UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-10475
PAGES, INC.
Incorporated - Delaware I.R.S. Identification No. 34-1297143
801 94th Avenue North, St. Petersburg, Florida 33702
Registrant's Telephone Number (813) 578-3300
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of latest practicable
date: 6,464,009 common shares outstanding, each $0.01 par
value, as of November 7, 1997.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PAGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------- ---------------------------------
1997 1996 1997 1996
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 3,121,227 $ 3,366,483 $17,209,109 $19,469,969
------------ ------------ ----------- -----------
Costs and Expenses:
Cost of goods sold 2,007,079 1,801,634 10,317,484 11,475,914
Selling, general and administrative 2,485,023 2,599,473 8,535,021 9,927,877
Interest, net 236,560 213,260 614,889 733,777
Depreciation and amortization 159,785 153,797 593,838 539,604
Gain on sale of distribution channel -- -- -- (3,255,337)
------------ ------------ ----------- -----------
4,888,447 4,768,164 20,061,232 19,421,835
------------ ------------ ----------- -----------
Income(loss) from continuing operations
before income taxes (1,767,220) (1,401,681) (2,852,123) 48,134
Provision for income taxes -- -- -- --
------------ ------------ ----------- -----------
Income(loss) from continuing operations (1,767,220) (1,401,681) (2,852,123) 48,134
Discontinued operations:
Income from operations -- (655,866) -- (577,338)
Cumulative effect of change in
accounting principle -- -- -- 994,664
------------ ------------ ----------- -----------
NET INCOME(LOSS) $(1,767,220) $(2,057,547) $(2,852,123) $ 465,460
============ ============ =========== ===========
Income(loss) per common share:
Income(loss) from continuing operations $ (0.28) $ (0.26) $ (0.46) $ 0.01
Discontinued operations before
cumulative effect of change in
accounting principle -- (0.12) -- (0.11)
Cumulative effect of change in
accounting principle -- -- -- 0.19
------------ ------------ ----------- -----------
Income(loss) per common share $ (0.28) $ (0.38) $ (0.46) $ 0.09
============ ============ =========== ===========
Weighted average common and common
equivalent shares 6,360,000 5,483,000 6,251,000 5,366,000
============ ============ =========== ===========
</TABLE>
See accompanying notes
<PAGE>
PAGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
ASSETS 1997 1996
------------- -------------
(Unaudited)
Current Assets:
Cash $ 177,282 $ 317,911
Accounts receivable, net of allowance
for doubtful accounts of $278,000
and $316,000, respectively 3,502,638 6,896,366
Inventory 16,566,546 19,358,374
Prepaid expenses 1,921,718 1,541,964
Note receivable from CASCO
INTERNATIONAL, INC. 100,000 --
------------- -------------
Total current assets 22,268,184 28,114,615
------------- -------------
Property and equipment:
Buildings 1,070,201 4,264,259
Equipment 2,344,618 4,045,248
------------- -------------
3,414,819 8,309,507
Less accumulated depreciation (1,437,893) (2,448,860)
------------- -------------
1,976,926 5,860,647
Land 420,000 631,468
------------- -------------
Total property and equipment, net 2,396,926 6,492,115
------------- -------------
Other assets:
Note receivable from CASCO
INTERNATIONAL, INC. 4,900,000 --
Cost in excess of net assets acquired,
net of accumulated amortization of
$1,057,000 and $645,000, respectively 4,483,445 5,828,757
Other 276,606 884,752
------------- -------------
9,660,051 6,713,509
------------- -------------
TOTAL ASSETS $34,325,161 $41,320,239
============ ============
See accompanying notes
<PAGE>
PAGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
------------- -------------
(Unaudited)
Current Liabilities:
Accounts payable $ 8,655,752 $ 3,388,341
Short-term debt obligations 12,465,521 13,120,561
Accrued liabilities 362,908 2,060,637
Accrued tax liabilities 1,594,132 2,283,836
Deferred revenue 1,337,313 3,068,320
Current portion of long-term debt
obligations 119,724 158,160
Current portion of capital lease
obligations 59,910 100,123
------------- -------------
Total current liabilities 24,595,260 24,179,978
------------- -------------
Long-term debt and capital lease
obligations 2,177,312 1,328,986
Deferred revenue -- 2,935,626
------------- -------------
Total liabilities 26,772,572 28,444,590
Commitments and contingencies
Stockholders' Equity:
Preferred stock: $.01 par value; authorized
300,000 shares; none issued and outstanding
Common stock: $.01 par value; authorized
20,000,000 shares; issued 6,762,722 and
6,497,268 shares, respectively 67,627 64,973
Capital in excess of par value 21,731,059 23,951,788
Notes receivable from stock sales (902,373) (903,123)
Accumulated deficit (13,102,601) (9,996,866)
------------- -------------
7,793,712 13,116,772
Less 298,713 shares of common stock in
treasury, at cost (241,123) (241,123)
------------- -------------
Total stockholders' equity 7,552,589 12,875,649
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $34,325,161 $41,320,239
============= ============
See accompanying notes
<PAGE>
PAGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
--------------------------
1997 1996
----------- -----------
Cash Flow Used In Operations:
Income(loss) from continuing operations $(2,852,123) $ 48,134
----------- -----------
Reconciliation to net cash flow used in
continuing operations:
Depreciation and amortization 593,838 539,604
Gain on sale of distribution channel -- (3,255,337)
Changes in working capital items of
continuing operations:
Accounts receivable (1,250,299) (198,990)
Inventory (4,371,325) (101,773)
Prepaid expenses and other assets (1,144,515) (679,981)
Accounts payable and accrued liabilities 4,733,200 (1,653,770)
Deferred revenue 221,310 (89,101)
----------- -----------
Net cash used in continuing operations (4,069,914) (5,391,214)
----------- -----------
Net cash from (used in) discontinued
operations (152,787) 371,526
----------- -----------
Net cash used in operations (4,222,701) (5,019,688)
----------- -----------
Cash Flow From (Used In) Investing Activities:
Proceeds from sale of property and equipment -- 8,031
Payments for purchases of property and equipment (170,011) (189,538)
Proceeds from disposition of distribution channel -- 11,287,500
----------- -----------
Net cash flow from (used in) investing
activities (170,011) 11,105,993
----------- -----------
Cash Flow From (Used In) Financing Activities:
Proceeds from issuance of stock 467,700 279,772
Proceeds from debt obligations 17,426,406 22,215,221
Proceeds from subordinated debt issued 980,000 --
Payments on debt and lease obligations (14,622,023) (28,921,379)
----------- -----------
Net cash flow from (used in) financing
activities 4,252,083 (6,426,386)
----------- -----------
Effect of changes in exchange rates on cash -- (15,370)
----------- -----------
Decrease in cash (140,629) (355,451)
Cash, beginning of period 317,911 532,855
----------- -----------
Cash, end of period $ 177,282 $ 177,404
=========== ============
See accompanying notes
<PAGE>
PAGES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying consolidated condensed financial statements have not been
audited, but reflect all adjustments which, in the opinion of management, are
necessary for a fair presentation of financial position, results of operations
and cash flows. All adjustments are of a normal and recurring nature.
