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<INCOME-PRETAX> (4,224,231)
<INCOME-TAX> 2,119,400
<INCOME-CONTINUING> (6,343,631)
<DISCONTINUED> (2,876,088)
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
For the fiscal year ended December 31, 1995
Commission File Number 0-10475
PAGES, INC.
-----------------------------------------------------
(Exact Name of Registrant as specified in its charter)
Delaware 34-1297143
- ------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
801 94th Avenue North, St. Petersburg, Florida 33702
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (813) 578-3300
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
-----------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO .
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
------
The aggregate market value of the voting shares held by non-affiliates of the
Registrant as of March 11, 1996, was $5,393,535 (computed by reference to the
average bid and asked prices of such shares on such date).
Number of Common Shares, each with $0.01 par value, of the Registrant
outstanding as of March 11, 1996: 5,175,843 Common Shares.
<PAGE>
PART I
ITEM 1. BUSINESS
BUSINESS
General
PAGES, Inc. (the "Company") was originally formed as an Ohio corporation,
but on October 14, 1994, it reincorporated under the laws of the State of
Delaware. The Company operates principally through its wholly-owned
subsidiaries, School Book Fairs, Inc. and its affiliates ("SBF") and Clyde A.
Short Company, Inc. ("CAS"). The Company engages in the children's literature
and incentive/recognition awards businesses. SBF, which the Company acquired in
1992, publishes and distributes children's literature throughout the United
States, and until the sale of its United Kingdom subsidiary and the closing of
its Canadian distribution channel in March 1996, Canada (other than Quebec), the
United Kingdom, and Ireland. The Company's children's literature segment
accounted for 68.8%, 66.8%, and 61% of the Company's revenues in 1995, 1994,
and 1993, respectively. Foreign operations accounted for 20.0%, 20.4% and 20.4
% of the Company's revenues in 1995, 1994 and 1993, respectively. CAS, which
the Company acquired in 1990, 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; however,
its customer base is concentrated in the Southeastern United States. The
Company's incentive/recognition awards segment accounted for 31.2%, 33.2%, and
39% of the Company's revenues in 1995, 1994, and 1993, respectively. See Note 10
to the Company's Consolidated Financial Statements for certain financial
information attributable to the Company's two industry segments and its
operations by geographical area.
Children's Literature (School Book Fairs)
Publishing. The Company, through SBF, publishes and markets reasonably
priced, leisure-based children's printed literature and media products. The
Company's books generally have a retail price ranging from $0.99 to $19.99
depending, largely, on whether the books are soft or hardcover. Most of the
books sold are softcover having a retail price of less than $5.95 and an average
retail price of approximately $3.55. In 1995, approximately 75% of the titles
offered by the Company were purchased from other publishers or were reprints
licensed from other publishers. The remaining titles offered by the Company were
proprietary titles produced and published by the Company's Publishing division
under its Willowisp Press (R), Hamburger Press (R), Worthington Press (R), and
Riverbank Press (TMPend) imprints. In 1995, the Company published over 40
fiction and non-fiction books and related products under its proprietary
imprints. The Company's proprietary titles consistently rank at the top of the
best selling books in the Company's book fairs. All of the Company's proprietary
books are manufactured by independent printers, which are generally selected on
the basis of price and quality. The Company has no agreements or contractual
arrangements with any printer other than purchase order commitments issued in
the normal course of business. The Company believes that it is not dependent on
any one printer.
Market Overview. The Company markets its children's leisure-based literature
primarily through book fairs held at pre-schools, elementary schools, and middle
schools. There are approximately 79,600 pre-schools and day care centers, 64,000
elementary schools, and 13,000 middle schools in the United States.
Total student enrollment in United States elementary schools is
approximately 27 million and in middle schools is approximately 9 million. A
relatively high number of births in the late 1980's and early 1990's is expected
to result in continued growth in pre-school and elementary school enrollment and
an increase in middle school enrollment during the 1990's.
The Company also markets children's literature directly to elementary and
middle school librarians and teachers. There are over 1,800,000 elementary and
middle school teachers in the United States. In addition, the Company markets
directly to librarians at public libraries. There are over 18,000 public
libraries in the United States, Canada and the United Kingdom.
School Book Fairs. The principal distribution channel for the Company's
children's literature is through its school book fairs. The Company currently
markets its book fairs under its "PAGES Book Fairs (R)" trade name. The Company
sold more than 15 million children's books in 1995 through its book fairs. The
Company's concentration in school-based distribution distinguishes it from other
children's book publishers. Based on information obtained through the conduct of
its business, the Company believes that it currently operates the second largest
book fair business in the United States.
The Company's typical book fair is generally one week in duration, is
conducted at a central location on school premises, and is sponsored as a fund-
raising event by parent groups, librarians, or media specialists. A school
typically conducts one or two book fairs during the school year. Book fairs give
students the opportunity to browse and purchase quality, reasonably-priced,
leisure-based paperback books, hardcover books, and related products such as
posters, pencils, erasers, and bookmarks. The Company provides to the schools
child friendly display cases which are fully stocked with books and related
products. The sponsor conducts the book fair, retains a percentage of the sales
receipts, and remits the balance to the Company.
Distribution. Approximately 95% of the Company's elementary and middle
school book fairs are "case fairs," in which fully stocked book cases are
delivered to and retrieved from the schools by the Company's independent
distributors. The balance of the Company's book fairs are "box fairs," in which
the books and merchandise are delivered and retrieved through the mail. Box
fairs are utilized for elementary and middle schools located in sparsely
populated areas with a small number of schools where a case fair would not be
cost-effective and for pre-schools because fewer titles are offered. Books and
related merchandise for case fairs are distributed by the Company to its
distributors from its warehouses in Worthington, Ohio. Books and merchandise
for box fairs are distributed directly to the schools from the Company's
warehouses.
As of March 25, 1996, the Company had approximately 7 company and 69
independent distributors located in territories throughout the United States.
Relationships with 34 independent distributors were severed in early March of
1996 when the Company sold its United Kingdom subsidiary and discontinued its
Canadian distribution channel. The Company's independent distributors are
independent contractors who are compensated by the Company on a commission
basis. All distributors are responsible for the custody and care of an
inventory of the Company's products and for delivery, setup, and retrieval of
the products at book fairs. The Company believes its distribution structure is
superior to others in the book fair business because it allows the distributor
to customize the fairs to the needs of the customer and because it provides
extraordinary service. The distributors are exclusive as it relates to the
distribution of book fairs and related products and non exclusive as it relates
to other business endeavors.
Marketing and Customer Service. Currently, the Company markets its book
fairs through approximately 41 trained telephone sales representatives located
in its offices in Worthington, Ohio, St. Petersburg, Florida, and Anaheim,
California, as well as through its network of distributors. The telephone sales
representatives undergo extensive training, monitoring, and supervision to
ensure quality control and consistency. The Company's computer system allows
telephone sales representatives to sequence solicitations according to account
profitability.
In elementary and middle schools, decisions relating to book fairs are
usually made by school librarians, media specialists or coordinators, or parent-
teacher organizations, which also sponsor, organize, and conduct the fairs. In
pre-schools, decisions relating to book fairs are made by center administrators
or directors.
Surveys conducted by the Company indicate that product quality, quantity,
and customer service are the three most important factors considered by sponsors
of book fairs in selecting one book fair company over another. The Company has
established an on-line system which can be accessed by each of its distributors
and customer service representatives to retrieve messages and special requests
from customers and monitor and order inventory. Additionally, the Company
maintains a customer service department with a national toll-free number. The
customer service department collects a representative number of book fair
customer evaluations and incorporates information derived from such evaluations
into a database, which enables the Company to measure the effectiveness of its
marketing programs and monitor the performance of its distributors.
The Company currently offers approximately 375 book titles and other items
in its book fairs. The Company's Creative Services department selects book
titles and other items for sale at its book fairs based upon such factors as
sales potential, literary quality, and educational and entertainment value. The
Company determines the sales potential for a particular book title or other
item, in part, from historical sales data and from qualitative and quantitative
readership surveys it conducts.
Growth opportunities. In 1995, the Company's 52,000 book fairs gave it
direct access to approximately 18 million students and teachers. This access
affords the Company an opportunity to cross-market other products and to
increase sales of its products directly to teachers and librarians.
The Company believes that its existing book fair sales organization and its
marketing system are capable of absorbing additional volume and can be utilized
to increase its share of the existing elementary school and middle school book
fair markets.
Except for its operations in Canada, the United Kingdom, and Ireland, the
Company did not operate in any foreign countries in 1995. However, countries in
Western Europe and South America could offer longer-range opportunities for
sales of non-English language products. There is also a demand in the United
States for Spanish language products which could be easily integrated into the
Company's current marketing and distribution systems.
Incentive/Recognition Awards (Clyde A. Short Company)
General. The Company creates, markets, and administers awareness and
incentive/recognition programs which address specific needs in employee
education, training, motivation, and recognition. Programs offered by the
Company include safety, sales incentive, quality control, production, service
recognition, attendance, birthday, and corporate holiday gift programs.
Virtually every program employs merchandise (alternatively, jewelry or,
occasionally, travel) 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 "incentive" 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.
Awareness and Incentive/Recognition Programs
Safety Awareness/Incentive 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.
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 territory, or boosting overall sales. When those goals are met, the
responsible employees are provided with awards.
Service Recognition Programs. Service awards 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.
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.
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.
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 20 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 100 independent commissioned
sales representatives, sales consultants, telephone sales representatives and by
direct mail, trade show participation, and trade journal advertising. 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 commission 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
award programs and actively cross-sell its broad range of programs to its
existing clients.
Employees
As of March 25, 1996, the Company employed a total of approximately 239
permanent and 135 seasonal persons in the United States. The number of seasonal
employees fluctuated during 1995 from a high of 592 to a low of 197 due to the
cyclical nature of the Company's business. None of the Company's employees is
represented by a labor union. The Company considers its relationship with its
employees to be excellent. As of March 25, 1996, the Company's health care plan
covered 201 of its domestic employees.
Trademarks, Copyrights, and Licenses
The Company owns or licenses the rights to the principal trademarks used in
its business. The Company's principal trademarks are registered and the Company
considers protection of such trademarks to be important to its business. U.S.
trademarks expire ten years after they are granted, but are renewable. It is
the Company's policy to renew all of its active trademarks. The names
"Willowisp Press(R)," "Hamburger Press(R)," "Rainbow Book Fairs (R),"
"Worthington Press(R)," "Reading Resources(R)," "Riverbank Press (TM) Pend," and
others are registered trademarks or have trademark registration pending in the
United States. The Company is not aware of any other pending claims of
infringement or challenges to the Company's right to use its trademarks.
The Company sometimes acquires license rights to reproduce characters or
images such as cartoon characters or pictures of sports figures, but such
licensing is not critical to its children's literature business.
Competition
The distribution of children's leisure-based literature is a highly
competitive business. The Company's major competitors are Scholastic Corporation
and Troll Associates, which are significantly larger and better capitalized than
the Company, and numerous small independent companies. The Company competes on
the basis of customer service, product quality, and competitive pricing.
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.
<PAGE>
ITEM 2. PROPERTIES
<TABLE>
<CAPTION>
Owned/
Location Use Size Leased Principally Used By
-------- --- ---- ------ -------------------
<S> <C> <C> <C> <C>
St. Petersburg, Florida Office 48,760 sq. ft. Leased PAGES,Inc./School Book Fairs
Worthington, Ohio Office & Warehouse 84,000 sq. ft. Leased School Book Fairs
Worthington, Ohio Office & Warehouse 61,530 sq. ft. Owned Under remodeling
Christchurch, England (1) Office & Warehouse 29,700 sq. ft. Leased School Book Fairs
Dublin, Ohio Office 4,700 sq. ft. Leased PAGES, Inc.
Scarborough, Ontario Canada (2) Office & Warehouse 21,400 sq. ft. Leased School Book Fairs
Silver Spring, Maryland Office & Warehouse 5,200 sq. ft. Leased School Book Fairs
Anaheim, California Office & Warehouse 11,600 sq. ft. Leased School Book Fairs
St. Louis, Missouri Office & Warehouse 25,000 sq. ft. Leased School Book Fairs
Orlando, Florida Office & Warehouse 1,700 sq. ft. Leased School Book Fairs
Wilmington, Delaware Office & Warehouse 3,500 sq. ft. Leased School Book Fairs
Tampa, Florida Warehouse 3,500 sq. ft. Leased School Book Fairs
New York, New York Office 750 sq. ft. Leased School Book Fairs
Marietta, Georgia Office & Warehouse 13,000 sq. ft. Leased School Book Fairs
Oklahoma City, Oklahoma Office & Warehouse 8,900 sq. ft. Leased School Book Fairs
Shelby, North Carolina Office & Warehouse 134,000 sq. ft. Owned Clyde A. Short Company
Kings Mountain, North Carolina Warehouse 163,700 sq. ft. Owned Clyde A. Short Company
</TABLE>
(1) On March 6, 1996, the Company sold School Book Fairs, Ltd., its United
Kingdom subsidiary, terminating its lease obligation. See Item 1.
(2) On March 13, 1996, the Company discontinued its Canadian distribution
channel. See Item 1.
The leases (including renewals) on the properties set forth above expire as
follows: St. Petersburg, Florida - December 31, 2002; Worthington, Ohio -
December 31, 1996; Dublin, Ohio - month to month term; Scarborough, Ontario,
Canada - August 31, 1997; Silver Spring, Maryland - December 31, 1997;
Anaheim, California - August 31, 1997; St. Louis, Missouri - February 27,
1998; Orlando, Florida - March 31, 1998; Wilmington, Delaware - August 31,
1998; Tampa, Florida - January 31, 1997; New York, New York - February 28,
1998; Marietta, Georgia - May 31, 1998; Oklahoma City, Oklahoma - June 30,
1996. These facilities are all located in appropriately designed buildings
which are kept in good repair. All of the properties owned by the Company are
pledged to various lenders.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Internal Revenue Service
On October 13, 1995, the Company received a Notice of Deficiency
from the Internal Revenue Service (the "IRS") relating, respectively , to (i)
School Book Fairs, Inc. and Subsidiaries for the fiscal year ending July 31,
1988, asserting a deficiency of $65,020 in income taxes and penalties plus
interest as provided by law, and (ii) School Book Fairs, Inc. and Subsidiaries
for the fiscal year ending July 31, 1989, asserting a deficiency of $5,113,174
in income taxes and penalties plus interest as provided by law. On October 19,
1995, the IRS issued two additional notices of deficiency relating, specifically
to (a) SBF Services, Inc. for the fiscal year ending July 31, 1989, asserting a
deficiency of $547,104 in income taxes and penalties plus interest as provided
by law, and (b) SBF Services, Inc. for the fiscal years ending July 31, 1990,
and July 1991, asserting a deficiency of $327,013 in income taxes and penalties
plus interest as provided by law for an aggregate of $4,693,681 in income taxes
and $1,358,630 in penalties. Using a constant annual interest rate of 9%,
interest payable as of December 31, 1995, on the aforementioned asserted
deficiencies would approximate $4,200,000.
On January 11, 1996, the Company filed separate petitions with United
States Tax Court with respect to each of the two notices of deficiency issued on
October 13, 1995. These petitions dispute the entire amount of the deficiencies
asserted by the IRS. On January 16, 1996, two additional petitions were filed
with the United States Tax Court with respect to the two notices of deficiency
issued on October 19, 1995. These petitions also dispute the entire amount of
the deficiencies asserted by the IRS.
On March 7, 1996, the IRS filed separate answers to each of the four
petitions, generally denying the allegations set forth therein. The Company
intends to vigorously contest the various assertions made by the IRS in the
notices of deficiency.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on August 31, 1995.
The matters voted upon were the election of five directors. The number of votes
cast at the meeting were as follows:
Votes Cast Broker
--------------------------------
MATTER For Against Withheld Abstentions Non-Votes
------- --- ------- -------- ----------- ---------
Nominees:
S. Robert Davis 4,097,266 50,217 0 0 0
Richard A. Stimmel 4,098,673 48,810 0 0 0
Charles R. Davis 4,086,873 60,610 0 0 0
Juan F. Sotos 4,097,923 49,560 0 0 0
Robert J. Tierney 4,098,473 49,010 0 0 0
<PAGE>
PART II
ITEM 5. MARKET PRICE FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The 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 trading prices for shares of the Common Stock, as reported on the
NASDAQ National Market.
Trade Price
------------------------
High Low
----- ------
Calendar Year Ended December, 1995
Fourth Quarter ...................... 3 1 5/8
Third Quarter ....................... 3 5/8 2 1/2
Second Quarter ...................... 7 1/4 3
First Quarter ....................... 8 3 1/4
Calendar Year Ended December 31, 1994
Fourth Quarter ...................... 7 4
Third Quarter ..................... 9 1/2 6 3/8
Second Quarter ...................... 11 8 1/8
First Quarter ....................... 12 1/8 10 1/8
As of March 11, 1996, the Company had approximately 443 holders of
record of its Common Stock.
The Company has not paid dividends since December 27, 1985. The Company
anticipates that for the foreseeable future it will retain earnings in order
to finance the expansion and development of its business, and no cash
dividends will be paid on its common stock. The Loan Agreement between the
Company and The Huntington National Bank N.A. (the "Loan Agreement") does
not allow the Company to pay cash dividends which total in excess of
$100,000 on its common stock and only then when the Company is not in
default under the Loan Agreement.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
Ten Months
Year Ended Year Ended Year Ended Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, February 29, February 28,
---------------------------------------------------------------------------------------
1995 1994 1993 1992(1) 1992 1991
---------------------------------------------------------------------------------------
Consolidated Statements of Operations
Data:
<S> <C> <C> <C> <C> <C> <C>
Revenues $72,821 $76,336 $76,531 $44,507 $22,222 $24,320
Costs and expenses 77,045 76,743 74,963 44,209 21,982 23,711
------- ------- ------- ------- ------- -------
Income from continuing operations
before income taxes (4,224) (407) 1,568 298 240 609
(Provision) benefit for income taxes (2,119)(6) 169 (568) 700(3) (77) (8)
------- ------- ------- ------- ------- -------
Income (loss) from continuing
operations (6,343) (238) 1,000 - - -
Income (loss) from discontinued
operations (2,876) (234) 11 - - -
------- ------- ------- ------- ------- -------
Income (loss) before cumulative effect
of change in accounting principle (9,219) (472) 1,011 998 163 601
Cumulative effect of change in
accounting principle - - - - 828(2) -
------- ------- ------- ------- ------- -------
Net income (loss) $(9,219) $(472) $1,011 $998 $ 991 $ 601
------- ------- ------- ------- ------- -------
Per Share Data(4):
Income (loss) from continuing
operations $(1.29) $(0.06) $0.18 $0.19 $0.04 $0.14
Discontinued operations (0.58) (0.06)
Cumulative effect of change in
accounting principle - - - - 0.17 -
------- ------- ------- ------- ------- -------
Net income (loss) per common share(5) $(1.87) $(0.12) $0.18 $0.19 $0.21 $0.14
------- ------- ------- ------- ------- -------
Cash dividends per common share - - - - - -
Weighted average common and common
equivalent shares 4,930 4,055 5,757 5,546 4,941 4,855
</TABLE>
<TABLE>
<CAPTION>
At At At At At At
December 31, December 31, December 31, December 31, February 29, February 28,
1995 1994 1993 1992 1992 1991
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance Sheets Data:
Working capital $13,732 $13,527 $10,054 $8,456 $2,328 $4,518
Total assets 54,849 68,005 53,761 44,634 12,092 12,103
Long-term obligations 17,373 8,927 10,362 10,533 420 2,423
Stockholders' equity 10,674 19,593 12,814 8,734 7,803 6,810
</TABLE>
NOTE 1: On May 19, 1992, Pages, in a transaction accounted for as a purchase,
acquired the outstanding stock of School Book Fairs, Inc. and affiliated
entities. The aggregate cost of this transaction, including major debt
refinancing, approximated $8,841,000. Additionally, during 1992, the Company
changed its year end from February 28 to December 31.
NOTE 2: Pursuant to the Financial Accounting Standards Board (FASB) statement of
Financial Accounting Standards (SFAS) No. 109, issued in February, 1992, the
Company, effective March 1, 1991, recorded a deferred tax asset of $828,287 with
a corresponding credit to income.
NOTE 3: For the ten months ended December 31, 1992, the tax provision included
an $812,400 tax benefit attributable to the Company's reassessment of the future
realizability of deferred tax assets.
NOTE 4: Adjusted to give effect to five-for-four stock split in each of April
1990 and October 1993.
NOTE 5: Represents earnings per common and common equivalent share both on a
primary and a fully diluted basis. On a fully diluted basis, dilution is less
than 3%.
NOTE 6: The tax provision was an allowance against previously recorded
deferred tax assets.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Selected
Financial Data and the Consolidated Financial Statements and Notes contained
elsewhere herein. The Company's results of operations have been, and in certain
cases are expected to continue to be, affected by certain general factors.
Acquisitions and Changes in Fiscal Years
On May 19, 1992, the Company acquired all of the outstanding capital stock
of School Book Fairs. The transaction was accounted for as a purchase and, as a
result, operations of School Book Fairs are reflected in the Company's
Consolidated Financial Statements from May 20, 1992, forward. As part of the
transaction, the Company acquired certain School Book Fairs bank indebtedness
directly from School Book Fairs' primary lending institution, at a substantial
discount, and issued to such lender warrants to purchase Common Shares of the
Company. The Company also issued, to key management personnel of School Book
Fairs, stock options to purchase Common Shares of the Company.
During December 1992 as a consequence of the School Book Fairs acquisition,
the Company changed its fiscal year end from the last day of February back to
December 31 so that future reporting years would more closely approximate the
annual business cycle for the combined businesses.
During 1994 and 1993, the Company acquired several businesses involved in
the distribution and publishing of children's literature, including the Junior
Library Guild, National Library Service and Cornerstone Books from Bantam
Doubleday Dell Publishing Group, Inc. in 1994 and Parents Magazine Read Aloud
Book Club from the publisher of Parents Magazine in 1993. The aggregate cost of
these acquisitions approximated $2.9 million and $1.7 million in 1994 and 1993,
respectively, and was paid with a combination of cash, Common Shares, and notes.
The transactions were accounted for as purchases and, as a result, the
operations of the acquired entities are included in the Company's consolidated
financial statements commencing with the respective dates of acquisition.
However, the Read Aloud Book Club is reflected as a discontinued operation in
the accompanying consolidated financial statements.
IRS Assessment
During the Spring of 1993, the Company was advised that the Internal Revenue
Service ("IRS") may assess additional income taxes in connection with the
examination of the tax returns of School Book Fairs and its affiliates for the
fiscal years ending July 31, 1989, 1990, and 1991. In June 1993, the Company
recorded a $2 million adjustment to its purchase price allocation of SBF assets,
which increased the cost in excess of assets acquired (i.e. - goodwill) and
recorded a corresponding increase in accrued tax liabilities and related costs.
In October of 1995, the Company received four Notices of Deficiency from the
IRS relating to this examination. The Notices of Deficiency assessed additional
income taxes of $4,693,681 and penalties of $1,358,630. Using a constant annual
interest rate of 9%, interest payable as of December 31, 1995, on the
aforementioned asserted deficiencies would approximate $4,200,000.The asserted
deficiencies are attributable primarily to a restructuring of SBF and related
entities that occurred on August 31, 1988, in which, along with other events,
certain assets were transferred between related companies. The IRS has
challenged, among other things, the values assigned to those assets by the
parties to the transaction, contending that the assets were undervalued and that
SBF recognized a substantial taxable gain in the transaction. The Company
intends to vigorously contest the various assertions made by the IRS in the
notices of deficiency and believes the IRS's position regarding the adjustments
to taxable income is substantially overstated. The Company has retained the law
firm of Akin, Gump, Strauss, Hauer & Feld as counsel, and in January 1996, filed
petitions with the Tax Court disputing the IRS valuation of the assets
transferred, and other points in the IRS assessment.
The Company is unable to determine the ultimate outcome of this uncertainty
and accordingly, has not provided for any additional amounts in excess of the $2
million relating to this assessment in its fiscal 1995 financial statements.
Should the IRS prevail on its entire $6.1 million of proposed income taxes and
penalties and $4.2 of potential interest as of December 31, 1995, the
additional $8.3 million above the $2 million recorded by the Company during 1993
would approximate $1.60 per common share outstanding.
Disposal and Phase Out of Certain Children's Literature Business Segment
Distribution Channels
During 1995, the Company disposed of or phased out the operations of several
acquisitions made in 1993 and 1994 and curtailed the distribution of early
childhood product through the mail to pre-schools and daycare centers. Combined
revenues, included in the accompanying consolidated financial statements, of the
aforementioned operations for 1995, 1994 and 1993 approximated $2,300,000,
$3,400,000, and $2,300,000, respectively. The combined costs and expenses
associated with the aforementioned operations including loss on disposition or
phase out included in cost of goods sold and selling, general and administrative
expenses in the accompanying consolidated financial statements for 1995, 1994
and 1993 approximated $2,700,000, $3,300,000 and $1,518,000, respectively.
Subsequent Events -Disposition of United Kingdom and Discontinuance of Canadian
Distribution Channel
On March 6, 1996, the Company sold its United Kingdom subsidiary. Revenues
in US dollars for the United Kingdom subsidiary for the years ended December 31,
1995, 1994 and 1993 approximated $11,264,000, $12,173,000, and $11,969,000,
respectively, with income/(loss) before income taxes of approximately
$(1,197,000), $(276,000), and $57,000, for the same years.
On March 13, 1996, the Company discontinued its Canadian distribution
channel. Revenues in U.S. dollars for the Canadian distribution channel for the
years ended December 31, 1995, 1994, and 1993 approximated $3,322,000,
$3,406,000, and $3,631,000, respectively, with loss before income taxes of
approximately $(386,000), $(367,000) and $(344,000) for the same years.
Trends
The Company believes that the public's interest in education and general
demographic conditions will continue for the foreseeable future to have a
favorable impact on the Company's domestic operations, particularly with
regard to the sale of children's literature products. Additionally,
public elementary and secondary enrollment is projected to continue to
grow through the year 2000. As the population of school children increases, the
number of schools and teachers will likely increase.
For the Spring 1996 book fair season, the number of domestic events
delivered through March 25, 1996 were approximately 15% less than the same
season in 1995. Additionally, the remaining scheduled events for the Spring
1996 season are 15% less than the same time in the previous year. The Company
anticipates this trend to hold through the Spring 1996.
Seasonality and Quarterly Data
Both the children's literature and the incentive/recognition awards segments
are significantly seasonal. The majority of the Company's book fairs are held
during the school year. As a result, most of the revenues of SBF are generated
between the months of September and May and the Company must build up inventory
in anticipation of sales during the season. Approximately one-half of the
revenues of CAS and most of its profits are recorded during the months of
November through January. Working capital requirements, inventory, and
receivables are at their peak levels at that time and the Company experiences
negative cash flow and losses in the summer months.
Discontinued Operations
In 1995, the Company adopted plans to discontinue the operations of its Read
Aloud Book Club division (the "Club"). The Club is accounted for as a
discontinued operations in the accompanying consolidated statements of
operations. The Club's results of operations for the years ended December 31,
1994 and 1993 have been reclassified in order to conform with the current year's
presentation.
Results of Operations
The table below sets forth certain financial data expressed as a percentage
of revenues (percentage may not total 100% due to rounding):
Percentage of Revenues
---------------------------------------------
Twelve Months Twelve Months Twelve Months
Ended Ended Ended
December 31, December 31, December 31,
1995 1994 1993
---------------------------------------------
Total revenue 100.0% 100.0% 100.0%
Cost of goods sold 61.8 60.0 60.5
------ ------ ------
Gross profit 38.2 40.0 39.5
Selling, general,and 38.9 36.5 34.0
administration
Interest 3.0 2.2 1.7
Depreciation and amortization 2.1 1.8 1.7
Foreign exchange _ (0.1) 0.0
------ ------ ------
Income (loss) from continuing
operationsbefore income taxes (5.8%) (0.5%) 2.1%
------ ------ ------
Year Ended December 31, 1995, Compared to Year Ended December 31, 1994
Consolidated revenues for the year ended December 31, 1995 approximated
$72.8 million compared to approximately $76.3 million for the year ended
December 31, 1994, a decrease of 4.6% or approximately $3.5 million. The
Company's children`s literature business segment accounted for approximately
$50.1 million compared to approximately $50.9 million of revenues in 1994, a
decrease of 1.7%, or approximately $800,000. The decrease in children's
literature business segment revenues is attributable to the following: an
approximate $2 million decrease in book fair sales ($1.1 million in the domestic
market and $900,000 in the foreign market) with an offset of an approximate $1.2
million increase in school and library sales.
The Company's incentive/recognition awards business segment accounted for
approximately $22.7 million in revenues for the year ended December 31, 1995,
compared to $25.2 million in revenues for the year ended December 31, 1994, a
decrease of 10% or approximately $2.5 million. The decline in revenue was due
to disappointing year end holiday sales and a decrease in volume on certain
existing customers coupled with delayed redemption on new accounts. The
majority of revenues generated by the incentive/recognition awards business
segment are from the sales of products, and revenues from services are
insignificant.
International revenues in U.S. dollars associated with the children's
literature business segment were approximately $14.6 million for the year ended
December 31, 1995, compared to $15.6 million for the year ended December 31,
1994. In local currencies, international revenues for 1995 decreased by 8.1%
from 1994 revenues; however, due to foreign currency fluctuations, the 1995 U.S.
dollar revenues from foreign operations declined by 6.4% from the prior year.
Consolidated cost of goods sold was approximately $45.0 million for the year
ended December 31, 1995, compared to approximately $45.9 million for the year
ended December 31, 1994, a decrease of 1.9% or approximately $900,000. The
Company's children's literature business segment accounted for approximately
$31.2 million of costs of goods sold for the year ended December 31, 1995,
compared to approximately $30.4 million for the year ended December 31, 1994, an
increase of 2.6% or approximately $800,000. As a percentage of revenues from
the children's literature business segment, cost of goods sold increased to
63.5% in 1995 from 59.8% in 1994. The increase in cost of goods sold in the
children's literature business segment is principally due to erosion in margin,
change in product mix and the related channel of product distribution.
The Company's incentive/recognition awards business segment accounted for
approximately $13.8 million of cost of goods sold for the year ended December
31, 1995, compared to approximately $15.5 million of cost of goods sold for the
year ended December 31, 1994, a decrease of 10.7% or approximately $1.7 million.
The decrease in cost of goods sold was attributable to the decrease in revenues.
As a percentage of revenues from the incentive/recognition awards business
segment, cost of goods sold improved to 61.1% in 1995 from 61.4% in 1994. The
0.3% decrease in cost of goods sold is principally attributable to the change in
product mix.
Consolidated selling, general, and administrative expense was approximately
$28.3 million for the year ended December 31, 1995, compared to approximately
$27.8 million for the year ended December 31, 1994, an increase of 1.7% or
approximately $500,000. Selling, general, and administrative expense associated
with the Company's children's literature business segment was approximately
$19.0 million for the year ended December 31, 1995, compared to approximately
$18.0 million for the year ended December 31, 1994, an increase of 5.5% or
approximately $1.0 million. The increase in selling, general and administrative
expenses attributable to the children's literature business segment in 1995 was
due to reflecting a full year of expense relating to 1994 business acquisitions
as well as additional expenses relating to the operations of the 1995 business
acquisitions and expenditures to further develop historical and acquired
channels of distribution. Additionally, the 1995 expense includes approximately
$400,000 of costs associated with the disposal and phasing out of operations.
Selling, general, and administrative expense associated with the Company's
incentive/recognition awards business was approximately $8.2 million for the
year ended December 31, 1995, compared to approximately $8.8 million for the
year ended December 31, 1994, a decrease of 7% or approximately $600,000. The
decrease in selling, general and administrative expenses was due to decreased
sales and cost reduction efforts implemented by the Company.
Consolidated general corporate and administrative expense was approximately
$1.1 million for the year ended December 31, 1995, compared to $1.0 million for
the year ended December 31, 1994, an increase of 10% or $100,000.
Consolidated interest expense was approximately $2.2 million for the year
ended December 31, 1995, compared to $1.7 million for the year ended December
31, 1994, an increase of 30% or $500,000. During 1995, the children's
literature business segment had higher levels of borrowings at higher interest
rates. The average outstanding debt by quarter in 1995 approximated $23.9
million compared to $23.3 million for 1994. Additionally, the average interest
rate for 1995 approximated 9.3% compared to approximately 7.9% for 1994. The
higher levels of borrowings resulted from seasonal needs, business acquisitions
and business expansion.
Consolidated depreciation and amortization expense was approximately $1.5
million for the year ended December 31, 1995, compared to $1.4 million for the
year ended December 31, 1994, an increase of 5.2% or approximately $100,000. The
increase in depreciation and amortization expense in 1995 was primarily due to
the inclusion of a full year of expense in 1995 for acquisitions made in the
children's literature business segment in 1994, which increased depreciable and
amortizable assets. The increase is due also to the addition of depreciable and
amortizable assets associated with the 1995 business acquisitions in the
children's literature business segment.
The provision for income taxes reflects a reserve for previously recorded
deferred tax assets, as required by SFAS No 109.
Year Ended December 31, 1994, Compared to Year Ended December 31, 1993
Consolidated revenues for the year ended December 31, 1994, approximated
$76.3 million compared to approximately $76.5 million for the year ended
December 31, 1993, a decrease of 0.2% or approximately $200,000. The Company's
children's literature business segment accounted for approximately $50.9 million
of revenues for the year ended December 31, 1994, compared to approximately
$46.9 million of revenues for the year ended December 31, 1993, an increase of
8% or approximately $4 million. The increase in children's literature segment
revenues is principally due to the inclusion of a full year of revenues in 1994
for 1993 business acquisitions as well as revenues generated from 1994 business
acquisitions (book clubs and upscale book fairs). Although revenues were up,
they were less than anticipated.
International revenues in U.S. dollars associated with the children's
literature business segment were approximately $15.6 million for each of the
years ended December 31, 1994, and 1993. In local currencies, international
revenues for 1994 decreased by 1.4% over the comparable 1993; however, due to
foreign currency fluctuations, the U.S. dollar revenues from foreign operations
declined 0.4% from last year.
The Company's incentive/recognition awards business segment accounted for
approximately $25.2 million of revenues for the year ended December 31, 1994,
compared to approximately $29.7 million of revenues for the year ended December
31, 1993, a decrease of 15% or approximately $4.5 million. The decline in
revenue was due to disappointing year end holiday sales and the Company's
inability to timely replace low margin and unprofitable accounts purposefully
eliminated that were previously serviced in connection with the 1993 marketing
alliance. The majority of revenues generated by the incentive/recognition
awards business segment are from the sale of products, and revenues from
services are insignificant.
Approximately $0.2 million of revenues for the year ended December 31, 1994
were principally attributable to gain on assets held for disposition and rental
income.
Consolidated cost of goods sold was approximately $45.9 million for the year
ended December 31, 1994, compared to approximately $46.3 million for the year
ended December 31, 1993, a decrease of 1% or approximately $400,000. The
Company's children's literature business segment accounted for approximately
$30.4 million of costs of goods sold for the year ended December 31, 1994,
compared to approximately $27.1 million for the year ended December 31, 1993, an
increase of 12% or approximately $3.3 million. The increase in cost of goods
sold in 1994 is due to the increase in revenues. As a percentage of revenues
from the children's literature business segment, cost of goods sold increased,
registering 59.6% during 1994 compared to 57.9% during 1993. The 1.7% increase
in cost of goods sold as a percentage of revenues is due to the adverse effect
of competitive pricing pressures somewhat offset by the favorable gross margin
impact of distributing product through additional channels.
The Company's incentive/recognition awards business segment accounted for
approximately $15.5 million of cost of goods sold for the year ended December
31, 1994, compared to approximately $19.2 million for the year ended December
31, 1993, a decrease of 19% or approximately $3.7 million. The decrease in cost
of goods sold was attributable to the decrease in revenues. As a percentage of
revenues from the incentive/recognition awards business segment, cost of goods
sold improved to 61.4% in 1994 from 64.7% in 1993. The 3.3% decrease in cost of
goods sold is principally attributable to the change in product mix.
Consolidated selling, general, and administrative expense was approximately
$27.8 million for the year ended December 31, 1994, compared to approximately
$26.1 million for the year ended December 31, 1993, an increase of 6.8% or
approximately $1.7 million. Selling, general, and administrative expense
associated with the Company's children's literature business segment was
approximately $18.0 million for the year ended December 31, 1994, compared to
approximately $16.8 million for the year ended December 31, 1993, an increase of
7% or approximately $1.2 million. Approximately $400,000 of the increase in
selling, general and administrative expenses attributable to the children's
literature business segment in 1994 was due to reflecting a full year of expense
relating to 1993 business acquisitions as well as an approximate $500,000
additional expenses relating to the operations of the 1994 business acquisitions
and approximately $300,000 of expenditures to further develop historical
acquired channels of distribution.
