 ,1996
--------------------
Shelby, North Carolina
CA Short Company, a Delaware corporation (herein called the "Company"),
for value received, hereby promises to pay to Pages, Inc., a Delaware
corporation, 801 94th Street North, St. Petersburg, Florida 33702 or permitted
assigns, ("Payee"), the principal sum of Five Million Dollars ($5,000,000.00) as
set forth in Schedule "A" hereto, and to pay interest on the unpaid principal
balance hereof at a rate of seven percent (7%) per annum from the date hereof or
from the most recent interest payment date to which interest has been paid, on
each January 1, April 1, July 1, and October 1 commencing January 1, 1997 (each
an "Interest Payment Date") until the principal hereof is paid in full. Payment
of the principal of and interest on this Debenture will be made to Payee by
check mailed to the address of Payee set forth above or at such other address as
Payee designates by written notice received by Company not less than fifteen
days prior to a payment date.
This Debenture is secured by a Security Agreement of even date herewith
which provides, among other things, that such Security Agreement (but not this
Debenture) terminates and is null and void in the event of (i) a change in
control of Pages, a Delaware corporation, or (ii) the assignment by Payee of
this Debenture.
The following is a statement of the rights of the holder of this
Debenture and the conditions to which this Debenture is subject, to which the
holder hereof, by the acceptance of this Debenture, assents:
1. SUBORDINATION.
(a) The indebtedness evidenced by this Debenture is and shall
remain subordinate and subject in right of payment, to the extent and in the
manner hereinafter set forth, to the prior payment in full of all of the Senior
Indebtedness. "Senior Indebtedness" means the principal of (and premium, if any)
and unpaid interest on (i) indebtedness of the Company or with respect to which
the Company is a guarantor, whether outstanding on the date hereof or hereafter
created, to banks, insurance companies or other lending institutions regularly
engaged in the business of lending money, which is for money borrowed by the
Company or a subsidiary of the Company, whether or not secured, including but
not limited to that certain ___________________ dated ____________, 19___,
between the Company and The Huntington National Bank, and (ii) any deferrals,
renewals or extensions of any such indebtedness or any debentures, Debentures or
other evidence of indebtedness issued in exchange for such Senior Indebtedness.
As used herein, the term "subsidiary" means a corporation at least fifty percent
(50%) of the voting securities, having ordinary voting power not dependent on a
default, of which is owned
<PAGE> 2
directly or indirectly by the Company or by one of its other subsidiaries or by
the Company in conjunction with one or more of its subsidiaries.
(b) Upon any payment or distribution of the assets of the
Company upon any dissolution or winding up or total liquidation or
reorganization of the Company (whether in bankruptcy, insolvency, reorganization
or receivership proceedings, or upon an assignment for the benefit or creditors,
or any other marshaling of the assets and liabilities of the Company, or
otherwise):
(i) all Senior Indebtedness shall first be paid in
full in cash, or provision made for such payment, before any holder of this
Debenture shall be entitled to receive any payments or distributions from or by
the Company on account of the principal of and premium, if any, or interest on
the indebtedness evidenced by this Debenture;
(ii) any payments or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which any holder of this Debenture would be entitled except for the provisions
of this subparagraph (b) shall be paid or delivered by the Company or by any
trustee in bankruptcy, receiver, assignee for benefit of creditors, or other
liquidating agent making such payment or distribution, directly to the holders
of Senior Indebtedness or their representative or representatives, or to such
trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Indebtedness may have been issued, ratably
according to the aggregate amounts remaining unpaid on account of the Senior
Indebtedness held or represented by each, to the extent necessary to pay all
Senior Indebtedness in full after giving effect to any concurrent payment or
distribution, or provision therefor, to the holders of such Senior
Indebtedness; and
(iii) in the event that, notwithstanding the
foregoing, any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, shall be received by any
holder of this Debenture before all Senior Indebtedness is paid in full, or
provision made for its payment, such payment or distribution shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders
of such Senior Indebtedness or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any amendments
evidencing any of such Senior Indebtedness may have been issued ratably as
aforesaid, for application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay all such Senior Indebtedness after giving
effect to any concurrent payment or distribution, or provision therefor, to the
holders of such Senior Indebtedness.