Pages, Inc. is a publisher and distributor of children's books. The
Company markets most of its products directly to children in elementary and
secondary schools and as a result its business cycle correlates closely to the
school year. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year.
Certain reclassifications were made to the prior year financial statements
to conform to current period presentations. The interim consolidated condensed
financial statements and notes thereto are presented as permitted by the
Securities and Exchange Commission and do not contain certain information
included in the Company's annual financial statements and notes thereto. These
financial statements should be read in conjunction with the Company's audited
financial statements and notes thereto for the fiscal year ended December 31,
1996.
Note 2. Debt Obligations
The Company has an $11.5 million Revolving Note Agreement bearing interest
at the lender's prime rate plus 1%, due June 30, 1998. $34,000 was unused at
September 30, 1997.
The Company has a $1.0 million Time Note Agreement bearing interest at the
lender's prime rate plus 2%, due February 28, 1998. No amount was unused at
September 30, 1997.
In August, 1997, the Company sold $850,000 of 12% Convertible Subordinated
Notes due August 1, 2000 through private placements. Interest on the Notes is
payable quarterly on January 1, April 1, July 1, and October 1 of each year.
The Notes are redeemable at the option of the Company in whole or in part from
time to time at 105% of par, plus accrued interest. At any time after the
expiration of twelve months after each Note was purchased from the Company and
until maturity, at the option of each holder, up to 85% of the original
principal amount of each Note or any portion thereof which equals $1,000 or any
integral multiple thereof may be converted into common stock of the Company.
The conversion price for $150,000 in principal amount of the Notes is $2.6875
per share and the conversion price for the remaining $700,000 in principal
amount of the Notes is $1.875 per share. $500,000 and $50,000 of these Notes
are due to S. Robert Davis, Chairman of Pages, Inc. and Juan F. Sotos, Board
Member of Pages Inc., respectively.
In August, 1997, the Company issued a $130,000 13.5% Subordinated Note due
February 22, 1998, to Charles R. Davis, son of S. Robert Davis, Chairman of
Pages, Inc. Interest is payable monthly. The Note is redeemable at the option
of the Company in whole or part from time to time at 105% of the principal
amount, plus accrued interest.
Note 3. Discontinued Operations
Effective on the close of business on December 31, 1996, the Company
completed a tax-free spin-off of the common stock of the Company's wholly-owned
subsidiary, CASCO INTERNATIONAL, INC. ("CASCO") through a distribution to the
stockholders of Pages, Inc. of one and one-half shares of CASCO common stock for
every ten shares of Pages, Inc. common stock outstanding on the record date.
Effective January 1, 1997, CASCO issued a subordinated debenture to Pages, Inc.
in the principal amount of $5.0 million bearing interest at 7% per annum payable
quarterly, with principal payments of $100,000 each due at the end of the first
four years, and a final payment of $4.6 million due at the end of the fifth
year. The Company had an investment and advances due from CASCO prior to the
spin-off that totaled approximately $7.7 million. Capital in excess of par
value of the Company was reduced by approximately $2.7 million effective January
1, 1997, to record the spin-off transaction.
The spin-off of this discontinued operation represents the entire
incentive/awards segment of the Company's business. The statements of
operations for the three and nine months ended September 30, 1996, have been
restated to reflect the results of CASCO as a discontinued operation. Revenues
for CASCO were $3.8 and $13.7 million for the three and nine months ended
September 30, 1996, respectively. Net income (loss) was $(660,000) and
$420,000, respectively. Included in the year to date net income is a $1.0
million cumulative effect of an accounting change adopted by CASCO as of January
1, 1996. CASCO changed its method of accounting for the recognition of revenues
relating to advance deposits. CASCO changed its name from CA Short Company to
CASCO INTERNATIONAL, INC. in third quarter 1997.