Selling, general, and administrative expense associated with the Company's
incentive/recognition awards business was approximately $8.8 million for the
year ended December 31, 1994, compared to approximately $8.2 million for the
year ended December 31, 1993, an increase of 7% or approximately $600,000. 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 $400,000 of the increase. Additionally, the
incentive/recognition awards business segment's selling, general and
administrative expenses includes approximately $200,000 of staffing and
marketing costs associated with anticipated fourth quarter sales which did not
materialize.
Consolidated general corporate and administrative expense was approximately
$1.0 million for the year ended December 31, 1994, compared to $1.1 million for
the year ended December 31, 1993, a decrease of 9.1% or $100,000.
Consolidated interest expense was approximately $1.7 million for the year
ended December 31, 1994, compared to $1.3 million for the year ended December
31, 1993, an increase of 31% or $400,000. During 1994, both business segments
had higher levels of borrowings at slightly higher interest rates. The average
outstanding debt by quarter in 1994 approximated $23.3 million compared to
approximately $20 million for 1993. Additionally, the average interest rate for
1994 approximated 7.9% compared to 7% for 1993. The higher levels of borrowings
resulted from seasonal needs, business acquisitions and business expansion.
Consolidated depreciation and amortization expense was approximately $1.4
million for the year ended December 31, 1994, compared to $1.3 million for the
year ended December 31, 1993, an increase of 8% or approximately $100,000. The
increase in depreciation and amortization expense in 1994 was primarily due to
the inclusion of a full year of expense in 1994 for acquisitions made in the
children's literature business segment in 1993, which increased depreciable
assets. The increase is due also to the addition of depreciable and amortizable
assets associated with the 1994 business acquisitions in the children's
literature business segment.
The benefit provision for income taxes is less than the statutory rates due
to permanent differences between financial and tax reporting and the change in
state and local tax rates somewhat offset by the exclusion of losses of United
Kingdom operations.
The loss for the year was attributable to a combination of disappointing
fourth quarter sales coupled with additional costs and expenses incurred for the
integration of acquisitions, acceleration of the growth of book clubs and to
further develop historical channels of distribution.
Earnings (loss) per common and common equivalent share decreased to a loss
of $0.12 in 1994 from earnings of $0.18 in 1993. The decrease in per share
amounts was attributable to a $1,482,952 decrease in earnings from income of
$1,010,520 and a 1,702,000 decrease in the weighted average common and common
equivalent shares used to compute per share amounts. The decrease in common
equivalent shares was attributable to the exclusion of such common stock
equivalents when they are anti-dilutive and was somewhat offset by additional
shares issued in the August, 1994 stock offering.
Liquidity and Capital Resources
The Company's primary sources of liquidity have been cash generated from
operating activities from both of its business segments, amounts available under
its existing credit facilities, and proceeds from the public offering of Common
Shares during the third quarter of 1994. The Company's primary uses of funds
consist of financing inventory and receivables for both business segments.
The following table presents a historical summary of the Company's cash
flows (in thousands):
1995 1994 1993
---------------------------------------
Cash provided by (used) in
operating activities $ 3,269 $ (6,737) $ (4,305)
Capital expenditures (586) (854) (1,363)
Net (payments) borrowings on debt (2,420) 3,336 3,554
obligations
Payment for Company acquisitions (779) (2,720) (558)
Proceeds from issuance of Common 275 7,206 2,140
Shares
Other 102 141 2
--------- -------- ---------
Increase(decrease) in cash $ (139) $ 372 $ (530)
--------- -------- ---------
During early March 1996, the Company disposed of its foreign operations.
The $11,287,500 of proceeds were used to pay off the debt due Lloyds Bank, pay
down the revolving lines, and for working capital. On March 27, 1996 the
Company negotiated a new $16 million revolving credit facility to replace the
previous $25 million of domestic bank credit line. The credit facility consists
of the following: a $5 million long-term credit loan for use in the
incentive/recognition awards business (the "CA Short Line"), a $11 million long-
term credit loan for the use in the children's literature business (the "School
Book Fairs Line"). Both lines are due in full on June 1, 1997, subject to
annual renewal.
The Company anticipates that operating cash flows during the next twelve
months, coupled with the long-term credit facilities will, cover operating
expenditures and meet the current maturities on long-term obligations. The
Company does not anticipate any material expenditures for property, plant and
equipment during the next twelve months. Should the Internal Revenue Service
prevail in a potential tax assessment, it would place additional demands on the
Company's cash and lines of credit.
During 1995, Gruner + Jahr Printing and Publishing Company ("G+J") filed an
action against the Company seeking in excess of $900,000 in damages which have
been stayed by the court pending the resolution of an action filed by the
Company in federal court against G+J and Gareth Stevens, Inc., seeking
compensation arising out of the Company's purchase from G+J of the Read Aloud
Book Club. Gareth Stevens, Inc., filed a counterclaim in the action seeking an
unspecified amount of damages. The federal court action is in the pleading and
discovery stage and it is not possible at this time to predict the outcome.
However, if the Company is unsuccessful in its action and G+J and Gareth Stevens
are successful, the Company's liquidity may be adversely affected.
Seasonality
Both the children's literature and the incentive/recognition awards
businesses are extremely seasonal. The majority of the Company's school book
fairs are held during the school year. As a result, most of the income of SBF
is generated between the months of September and May. Approximately 45% of the
revenues of CAS and all of its profits are recorded during the months of
November through January. Working capital requirements, inventory, and
receivables are at their peak levels at that time and the Company experiences
negative cash flow in the other months.
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.
<PAGE>
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
The response to this item is submitted in a separate section of this report.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Previously reported on Form 8-K dated November 2, 1994 and Form 8-K/A
relating thereto.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors and Executive Officers
The following table sets forth certain information concerning the directors
and executive officers of the Company.
Director or
Executive
Name Age Position (1) Officer Since
S. Robert Davis (2) 57 Chairman of the Board
Assistant Secretary, and Director 1990
Richard A. Stimmel 57 President, Treasurer and Director;
President of School Book Fairs, Inc. 1981
Charles R. Davis (2) 34 Executive Vice President, Secretary,
and Director; President of Clyde A. 1983
Short Company, Inc.
Randall J. Asmo 31 Vice President 1992
Juan F. Sotos, M.D. 68 Director 1992
Robert J. Tierney 48 Director 1992
(1) All positions are those held with the Company, except as otherwise
indicated.
(2) S. Robert Davis is the father of Charles R. Davis.
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.
Business Experience of Directors and Executive Officers
S. Robert Davis was elected a director and Chairman of the Board in March,
1990, and Assistant Secretary in May, 1992. Prior to his election to the Board
of Directors, he served as Assistant to the President 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 the Company.
Richard A. Stimmel joined the Company as its Secretary and a director in
1981. In September, 1983, he was elected Chairman of the Board and he served in
that capacity through March, 1990. In September, 1989, Mr. Stimmel was also
elected Treasurer of the Company. In March, 1990, he resigned as Chairman of the
Board, and in June, 1990, he was elected as President. In May, 1992, Mr. Stimmel
was elected President of School Book Fairs, Inc., a subsidiary of the Company.
Additionally, during the past five years, Mr. Stimmel 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.
Charles R. Davis became a director of the Company in December, 1983. He was
elected as Vice President of the Company in April, 1986, and served as Secretary
and Assistant Treasurer of the Company from January, 1984, until April, 1986. In
September, 1989, Mr. Davis was again elected Secretary of the Company and, in
July, 1991, he was elected Executive Vice President of the Company. In
September, 1992, Mr. Davis was elected President of Clyde A. Short Company,
Inc., a subsidiary of the Company. 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.
Randall J. Asmo was elected Vice President in September, 1992. Prior to that
time, he served as Assistant to the President from February, 1990 to September,
1992. Additionally, since October, 1987, Mr. Asmo has served as Vice President
of Mid-States Development Corp., a privately-held real estate development and
leasing company, as Vice President of American Home Building Corp., a privately-
held real estate development company, and an officer of several other small
business enterprises.
Juan F. Sotos, M.D. was elected as a director on December 22, 1992. Dr.
Sotos has been a Professor of Pediatrics at The Ohio State University College of
Medicine since 1962 and also serves as Chief of Endocrinology and Metabolism at
Children's Hospital in Columbus, Ohio.
Robert J. Tierney was elected as a director on October 21, 1992. Dr. Tierney
currently serves as the Acting Chairperson of the Ohio State University
Department of Education Theory and Practice. Dr. Tierney is also active in
education research and has served as a Professor at The Ohio State University
since 1984.
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors, and persons who beneficially own more than 10% of the
Company's Common Stock, to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC") and the
National Association of Securities Dealers, Inc. Executive officers, directors
and greater than 10% beneficial owners are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on a review of the copies of such forms furnished to the Company and
written copies of such forms furnished to the Company and written
representations from the executive officers and directors, the Company believes
that all Section 16(a) filing requirements applicable to its executive officers,
directors, and greater than 10% beneficial owners were complied with.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Each director who is not an officer of the Company receives a fee of $1,100
for attendance at each Board meeting, a fee of $550 for attendance at each
telephonic Board meeting, and a fee of $500 for attendance at each meeting of a
Board committee of which he is a member. Directors who are also officers of the
Company receive no additional compensation for their services as directors.
The following table shows, for the fiscal years ended December 31, 1995,
1994, and 1993, the cash compensation paid by the Company and its subsidiaries,
as well as certain other compensation paid or accrued for those years, to the
Company's President and each of its four other most highly paid executive
officers (the "Named Executive Officers") in the principal capacity in which
they served:
<TABLE>
Summary Compensation Table
<CAPTION>
Long-term
Compensation
Annual Compensation
Name and Other Annual Number of Options
Principal Position Year Salary Bonus Compensation Awarded(1)
<S> <C> <C> <C> <C> <C>
S. Robert Davis, 12/31/95 $183,180 $0 $209,368(2) 0
Chairman 12/31/94 $185,000 $0 $0 0
12/31/93 $185,000 $0 $0 0
Richard A. Stimmel, 12/31/95 $158,180 $0 $349,719(2) 0
President 12/31/94 $160,000 $0 $0 0
12/31/93 $160,000 $0 $0 0
Charles R. Davis, 12/31/95 $147,896 $0 $103,389(2) 0
Executive Vice President 12/31/94 $140,000 $0 $0 0
12/31/93 $140,000 $0 $0 0
John C. Sontheimer,(3,4) 12/31/95 $131,261 $0 $480(4) 0
Senior Vice President 12/31/94 $150,000 $0 $2,658(4) 0
12/31/93 $150,000 $0 $4,990(4) 12,000
Richard B. Erven,(3,5,6) 12/31/95 $33,826 $0 $9,710(6) 0
Managing Director of 12/31/94 $166,378 $0 $5,787(6) 0
School Book Fairs, Ltd. 12/31/93 $136,963 $22,575 $4,810(6) 36,250
</TABLE>
(1) Stock options previously granted to the Named Executive officers, by their
terms, automatically adjust to reflect certain changes in the outstanding Common
Shares of the Company, including stock dividends.
(2) Represents the difference between the fair market value of the Common
Shares received and the stock option exercise price on the date of exercise.
(3) Mr. Erven left the Company in March of 1995 and Mr. Sontheimer left the
Company in May of 1995, compensation amounts include severance.
(4) Represents, for the years ended December 31, 1995, 1994, and 1993,
contributions to Mr. Sontheimer's 401(k) retirement plan in the amount of $0,
$2,082 and $4,510, respectively, and life insurance premiums paid for the
benefit of Mr. Sontheimer in the amounts of $480, $576 and $480, respectively.
Two hundred thousand dollars in term life insurance was provided to Mr.
Sontheimer as part of the health insurance plan provided to employees of SBF
generally.
(5) The amounts shown for Mr. Erven represent the estimated U.S. dollar
equivalent of salary and bonus paid or accrued in Pounds Sterling per U.S.
Dollar, based upon a weighted average of $1.5825 for the first three months of
1995, and, $1.542 and $1.505 for each Pound Sterling for the years ended
December 31, 1994, and 1993, respectively. Conversion fluctuations during the
periods, ranged from 1.839 to 1.478 Pounds Sterling per U.S. Dollar. The bonus
amount paid to Mr. Erven represents a bonus arrangement established for Mr.
Erven prior to the Company's acquisition of School Book Fairs, but paid
subsequent to such acquisition.
(6) Represents the estimated U.S. Dollar equivalent (based upon a weighted
average of $1.5825 for the first three months of 1995, and, $1.542, and $1.505
for each Pound Sterling for the years ended December 31, 1994 and 1993,
respectively) of contributions to an annuity insurance retirement product
purchased for the benefit of Mr. Erven prior to the Company's acquisition of
School Book Fairs, the cost of a Company-provided health club membership, health
benefits, and the estimated value of the personal use of a Company-provided
automobile.
Compensation Committee Interlocks and Insider Participation
Juan F. Sotos, M.D. and Robert J. Tierney served as the Executive
Compensation Committee during the last fiscal year. Neither Dr. Tierney nor Dr.
Sotos serve or have served as an employee of the Company or any of its
subsidiaries. Richard A. Stimmel, the Company's President, served on the
Executive Compensation Committee along with Drs. Tierney and Sotos during the
last fiscal year. None of such persons serves on the Board of Directors of any
other public company.
Executive Compensation Committee's Report on Executive Compensation
The Executive Compensation Committee (the "Committee") has designed its
executive compensation policies to provide incentives to its executives to focus
on both current and long-term Company goals, with an overriding emphasis on the
ultimate objective of enhancing stockholder value. The Committee has followed
an executive compensation program, comprised of cash and equity-based
incentives, which recognizes individual achievement and encourages executive
loyalty and initiative. The Committee considers equity ownership to be an
important factor in providing executives with a closer orientation to the
Company and its stockholders. Accordingly, although no options were granted
during 1995, the Committee encourages equity ownership by its executives through
the grant of options to purchase Common Stock. Similarly, the Committee
believes the Company's Employee Stock Purchase Plan encourages employees to
build a meaningful stake in the Company, further aligning their interests with
those of the stockholders.
The Company believes that providing attractive compensation opportunities is
necessary to assist the Company in attracting and retaining competent and
experienced executives. Base salaries for the Company's executives, and the
executives employed by the Company's subsidiaries, have historically been
established on a case-by-case basis by the Board of Directors, based upon
current market practices and the executive's level of responsibility, prior
experience, breadth of knowledge, and salary requirements. Since its
appointment in March, 1993, the Committee has carried forward those policies.
The base salaries of executive officers have historically been reviewed annually
by the Board of Directors and are now reviewed annually by the Committee.
Adjustments to such base salaries have been made considering: (a) historical
compensation levels; (b) the overall competitive environment for executives; and
(c) the level of compensation necessary to attract and retain executive talent.
Stock options have historically been awarded upon hiring, promotion, or based
upon merit considerations. As the value of a stock option is directly related
to the market price of the Company's Common Stock, the Board of Directors
believes the grant of stock options to executives encourages executives to take
a view toward the long-term performance of the Company. Other benefits offered
to executives are generally the same as those offered to the Company's other
employees.
The Committee utilizes the same policies and considerations enumerated above
with respect to compensation decisions regarding the Company's President (its
chief executive officer), Richard A. Stimmel. Mr. Stimmel's 1995 base salary
was determined primarily by reference to his historical compensation, his level
of responsibility, his historical performance, and the Company's desire to
retain his continued service. The Committee believes its compensation policies
with respect to its President promote the interests of the Company and its
Stockholders through current motivation of the President coupled with an
emphasis on the Company's long-term success.
Option Holdings
The following table sets forth information with respect to unexercised
options held by such officers as of the end of the year:
Year End Option Values
Number of Unexercised Value of Unexercised In-the-Money
Options at Year End Options at Year End (1)
--------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Richard A. Stimmel 579,622 - $369,005 -
S. Robert Davis 462,872 - 271,192 -
Charles R. Davis 535,115 - 355,876 -
(1) The value of unexercised in-the-money options at year end represents the
difference between the fair market value of the Common Shares underlying the
options on December 29, 1995, and the exercise price of the options.
Performance Graph
The following line graph compares the yearly change in the Company's total
return to its Stockholders as compared to total return of the Center for
Research in Securities Prices Total Return Index for the NASDAQ Stock Market
(U.S.) and the Standard & Poors Publishing Group, assuming a common starting
point of 100 for the five-year period from December 31, 1990 to December 31,
1995. Total stockholder return for the Company, as well as for the Indexes, was
determined by adding (a) the cumulative amount of dividends for a given year
(assuming dividend reinvestment), and (b) the difference between the share price
at the beginning and at the end of the year, the sum of which is then divided by
the share price at the beginning of such year.
<TABLE>
COMPARISION OF FIVE YEAR CUMULATIVE RETURN AMONG PAGES, INC, NASDAQ NMS COMP,
AND S&P PUBLISHING
<CAPTION>
Fiscal Year Covered Pages, Inc. NASDAQ Comp S&P Publishing
<S> <C> <C> <C>
Measurment Point 12/31/90 100.00 100.00 100.00
12/31/91 147.37 157.26 123.14
12/31/92 326.32 181.97 143.80
12/31/93 565.79 208.03 182.57
12/31/94 236.84 202.97 175.89
12/31/95 85.53 285.26 226.67
</TABLE>
<PAGE>
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 1, 1996, with
respect to the beneficial ownership of shares of the Company's common stock by
each person known to the Company to be the beneficial owner of more than 5% of
the Company's outstanding common stock, by each director, by the President and
each of the Company's four other most highly paid executive officers serving as
of December 31, 1995, and by all directors and executive officers of the Company
as a group:
Amount and Nature
of Beneficial Percent
Name and Address Ownership(1) of Class(2)
- ----------------------------- ------------- -----------
S. Robert Davis 1,276,572 (3) 22.64%
801 94th Avenue North
St. Petersburg, Florida 33702
Richard A. Stimmel 685,459 (4) 11.91%
801 94th Avenue North
St. Petersburg, Florida 33701
Charles R. Davis 631,716 (5) 11.06%
801 94th Avenue North
St. Petersburg, Florida 33702
American Home Building Corporation 164,062 (6) 3.17%
5720 Avery Road
Dublin, Ohio 43016
Juan F. Sotos, M.D. 57,812 1.12%
4400 Squirrel Bend
Columbus, Ohio 43220
Robert J. Tierney 2,760 0.05%
4805 Olentangy Blvd.
Columbus, Ohio 43214
Carret and Company, Inc.
560 Lexington Ave.
New York, New York 10022 423,500 8.81%
All executive officers and
directors
as a group (6 persons) 2,889,631 (7) 42.61%
(1) Represents sole voting and investment power unless otherwise indicated.
(2) Based on 5,175,843 shares of common stock outstanding as of March 1, 1996,
plus, as to each person listed, that portion of the 2,295,516 unissued shares of
common stock subject to outstanding options and warrants which may be exercised
by such person, and as to all officers and directors as a group, unissued shares
of common stock as to which the members of such group have the right to acquire
beneficial ownership upon the exercise of stock options.
(3) Includes 11,000 shares owned by Mr. Davis' wife as to which Mr. Davis
disclaims beneficial ownership and includes 462,872 unissued Common Shares as to
which Mr. Davis has the right to acquire beneficial ownership upon the exercise
of stock options within the next 60 days. Does not include Common Shares owned
by American Home Building Corporation as to which Mr. Davis could be deemed to
have beneficial ownership.
(4) Includes 579,622 unissued Common Shares as to which Mr. Stimmel has the
right to acquire beneficial ownership upon the exercise of stock options within
the next 60 days. Does not include Common Shares owned by American Home Building
Corporation as to which Mr. Stimmel could be deemed to have beneficial
ownership.
(5) Includes 781 shares owned by Mr. Davis' wife and 3,874 shares owned by Mr.
Davis' children as to which Mr. Davis disclaims beneficial ownership and
includes 535,115 unissued Common Shares as to which Mr. Davis has the right to
acquire beneficial ownership upon the exercise of stock options within the next
60 days. Does not include Common Shares owned by American Home Building
Corporation as to which Mr. Davis could be deemed to have beneficial ownership.
(6) American Home Building Corporation is a private corporation owned equally by
S. Robert Davis, Charles R. Davis, and Richard A. Stimmel. Therefore, 54,687 of
the 164,062 Common Shares owned by American Home Building Corporation could be
attributed to each of Messrs. Davis, Davis, and Stimmel. Accordingly, S. Robert
Davis could be deemed the beneficial owner of 1,331,259 Common Shares,
constituting 23.61% of the class; Charles R. Davis could be deemed the
beneficial owner of 686,403 Common Shares, constituting 12.02% of the class; and
Richard A. Stimmel could be deemed the beneficial owner of 740,146 Common
Shares, constituting 12.86% of the class.
(7) The number of shares of common stock beneficially owned by all officers and
directors as a group includes 1,605,734 unissued shares of common stock as to
which they have the right to acquire beneficial ownership upon the exercise of
stock options within the next 60 days, 4,655 shares of common stock owned by Mr.
Charles Davis' wife and children as to which Mr. Davis disclaims any beneficial
ownership, and 11,000 shares of common stock owned by Mrs. S. Robert Davis as to
which Mr. Davis disclaims any beneficial ownership. This number also includes
7,500 shares owned and 28,125 unissued shares of common stock as to which
Randall J. Asmo, an officer of the Company, has the right to acquire beneficial
ownership upon exercise of stock options within the next 60 days; 57,812 shares
owned by Dr. Juan Sotos, a Director of the Company; 2,760 shares owned by Dr.
Tierney, a Director of the Company; 164,062 shares of common stock held by
American Home Building Corporation, to which Messrs. Davis, Davis, and Stimmel
could be deemed to have beneficial ownership.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
Incorporated by reference to List of Financial Statements and
Financial Statement Schedule following "Signatures."
2. Financial Statement Schedule:
Incorporated by reference to List of Financial Statements and
Financial Statement Schedule following "Signatures."
3. Exhibits:
Incorporated by reference to Exhibit Index immediately following
Financial Statement Schedule.
(b) Reports on Form 8-K filed by the Registrant during the quarter ended
December 31, 1995.
The Company filed a report on Form 8-K dated October 6, 1995 under Item 5
describing the settlement of the Class Action Law Suit filed on February 28,
1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PAGES, INC.
(Registrant)
Dated: __________________________ By: _______________________________
Richard A. Stimmel
Principal Accounting and
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Dated: _________________________ By: _______________________________
S. Robert Davis
Chairman of the Board, and
Director
Dated: __________________________ By: _______________________________
Richard A. Stimmel
President, Treasurer, and
Director
Dated: __________________________ By: ________________________________
Charles R. Davis
Executive Vice President, and
Director
<PAGE>
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1995
PAGES, INC. AND SUBSIDIARIES
ST. PETERSBURG, FLORIDA
FORM 10-K--ITEM 8, ITEM 14(a)(1), (2) AND (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements of PAGES, Inc. and Subsidiaries
are included in Item 8:
Independent Auditors' Reports
Deloitte & Touche LLP - for the years ended December 31, 1995 and 1994.
Hausser + Taylor and Arthur Andersen - for the year ended December 31, 1993
Consolidated statements of operations--
Years ended December 31, 1995, 1994 and 1993.
Consolidated balance sheets--
December 31, 1995 and December 31, 1994
Consolidated statements of cash flows--
Years ended December 31, 1995, 1994, and 1993.
Consolidated statements of stockholders' equity--
Years ended December 31, 1995, 1994, and 1993.
Notes to the consolidated financial statements--
Years ended December 31, 1995, 1994 and 1993.
The following consolidated financial statement schedule of PAGES, Inc. and
Subsidiaries is included in Item 14(d):
Schedule II--Valuation and qualifying accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
PAGES, Inc.
St. Petersburg, Florida
We have audited the accompanying consolidated balance sheets of PAGES, Inc. and
subsidiaries (the "Company") as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended. Our audits also include the information included in the
consolidated financial statement schedule listed in the index at Item 14(d) as
of and for the years ended December 31, 1995 and 1994. These consolidated
financial statements and consolidated financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the consolidated financial statements and consolidated financial
statement schedule based on our audits. The Company's consolidated financial
statements and consolidated financial statement schedule for the year ended
December 31, 1993 was audited by other auditors whose reports thereon dated
March 25, 1994 and March 23, 1994 expressed unqualified opinions on those
statements.
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 consolidated 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. Also,
in our opinion, the consolidated financial statement schedule as of and for the
years ended December 31, 1995 and 1994, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Tampa, Florida
March 27, 1996
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
Pages, Inc.
We have audited the accompanying consolidated
statements of operations, shareholders' equity and cash
flows of Pages, Inc. and Subsidiaries, for the year ended
December 31, 1993 and the financial statement schedule as
listed in Item 14 (a)(1) and (2) of this Form 10-K. 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 did not
audit the combined financial statements of Great British
Book Fairs, Inc. and School Book Fairs Limited, wholly-owned
subsidiaries, for the year ended December 31, 1993, which
statements reflect revenues of 15.6% of the consolidated
totals. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion,
insofar as it relates to the amounts included for Great
British Book Fairs, Inc. and School Book Fairs Limited, is
based solely on the report of the other auditors.
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 and the
report of other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of
other auditors, the consolidated financial statements
referred to above present fairly, in all material respects,
the results of operations of Pages, Inc. and Subsidiaries,
their cash flows and changes in stockholders' equity for the
year ended December 31, 1993, in conformity with generally
accepted accounting principles. In addition, the financial
statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole,
present fairly the information required to be included
therein.
/s/ Hausser + Taylor
HAUSSER + TAYLOR
Columbus, Ohio
March 25, 1994
<PAGE>
To the Shareholders of Great British Book Fairs Inc. and School Book Fairs
Limited:
We have audited the accompanying combined balance sheets of Great British Book
Fairs Inc. and School Book Fairs Limited at 31 December 1993 and the related
combined statements of operations, owners' equity and cash flows for the year
ended 31 December 1993 and the period from 20 May 1992 to 31 December 1992.
These combined financial statements are the responsibility of the companies'
management. Our responsibility is to express an opinion of these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Great British Book Fairs Inc.
and School Book Fairs Limited at 31 December 1993 and the results of their
operations and their cash flows for the year ended 31 December 1993 and the
period from 20 May 1992 to 31 December 1992 in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen
Arthur Andersen
Chartered Accountants and Registered Auditors
1 Surrey Street
London
WC2R 2PS
23 March 1994
<PAGE>
PAGES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1995, 1994 and 1993
----------------------------------------------------
1995 1994 1993
----------- ----------- -----------
Revenues $72,820,881 $76,336,093 $76,530,717
----------- ----------- -----------
Costs and Expenses:
Cost of goods sold 45,008,659 45,865,088 46,324,769
Selling, general and administrative 28,311,408 27,835,195 26,053,812
Interest 2,217,580 1,704,897 1,280,761
Depreciation and amortization 1,495,220 1,408,093 1,307,660
Foreign exchange 12,245 (69,804) (4,323)
----------- ----------- -----------
77,045,112 76,743,469 74,962,679
----------- ----------- -----------
Income/(loss)from continuing
operations before income taxes (4,224,231) (407,376) 1,568,038
(Provision)/ benefit for income taxes (2,119,400) 168,700 (568,000)
----------- ----------- -----------
Income/(loss) from continuing
operations (6,343,631) (238,676) 1,000,038
Discontinued operations:
Income/(loss) from operations of
discontinued division (2,226,088) (233,756) 10,482
Loss on abandonment of
discontinued division (650,000) - -
----------- ----------- -----------
NET INCOME/(LOSS) $(9,219,719) $ (472,432) $ 1,010,520
----------- ----------- -----------
Income/(loss) per common share:
Income/(loss) from continuing $ (1.29) $ (0.06) $ 0.18
operations
Discontinued operations (0.58) (0.06) -
----------- ----------- -----------
Income/(loss) per common share $ (1.87) $ (0.12) $ 0.18
----------- ----------- -----------
Weighted average common and
common equivalent shares 4,930,000 4,055,000 5,757,000
----------- ----------- -----------
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
PAGES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
--------------------------
ASSETS 1995 1994
------ ----------- -----------
Current Assets:
Cash $ 532,855 $ 671,602
Accounts receivable, net of allowance for
doubtful accounts of $457,000 and $168,000
respectively 9,931,548 13,965,086
Inventory 27,840,561 33,014,774
Prepaid expenses 2,229,829 3,394,212
Deferred income taxes - 1,966,200
----------- -----------
Total current assets 40,534,793 53,011,874
----------- -----------
Buildings and equipment:
Buildings 4,256,881 4,360,079
Equipment 5,810,714 5,696,782
----------- -----------
10,067,595 10,056,861
Less accumulated depreciation (3,442,661) (3,014,424)
----------- -----------
6,624,934 7,042,437
Land 631,468 636,468
----------- -----------
Total property and equipment, net 7,256,402 7,678,905
----------- -----------
Other assets:
Cost in excess of net assets acquired, net of
accumulated amortization of $479,075 and
$312,345, respectively 5,994,579 5,903,553
Deferred income taxes - 153,200
Other 1,063,701 1,257,872
----------- -----------
7,058,280 7,314,625
----------- -----------
TOTAL ASSETS $54,849,475 $68,005,404
----------- -----------
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
PAGES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
----------- -----------
Current Liabilities:
Accounts payable $8,394,054 $10,887,683
Short-term debt obligations 5,635,552 16,234,074
Accrued liabilities 2,417,940 2,948,896
Accrued tax liabilities 3,216,088 3,248,821
Deferred revenue 6,970,220 6,139,486
Current installments on capitalized lease
obligations 168,619 26,468
----------- -----------
Total current liabilities 26,802,473 39,485,428
----------- -----------
Long-term debt and capital lease obligations 17,373,403 8,927,312
----------- -----------
Commitments and contingencies
Stockholders' Equity:
Preferred shares: $.01 par value; authorized
300,000 shares; none issued and outstanding
Common shares: $.01 par value;
authorized 20,000,000 shares; issued
5,474,556 shares and 5,087,921 shares,
respectively 54,746 50,879
Capital in excess of par value 22,760,194 22,489,048
Foreign currency translation, net of tax (374,654) (400,295)
Accumulated deficit ( 11,525,564) (2,305,845)
----------- -----------
10,914,722 19,833,787
Less 298,713 shares of common stock in
treasury, at cost (241,123) (241,123)
----------- -----------
Total stockholders' equity 10,673,599 19,592,664
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $54,849,475 $68,005,404
----------- -----------
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
PAGES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
----------------------------------------------------
1995 1994 1993
------------ ---------- ----------
Cash flows from operating activities:
Net (loss)/income $ (9,219,719) $ (472,432) $1,010,520
------------ ---------- ----------
Adjustments to reconcile net
(loss)/income to cash provided by
(used in) operating activities:
Depreciation and amortization 1,495,220 1,408,093 1,307,660
Deferred income taxes 2,119,400 (168,700) 550,000
Foreign exchange 12,245 (69,804) (4,323)
Loss/(gain) on sale of property and
equipment 15,909 194 (4,728)
Bad debt expense 146,000 148,230 29,926
Write-off of intangible assets 349,753
Changes in assets and liabilities net of effects of
acquisitions by children's literature segment:
(Increase) decrease in assets:
Accounts receivable 4,238,330 (1,941,902) (2,371,831)
Inventory 5,258,045 (6,846,635) (3,761,611)
Prepaid expenses and other assets 1,260,362 (1,010,586) (328,837)
Increase (decrease) in liabilities:
Accounts payable and accrued
liabilities (2,887,614) 686,620 (1,505,424)
Deferred revenue 480,734 1,530,046 774,141
------------ ---------- ----------
Total adjustments 12,488,384 (6,264,444) (5,315,027)
------------ ---------- ----------
Net cash provided by (used in) operating
activities 3,268,665 (6,736,876) (4,304,507)
------------ ---------- ----------
Cash flows from investing activities:
Payments for purchases of property and
equipment (585,678) (854,396) (1,363,276)
Proceeds from sale of property and
equipment 102,129 266,282 65,818
Payment for acquisitions by children's
literature segment, net of cash and
debt acquired and stock issued (779,346) (2,720,000) (557,596)
------------ ---------- ----------
Cash used in investing activities (1,262,895) (3,308,114) (1,855,054)
------------ ---------- ----------
Cash flows from financing activities:
Proceeds from issuance of stock, net
of expense 275,013 7,205,539 2,139,718
Proceeds from debt obligations 55,890,001 58,282,852 37,454,680
Principal payments on debt and lease
obligations (58,310,350)(54,946,414) (33,900,704)
------------ ---------- ----------
Cash provided by (used in) financing
activities (2,145,336) 10,541,977 5,693,694
------------ ---------- ----------
Effect of exchange rate changes on cash 819 (125,102) (63,758)
------------ ---------- ----------
Increase (decrease) in cash (138,747) 371,885 (529,625)
Cash, beginning of year 671,602 299,717 829,342
------------ ---------- ----------
Cash, end of year $532,855 671,602 299,717
------------ ---------- ----------
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
<TABLE>
PAGES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1995, 1994 and 1993
----------------------------------------------------
<CAPTION>
Capital in Foreign
Common Excess of Currency Accumulated Treasury
Shares Stock Par Value Translation Deficit Stock Total
--------- ---------- ------------ ----------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1992 3,459,126 $ 34,591 $ 12,122,480 $ (337,560) $ (2,843,933) $ (241,123) $8,734,455
Year ended December 31, 1993:
Issuance of common shares
in connection with
acquisitions 109,243 1,092 1,036,445 1,037,537
Exercise of employee stock
options 1,000 10 3,265 3,275
Private placement issuance of
common shares, net of expenses
of $75,000 260,177 2,602 2,133,903 2,136,505
Foreign currency translation (107,980) (107,980)
Net income 1,010,520 1,010,520
--------- ---------- ------------ ----------- -------------- ----------- ----------
Balance December 31, 1993 3,829,546 38,295 15,296,093 (445,540) (1,833,413) (241,123) 12,814,312
Year ended December 31, 1994:
Exercise of employee stock
options 375 4 296 300
Issuance of common stock
through public offering,
net of expenses of
$671,099 1,258,000 12,580 7,192,659 7,205,239
Foreign currency translation 45,245 45,245
Net loss (472,432) (472,432)
--------- ---------- ------------ ----------- -------------- ----------- ----------
Balance December 31, 1994 5,087,921 50,879 22,489,048 (400,295) (2,305,845) (241,123) 19,592,664
Year ended December 31, 1995:
Exercise of employee stock
options 313,923 3,140 271,873 275,013
Other 72,712 727 (727) -
Foreign currency translation 25,641 25,641
Net loss (9,219,719) (9,219,719)
--------- ---------- ------------ ----------- -------------- ----------- ----------
Balance December 31, 1995 5,474,556 $54,746 $ 22,760,194 $ (374,654) $(11,525,564) $(241,123) $10,673,599
--------- ---------- ------------ ----------- -------------- ----------- ----------
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
PAGES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of PAGES, Inc.
and its wholly-owned subsidiaries after elimination of all material intercompany
accounts and transactions, collectively referred to as "the Company." The
Company has operations in the United States, Canada, Ireland, and the United
Kingdom. There are no material differences in the accounting principles used in
the preparation of the consolidated financial statements for the locations in
which the Company operates. The Company's children's literature business
segment is operated principally through School Book Fairs, Inc. and related
entities ("SBF") and the Company's incentive/recognition awards business segment
is operated through Clyde A. Short Company, Inc. ("CAS")
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 children's literature and incentive awards are
recognized upon shipment and delivery of the related merchandise. Revenues from
services are insignificant. The Company provides for estimated returns from the
sale of children's literature when those products are shipped. 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, as well as to schools and school organizations across the United
States, Canada, the United Kingdom and Ireland. The accounts receivable are
well diversified and are expected to be repaid in the normal course of business.
Inventory
Inventory consists of finished goods which are comprised of books and
general retail merchandise. Inventory is valued at the lower of cost or market
using the first-in, first-out (FIFO) method. Internal and external production
costs (which include costs for design, art, editorial services and color
separations in the publishing of finished goods inventory) are expensed as
incurred.
Prepaid Expenses
Prepaid expenses at December 31, 1995 and 1994, reflect approximately
$1,600,000 and $2,340,000, respectively, of prepaid selling costs that include
employee costs and incentive payments to distributors and salespeople for the
scheduling of future sales events and sales of incentive and recognition awards
programs. Such costs are directly attributable to obtaining specific future
commitments to hold a selling event 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 years
ended December 31, 1995, 1994, and 1993, totaled $1,236,412, $1,198,602, and
$1,180,396, 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 for each
subsidiary having a material goodwill balance. Based upon its most recent
analysis, the Company believes that no material impairment of goodwill exists at
December 31, 1995. 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 years ended December 31, 1995, 1994 and 1993 and
totaled $166,730, $109,477, and $90,557, respectively.
Other assets include payments for covenants not to compete, cash surrender
value of life insurance and deferred loan costs. The covenants not to compete
and deferred loan costs are amortized using the straight line method over the
terms of the related contracts. Amortization expense totaled $92,078, $100,014,
and $36,707, for the years ended December 31, 1995, 1994, and 1993,
respectively.