For purposes of this Debenture the words "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is subordinated at least to
the extent provided in this paragraph 2 with respect the payment of all Senior
Indebtedness which may at the time be outstanding, provided that (x) the Senior
Indebtedness is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (y) the rights of the holders of the Company
Senior Indebtedness are not, without the consent of such holders, altered by
such reorganization or readjustment.
2
<PAGE> 3
2. NON-IMPAIRMENT.
(a) Nothing contained in this Debenture is intended to or
shall impair, as between the Company, the Company's creditors other than the
holders of Senior Indebtedness, and any holder of Senior Indebtedness, and any
holder of this Debenture, the obligation of the Company, which is absolute and
unconditional, to pay to the holder of this Debenture the principal of, premium,
if any, and interest on this Debenture, as and when the same shall become due
and payable in accordance with the terms, and which subject to the rights under
this paragraph 2 of the holders of Senior Indebtedness, is intended to rank
equally with all other general obligations of the Company, or is intended to or
shall affect the relative rights of the holder of this Debenture and creditors
of the Company other than the holders of Senior Indebtedness, nor shall anything
herein or therein prevent the holder of this Debenture from exercising all
remedies otherwise permitted by applicable law upon the occurrence of an event
of default (as that term is hereinafter defined), subject to the rights, if any,
under this paragraph of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
(b) (i) No payment on account of principal or interest on this
Debenture shall be made by the Company unless full payment of amounts then due
for principal, premium, if any, sinking fund and interest on all Senior
Indebtedness has been made or duly provided for in money, and (ii) no payment on
account of principal, premium, if any, or interest on this Debenture shall be
made by the Company if, at the time of such payment or immediately after giving
effect thereto, (x) there shall exist a default in the payment of principal,
premium, if any, sinking fund or interest with respect to any Senior
Indebtedness, or (y) there shall have occurred an event of default (other than a
default in the payment of principal, premium, if any, sinking fund or interest)
with respect to any Senior Indebtedness, as defined therein or in the instrument
under which the same is outstanding, permitting the holders thereof to
accelerate the maturity thereof, and such event of default shall not have been
cured or waived or shall not have ceased to exist.
3 REMEDIES.
(a) Wherever used herein, the term "Event of Default" means
any one of the following events (whatever the reason for such Event of Default
and whether it shall be voluntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) default by the Company in the payment of any
installment of interest on this Debenture when such interest shall have
become due and payable and such default continues for a period of 10
days; or
(ii) default by the Company in the payment of any
installment or final payment of principal of this Debenture when such
installment or final payment becomes due and payable; or
3
<PAGE> 4
(iii) the entry with respect to the Company by a
court having competent jurisdiction of:
(A) a decree or order for relief in respect
of the Company in an involuntary proceeding under any
applicable bankruptcy, insolvency, reorganization or other
similar law and such decree or order shall remain unstayed and
in effect for a period of 60 consecutive days; or
(B) a decree or order adjudging the Company
to be insolvent, or approving a petition seeking
reorganization, arrangement, adjustment or composition of the
Company and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(C) a decree or order appointing any person
to act as a custodian, receiver, liquidator, assignee, trustee
or other similar official of the Company or of any substantial
part of the property of the Company, or ordering the winding
up or liquidation of the affairs of the Company and such
decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or
(iv) the commencement by the Company of a voluntary
case or proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding
seeking to be adjudicated bankrupt or insolvent or the consent by the
Company to the entry of a decree or order for relief in an involuntary
case or proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing
by the Company of a petition or answer or consent seeking
reorganization or relief under any applicable law, or the consent by
the Company to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee,
trustee or similar official for the Company or for any substantial part
of the property of the Company, or the making by the Company of an
assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due
or the taking of corporate action by the Company in furtherance of any
such action.
(b) If an Event of Default occurs and is continuing, then the
holder of this Debenture may declare the outstanding principal balance
of this Debenture, and the interest accrue thereon, to be due and
payable immediately, by notice in writing to the Company, and upon such
declaration such amount shall become immediately due and payable.
(c) No right or remedy herein conferred upon or reserved to
the holder of this Debenture is intended to be exclusive of any other
right or remedy, and every right and remedy, to the extent permitted by
law, shall be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity
or otherwise. The assertion or exercise of any right or remedy
hereunder, or otherwise, shall
<PAGE> 5
4
not prevent the concurrent assertion or exercise of any other right or
remedy available at law or in equity.