The components of net assets of the CASCO discontinued operations included
in the balance sheet at December 31, 1996, follow:
Cash $ 130,972
Accounts receivable, net 4,644,027
Inventory 7,163,153
Prepaid expenses 803,321
Property and equipment, net 3,931,800
Costs in excess of net asset acquired, net 1,133,023
Other assets 622,257
Accounts payable (1,572,022)
Accrued liabilities (342,156)
Short-term debt obligations (3,669,746)
Deferred revenue (4,887,943)
Note 4. Disposition of United Kingdom and Discontinuance of Canadian
Distribution Channels
The Company sold its United Kingdom subsidiary in March 1996. Revenues in
U.S. dollars for the United Kingdom subsidiary for the nine months ended
September 30, 1996, approximated $1.4 million, with loss before income taxes of
approximately $117,000.
The Company discontinued its Canadian distribution channel in March, 1996.
Revenues in U.S. dollars for the Canadian distribution channel for the nine
months ended September 30, 1996, approximated $370,000, with loss before income
taxes of approximately $105,000.
Note 5. Supplemental Cash Flow Information
Cash payments during the nine months ended September 30, 1997 and 1996,
included interest of $676,000 and $675,000, respectively, and income taxes of
$725,000 and $0, respectively.
During the three months ended March 31, 1997, the Company acquired a
$5,000,000 note receivable from CASCO INTERNATIONAL, INC. in connection with the
spin-off of this wholly-owned subsidiary effective on the close of business on
December 31, 1996. Interest at 7% has been paid quarterly to the Company.
Note 6. Stock Appreciation Rights
Included in the results of operations for the nine months ended September
30, 1997, is a reduction in administrative compensation expense of $431,287
associated with the Company's Stock Appreciation Rights issued under the
executive incentive compensation plan in October, 1996. Effective April 1,
1997, the Stock Appreciation Rights program dated November 1, 1996, was
canceled. Stock options totaling 200,000 shares were issued to certain key
executives in third quarter 1997.
Note 7. Income Taxes
There was no income tax provision for the three and nine months ended
September 30, 1997, due to the Company's net operating loss position and the
full valuation of any resulting deferred tax benefit. Estimated income tax
rates based on annualized income were taken into consideration.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
Certain statements contained in this Form 10-Q under "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding matters that are not historical facts are "forward looking statements"
(as such term is defined in the Private Securities Litigation Reform Act of
1995) and because such statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by such forward-
looking statements. Those statements include remarks regarding the intent,
belief, or current expectations of the Company, its directors, or its officers
with respect to, among other things: (i) the Company's ability to raise
additional capital; (ii) future operating cash flows; (iii) ability of the
Company to absorb additional volume; (iv) the Company's growth strategy,
including the introduction of new book fair concepts; and (v) seeking a waiver
of the senior debt covenant. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and that actual results may differ
materially from those projected, anticipated or expected in the forward-
looking statements as a result of various factors, many of which, such as the
Company's ability to raise additional capital, are beyond the control of the
Company. The accompanying information contained in this Form 10-Q, including,
without limitation, the information set forth under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
identifies important factors that could cause such differences.
Third Quarter 1997 Compared with Third Quarter 1996
Revenues for the three months ended September 30, 1997, approximated $3.1
million compared to approximately $3.4 million for the three months ended
September 30, 1996, a decrease of 7% or approximately $200,000. The decrease in
revenues is principally attributable to approximately 350 less domestic book
fair events held in the current quarter compared to the same period in 1996,
partially offset by a 9% increase in average revenue per fair.
Cost of goods sold was approximately $2.0 million for the three months
ended September 30, 1997, compared to approximately $1.8 million for the three
months ended September 30, 1996, an increase of 11% or approximately $200,000.
As a percentage of revenues, cost of goods sold was 64.3% during the third
quarter of 1997, compared to 53.5% for the same period in 1996. The increase in
costs of goods sold is due to the freight and carrying costs expensed during the
current quarter on a $1.7 million increased investment in inventory over
September 1996 levels, and a change in product mix of fair merchandise.
Selling, general, and administrative expense was approximately $2.5 million
for the three months ended September 30, 1997, compared to approximately $2.6
million for the three months ended September 30, 1996, a decrease of 4% or
approximately $100,000.
Interest expense was approximately $237,000 for the three months ended
September 30, 1997, compared to $213,000 for the three months ended September
30, 1996, an increase of 11% or $24,000. The average outstanding debt for the
three months ended September 30, 1997, approximated $13.8 million compared to
$10.5 million for the three months ended September 30, 1996. Additionally, the
average interest rate for the three months ended September 30, 1997,
approximated 9.70% compared to approximately 8.25% for the three months ended
September 30, 1996. Netted in interest expense for the three months ended
September 30, 1997, is approximately $90,000 of interest income earned on the
$5.0 million note receivable from the former subsidiary, CASCO INTERNATIONAL,
INC.
Depreciation and amortization expense was approximately $160,000 for the
three months ended September 30, 1997, compared to $154,000 for the three months
ended September 30, 1996, an increase of 4% or approximately $6,000.
There was no income tax provision for the three months ended September 30,
1997, due to the Company's net operating loss position and the full valuation of
any resulting deferred tax benefit. Estimated income tax rates based on
annualized income were taken into consideration.
The third quarter ended September 30, 1997, resulted in an operating loss
of $1.8 million compared to an operating loss of $1.4 million in the third
quarter ended September 30, 1996. Typically a loss quarter, the increased
amount over 1996 was due to slightly less revenue and higher cost of sales.
The third quarter ended September 30, 1997, resulted in a net loss of $1.8
million versus a net loss of $2.1 million in the third quarter ended September
30, 1996. Included in the net loss for the third quarter ended September 30,
1996, was $700,000 of loss from the discontinued operations of the Company's
subsidiary, CASCO INTERNATIONAL, INC. (which was spun-off to shareholders at
December 31, 1996). Current quarter primary and fully diluted loss per share
was $.28 versus $.38 in the comparable quarter last year. The weighted average
common and common equivalent shares for the third quarter 1997 increased to
6,360,000, from 5,483,000 in third quarter 1996.