During 1995, the Company wrote off approximately $350,000 of intangible
assets associated with operations in the children's literature business segment
which were disposed of or phased out. These written off assets were charged to
selling, general and administrative expenses in the consolidated financial
statements.
Deferred Revenue
Deferred revenue represents customer prepayments for goods and services
that the Company will deliver in the future. Upon delivery of such goods and
services, deferred revenues are recognized as revenues.
Foreign Currency Translation
The international organizations' transactions are recorded in their
functional currency. Balance sheet accounts are translated at the year end
exchange rate and the cumulative translation adjustment is included as a
separate component of shareholders' equity. Statements of operations amounts
are translated at the average monthly exchange rate. The gain or loss on
foreign exchange reflected in the statement of operations relates to realized
and unrealized gains on transactions and current account balances between
domestic and international operations.
Profit Sharing Plans
The Company has two noncontributory profit sharing retirement plans (the
"Plans"), covering a significant number of employees for which accrued costs are
funded. Company contributions to the Plans are discretionary. The Company's
contributions to both plans approximated $44,000, and $81,000 for the years
ended December 31, 1994 and 1993, respectively. There were no Company
contributions for the year ended December 31, 1995.
Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," which will be effective for the Company beginning
January 1, 1996. SFAS No. 123 requires expanded disclosures of stock-based
compensation arrangements with employees and encourages (but does not require)
compensation cost to be measured based on the fair value of the equity
instrument awarded. Companies are permitted, however, to continue to apply APB
Opinion No. 25, which recognizes compensation cost only if the equity instrument
is issued at cost less than its fair value at the date of grant. The Company
will continue to apply APB Opinion No. 25 to its stock based compensation awards
to employees and will disclose the required SFAS No. 123 pro forma effect on net
income and earnings per share.
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.
Per Share Data
Per share amounts have been computed based on the weighted average number
of common and common share equivalents outstanding during the period (adjusted
for the April 1990 and August 1993 five for four stock splits) using the
treasury stock method for 1993. Common stock equivalents are not included in
the computation for 1995 and 1994 since the effect of their inclusion would be
antidilutive.
Reclassifications
Certain reclassifications to the 1994 and 1993 consolidated financial
statements have been made to conform with the current year's presentation.
<PAGE>
2. STOCK OPTIONS AND WARRANTS
At December 31, 1995, 58,125 common shares of the Company were reserved for
issuance under the incentive stock option plan, 2,045,016 shares were reserved
under non-statutory stock options, and 250,000 shares were reserved under
outstanding warrants.
Information for the stock options is summarized as follows:
December 31, December 31, December 31,
1995 1994 1993
---- ---- ----
Incentive Stock Option Plans
- ----------------------------
Outstanding, beginning
of year 122,450 139,825 375
Granted 55,625 None 139,450
Canceled (119,950) (17,000) None
Exercised None (375) None
--------- --------- --------
Outstanding, end of year 58,125 122,450 139,825
--------- --------- --------
Exercise price range of
options outstanding $2.57 $10.88 $0.80
to to
$10.88 $10.88
Exercise price range of
options exercised during
the year - $0.80 -
Non-Statutory Stock Options
Outstanding, beginning
of year 2,666,821 2,639,132 2,960,845
Granted 92,308 66,064 189,662
Canceled (400,190) (38,375) (510,375)
Exercised (313,923) None (1,000)
--------- --------- --------
Outstanding, end of year 2,045,016 2,666,821 2,639,132
--------- --------- --------
Exercise price range of
options outstanding $ 0.80 $ 0.80 $ 0.80
to to to
$11.75 $11.75 $11.25
Exercise price range of
options exercised during
the year $ 0.80 None $ 3.20
to to
$ 0.88 $ 3.40
The Incentive Stock Options are exercisable at the fair market value on the
date of grant, and were granted from shares available for issuance from the
Company's 1993 Incentive Stock Option Plan. The options outstanding at December
31, 1995 are exercisable through November 18, 1999, September 29, 2000 and
November 13, 2000.
The non-statutory options are exercisable at the fair market value on the
date of grant. The non-statutory options outstanding at December 31, 1995, are
all presently exercisable and expire at various dates through February 2000.
Warrants to purchase 250,000 shares of PAGES, Inc. common stock were issued
in May 1992 as part of the acquisition of SBF. The warrants were issued to the
SBF primary lender. The warrants are exercisable for five years from date of
issuance at $3.90 per share, market value of the common stock at date of
issuance of the warrants.
<TABLE>
A summary of options and warrants outstanding at December 31, 1995 is as
follows:
<CAPTION>
Date Proceeds
Granted or Shares Shares Exercise To Company
Issued Reserved Exercisable Price Upon Exercise
---------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C>
Incentive
Stock Options:
1993 Plan November 18, 1993 2,500 500 $10.88 $27,200
1993 Plan September 29, 1995 23,625 0 2.69 63,551
1993 Plan November 13, 1995 32,000 0 2.57 82,240
------- -------- -------
Non-Statutory
Stock Options:
March 31, 1986 226,250 226,250 0.88 199,100
September 14, 1987 195,437 195,437 0.80 156,349
October 9, 1989 399,673 399,673 1.20 479,607
February 6, 1990 640,624 640,624 1.12 717,498
May 19, 1992 141,250 141,250 3.90 550,875
June 2, 1992 131,250 131,250 4.20 551,250
June 15, 1992 37,500 37,500 4.50 168,750
August 31, 1992 12,500 12,500 5.30 66,250
March 26, 1993 3,125 3,125 6.10 19,062
April 1, 1993 90,910 90,910 6.60 600,006
April 30, 1993 3,125 3,125 7.20 22,500
November 22, 1993 5,000 5,000 11.00 55,000
January 1, 1994 15,000 15,000 10.50 157,500
March 9, 1994 51,064 51,064 11.75 600,002
April 17, 1995 92,308 92,308 6.50 600,002
------- -------- -------
2,045,016 2,045,016 4,943,751
------- -------- -------
Warrants: May 19, 1992 250,000 250,000 $3.90 975,000
------- -------- -------
Total 2,353,141 2,295,516 $6,091,742
------- -------- -------
</TABLE>
<PAGE>
3. STOCK SPLITS
On August 31, 1993, the Company declared a stock split effected in the
form of a 5-for-4 stock dividend payable October 15, 1993, to stockholders of
record on October 15, 1993. Accordingly, the average number of shares
outstanding, per share amounts and stock option data have been restated for
periods prior to the split. As a result of the split, 691,825 additional shares
were issued, capital in excess of par value was reduced by $6,919, and the
consolidated financial statements for all years presented have been
retroactively adjusted for the stock split. There was no distribution or cash
payment relating to fractional shares.
<PAGE>
4. DEBT OBLIGATIONS
Debt obligations consisted of the following:
1995 1994
----------- -----------
Line of credit with interest at prime plus
1/2 percent; interest payable monthly, maturing
on June 7 , 1996, collateralized by substantially
all assets of the Company ($1,583,846 available
at December 31, 1995) $4,416,154 $5,888,261
Line of credit with interest at prime plus
1/2 percent; interest payable monthly, maturing on
June 7, 1996 collaterized by substantially all
assets of the Company ($3,455,600 available
at December 31, 1995) 3,544,400 5,741,548
United Kingdom - Lloyds Bank $2,174,200 line of
credit with with interest at base plus 2 percent
(8 1/4 per cent at December 31, 1995), payable on
demand, collateralized by substantially all assets of
the United Kingdom operations ($452,622 available
at December 31, 1995) 1,721,578 1,960,230
Note with interest of prime plus 1 percent;
interest payable monthly, maturing June 7, 1996 2,500,000 2,500,000
Revolving loan payable with interest at prime
plus 1/2 percent; interest payable monthly, maturing
on June 3, 1997; collateralized by substantially
all assets of the Company ($203,725 available at
December 31, 1995) 9,296,275 7,576,783
Mortgage payable with interest at prime plus
1 1/4 percent; principal and interest payable in
monthly installments of $11,280, maturing on
March 1, 2008, collateralized by office and
warehouse facility 719,549 781,131
Second mortgage note payable with interest at
12.825 percent; principal and interest payable in
monthly installments of $5,313, maturing on
November 1, 2008, collateralized by office and
warehouse facility 415,063 427,665
Promissory note payable with interest at 10
percent, payable in five annual installments
due through April 29, 1998 76,647 98,508
Promissory note payable with interest at 7
percent payable quarterly through August 16, 1997 91,270 138,658
----------- -----------
Total debt obligations 22,780,936 25,112,784
Less - short-term obligations 5,635,552 16,234,074
----------- -----------
Total long-term obligations $17,145,384 $8,878,710
----------- -----------
The prime interest rate at December 31, 1995 and 1994, was 8 1/2 percent.
Future maturities on debt as of December 31, 1995 and during the next five years
and thereafter are as follows:
1996 $5,635,552
1997 16,157,529
1998 128,848
1999 112,115
2000 141,250
Thereafter 605,642
-----------
$22,780,936
-----------
On March 27, 1996, the Company entered into a $16 million long-term
revolving credit facility which replaced the $6 million short-term credit line,
$7 million short-term credit line, and a $9.5 million line for acquisitions
and working capital. The interest rate for the facility is prime + 1. The line
is due in full by June 1, 1997, subject to annual renewals.
The maximum line amount on the long-term credit is calculated, in part,
based on the Company's eligible borrowing base that includes inventory and
other eligible accounts. The long-term credit agreements contain certain
restrictive provisions 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.
<PAGE>
5. LEASE OBLIGATIONS
The Company is obligated under various noncancelable operating and
capital leases. Operating leases are principally for office and warehouse
facilities, equipment and vehicles. Rent expense under operating leases
amounted to $1,327,840, $1,523,935, and $1,372,742 for the years ended
December 31, 1995, 1994, and 1993, respectively. Future minimum lease
payments under leases are as follows:
Year Ended
December 31, Capital Operating
------------ ----------- -----------
1996 $ 206,311 $ 847,478
1997 104,972 646,056
1998 95,612 63,450
1999 47,840 13,280
2000 7,181 7,016
Thereafter - -
----------- -----------
461,916 $1,577,280
-----------
Less - amounts representing
interest and executory costs (65,278)
Less - current installments,
capital lease obligations (168,619)
----------
Long-term lease obligations $ 228,019
----------
The property and equipment under capital leases, primarily consisting of
computer, telephone, office and warehouse equipment, automobiles and furniture
are recorded at December 31, 1995 as follows:
Property and equipment $ 524,273
Less - accumulated depreciation ( 69,429)
----------
$ 454,844
----------
<PAGE>
6. INCOME TAXES
The Company is required to use SFAS No. 109 -- Accounting for Income Taxes.
Under SFAS 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 doubtful
accounts, inventory costs, accrued and prepaid expenses and reserves, and
depreciation and amortization expense.
For the years presented, the provision (benefit) for income taxes consisted of
the following:
December 31, December 31, December 31,
1995 1994 1993
---------- ---------- ----------
Current
Federal $ - $ - $ -
State and local - - 18,000
---------- ---------- ----------
Net current $ - $ - $ 18,000
---------- ---------- ----------
Deferred
Federal $1,966,200 $ (76,300) $ 550,000
State and local 153,200 (92,400) -
Adjustment to valuation allowance - - -
---------- ---------- ----------
Net deferred provision (benefit) 2,119,400 (168,700) 550,000
---------- ---------- ----------
Net provision (benefit) for taxes $2,119,400 $ (168,700) $ 568,000
---------- ---------- ----------
A reconciliation of income taxes based upon the application of the federal
statutory tax rate is as follows:
December 31, December 31, December 31,
1995 1994 1993
---------- ---------- ----------
Provision (benefit) for taxes at
statutory rate $(2,414,100) $ (218,000) $ 537,000
United Kingdom operations 406,900 95,300 -
Goodwill amortization 29,000 29,000 29,000
State taxes net of federal benefit ( 86,100) (92,400) 18,000
Establishment of valuation
allowance 4,385,600 - -
Stock options exercised (225,200) - -
Other 23,300 17,400 (16,000)
---------- ---------- ----------
Total provision (benefit) for
income taxes $ 2,119,400 $ (168,700) $ 568,000
---------- ---------- ----------
The components of net deferred tax assets as of December 31, 1995 and 1994, are
as follows:
December 31, December 31,
1995 1994
----------- -----------
Assets
Provision for doubtful accounts $ 275,100 $ 114,900
Inventory costs capitalized for tax purposes 657,500 736,300
Accruals and reserves to be expensed as paid
for tax purposes 743,800 819,950
Other 21,700 9,300
Net operating loss carryforwards 3,968,400 2,162,300
Investment tax credit carryforwards 122,000 122,000
Losses on foreign currency translation 203,600 217,500
----------- -----------
5,992,100 4,182,250
Less valuation allowance (4,802,300) (416,650)
----------- -----------
Deferred tax asset, net of valuation allowance 1,189,800 3,765,600
----------- -----------
Liabilities:
Costs deducted as paid for tax purposes (332,000) (718,300)
Excess of tax over financial accounting
depreciation and amortization (857,800) (927,900)
----------- -----------
(1,189,800) (1,646,200)
----------- -----------
Net deferred tax asset $ - $ 2,119,400
----------- -----------
Current portion - $ 1,966,200
Noncurrent portion - 153,200
----------- -----------
Net deferred tax asset $ - $ 2,119,400
----------- -----------
At December 31, 1995, operating loss carryforwards of approximately
$11,200,000 are available to offset future taxable income and will expire during
the years 1997 through 2010. Investment tax credit carryforwards will expire in
1997 and 1998.
<PAGE>
7. CHILDREN'S LITERATURE ACQUISITIONS AND DISPOSALS
During 1995, 1994 and 1993, the children's literature business acquired
several small operations involved in the publishing and distribution of
children's literature. These acquisitions were accounted for using the purchase
method of accounting. The aggregate cost of these acquisitions approximated
$779,000, $2,870,000 and $1,725,000 in 1995, 1994, and 1993, respectively, and
was allocated to the net assets acquired based upon their fair values. The
Company paid cash of $779,000 for the 1995 acquisition. The Company paid cash
of $2,720,000 and $150,000 in a promissory note for the 1994 acquisitions. In
connection with the 1993 acquisitions and in partial payment of the purchase
price, the Company issued 109,243 shares of common stock with a market value of
$1,037,537 at date of issuance. The balance was paid in $568,750 cash and a
$118,750 promissory note. In connection with the aforementioned acquisitions,
costs assigned to cost in excess of net assets acquired approximated $471,000,
$2,185,000 and $649,000 in 1995, 1994 and 1993, respectively.
During 1995, the Company disposed of or phased out the operations of several
acquisitions made in 1993 and 1994 and curtailed the distribution of early
childhood product through the mail to pre-schools and daycare centers. Combined
revenues, included in the accompanying consolidated financial statements, of the
aforementioned operations for 1995, 1994 and 1993 approximated $2,300,000,
$3,400,000, and $2,300,000, respectively. The combined costs and expenses
associated with the aforementioned operations including loss on disposition or
phase out included in cost of goods sold and selling, general, and
administrative expense in the accompanying consolidated financial statements for
1995, 1994 and 1993 approximated $2,700,000, $3,300,000 and $1,518,000,
respectively.
<PAGE>
8. DISCONTINUED OPERATIONS
In 1995, the Company adopted a plan to discontinue the operations of
its Read Aloud Book Club division (the "Club"). The Company anticipates that
operations of the Club will cease in the second quarter of 1996. The Club is
accounted for as discontinued operations, and accordingly, its operations are
segregated in the accompanying consolidated statements of operations. The
Club's results of operations for the years ended December 31, 1994 and 1993 have
been reclassified in order to conform with the current year's presentation.
Losses anticipated to be incurred between the measurement date (December 31,
1995) and the expected date on which operations will cease are also included as
discontinued operations as part of the loss on abandonment of discontinued
division. These losses include estimated operating and phase out costs of the
Club expected to be incurred during 1996. Revenues associated with the
discontinued club operation for 1995, 1994, and 1993 were $2,451,965,
$2,732,036, and $ 31,947, respectively.
<PAGE>
9. SUPPLEMENTAL DISCLOSURE FOR CASH FLOW INFORMATION
Cash paid for interest during the years ended December 31, 1995, 1994 and
1993 aggregated $2,189,859, $1,654,755, and $1,284,564 and cash paid for taxes
was $0, $18,000, and $3,698 respectively.
During the years ended December 31, 1995 and 1994, the Company acquired
$434,882 and $9,227, respectively, in office furniture and equipment through
capital financing leases. Additionally, in 1995, the Company sold $21,800 of
net fixed assets in return for a promissory note.
In connection with the 1993 children's literature business segment
acquisitions, the Company issued 109,243 shares of common stock with a market
value of $1,037,537 at date of issuance.
<PAGE>
10. SEGMENT REPORTING
The Company operates principally in two lines of business: children's
literature and incentive/recognition awards. The children's literature
operation creates and distributes books, posters, audio/video products and
related merchandise. The Company's markets for children's literature include
elementary and junior high school fund raising events and product lines marketed
directly to schools and libraries throughout the United States, Canada, the
United Kingdom and Ireland. Operations in the incentive/recognition awards
business consists of the design, implementation and fulfillment of incentive
awards and recognition programs for businesses throughout the United States.
Operating profit is total sales less operating expenses. In computing
operating profit, none of the following items have been added or deducted:
general corporate expenses, interest expense, interest income or income taxes.
<PAGE>
<TABLE>
PAGES INC. AND SUBSIDIARIES
INFORMATION ABOUT THE COMPANY'S OPERATIONS BY BUSINESS SEGMENTS
<CAPTION>
INCENTIVE/
RECOGNITION CHILDRENS
AWARDS LITERATURE ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ -----------
- -------------------------------------------------------------------------------------------------
Year Ended December 31, 1995
<S> <C> <C> <C> <C>
Revenues $22,720,122 $50,100,759 $ $72,820,881
----------- ----------- ------------ -----------
Operating profit/(loss) $ 390,388 $(1,287,039) $ $ (896,651)
----------- ----------- ------------
Interest expense (2,217,580)
General Corporate Expenses (1,110,000)
-----------
Loss before Taxes (4,224,231)
-----------
Segment Depreciation & Amortization $ 312,415 $ 1,182,805 $ 1,495,220
----------- ----------- ------------ -----------
Segment Capital Expenditures $ 162,529 $ 423,149 $ 585,678
----------- ----------- ------------ -----------
Identifiable Assets at December 31, 1995 $19,847,895 $34,551,530 $54,399,425
----------- ----------- ------------
Corporate Assets $ 450,050
-----------
Assets at December 31, 1995 $54,849,475
-----------
- -------------------------------------------------------------------------------------------------
Year Ended December 31, 1994
Revenues $25,157,704 $50,965,788(a)$212,601 $76,336,093
----------- ----------- ------------ -----------
Operating profit $ 532,922 $ 1,551,530(a)$212,601 $ 2,297,053
----------- ----------- ------------
Interest Expense (1,704,897)
General Corporate Expenses (999,532)
-----------
Loss before Taxes $ (407,376)
-----------
Segment Depreciation & Amortization $ 282,642 $ 1,125,451 $ 1,408,093
----------- ----------- ------------ -----------
Segment Capital Expenditures $ 277,779 $ 576,617 $ 854,396
----------- ----------- ------------ -----------
Identifiable Assets at December 31, 1994 $25,267,281 $40,147,663 $65,414,944
----------- ----------- ------------
Corporate Assets $ 2,590,460
-----------
Assets at December 31, 1994 $68,005,404
-----------
- -------------------------------------------------------------------------------------------------
Year Ended December 31, 1993
Revenues $29,700,082 $46,830,635 $ $76,530,717
----------- ----------- ------------ -----------
Operating profit $ 1,992,713 $ 1,928,896 $ $ 3,921,609
----------- ----------- ------------ -----------
Interest Expense (1,280,761)
General Corporate Expenses (1,072,810)
-----------
Income before Taxes $ 1,568,038
-----------
Segment Depreciation & Amortization $ 264,966 $ 1,042,694 $ 1,307,660
----------- ----------- ------------ -----------
Segment Capital Expenditures $ 814,363 $ 651,457 $ 1,465,820
----------- ----------- ------------ -----------
Identifiable Assets at December 31, 1993 $24,926,327 $26,575,713 $51,502,040
----------- ----------- ------------
Corporate assets $ 2,258,671
-----------
Assets at December 31, 1993 $53,760,711
-----------
- -------------------------------------------------------------------------------------------------
</TABLE>
(a) Principally gain on sale of assets held for disposition and rental income.
<PAGE>
<TABLE>
PAGES, INC. AND SUBSIDIARIES
INFORMATION ABOUT THE COMPANY'S OPERATIONS BY GEOGRAPHIC AREAS
<CAPTION>
UNITED
STATES INTERNATIONAL ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ -----------
- -------------------------------------------------------------------------------------------------
Year Ended December 31, 1995
<S> <C> <C> <C> <C>
Revenues $58,231,327 $14,589,554 $ $72,820,881
----------- ----------- ------------ -----------
Operating Profit/(Loss) $ 277,279 $(1,173,930) $ $ (896,651)
----------- ----------- ------------ -----------
Interest Expense (2,217,580)
General Corporate Expenses (1,110,000)
-----------
Loss Before Discontinued Operations
and Taxes $(4,224,231)
-----------
Assets at December 31, 1995 $42,362,640 $12,486,835 $54,849,475
----------- ----------- ------------ -----------
- ------------------------------------------------------------------------------------------------
Year Ended December 31, 1994
Revenues $60,756,617 $15,579,476 $ $76,336,093
----------- ----------- ------------ -----------
Operating Profit/(Loss) $ 2,364,782 $ (67,729) $ $ 2,297,053
----------- ----------- ------------ -----------
Interest Expense $(1,704,897)
General Corporate Expenses $ (999,532)
-----------
Loss before Discontinued
Operations Taxes $ (407,376)
-----------
Assets at December 31, 1994 $57,477,759 $10,527,645 $68,005,404
----------- ----------- ------------ -----------
- ------------------------------------------------------------------------------------------------
Year Ended December 31, 1993
Revenues $60,931,378 $15,599,339 $ $76,530,717
----------- ----------- ------------ -----------
Operating Profit $ 3,578,050 $ 343,559 $ $ 3,921,609
----------- ----------- ------------ -----------
Interest Expense (1,280,761)
General Corporate Expenses (1,072,810)
-----------
Income Before Taxes $ 1,568,038
-----------
Assets at December 31, 1993 $43,550,678 $10,210,033 $53,760,711
----------- ----------- ------------ -----------
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
11. INTERIM FINANCIAL INFORMATION (UNAUDITED):
<TABLE>
<CAPTION>
Twelve Months Ended December 31, 1995
--------------------------------------------------------
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended
March 31 June 30 Sept. 30 Dec. 31
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $18,913,877 $16,571,657 $ 9,568,999 $ 27,766,348
Gross Profit 7,701,018 6,695,629 3,030,269 10,385,306
Income (loss) from continuing
operations before income taxes (896,073) (892,531) (3,781,033) 1,345,406
Income (loss) from discontinued
operations (175,494) 43,398 (275,510) (2,468,482)
Net income (loss) (721,567) (699,133) (2,859,543) (4,939,476)
Income/(loss) per common share:
Discontinued operations (0.04) 0.01 (0.05) (0.48)
Net income (loss) (0.15) (0.15) (0.56) (0.97)
----------- ----------- ----------- ------------
Weighted average common
shares and equivalents 4,789,000 4,806,000 5,105,000 5,109,000
----------- ----------- ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended December 31, 1994
--------------------------------------------------------
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended
March 31 June 30 Sept. 30 Dec. 31
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $19,249,247 $15,670,529 $ 9,962,262 $31,454,055
Gross Profit 8,040,871 6,463,140 3,186,573 12,780,421
Income (loss) from continuing
operations before income taxes 357,206 (846,498) (3,181,697) 3,263,613
Income (loss) from discontinued
operations (17,963) 114,937 (73,392) (257,338)
Net income (loss) 211,243 (458,561) (2,087,089) 1,861,975
Income/(loss) per common share:
Discontinued operations - 0.03 (0.02) (0.04)
Net income (loss) 0.04 (0.13) (0.50) 0.28
----------- ----------- ----------- ------------
Weighted average common
shares and equivalents 5,831,000 3,531,000 4,160,000 6,592,000
----------- ----------- ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended December 31, 1993
--------------------------------------------------------
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended
March 31 June 30 Sept. 30 Dec. 31
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $17,585,185 $15,029,265 $11,108,858 $32,807,409
Gross Profit 7,157,224 6,046,775 3,510,780 13,491,169
Income (loss) from continuing
operations before income taxes 190,389 (888,195) (3,377,732) 5,643,576
Income (loss) from discontinued
operations 10,482
Net income (loss) 121,946 (583,195) (2,229,732) 3,701,501
Income/(loss) per common share:
Discontinued operations
Net income (loss) 0.02 (0.18) (0.55) 0.64
----------- ----------- ----------- ------------
Weighted average common
shares and equivalents 5,754,000 3,201,000 4,020,000 5,757,000
----------- ----------- ----------- ------------
</TABLE>
Per share calculations are based on the average number of shares and dilutive
share equivalents outstanding for each quarter using the treasury stock method.
Thus, the sum of the quarters may not necessarily be equal to the full year's
earnings per share amounts.
<PAGE>
12. COMMITMENTS AND CONTINGENCIES
During the Spring of 1993, the Company was advised that the Internal
Revenue Service ("IRS") may assess additional income taxes in connection with
the examination of the tax returns of School Book Fairs and its affiliates for
the fiscal years ending July 31, 1989, 1990, and 1991. In June 1993, the
Company recorded a $2 million adjustment to its purchase price allocation of SBF
assets, which increased the cost in excess of assets acquired (i.e. - goodwill)
and recorded a corresponding increase in accrued tax liabilities and related
costs.
In October of 1995, the Company received four Notices of Deficiency from
the IRS relating to this examination. The Notices of Deficiency assessed
additional income taxes of $4,693,681 and penalties of $1,358,630. Using a
constant annual interest rate of 9%, interest payable as of December 31, 1995,
on the aforementioned asserted deficiencies would approximate $4,200,000. The
asserted deficiencies are attributable primarily to a restructuring of SBF and
related entities that occurred on August 31, 1988, in which, along with other
events, certain assets were transferred between related companies. The IRS has
challenged, among other things, the values assigned to those assets by the
parties to the transaction, contending that the assets were undervalued and that
SBF recognized a substantial taxable gain in the transaction. The Company
intends to vigorously contest the various assertions made by the IRS in the
notices of deficiency and believes the IRS's position regarding the adjustments
to taxable income is substantially overstated. The Company has retained the law
firm of Akin, Gump, Strauss, Hauer & Feld as counsel, and in January 1996, filed
petitions with the Tax Court disputing the IRS valuation of the assets
transferred, and other points in the IRS assessment. The Company is unable to
determine the ultimate outcome of this uncertainty and accordingly, has not
provided for any additional amounts in excess of the $2 million relating to this
proposed assessment in it fiscal 1995 financial statements.
Additionally, the Company is the subject of a state sales tax audit for one
of its subsidiaries. Management believes the outcome of this audit will not
result in any significant adjustments that would be material to the Company's
consolidated financial statements. Additionally, the Company is subject to
litigation which is incidental to its business and is not considered material
individually or in the aggregate to the Company's consolidated financial
statements.
<PAGE>
13. SUBSEQUENT EVENTS
On March 6, 1996, the Company sold to Scholastic Limited, a United
Kingdom subsidiary of Scholastic, Inc. and its affiliates ("Scholastic") all the
capital stock of School Book Fairs, Limited ("Limited") , the Company's United
Kingdom subsidiary for $5,016,531 cash. Additionally, as part of the
transaction, (i) Scholastic paid in full (1) the outstanding balance of
$2,129,846 due by Limited to Lloyds Bank and (2) an intercompany payable due
from Limited to the Company in the amount of $2,066,122, and (ii) the Company
signed a Non-Competition Agreement pursuant to which, in return for the payment
of $1,500,000 in cash, the Company agreed for a five-year period not to compete
with the book fair business of Scholastic and its affiliates in the following
countries: Canada, the United Kingdom, Ireland, Germany, Italy, Greece,
Eastern Europe, including without limitation, the Commonwealth of Independent
States, Turkey, the countries of the Middle East and Africa.
On March 6, 1996, the Company closed its distribution channel in
Canada and on March 13, 1996, the Company sold a portion of its inventory in
Canada to Scholastic Canada, Ltd., a corporation organized under the laws of
Canada for $575,000 cash.
The net proceeds to the Company of the above-described transactions of
$8,950,000 after the pay off of the Lloyds Bank debt and estimated transactions
costs were used to reduce the Company's domestic bank indebtedness. The Company
has preliminarily determined there is an approximate $2,000,000 gain on the
transaction, however, the final calculation has not been made and the actual
gain could be materially different. The gain will be recorded in the first
quarter of 1996.
<PAGE>
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
PAGES, INC. AND SUBSIDIARIES
- ---------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D. COL. E. COL. F
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
Additions Additions
Balance Charged Charged Balance
at Beginning to Costs to Other at End
Description of Period and Expenses Accts. Deductions of Period
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Allowance for doubtful accounts $ 168,000 $ 146,000 $ 885,000(e) $ 742,000(a) $ 457,000
----------- ----------- ---------- ---------- -----------
Allowance for valuation on deferred
tax assets $ 416,650 $2,119,400(b) $ 2,536,050
----------- ----------- ---------- ---------- -----------
Year ended December 31, 1994:
Allowance for doubtful accounts $ 45,028 $ 148,230 $ 25,258(a) $ 168,000
----------- ----------- ---------- ---------- -----------
Allowance for valuation on deferred
tax assets $ $ 416,650(c) $ 416,650
----------- ----------- ---------- ---------- -----------
Year ended December 31, 1993:
Allowance for doubtful accounts $ 74,112 $ 29,926 $ 59,010(a) $ 45,028
----------- ----------- ---------- ---------- -----------
</TABLE>
(a) Doubtful accounts written off against reserve.
(b) Change in valuation allowance relating to change in assessment as to
future realizability of deferred tax asset.
(c) Principally relates to a reclass of amounts previously netted against
the asset.
(d) Amounts charged against the reserve.
(e) Amounts charged through discontinued operations.
<PAGE>
EXHIBIT INDEX
PAGES, INC. FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 1995
(a) 1. Financial Statements. See Index to Financial Statements and
Financial Schedule on page 33.
2. Financial Statement Schedules. See Index to Financial Statements
and Financial Statement Schedule on page 33.
3. Exhibits. The following exhibits are required to be filed as
part of this report:
3(a)1 Certificate of Incorporation dated October 5, 1994
3(b)1 Bylaws of the Company
3(c)2 Agreement of merger
10(a)4 Lease Dated January 1, 1993, for St. Petersburg, Florida, Office and
Warehouse
10(b)5 Unconditional Guaranty of Lease Effective January 1, 1993, for Lease of
St. Petersburg, Florida, Office and Warehouse
10(c)5 Lease Dated August 26, 1991, for Columbus, Ohio, Office and Warehouse
10(d)5 Lease Dated January 1, 1989, for Scarborough, Ontario, Canada, Office
and Warehouse
*10(e)5 Non-Qualified Stock Option Agreement Dated July 19, 1985, between the
company and Richard A. Stimmel, S. Robert Davis, and Charles R. Davis
*10(f)5 Non-Statutory Stock Option Agreement Dated March 31, 1986, between the
company and Richard A. Stimmel
*10(g)5 Non-Statutory Stock Option Agreement Dated March 31, 1986, between the
Company and Charles R. Davis
*10(h)5 Non-Statutory Stock Option Agreement Dated September 14, 1987, between
the Company and Richard A. Stimmel
*10(i)5 Non-Statutory Stock Option Agreement Dated September 14, 1987, between
the Company and S. Robert Davis
*10(j)5 Non-Statutory Stock Option Agreement Dated September 14, 1987, between
the Company and Charles R. Davis
*10(k)5 Non-Statutory Stock Option Agreement Dated October 9, 1989, between the
Company and Richard A. Stimmel
*10(l)5 Non-Statutory Stock Option Agreement Dated October 9, 1989, between the
Company and S. Robert Davis
*10(m)5 Non-Statutory Stock Option Agreement Dated October 9, 1989, between the
Company and Charles R. Davis
*10(n)5 Non-Statutory Stock Option Agreement Dated February 6, 1990, between
the Company and Richard A. Stimmel
*10(o)5 Non-Statutory Stock Option Agreement Dated February 6, 1990, between
the Company and S. Robert Davis
*10(p)5 Non-Statutory Stock Option Agreement Dated February 6, 1990, between
the Company and Charles R. Davis
*10(q)4 Non-Statutory Stock Option Agreement Dated May 19, 1992, between the
Company and Randall J. Asmo
*10(r)4 Non-Statutory Stock Option Agreement Dated May 19, 1992, between the
Company and John C. Sontheimer
*10(s)4 Non-Statutory Stock Option Agreement Dated June 3, 1992, between the
Company and S. Robert Davis
*10(t)4 Non-Statutory Stock Option Agreement Dated June 3, 1992, between the
Company and Charles R. Davis
*10(u)4 Non-Statutory Stock Option Agreement Dated June 3, 1992, between the
Company and Richard A. Stimmel
*10(v)4 Non-Statutory Stock Option Agreement Dated March 25, 1993, between the
Company and Richard B. Erven
*10(w)4 PAGES, Inc. 1993 Incentive Stock Option Plan
10(x) Amended and Restated Loan Agreement dated March 27, 1996
10(y) Stock Purchase Agreement dated as of March 6, 1996 P - (with respect
to certain Schedules)
10(z) Non-Competition Agreement dated as of March 6, 1996
11 Statement Regarding Computation of Per Share Earnings
13 1 Annual Report to Stockholders for Last Fiscal Year. Letter to
Stockholders and List of Officers, Directors and Locations. The
remainder of the report is a reproduction of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994.
16(a)6 Letter from Hausser + Taylor Dated November 3, 1994
16(b)6 Letter from Arthur Andersen Dated November 11, 1994
21 Subsidiaries of the Company
23(a) Consent of Hausser & Taylor
23(b) Consent of Arthur Andersen
23(c) Consent of Deloitte & Touche LLP
____________________
1 Incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, File Number 0-10475, filed in Washington,
D.C.
2 Incorporated by reference to the Company's Proxy Statement dated August 4,
1994, File Number 0-10475, Filed in Washington, D.C.
3 Incorporated by reference to the Company's Current Report on Form 8-K dated
May 19, 1992, File Number 0-10475, Filed in Washington, D.C.
4 Incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, File Number 0-10475, filed in Washington,
D.C.
5 Incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, File Number 0-10475, filed in Washington,
D.C.
6 Incorporated by reference to the Company's Form 8-K/A dated November 2, 1994,
File Number 0-107475, filed in Washington, D.C.
* Indicates a management contract or compensatory plan or arrangement required
to be filed herewith. No other exhibits required by Form 10-K are listed as
they are not applicable.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated October 6, 1995 under
Item 5 describing the settlement of the Class Action Law Suit filed on
February 28, 1995.
<PAGE>
AVAILABILITY OF EXHIBITS TO FORM 10-K
Exhibits to Form 10-K Report are on file with the Securities and Exchange
Commission and are referenced on the Exhibit Index contained hereinabove.
Exhibits are available upon request, at $0.25 per page, representing the
Registrants reasonable expenses in furnishing such exhibit(s). Exhibits may be
obtained by writing to Charles R. Davis, Secretary, PAGES, Inc.
<PAGE>
EXHIBIT 10(x)
THE HUNTINGTON NATIONAL BANK
Amended and Restated
Revolving Note
- -------------------------------------------------------------------------------
City Office Division Branch [X] Secured
----------- ------------ --------------
Account No. Note No. [ ] Unsecured
------------- ---------------------------
Account Name: School Book Fairs, Inc.
----------------------------------------------------------------
[X] Corporation [ ] Partnership [ ] Individual/Proprietorship
[ ] Other
-------------------------------------------------------------------
- -------------------------------------------------------------------------------
$12,000,000.00 Columbus, Ohio March 27, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of The
Huntington National Bank (hereinafter called the "Bank," which term shall
include any holder hereof) at such place as the Bank may designate or, in the
absence of such designation, at any of the Bank's offices, the sum of Twelve
Million Dollars ($12,000,000.00) or so much thereof as shall have been advanced
by the Bank at any time and not thereafter repaid (hereinafter referred to as
"Principal Sum") together with interest as hereinafter provided and payable at
the time and in the manner hereinafter provided. The proceeds of the loan
evidenced hereby may be advanced, repaid and readvanced in partial amounts
during the term of this revolving note (this "Note") and prior to maturity.