(d) No delay or omission of the holder of this Debenture to
exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such
Event of Default or an acquiescence therein. Every right and remedy
given by this paragraph or by law to the holder of this Debenture may
be exercised from time to time, and as often as may be deemed expedient
by such holder.
IN WITNESS WHEREOF, the Company has caused this Debenture to be signed
in its name by its President and attested by its Secretary.
Dated: CA SHORT COMPANY
By:
-------------------------------
as President
ATTEST:
-------------------------------
as Secretary
5
<PAGE> 6
SCHEDULE A
PRINCIPAL PAYMENT SCHEDULE
<TABLE>
<CAPTION>
PAYMENT DATE AMOUNT
<S> <C>
January 1, 1998 $100,000
January 1, 1999 $100,000
January 1, 2000 $100,000
January 1, 2001 $100,000
January 1, 2002 $4,600,000
</TABLE>
<PAGE> 1
Exhibit 10.6
CA SHORT COMPANY
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. The purpose of the CA Short Company Non-Employee
Director Stock Option Plan (the "Plan") is to provide for the receipt by
Non-Employee Directors of the Company of stock options in order to further
align their interests with those of the shareholders by increasing their
proprietary interests in the Company.
2. SHARES SUBJECT TO THE PLAN. Subject to the provisions of
Section 10 of the Plan, 40,000 shares of common stock of the Company shall be
reserved and may be optioned under the Plan. The reserved shares may be
authorized and unissued shares or treasury shares of the Company or any
combination of both as determined by the Board of Directors (the "Board") of
the Company. If an option granted under the Plan ceases to be exercisable in
whole or in part, the shares representing such option shall be available under
the Plan for the grant of options in the future.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Board. Subject to and not inconsistent with the provisions of the Plan,
the Board shall have complete authority in its discretion to interpret all
provisions of the Plan consistently with the law, to prescribe the form of the
instrument evidencing any option granted under the Plan, to adopt, amend, and
rescind general and special rules and regulations for the administration of the
Plan, and to make all other determinations necessary or advisable for
administration of the Plan.
4. ELIGIBILITY AND GRANT OF OPTIONS UNDER THE PLAN. Options may
be granted at such times, in such amounts, and, to the extent not inconsistent
with the Plan, on such terms as the Board shall determine. However, options
shall be granted only to members of the Board who are not, at the time of such
grant, employees of the Company or any of its subsidiaries.
5. TERMS AND CONDITIONS OF OPTIONS GRANTED UNDER THE PLAN. Each
option granted under the Plan shall be evidenced by an agreement, in a form
determined by the Board, which agreement shall set forth, among other things,
the number of shares of the Company's common stock subject to the option and
the price to be paid upon exercise of the option. Such agreement shall be
subject to such other terms and conditions as the Board may deem appropriate.
Provided, however, that at least six months must elapse between the date of the
grant of any option pursuant to the Plan and the date of disposition of the
shares of common stock of the Company issued pursuant to the exercise of such
options. The option price per share shall be determined by the Board at the
time an option is granted. Each option shall provide that the purchase price
of the shares for which an option may be exercised shall be paid to the Company
at the time of exercise by any of the following methods or any combination
thereof: (a) cash, (b) certified or cashier's check payable to the order of
the Company, (c) the delivery of whole shares of Company common stock owned by
the option holder, or (d) by requesting that the Company withhold whole shares
of common stock of the Company issuable upon exercise of the option (for
purposes of such a transaction, the value of the shares of Company common stock
shall be determined by the Board in good faith).
<PAGE> 2
6. EXERCISE. All or a portion of an exercisable option shall be
deemed exercised upon delivery to the Secretary of the Company at the Company's
principal office all of the following: (a) a written notice of exercise
specifying the number of shares to be purchased signed by the Non-Employee
Director or other person then entitled to exercise the option, (b) full payment
of the exercise price by any of the means set forth in Section 5 of the Plan,
(c) such representations and documents as the Board, in its sole discretion,
deems necessary or advisable to effect compliance with all applicable
provisions of the Securities Act of 1933, as amended, and any other federal or
state securities laws or regulations, (d) in the event that the option shall be
exercised pursuant to the last sentence of this Section 6 by any person or
persons other than the Non-Employee Director, appropriate proof of the right of
such person or persons to exercise the option, and (e) such representations and
documents as the Board, in its sole discretion, deems necessary or advisable.