Nine Months Ended September 30, 1997 Compared with Nine Months Ended September
30, 1996
Revenues for the nine months ended September 30, 1997, approximated $17.2
million compared to approximately $19.5 million for the nine months ended
September 30, 1996, a decrease of 12% or approximately $2.3 million.
Considering the comparative quarterly discussion above, the decrease in revenues
is principally attributable to the following: the sale of the United Kingdom
operation in March 1996 (7% or $1.4 million); the discontinuance of the Canadian
distribution channel in early March 1996 (2% or $400,000); and a 2% or $400,000
decrease in year to date sales from discontinued product lines. Year to date
revenues for 1997 from domestic book fair events are approximately $300,000
below 1996 revenue levels. Pages Library Services division year to date
revenues for 1997 are $200,000 higher than 1996 revenue levels.
Cost of goods sold was approximately $10.3 million for the nine months
ended September 30, 1997, compared to approximately $11.5 million for the nine
months ended September 30, 1996, a decrease of 10% or approximately $1.2
million. Considering the comparative quarterly discussion above, the decrease
in cost of goods sold is primarily due to the reduction in year to date revenues
discussed above. Cost of goods sold as a percentage of revenues was 60.0% for
the nine months ended September 30, 1997, compared to 58.9% for the nine months
ended September 30, 1996.
Selling, general and administrative expense was approximately $8.5 million
for the nine months ended September 30, 1997, compared to $9.9 million for the
nine months ended September 30, 1996, a decrease of 14% or approximately $1.4
million. The net decrease in selling, general and administrative expense is
attributable to the sale of the United Kingdom operations and the discontinuance
of the Canadian distribution channel in March 1996, and the reduction in
expenses of approximately $431,000 in March 1997, to record the current value of
Stock Appreciation Rights issued in 1996.
Interest expense was approximately $615,000 for the nine months ended
September 30, 1997, compared to approximately $734,000 for the nine months ended
September 30, 1996, a decrease of 16% or approximately $119,000. The average
outstanding debt for the nine months ended September 30, 1997, approximated
$12.4 million compared to $11.8 million for the nine months ended September 30,
1996. The average interest rate for the nine months ended September 30, 1997,
approximated 9.48% compared to approximately 8.45% for the nine months ended
September 30, 1996. Netted in interest expense for the nine months ended
September 30, 1997 is approximately $260,000 of interest income earned on the
$5.0 million note receivable from the former subsidiary, CASCO INTERNATIONAL,
INC.
Depreciation and amortization expense was approximately $594,000 for the
nine months ended September 30, 1997, compared to $540,000 for the nine months
ended September 30, 1996, an increase of 10% or $54,000.
The nine months ended September 30, 1997, resulted in an operating loss of
$2.9 million compared to operating income of $48,000 for the nine months ended
September 30, 1996. The operating results of the nine months ended September
30, 1996, included a $3.3 million gain recorded on the sale of the United
Kingdom distribution channel. Without the gain, operating results improved
slightly in the nine months ended September 30, 1997, over the nine months ended
September 30, 1996.
The nine months ended September 30, 1997, resulted in a net loss of $2.9
million versus net income of $465,000 for the nine months ended September 30,
1996. Included in the net income for the nine months ended September 30, 1996,
was $400,000 of income from the discontinued operations of the Company's former
subsidiary, CASCO INTERNATIONAL, INC. (which was spun-off to shareholders at
December 31, 1996). Without the income from discontinued operations and the
gain mentioned above, net results improved slightly in the nine months ended
September 30, 1997, over the nine months ended September 30, 1996. Primary and
fully diluted earnings per share decreased from $.09 for the nine months ended
September 30, 1996, to a net loss per share of $.46 for the nine months ended
September 30, 1997. The weighted average common and common equivalent shares
for the nine months ended September 30, 1997 increased to 6,251,000, from
5,366,000 for the comparable period in 1996.
Liquidity and Capital Resources
The Company had a net decrease in cash for the nine months ended September
30, 1997, of $141,000, compared to a net decrease for the comparable period in
the prior year of $355,000. Cash provided by financing activities funded the
net cash used in operating and investing activities during the nine months ended
September 30, 1997. Cash on hand was $177,000 at September 30, 1997 and 1996,
respectively.
For the nine months ended September 30, 1997, continuing operations used
$4.1 million in cash as compared to $5.4 million during the nine months ended
September 30, 1996. Included in operating cash outlays in the nine months ended
September 30, 1997, was $375,000 and $725,000, relating to the settlements of
the previously disclosed litigation with Gruner + Jahr and the Internal Revenue
Service, respectively. The decrease in cash used in operations for the nine
months ended September 30, 1997 versus 1996 is primarily from slower payment of
trade accounts payable in 1997 than in 1996.
Cash used in investing activities was $170,000 for the nine months ended
September 30, 1997, representing payments for capital expenditures. The nine
months ended September 30, 1996 had cash provided by investing activities of
$11.1 million, primarily representing the proceeds from the sale of the United
Kingdom distribution channel.
For the nine months ended September 30, 1997, net cash provided by
financing activities was $4.3 million. This compares to net cash used in
financing activities of $6.4 million for the nine months ended September 30,
1996. Financing activities in 1997 consisted primarily of net borrowings of
approximately $1.8 million on the $11.5 million line of credit and $ 1.0 million
on the time note, approximately $500,000 of stock issued for inventory
purchases and consulting services, and approximately $1.0 million raised through
private placement of subordinated debt. In the comparable period in 1996,
proceeds from the sale of the United Kingdom distribution channel were used to
repay debt obligations and net borrowings on the line of credit increased in
third quarter 1996. The Company's primary source of liquidity has been amounts
available under its existing credit facilities. The Company has an $11.5
million revolving credit facility ($34,000 unused at September 30, 1997) bearing
interest at the lender's prime rate plus 1%, due June 30, 1998. It also has a
$1.0 million time note (none unused at September 30, 1997) bearing interest at
the lender's prime rate plus 2%, due February 28, 1998.