Each such advance shall be made to the undersigned upon receipt by the Bank of
the undersigned's application therefor and disbursement instructions, which
shall be in such form as the Bank shall from time to time prescribe. The Bank
shall be entitled to rely on any oral or telephonic communication requesting an
advance and/or providing disbursement instructions hereunder, which shall be
received by it in good faith from anyone reasonably believed by the Bank to be
the undersigned, or the undersigned's authorized agent. The undersigned agrees
that all advances made by the Bank will be evidenced by entries made by the Bank
into its electronic data processing system and/or internal memoranda maintained
by the Bank. The further agrees that the sum or sums shown on the most recent
printout from the Bank's electronic data processing system and/or on such
memoranda shall be rebuttably presumptive evidence of the amount of the
Principal Sum and of the amount of any accrued interest.
This Note is executed and the advances contemplated hereunder are to be
made pursuant to an Amended and Restated Loan Agreement by, between and among
the undersigned, Pages, Inc., Clyde A. Short Company and the Bank dated as of
August 2, 1994, and all amendments, modifications, and supplements thereto from
time to time, including without limitation, a certain First Amendment to Amended
and Restated Loan Agreement dated as of June 28, 1995, and a certain Second
Amendment to Amended and Restated Loan Agreement dated as of March 27, 1996
(hereinafter collectively called the "Loan Agreement"), and all the covenants,
representations, agreements, terms, and conditions contained therein, including
but not limited to additional conditions of default, are incorporated herein as
if fully rewritten.
This Note is an amendment and restatement of a certain Revolving Note dated
June 28, 1995, in the original principal sum of Seven Million Dollars
($7,000,000.00). Notwithstanding the Principal Sum referenced above, the
maximum amount that the undersigned may borrow hereunder is limited by the terms
of the Loan Agreement.
INTEREST
The undersigned agrees to pay interest in like money and in immediately
available funds at such office on the unpaid Principal Sum hereof from time to
time from the date hereof until such amount shall become due and payable
(whether at the stated maturity, by acceleration or otherwise) on the dates and
at the applicable rates per annum as provided in the Loan Agreement.
MANNER OF PAYMENT
The Principal Sum shall be due and payable on June 1, 1997, and at
maturity, whether by demand, acceleration or otherwise. Accrued interest shall
be due and payable monthly beginning on May 1, 1996, and continuing on the first
day of each month thereafter, and at maturity, whether by demand, acceleration
or otherwise.
LATE CHARGE
Any installment or other payment not made within 10 days of the date such
payment or installment is due shall be subject to a late charge equal to 5% of
the amount of the installment or payment.
SECURITY
This Note is secured by the security interests, assignments, and mortgages
granted and/or referenced in the Loan Agreement and by various security
agreements dated of even date herewith or various other dates.
DEFAULT
Upon the occurrence of any of the following events:
(a) the undersigned fails to make any payment of interest or of the
Principal Sum on or before the date such payment is due;
(b) an "Event of Default" under the Loan Agreement shall have
occurred;
then the Bank may, at its option, without notice or demand, accelerate the
maturity of the obligations evidenced hereby, which obligations shall become
immediately due and payable. In the event the Bank shall institute any action
for the enforcement or collection of the obligations evidenced hereby, the
undersigned agrees to pay all costs and expenses of such action, including
reasonable attorneys' fees, to the extent permitted by law.
GENERAL PROVISIONS
The undersigned, and any indorser, surety, or guarantor, hereby severally
waive presentment, notice of dishonor, protest, notice of protest, and diligence
in bringing suit against any party hereto, and consent that, without discharging
any of them, the time of payment may be extended an unlimited number of times
before or after maturity without notice. The Bank shall not be required to
pursue any party hereto, including any guarantor, or to exercise any rights
against any collateral herefor before exercising any other such rights.
The obligations evidenced hereby may from time to time be evidenced by
another note or notes given in substitution, renewal or extension hereof. Any
security interest or mortgage which secures the obligations evidenced hereby
shall remain in full force and effect notwithstanding any such substitution,
renewal, or extension.
The captions used herein are for references only and shall not be deemed a
part of this Note. If any of the terms or provisions of this Note shall be
deemed unenforceable, the enforceability of the remaining terms and provisions
shall not be affected. This Note shall be governed by and construed in
accordance with the law of the State of Ohio.
WAIVER OF RIGHT TO TRIAL BY JURY
THE UNDERSIGNED HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS NOTE OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE UNDERSIGNED OR THE BANK WITH RESPECT TO THIS NOTE OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH,
OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
THE UNDERSIGNED HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT THE
UNDERSIGNED OR THE BANK MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE UNDERSIGNED TO
THE WAIVER OF THE RIGHT OF THE UNDERSIGNED TO TRIAL BY JURY.
WARRANT OF ATTORNEY
The undersigned authorizes any attorney at law to appear in any Court of
Record in the State of Ohio or in any state or territory of the United States
after the above indebtedness becomes due, whether by acceleration or otherwise,
to waive the issuing and service of process, and to confess judgment against the
undersigned in favor of the Bank for the amount then appearing due together with
costs of suit, and thereupon to waive all errors and all rights of appeal and
stays of execution.
WARNING-BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
Borrower:
SCHOOL BOOK FAIRS, INC.
By: /s/ S. Robert Davis
Its: Chairman
COLUMBUS/0224714.01
- 17 -
SECOND AMENDMENT TO
AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDMENT (this "Amendment") to the Amended and
Restated Loan Agreement is entered into as of the 27th day of
March, 1996, by and between Pages, Inc. ("Pages"), Clyde A. Short
Company ("Clyde Short"), School Book Fairs, Inc. ("School Book
Fairs") (Pages, Clyde Short and School Book Fairs shall be
individually referred to as a "Borrower" and collectively as the
"Borrowers"), and The Huntington National Bank ("Bank").
RECITALS:
A. As of August 2, 1994, the Borrowers, Craftmark Inc.
("Craftmark"), School Book Fairs, Limited ("Limited"), Graham
Hamilton Properties, an Ohio general partnership ("Graham
Hamilton") and the Bank executed a certain Amended and Restated
Loan Agreement, which was amended by a certain First Amendment to
Amended and Restated Loan Agreement dated as of June 28, 1995,
and certain letter agreements dated October 13, 1995, and
November 2, 1995, respectively relating to temporary waiver and
modification of certain covenants (hereinafter collectively the
"Loan Agreement"), setting forth the terms of certain loans and
extensions of credit to the Borrowers; and
B. As of February 28, 1990, Clyde Short executed and
delivered to the Bank, inter alia, a certain Revolving Note in
the original principal sum of Ten Million Dollars
($10,000,000.00), which note was modified by a First Note
Modification Agreement dated June 12, 1992, that, inter, alia,
decreased the maximum principal amount of the obligation
evidenced by such note to Six Million Dollars ($6,000,000.00), by
a Second Note Modification Agreement dated June 30, 1993, by a
Third Note Modification and Extension Agreement dated June 29,
1994, by a Fourth Note Modification Agreement dated as of August
2, 1994, and by a Fifth Note Modification Agreement dated as of
June 28, 1995 (hereinafter collectively the "Short Note"); and
C. As of August 2, 1994, the Borrowers executed and
delivered to the Bank, inter alia, a certain Revolving Note in
the original principal sum of Seven Million Dollars
($7,000,000.00) that was replaced by a certain Revolving Note
dated June 28, 1995, in the original principal sum of Seven
Million Dollars ($7,000,000.00) (hereinafter the "School Book
Fairs Note"); and
D. As of August 2, 1994, the Borrowers executed and
delivered to the Bank, inter alia, a certain Revolving Note in
the original principal sum of Nine Million Five Hundred Thousand
Dollars ($9,500,000.00), that was replaced by a certain Revolving
Note dated June 28, 1995, in the original principal sum of Nine
Million Five Hundred Thousand Dollars ($9,500,000.00)
(hereinafter the "Pages Revolving Note"); and
E. As of July 21, 1994, the Borrowers executed and
delivered to the Bank, inter alia, a certain Time Note in the
original principal sum of Two Million Five Hundred Thousand
Dollars ($2,500,000.00), that was replaced by a certain Time Note
dated June 28, 1995, in the original principal sum of Two Million
Five Hundred Thousand Dollars ($2,500,000.00) (hereinafter the
"Pages Time Note") (the Short Note, the School Book Fairs Note,
the Pages Revolving Note and the Pages Time Note are hereinafter
collectively referred to as the "Notes"); and
F. In connection with the Loan Agreement and the Notes,
the Borrowers, Craftmark, Limited and Graham Hamilton executed
and delivered to the Bank certain other loan documents,
promissory notes, a deed of trust, assignment of rents and
security agreement, lockbox agreements, consents, assignments,
security agreements, agreements, instruments and financing
statements in connection with the indebtedness referred to in the
Loan Agreement (all of the foregoing, together with the Notes and
the Loan Agreement, are hereinafter collectively referred to as
the "Loan Documents"); and
G. Graham Hamilton was dissolved in August, 1994; and
H. The common stock in Limited was sold as of March 5,
1996; and
I Craftmark merged into School Book Fairs on November 1,
1995; and
J. The Borrowers are currently in default of the Loan
Agreement pursuant to the following Sections:
1. The failure of the Borrowers to comply with Section
7.13 of the Loan Agreement with respect to working
capital;
2. The failure of the Borrowers to comply with Section
7.14 of the Loan Agreement with respect to the ratio of
total liabilities to consolidated tangible net worth;
3. The failure of the Borrowers to comply with Section
7.15 of the Loan Agreement with respect to the ratio of
cash flow to debt service;
4. The failure of the Borrowers to comply with Section
7.21 of the Loan Agreement with respect to obtaining a
participant; and
5. The failure of the Borrowers to comply with Section
7.23 of the Loan Agreement with respect to resting the
Clyde A. Short Company and School Book Fairs, Inc.
revolving loans.
(collectively the "Identified Defaults"); and
K. The Borrowers have requested that the Bank amend and
modify certain terms and covenants in the Loan Agreement and
waive the Identified Defaults, and the Bank is willing to do so
upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements and promises contained herein, the receipt and
sufficiency of which are hereby acknowledged, and intending to be
legally bound, each of the Borrowers and the Bank, for themselves
and their successors and assigns do hereby agree, recite,
represent and warrant as follows:
1. All capitalized terms not otherwise defined herein
shall have the same meanings ascribed as such terms in the Loan
Agreement.
2. The Bank hereby waives all of the Identified Defaults
through the date of the execution of this Amendment.
3. Section 1.2, "The Loans," of the Loan Agreement is
hereby amended to recite in its entirety that:
1.2 The Loans. The Bank, subject to the
terms and conditions hereof, will make loans
and advances on a revolving basis and will
extend commercial letters of credit to the
Borrowers up to the aggregate sum of
$16,000,000.00 (the "Loans"). The Loans
shall be comprised of (a) credit extensions,
subject to the terms and conditions hereof,
to Clyde A. Short Company in an amount up to
the aggregate sum of $5,000,000.00 (the
"Short Revolving Credit"), and (b) a
revolving credit facility, subject to the
terms and conditions hereof, to School Book
Fairs in an amount up to the principal sum of
$12,000,000.00 (the "School Book Fairs
Revolving Credit"), provided, however, that
notwithstanding the principal sums referenced
herein or in the promissory notes evidencing
the Short Revolving Credit and the School
Book Fairs Revolving Credit, respectively,
the aggregate principal balances of the Short
Revolving Credit and the School Book Fairs
Revolving Credit shall at no time exceed
$16,000,000.00.
4. Section 1.3, "Short Revolving Credit," is hereby
amended to recite in its entirety that:
1.3 Short Revolving Credit. The Short
Revolving Credit shall be a revolving loan
not to exceed the principal sum of
$5,000,000.00, provided, however, that the
principal balance of such revolving loan,
shall not exceed the lesser of $5,000,000.00
or the sum of (a) the Short Borrowing Base,
plus (b) the School Book Fairs Unused
Availability. "School Book Fairs Unused
Availability" shall mean the difference
between (i) the School Book Fairs Borrowing
Base and (ii) the aggregate principal balance
of the School Book Fairs Revolving Credit.
5. Section 1.4, "Short Lending Formula," of the Loan
Agreement is hereby amended to recite in its entirety that:
1.4 Short Lending Formula. "Short Borrowing
Base" shall mean the sum of (a) up to 60% of
Eligible Inventory owned by Clyde A. Short
Company, up to the Short Maximum Inventory
Advance, plus (b) up to 80% of Eligible
Accounts owned by Clyde A. Short Company,
plus (c) up to 75% of Eligible Real Estate
owned by Clyde A. Short Company. "Short
Maximum Inventory Advance" shall mean up to
the sum of $3,500,000.00 beginning January 1
and continuing through and including May 31
of each calendar year, and up to the sum of
$6,500,000.00 beginning June 1 and continuing
through and including December 31 of each
calendar year.
6. Section 1.5, "School Book Fairs Revolving Credit," of
the Loan Agreement is hereby amended to recite in its entirety
that:
1.5 School Book Fairs Revolving Credit. The
principal sum of the School Book Fairs
Revolving Credit shall not exceed the lesser
of $12,000,000.00 or the sum of (a) the
School Book Fairs Borrowing Base, plus (b)
the Short Unused Availability. "Short Unused
Availability" shall mean, at the time of
determination, the difference between (i) the
Short Borrowing Base and (ii) the aggregate
principal balance of the Short Revolving
Credit.
7. Section 1.6, "School Books Fairs Lending Formula," of
the Loan Agreement is hereby amended to recite in its entirety
that:
1.6 School Books Fairs Lending Formula.
"School Book Fairs Borrowing Base" shall mean
the sum of (a) the applicable School Book
Fairs Inventory Advance Rate, multiplied by
Eligible Inventory owned by School Book
Fairs, Inc., up to the School Book Fairs
Maximum Inventory Advance, plus (b) 75% of
Eligible Accounts owned by School Book Fairs,
Inc. "School Book Fairs Inventory Advance
Rate" shall mean up to 50% beginning June 1,
and continuing through January 31 of the
immediately succeeding calendar year, and up
to 30% beginning February 1 and continuing
through May 31 of each calendar year. "School
Book Fairs Maximum Inventory Advance" shall
mean up to $9,000,000.00 beginning June 1,
and continuing through January 31 of the
immediately succeeding calendar year and
$6,500,000.00 beginning February 1, and
continuing through May 31 of each calendar
year.
8. Section 1.7, "Pages Revolving Credit and Pages Time
Credit," of the Loan Agreement is hereby deleted in its entirety.
9. Section 1.8, "Pages Lending Formula," of the Loan
Agreement is hereby deleted in its entirety.
10. Section 2.1(d) of Section 2.1, "Eligible Accounts," of
the Loan Agreement is hereby amended to recite:
(d) the account does not, when added to all
other accounts of School Book Fairs, Inc.
arising from consumer transactions, produce
an aggregate indebtedness to School Book
Fairs, Inc. from Account Debtors in
connection with consumer transactions, or an
aggregate indebtedness to School Book Fairs,
Inc. that is reflected on its books and
records as unpaid fair accrual, in excess of
$5,000,000.00.
All other provisions of Section 2.1 shall remain as originally
written.
11. Notwithstanding anything to the contrary contained in
the Loan Agreement, the Borrowers shall have no right to borrow
at the LIBO Rate.
12. Section 3.2(a) of Section 3.2, "Prime Interest Rate,"
of the Loan Agreement is hereby amended to recite:
(a) one percentage point (1%) in excess of
the Prime Commercial Rate of the Bank, from
time to time in effect, in respect of the
Short Revolving Credit and the School Book
Fairs Revolving Credit;
All other provisions of Section 3.2 shall remain as originally
written.
13. The definition of "Termination Date" set forth in
Section 3.3, "LIBO Rate," of the Loan Agreement is hereby amended
to recite in its entirety that:
"Termination Date" shall mean, (a) with
respect to any Advances under the Short
Revolving Credit or School Book Fairs
Revolving Credit, June 1, 1997.
14. Section 3.11, "Interest Rate After Default" of the Loan
Agreement is hereby amended to recite in its entirety:
3.11 Interest Rate After Default. Upon the
occurrence of any Pending Default or Event of
Default, interest shall thereafter accrue on
the outstanding principal balance of all
Advances made pursuant to this Agreement at a
rate equal to (a) three and one-half
percentage points per annum in excess of the
Prime Interest Rate, with respect to any
Prime Interest Rate Advances.
15. Section 3.12, "Fees," of the Loan Agreement is hereby
amended to recite in its entirety that:
3.12 Fees. (a) The Borrowers jointly and
severally agree to pay a fee in respect of
the Short Revolving Credit equal to one-half
of one percent per annum (1/2%) of the
difference, if any, between $5,000,000.00 and
the average daily principal balance of the
Short Revolving Credit during any full or
partial calendar quarter the Short Revolving
Credit is in effect, payable quarterly in
arrears, beginning on the first day of July,
1996, and continuing on the first day of each
October, January, April, and July, thereafter
during the period the Short Revolving Credit
is in effect, and (b) the Borrowers jointly
and severally agree to pay a fee in respect
of the School Book Fairs Revolving Credit
equal to one-half of one percent per annum
(1/2%) of the difference, if any, between
$11,000,000.00 and the average daily
principal balance of the School Book Fairs
Revolving Credit during any full or partial
calendar quarter the School Book Fairs
Revolving Credit is in effect, payable
quarterly in arrears, beginning on the first
day of July, 1996, and continuing on the
first day of each October, January, April and
July thereafter during the period the School
Book Fairs Revolving Credit is in effect.
16. The fourth sentence of Section 3.13, "Evidence of
Loans, Advance Requests and Costs and Expenses," is hereby
amended to recite that:
The Companies further jointly and severally
agree to pay analysis fees, audit fees in the
amount of $500.00 per auditor per day, which
in the absence of extraordinary circumstances
or a Pending Default will not exceed four
audits per year, plus out-of-pocket expenses
of such auditors, and all costs and expenses
incidental to or in connection with (i) the
Loans, (ii) the enforcement of the Bank's
rights in connection therewith, (iii) any
amendment or modification of this Agreement
or any other loan documents, (iv) any
litigation, contest, dispute, proceeding or
action in any way relating to the Collateral
or to this Agreement, whether the same are
incurred prior to or after maturity, an Event
of Default, or judgment.
All other provisions of Section 3.13 shall remain as originally
written.
17. Section 3.15, "Maturity," of the Loan Agreement is
hereby amended to recite in its entirety that:
3.15 Maturity. The Short Revolving Credit
and School Book Fairs Revolving Credit shall
be due and payable on June 1, 1997, and as
extended from time to time in the sole
discretion of the Bank.
18. Section 5.1, "Organization and Authority," of the Loan
Agreement is hereby amended to recite in its entirety that:
5.1 Organization and Authority. Such
Company (a) is a corporation duly organized,
validly existing and in good standing under
the laws of the jurisdiction set forth below:
Pages, Inc. -- Delaware
Clyde A. Short Company -- North Carolina
School Book Fairs, Inc. -- Florida
(b) has all requisite power and authority and
all necessary licenses and permits to own and
operate its properties and to carry on its
business as now conducted and as presently
proposed to be conducted in the locations set
forth in Exhibit C to the Second Amendment to
Amended and Restated Loan Agreement; and (c)
to the best of such Company's knowledge, by
reason of ownership or lease of real
property, has qualified to do business in
each jurisdiction in which it owns or leases
such real property.
19. Section 7.2, "Maintenance of Properties and Corporate
Existence," of the Loan Agreement is hereby amended to recite in
its entirety that:
7.2 Maintenance of Properties and
Corporate Existence. Such Company shall (a)
maintain its property in good condition and
make all renewals, replacements, additions,
betterments and improvements thereto which it
deems necessary; (b) maintain, with
financially sound and reputable insurers, (i)
insurance with respect to its properties and
business against such casualties and
contingencies, of such types (including but
not limited to fire and casualty, public
liability, products liability, larceny,
embezzlement or other criminal
misappropriation insurance) in such amounts
as is customary in the case of entities of
established reputations engaged in the same
or a similar business and similarly situated,
(ii) life insurance with respect to the
individuals managing such Company in such
amounts as is customary in the case of
corporations of established reputations
engaged in the same or a similar business and
similarly situated; (c) keep true books of
records and accounts in which full and
correct entries will be made of all its
business transactions, and reflect in its
financial statements adequate accruals and
appropriations to reserves; (d) do or cause
to be done all things necessary (i) to
preserve and keep in full force and effect
its existence, rights and franchises, and
(ii) to maintain its status as a corporation
duly organized and existing and in good
standing under the laws of the state of its
incorporation; and (e) not be in violation of
any laws, ordinances, or governmental rules
and regulations or fail to obtain any
licenses, permits, franchises or other
governmental authorizations necessary to the
ownership of its properties or to the conduct
of its business, which violation or failure
to obtain might materially and adversely
affect the business, prospects, profits,
properties or condition (financial or
otherwise) of such Company.
20. Section 7.3, "Sale of Assets, Merger; Subsidiaries;
Tradenames," of the Loan Agreement is hereby amended to recite in
its entirety that:
7.3 Sale of Assets; Merger;
Subsidiaries; Tradenames. Such Company will
not, except in the ordinary course of
business, sell, lease, transfer or otherwise
dispose of, any of its assets, except that
(i) such Company may sell or otherwise
dispose of its inventory in the ordinary
course of its business, and (ii) such Company
may sell or trade-in specific items of
equipment each year up to an annual aggregate
amount of $250,000.00, provided that no
individual item being traded is in excess of
$100,000.00 in value. Such Company will not,
without the prior written consent of the Bank
and the execution of such documents deemed
necessary by the Bank, which consent of the
Bank shall not be unreasonably withheld, and
will not permit any of its affiliates to,
consolidate with, merge into, or make
investments in any other entity, or permit
any other entity to consolidate with or merge
into it. Without the prior written consent
of the Bank, Pages, Inc. shall not acquire
all or substantially all of the assets or
business of any other company, person or
entity or make investments in any other
company, person or entity. With respect to
any acquisition of or investment in all or
substantially all of the assets or business
of any other company, person or entity,
Pages, Inc. shall execute and deliver to the
Bank such documents deemed necessary by the
Bank. No other Company shall acquire all or
substantially all of the assets or business
of any other company, person or entity or
make investments in any other company, person
or entity. Except for the entities as set
forth in Exhibit F to this Agreement (herein
an "Affiliate"), such Company has no
subsidiaries and conducts business only in
the name(s) of such Company. Such Company
will not create or acquire any subsidiaries
without the prior written consent of the
Bank, which consent will not be withheld
unreasonably. If such Company conducts
business under tradenames other than the
names of such Company, such Company shall
provide to the Bank notice of such tradename
or tradenames within thirty days after
beginning the use of the same and shall
execute such documents deemed necessary by
the Bank in connection therewith.
21. Section 7.12, "Consolidated Tangible Net Worth," of the
Loan Agreement is hereby amended to recite in its entirety that:
7.12 Consolidated Tangible Net Worth. The
Parent, on a combined and consolidated basis,
shall achieve a Consolidated Tangible Net
Worth of not less than the amounts specified
below as of the dates also specified below:
As of March 31, 1996 - not less than $5,250,000.00
As of June 30, 1996 - not less than $4,750,000.00
As of September 30, 1996 - not less than
$3,375,000.00
As of December 31, 1996 - not less than
$5,000,000.00
As of March 31, 1997 - not less than $4,400,000.00
22. Section 7.13, "Working Capital," of the Loan Agreement
is hereby deleted in its entirety.
23. Section 7.14, "Ratio of Total Liabilities to
Consolidated Tangible Net Worth," of the Loan Agreement is hereby
deleted in its entirety.
24. Section 7.15, "Debt Service Coverage Ratio," of the
Loan Agreement is hereby deleted recite in its entirety.
25. Section 7.16, "Capital Expenditures," of the Loan
Agreement is hereby amended to recite in its entirety that:
7.16 Capital Expenditures. The Companies in
the aggregate will not make any expenditure
for fixed or capital assets, including by way
of the incurrence of capitalized lease
obligations, expenditures for maintenance and
repairs which should be capitalized in
accordance with generally accepted accounting
principles or otherwise in excess of
$500,000.00.
26. Section 7.17, "Loans and Advances," of the Loan
Agreement is hereby amended to recite in its entirety that:
7.17 Loans and Advances. The Companies
in the aggregate will not make any loans or
advances (except for inventory advances) to
any person, corporation or entity if such
loans or advances (except for inventory
advances) will exceed an aggregate total
outstanding at any one time of $100,000.00,
except for intercompany advances between
entities comprising the Companies.
27. Section 7.18, "Operating Lease Rentals," of the Loan
Agreement is hereby amended to recite in its entirety that:
7.18 Operating Lease Rentals. The
Companies in the aggregate will not without
the prior written approval of the Bank enter
into operating leases providing in the
aggregate for annual rentals which exceed
$1,000,000.00.
28. Section 7.21, "Prospective Participant or Co-Lender,"
of the Loan Agreement is hereby deleted in its entirety.
29. Section 7.23, "Resting of Short Revolving Credit and
School Book Fairs Revolving Credit," of the Loan Agreement is
hereby deleted in its entirety.
30. A new Section 7.25, entitled "Maximum Operating
Losses," is here added to the Loan Agreement and shall recite in
its entirety as set forth below:
7.25 Maximum Operating Losses. Beginning
with the quarter ending March 31, 1996, and
continuing as of the end of each fiscal
quarter thereafter, the Borrowers on a
consolidated and combined basis, shall not
incur an Accumulated Operating Loss during
any fiscal year in excess of the amounts set
forth below:
As of March 31, 1996, Accumulated Operating
Loss not to exceed $1,100,000.00
As of June 30, 1996, Accumulated Operating
Loss not to exceed $1,850,000.00
As of September 30, 1996, Accumulated
Operating Loss not to exceed $3,950,000.00
As of December 31, 1996, Accumulated
Operating Loss not to exceed $1,350,000.00;
and
As of March 31, 1997, Accumulated Operating
Loss not to exceed $1,000,000.00
Accumulated Operating Loss shall be
determined on a fiscal year-to-date basis,
beginning on the first day of each fiscal
year and shall be calculated through the date
of determination. "Accumulated Operating
Loss" shall mean, with respect to the period
of determination, the following calculation
which results in a number less than zero, (a)
the sum of the Borrower's net income (or
loss) after taxes as determined in accordance
with GAAP, plus, the sum of all extraordinary
losses (and any unusual losses arising
outside the ordinary course of business not
included in extraordinary losses determined
in accordance with GAAP), minus (b) the sum
of all extraordinary gains (and any unusual
gains arising outside the ordinary course of
business not included in extraordinary gains
determined in accordance with GAAP), is less
than $0.00.
31. Section 8(a) of Section 8, "Financial Information and
Reporting," of the Loan Agreement is hereby amended to recite:
(a) within 30 days after the end of each
month, financial statements, including a
balance sheet and statements of income and
surplus, of each of the Companies, which
shall include, without limitation, an
itemization of all of Clyde Short's or School
Book Fairs loans/advances to Affiliates and
each Borrower's loans/advances from
Affiliates, certified by the president or
chief financial officer of the Parent (a
"Financial Officer") as fairly representing
each Company's financial condition as of the
end of such period, and within 45 days after
the end of each quarter, financial
statements, including a balance sheet and
statements of income and surplus, and a
statement of cash flows of the Companies, on
a combined and consolidated basis, certified
by a Financial Officer as fairly representing
the Companies' financial condition as of the
end of such period;
All other provisions of Section 8 shall remain as originally
written.
32. Section 10.1, "Notices," of the Loan Agreement is
hereby amended to recite in its entirety that:
10.1 Notices. (a) All communications under
this Agreement or under the notes executed
pursuant hereto shall be in writing and shall
be mailed by first class mail, postage
prepaid, (1) if to the Bank, at the following
address, or at such other address as may have
been furnished in writing to such Company by
the Bank:
The Huntington National Bank
41 South High Street
Columbus, Ohio 43215
Attn: Mark A. Koscielski, Vice President
(2) if to any of the Companies, at the
following address, or at such other address
as may have been furnished in writing to the
Bank by the Borrower:
Pages, Inc.
801 94th Avenue North
St. Petersburg, Florida 33702
Attn: Richard A. Stimmel, President
(b) any notice so addressed and mailed by
registered or certified mail shall be deemed
to be given when so mailed.
33. Concurrently with the execution of this Amendment,
Clyde Short shall execute and deliver to the Bank a Note
Modification Agreement, a Deed of Trust Modification Agreement,
and a Continuing Guaranty Unlimited in form satisfactory to the
Bank.
34. Concurrently with the execution of this Amendment,
Pages shall execute and deliver to the Bank Continuing Guaranties
Unlimited of the obligations of Clyde Short and School Book Fairs
in form satisfactory to the Bank.
35. Concurrently with the execution of this Amendment,
School Book Fairs shall execute and deliver to the Bank an
Amended and Restated Promissory Note and a Continuing Guaranty
Unlimited in form satisfactory to the Bank.
36. Concurrently with the execution of this Amendment, the
Borrowers shall indefeasibly pay in full all outstanding amounts
the Pages Revolving Credit, and the Borrowers shall have no
further rights to seek advances under the Pages Revolving Credit
or the Pages Term Credit.
37. All references in the Loan Agreement to School Book
Fairs, Limited, a United Kingdom corporation, shall hereafter be
of no further force and effect and School Book Fairs, Limited, a
United Kingdom corporation, shall hereafter cease to be a party
to the Loan Agreement.
38. Each reference to the Loan Agreement, whether by use of
the phrase "Loan Agreement," "Amended and Restated Loan
Agreement," "Agreement," the prefix "herein" or any other term,
and whether contained in the Loan Agreement itself, in this
Amendment or any document executed concurrently herewith or in
any loan documents executed hereafter, shall be construed as a
reference to the Loan Agreement as amended by this Amendment.
39. Each of the Borrowers hereby reaffirms each and every
warranty and representation made in the Loan Documents as if the
same were made as of the date this Amendment becomes effective,
except to the extent that such warranties and representations
expressly relate to an earlier date.
40. Except as modified herein, the Loan Agreement, Loan
Documents and all other agreements as to payment, guarantee of
payment or security executed in connection therewith shall remain
as written originally and in full force and effect in all
respects, and nothing herein shall affect, modify, limit or
impair any of the rights and powers which the Bank may have
thereunder. Any modification or waiver of any of the agreements,
covenants, or terms of the Loan Agreement or the Loan Documents
shall not be construed as the Bank's agreement or intention to
agree to any further modifications or waivers.
41. Each of the Borrowers agrees to perform and observe all
of the covenants, agreements, stipulations, and conditions to be
performed under the Loan Agreement, Loan Documents, and all other
related agreements, as amended hereby.
42. Each of the Borrowers represents and warrants that upon
the execution of this Amendment, no "Event of Default" or
"Pending Default," as defined in the Loan Agreement, has occurred
and is continuing, nor will any occur immediately after the
execution and delivery of this Amendment by the performance or
observance of any provision hereof.
43. Each of the Borrowers hereby represents and warrants to
the Bank that (a) such Borrower has legal power and authority to
execute and deliver the within Amendment; (b) the officer
executing the within Amendment on behalf of such Borrower has
been duly authorized to execute and deliver the same and bind
such Borrower with respect to the provisions provided for herein;
(c) the execution and delivery hereof by such Borrower and the
performance and observance by such Borrower of the provisions
hereof do not violate or conflict with the articles of
incorporation, memorandum and articles of association,
regulations or by-laws of such Borrower or any law applicable to
such Borrower or result in the breach of any provision of or
constitute a default under any agreement, instrument or document
binding upon or enforceable against such Borrower; and (d) this
Amendment constitutes a valid and legally binding obligation upon
such Borrower in every respect.
44. Each of the undersigned Borrowers authorizes any
attorney-at-law to appear in any court of record in the State of
Ohio or in any state or territory of the United States after the
indebtedness referred to in the Loan Agreement becomes due,
whether by acceleration or otherwise, to waive the issuing and
service of process, and to confess judgment against any one or
more of the undersigned Borrowers in favor of the Bank for the
amount then appearing due, together with costs of suit, and
thereupon to waive all errors and all rights of appeal in stays
of execution. No such judgment or judgments against less than
all the undersigned Borrowers shall be a bar to a subsequent
judgment or judgments against any one or more of the undersigned
Borrowers against whom judgment has not been obtained hereon,
this being a joint and several warrant of attorney to confess
judgment. The attorney-at-law authorized hereby to appear for
the undersigned Borrowers may be an attorney-at-law representing
the Bank, and each of the undersigned Borrowers hereby expressly
waives any conflict of interest that may exist by virtue of such
representation.
45. THIS AMENDMENT shall become effective only upon its
execution by all parties hereto.
IN WITNESS WHEREOF, each of the Borrowers and the Bank have
hereunto set their hands at Columbus, Ohio as of the date first
set forth above.
BORROWERS:
PAGES, INC.
By: /s/ S. Robert Davis
-----------------------
Its: Chairman of the Board
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY
BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY
CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
CLYDE A. SHORT COMPANY
By:
Its: Assistant Secretary
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY
BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY
CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
SCHOOL BOOK FAIRS, INC.
By:
Its: Assistant Secretary
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY
BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY
CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
BANK:
THE HUNTINGTON NATIONAL BANK
By:
Its: Vice President
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY
BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY
CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
COLUMBUS/0221683.04
SIXTH NOTE MODIFICATION AGREEMENT -- $5,000,000.00
This Sixth Note Modification Agreement (this "Agreement") is
entered into as of the 27th day of March, 1996, by and
between The Huntington National Bank (hereinafter the "Bank") and
Clyde A. Short Company (hereinafter the "Company").
WITNESSETH:
A. As of February 28, 1990, the Bank and the Company
entered into and executed a certain Loan and Security Agreement
(hereinafter the "First Loan Agreement"); and
B. As of February 28, 1990, the Company executed and
delivered to the Bank, inter alia, a certain revolving note in
the original principal amount of Ten Million Dollars
($10,000,000), which was modified by a First Note Modification
Agreement dated June 12, 1992, thereby decreasing the principal
amount to Six Million Dollars ($6,000,000.00), by a Second Note
Modification Agreement dated June 30, 1993, by a Third Note
Modification and Extension Agreement dated June 29, 1994, by a
Fourth Note Modification Agreement dated August 2, 1994, and by a
Fifth Note Modification Agreement -- $6,000,000.00 dated June 28,
1995 (hereinafter collectively the "Note"); and
C. To secure the repayment of the Note, the Company
granted to the Bank, inter alia, a security interest in (a) the
collateral described in the First Loan Agreement, and (b) a Deed
of Trust, Assignment of Rents and Security Agreement upon certain
real property owned by the Company and located in Cleveland
County, North Carolina, (hereinafter collectively the "Real and
Personal Property"); and
D. The Bank's security interests and deed of trust in the
Real and Personal Property were perfected properly by the filing
of financing statements and the recording of a deed of trust with
various recording authorities; and
E. In connection with the First Loan Agreement and the
Note, the Company executed and delivered to the Bank certain
other loan documents, promissory notes, agreements, instruments
and financing statements in connection with the indebtedness
referred to in the First Loan Agreement (all of the foregoing,
together with the Note and the First Loan Agreement, are
hereinafter collectively referred to as the "First Loan
Documents"); and
F. On or about June 12, 1992, the Company, the Bank and
certain affiliates of the Company entered into a certain Loan
Agreement (the "Second Loan Agreement"), thereby amending and
restating the terms of the First Loan Agreement; and
G. In connection with the Second Loan Agreement, the
Company executed and delivered to the Bank certain other loan
documents, promissory notes, agreements, and instruments in
connection with the indebtedness referred to in the Second Loan
Agreement, including, but not limited to, a Security Agreement
(the "Security Agreement") with respect to the Personal Property
(all of the foregoing, together with the Second Loan Agreement,
are hereinafter collectively referred to as the "Second Loan
Documents"); and
H. As of August 2, 1994, the Company, the Bank and certain
affiliates of the Company entered into a certain Amended and
Restated Loan Agreement, that was amended by a certain First
Amendment to Amended and Restated Loan Agreement dated as of June
28, 1995, and by a certain Second Amendment to Amended and
Restated Loan Agreement dated as of March 27, 1996
(collectively, the "Third Loan Agreement"), which Third Loan
Agreement amended and restated the terms of the Second Loan
Agreement; and
I. In connection with the Third Loan Agreement, the
Company executed and delivered to the Bank certain other loan
documents, promissory notes, agreements and instruments in
connection with the indebtedness referred to in the Third Loan
Agreement (hereinafter collectively the "Third Loan Documents")
(all of the foregoing, together with the First Loan Documents,
the Second Loan Documents and the Third Loan Agreement are
hereinafter collectively referred to as the "Loan Documents").