Options granted under the Plan shall be exercisable only by the Non-Employee
Director during his or her lifetime or by his/her guardian, conservator or
other legal representative and shall not be transferable other than by will or
the laws of dissent and distribution or pursuant to a valid qualified domestic
relations order.
7. ISSUANCE OF SHARES. No shares shall be issued and delivered
upon exercise of any option unless and until (a) in the opinion of the
Company's legal counsel, any applicable registration requirements of the
Securities Act of 1933, any applicable listing requirements of any securities
exchange on which the common stock of the same class is then listed, and any
other requirements of law or any regulatory bodies having jurisdiction over
such issuance and delivery, shall have been fully complied with, (b) the lapse
of such reasonable time period following the exercise of the option as the
Board may deem necessary for administrative convenience, and (c) the receipt by
the Company of full payment for such shares.
8. AMENDMENT OF THE PLAN. The Plan may be terminated, suspended
or amended by the Board as it deems advisable. However, no amendment,
termination or suspension may revoke or alter in any manner adverse to the
Non-Employee Director any stock options then outstanding or due and owing to a
director but not yet granted, nor may the Plan be amended without shareholder
approval where the absence of such approval would cause the Plan to fail to
comply with any requirement of applicable law or regulation.
9. TERM OF PLAN. The Plan shall expire when all options have
been granted hereunder and all shares subject to options issued under the Plan
shall have been issued.
10. CHANGES IN CAPITALIZATION. In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
spin-off, consolidation, rights offering, or any other change in the corporate
structure or shares of the Company, appropriate adjustments in the number and
kind of shares authorized by the Plan, in the manner and kind of shares covered
by, and in the option price of outstanding stock options under this Plan shall
be made so as to preserve the value of such options.
11. COMPLIANCE WITH SEC REGULATIONS. It is the Company's intent
that the Plan comply in all respect with Rule 16b-3 of the Securities Act of
1933, as amended, and any regulations promulgated thereunder. If any provision
of the Plan is later found not to be in compliance with the Rule, the provision
shall be deemed null and void. All grants and exercises of stock options under
the Plan shall be exercised in accordance with the requirements of Section 16
2
<PAGE> 3
of the Act, as amended, and any regulations promulgated thereunder. To the
extent that any of the provisions contained herein do not conform with Rule
16b-3 of the Act or any amendments thereof or any successor regulation, then
the Board may make such modifications as to conform the Plan any stock options
granted thereunder to the Rule's requirements.
12. RIGHT TO SERVICE. No Non-Employee Director shall have any
claim or right to be granted a stock option under the Plan. Neither the Plan
nor any action pursuant thereto shall be construed as giving any Non-Employee
Director a right to be retained in the service of the Company. The adoption of
this Plan shall not affect any other compensation, retirement or other benefit
program in effect for the Company.
13. EFFECTIVE DATE. The Plan, which is subject to shareholder
approval, shall be effective November 12, 1996 or such other date as
shareholder approval is obtained.
14. VALIDITY. In the event that any provision of the Plan or any
related agreement is held to be invalid, void or unenforceable, the same shall
not affect, in any respect whatsoever, the validity of any other provision of
the Plan or any related agreement.
15. INUREMENT OF RIGHTS AND OBLIGATIONS. The rights and
obligations under the Plan and any related agreements shall inure to the
benefit of, and shall be binding upon the Company, its successors and assigns,
and the Non-Employee Directors and their beneficiaries.
16. TITLES. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of the Plan.
17. GOVERNING LAW. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the laws of the State of Delaware.
18. ARBITRATION. Any claim, dispute or other matter in question
of any kind relating to the Plan shall be settled by arbitration in accordance
with the Rules of the American Arbitration Association. Notice of demand for
arbitration shall be made in writing to the opposing party and to the American
Arbitration Association within a reasonable time after the claim, dispute or
other matter in question has arisen. In no event shall a demand for
arbitration be made after the date when the applicable statute of limitations
would bar the institution of a legal or equitable proceeding based on such
claim, dispute, or other matter in question. The decision of the arbitrators
shall be final and may be enforced in any court of competent jurisdiction.