The Company does not anticipate any material expenditures for property and
equipment during the next twelve months.
The Company has expanded several of its product lines and introduced new
book fair concepts. To achieve an increase in revenues from these
introductions, an increased inventory investment, over the current levels, is
required. However, separate from the specific requirements for the new book
fair concepts, the Company intends to reduce its inventory levels during the
first half of 1998. The objective of this reduction is to allow the Company to
convert an additional $1 to $2 million of inventory into cash.
The Company estimates that during the next twelve months, to cover
operating expenditures, bring trade payables current, meet the current
maturities on debt obligations and increase inventory levels, its operating cash
flow, coupled with the revolving credit facility, must be supplemented by
raising additional capital (in the form of debt or equity financing).
Management has been actively seeking capital and believes that additional
capital will be raised during the fourth quarter of 1997 and the first quarter
of 1998. During the third quarter of 1997, $1.4 million of capital was raised
through private placements of stock ($468,000) and subordinated notes
($980,000). Additionally, a $1.0 million time note was obtained from the
Company's primary lender. The Company currently has received a proposal from a
large financial institution for $3.0 million of subordinated debt. The Company
anticipates a commitment on these funds subsequent and subject to the lender's
due diligence. The Company also intends to raise $2.5 million in private
placements of debt and equity. No assurance can be given that this will occur.
If the Company is unable to raise the needed capital, product line expansion
will be curtailed, purchase commitments canceled, existing vendor payments
restructured, and due dates of debt facilities extended, so that operating
expenditures and debt obligations may be covered by operating cash flow and the
existing debt facilities.
The Company's current forecast indicates that it could be in default at
December 31, 1997 on its senior debt covenants related to allowable loss levels.
If this occurs, the Company will seek a waiver of this covenant with its senior
lender and has no reason to believe that it should not be granted, however, no
assurance can be given that this will occur.
Seasonality
The children's literature business is highly seasonal and correlated
closely to the school year. As a result, most of the Company's income is
generated between the months of September and May. Due to the seasonality, the
Company experiences negative cash flow during the summer months. Further, in
order to build its inventory for its Fall sales, the Company's borrowings
increase over the summer and generally peak during late Fall. Inventory and
receivables reach peak levels during the months of October through December.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
(a) On December 27, 1996, the Company filed an action in U.S.
District Court for the Northern District of Ohio against Arthur
Andersen & Co. LLP seeking in excess of $16,000,000 in damages.
The complaint is a result of the final outcome of the Internal
Revenue Service assessment settled in October, 1996, and
representations made by Arthur Andersen & Co. during Pages,
Inc.'s purchases of School Book Fairs, Inc. at May 19, 1992.
(b) Reference is made to the Company's Form 10-Q's for the quarters
ended March 31 and June 30, 1997 for disclosure of the Gruner +
Jahr Printing and Publishing Company settlement.
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3: DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5: OTHER INFORMATION
None.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number Description of Document
------- ----------------------------
3(a)1 Certificate of Incorporation dated October 5, 1994
3(b)1 By-laws of the Company
10(a) First Amendment to Second Amended and Restated Loan
Agreement dated June 30, 1997 between the Company and
The Huntington National Bank.
10(b) Time Note dated August 29, 1997 between the Company and
The Huntington National Bank
10(c) 13 1/2% Subordinated Note Due February 22, 1998 dated
August 21, 1997 between the Company and Charles R.
Davis.
10(d)2 Note Purchase Agreement and 12% Convertible
Subordinated Note Due 2000, No. 4 between the Company
and S. Robert Davis.
11 Computation of Per Share Earnings
27 Financial Data Schedule (filed only electronically with
the SEC)
(b) Reports on 8-K:
None.
Footnotes:
(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) 12% Convertible Subordinated Notes Due 2000
Note No. Note Holder Date Total Note
- ------------- ------------------------ ------------ ---------
1 Drs. Graver or Avery Inc.
Profit Sharing Plan July 15, 1997 $100,000
2 Marlin F. Troiano July 16, 1997 50,000
3 Juan F. Sotos July 16, 1997 50,000
4 S. Robert Davis July 16, 1997 500,000
5 Joseph Fred Bell August 8, 1997 100,000
6 Joseph Fred Bell August 15, 1997 50,000
--------
$850,000
========
<PAGE>
SIGNATURE
------------
Pursuant to the requirements 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: November 14, 1997 By: /s/ Steven L. Canan
------------------- ----------------------------
Steven L. Canan
Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
EXHIBIT 10(a)
FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS FIRST AMENDMENT (this "Amendment") to the Second Amended and
Restated Loan Agreement is entered into as of the 30th day of June, 1997,
by and between Pages Book Fairs, Inc., and Pages Library Services, Inc.
(collectively the "Borrowers"), Pages, Inc. (the "Guarantor") and The
Huntington National Bank (the "Bank").