J. The Company remains the owner of the Real and Personal
Property and the Bank holds the Loan Documents; and
K. The Company and the Bank desire and are willing to
amend and modify the terms of the Note.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements and promises contained herein, the receipt and
sufficiency of which are hereby acknowledged, and intending to be
legally bound, the Company and the Bank, for themselves and their
successors and assigns do hereby agree, recite, represent and
warrant as follows:
1. The first paragraph on page one of the Note is hereby
amended to recite in its entirety that:
FOR VALUE RECEIVED, the undersigned,
promises to pay to the order of The
Huntington National Bank (hereinafter called
the "Bank," which term shall include any
holder hereof) at such place as the Bank may
designate or, in the absence of such
designation, at any of the Bank's offices,
the sum of Five Million Dollars
($5,000,000.00) or so much thereof as shall
have been advanced by the Bank at any time
and not thereafter repaid (hereinafter
referred to as "Principal Sum") together with
interest as hereinafter provided and payable
at the time and in the manner hereinafter
provided. The proceeds of the loan evidenced
hereby may be advanced, repaid and readvanced
in partial amounts during the term of this
revolving note (this "Note") and prior to
maturity. Each such advance shall be made to
the undersigned upon receipt by the Bank of
the undersigned's application therefor and
disbursement instructions, which shall be in
such form as the Bank shall from time to time
prescribe. The Bank shall be entitled to
rely on any oral or telephonic communication
requesting an advance and/or providing
disbursement instructions hereunder, which
shall be received by it in good faith from
anyone reasonably believed by the Bank to be
the undersigned, or the undersigned's
authorized agent. The undersigned agrees
that all advances made by the Bank will be
evidenced by entries made by the Bank into
its electronic data processing system and/or
internal memoranda maintained by the Bank.
The undersigned further agrees that the sum
or sums shown on the most recent printout
from the Bank's electronic data processing
system and/or on such memoranda shall be
rebuttably presumptive evidence of the amount
of the Principal Sum and of the amount of any
accrued interest. Notwithstanding the
Principal Sum referenced above, the maximum
amount that the undersigned may borrow
hereunder is limited by the terms of the Loan
Agreement.
2. The second paragraph on page one of the Note is hereby
amended to recite in its entirety that:
This Note is executed and the advances
contemplated hereunder are to be made
pursuant to an Amended and Restated Loan
Agreement by, between and among, inter alia,
the undersigned and the Bank dated as of
August 2, 1994, and all amendments,
modifications, and supplements thereto from
time to time, including, without limitation a
certain First Amendment to Amended and
Restated Loan Agreement dated as of June 28,
1995, and a certain Second Amendment to
Amended and Restated Loan Agreement dated as
of March 27, 1996 (hereinafter
collectively called the "Loan Agreement"),
and all the covenants, representations,
agreements, terms, and conditions contained
therein, including but not limited to
limitations upon the maximum advances
available to the undersigned and additional
conditions of default, are incorporated
herein as if fully rewritten.
3. The Company hereby covenants and agrees that the Bank's
agreement in this Agreement to modify the Note shall not be
construed and shall not be the Bank's agreement to further modify
the Note.
4. Nothing contained in this Agreement shall be construed
to affect, modify, or cure in any manner, or effect a waiver of
the occurrence and/or continuance of any Event of Default, or
default or breach of any term, condition, covenant or agreement
contained in the Third Loan Agreement, the Note, the Loan
Documents, or any other agreement executed in connection
therewith.
5. Except as modified herein, the Note, the Third Loan
Agreement, the Loan Documents and all other agreements as to
payment, guarantee of payment or security executed in connection
therewith shall remain as written originally and in full force
and effect in all respects, and nothing herein shall affect,
modify, limit or impair any of the rights and powers which the
Bank may have thereunder.
6. The Company agrees to perform and observe all of the
covenants, agreements, stipulations, and conditions to be
performed under the Note, the Third Loan Agreement, Loan
Documents, and all other related agreements, as amended hereby.
Except as modified by this Agreement, all the terms, conditions
and covenants of the Note, the Third Loan Agreement, the Loan
Documents and any other related agreements shall remain as
originally written.
7. The Company agrees to execute such continuation
statements, financing statements, or other documents, if any, as
may be necessary or desirable to continue in full force and
effect the security interest granted to the Bank.
8. THIS AGREEMENT shall become effective only upon its
execution by all parties hereto.
IN WITNESS WHEREOF, the Company and the Bank have hereunto
set their hands at Columbus, Ohio, as of the date first set
forth above.
COMPANY:
CLYDE A. SHORT COMPANY
By:
Its: Assistant Secretary
BANK:
THE HUNTINGTON NATIONAL BANK
By:
Its: Vice President
COLUMBUS/0224650.01
-3-
GUARANTOR: SCHOOL BOOK FAIRS, INC. DEBTOR: CLYDE A. SHORT
COMPANYADDRESS: 801 94th Street ADDRESS:4205 East Dixon Blvd
St. Petersburg, FL 33702 Shelby, NC 28150
CONTINUING GUARANTY
UNLIMITED
For the purpose of inducing The Huntington National Bank (hereinafter referred
to as "Bank") to lend money or extend credit to Clyde A. Short Company
(hereinafter referred to as "Debtor"), the undersigned (hereinafter referred to
as "Guarantor") hereby unconditionally guarantees the prompt and full payment to
Bank when due, whether by acceleration or otherwise, of all Obligations of any
kind for which Debtor is now or may hereafter become liable to Bank in any
manner.
The word "Obligations" is used in its most comprehensive sense and includes,
without limitation, all indebtedness, debts and liabilities (including
principal, interest, late charges, collection costs, attorneys' fees and the
like) of Debtor to Bank, either created by Debtor alone or together with another
or others, primary or secondary, secured or unsecured, absolute or contingent,
liquidated or unliquidated, direct or indirect, whether evidenced by note,
draft, application for letter of credit, agreements of guaranty or otherwise,
and any and all renewals of, extensions of or substitutes therefor. The word
"Obligations" shall include, BUT NOT BE LIMITED TO, all indebtedness owed by
Debtor to Bank by reason of credit extended or to be extended to Debtor in the
principal amount of $5,000,000.00, pursuant to one or more instruments of
indebtedness and related documents.
Guarantor hereby promises that if one or more of the Obligations are not paid
promptly when due, Guarantor will, upon request of Bank, pay the Obligations to
Bank, irrespective of any action or lack of action on Bank's part in connection
with the acquisition, perfection, possession, enforcement or disposition of any
or all Obligations or any or all security therefor or otherwise, and further
irrespective of any invalidity in any or all Obligations, the unenforceability
thereof or the insufficiency, invalidity or unenforceability of any security
therefor.
Guarantor waives notice of any and all acceptances of this Guaranty. This
Guaranty is a continuing guaranty, and, in addition to covering all present
Obligations of Debtor to Bank, will extend to all future Obligations of Debtor
to Bank, whether such Obligations are reduced amended, or entirely extinguished
and thereafter increased or reincurred. This Guaranty is made and will remain
in effect until the Obligations are paid in full and until the Debtor has no
right to request further advances under the documents or instruments evidencing
the Obligations. Bank's rights hereunder shall be reinstated and revived, and
this Guaranty shall be fully enforceable, with respect to any amount at any time
paid on account of the Obligations which thereafter shall be required to be
restored or returned by Bank upon the bankruptcy, insolvency or reorganization
of Debtor, Guarantor, or any other person, or as a result of any other fact or
circumstance, all as though such amount had not been paid.
In the event Guarantor shall any time pay any sums on account of any Obligations
or take any other action in performance of any Obligations, Guarantor shall be
subrogated to the rights, powers, privileges and remedies of the Debtor in
respect of such Obligation; provided that all such rights of subrogation and all
claims and indebtedness arising therefrom shall be, and Guarantor hereby agrees
that the same are, and shall be at all times, in all respects subordinate and
junior to all Obligations, and provided, further, that Guarantor hereby agrees
that he shall not seek to exercise any such rights of subrogation,
reimbursement, exoneration, or indemnity whatsoever or any rights of recourse to
any security for any of the Obligations unless or until all Obligations shall
have been indefeasibly paid in full in cash and duly and fully performed.
Guarantor waives presentment, demand, protest, notice of protest and notice of
dishonor or other nonpayment of any and all Obligations and further waives
notice of sale or other disposition of any collateral or security now held or
hereafter acquired by Bank. Guarantor agrees that no extension of time, whether
one or more, nor any other indulgence granted by Bank to Debtor, or to
Guarantor, and no omission or delay on Bank's part in exercising any right
against, or in taking any action to collect from or pursue Bank's remedies
against Debtor or Guarantor, or any of them, will release, discharge or modify
the duties of Guarantor. Guarantor agrees that Bank may, without notice to or
further consent from Guarantor, release or modify any collateral, security or
other guaranties now held or hereafter acquired, or substitute other collateral,
security or other guaranties, and no such action will release, discharge or
modify the duties of Guarantor hereunder. Guarantor further agrees that Bank
will not be required to pursue or exhaust any of its rights or remedies against
Debtor or Guarantor, or any of them, with respect to payment of any of the
Obligations, or to pursue, exhaust or preserve any of its rights or remedies
with respect to any collateral, security or other guaranties given to secure the
Obligations, or to take any action of any sort, prior to demanding payment from
or pursuing its remedies against Guarantor.
Guarantor agrees that any legal suit, action or proceeding arising out of or
relating to this Guaranty may be instituted in a state or federal court of
appropriate subject matter jurisdiction in the State of Ohio; waives any
objection which Guarantor may have now or acquire hereafter to the venue of any
such suit, action or proceeding; and irrevocably submits to the jurisdiction of
any such court in any such suit, action or proceeding.
WAIVER OF RIGHT TO TRIAL BY JURY
GUARANTOR ACKNOWLEDGES THAT, AS TO ANY AND ALL DISPUTES THAT MAY ARISE BETWEEN
GUARANTOR AND BANK, THE COMMERCIAL NATURE OF THE TRANSACTION OUT OF WHICH THIS
GUARANTY ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE FOR TRIAL BY JURY.
ACCORDINGLY, GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY AS TO ANY AND
ALL DISPUTES THAT MAY ARISE RELATING TO THIS GUARANTY OR TO ANY OF THE OTHER
INSTRUMENTS OR DOCUMENTS EXECUTED IN CONNECTION HEREWITH.
Guarantor hereby authorizes any attorney at law to appear for Guarantor in any
action on any or all Obligations guaranteed hereby at any time after such
Obligations become due, whether by acceleration or otherwise, in any court of
record in or of the State of Ohio or elsewhere, to waive the issuing and service
of process against, and confess judgment against Guarantor in favor of Bank for
the amount that may be due, including interest, late charges, collection costs,
attorneys' fees and the like as provided for in said Obligations, and costs of
suit, and to waive and release all errors in said proceedings and judgments, and
all petitions in error and rights of appeal from the judgments rendered.
If any Obligation of Debtor is assigned by Bank, this Guaranty will inure to the
benefit of Bank's assignee, and to the benefit of any subsequent assignee, to
the extent of the assignment or assignments, provided that no assignment will
operate to relieve Guarantor from any duty to Bank hereunder with respect to any
unassigned Obligation. In the event that any one or more of the provisions
contained in this Guaranty or any application thereof shall be determined to be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and any other
applications thereof shall not in any way be affected or impaired thereby. This
Guaranty shall be construed in accordance with the law of the State of Ohio.
The liabilities evidenced hereby may from time to time be evidenced by another
guaranty or guaranties given in substitution or reaffirmation hereof. Any
security interest or mortgage which secures the liabilities evidenced hereby
shall remain in full force and effect notwithstanding any such substitution or
reaffirmation.
If at the time of payment of the Obligations and any discharge hereof, Guarantor
shall be then directly or contingently liable to Bank as maker, indorser, surety
or guarantor of any other loan or obligation whether the same shall be evidenced
by a note, bill of exchange, agreement of guaranty or other instrument, then
Bank may continue to hold any collateral of Guarantor as security therefor, even
though this Guaranty shall have been surrendered to Guarantor. Bank shall not
be bound to take any steps necessary to preserve any rights in the collateral
against prior parties. If any Obligations hereunder are not paid when due, Bank
may, at its option, demand, sue for, collect or make any compromise or
settlement it deems desirable with reference to any collateral, and shall have
the rights of a secured party under the law of the State of Ohio. Guarantor
shall be liable for any deficiency.
Executed and delivered at Columbus, Ohio, as of the 27th day of March, 1996.
GUARANTOR:
SCHOOL BOOK FAIRS, INC.
BY:
ITS: Assistant Secretary
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
COLUMBUS/0224731.01
3
GUARANTOR: PAGES, INC. DEBTOR: CLYDE A. SHORT COMPANY
ADDRESS: 801 94th Street ADDRESS: 4205 East Dixon Blvd.
St. Petersburg, FL 33702 Shelby, NC 28150
CONTINUING GUARANTY
UNLIMITED
For the purpose of inducing The Huntington National Bank (hereinafter referred
to as "Bank") to lend money or extend credit to Clyde A. Short Company
(hereinafter referred to as "Debtor"), the undersigned (hereinafter referred to
as "Guarantor") hereby unconditionally guarantees the prompt and full payment to
Bank when due, whether by acceleration or otherwise, of all Obligations of any
kind for which Debtor is now or may hereafter become liable to Bank in any
manner.
The word "Obligations" is used in its most comprehensive sense and includes,
without limitation, all indebtedness, debts and liabilities (including
principal, interest, late charges, collection costs, attorneys' fees and the
like) of Debtor to Bank, either created by Debtor alone or together with another
or others, primary or secondary, secured or unsecured, absolute or contingent,
liquidated or unliquidated, direct or indirect, whether evidenced by note,
draft, application for letter of credit, agreements of guaranty or otherwise,
and any and all renewals of, extensions of or substitutes therefor. The word
"Obligations" shall include, BUT NOT BE LIMITED TO, all indebtedness owed by
Debtor to Bank by reason of credit extended or to be extended to Debtor in the
principal amount of $5,000,000.00, pursuant to one or more instruments of
indebtedness and related documents.
Guarantor hereby promises that if one or more of the Obligations are not paid
promptly when due, Guarantor will, upon request of Bank, pay the Obligations to
Bank, irrespective of any action or lack of action on Bank's part in connection
with the acquisition, perfection, possession, enforcement or disposition of any
or all Obligations or any or all security therefor or otherwise, and further
irrespective of any invalidity in any or all Obligations, the unenforceability
thereof or the insufficiency, invalidity or unenforceability of any security
therefor.
Guarantor waives notice of any and all acceptances of this Guaranty. This
Guaranty is a continuing guaranty, and, in addition to covering all present
Obligations of Debtor to Bank, will extend to all future Obligations of Debtor
to Bank, whether such Obligations are reduced amended, or entirely extinguished
and thereafter increased or reincurred. This Guaranty is made and will remain
in effect until the Obligations are paid in full and until the Debtor has no
right to request further advances under the documents or instruments evidencing
the Obligations. Bank's rights hereunder shall be reinstated and revived, and
this Guaranty shall be fully enforceable, with respect to any amount at any time
paid on account of the Obligations which thereafter shall be required to be
restored or returned by Bank upon the bankruptcy, insolvency or reorganization
of Debtor, Guarantor, or any other person, or as a result of any other fact or
circumstance, all as though such amount had not been paid.
Guarantor waives any claims or other rights which Guarantor might now have or
hereafter acquire against Debtor or any other person that is primarily or
contingently liable on the Obligations that arise from the existence or
performance of Guarantor's obligations under this Guaranty, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution,
indemnification, or any right to participate in any claim or remedy of Bank
against Debtor or any collateral security therefor which Bank now has or
hereafter acquires; whether such claim, remedy or right arises in equity, under
contract or statute, at common law, or otherwise.
Guarantor waives presentment, demand, protest, notice of protest and notice of
dishonor or other nonpayment of any and all Obligations and further waives
notice of sale or other disposition of any collateral or security now held or
hereafter acquired by Bank. Guarantor agrees that no extension of time, whether
one or more, nor any other indulgence granted by Bank to Debtor, or to
Guarantor, and no omission or delay on Bank's part in exercising any right
against, or in taking any action to collect from or pursue Bank's remedies
against Debtor or Guarantor, or any of them, will release, discharge or modify
the duties of Guarantor. Guarantor agrees that Bank may, without notice to or
further consent from Guarantor, release or modify any collateral, security or
other guaranties now held or hereafter acquired, or substitute other collateral,
security or other guaranties, and no such action will release, discharge or
modify the duties of Guarantor hereunder. Guarantor further agrees that Bank
will not be required to pursue or exhaust any of its rights or remedies against
Debtor or Guarantor, or any of them, with respect to payment of any of the
Obligations, or to pursue, exhaust or preserve any of its rights or remedies
with respect to any collateral, security or other guaranties given to secure the
Obligations, or to take any action of any sort, prior to demanding payment from
or pursuing its remedies against Guarantor.
Guarantor agrees that any legal suit, action or proceeding arising out of or
relating to this Guaranty may be instituted in a state or federal court of
appropriate subject matter jurisdiction in the State of Ohio; waives any
objection which Guarantor may have now or acquire hereafter to the venue of any
such suit, action or proceeding; and irrevocably submits to the jurisdiction of
any such court in any such suit, action or proceeding.
WAIVER OF RIGHT TO TRIAL BY JURY
GUARANTOR ACKNOWLEDGES THAT, AS TO ANY AND ALL DISPUTES THAT MAY ARISE BETWEEN
GUARANTOR AND BANK, THE COMMERCIAL NATURE OF THE TRANSACTION OUT OF WHICH THIS
GUARANTY ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE FOR TRIAL BY JURY.
ACCORDINGLY, GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY AS TO ANY AND
ALL DISPUTES THAT MAY ARISE RELATING TO THIS GUARANTY OR TO ANY OF THE OTHER
INSTRUMENTS OR DOCUMENTS EXECUTED IN CONNECTION HEREWITH.
Guarantor hereby authorizes any attorney at law to appear for Guarantor in any
action on any or all Obligations guaranteed hereby at any time after such
Obligations become due, whether by acceleration or otherwise, in any court of
record in or of the State of Ohio or elsewhere, to waive the issuing and service
of process against, and confess judgment against Guarantor in favor of Bank for
the amount that may be due, including interest, late charges, collection costs,
attorneys' fees and the like as provided for in said Obligations, and costs of
suit, and to waive and release all errors in said proceedings and judgments,
and all petitions in error and rights of appeal from the judgments rendered.
If any Obligation of Debtor is assigned by Bank, this Guaranty will inure to the
benefit of Bank's assignee, and to the benefit of any subsequent assignee, to
the extent of the assignment or assignments, provided that no assignment will
operate to relieve Guarantor from any duty to Bank hereunder with respect to any
unassigned Obligation. In the event that any one or more of the provisions
contained in this Guaranty or any application thereof shall be determined to be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and any other
applications thereof shall not in any way be affected or impaired thereby. This
Guaranty shall be construed in accordance with the law of the State of Ohio.
The liabilities evidenced hereby may from time to time be evidenced by another
guaranty or guaranties given in substitution or reaffirmation hereof. Any
security interest or mortgage which secures the liabilities evidenced hereby
shall remain in full force and effect notwithstanding any such substitution or
reaffirmation.
If at the time of payment of the Obligations and any discharge hereof, Guarantor
shall be then directly or contingently liable to Bank as maker, indorser, surety
or guarantor of any other loan or obligation whether the same shall be evidenced
by a note, bill of exchange, agreement of guaranty or other instrument, then
Bank may continue to hold any collateral of Guarantor as security therefor, even
though this Guaranty shall have been surrendered to Guarantor. Bank shall not
be bound to take any steps necessary to preserve any rights in the collateral
against prior parties. If any Obligations hereunder are not paid when due, Bank
may, at its option, demand, sue for, collect or make any compromise or
settlement it deems desirable with reference to any collateral, and shall have
the rights of a secured party under the law of the State of Ohio. Guarantor
shall be liable for any deficiency.
Executed and delivered at Columbus, Ohio, as of the 27th day of March, 1996.
GUARANTOR:
PAGES, INC.
BY:
ITS: Chairman of the Board
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
COLUMBUS/0224741.01
FIRST DEED OF TRUST MODIFICATION AGREEMENT
This First Deed of Trust Modification Agreement (this
"Agreement") is made as of the 27th day of March, 1996, by
Clyde A. Short Company, a North Carolina corporation, aka
Clyde A. Short Company, Inc., aka Clyde A. Short Co., Inc.
(herein "Borrower"), W. Jeffrey Cecil, Trustee, 41 South High
Street, Columbus, Ohio 43215 (herein "Trustee"), and The
Huntington National Bank, a national banking association, whose
address is 41 South High Street, Columbus, Ohio 43215 (herein
"Beneficiary" or "Lender").
WITNESSETH:
WHEREAS, Borrower executed a certain Deed of Trust,
Assignment of Rents and Security Agreement in favor of Lender,
dated the 28th day of February, 1990, and filed for
registration and registered February 28, 1990, in Book 1082,
Page 1815, Register of Deeds Office, Cleveland County, North
Carolina (the "Deed of Trust"), to secure certain indebtedness
evidenced by (a) Borrower's revolving note dated as of February
28, 1990, in the original principal sum of Ten Million Dollars
($10,000,000.00) (the "Revolving Loan"); (b) Borrower's certain
Commercial Letter of Credit Reimbursement Agreement dated
February 28, 1990; and (c) a certain Loan and Security
Agreement between Lender and Borrower dated as of February 28,
1990 (the "1990 Loan Agreement"); and
WHEREAS, as of August 2, 1994, the Lender and Borrower
entered into a certain Amended and Restated Loan Agreement, as
amended by a certain First Amendment to Amended and Restated
Loan Agreement dated as of June 28, 1995, and by a certain
Second Amendment to Amended and Restated Loan Agreement dated
as of March 27, 1996, thereby amending and replacing the 1990
Loan Agreement; and
WHEREAS, as of even date herewith, Lender and Borrower
have entered into a certain Sixth Note Modification Agreement
- -- $5,000,000.00 (the "Revolving Note Modification Agreement")
whereby certain terms of the Revolving Loan were revised; and
WHEREAS, in connection with the Revolving Note
Modification Agreement, Lender and Borrower desire to amend the
Deed of Trust to reflect certain revised terms of the Revolving
Loan.
NOW, THEREFORE, for and in consideration of the covenants
set forth herein, Lender and Borrower hereby agree as follows:
1. The fourth paragraph of the first page of the Deed of
Trust is hereby deleted in its entirety and the following
paragraph is hereby inserted in its place:
TO SECURE TO LENDER (a) the repayment
of the indebtedness evidenced by Borrower's
revolving note dated as of February 28,
1990, in the original aggregate principal
sum of Ten Million Dollars
($10,000,000.00), as modified by (i) a
certain First Note Modification Agreement -
- $6,000,000.00 dated June 12, 1992,
thereby decreasing the principal sum of the
note to Six Million Dollars
($6,000,000.00), (ii) a certain Second Note
Modification Agreement dated June 30, 1993,
(iii) a certain Third Note Modification and
Extension Agreement -- $6,000,000.00 dated
as of June 29, 1994, (iv) a certain Fourth
Note Modification Agreement --
$6,000,000.00 dated as of August 2, 1994,
(v) a certain Fifth Note Modification
Agreement -- $6,000,000.00 dated as of June
28, 1995, and (vi) a certain Sixth Note
Modification Agreement -- $5,000,000.00
dated as of March 27, 1996, thereby
decreasing the principal sum of the note to
Five Million Dollars ($5,000,000.00)
(collectively the "Note"), and all
renewals, extensions and modifications
thereof; (b) the performance of the
covenants and agreements of Borrower
contained in a Commercial Letter of Credit
Reimbursement Agreement between Lender and
Borrower dated as of February 28, 1990, in
the aggregate principal sum of Two Million
Dollars ($2,000,000.00), as amended from
time to time, including, without
limitation, a certain First Amendment to
Commercial Letter of Credit Reimbursement
Agreement dated as of August 2, 1994 (such
Commercial Letter of Credit Reimbursement
Agreement, as amended, together with the
Note are herein collectively called the
"Obligation"); (c) the performance of the
covenants and agreements of Borrower
contained in a certain Amended and Restated
Loan Agreement dated as of August 2, 1994,
as amended from time to time, including,
without limitation, a certain First
Amendment to Amended and Restated Loan
Agreement dated as of June 28, 1995, and a
certain Second Amendment to Amended and
Restated Loan Agreement dated as of March
27, 1996 (collectively the "Loan and
Security Agreement"), as provided in
paragraph 28 hereof; (d) the payment of all
other sums with interest thereon advanced
in accordance herewith to protect the
security of this Instrument; and (e) the
performance of the covenants and agreements
of Borrower herein contained.
2. Paragraph 31 of the Deed of Trust, "Obligatory Future
Advances," is hereby deleted in its entirety and the following
paragraph is hereby inserted in its place:
31. OBLIGATORY FUTURE ADVANCES. This
Instrument secures all present and future
loan advances made by Lender under the
Obligation, and all other sums from time to
time owing to Lender by Borrower under the
Loan and Security Agreement as provided in
paragraph 28 hereof. Contemporaneously
with the date of recording of this
Instrument, there will be an advance of
loan proceeds. The maximum amount which
may be secured hereby at any one time is
Seven Million Dollars ($7,000,000.00). The
time period within which such future
advances are to be made is the period
between the date hereof and a date ten (10)
years from the date hereof. The making of
future advances hereunder is obligatory
within the meaning of such term in Section
45-70(a) North Carolina General Statutes
but subject to the conditions contained in
the Loan and Security Agreement. Advances
secured hereby shall not be required to be
evidenced by a "written instrument or
notation" as described in Section 45-68(2)
of the North Carolina General Statutes, it
being the intent of the parties that the
requirements of Section 45-68(2) for a
"written instrument or notation" for each
advance shall not be applicable to advances
made under the Loan and Security Agreement
and the Obligation.
3. All covenants, terms and conditions set forth in the
Deed of Trust, except those amended hereby, are and shall
remain in full force and effect and are hereby ratified,
assumed and reaffirmed.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
LENDER:
Signed and Acknowledged THE HUNTINGTON NATIONAL BANK
in the presence of:
By: /s/ Mark A. Koscielski
Its: Vice President
BORROWER:
Signed and Acknowledged CLYDE A. SHORT COMPANY
in the presence of:
By: /s/ S. Robert Davis
Its: Assistant Secretary
TRUSTEE:
Signed and Acknowledged
in the presence of:
/s/ W. Jeffrey Cecil,
Trustee
STATE OF OHIO,
COUNTY OF FRANKLIN SS.
On this 27th day of March, 1996, before me, a Notary
Public in and for said County and State, personally appeared
Mark A. Koscielski, who acknowledged himself to be Vice
President of The Huntington National Bank, the national banking
association which executed the foregoing instrument, and who
acknowledged that he, as such officer of said association,
being duly authorized by the Board of Directors of said
association, did execute the foregoing instrument for and on
behalf of said association and that such signing is the free
act and deed of said association for the uses and purposes
therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal.
Notary Public
STATE OF OHIO,
COUNTY OF FRANKLIN, SS.
On this 27th day of March, 1996, before me, a Notary
Public in and for said County and State, personally appeared S.
Robert Davis, known to me to be the person who as Assistant
Secretary of Clyde A. Short Company, the corporation which
executed the foregoing instrument, signed the same, and
acknowledged to me that he did so sign said instrument in the
name and upon behalf of said corporation as such officer, and
by authority of the resolution of its Board of Directors; and
that the same is his free act and deed as such officer, and the
free and corporate act and deed of said corporation.
Notary Public
STATE OF OHIO,
COUNTY OF FRANKLIN, SS:
On this March day of March, 1996, before me, a Notary
Public in and for said County and State, personally appeared W.
Jeffrey Cecil, Trustee, personally known to me or
satisfactorily identified to be the person who executed the
foregoing instrument, signed the same, and, being first duly
sworn, acknowledged to me that he did so sign said instrument
his free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and
official seal.
Notary Public
This Instrument Prepared By:
Timothy E. Grady, Attorney-at-Law
PORTER, WRIGHT, MORRIS & ARTHUR
41 South High Street
Columbus, Ohio 43215
COLUMBUS/0224764.01
3
GUARANTOR: PAGES, INC. DEBTOR: SCHOOL BOOK FAIRS, INC.
ADDRESS: 801 94th Street ADDRESS: 801 94th Street
St. Petersburg, FL 33702 St. Petersburg, FL 33702
CONTINUING GUARANTY
UNLIMITED
For the purpose of inducing The Huntington National Bank (hereinafter referred
to as "Bank") to lend money or extend credit to School Book Fairs, Inc.
(hereinafter referred to as "Debtor"), the undersigned (hereinafter referred to
as "Guarantor") hereby unconditionally guarantees the prompt and full payment to
Bank when due, whether by acceleration or otherwise, of all Obligations of any
kind for which Debtor is now or may hereafter become liable to Bank in any
manner.
The word "Obligations" is used in its most comprehensive sense and includes,
without limitation, all indebtedness, debts and liabilities (including
principal, interest, late charges, collection costs, attorneys' fees and the
like) of Debtor to Bank, either created by Debtor alone or together with another
or others, primary or secondary, secured or unsecured, absolute or contingent,
liquidated or unliquidated, direct or indirect, whether evidenced by note,
draft, application for letter of credit, agreements of guaranty or otherwise,
and any and all renewals of, extensions of or substitutes therefor. The word
"Obligations" shall include, BUT NOT BE LIMITED TO, all indebtedness owed by
Debtor to Bank by reason of credit extended or to be extended to Debtor in the
principal amount of $12,000,000.00, pursuant to one or more instruments of
indebtedness and related documents.
Guarantor hereby promises that if one or more of the Obligations are not paid
promptly when due, Guarantor will, upon request of Bank, pay the Obligations to
Bank, irrespective of any action or lack of action on Bank's part in connection
with the acquisition, perfection, possession, enforcement or disposition of any
or all Obligations or any or all security therefor or otherwise, and further
irrespective of any invalidity in any or all Obligations, the unenforceability
thereof or the insufficiency, invalidity or unenforceability of any security
therefor.
Guarantor waives notice of any and all acceptances of this Guaranty. This
Guaranty is a continuing guaranty, and, in addition to covering all present
Obligations of Debtor to Bank, will extend to all future Obligations of Debtor
to Bank, whether such Obligations are reduced amended, or entirely extinguished
and thereafter increased or reincurred. This Guaranty is made and will remain
in effect until the Obligations are paid in full and until the Debtor has no
right to request further advances under the documents or instruments evidencing
the Obligations. Bank's rights hereunder shall be reinstated and revived, and
this Guaranty shall be fully enforceable, with respect to any amount at any time
paid on account of the Obligations which thereafter shall be required to be
restored or returned by Bank upon the bankruptcy, insolvency or reorganization
of Debtor, Guarantor, or any other person, or as a result of any other fact or
circumstance, all as though such amount had not been paid.
Guarantor waives any claims or other rights which Guarantor might now have or
hereafter acquire against Debtor or any other person that is primarily or
contingently liable on the Obligations that arise from the existence or
performance of Guarantor's obligations under this Guaranty, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution,
indemnification, or any right to participate in any claim or remedy of Bank
against Debtor or any collateral security therefor which Bank now has or
hereafter acquires; whether such claim, remedy or right arises in equity, under
contract or statute, at common law, or otherwise.
Guarantor waives presentment, demand, protest, notice of protest and notice of
dishonor or other nonpayment of any and all Obligations and further waives
notice of sale or other disposition of any collateral or security now held or
hereafter acquired by Bank. Guarantor agrees that no extension of time, whether
one or more, nor any other indulgence granted by Bank to Debtor, or to
Guarantor, and no omission or delay on Bank's part in exercising any right
against, or in taking any action to collect from or pursue Bank's remedies
against Debtor or Guarantor, or any of them, will release, discharge or modify
the duties of Guarantor. Guarantor agrees that Bank may, without notice to or
further consent from Guarantor, release or modify any collateral, security or
other guaranties now held or hereafter acquired, or substitute other collateral,
security or other guaranties, and no such action will release, discharge or
modify the duties of Guarantor hereunder. Guarantor further agrees that Bank
will not be required to pursue or exhaust any of its rights or remedies against
Debtor or Guarantor, or any of them, with respect to payment of any of the
Obligations, or to pursue, exhaust or preserve any of its rights or remedies
with respect to any collateral, security or other guaranties given to secure the
Obligations, or to take any action of any sort, prior to demanding payment from
or pursuing its remedies against Guarantor.
Guarantor agrees that any legal suit, action or proceeding arising out of or
relating to this Guaranty may be instituted in a state or federal court of
appropriate subject matter jurisdiction in the State of Ohio; waives any
objection which Guarantor may have now or acquire hereafter to the venue of any
such suit, action or proceeding; and irrevocably submits to the jurisdiction of
any such court in any such suit, action or proceeding.
WAIVER OF RIGHT TO TRIAL BY JURY
GUARANTOR ACKNOWLEDGES THAT, AS TO ANY AND ALL DISPUTES THAT MAY ARISE BETWEEN
GUARANTOR AND BANK, THE COMMERCIAL NATURE OF THE TRANSACTION OUT OF WHICH THIS
GUARANTY ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE FOR TRIAL BY JURY.
ACCORDINGLY, GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY AS TO ANY AND
ALL DISPUTES THAT MAY ARISE RELATING TO THIS GUARANTY OR TO ANY OF THE OTHER
INSTRUMENTS OR DOCUMENTS EXECUTED IN CONNECTION HEREWITH.
Guarantor hereby authorizes any attorney at law to appear for Guarantor in any
action on any or all Obligations guaranteed hereby at any time after such
Obligations become due, whether by acceleration or otherwise, in any court of
record in or of the State of Ohio or elsewhere, to waive the issuing and service
of process against, and confess judgment against Guarantor in favor of Bank for
the amount that may be due, including interest, late charges, collection costs,
attorneys' fees and the like as provided for in said Obligations, and costs of
suit, and to waive and release all errors in said proceedings and judgments,
and all petitions in error and rights of appeal from the judgments rendered.
If any Obligation of Debtor is assigned by Bank, this Guaranty will inure to the
benefit of Bank's assignee, and to the benefit of any subsequent assignee, to
the extent of the assignment or assignments, provided that no assignment will
operate to relieve Guarantor from any duty to Bank hereunder with respect to any
unassigned Obligation. In the event that any one or more of the provisions
contained in this Guaranty or any application thereof shall be determined to be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and any other
applications thereof shall not in any way be affected or impaired thereby. This
Guaranty shall be construed in accordance with the law of the State of Ohio.
The liabilities evidenced hereby may from time to time be evidenced by another
guaranty or guaranties given in substitution or reaffirmation hereof. Any
security interest or mortgage which secures the liabilities evidenced hereby
shall remain in full force and effect notwithstanding any such substitution or
reaffirmation.
If at the time of payment of the Obligations and any discharge hereof, Guarantor
shall be then directly or contingently liable to Bank as maker, indorser, surety
or guarantor of any other loan or obligation whether the same shall be evidenced
by a note, bill of exchange, agreement of guaranty or other instrument, then
Bank may continue to hold any collateral of Guarantor as security therefor, even
though this Guaranty shall have been surrendered to Guarantor. Bank shall not
be bound to take any steps necessary to preserve any rights in the collateral
against prior parties. If any Obligations hereunder are not paid when due, Bank
may, at its option, demand, sue for, collect or make any compromise or
settlement it deems desirable with reference to any collateral, and shall have
the rights of a secured party under the law of the State of Ohio. Guarantor
shall be liable for any deficiency.
Executed and delivered at Columbus, Ohio, as of the 27th day of March, 1996.
GUARANTOR:
PAGES, INC.
BY: /s/ S. Robert Davis
ITS: Chairman of the Board
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
COLUMBUS/0224953.01
3
GUARANTOR:CLYDE A. SHORT DEBTOR: SCHOOL BOOK FAIRS, INC.
COMPANY
ADDRESS: 4205 East Dixon Blvd. ADDRESS: 801 94th Street
Shelby, NC 28150 St. Petersburg, FL 33702
CONTINUING GUARANTY
UNLIMITED
For the purpose of inducing The Huntington National Bank (hereinafter referred
to as "Bank") to lend money or extend credit to School Book Fairs, Inc.
(hereinafter referred to as "Debtor"), the undersigned (hereinafter referred to
as "Guarantor") hereby unconditionally guarantees the prompt and full payment to
Bank when due, whether by acceleration or otherwise, of all Obligations of any
kind for which Debtor is now or may hereafter become liable to Bank in any
manner.
The word "Obligations" is used in its most comprehensive sense and includes,
without limitation, all indebtedness, debts and liabilities (including
principal, interest, late charges, collection costs, attorneys' fees and the
like) of Debtor to Bank, either created by Debtor alone or together with another
or others, primary or secondary, secured or unsecured, absolute or contingent,
liquidated or unliquidated, direct or indirect, whether evidenced by note,
draft, application for letter of credit, agreements of guaranty or otherwise,
and any and all renewals of, extensions of or substitutes therefor. The word
"Obligations" shall include, BUT NOT BE LIMITED TO, all indebtedness owed by
Debtor to Bank by reason of credit extended or to be extended to Debtor in the
principal amount of $12,000,000.00, pursuant to one or more instruments of
indebtedness and related documents.