Dated: November 12, 1996
3
<PAGE> 1
EXHIBIT 99
[RECCA & COMPANY, INC. LETTERHEAD]
December 13, 1996
The Board of Directors
Pages, Inc.
801 94th Avenue North
St. Petersburg, Florida 33702
Dear Sirs,
We understand that Pages, Inc. ("Pages" or the "Company") intends to spin-off
CA Short Company, ("Short") a wholly owned subsidiary, to its stockholders.
The spin-off will be in the form of a pro rata tax-free distribution of the
outstanding shares of common stock of Short to holders of Pages common stock
with each stockholder of Pages receiving one and one-half shares of Short common
Stock for every ten shares of Pages commmon stock held all as more fully
described below and in the Form 10 Registration statement filed November 12,
1996 with the Securities and Exchange Commission.
You have asked us to render our opinion as to whether, from a financial point
of view, the distribution is fair to the Company's shareholders. In that
connection, we are not opining as to any other transactions or contractual
arrangements to be entered into by Pages.
In the course of arriving at our opinion, we have (i) reviewed the Form 10
Registration statement relating to the distribution, (ii) met with certain
members of Page's management with respect to the Company's businesses and
strategic business objectives of each, (iii) reviewed Pages' Annual Reports to
shareholders on Form 10-K for the fiscal years ended December 31, 1994 and
1995, and its Quarterly Reports on Form 10-Q for the periods ended March 31,
1996, June 30, 1996 and September 30, 1996, (iv) reviewed certain financial
forecasts for Pages and Short for fiscal 1996 and fiscal 1997 provided to us by
the Company's senior management, and (v) conducted such other studies,
analyses, inquiries and investigations as we deemed appropriate.
In our review and analysis and in rendering the opinion contained herein, we
have relied upon, and have not independently verified, the accuracy,
completeness and fair presentation of all financial and other information that
was provided to us by Pages or was publicly available, and such opinion is
conditioned upon such information (whether written or oral) being complete,
accurate and fair in all material respects. We note that the Company has not
prepared, and we
<PAGE> 2
have not accordingly reviewed or conducted valuation analyses based upon, any
financial projections with respect to the estimated future performance of Pages
or Short, and our opinion, is as a result, qualified by the absence of such
reviews and analyses. We have not made an independent evaluation or appraisal
or conducted a physical inspection of any of the assets of Pages or Short, nor
have we been furnished with any such appraisals. Our opinion is based on
economic, monetary, political, market and other conditions existing on the
date of this opinion.
In rendering such opinion we have also assumed that: (i) the conditions set
forth in the Form 10 in order to complete the distribution will be consummated
(ii) there is not now, and there will not as a result of the distribution be,
any default, or event of default under any indenture, credit agreement or other
material instrument to which Pages or Short or any of their subsidiaries or
affiliates is a party.
Finally, in rendering the opinion set forth below we note that: (i) the Company
elected to pursue the distribution following a thorough consideration of the
financial alternatives available to it; (ii) the consummation of the
distribution is not conditioned upon the approval of the Company's
stockholders; and (iii) we are not opining as to the prices at which any of the
securities of Pages or Short may trade upon and following the consummation of
the distribution.
Based upon and subject to the foregoing, and upon such other matters as we
consider relevant, it is our opinion as investment bankers that, as of the
date hereof, from a financial point of view, that the distribution is fair to
the shareholders of Pages.
As you are aware, Recca and Company, Inc. has been engaged by the Company to
provide the opinion contained herein, and will receive a fee for providing such
opinion. In addition, we note that we have not been authorized by the Company
or its Board of Directors to solicit, nor have we solicitated, offers for
transactions alternative to the distribution (including the sale of all of the
Company's equity securities or any of its constituent businesses), nor have we
been asked to advise the Company or its Board of Directors as to financial
alternatives to the distribution.
It is understood and agreed that his opinion is provided for the use of the
Board of Directors of the Company and is not to be quoted or referred to, in
whole or in part in any registration statement, prospectus, or proxy statement,
or in any other written document used in connection with the offering or sale of
securities, nor shall this letter be used for any other purposes, without the
prior written consent of Recca and Company, Inc.
Sincerely,
/s/ Recca & Company, Inc.
Recca & Company, Inc.