RECITALS:
A. As of December 31, 1996, the Borrowers and the Bank executed a
certain Second Amended and Restated Loan Agreement (the "Loan Agreement"),
setting forth the terms of a certain extension of credit to the Borrowers;
and
B. As of December 31, 1996, the Borrowers executed and delivered to
the Bank, inter alia, an Amended and Restated Revolving Note in the
original principal sum of Eleven Million Five Hundred Thousand Dollars
($11,500,000.00) (hereinafter the "Note"); and
C. In connection with the Loan Agreement and the Note, the Borrowers
executed and delivered to the Bank certain other loan documents, a 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
Note and the Loan Agreement, are hereinafter collectively referred to as
the "Loan Documents"); and
D. The Borrowers have requested that the Bank amend and modify
certain terms and covenants in the Loan Agreement and extend the maturity
of the Note, 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, the parties hereto
for themselves and their successors and assigns do hereby agree, represent
and warrant as follows:
1. Definitions. All capitalized terms not otherwise defined herein
shall have the meanings ascribed to such terms in the Loan Agreement.
2. Section 7.12, "Consolidated Tangible Net Worth," of the Loan
Agreement is hereby amended to recite in its entirety as follows:
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 June 30, 1997 - not less than $4,000,000.00
As of September 30, 1997 - not less than $2,300,000.00
As of December 31, 1997, and at all times
thereafter - not less than $4,700,000.00
In addition to the foregoing requirements, the Parent,
on a combined and consolidated basis, shall maintain at
all times a Consolidated Tangible Net Worth of not less
than $2,300,000.00. "Consolidated Tangible Net Worth"
shall mean the Companies' consolidated equity, minus
(i) the excess of cost over the value of net assets of
purchased businesses, rights, and other similar
intangibles, (ii) organizational expenses, (iii)
intangible assets, (iv) goodwill, (v) deferred charges
or deferred financing costs, (vi) loans or advances to
shareholders, officers, or directors or affiliates
and/or accounts or notes receivable from affiliates,
shareholders, officers, or directors (except that the
obligations from CA Short Company to the Parent
evidenced by that Subordinated Debenture dated December
31, 1996, the original principal amount of
$5,000,000.00 shall not be excluded); (vii) leasehold
improvements, (viii) non-compete agreements, and (ix)
any asset not directly related to the operation of the
Parent or the Borrowers.
3. Section 7.19, "Minimum Pretax Operating Profit or Maximum Pretax
Operating Loss," of the Loan Agreement is hereby amended to recite in its
entirety as follows:
7.19 Minimum Pretax Operating Profit or Maximum Pretax
Operating Loss. Beginning with the fiscal quarter
ending December 31, 1996, and continuing as of the end
of each fiscal quarter thereafter, the Parent, on a
consolidated and combined basis, shall, as the case may
be, either (a) achieve an Accumulated Operating Profit
during any fiscal year on a year-to-date basis of not
less than the amount set forth below, or (b) not incur
an Accumulated Operating Loss during any fiscal year on
a year-to-date basis in excess of the amounts set forth
below:
As of June 30, 1997, Accumulated Operating Loss not to
exceed $1,100,000.00.
As of September 30, 1997, Accumulated Operating Loss
not to exceed $2,900,000.00
As of December 31, 1997, Accumulated Operating Loss not
to exceed $500,000.00
Accumulated Operating Loss and Accumulated Operating
Profit 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, provided that such calculation
results in a number less than zero: (a) the sum of the
Parent's consolidated 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). "Accumulated Operating Profit" shall mean, with
respect to the period of determination, the following
calculation, provided that such calculation results in
a number greater than zero: (a) the sum of the
Parent's consolidated 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).
4. Conditions of Effectiveness. This Amendment shall become
effective as of June 30, 1997, upon satisfaction of all of the following
conditions precedent:
(a) The Bank shall have received two duly executed copies of the
First Amendment to Second Amended and Restated Loan Agreement and such
other certificates, instruments, documents, agreements, and opinions of
counsel as may be required by the Bank, each of which shall be in form and
substance satisfactory to the Bank and its counsel; and
(b) The representations contained in paragraph 5 below shall be true
and accurate.
5. Representations. Each of the Borrowers represents and warrants
that after giving effect to this Amendment (a) each and every one of the
representations and warranties made by or on behalf of such Borrower in the
Loan Agreement or the Loan Documents is true and correct in all respects on
and as of the date hereof, except to the extent that any of such
representations and warranties related, by the expressed terms thereof,
solely to a date prior hereto; (b) such Borrower has duly and properly
performed, complied with and observed each of its covenants, agreements and
obligations contained in the Loan Agreement and Loan Documents; and (c) no
event has occurred or is continuing, and no condition exists which would
constitute an Event of Default or a Pending Default.
6. Amendment to Loan Agreement. (a) Upon the effectiveness of
Section 2 and Section 3 hereof, each reference in the Loan Agreement to
"Second Amended and Restated Loan Agreement," "Loan Agreement,"
"Agreement," the prefix "herein," "hereof," or words of similar import, and
each reference in the Loan Documents to the Loan Agreement, shall mean and
be a reference to the Loan Agreement as amended hereby. (b) Except as
modified herein, all of the representations, warranties, terms, covenants
and conditions of the Loan Agreement, the Loan Documents and all other
agreements executed in connection therewith shall remain as written
originally and in full force and effect in accordance with their respective
terms, and nothing herein shall affect, modify, limit or impair any of the
rights and powers which the Bank may have thereunder. The amendment set
forth herein shall be limited precisely as provided for herein, and shall
not be deemed to be a waiver of, amendment of, consent to or modification
of any of the Bank's rights under or of any other term or provisions of the
Loan Agreement, any Loan Document, or other agreement executed in
connection therewith, or of any term or provision of any other instrument
referred to therein or herein or of any transaction or future action on the
part of the Borrowers which would require the consent of the Bank,
including, without limitation, waivers of Events of Default which may exist
after giving effect hereto. The Borrowers ratifies and confirms each term,
provision, condition and covenant set forth in the Loan Agreement and the
Loan Documents and acknowledges that the agreement set forth therein
continue to be legal, valid and binding agreements, and enforceable in
accordance with their respective terms.