Guarantor hereby promises that if one or more of the Obligations are not paid
promptly when due, Guarantor will, upon request of Bank, pay the Obligations to
Bank, irrespective of any action or lack of action on Bank's part in connection
with the acquisition, perfection, possession, enforcement or disposition of any
or all Obligations or any or all security therefor or otherwise, and further
irrespective of any invalidity in any or all Obligations, the unenforceability
thereof or the insufficiency, invalidity or unenforceability of any security
therefor.
Guarantor waives notice of any and all acceptances of this Guaranty. This
Guaranty is a continuing guaranty, and, in addition to covering all present
Obligations of Debtor to Bank, will extend to all future Obligations of Debtor
to Bank, whether such Obligations are reduced amended, or entirely extinguished
and thereafter increased or reincurred. This Guaranty is made and will remain
in effect until the Obligations are paid in full and until the Debtor has no
right to request further advances under the documents or instruments evidencing
the Obligations. Bank's rights hereunder shall be reinstated and revived, and
this Guaranty shall be fully enforceable, with respect to any amount at any time
paid on account of the Obligations which thereafter shall be required to be
restored or returned by Bank upon the bankruptcy, insolvency or reorganization
of Debtor, Guarantor, or any other person, or as a result of any other fact or
circumstance, all as though such amount had not been paid.
Guarantor waives any claims or other rights which Guarantor might now have or
hereafter acquire against Debtor or any other person that is primarily or
contingently liable on the Obligations that arise from the existence or
performance of Guarantor's obligations under this Guaranty, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution,
indemnification, or any right to participate in any claim or remedy of Bank
against Debtor or any collateral security therefor which Bank now has or
hereafter acquires; whether such claim, remedy or right arises in equity, under
contract or statute, at common law, or otherwise.
Guarantor waives presentment, demand, protest, notice of protest and notice of
dishonor or other nonpayment of any and all Obligations and further waives
notice of sale or other disposition of any collateral or security now held or
hereafter acquired by Bank. Guarantor agrees that no extension of time, whether
one or more, nor any other indulgence granted by Bank to Debtor, or to
Guarantor, and no omission or delay on Bank's part in exercising any right
against, or in taking any action to collect from or pursue Bank's remedies
against Debtor or Guarantor, or any of them, will release, discharge or modify
the duties of Guarantor. Guarantor agrees that Bank may, without notice to or
further consent from Guarantor, release or modify any collateral, security or
other guaranties now held or hereafter acquired, or substitute other collateral,
security or other guaranties, and no such action will release, discharge or
modify the duties of Guarantor hereunder. Guarantor further agrees that Bank
will not be required to pursue or exhaust any of its rights or remedies against
Debtor or Guarantor, or any of them, with respect to payment of any of the
Obligations, or to pursue, exhaust or preserve any of its rights or remedies
with respect to any collateral, security or other guaranties given to secure the
Obligations, or to take any action of any sort, prior to demanding payment from
or pursuing its remedies against Guarantor.
Guarantor agrees that any legal suit, action or proceeding arising out of or
relating to this Guaranty may be instituted in a state or federal court of
appropriate subject matter jurisdiction in the State of Ohio; waives any
objection which Guarantor may have now or acquire hereafter to the venue of any
such suit, action or proceeding; and irrevocably submits to the jurisdiction of
any such court in any such suit, action or proceeding.
WAIVER OF RIGHT TO TRIAL BY JURY
GUARANTOR ACKNOWLEDGES THAT, AS TO ANY AND ALL DISPUTES THAT MAY ARISE BETWEEN
GUARANTOR AND BANK, THE COMMERCIAL NATURE OF THE TRANSACTION OUT OF WHICH THIS
GUARANTY ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE FOR TRIAL BY JURY.
ACCORDINGLY, GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY AS TO ANY AND
ALL DISPUTES THAT MAY ARISE RELATING TO THIS GUARANTY OR TO ANY OF THE OTHER
INSTRUMENTS OR DOCUMENTS EXECUTED IN CONNECTION HEREWITH.
Guarantor hereby authorizes any attorney at law to appear for Guarantor in any
action on any or all Obligations guaranteed hereby at any time after such
Obligations become due, whether by acceleration or otherwise, in any court of
record in or of the State of Ohio or elsewhere, to waive the issuing and service
of process against, and confess judgment against Guarantor in favor of Bank for
the amount that may be due, including interest, late charges, collection costs,
attorneys' fees and the like as provided for in said Obligations, and costs of
suit, and to waive and release all errors in said proceedings and judgments,
and all petitions in error and rights of appeal from the judgments rendered.
If any Obligation of Debtor is assigned by Bank, this Guaranty will inure to the
benefit of Bank's assignee, and to the benefit of any subsequent assignee, to
the extent of the assignment or assignments, provided that no assignment will
operate to relieve Guarantor from any duty to Bank hereunder with respect to any
unassigned Obligation. In the event that any one or more of the provisions
contained in this Guaranty or any application thereof shall be determined to be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and any other
applications thereof shall not in any way be affected or impaired thereby. This
Guaranty shall be construed in accordance with the law of the State of Ohio.
The liabilities evidenced hereby may from time to time be evidenced by another
guaranty or guaranties given in substitution or reaffirmation hereof. Any
security interest or mortgage which secures the liabilities evidenced hereby
shall remain in full force and effect notwithstanding any such substitution or
reaffirmation.
If at the time of payment of the Obligations and any discharge hereof, Guarantor
shall be then directly or contingently liable to Bank as maker, indorser, surety
or guarantor of any other loan or obligation whether the same shall be evidenced
by a note, bill of exchange, agreement of guaranty or other instrument, then
Bank may continue to hold any collateral of Guarantor as security therefor, even
though this Guaranty shall have been surrendered to Guarantor. Bank shall not
be bound to take any steps necessary to preserve any rights in the collateral
against prior parties. If any Obligations hereunder are not paid when due, Bank
may, at its option, demand, sue for, collect or make any compromise or
settlement it deems desirable with reference to any collateral, and shall have
the rights of a secured party under the law of the State of Ohio. Guarantor
shall be liable for any deficiency.
Executed and delivered at Columbus, Ohio, as of the 27th day of March, 1996.
GUARANTOR:
CLYDE A. SHORT COMPANY
BY:
ITS: Assistant Secretary
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
COLUMBUS/0224979.01
<PAGE>
EXHIBIT 10(y)
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of March 6, 1996, by and
among Scholastic Limited, a corporation organized under the laws of England and
Wales ("Buyer"), and (ii) Pages, Inc., a Delaware corporation ("Pages"), and
School Book Fairs, Inc., a Florida corporation ("SBFS" and together with Pages,
"Sellers").
WITNESSETH:
WHEREAS, School Book Fairs Ltd., a corporation organized under the laws of
England and Wales (the "Company") engages in a school book fair business
consisting of distributing and selling books and other products to teachers,
students and parents through book fairs (including case fairs and box fairs)
that are held or sponsored by schools or other educational organizations or
institutions, and other businesses as described in Schedule 5(t) (the "Book Fair
Business") in the United Kingdom and Ireland; and
WHEREAS, Sellers are the beneficial and record owners of all of the Shares
(as hereafter defined); and
WHEREAS, Sellers wish to sell the Shares to Buyer, and Buyer wishes to
purchase the Shares from Sellers, on the terms and conditions and for the
consideration described in this Agreement.
NOW THEREFORE, in consideration of the mutual agreements and covenants
contained herein, the parties hereto hereby agree as follows:
Section 1. Definitions.
"Affiliate" shall mean, with respect to any person or entity, any other
person or entity directly or indirectly controlling, controlled by or under
common control with such person or entity, or any director, officer or employee
of such person or entity.
"Audited Financial Statements" shall mean, with respect to any period, the
audited balance sheet and profit and loss account of an entity, and the notes
thereto, and the Directors' and Auditors' reports thereon, at and for such
period.
"Christchurch Property" shall mean the warehouse and office space located
at Units 5, 6 and 12 Priory Industrial Park, Christchurch, England, leased
pursuant to, respectively, (i) the Lease, dated July 13, 1987, between
Postel Properties Limited, as lessor, and the Company, as lessee, (ii) the
Lease, dated February 28, 1989, between Lloyds Bank plc, as lessor, and Gelson
Industries (UK) Limited, as lessee; and (iii) the Lease, dated April 13, 1988,
between Postel Properties Limited, as lessor, and Gelson Industries (UK)
Limited, as lessee (which leases shall together be referred to as the
"Christchurch Leases").
"Encumbrances" shall mean, any and all liens (including tax liens),
security interests, pledges, charges, claims, liabilities, obligations, title
defects, charges (including tax charges), restrictions, licenses, leases and
other encumbrances.
"Environmental Laws" shall mean any Law relating to environmental matters,
and any hazardous substance, wastes, materials or constituents, including, but
not limited to, any such materials defined, listed, identified under or
described in any such laws.
"Law" shall mean any law, statute, subordinate legislation, rule,
regulation, ordinance, code, judgment, order, ruling, stipulation, decree, writ,
injunction, decree or other requirements of any court, tribunal or arbitrator or
of any governmental body, agency or authority.
"Material Adverse Effect" shall mean any event, occurrence, change in
facts, conditions or other change or effect materially adverse to the business,
operations, results of operations, condition (financial or otherwise),
properties (including intangible properties), assets (including intangible
assets) or liabilities of the Company, taken as a whole.
"Related Agreements" shall mean any and all instruments, certificates and
agreements required to be executed and delivered by either party at the Closing
pursuant to this Agreement, including, but not limited to, the TOMINY Software
Agreement.
"Relief" shall mean any loss, relief, allowance, exemption, set-off,
deduction, right to repayment or credit or other relief of a similar nature
granted by or available in relation to Tax pursuant to any legislation or
otherwise.
"Shares" means the issued and allotted shares of the Company comprising (i)
1,000 ordinary shares of 1 pd ster each and 182,817 "A" ordinary shares of
1 pd ster each, which are, in each case, held by SBFS, and (ii) 1,831,408
ordinary shares of 1 pd ster each, which are held by Pages.
"Tax" shall mean any form of taxation, levy, duty, charge, contribution or
impost of whatever nature imposed by a Tax Authority (including all interest and
penalties thereon and additions thereto whether disputed or not). For the
purposes of Section 5(y) and Section 8, "liability to Tax" or "Tax for which the
Company is liable" (or any analogous expression) shall include liability with
respect to Tax for which the Company would have been liable but for the
utilization or set off of any Relief available to the Company or any member of
Buyer's group (including the Buyer) for the purposes of any Tax (whether arising
before or after Closing).
"Tax Authority" shall mean any local, municipal, governmental, state,
federal or other fiscal, revenue, customs or excise authority, body or official
anywhere in the world including, but not limited to, the U.K. Inland Revenue and
H.M. Customs and, Excise.
"Taxes Act" shall mean the U.K. Income and Corporation Taxes Act 1988,
including any re-enactment or modification thereof or subordinate legislation
thereunder.
"TAM" means the United Kingdom Taxes Management Act 1970, including any re-
enactment or modification thereof or subordinate legislation thereunder.
"U.K. Book Fair Business" shall mean the Book Fair Business conducted by or
for the benefit of the Company in the United Kingdom and Ireland.
"VAT Act 1994" shall mean, in the United Kingdom, the Value Added Tax Act
1994 and, in any other jurisdiction, any equivalent legislation, in each case,
including any re-enactment or modification thereof or subordinate legislation
thereunder.
"Warranties relating to Tax" means the warranties set out in Sections 5(y),
5(ab)(xiv) to (xix) inclusive and any other warranty in so far as any claim
arising under the same relates to Tax.
As used in this Agreement, the phrase "to the knowledge of Sellers or the
Company," or any permutation thereof, shall mean the actual knowledge of any of
the following individuals: Philip Hodson, Fiona Waters, Geoffrey Bevis, S.
Robert Davis, Steve Canan and Richard A. Stimmel.
Section 2. Purchase and Sale of the Shares. Subject to the terms and
conditions hereof, Sellers shall sell, as beneficial owners, all of the Shares
to Buyer, and Buyer shall purchase all of the Shares (together with all rights
attaching thereto) from Sellers, for an aggregate purchase price (the "Purchase
Price") equal to $5,016,531.71. Each Seller hereby waives any rights of
preemption conferred upon it by the Articles of Association of the Company or in
any other way in respect of those Shares agreed to be sold by the other Seller.
Section 3. Closing. The closing of the sale and purchase of the Shares
(the "Closing") shall take place at the offices of counsel to Buyer, or at such
other location mutually agreeable to Buyer and Sellers, on March 5, 1996 or at
such other date and time as the parties may agree in writing (the "Closing
Date"). At the Closing, Sellers will (a) deliver to Buyer, free and clear of
any Encumbrances, one or more certificates representing all of the Shares,
together with stock transfers in common form relating to all the Shares, duly
executed in favor of Buyer or as Buyer may direct; and (b) procure the passing
of Board Resolutions of the Company which (i) sanction for registration (subject
where necessary to due stamping) the transfers in respect of the Shares; (ii)
appoint such persons as Buyer may nominate to be the Directors and Secretary of
the Company; (iii) modify all mandates to the Company's bankers to give
authority in favor of the Directors appointed under sub-section (ii) above or
such other persons as Buyer may nominate to operate the Company's bank accounts;
and (iv) change the Company's accounting reference date to May 31.
Section 4. Payment. Buyer shall pay to Sellers an amount equal to
$5,016,531.71 at the Closing. Any such amounts shall be paid by wire transfer
of immediately available funds to an account or accounts of Sellers, which
account or accounts shall be designated by either Seller at least three (3)
business days prior to the Closing Date.
Section 5. Representations and Warranties. Each Seller hereby
represents and warrants of the date hereof and effective as of the Closing Date,
and agrees as follows:
(a) Organization, Authorization. SBFS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida. Pages is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company is a corporation
duly organized, validly existing and in good standing (to the extent of
applicable law) under the laws of England and Wales. True and complete copies
of the Memorandum and Article of Associations of the Company, including any
amendments thereof, have been delivered to Buyer. Each Seller has full power
and authority and legal right to execute, deliver and perform this Agreement and
any Related Agreements to which such Seller is a party, and to consummate the
transactions contemplated hereby and thereby. All corporate action to be taken
by or on the part of each of Sellers and the Company to authorize and permit the
execution and delivery by such Seller or the Company, as the case may be, of
this Agreement and all other Related Agreements required to be executed and
delivered pursuant hereto by such Seller or the Company, as the case may be, the
performance by such Seller or the Company of its respective obligations
hereunder and thereunder, and the consummation of the transactions contemplated
hereby and thereby, have been duly and properly taken. This Agreement and the
Related Agreements are valid and binding obligations on each Seller and
enforceable in accordance with their respective terms.
(b) Capitalization; Title to Shares. As of the Closing Date, the
authorized share capital of the Company consists of 2,000,000 ordinary shares of
F-I each and 500,000 "A" ordinary shares of l pd ster each. The Shares
constitute the entire issued share capital of the Company and the Register
of Members of the Company contains true and accurate records of the members
from time to time of the Company. All of the Shares were duly authorized
and validly issued and fully paid. Each Seller owns legally and
beneficially free and clear of any Encumbrances, and has full power and
authority to transfer free and clear of any Encumbrances except with respect
to any Encumbrance held by Huntington National Bank which is to be
released at Closing, the Shares owned by it and, upon delivery of and
payment for the Shares as herein provided, Buyer will acquire
good and valid title to such Shares, free and clear of any Encumbrances.
(c) No Equity Rights. Except as set forth in the Articles of Association
of the Company, there are no preemptive or similar rights on the part of any
holders of any class of shares or securities of the Company. Except for this
Agreement, no subscriptions, options, warrants, conversion or other rights,
agreements, commitments, arrangements or understandings of any kind obligating
either Seller or the Company, contingently or otherwise, to issue or sell, or
cause to be issued or sold, any shares, other equity interests or loan capital
of the Company, or any securities convertible into or exchangeable for any such
shares, are outstanding, and no authorization therefor has been given. There
are no outstanding contractual or other rights or obligations to or of such
Seller or the Company to repurchase, redeem or otherwise acquire any outstanding
shares or other equity interests of the Company.
(d) Subsidiaries. The Company owns no shares or other equity
interests or securities of, or interest in, any company, corporation,
partnership, joint venture or other entity, and the Company has never had any
subsidiary.
(e) No Conflicts, etc. The execution and delivery of this Agreement
and the Related Agreements by each Seller and the consummation of the
transactions contemplated hereby and thereby, will not (i) conflict with, result
in a breach or violation of, or constitute a default (with or without notice or
the passage of time) under, (x) any Law applicable to such Seller or the Company
or to any of the Company's assets and properties, (y) any provision of any of
the charter documents of such Seller or the Memorandum and Articles of
Association of the Company or (z) except any agreements with Huntington National
Bank to the extent any consent required thereunder is satisfied by the delivery
of a "Release, Cancellation and Discharge" pursuant to Section 9(b)(viii), any
mortgage, charge, debenture, loan or credit agreement, guarantee, or any
agreement or instrument to which such Seller or the Company or any of their
respective Affiliates is a party or by which any of their respective assets and
properties may be bound or affected, or (ii) result in the creation of, or give
any person or entity the right to create, any Encumbrance upon the properties
and assets of the Company.
(f) Consents. No permit, license, exemption, consent, authorization
or approval of, or the giving of any notice by, either Seller or the Company to,
any governmental or regulatory body, agency or authority is required in
connection with the execution, delivery and performance of this Agreement or any
Related Agreement by such Seller or the Company, and the consummation of the
transactions contemplated hereby or thereby.
(g) Compliance with Law-, Permits. The Company has at all times
conducted its operations and business including the U.K. Book Fair Business, in
full compliance with all applicable Laws (other than any Environmental Laws).
The Company possesses all governmental registrations, licenses, permits,
authorizations and approvals (including, but not limited to, any licenses,
authorizations or approvals required by U.K. Data Protection or Consumer Credit
legislation) necessary to carry on, as currently conducted, its operations and
business, including the U.K. Book Fair Business.
(h) Financial Statements. Subject as provided hereafter, true and
complete copies of the Audited Financial Statements of the Company for each of
the periods ending December 31, 1994 and December 31, 1995 (the "Audited 1994
Financial Statements" and the "Audited 1995 Financial Statements," respectively,
and together, the "Financial Statements") have been delivered to Buyer. The
audited 1995 Financial Statements have been delivered in draft form prior to
Closing, and shall be delivered in final form at the Closing. Each of the
Financial Statements (including the notes thereto, if any) (i) gives a true and
fair view of the assets and liabilities of the Company as at December 31, 1994
and 1995 respectively and its profits and losses for the period ending on that
date, (ii) is consistent with the Company's books and records (which, in turn,
are complete and correct in all material respects), as of the times and for the
periods referred to therein and (iii) makes full provision or reserve for
depreciation, bad or doubtful debts and other liabilities (whether actual
contingent, postponed or deferred) and has been prepared in accordance with U.K.
generally accepted accounting principles ("GAAP") applied on a consistent basis
from year to year.
(i) Assets. The Company owns, or otherwise has fun, exclusive, valid
and legally enforceable rights to use, all of the properties and assets (real,
personal or mixed, tangible or intangible), used or held for use in connection
with, necessary for, or otherwise material to the conduct of the U.K. Book Fair
Business (collectively, the "Assets"). The Company has, and immediately after
the Closing will have good and valid title to or, in the case of leased Assets,
good and valid leasehold interests in, all Assets that are material to the U.K.
Book Fair Business, including, but not limited to, all such Assets reflected in
the Audited 1995 Financial Statements or acquired since the date thereof (except
as may be disposed of in the ordinary course of business after the date hereof
and in accordance with this Agreement), in each case (and except as otherwise
disclosed in Schedule 5(i)) free and clear of any Encumbrances. Schedule 5(i)
lists all Assets which are the subject of a lease, license, retention of title
arrangement or which otherwise belong to any other Person, and with respect to
any such Assets to the knowledge of Sellers or the Company, no event has
occurred which entitles or which upon intervention or notice by any other Person
may entitle any such Person to repossess the Asset concerned, or terminate the
lease, license or other agreement in respect of the same. The Assets comprise
all of the assets and properties necessary for or material to the conduct of the
U.K. Book Fair Business as currently conducted. Except for inventory (which is
the subject of Section 5(1)) and the Christchurch Property (which is the subject
of Section 5 (m)), all of the tangible Assets that are material to the U.K. Book
Fair Business have been maintained in good condition and are free from defects
(reasonable wear and tear excepted), and, except as set forth in Schedule 5(i),
are physically located at the Christchurch Property. Schedule 5(i) sets forth a
complete and correct list of all tangible Assets that (x) have a book value (net
of depreciation) equal to or greater than $5,000 or (y) are material to the U.K.
Book Fair Business, except that Schedule 5(i) need not list Assets comprising of
inventory, which is the subject of disclosures pursuant to Section 5(1). Except
as set forth in Schedule 5(i), there is no judgment, order, ruling, stipulation,
decree, writ, injunction, decree or other requirements of any court, tribunal or
arbitrator or of any governmental body, agency or authority relating to or
affecting any of the Assets or to which any of the Assets are subject.
(j) Contracts. Schedule 50) sets forth a complete and correct list
of all contracts, agreements, arrangements, commitments and understandings
(whether written or oral) (A) to which the Company is a party, (B) by which any
of the Assets are bound or affected or (C) to which any of Sellers or any of
their respective Affiliates (other than the Company) is a party or subject in
connection with the U.K. Book Fair Business (in the case of (C), such contracts
shall be assigned to the Company prior to the Closing), in each case, of the
types listed in clauses (i) through (xii) below :
(i) any leases, permits, franchises, insurance policies and
other agreements concerning or relating to the personal property or real
property (including the Christchurch Property);
(ii) any employment agreements for officers, directors,
management or key personnel, consulting, severance or compensation
agreements, collective bargaining or other similar agreements;
(iii) any agreement with any sales representatives,
distributors, dealers, agents or independent contractors, including sales
agency or distributorship agreements or arrangements, for the sale of any
of the products or services, or brokers or finder's agreements;
(iv) any loan agreements, indentures, letters of credit
(including related letter of credit applications and reimbursement
obligations), mortgages, security agreements, pledge agreements, deeds of
trust, bonds, notes, guarantees, instruments and other contracts relating
to the borrowing of money or the obtaining of or extension of credit;
(v) any licenses, licensing arrangements and other agreements
providing in whole or in part for the use of, or limiting the use of, any
Intellectual Property (as defined in Section 5(n));
(vi) any joint venture, partnership and similar agreements
involving a sharing of profits or expenses;
(vii) asset purchase agreements or other acquisition or
divestiture agreements (other than for sale or purchase of inventory in the
ordinary course of business);
(viii) any agreements relating to the sale, lease or disposal
of any capital assets in the amount of $50,000 or more;
(ix) any non-competition or other agreement prohibiting or
materially restricting the ability of the Company to conduct the U.K. Book
Fair Business, to engage in any other business or to operate in any
geographical area or to compete with any person or entity;
(x) any (A) order or other agreement for the purchase or sale of
books or other products or services from any vendor or supplier, involving
payments in excess of $20,000 individually or $150,000 in the aggregate or
(B) other agreements or series of related agreements with respect to which
the aggregate amount that could reasonably expected to be paid or received
thereunder in the future exceeds $20,000 per annum or $150,000 during the
term of the agreement;
(xi) any orders and other agreements with or for the direct or
indirect benefit of either Seller or any of such Seller's Affiliates (other
than the Company) (whether or not legally binding and whether or not in the
ordinary course of business); and
(xii) any other agreements that are material to the U.K. Book
Fair Business or the operations or financial condition of the Company.
Any and all of the foregoing contracts that are listed or should be listed in
Schedule 50) shall be known, individually, as a "Material Contract" and
collectively, as the "Material Contracts." Each Material Contract is legal,
valid and binding and in full force and effect, and, to the knowledge of Sellers
or the Company, there exists no default or breach or event or condition
(including the consummation of the transactions contemplated hereby) which,
whether with notice or passage of time or otherwise, would constitute a material
breach or default or permit termination, modification or accelerated payment
thereunder, except as set forth in Schedule 5(j). The Company (and in the case
of (C), such Seller or its Affiliate, as the case may be) has not violated any
of the terms or conditions of any Material Contract and, to the knowledge of
such Seller or the Company, all of the covenants in any Material Contract to be
performed by any other party thereto have been performed to date, except as set
forth in Schedule 5(j). There are no oral agreements between the Company and
any other person or entity, except as set forth and summarized in Schedule 50).
Sellers have delivered to Buyer true and complete copies of all Material
Contracts.
(k) Cases. Schedule 5(k) sets forth a complete and correct list of
the location and a complete and correct list of the age of any and all book fair
cases at the Closing Date, together with a list of all leases pursuant to which
any cases have been leased for use in the U.K. Book Fair Business. The cases
listed in Schedule 5(k) are the only cases used in connection with the U.K. Book
Fair Business. Immediately after the Closing, Buyer will own all right, title
and interest in and to each case fisted in Schedule 5(k), and any and all leases
for any such cases shall have been terminated effective as of the Closing Date.
(l) Inventory. Sellers have delivered a list, by title, complete and
correct as of December 31, 1995, of any and all inventories of the U.K. Book
Fair Business (collectively, the "Inventories"), together with the location and
the quantity at each such location of all such Inventories. At the Closing,
Sellers shall deliver to Buyer a complete and correct list updated to list all
Inventories as of the Closing Date. Except to the extent that any items may be
subject to standard retention of title arrangements negotiated in the ordinary
course of business, all of the inventories consist of items which are of good
title. All inventories are recorded on the books at the lower of cost or market
value determined in accordance with GAAP.
(m) Real Property. The Company does not own, lease, occupy, license
or use any real property (other than leasehold interests in the Christchurch
Property) in the United Kingdom or Ireland. sellers have delivered to Buyer
true and complete copies of the Christchurch Leases, and there is no
documentation supplemental to any such Leases other than those provided to
Buyer's U.K. solicitors. Each of the Christchurch Leases is legal, valid,
binding, enforceable, and in full force and effect, and neither the Company nor,
to the knowledge of Sellers or the Company, any other party is in breach or
default, and there exists no event or condition (including the consummation of
the transactions contemplated hereby) which, with notice or passage of time,
would constitute a breach or default or permit termination, modification or
acceleration thereunder. All leases which are required to be registered are
registered at H.M. Land Registry, as set out in the registered title of unit 12
(title no. DT 157818). Except as set forth in Schedule 5(m), the Company has
not assigned, transferred, conveyed, deeded in trust or otherwise encumbered any
interest in the Christchurch Property or the Company's leasehold interest
therein other than as revealed by Buyer's Land Charges Registry search dated
February 27, 1996 and, with respect to unit 12, the entries subsisting on the
registers of registered title number DT 157818 as of February 28, 1996, nor to
the knowledge of the Company or Sellers is the Christchurch Property subject to
any Encumbrance including, but not limited to, an overriding interest (as
defined in sub-section 70(1) of the U.K. Land Registration Act 1925). Each of
the Christchurch Leases grants, and after the Closing will grant, the Company
the exclusive right to use and occupy the Christchurch Property, and there is
appurtenant to the Christchurch Property each right and easement necessary for
its existing use (which use is permitted under the relevant Christchurch Lease
and any applicable planning legislation). The rent payable in respect of the
Christchurch Property is not as the date hereof being reviewed. The Company has
received no notices, orders, proposals, applications, requests or schedules of
dilapidation affecting or relating to the Christchurch Property which have been
served or made by any authority or other persons or by the Company and, to the
knowledge of Sellers or the Company, there are no circumstances which are likely
to result in any of the foregoing being served or made. There is no dispute
between the Company and any of its landlords or the owner or occupier of any
adjoining premises to the Christchurch Property (or any part thereof) and there
are, to the knowledge of Sellers or the Company, no circumstances which might
give rise to any such disputes. There is no outstanding monetary claim or
asserted liability, contingent or otherwise, affecting the Christchurch Property
or any other property, land or buildings previously owned, occupied or otherwise
used by the Company or in respect of which the Company has had any interest,
except as may relate to a malodorous condition at the Christchurch Property.
(n) Intellectual Property. Schedule 5(n) sets forth a complete and
correct list of any and all trademarks, service marks, design rights (whether
registerable or otherwise), trade dress, logos, trade names, patents,
copyrights, software, trade secrets, know-how, data, inventions, technology and
other intellectual property and proprietary rights, and any registrations of and
applications for any of the foregoing (the "Intellectual Property") owned or
used or held for use, necessary for the conduct of or otherwise material to the
conduct of the U.K. Book Fair Business as currently conducted or conducted in
the past twelve months (the "Company Intellectual Property"), provided, that
Schedule 5(n) need not list, although "Company Intellectual Property" shall be
deemed to include, any copyrights (other than registered copyrights owned by the
Company), trade secrets, trade dress, know-how, data, inventions or technology.
Except as set forth in Schedule 5(n) and as provided in the TOMINY System
Agreement, the Company owns, and immediately after the Closing will own and have
the full and exclusive right in the United Kingdom and Ireland to use, all
right, title and interest in, under and to all of the Company Intellectual
Property, free and clear of any Encumbrances. Renewal fees payable in respect
of any registered Company Intellectual Property owned by the Company, Sellers or
any of their Affiliates have been paid, and each other action required to
maintain and protect any such owned Company Intellectual Property has been
taken. The conduct of the U. K. Book Fair Business on or prior to the Closing
Date does not, and immediately after the Closing, will not as a result of
consummating the transactions contemplated hereby, infringe or otherwise
conflict with the rights of any person or entity in respect of any Intellectual
Property. To the knowledge of Sellers or the Company, none of the Company
Intellectual Property owned by the Company, Sellers or any of their Affiliates
is being infringed, misappropriated or used without authority by any person or
entity.
(o) Customers. Sellers have delivered to Buyer a list, complete and
correct as of a day not more than one week prior to the Closing Date, of the
names, phone numbers, names of any contact persons and addresses of schools,
institutions, organizations, individuals and other customers to which the
Company (by itself or through any of its agents) has within the past two years
sold or provided any goods or services in connection with the U.K. Book Fair
Business (the "Customer List"), and shall make available (through the TOMINY
System or otherwise) the total amounts invoiced to or remitted by each such
customer during the last completed fiscal year.
The Company possesses all such Customer Lists in a form and medium that is
humanly intelligible and usable without the aid of any software, equipment or
other device (other than the TOMINY System or any other software, equipment or
other device approved by Buyer prior to the delivery thereof). Sellers have
disclosed to Buyer prior to the Closing Date any and all unresolved or pending
claims, demands and complaints in respect of which the amounts claimed, demanded
or subject to dispute exceed $2,000 individually (or the sterling equivalent
thereof), that are received by any of Sellers or the Company in writing from any
customer on or prior to the Closing Date.
(p) Book Fairs. Sellers have delivered to Buyer a complete and
correct list of all book fairs scheduled or proposed to be held within thirty
(30) days after the Closing Date and otherwise made available through the TOMINY
System any and all book fairs scheduled or proposed to be held thereafter (other
than, in each case, any scheduled book fairs canceled within the one (1) week
prior to the Closing Date), together with the name, phone number, names of any
contact persons and address of each customer, the type of each such book fair
(i.e., box fair or case fair), summary description of the terms (including
financial) thereof and the Distributor, if any, responsible therefor.
(q) Distributors, Agents. Sellers have delivered to Buyer a list,
complete and correct as of Closing Date, of any and all distributors or other
sales agents responsible for the account of any customer of the U.K. Book Fair
Business as currently conducted or as conducted during the past two years (the
"Distributors"), indicating with respect to each such Distributor the type of
account or geographical territory serviced by such Distributor and the aggregate
value of goods and services sold by the Company to the customers for whose
accounts such Distributor was responsible. Sellers have delivered to Buyer a
true and complete copy of the model agreement that is the basis of the Company's
agreements with its Distributors (the "Model Distributor Agreement") and at the
Closing shall deliver to Buyer true and complete copies of any and all
agreements with any Distributors. None of the Company's agreements with its
Distributors contain any terms or conditions that are different than, and
materially unfavorable to the Company when compared to, the terms and conditions
of the Model Distributor Agreement except as set forth on Schedule 5(Q).
(r) Bank Accounts-, Powers of Attorney. Schedule 5(r) sets forth a
complete and correct list of (i) each bank in which the Company has an account
or safe deposit or lock box, the account or box number, as the case may be, and
the name of every person authorized to draw thereon or having access thereto,
and (ii) the names of all persons or entities holding powers of attorney from
the Company and a summary statement of the terms thereof.
(s) operation of Business. Except as set forth on Schedule 5(s): (i)
no part of the U.K. Book Fair Business is conducted by any Seller or any
Affiliate of any Seller or any other person or entity (other than the Company
and Distributors); and (ii) none of Sellers and their Affiliates (other than the
Company) owns or possesses the right to use (whether or not for the benefit of
the Company) any assets or properties relating to the U.K. Book Fair Business.
(t) Scope of Business. Except as set forth on Schedule 5(t), the
Company does not currently conduct, and has not within the past twelve months
conducted, any business other than the Book Fair Business.
(u) Insurance. Schedule 5(u) sets forth a complete and correct list
of insurance policies carried by, or covering, the Company or its assets or
businesses, together with a description with respect to each policy of the
amount and types of coverage, limits and deductibles, inception and expiration
dates and insurance carrier. Sellers have delivered to Buyer true and complete
copies of all such policies together with all riders and amendments thereto. To
the knowledge of Sellers or the Company, all such policies are in full force and
effect. The Company is not aware of any act or omission which might make any of
the policies void or voidable. All premiums due on each such policy have been
paid. To the knowledge of such Seller or the Company, no claim is outstanding
under any of the policies and no matter exists which might give rise to a claim
under any of the policies, except as set forth in Schedule 5(u).
(v) No Litigation. Except as set forth in Schedule 5(v), neither
Seller nor the Company have received notice of any pending claim, action, suit,
proceeding at law or in equity, arbitration or administrative or other
proceeding by or before (or, to the knowledge of such Seller or the Company, any
investigation by) any governmental or other instrumentality or agency, nor is
any such claim, action, suit or proceeding, to the knowledge of such Seller or
the Company, threatened, against or affecting the Company or its properties or
assets or a person or entity for whose acts or defaults the Company may be
vicariously liable or the U.K. Book Fair Business, or, to the extent involving
the Company or any of Sellers or their Affiliates, seeking to prevent or
challenging the transactions contemplated by this Agreement, and such Seller
knows of no valid basis for any such claim, action, suit, proceeding or
investigation.
(w) Guarantees. Except as set forth in Schedule 5(w): (i) none of
the obligations or liabilities of the U.K. Book Fair Business or of either
Seller or the Company or any of their respective Affiliates incurred in
connection with the U.K. Book Fair Business is guaranteed by, or subject to a
similar contingent obligation of, any other person or entity; (ii) the Company
has not guaranteed, nor become subject to a similar contingent obligation in
respect of, the obligations or liabilities of any other person or entity; and
(iv) there are no outstanding letters of credit, surety bonds or similar
instruments for the benefit of the U.K. Book Fair Business.
(x) Affiliate Transactions. Schedule 5(x) sets forth a complete and
correct list of all agreements, contracts, transfers of assets or liabilities or
other transactions or commitments therefor, whether or not entered into in the
ordinary course of business, to or by which the Company, on the one hand, and
either Seller or any of such Seller Affiliates (other than the Company), on the
other hand, are a party or otherwise bound or affected.
(y) Taxes.
(i) The Company has paid all Tax for which it is liable and
which is due and payable, and is not liable to pay a penalty, surcharge, fine or
interest in connection with any Tax. The Company has within applicable time
limits made all returns, provided all information and maintained all records in
relation to Tax as it is so required to make, provide or maintain. No return
(and nothing in a return) is disputed or is yet to be determined by, or is
subject to agreement with, a Tax Authority. The Company is not, and none of
Sellers and the directors, officers, and agents of the Company knows of any
valid basis upon which the Company would be, involved in a dispute in relation
to Tax with respect to events occurring on or prior to the Closing.
(ii) The Company has properly operated the Pay-As-You-Earn and
national insurance systems and has complied with each reporting obligation in
connection with benefits provided for the Company's directors, other officers
and employees.
(iii) All documents by virtue of which the Company has any
right which are required to be stamped have been duly stamped, or if
appropriate, adjudicated not liable to stamp duty on the basis of full
disclosure of all material facts, and all duty, interest and penalties on those
documents have been paid. The Company has no unsatisfied liability to stamp
duty reserve tax or interest or penalties on stamp duty reserve tax.
(iv) On disposal of an asset of the Company for a consideration
equal to the value attributed to the asset in the Audited Financial Statements,
no liability to Tax (including without limitation corporation tax on chargeable
gains or balancing charges) will arise (disregarding a statutory right to claim
an allowance or Relief).
(v) The Company is registered for the purposes of the VAT Act
1994, has made, given, obtained and kept up-to-date, full and accurate records,
invoices and documents appropriate or required for the purposes of the VAT Act
1994, is not in arrears with payment or returns due under the VAT Act 1994, and
has not been required by a Tax Authority to give security under the VAT Act
1994.
(vi) The Audited Financial Statements reserve or provide in full
for all Tax liable to be assessed on the Company, or for which it is or may
become accountable, for any period ending on or before December 31, 1995
(whether or not the Company has or may have a right of reimbursement against any
other person) and/or by reference to any income, profits or gains accrued or
deemed to have accrued prior to such date, and the latest Audited Financial
Statements also make proper provision in accordance with generally accepted
accounting principles applicable in the U.K. for all contingent or deferred
liabilities to Tax for any such period. All Reliefs which have been shown as an
asset in the Audited 1995 Financial Statements or which have been taken into
account in computing any provision for Tax in those Audited 1995 Financial
Statements (including deferred tax) or which have resulted in no such provision
(or deferred tax provision) being shown are available to the Company and are not
liable (now or in the future) to loss, modification, reduction or cancellation.
(vii) All claims and disclaimers assumed for the purposes of
the Audited Financial Statements have been duly submitted within applicable time
limits.
(viii) No event, transaction, act or omission has occurred
which is likely to result in the Company becoming liable for Tax which is
primarily or directly chargeable against or attributable to a person or entity,
other than the Company or which is charged by reference to the income, profits
or gains of another person, including, but not limited to, any liabilities
arising as a consequence of the Company having been a member of any group for
Tax purposes at any time up until and including the Closing and any liabilities
under section 767A Taxes Act.
(ix) The Company has no liability, actual, contingent or
prospective, to indemnity or reimburse any other Person for or in respect of any
liability to Tax.
(x) There are no security interests or liens on any of the
assets of either Seller and/or any of its U.S. Affiliates that arise in
connection with any failure to pay any Tax.
(xi) The activities of the Company as carried out at the Closing
Date in any jurisdiction other than the United Kingdom have not and do not
expose the Company to any liability to Tax in such jurisdiction nor have they or
do they involve any liability to register for the purposes of any tax in such
jurisdiction.
(z) Employees.
(i) Schedule 5(z) sets forth a complete and correct list of all
employees of the Company together with details of all remuneration payable and
other benefits (including profit sharing, incentive and bonus arrangements)
provided or which the Company is bound to provide (whether now or in the future)
to each employee.
(ii) There are no employment agreements or contracts for services
between the Company and any of its employees, consultants or agents which is not
terminable by the Company without compensation (other than any compensation
payable by statute) on one month's notice given at any time.
(iii) There is no outstanding claim against the Company by
any person who is now or has been an employee of the Company and no compensation
or awards or damages are due by the Company to any employee or former employee.
(iv) The Company has not recognized any trade union or
association of trade unions or any other organization of employees in respect of
its employees at any time.
(v) The Company is under no legal or moral liability or obligation to
pay pensions, gratuities, superannuation allowances or the like, or otherwise to
provide "relevant benefits" within the meaning of section 612(1) of the Taxes
Act to any of its past or present officers or employers and/or dependents and,
save for the pension arrangements set forth in Schedule 5(z) (the "Scheme"), the
Company is not party to any scheme or arrangement having as its purpose or one
of its purposes the making of payments or the provision of benefits as
aforesaid. All contributions due by the Company in connection with the Scheme
have been duly paid. Full particulars of the Scheme are set out in Schedule
5(z).
(aa) Insolvency. During the two (2) years prior to the date hereof:
(i) No order in the U.K. has been made, petition presented or resolution passed
for the winding up of the Company, for the appointment of a provisional
liquidator of the Company, or for an administration order in respect of the
Company, and none of the Company, Sellers and their respective Affiliates has
contemplated to seek any such order, present any such petition or pass any such
resolution for any of the same. No receiver or receiver and manager has been
appointed in the U.K. of the whole or part of the Company's business or assets,
and none of the Company, Sellers and their respective Affiliates has
contemplated to appoint the same. No voluntary arrangement has been proposed,
or contemplated to be proposed by the Company, any of Sellers or their
respective Affiliates, under Section 1 of the U.K. Insolvency Act 1986 in
respect of the Company. No compromise or arrangement has been contemplated,
proposed, agreed to or sanctioned under Section 425 of the U.K. Insolvency Act
1986 in respect of the Company. With financial assistance from its
shareholders, the Company is not insolvent or unable to pay its debts (without
taking into account any intercompany liability reflected in the Audited
Financial Statements or Schedule 5(bb)) within the meaning of Section 123 of the
U.K. Insolvency Act 1986.
(ii) No filing of a voluntary or involuntary or involuntary
petition in bankruptcy has been made by either of Sellers or any of their
respective Affiliates, and none of Sellers and their Affiliates has contemplated
to make any such filing. Neither Seller has admitted in writing its inability
to pay its debts generally as they become due. No receiver, trustee, assignee,
liquidator, sequestrator or similar official of either of the Sellers or of all
or any substantial portion of either Seller's assets or any of its property has
been appointed in any proceeding brought against either of Sellers nor has any
such official been applied for, and none of Sellers and their Affiliates has
contemplated to appoint or apply for the same. Neither Seller has made, nor
does any Seller contemplate that it win make, any assignment for the benefit of
any of its creditors, and neither Seller has entered into, nor has any Seller
contemplated at any time entering into, any agreement of composition with any of
its creditors. Neither Seller is insolvent or unable to pay its debts as they
become due.
(ab) Absence of Changes. Except as set forth in Schedule 5(bb), since
December 31, 1995, the Company has not:
(i) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock or otherwise purchased or redeemed,
directly or indirectly, any shares of its capital stock;
(ii) issued or sold any shares of any class of its capital stock,
or any securities convertible into or exchangeable for any such shares, or
issued, sold, granted or entered into any subscriptions, options, warrants,
conversion or other rights, agreements, commitments, arrangements or
understandings of any kind, contingently or otherwise, to purchase or otherwise
acquire any such shares or any securities convertible into or exchangeable for
any such shares;
(iii) incurred any indebtedness for borrowed money, issued or
sold any debt securities or prepaid any debt (including, without limitation, any
borrowings from or prepayments to any Seller or any of such Seller's Affiliates)
(other than any of the foregoing incurred, issued, sold or prepaid in connection
with the credit facility with Lloyds Bank plc or any intercompany indebtedness
listed on Schedule 5(bb));
(iv) (save for any contractual arrangements entered into in the
ordinary course of business whereby any inventory is acquired on the basis that
the supplier retains title until payment in fun has been made for such
inventory) mortgaged, pledged or otherwise subjected to any Encumbrance any of
its properties or assets, tangible or intangible;
(v) other than in the ordinary course of business in respect of
any customer for any amount not more than $10,000 individually, forgiven,
canceled, compromised, waived or released any debts, claims or rights, against
any person or entity (including, but not limited to, any Seller or any of such
Seller's Affiliates);
(vi) modified any existing contract or other agreement or entered
into (x) any agreement, commitment or other transaction, other than agreements
entered into in the ordinary course of business and involving an expenditure of
less than $10,000, individually or in the aggregate, or (y) any agreement or
commitment that, pursuant to its terms, is not cancelable without penalty on
less than thirty (30) days' notice;
(vii) paid any bonus to any officer, director, employee,
sales representative, agent or consultant (other than any 1995 year-end bonuses
paid to any Distributors and any customary and normal bonuses paid to any
employees, including any telemarketers), or granted to any officer, director,
employee, sales representative, agent or consultant any other increase in
compensation in any form, or entered into, adopted or amended any employment,
consulting, retention, change-in-control, collective bargaining, bonus or other
incentive compensation, profit-sharing, health or other welfare, stock option or
other equity, pension, retirement, vacation, severance, deferred compensation or
other employment, compensation or benefit plan, policy, agreement, trust, fund
or arrangement for the benefit of any officer, director, employee, sales
representative, agent, consultant or Affiliate (whether or not legally binding);
(viii) changed in any respect its accounting practices,
policies or principles;
(ix) other than purchase orders in the ordinary course of
business, incurred, assumed, guaranteed or otherwise become directly or
indirectly liable with respect to any liability or obligation in excess of
$10,000, individually or in the aggregate, at any one time outstanding (whether
absolute, accrued, contingent or otherwise and whether direct or indirect, or as
guarantor or otherwise with respect to any liability or obligation of any other
person or entity);
(x) transferred or granted any rights or licenses under, or
entered into any settlement regarding the infringement of, Company Intellectual
Property or entered into any licensing or similar agreements or arrangements;
(xi) sold any assets with a value in excess of $10,000,
individually or in the aggregate, other than inventory in the ordinary course of
business;
(xii) made any purchase commitments with respect to any
inventories or supplies in excess of the normal, ordinary and usual requirements
of its business or at a price or upon terms and conditions more onerous than
those usual and customary in the industry, except to the extent that the Company
shall have replenished the inventories and supplies in a normal and customary
manner consistent with its prior practice;
(xiii) made any material changes in policies or practices
relating to selling practices, returns, discounts or other terms of sale or
accounting therefor or in policies of employment; or
(xiv) incurred any liability to Tax otherwise than in the
ordinary course of conducting the U.K. Book Fair Business (which shall not, for
the avoidance of doubt, include any disposal of capital assets);
(xv) entered into any transaction where the consideration for Tax
purposes is or could be treated as different from the consideration actually
paid or received;
(xvi) to the knowledge of Sellers or the Company, made or
undertaken to make any payments which will not be fully deductible in computing
its liability to Tax;
(xvii) acquired any asset which would, if disposed of for a
consideration equal to the consideration actually paid, give rise to a liability
for Tax;
(xviii) engaged in any transaction which has or could give rise
to any liability under Part VIII Taxes Management Act 1970 (charges arising on
non-residents); or
(xix) paid or made any dividend or other distribution
(including a deemed distribution) for Tax purposes.
(ac) Brokers, Finders etc. All negotiations relating to this
Agreement and the transactions contemplated hereby and thereby have been carried
on without the participation of any person or entity acting on behalf of either
Seller in such a manner as to, and the transactions contemplated hereby and
thereby will not otherwise, give rise to any valid claim against Buyer for any
brokerage or finder's commission, fee or similar compensation.
Section 6. Representations and Warranties of Buyer.
(a) Organization; Authorization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of England and
Wales. Buyer has full power and authority and legal right to execute, deliver
and perform this Agreement and the Related Agreements to which Buyer is a party,
and to consummate the transactions contemplated hereby and thereby. All
corporate action to be taken by or on the part of Buyer to authorize and permit
the execution and delivery by Buyer of this Agreement and the Related Agreements
to which Buyer is a party, the performance by Buyer of its obligations hereunder
and thereunder, and the consummation of the transactions contemplated hereby and
thereby, have been duly and properly taken. This Agreement and the Related
Agreements to which the Buyer is a party are valid and binding obligations of
Buyer and enforceable in accordance with their respective terms.
(b) No Conflicts, etc. The execution and delivery of this Agreement
and the con and the Related Agreements by Buyer, summation of the transactions
contemplated hereby and thereby, will not (i) conflict with, result in a breach
or violation of, or constitute a default (with or without notice or the passage
of time) under, (x) any Law applicable to Buyer or to any of Buyer's assets and
properties, (y) any provision of the Memorandum and Articles of Association of
Buyer or (z) any mortgage, indenture, loan or credit agreement, guarantee, or
any agreement or instrument to which Buyer is a party or by which any of its
assets and properties may be bound or affected, or (ii) result in the creation
of, or give any person or entity the right to create, any Encumbrance upon the
properties and assets of Buyer.
(c) Brokers, Finders, etc. All negotiations relating to this
Agreement, and the transactions contemplated hereby, have been carried on
without the participation of any person or entity acting on behalf of Buyer in
such a manner as to, and the transactions contemplated hereby and thereby will
not otherwise, give rise to any valid claim against either Seller for any
brokerage or finder's commission, fee or similar compensation.
(d) Acquisition for Investment. Buyer is acquiring the Shares solely
for investment, with no present intention to resell or offer for resale the
Shares, or engage in any distribution of the Shares within the meaning of
Section 2(11) of the Securities Act of 1933, as amended (the "Act"). The Buyer
acknowledges that the Shares have not been registered pursuant to the Act, and
may not be transferred in the absence of such registration or an exemption
therefrom under the Act.
Section 7. Covenants.
(a) Filings and Authorizations. Each party shall use its best
efforts, and shall cooperate with the other party, to secure all necessary
consents, approvals, authorizations, exemptions and waivers from third parties
as shall be required in order to effect the transactions contemplated hereby.
(b) Trademarks. Following the Closing Date, neither Buyer nor the
Company shall use the SCHOOL BOOK FAIRS design mark and logo in the United
States, except that Buyer, the Company and their respective Affiliates may use
the SCHOOL BOOK FAIRS design mark and logo in connection with making any
truthful statement for disclosure or other non-promotional purposes.
(c) TOMINY System Arrangement. Seller shall license the right to
continue to use the TOMINY software systems (the "TOMINY System") in connection
with the conduct of the U.K. Book Fair Business pursuant to a software and
support agreement in substantially the form of Exhibit 1 hereto (the "TOMINY
System Agreement").
Section 8. Taxes.
(a) Subject only to Section 8(i), Sellers shall, jointly and
severally, be liable for, and shall pay on the Due Date (as defined below) and
reimburse, indemnity, defend and hold harmless Buyer and its Affiliates from and
against, any liability for any and all Taxes that are imposed at any time (i)
relating to or resulting from the transaction pursuant to which the Shares are
sold (other than any stamp duty payable thereon) and (ii) on Buyer or any of
Buyer's Affiliates (including, but not limited to, after the Closing, the
Company), or any of their respective successors or assigns to whom any of them
may have an obligation to reimburse any impact of such Taxes, relating to or
resulting from any business operations, transactions or other activities either
(x) by Sellers or any of their respective Affiliates (other than the Company) at
any time or (y) by the Company on or prior to the Closing Date, expressly
excluding any and all Taxes that are both (A) imposed on the Company (but not
yet due on or prior to the Closing Date) relating to or resulting from the
conduct of the U.K. Book Fair Business in the ordinary course and (B) accrued or
provided in the Financial Statements. Notice to Buyer or any of its Affiliates
of any potential claims for Taxes shall not relieve any of Sellers of any
liability hereunder. Each Seller shall prepare and file all appropriate sales,
transfer, excise, use, documentary stamps and other tax returns and other
documents due in any jurisdiction in connection with the transactions
contemplated by this Agreement.
(b) Any payment for which the sellers are liable under this Section 8
or in respect of any of the Warranties relating to Tax shall be made in cleared
funds on the day or date specified in Section 8(c) below (the "Due Date").
(c) The day and dates referred to in Section 8(b) above are as
follows:
(i) if the liability for Tax giving rise to a claim under this
Section 8 or the Warranties relating to Tax involves an actual payment of
Tax by the Company, 5 business days before the date on which the Tax
becomes due and payable;
(ii) if the liability for Tax giving rise to such claim involves
the denial or loss or setting off in whole or in part of right to repayment
of Tax, the date on which such Tax would otherwise have been repaid;
(iii) if the liability for Tax giving rise to such claim
involves the utilization or set off in whole or in part of any other Relief
against what would otherwise have been a payment of Tax by he Company
falling with Section 8 or the Warranties relating to Tax, the date on which
the Tax saved thereby would otherwise have become due and payable;
(iv) if the liability for Tax giving rise to the claim under this
Section 8 or under the Warranties relating to Tax involves the loss,
modification, reduction or cancellation of some Relief (otherwise than in
the circumstances specified in Section 8(c)(iii) above), the Buyer shall
give Sellers written notice of any amount payable and Sellers shall pay the
amount specified in the notice to the Buyer on or before the fifth business
day following the date of the notice;
(v) if the claim relates to an obligation to indemnity or
reimburse in respect of Tax, the date which falls five business days prior
to the date on which the Company is required to make payment in respect of
the relevant obligation; and
(vi) in the case of any sums payable pursuant to Section
8(d)(i)(D) (costs), the date which fails 5 business days following
production by the Buyer to the Sellers of evidence that it or the Company
has been invoiced for, or has paid, the relevant sums.
If any sum due under Section 8 or the Warranties relating to Tax
is not paid by the Due Date the same shall carry interest (from the Due
Date until the date of payment) at the rate of 2 per cent above the base
rate for the time being of Lloyds Bank plc.
(d) (i) In the event of any breach of any Warranties relating to Tax
or this Section 8, Sellers shall, jointly and severally, pay and reimburse to
Buyer on the Due Date an amount equal to:
(A) in the case of a breach which concerns an actual
payment of Tax, the amount of the Tax which is so payable; and
(B) in the case of a breach which covers Section 5(y)(ix),
the amount of the relevant obligation to reimburse or indemnity, as the
case may be; and
(C) in the case of a breach which concerns the loss,
modification, reduction, cancellation, utilization or set off of any
Relief, an amount equal to the Tax which would have been payable by the
Company or the Buyer (or any of its Affiliates) but for such loss,
modification, reduction, cancellation, utilization or set off (assuming in
the case of any loss, modification, reduction or cancellation of a Relief
that the Company, or Buyer or relevant group member had sufficient taxable
profits to utilize such Relief in full at the time of the written demand
and that the Company, Buyer or relevant group member was liable to U.K.
corporation tax on its profits at the rate of 33 %) or, where a right to
repayment of Tax is concerned, an amount equal to the amount which would
have been repaid; and
(D) the amount of any liability of Buyer or any of its
Affiliates (including the Company) for reasonable costs incurred by Buyer
or any of its Affiliates (including the Company) in connection with any
claim in respect of which either Seller is required to make payment under
this Section 8.
(ii) Without prejudice to either Seller's obligation to pay on
the Due Date, each Seller shall be entitled, at such Sellers' expense, to
require any amount paid by it under Section 8(d)(i) to be certified by the
auditors of the Company. If the amount paid by Sellers shall exceed the
amount certified by such auditors, Buyer shall promptly refund the excess
to Sellers, provided, that, if the amount so certified shall prove to have
been insufficient having regard to the provisions of Section 8(d)(i),
Sellers shall, jointly and severally, pay to Buyer on written demand (or,
if later, on the Due Date) an amount equal to the shortfall.
All sums payable by sellers under this Section 8 shall be paid
gross, free of any rights of counterclaim or set-off and without any
deduction or withholding of any nature other than a deduction or
withholding required by law.
(iv) If Sellers make any deduction or withholding (including Tax)
required by law from any payment under this Agreement then the sum due from
Sellers in respect of the payment shall be increased to the extent
necessary to ensure that after the making of any deduction or withholding
Buyer receives a sum equal to the sum it would have received had no
deduction or withholding been required to be made.
(v) If any payment under this Agreement is or win be subject to
Tax, Sellers' payment shall include such additional amounts required to be
paid (after taking into account any Tax payable in respect thereof) in
order to insure that Buyer receives and retains a net sum equal to the sum
it would have received had the payment not been subject to Tax.
(vi) sellers will afford to Buyer and the Company all such
assistance as may reasonably be requested by Buyer and the Company in order
to complete and submit all necessary tax returns and computations (and any
related claims and other documentation) of the Company within applicable
time limits. Sellers shall also afford to Buyer such access as may be
reasonably requested by Buyer to records relating to the Company which are
at any time in their possession or the possession of any of their
Affiliates and which are relevant to the tax position. For these purposes,
"records" includes (without limitation) returns, computations,
correspondence with Tax Authorities and all related working papers and
documentation.
(e) The indemnification and reimbursement obligations provided in
this Section 8 shall survive the Closing Date and expire upon the expiration of
all limitation periods applicable to all Taxes described therein.
(f) Subject to Section 8(g), Buyer shall have no claim against
Sellers in respect of any liability for any Tax if and to the extent that:
(i) the Company has available to it losses incurred in a trade
carried on by the Company prior to Closing (not being losses which have
been taken into account in computing and so reducing any provision for Tax
or deferred Tax or resulting in no such provision being shown) and those
losses arose in consequence of events or by reference to an accounting
period of the Company ended on or before December 31, 1995; and
(ii) following the making of any relevant claim required from the
Company it shall have been finally determined by the auditors of the
Company that for the purposes of the United Kingdom tax that those losses
are available for set off against the trading income or other profits of
the Company giving rise to the relevant liability to Tax.
(g) If (i) it shall have been determined by the auditors of the
Company in accordance with Section 8(f)(ii) that losses to which Section 8(f)(i)
applies are available to be set off against income or profits of the Company in
the circumstances specified in Section 8(f)(ii) (with the result that the Buyer
shall, to the extent of such losses, have then had no claim against the Sellers
in respect to the relevant liability to Tax); and (ii) it shall subsequently
become apparent (from correspondence or otherwise) that the set off in question
is or may be disputed by the U.K. Inland Revenue in whole or in part, or that
the losses or their set off are or is not or may not be available in whole or in
part for some other reason, then the Sellers shall pay to the Buyer on written
demand therefor an amount equal to the liability to Tax in question calculated
in accordance with Section 8(d) which would have been payable but for the
operation of Section 8(f) following the auditors' initial determination.
(h) If (i) Sellers shall have made payment to the Buyer in respect of
a claim under any Warranties relating to Tax or other obligation relating to
Tax; and (ii) following such payment it shall be finally determined that losses
with respect to which Section 8(f) apply are available for set off against all
or part of the income or profits giving rise to the relevant claim (so
discharging the relevant liability to the Tax), Buyer shag within five business
days of written demand therefor refund to sellers the payment in question (or
the relevant proportion thereof in the case of partial set off of the income or
profits in question).
(i) Notwithstanding anything to the contrary provided herein, Sellers
shag not be liable to Buyer or the Company in respect of any representation
relating to Tax:
(i) to the extent that provision or reserve in respect thereof
has been made in the 1995 Financial Statements or to the extent that
payment or discharge of such claim has been taken into account therein;
(ii) for which the Company is or may become liable as a result of
transactions in the ordinary course of its business after 31 December, 1995
or in respect of value added tax relating to supplies made and imports
received the liability for which has been incurred in the ordinary course
of the Company's business since the 31 December 1995. For the purposes of
this Section 8(i)(ii), none of the following shall (without limitation) be
regarded as the ordinary course of business of the Company:
(a) a disposal of a capital asset;
(b) any of the matters specified in Warranties 5(ab)(xv),
(xviii) and (xix); and
(c) any other transaction which gives rise to deemed as
opposed to actual profits or receipts of the Company.
(iii) to the extent that such claim would not have arisen but for
a cessation of trading or a significant change in the nature or conduct of
a trade by the Company where such cessation or change occurs wholly or is
deemed to have occurred wholly after Closing and is not deemed to arise
from or be in any way connected with the sale of the Shares or with any
other transactions contemplated hereunder;
(iv) which would not have arisen but for any claim, election,
surrender or disclaimer made or omitted to be made or notice or consent
given or omitted to be given or any other thing done or omitted to be done
by the Company or Buyer under the provisions of U.K. Tax legislation after
the date of this Agreement, not being a claim, election, surrender,
disclaimer, notice or consent which was assumed for the purposes of any of
the Financial Statements. In any event, this exclusion shall not apply
unless Buyer or the Company knew or ought reasonably to have known that the
claim, election, surrender, disclaimer, notice or consent would be likely
to give rise to the relevant liability to Tax.
(j) The following procedure shag, apply to any claims made under
Section 8 or the Warranties relating to Tax (any such claim being for the
purpose of this Section 80) referred to as a "Claim"):
(i) The Company and/or the Buyer shall notify the Sellers in
writing of any Claim which comes to its notice whereby it appears that the
Sellers are or may become liable to indemnity the Company under this
Agreement. Where a time limit for appeal applies to such Claim, such
notification shall be given, if reasonably practicable, prior to the expiry
of such time limit, but where no such limit applies or the period to which
such limit relates has not commenced the notification shag be given within
56 days of the date on which the relevant Claim came to the notice of the
Company or the Buyer but so that, for the avoidance of doubt, notice under
this Section 80)(i) shall not be a condition precedent to the liability of
Sellers in relation to the Claim.
(ii) The Company and Buyer shall ensure that a Claim to which
this procedure -applies is, so far as is reasonably practicable, dealt with
separately from claims to which it does not apply and not paid prematurely,
and for this purpose any payment made by the Company to avoid incurring
interest or any penalty in respect of unpaid Taxation shall be deemed not
to be paid prematurely.
(iii) The Company and Buyer shall ensure at the request in
writing of Sellers that Sellers are placed in a position to dispute any
Claim on behalf of the Company and shall render or cause to be rendered to
Sellers at the expense of Sellers all such assistance as Sellers may
reasonably require in disputing any Claim.
(iv) Subject to Section 8(j)(v), Sellers shall be entitled on
behalf of the Company to instruct such solicitors or other professional
advisers as Sellers may nominate to act on behalf of sellers or the Company
to the intent that the conduct and costs and expenses of the dispute shall
be delegated entirely to and be borne solely by Sellers.
(v) In connection with the conduct of any dispute relating to a
Claim:
(a) Sellers shall keep the Company fully informed of all
matters pertaining thereto and Sellers shall promptly
forward or procure to be forwarded to the finance
director of the Company copies of all correspondence
and other written communications pertaining thereto;
(b) the appointment of solicitors or other professional
advisers shall be subject to the approval of the
Company, such approval not to be unreasonably withheld
or delayed;
(c) Sellers shall make no settlement or compromise of the
dispute or agree any matter in the conduct of such
dispute which is likely to affect the amount thereof or
the future liability of the Company to Tax without the
prior approval of the Company such approval not to be
unreasonably withheld or delayed; and
(d) the Company shall not be obliged to pursue an appeal
beyond the General or Special Commissioners unless
Sellers shall have provided Buyer with written opinion
of counsel (the identity of whom and the instructions
to whom shall have been approved by Buyer) to the
effect that the further appeal has a reasonable
prospect of success.
(vi) Sellers shall at the request of the Company provide to the
reasonable satisfaction of the Company security or indemnities or both in
respect of all the costs and expenses of disputing any claim for taxation
and the Tax in question if postponed.
(k) Without prejudice to any obligation of Sellers hereunder to
compensate Buyer for a liability of the Company to make an actual payment of Tax
where such liability arose prior to Closing, for the avoidance of all doubt,
nothing in this Agreement shall impose any obligation on Sellers to reimburse
Buyer or the Company in respect of the loss, modification, reduction,
cancellation or other non-availability of any Relief which arose or was believed
to have arisen prior to Closing unless such Relief was taken into account in
computing and so reducing any provision for Tax or deferred tax in the Financial
Statements or resulted in no such provision being shown.
Section 9. Conditions to Closing of Buyer. The obligations of Buyer
under this Agreement to consummate the transactions contemplated hereby shall be
subject to the satisfaction (or express waiver by Buyer) on or prior to the
Closing Date of all of the following conditions (provided, that in the event of
any Closing, Sellers shag have no continuing liability or obligation under this
Section 9 as to satisfaction of any of the following conditions):
(a) The representations and warranties of each Seller contained in
this Agreement or any Related Agreement to which such Seller is a party or in
any schedule, exhibit, agreement, certificate or other document delivered
pursuant hereto or thereto shall be true and correct on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of the Closing Date, and each and all of the agreements and
covenants of each Seller to be performed on or before the Closing Date pursuant
to the terms hereof shall have been duly performed; and in the event the Closing
Date is not the date hereof, each Seller shall have delivered to Buyer a
certificate executed by an officer of such Seller, dated the Closing Date, to
such effect.
(b) Buyer shall have received the following:
(i) one or more certificates representing all of the Shares,
together with stock transfers in common form relating to all of the Shares;
(ii) all minute books, statutory registers, corporate seal (if
any) and other corporate and shareholder records of the Company; and
(iii) original and updated lists of Inventories (both as
provided in Section 5(1)), list of customers (as provided in Section 5(o)), list
of Distributors (as provided in Section 5(p)) and list of scheduled book fairs
(as provided in Section 5(q));
(iv) resignations, effective as of the Closing Date, of each
director of the Company other than Philip Hodson and Fiona Waters;
(v) an opinion(s) addressed to Buyer from counsel(s) to Sellers,
in form and substance reasonably satisfactory to Buyer;
(vi) the TOMINY System Agreement, relating to use of the TOMINY
system in accordance with Section 7(c);
(vii) a letter from S. Robert Davis addressed to Buyer,
substantially in the form of Exhibit 2;
(viii) a "Release, Cancellation and Discharge" of Huntington
National Bank in connection with the transactions contemplated herein
substantially in the form of Exhibit 3 hereto or otherwise and UCC-3 financing
statements evidencing the release and discharge of their security interests with
respect to the Shares;
(ix) a deed of release, substantially in the form of Exhibit 4
hereto relating to the pay-off of any indebtedness owing to Lloyds Bank plc;
(x) a duly executed release, substantially in the form of
Exhibit 5 hereto, releasing the Company from any liability whatsoever (actual or
contingent) which may be owing to either of the Sellers by the Company;
(xi) evidence satisfactory to Buyer that Clause 3(a) of the
Memorandum of Association of the Company shall have been altered in such manner
as Buyer may require; and
(xii) such other documents relevant to the Closing of the
transactions contemplated hereby as Buyer acting reasonably, may request.
(c) No preliminary or permanent injunction or other order, judgment
or decision that restrains or prohibits the consummation of the transactions
contemplated by this Agreement or any Related Agreement shall have been issued
by any court or governmental body.
(d) No action, suit or proceeding shall have been instituted or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would prevent consummation of any of
the transactions contemplated by this Agreement or any Related Agreement.
(e) No event, occurrence, fact, condition, change, development or
effect shall have occurred, exist or come to exist since December 31, 1995 that,
individually or in the aggregate, has constituted or resulted in, or could
reasonably be expected to constitute or result in, a Material Adverse Effect on
the assets, operations or financial condition of the Company.
Section 10. Conditions to Closing of Seller. The obligations of Sellers
under this Agreement to consummate the transactions contemplated hereby shall be
subject to the satisfaction (or express waiver by either Seller) on or prior to
the Closing Date of all of the following conditions (provided, that in the event
of any Closing, Buyer shall have no continuing liability or obligation under
this Section 10 as to satisfaction of any of the following conditions):
(a) The representations and warranties of Buyer contained in this
Agreement or any Related Agreement to which Buyer is a party or in any schedule,
exhibit, agreement, certificate or other document delivered pursuant hereto or
thereto shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date, and each and all of the agreements and covenants of Buyer to
be performed on or before the Closing Date pursuant to the terms hereof shall
have been duly performed; and in the event the Closing Date is not the date
hereof, Buyer shall have delivered to Sellers a certificate executed by an
officer of Buyer, dated the Closing Date, to such effect.
(b) Buyer shall procure concurrently with Closing the payment by or
on behalf of the Company of the sum of $2,066,122 representing all sums
outstanding as intercompany debt owed by the Company to Sellers (which payment
shall be deemed to be in full and final settlement of all indebtedness of the
Company to the Sellers and/or any of their Affiliates).
(c) No preliminary or permanent injunction or other order, judgment
or decision that restrains or prohibits the consummation of the transactions
contemplated by this Agreement or any Related Agreement shall have been issued
by any court or governmental body.
(d) No action, suit or proceeding shall have been instituted or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would prevent consummation of any of
the transactions contemplated by this Agreement or any Related Agreement.
Section 11. Survival of Representations, Warranties and Covenants.
(a) Except as provided in Section 8(e), the respective
representations and warranties of Sellers and Buyer contained in this Agreement
or any Related Agreement or in any schedule or exhibit attached hereto or
thereto, shall survive the Closing Date, but shall expire on March 5, 1998,
except that any of such representations and warranties shall survive with
respect to any asserted claim for breach of any such representation or warranty
for which a notice has been delivered under Section 140) prior to such
expiration.
(b) The respective covenants and agreements of Sellers and Buyer as
of the Closing Date contained in this Agreement or any Related Agreement or 'm
any schedule or exhibit attached hereto or thereto (including, but not limited
to, the indemnification obligations of Sellers set forth in Sections 8 and 12)
shall survive the consummation of the transactions contemplated by this
Agreement, and with respect to the indemnification obligations of Sellers set
forth in Sections 8 and shall not expire until such time as is provided in
Section 8.
Section 12. Indemnification. Sellers shall, jointly and severally,
indemnity, defend and hold harmless Buyer, its Affiliates and their respective
officers, directors, stockholders, agents, insurers, representatives and
employees (the "Buyer Indemnities") from and against, and pay or reimburse Buyer
Indemnities for, any and all claims, actions, proceedings, demands, obligations,
fines, deficiencies, costs, losses, damages or liabilities (including, but not
limited to, reasonable attorneys' fees incurred in the investigation or defense
of any of the same or in asserting any of their respective rights hereunder,
interest and any penalties) (collectively, "Losses" and individually, a "Loss"),
whether or not resulting from any third party claims, incurred or suffered by
any of Buyer Indemnities with respect to or in connection with:
(a) the breach of any representation or warranty made by, or any
breach or nonfulfillment of any covenant or obligation of, either Seller in,
pursuant to or under this Agreement or any Related Agreement or in the schedules
or exhibits attached hereto or thereto and any other agreements, documents or
instruments delivered by Sellers at the Closing pursuant to this Agreement, any
Related Agreement or to any of the foregoing; or
(b) any claim by Buyer for indemnification under Section 8.
provided, that Sellers shall not be required to indemnity the Buyer Indemnities
with respect to any claim for indemnification pursuant to Section 12 unless and
until the aggregate amount of all claims against the Sellers under this Section
12 exceeds $150,000 and then only for the amount by which such claim against
Sellers under this Section 12 exceeds $150,000, provided, further, that in no
event shall Sellers' liability under this Section 12 exceed $1,000,000.
Notwithstanding the foregoing, the thresholds and limits set forth in the
foregoing provisos shall not apply to any obligation with respect to any claim
for indemnification resulting from or arising out of any fraud or gross
negligence by or on the part of either Seller or any Affiliates of such Seller.
With respect to any breach of any representation or warranty, the remedy set out
in this Section 12 shall, except in the case of fraud or gross negligence by or
on the part of either Seller or any Affiliates of such Seller, be the sole and
exclusive remedy available to Buyer with respect to such breach.
Section 13. Indemnification Procedures. In the case of any Loss, other
than as of result of any claim asserted by a third party or any claim to which
Section 8(i) applies, as to which indemnity may be sought by a party entitled to
indemnification under this Agreement (the "Indemnified Party"), notice shall be
given by the Indemnified Party to the party required to provide indemnification
(the "Indemnifying Party"). In the case of any claim asserted and/or threatened
by a third party against the Indemnified Party (other than any claim to which
Section 80) applies), notice shall be given by the Indemnified Party to the
Indemnifying Party promptly after such Indemnified Party has actual knowledge of
such claim or threatened claim as to which indemnity may be sought, and the
Indemnified Party shall permit the Indemnifying Party (at the expense of such
Indemnifying Party) to assume the defense of any claim or any litigation
relating thereto or resulting therefrom, provided that (i) the counsel for the
Indemnifying Party who shall conduct the defense of such claim or litigation
shall be reasonably satisfactory to the Indemnified Party, (ii) the Indemnified
Party may participate in such defense at such Indemnified Party's expense, (ii)
the assumption of such defense by the Indemnifying Party shall not in and of
itself constitute any admission as to liability hereunder to the Indemnified
Party and (iv) the omission by any Indemnified Party to give notice as provided
herein shag not relieve the Indemnifying Party of its indemnification obligation
under this Agreement except to the extent that such omission results in a
failure of actual notice to the Indemnifying Party and has a material adverse
effect on the Indemnifying Party's ability to defend against such claim or
litigation. Except with the prior written consent of the Indemnified Party, no
Indemnifying Party, in the defense of any such claim or litigation, shall
consent to entry of any judgment or enter into any settlement that provides for
injunctive or other non-monetary relief affecting the Indemnified Party or that
does not include as an unconditional term thereof the giving by each claimant or
plaintiff to such Indemnified Party of a release from all liability with respect
to such claim or litigation. In the event that the Indemnifying Party does not
accept the defense of any matter as above provided, (A) the Indemnified Party
shall have the full right to defend against any such claim or litigation and
shall be entitled to settle or agree to pay in fun such claim or litigation; and
(B) all legal and other expenses reasonably incurred by the Indemnified Party
shall be borne by the Indemnifying Party.
Section 14. Miscellaneous.
(a) Entire Agreement. This Agreement and the Related Agreements
(including the schedules and exhibits hereto and thereto) sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof.
Any prior agreements or undertakings among the parties hereto regarding the
subject matter hereof are merged into and superseded by this Agreement and the
Related Agreements.
(b) Modification, Remedies. No amendment, modification or alteration
of the terms or provisions of this Agreement shall be binding unless the same
shall be in writing and duly executed by the parties hereto. The rights and
remedies provided herein are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity.
(c) Severability. If any provision of this Agreement is invalid,
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering the provision in question inoperative or unenforceable
in any other case or circumstance, or of rendering any other provision or
provisions herein invalid, inoperative or unenforceable to any extent
whatsoever, and all such other provisions shall remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby are not affected in any manner adverse to any party hereto.