7. Authority. 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,
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.
8. Counterparts. This Amendment may be executed in two or more
counterparts, each of which, when so executed and delivered, shall be an
original, but all of which together shall constitute one and the same
document. Separate counterparts may be executed with the same effect as if
all parties had executed the same counterparts.
9. Governing Law. This Amendment shall be governed by and construed
in accordance with the law of the State of Ohio.
IN WITNESS WHEREOF, the Borrowers and the Bank have hereunto set their
hands as of the date first set forth above.
THE BORROWERS:
PAGES BOOK FAIRS, INC.
By:
Its:
PAGES LIBRARY SERVICES, INC.
By:
Its:
THE GUARANTOR:
PAGES, INC.
By:
Its:
THE BANK:
THE HUNTINGTON NATIONAL BANK
By:
Its:
<PAGE>
EXHIBIT 10(b)
THE HUNTINGTON NATIONAL BANK
Time Note
City Office Division Branch [X] Secured
-------- ---------- ----------
Account No. Note No. [ ] Unsecured
-------------------------- ---------
Account Name Pages Book Fairs, Inc. and Pages Library Services, Inc.
[X] Corporations [ ] Partnerships [ ] Individuals/Proprietorships
[ ] Other
$1,000,000.00 Columbus, Ohio August ___, 1997
FOR VALUE RECEIVED, the undersigned, jointly and severally, promise 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 One Million Dollars ($1,000,000.00) (hereinafter
referred to as "Principal Sum") together with interest as hereinafter
provided and payable at the time and in the manner hereinafter provided.
This Note is executed and the advances contemplated hereunder are to
be made supplemental to and in addition to advances made under a certain
Second Amended and Restated Loan Agreement by, between and among the
undersigned, Pages, Inc. and the Bank dated as of December 31, 1996, and
all amendments, modifications, and supplements thereto from time to time,
including without limitation a certain First Amendment to Second Amended
and Restated Loan Agreement dated as of June 30, 1997 (hereinafter
collectively called the "Loan Agreement").
INTEREST
The undersigned jointly and severally agree 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) at a variable rate of interest per annum, which
shall change in the manner set forth below, equal to two percentage points
(2%) in excess of the Prime Commercial Rate.
Upon the occurrence of an "Event of Default" pursuant to the Loan
Agreement, interest will accrue on the unpaid balance of the Principal Sum
and unpaid interest, if any, at a variable rate of interest per annum,
which shall change in the manner set forth below, equal to five percentage
points (5%) in excess of the Prime Commercial Rate.
All interest shall be calculated on the basis of a 360 day year for
the actual number of days the Principal Sum or any part thereof remains
unpaid.
As used herein, "Prime Commercial Rate" shall mean the rate
established by the Bank from time to time based on its consideration of
economic, money market, business and competitive factors. The Prime
Commercial Rate is not necessarily the Bank's most favored rate. Subject
to any maximum or minimum interest rate limitation specified by applicable
law, any variable rate of interest on the obligation evidenced hereby shall
change automatically without notice to the undersigned immediately with
each change in the Prime Commercial Rate.
MANNER OF PAYMENT
The Principal Sum shall be due and payable on February 28, 1998, and
at maturity, whether by acceleration or otherwise. Accrued interest shall
be due and payable monthly beginning on October 1, 1997, and continuing on
the first day of each month thereafter, and at maturity, whether by
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 amended and restated security agreements dated as of
various dates.
WARRANTS
To induce the Bank to extend the credit evidenced by this Note, the
undersigned shall cause Pages, Inc. to issue and deliver to the Bank, on or
before the date hereof, warrants for the purchase of 100,000 shares of
common stock of Pages, Inc. , which warrants shall be acceptable to the
Bank, shall be exercisable for a period of three years from the date of
issuance, and shall provide for an exercise price of not greater than $2.00
per share. If the undersigned shall fail to pay to the Bank the Principal
Sum on or before February 28, 1998, then the undersigned shall cause Pages,
Inc. to issue and deliver to the Bank warrants for the purchase of an
additional 100,000 shares of common stock of Pages, Inc., which warrants
shall be acceptable to the Bank, shall be exercisable for a period of three
years from the date of issuance and shall provide for an exercise price of
not greater than $2.00 per share.
DEFAULT
Upon the occurrence of any of the following events:
(a) the undersigned fail to make any payment of interest or of
the Principal Sum on or before the date such payment is due; or
(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 agree to pay all costs and expenses of such action,
including reasonable attorneys' fees, to the extent permitted by law.
GENERAL PROVISIONS
Each of the parties executing this Note, and any indorser, surety, or
guarantor, hereby jointly and severally waive presentment, notice of
dishonor, protest, notice of protest, and diligence in bringing suit
against any party hereto, waive the defenses of impairment of collateral
for the obligation evidenced hereby, impairment of a person against whom
the Bank has any right of recourse, and any defenses of any accommodation
maker and consent that without discharging any of them, the time of payment
and any other provision of this promissory note may be extended or modified
an unlimited number of times before or after maturity without notice to the
undersigned. Each of the undersigned jointly and severally agrees that it
will pay the obligations evidenced hereby, irrespective of any action or
lack of action on the Bank's part in connection with the acquisition,
perfection, possession, enforcement, disposition, or modification of all
the obligations evidenced hereby or any and all security therefor, and no
omission or delay on the Bank's part in exercising any right against, or
taking any action to collect from or pursue the Bank's remedies against any
party hereto will release, discharge, or modify the duties of the
undersigned, or any of them, to make payments hereunder. Each of the
undersigned agrees that the Bank, without notice to or further consent from
the undersigned, may release or modify any collateral, security, document
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 the undersigned, or any of them,
hereunder. Each of the undersigned agrees that the Bank will not be
required to pursue or exhaust any of its rights or remedies against the
undersigned, or any of them, or any guarantors of the obligations evidenced
hereby with respect to the payment of any said obligations, or to pursue,
exhaust or preserve any of the Bank's rights or remedies with respect to
any collateral, security or other guaranties given to secure said
obligations. Each of the undersigned subordinates any claim or other right
which it might now have or hereafter acquire against any other person or
entity that is primarily or contingently liable on the obligations that
arise from the existence or performance of this Note, including, to the
prior payment in full of the obligations evidenced by this Note without
limitation, any right of subrogation, reimbursement, exoneration,
contribution, indemnification, or any right to participate in any claim or
remedy of the Bank or any collateral security which the Bank now has or
hereafter acquires, whether such claim, remedy or right arises in equity,
under contact or statute, at common law, or otherwise.