(d) Assignment. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Neither this Agreement nor any rights, duties or obligations shall be
assigned by any party hereto without the prior written consent of the other
party hereto, and any attempted assignment or transfer without prior written
consent shall be null and void; provided, however, that Buyer shall have the
right, without prior written consent of any Seller to assign its rights and
delegate its duties under this Agreement to any Affiliate of Buyer.
(e) Further Assurances. Following the Closing, each party hereto
shall, from time to time, execute and deliver such additional instruments,
documents, conveyances or assurances and take such other actions as shall be
necessary, or otherwise reasonably requested by the other party or parties, to
confirm and assure the rights and obligations provided for in this Agreement and
render effective the consummation of the transactions contemplated hereby.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and an of which shall constitute the same instrument.
(g) Headings. The headings of the Articles, Sections and paragraphs
of this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
(h) No Third Party Beneficiary Rights. This Agreement is not
intended to and shall not be construed to give any person or entity other than
the parties signatory hereto any interest or rights (including, but not limited
to, any third party beneficiary rights) with respect to or in connection with
any agreement or provision contained herein or contemplated hereby.
(i) Expenses. Except as otherwise provided in this Agreement,
Sellers, on the one hand, and Buyer, on the other hand, shall pay all costs and
expenses incurred by it or on its behalf in connection with this Agreement and
all Related Agreements (including all costs, expenses of legal and other
professional advisers) and the transactions contemplated hereby, and Buyer shall
not assume any liability of Sellers in connection therewith.
(j) Notices. Any notice, request, instruction or other document to
be given hereunder by any party hereto to the other party shall be in writing
and shall be sufficiently given if delivered in person, sent by telecopier, sent
by reputable express overnight courier service or sent by registered or
certified mail, postage prepaid, as
follows:
To Buyer: Scholastic Limited
Westfield Road
Southam
Leamington Spa
Warwickshire CV33 0JH
England
Attn.: David Kewley
With a copy to: Scholastic, Inc.
555 Broadway
New York, New York 10012
U.S.A.
Attn.: Legal Department
To Sellers: Pages, Inc./School Book Fairs, Inc.
801 994th Avenue North
Suite 100
St. Petersburg, Florida 33702
U.S.A.
Attn.: S. Robert Davis, Chairman
or at such other address for a party as shall be specified by like notice. All
such notices shall be deemed given when received, as evidenced by the
acknowledgment of receipt issued with respect thereto by the applicable postal
authorities or the signed acknowledgment of receipt of the person to whom such
notice shall have been personally delivered, confirmed answer back or other
evidence of transmission.
(k) Governing Law. This Agreement shag be governed in all respects,
including as to validity, interpretation and effect, by the internal laws of the
State of New York, without giving effect to the conflict of laws rules thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the date first above written.
SCHOLASTIC LIMITED
By:
Name: /s/ David Walsh
Title: Director
PAGES, INC.
By:
Name: /s/ S. Robert Davis
Title: Chairman
SCHOOL BOOK FAIRS, INC.
By:
Name: /s/ S. Robert Davis
Title: Chairman
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the date first above written.
SCHOLASTIC LIMITED
By:
Name: /s/ David Walsh
Title: Director
PAGES, INC.
By:
Name: /s/ S. Robert Davis
Title: Chairman
SCHOOL BOOK FAIRS, INC.
By:
Name: /s/ S. Robert Davis
Title: Chairman
0034494.01
Schedule 5(bb)
i. None
ii None
iii School Book Fairs, Inc. Loan to School Book Fair, Ltd. in
the amount of $300,000 on 2/1/96 and 2/2/96.. See Schedule
5(X)
iv The company has negotiated extending payments with several
of their vendors. See attached letter from trade indemnity
requiring financial information to reassess credit limits
for four of their accounts.
Schedule 5(bb)(iv) is the subject of a temporary
hardship exemption under Reg. 232.201 and a request
for a continuing hardship exemption under Reg.
232.202.
Schedule 5(H)
Audit Report 12/31195
To be provided at Christchurch Office
Schedule 5(I)
1) Fixed asset List - attached
2) As previously disclosed - certain assets are located at
Distributor
locations:
Cases
Trailers
Computer Equipment
Schedule 5(i)(1) is the subject of a temporary hardship
exemption under Reg. 232.201 and a request for a
continuing hardship exemption under Reg. 232.202.
Schedule 5(J)(i) is the subject of a temporary hardship
exemption under Reg. 232.201 and a request for a
continuing hardship exemption under Reg. 232.202.
Schedule 5(J) ii.
a) Individual Employment Contract for P Hodson
b) Individual Employment Contract for F Waters
c) Employment Contract for Full-Time Staff
d) Employment Contract for Part-Time Staff
e) Agreement for the employment of a General Manager - Ireland (Copy
letter attached)
f) Agreement for the employment of staff in Eire through Central
Technology (main Irish Distributor) (Scheduled attached)
g) Commission arrangement for Tele-sales staff
h) Bonus arrangement for Tele-sales Staff
i) Bonus arrangement for Sales Manager - Tele-sales
j) Death in Service Benefit for all Staff
k) Pension arrangements
Schedule 5(J)(ii)(e) is the subject of a temporary
hardship exemption under Reg. 232.201 and a request
for a continuing hardship exemption under Reg.
232.202.
Schedule 5(J)(ii)(f) is the subject of a temporary
hardship exemption under Reg. 232.201 and a request
for a continuing hardship exemption under Reg.
232.202.
Contracts: 5(J)
(iii) Distributor Agreements, ETC
a) Distributor Agreement - EIRE
b) Bonus arrangements for distributors
c) Securicor Agreement for dispatch of parcels
d) Parceline Agreement for dispatch/collection of Teacher Book Fair
boxes
e) Farsons Transport - undertaking for delivery of palletized stock
for distributors
f) Royal Mail Contract for letter and packet post
g) Distributor Agreements - UK - made available at Christchurch
office.
(iv) Loan Agreements guarantees
a) Distributor advances and short term loans - see attached note
b) Staff advances and short term loans - see attached note
c) Guarantee of payment to landlord on property for Irish
Distributor and staff dealing with School Book Fair activity
d) Lloyds debenture for overdraft bank facilities
e) Huntingdon National Bank debenture over assets
f) Deed of Postponement relating to debentures
g) Debenture at Twickenham for seats at rugby stadium and sub.
agreement with RB Erven for annual use
h) Distributor agreement arrangement to 31 December 1996 with James
Amos to guarantee income providing he carries out his duties.
NOTE TO (iv)a
At various times of the year distributors are allowed advances against
commission that is due to be payable during that term.
Currently outstanding to Mr. A. Aiddall, Manchester Distributor is E783.54 and
to Mr. K. Thomas, Liverpool Distributor - 1,291.18. pd ster
Additionally, as the Irish Distributor, Mr. Art McMillen, through his company
Central Technology, employs staff and dispatches product, a float of 6,000 Irish
punts is provided and reconciled to each month.
NOTE TO (iv)b
Occasionally we have staff having the need to ask for advances on salary or
short term loans.
These loans are generally for 6 months to a year and the only outstanding loan
at present is to Mrs. M.C. Hanslip for the sum of E388, which will be competed
by the end of 1996.
5(J)(v) License Agreements Software
a) Computer Associates Software License
b) Intercompany license with School Book Fairs, Inc. cancelled 3/1/96.
c) Tominy License - Software for EIRE office in process
5(J)(vi)
a) International Creative Agency understanding in the area
of Children's Library, and non-book fair revenue areas.
b) Random House arrangement for the publishing and sales
of the Roald Dahl Wundercrump Poetry Book each year.
NOTE TO 5(J)(vi)(a)
An understanding between School Book Fairs Limited and the
International Creative Agency on children's library activity.
In 1994, the Directors of School Book Fairs Limited, agreed that we should
investigate the possibility of developing sales to non-school outlets. To
assist us with this activity we called on the services of an outside Agency
"The International Creative Agency" of Faversham, Kent. This initial
decision was to present a premium or voucher scheme to supermarkets and non-
book retailers. This led to many presentations and meetings. At this
point it was agreed that School Book Fairs Limited would pay a monthly fee
of l,500 PD ster to cover expenses and costs and that once a retailer or
wholesaler had been found to carry our fair activity, a percentage of the
profitability would be paid to The International Creative Agency.
During 1995 a small range of activities were carried out which generated
revenue but were not sufficient to discuss a profit-sharing arrangement
with The International Creative Agency. Additionally, as the concentration
of our finder's activity was on a smaller number of outlets and we were not
seeing a financial benefit, the agreed monthly fee was reduced to E875.
Towards the end of 1995, an informal understanding was made with The
International Creative Agency that on projects where a product was produced
to an order from a third party and that the product was supplied direct
with School Book Fairs Limited taking no stock liability, a commission of
25% would be paid on the sum realized between the income received and the
costs incurred.
Further, on the Booker Belmont project, that a commission on the net
contribution (revenue less known costs) from this total project would be
paid to The International Creative Agency on this activity. this is still
under negotiation whilst the project comes to launch early in March, 1996.
Booker Belmont has other non-book related requirements, i.e., cigarette
coupon redemption, premiums where children's books would not be suitable.
In these areas, the International Creative Agency are providing a marketing
product sourcing service whilst using other fulfillment centre. The
understanding with The International Creative Agency is that they may only
use School Book Fairs Limited when dealing with premium promotion that
require children's books and related material.
5(J)(vii)
Blade Communications are holding on our behalf stack of paper we
purchased in 1995 for the production of the summer and part of the
autumn 1996 Book Fair News.
(viii) None
No agreements, arrangements, commitments or understandings
(ix) Non Competition Agreements
No agreements, arrangements, commitments or understandings
(x) a) See Attached Schedule
b) Any other - See Attached Schedule
5(J)(xi) Orders - Sellers
An understanding with Blade Communications to purchase paper for the
production of Book Fair News material for the summer and autumn term 1996.
5(J)(xii) No agreements, arrangements, commitments or understandings
Without admitting that such exists, the pending dispute with Computer
Associates could constitute a default, or breach by the company.
Schedule 5(J)(x)(a) is the subject of a temporary
hardship exemption under Reg. 232.201 and a request
for a continuing hardship exemption under Reg.
232.202.
Schedule 5(J)(x)(b) is the subject of a temporary
hardship exemption under Reg. 232.201 and a request
for a continuing hardship exemption under Reg.
232.202.
Schedule 5(K)
List of cases by:
a) Location
b) Age
Attached
Schedule 5(K) is the subject of a temporary hardship
exemption under Reg. 232.201 and a request for a
continuing hardship exemption under Reg. 232.202.
Schedule 5(M)
- Except for collateral assignment of Christchurch lease to Lloyds
and Huntington National Bank - None
- Any encumbrances against Christchurch Property
- The Rent of Unit 5 is due for review in July 1997.
- A previous tenant holds a preemptive right with respect to
certain Units of the Christchurch U.K. property
Schedule 5(N)
a) Trademarks - attached
b) Software
1) Computer Associates Financial Software
2) Operating software for scheduling, servicing, and delivering
fairs - proprietary written in Tominy data bass language.
Note as previously disclosed. Tominy not licensed for use
on UK mainframes.
SCHOOL BOOK FAIRS LIMITED
REGISTERED
UK TRADE MARK APPLICATIONS
Schedule 5(N)(ii) is the subject of a temporary
hardship exemption under Reg. 232.201 and a request
for a continuing hardship exemption under Reg.
232.202.
Schedules 5(N)(ii)
SCHOOL BOOK FAIRS LIMITED
Logo's used which are not registered
READING RESOURCES
CHILDREN'S LIBRARY
BALLOON LOGO USED ON SCHOOL BOOK FAIRS' TRAILERS & VANS
SELLER DOES NOT HAVE EXCLUSIVE RIGHT TO THE SCHOOL BOOK FAIRS NAME.
Schedule 5(Q)
a) List of Distributors, territory, and sales by territory
b) Copies of all Distributor Agreements available at Christchurch office,
the Company's Agreement with its distributor in Ireland contains terms
materially different from the terms of the Agreements with its other
distributors.
LIST OF DISTRIBUTORS
Schedule 5(Q) is the subject of a temporary hardship
exemption under Reg. 232.201 and a request for a
continuing hardship exemption under Reg. 232.202.
Schedule 5(R)\
SCHOOL BOOK FAIRS LIMITED
BANK ACCOUNTS Signers
Lloyd Bank UK 0465175 30-92.0 Philip John
Hodson, Fiona Margaret Waters,
Geoffrey David Bevis, Robert
Merrell
Lloyds Bank Cardnett 1235734 30-92.0
Bank of Ireland Current 1801042 90-00-68 Richard B.
Erven, Philip J. Hodson, Fiona
Waters, Robert Merrell, Art
McMillen
Deposit 39067667 90-00.6
Schedule 5(S)
i. None
ii. None
Schedule 5(T)
SCOPE OF BUSINESS
School Book Fairs Limited's activities comprise:-
1. School Book Fair Book sales to children through
schools using Distributor appointed in the UK and
Ireland.
2. Box Fairs Book sales to children through schools using
Third Party Carders in the UK and Ireland.
3. Starting Out Book sales to children and parents
through schools using Distributor appointed in the UK
and Ireland.
4. Teacher Book Fairs Book sales to teachers and schools
using Distributor appointed In the UK or Third Party
Carrier.
5. Reading Resources Sales of themed boxed sets of books
direct to teachers and schools.
6. Children's library Direct sales to consumers via
premium promotions of children's books and related
material.
Schedule 5(U)
a) Summary of Insurance - Attached
b) Employer's liability claim in process - Jeff Sutcliffe, Ex-
distributor claiming personal injury - see 5(V) note.
SUMMARY OF INSURANCES
Schedule 5(U) is the subject of a temporary hardship
exemption under Reg. 232.201 and a request for a
continuing hardship exemption under Reg. 232.202.
Schedule 5(V)
1 See Schedule 5(U) with respect to claim by Jeff Sutcliffe.
2) See attached detail Schedule.
L DETAILS OF OUTSTANDING LITIGATION & DISPUTES
Schedule 5(V)(2) is the subject of a temporary hardship
exemption under Reg. 232.201 and a request for a
continuing hardship exemption under Reg. 232.202.
Schedule 5(W)
i None
ii Lease Guarantee-
Eire distributor's office
previously made available
iii None
Schedule 5(X)
UK - INTERCOMPANY CHARGES
1.) SBF US through a license fee - charges SBF, Ltd. a fee calculated at 4% of
the sales less freight costs. This license fee was $466,766 for the year
ended 12131194. This license agreement will be cancelled prior to closing.
2.) At times, SBF U.S. has sold product, cases, and trailers to UK. These were
sold at cost including shipping and handling. Details attached.
3.) SBF U.S. provides Ltd. with the operating software to manage the fair
business (Tominy). SBF U.S. provides ongoing systems operation and
programming support to UK for both the Tominy software and the Computer
Associates software.
4.) SBF, Ltd. sold inventory to SBF U.S. in February, 1996 with a value of
$48,249.
Schedule 5(Z) I
(1) List of employees with salaries - attached
(2) Benefits information available in Christchurch
(3) The Company contributes an amount equal to 2% of salaries with respect
to employees and 3% of salaries with respect to persons who are
directors and employees to purchase a third party money purchase
scheme
SCHOOL BOOK FAIRS LTD - FULL TIME STAFF, MONTHLY PAID
Schedule 5(Z)(1) is the subject of a temporary hardship
exemption under Reg. 232.201 and a request for a
continuing hardship exemption under Reg. 232.202.
Schedule is the subject of a temporary hardship
exemption under Reg. 232.201 and a request for a
continuing hardship exemption under Reg. 232.202.
<PAGE>
EXHIBIT 10(z)
NON-COMPETITION AND PROMOTION AGREEMENT
NON-COMPETITION AND PROMOTION AGREEMENT, dated as of March 6, 1996, by and
between Scholastic Inc., a New York corporation ("Scholastic") and Pages, Inc.,
a Delaware corporation ("Pages").
W I T N E S S E T H:
WHEREAS, Pages, together with School Book Fairs, Inc., a Florida
corporation formerly known as SBF Services. Inc. ("SBF"), School Book Fairs,
Ltd. and other current and former Affiliates (as defined below), have engaged in
the school book fair business consisting of distributing and selling books and
other products to teachers, students and parents through book fairs (including
case fairs and box fairs) that are held or sponsored by schools or other
educational organizations or institutions (the "Book Fair Business"); for the
purposes of this Agreement, the term "Affiliate" shall mean with respect to any
person or entity, any other person or entity directly or indirectly controlling,
controlled by or under common control with such person or entity, or any
director, officer or employee of such person or entity; and
WHEREAS, Pages, SBF and Scholastic Canada Ltd. ("Scholastic Canada"), a
corporation organized under the laws of Canada, have entered into an Inventory
Purchase Agreement, dated as of even date herewith (the "Canadian Agreement"),
for the purchase of certain inventories located at various distributors'
locations throughout Canada;
WHEREAS, Pages and SBF, on the one hand, and Scholastic, Ltd., a
corporation organized under the laws of England and Wales, on the other hand,
have entered into a Share Purchase Agreement, dated as of the date hereof (the
"U.K. Stock Purchase Agreement"), for the purchase of all of the issued and
outstanding shares of School Book Fairs Ltd., a corporation organized under the
laws of England and Wales;
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
covenants and provisions herein contained and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
1. Non-Competition. Pages hereby covenants and agrees that for a five-
year period from the date hereof Pages will not, and will not permit any of its
Affiliates to, directly or indirectly: (a) own, manage, operate, control or
otherwise become interested in any other person or entity that provides or
performs services that are the same as, substantially similar to, or competitive
with, the Book Fair Business in Canada, the United Kingdom, Ireland, Germany,
Italy, Greece, Eastern Europe, including, without limitation, the Commonwealth
of Independent States, Turkey, the countries of the Middle East and Africa
(collectively, the "Territory"); (b) perform or provide any services that are
the same as, substantially similar to, or competitive with, the Book Fair
Business, whether on behalf of itself or any other person or entity in the
Territory; (c) enter into any agreement or arrangement with any person or entity
(other than Scholastic or any of its Affiliates) pursuant to which services
which are the same as, substantially similar to, or competitive with, the Book
Fair Business are to be provided in the Territory; or (d) engage in any practice
the purpose of which is to evade the provisions of this Agreement.
Notwithstanding the foregoing, the obligations contained in this Section I shall
not be effective in respect of Canada and its territories and possessions until
and unless the Closing (as defined in the Canadian Agreement) occurs, provided,
that Pages shall be permitted, and shall be permitted to allow SBF, to conduct
and complete in the normal course any book fairs that commenced prior to the
Closing Date (as defined in the Canadian Agreement) in accordance with the terms
of the Canadian Agreement.
2. (a) Confidentiality; Public Announcement. Except as otherwise
required by applicable laws or regulations, after the date hereof, Pages shall,
and shall cause its Affiliates to, keep strictly confidential and not to
disclose to any other person or entity any and all non-public information,
including any customer lists, pricing strategies, inventory lists, distribution
lists and other trade secrets and know-how, used by Pages or any of its
Affiliates in connection with operating its Book Fair Business in the Territory.
The foregoing confidentiality and nondisclosure obligations shall not apply to
any information that has become generally available to the public due to no
fault of Pages or any of its Affiliates.
On and prior to the Closing (as defined in the Canadian Agreement),
neither party shall, nor shall any Affiliate of any such party be permitted to,
make any public announcement of, or otherwise disclose to any third party person
or entity, any of the terms of or other information relating to either this
Agreement or the transactions contemplated hereby, except in such form and
substance as the parties shall discuss in good faith and mutually agree upon in
advance, except that either party may make any disclosure required by applicable
law, provided, that in such case, notice shall be given to the other party prior
to any announcement or other disclosure if possible or otherwise as soon as
possible thereafter.
(b) Sales, Marketing and Promotion Production.
(i) Scholastic agrees that it will cause its subsidiary
Scholastic Book Fairs, Inc. (x) on or before 12:00 noon on March 7, 1996 to
instruct in writing its sales and marketing personnel to refrain from using the
fact of the transactions consummated under the Canadian Agreement and the U.K.
Stock Purchase Agreement to disparage Pages, to question the viability of Pages
or otherwise to solicit (orally or in writing) book fair business in the United
States and (y) to monitor compliance with such instructions and promptly take
appropriate remedial action upon becoming aware at the management level of a
breach by any of such personnel of such instructions. Such instructions shall
be in the form attached hereto as Exhibit "A". The obligations of this
paragraph (i) shall survive until the second anniversary of the date hereof.
(ii) The forgoing covenant is given by Scholastic to induce Pages
to enter into and consummate the transactions provided for herein. The
provisions of this paragraph 2(b) shall be construed as an agreement independent
of any other provision of this Agreement and the existence of any claim or cause
of action of Scholastic against Pages, whether predicated upon this Agreement or
otherwise, shall not constitute a defense to the enforcement by Pages of the
provisions of this paragraph 2(b).
(iii) Scholastic and Pages agree that, in the event of a
breach by Scholastic of the provisions of this paragraph 2(b) such a breach
would cause irreparable injury to Pages and would leave Pages with no adequate
remedy at law, and Scholastic and Pages further agree that, if legal proceedings
should have to be brought by Pages against Scholastic to enforce such
provisions, Pages shall be entitled to any and all available civil remedies,
including without limitation, preliminary and permanent injunctive relief
without the necessity of posting any bond restraining Scholastic from violating,
directly or indirectly, either on its own account or as a partner, joint
venturer, agent, or otherwise, the restrictions of this paragraph 2(b).
(iv) Nothing in this paragraph 2(b) shall be construed as
prohibiting Pages from pursuing any other legal or equitable remedies available
to it for breach of the provisions of this paragraph 2(b).
3. Payment. In consideration of the representations, warranties,
indemnities, the non-competition, confidentiality and other undertakings
contained in this Agreement, Scholastic hereby agrees to pay to Pages $1,500,000
on March 6, 1996 by wire transfer in immediately available funds to an account
of Pages to be designated by Pages in writing to Scholastic prior to the date
hereof.
4. Representations and Warranties.
(a) Pages hereby represents and warrants of the date hereof and
effective as of the Closing Date, and agrees as follows:
(i) Authorization. Pages has full power and authority and legal
right to execute, deliver and perform this Agreement, and to consummate the
transactions contemplated hereby. All corporate action to be taken by or on the
part of Pages to authorize and permit the execution and delivery by Pages of
this Agreement, the performance by Pages of its obligations hereunder, and the
consummation of the transactions contemplated hereby, have been duly and
properly taken. This Agreement is a valid and binding obligation on Pages and
enforceable in accordance with its terms.
(ii) Customer Lists. On or prior to the date hereof, Pages has
delivered to Scholastic complete and correct copies of all customers mailing
lists, phone lists, distribution lists and any other lists (in any form or
medium whatsoever) of any and all schools, institutions, organizations,
individuals and other customers to which Pages (by itself or through any of its
agents or Affiliates, including SBF) has within the past two (2) years sold or
provided, or plans or intends currently to sell or provide, books or other goods
and services in connection with Pages' Book Fair Business in the Territory
(collectively, the "Customer Lists"). The Customer Lists include all of the
following information with respect to each Customer listed thereon: the name,
address and phone number thereof and names of any contact persons thereat, and,
if applicable, types and quantities of fairs booked thereby within the past two
(2) years. The Customer Lists are in a form and medium that is humanly
intelligible and usable without the aid of any software, equipment or other
device (other than any software, equipment or other device approved by
Scholastic prior to the delivery thereof).
(iii) Book Fairs. Pages has delivered to Scholastic on or
prior to the date hereof a complete and correct list of all book fairs scheduled
or proposed to be held in the Territory at any time after date hereof (other
than any scheduled book fairs canceled within the one (1) week prior to the date
hereof ), together with the name, phone number, names of any contact persons and
address of each customer, the type of each such book fair (i.e., box fair or
case fair), summary description of the terms (including financial) thereof and
the distributor, if any, responsible therefor.
(b) Scholastic hereby represents and warrants as of the date hereof
and effective as of the Closing Date that Scholastic has full power and
authority and legal right to execute, deliver and perform this Agreement, and to
consummate the transactions contemplated hereby. All corporate action to be
taken by or on the part of Scholastic to authorize and permit the execution and
delivery by Scholastic of this Agreement, the performance by Scholastic of its
obligations hereunder, and the consummation of the transactions contemplated
hereby, have been duly and properly taken. This Agreement is a valid and
binding obligation on Scholastic and enforceable in accordance with its terms.
5. Remedies. Pages agrees that irreparable damage would occur in the
event that any of the noncompetition and confidentiality and nondisclosure
provisions of this Agreement were not performed in accordance with its specific
terms or were otherwise breached. It is accordingly agreed that Scholastic or
any of its Affiliates shall be entitled to an injunction or injunctions to
prevent such breaches of this Agreement and to enforce specifically such terms
and provisions in (a) the Supreme Court of the State of New York, New York
County or (b) the United States District Court for the Southern District of New
York, this being in addition to any other remedy to which such party is entitled
at law or in equity.
6. Indemnification.
(a) In consideration of the closing of the transactions contemplated
by the Canadian Agreement and the U.K. Stock Purchase Agreement and other good
and valuable consideration the receipt and sufficiency of which is hereby
confirmed, Pages shall indemnity, defend and hold harmless, Scholastic, its
Affiliates and their respective officers, directors, stockholders, agents,
insurers, representatives and employees (the "Scholastic Indenmitees") from and
against, and pay or reimburse Scholastic Indemnitees for, any and all claims,
actions, proceedings, demands, obligations, fines, deficiencies, costs, losses,
damages or liabilities (including, but not limited to, reasonable attorneys'
fees incurred in the investigation or defense of any of the same or in asserting
any of their respective rights hereunder, interest and any penalties)
(collectively, "Losses" and individually, a "Loss"), whether or not resulting
from any third party claims, incurred or suffered by any of Scholastic
Indemnitees with respect to or in connection with the breach of any
representation or warranty made by, or any breach or nonfulfillment of any
covenant or obligation of Pages in, pursuant to or under this Agreement.
(b) In consideration of the closing of the transactions contemplated
by the Canadian Agreement and the U.K. Stock Purchase Agreement and other good
and valuable consideration the receipt and sufficiency of which is hereby
confirmed, Scholastic shall indemnity, defend and hold harmless, Pages, its
Affiliates and their respective officers, directors, stockholders, agents,
insurers, representatives and employees (the "Pages Indemnitees") from and
against, and pay or reimburse the Pages Indemnitees for, any and all claims,
actions, proceedings, demands, obligations, fines, deficiencies, costs, losses,
damages or liabilities (including, but not limited to, reasonable attorneys'
fees incurred in the investigation or defense of any of the same or in asserting
any of their respective rights hereunder, interest and any penalties)
(collectively, "Losses" and individually, a "Loss"), whether or not resulting
from any third party claims, incurred or suffered by any of the Pages
Indemnitees with respect to or in connection with the breach of any
representation or warranty made by, or any breach or nonfulfillment of any
covenant or obligation of Scholastic in, pursuant to or under this Agreement.
7. Severability. If any provision of this Agreement is invalid,
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering the provision in question inoperative or unenforceable
in any other case or circumstance, or of rendering any other provision or
provisions herein invalid, inoperative or unenforceable to any extent
whatsoever, and all such other provisions shall remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby are not affected in any manner adverse to any party hereto. Upon such
determination that any provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled, provided, that in the event the parties are unable to
agree with respect to any such provision, such provision shall be reduced in
scope or duration or otherwise modified and shall be enforced to the extent
permitted by law.
8. Entire Agreement. This Agreement (including the schedules and
exhibits hereto) sets forth the entire understanding of the parties hereto with
respect to the subject matter hereof. Any prior agreements or undertakings
among the parties hereto regarding the subject matter hereof are merged into and
superseded by this Agreement.
9. Modification; Remedies. No amendment, modification or alteration of
the terms or provisions of this Agreement shall be binding unless the same shall
be in writing and duly executed by the parties hereto. The rights and remedies
provided herein are cumulative and are not exclusive of any rights or remedies
that any party may otherwise have at law or in equity.
10. Assignment. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Neither this Agreement nor any rights, duties or obligations shall be
assigned by any party hereto without the prior written consent of the other
party hereto, and any attempted assignment or transfer without prior written
consent shall be null and void; provided, however, that Scholastic shall have
the right, without prior written consent of Pages to assign its rights and
delegate its duties under this Agreement to any Affiliate of Scholastic,
provided that no such assignment or delegation shall release Scholastic from any
of its obligations herein.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
12. Headings. The headings of the Articles, Sections and paragraphs of
this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
13. No Third Party Beneficiary Rights. This Agreement is not intended to
and shall not be construed to give any person or entity other than the parties
signatory hereto any interest or rights (including, but not limited to, any
third party beneficiary rights) with respect to or in connection with any
agreement or provision contained herein or contemplated hereby.
14. Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to the other party shall be in writing and
shall be sufficiently given if delivered in person, sent by telecopier, sent by
reputable express overnight courier service or sent by registered or certified
mail, postage prepaid, as follows:
To Scholastic:
Scholastic Inc.
555 Broadway
New York, N.Y. 10012-3999
Att.: Legal Department
Facsimile No.: (212) 343-6965
With copy to:
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036
Attn.: James C. Colihan, Esq.
Facsimile: (212) 626 4121
To Pages:
Pages, Inc.
801 94th Avenue North
St. Petersburg, FL 33702
Facsimile No.: (813) 578-3101
With copy to:
Philip M. Shasteen
Johnson, Blakely, Pope, Bokor, Ruppel & Bums, P.A.-
P.O. Box 1100
Tampa, FL 3360 1 -II 00
Facsimile.: (813) 223-7118
or at such other address for a party as shall be specified by like notice. All
such notices shall be deemed given when received, as evidenced by the
acknowledgment of receipt issued with respect thereto by the applicable postal
authorities or the signed acknowledgment of receipt of the person to whom such
notice shall have been personally delivered, confirmed answer back or other
evidence of transmission.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS,
INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS RULES THEREOF.
16. Foreign Currencies. Unless otherwise stated, all dollars specified in
this Agreement shall be in U.S. dollars. All foreign currency shall be
converted to U.S. dollar equivalents determined on the basis of the exchange
rates published in the Wall Street Journal on the date three (3) business days
prior to the date on which any payment is made or anticipated to be made.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the date first above written.
PAGES, INC.
By:
Name: /s/ S. Robert Davis
Title: Chairman
SCHOLASTIC INC.
By:
Name: /s/ R. Bingham Taylor
Title: Vice President
EXHIBIT A
MEMORANDUM
TO: Zone Vice Presidents, Regional Managers,
Branch Managers, Sales & Service Consultants
FROM: David D. Yun
SUBJECT: PAGES, INC.
DATE: March _, 1996
As you may have heard, as described in the attached press release, Scholastic
Ltd. (Scholastic's United Kingdom subsidiary) has purchased Pages' United
Kingdom subsidiary, School Book Fairs. In addition, Pages is planning to cease
operations in Canada and Scholastic Canada is purchasing certain Canadian
inventory.
In connection with these transactions, Scholastic has agreed that it will not
use the fact of these transactions in any way to disparage Pages in the United
States or otherwise in connection with soliciting book fair business.
Accordingly, the existence of these transactions (including any mention of
Pages' cessation of business in the United Kingdom and Canada) should not be
mentioned to any actual or potential customer. If a customer volunteers
information about the topic or asks you specific questions about the subject,
you may confirm the fact of the transaction, but must avoid any commentary about
any implications for Pages in the United States. In accordance with our
agreement with Pages, it is imperative that these instructions are followed on
penalty of disciplinary action. If you have any questions about this subject,
please contact Alan Boyko or me.
0034489.01
<PAGE>
EXHIBIT II
PAGES, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31,1993
---------- ---------- ----------
Primary
Weighted average number of
common shares outstanding 4,930,000 4,055,000 3,214,000
Adjustment of stock options
which have a dilutive effect
based upon the average market
price per common stock:
Add dilutive stock options - - 3,178,000
Deduct shares that could be
repurchased from the proceeds
of dilutive options - - (635,000)
---------- ---------- ----------
Weighted average common and
common equivalent shares 4,930,000 4,055,000 5,757,000
---------- ---------- ----------
Income/(loss) from continuing
operations $(6,343,631) $ (238,676) $ 1,000,038
Discontinued operations (2,876,088) (233,756) 10,482
---------- ---------- ----------
Net income/(loss) (9,219,719) (472,432) 1,010,520
Earnings adjustment (20% rule) - - 41,000
---------- ---------- ----------
Net income/(loss) for computation
purposes $(9,219,719) $ (472,432) $ 1,051,520
---------- ---------- ----------
Income/(loss) per common share:
Income/(loss) from continuing
operations $ (1.29) $ (0.06) $ 0.18
Discontinued operations (0.58) (0.06) -
---------- ---------- ----------
Earnings/(loss) per common and
common equivalent share $ (1.87) $ (0.12) $ 0.18
---------- ---------- ----------
Fully Diluted:
Weighted average number of
common shares outstanding 4,930,000 4,055,000 3,214,000
Adjustment for stock options
which have a dilutive effect
based upon the market price
or common stock at end of Period:
Add dilutive stock options - - 3,178,000
Deduct shares that could be
repurchased from the proceeds
of the dilutive options - - (616,000)
---------- ---------- ----------
Fully diluted shares 4,930,000 4,055,000 5,776,000
---------- ---------- ----------
Income/(loss) per common share:
Income/(loss) from continuing
operations $(6,343,631) $ (238,676) $ 1,000,038
Discontinued operations (2,876,088) (233,756) 10,482
---------- ---------- ----------
Net income/(loss) (9,219,719) (472,432) 1,010,520
Earnings adjustment (20% rule) - - -
---------- ---------- ----------
Net income/(loss) for computation
purposes $(9,219,719) $ (472,432) $ 1,010,520
---------- ---------- ----------
Income/(loss) from continuing
operations $ (1.29) $ (0.06) $ 0.18
Discontinued operations (0.58) (0.06) -
---------- ---------- ----------
Earnings/(loss) per common
and common equivalent share
assuming full dilution $ (1.87) $ (0.12) $ 0.18
---------- ---------- ----------
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF
PAGES, INC.
State of Percent of Stock
Name of Subsidiary Incorporation Owned by Registrant
- --------------------------- ------------- -------------------
CLYDE A. SHORT COMPANY, INC North Carolina 100%
SCHOOL BOOK FAIRS, INC. Florida 100%
GREAT BRITISH BOOK FAIRS, INC. Florida 100%
SCHOOL BOOK FAIRS, LTD. (1) United Kingdom 100%
JDRV, INC. Delaware 100%
PAGES LIBRARY SERVICES, INC. Florida 100%
(1) Sold on March 6, 1996. See Item 7.
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Pages, Inc.
As independent accountants, we hereby consent to the
inclusion by reference to our report dated March 25, 1994 on
our audit of the consolidated financial statements of Pages,
Inc., and Subsidiaries for the year ended December 31,
1993, which report is included in the Pages, Inc., Annual
Report on Form 10-K for the year ended December 31, 1995,
referred to in the Registration Statement No. 33-63421 on
Form S-3, and in the related Prospectus, which is a part of
the Registration Statement; Registration Statement No. 33-
60613 on Form S-8 and in the related Reoffer Prospectus; and
Registration Statement No. 33-72294 on Form S-8 and in the
related Reoffer Prospectus.
We also consent to the reference to our firm under the
heading "Experts" in the Prospectus.
/s/ Hausser + Taylor
HAUSSER + TAYLOR
Columbus, Ohio
March 29, 1996
<PAGE>
EXHIBIT 23(b)
Consent of independent chartered accountants
To the Board of Directors of Pages, Inc.
As independent chartered accountants, we hereby consent to
the inclusion by reference to our report dated 23 March 1994
on our audit of the combined financial statements of Great
British Book Fairs, Inc., and School Book Fairs Limited for
the year ended 31 December 1993, and the period from 20 May
1992 to 31 December 1992, which were consolidated into the
financial statements of Pages, Inc., which report is
incorporated by reference in the Pages, Inc. Annual Report
on Form 10-K for the year ended 31 December 1995, referred
to in the Registration Statement No. 33-60613 on From S-8
and in the related Reoffer Prospectus; and Registration
Statement No. 33-72294 on Form S-8 and in the related
Reoffer Prospectus.
/s/ Arthur Andersen
Arthur Andersen
Chartered Accountants and Registered Auditors
1 Surrey Street
London
WC2R 2PS
1 April 1996
<PAGE>
EXHIBIT 23(c)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement Nos. 33-72294 and 33-60613 of PAGES, Inc. on Form
S-8 of our report dated March 27, 1996, appearing in the
Annual Report on Form 10-K of PAGES, Inc. for the year ended
December 31, 1995.
/s/ Deloitte & Touche LLP
Tampa, Florida
April 1, 1996
<PAGE>