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
EACH OF 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, OR ANY OF THEM,
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 EACH OF 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 ANY OF THEM, OR THE BANK MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF EACH OF THE UNDERSIGNED TO THE WAIVER OF THE RIGHT OF THE
UNDERSIGNED TO TRIAL BY JURY.
WARRANT OF ATTORNEY
Each of 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 any one or more of 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. No such judgment or judgments against less than all of the
undersigned shall be a bar to a subsequent judgment or judgments against
any one or more of the undersigned against whom judgment has not been
obtained hereon, this being a joint and several warrant of attorney to
confess judgment.
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: Borrower:
PAGES LIBRARY SERVICES, INC. PAGES BOOK FAIRS, INC.
By: By:
Its: Its:
<PAGE>
EXHIBIT 10(c)
The securities represented by this Note have not been
Registered under the Securities Act of 1933, as
amended, and may not be sold, pledged, by apothecated,
donated, or otherwise transferred, whether or not for
consideration, unless either the securities have been
Registered under such Act or an exemption from such
Registration requirement is available. If the
securities are to be sold or transferred pursuant to an
exemption from the Registration requirement, the
Company may require a written opinion of counsel, in
form and content satisfactory to the Company, to the
effect that Registration is not required or that such
transfer will not violate such Act or applicable state
securities laws.
PAGES, INC.
13 1/2% SUBORDINATED NOTE DUE FEBRUARY 22, 1998
$130,000
Pages, Inc. a Delaware corporation (herein called the
"Issuer") , for value received, hereby promises to pay to Charles
R. Davis or permitted assigns, ("Payee"), the principal sum of
One Hundred Thirty Thousand Dollars ($130,000.00) on February 22,
1998, and to pay interest on the unpaid principal balance hereof
at a rate of thirteen and one-half percent (13 1/2%) per annum from
the date hereof or from the most recent interest payment date to
which interest has been paid, monthly commencing on October 1,
1997 and continuing on the first day of each month thereafter
until the principal is paid in full. Payment of the principal of
and interest on this Note will be made to Payee by check mailed
to the address of Payee set forth above or at such other address
as Payee designates by written notice received by Issuer not less
than fifteen days prior to a payment date.
1. Subordination.
(a) General. The indebtedness evidenced by this Note
is and shall remain subordinate and subject in right of payment,
to the extent and in the manner hereinafter set forth, to the
prior payment in full of all of the Senior Indebtedness. "Senior
Indebtedness" means the principal of (and premium, if any) and
unpaid interest on (i) indebtedness of the Issuer or with respect
to which the Issuer is a guarantor, whether outstanding on the
date hereof or hereafter created, to banks, insurance companies
or other lending institutions regularly engaged in the business
of lending money, which is for money borrowed by the Issuer or a
subsidiary of the Issuer, whether or not secured, including but
not limited to that certain Second Amended and Restated Loan
Agreement dated as of December 31, 1996, between the Issuer and
The Huntington National Bank, a National Banking Association and
(ii) any deferrals, renewals or extensions of any such
indebtedness or any debentures, notes or other evidence of
indebtedness issued in exchange for such Senior Indebtedness.
(b) Distribution of Assets, Liquidation or
Reorganization. Upon any payment or distribution of the assets
of the Issuer upon any dissolution or winding up or total
liquidation or reorganization of the Issuer (whether in
bankruptcy, insolvency, reorganization or receivership
proceedings, or upon an assignment for the benefit or creditors,
or any other marshaling of the assets and liabilities of the
Issuer, or otherwise):
(i) all Senior Indebtedness shall first be paid
in full in cash, or provision made for such payment, before any
holder of this Note shall be entitled to receive any payments or
distributions from or by the Issuer on account of the principal
of and premium, if any, or interest on the indebtedness evidenced
by this Note;
(ii) any payments or distribution of assets of the
Issuer of any kind or character, whether in cash, property or
securities, to which any holder of this Note would be entitled
except for the provisions of this subparagraph (b) shall be paid
or delivered by the Issuer or by any trustee in bankruptcy,
receiver, assignee for benefit of creditors, or other liquidating
agent making such payment or distribution, directly to the
holders of Senior Indebtedness or their representative or
representatives, or to such trustee or trustees under any
indenture pursuant to which any instruments evidencing any of
such Senior Indebtedness may have been issued, ratably according
to the aggregate amounts remaining unpaid on account of the
Senior Indebtedness held or represented by each, to the extent
necessary to pay all Senior Indebtedness in full after giving
effect to any concurrent payment or distribution, or provision
therefor, to the holders of such Senior Indebtedness; and
(iii) in the event that, notwithstanding the
foregoing, any payment or distribution of assets of the Issuer of
any kind or character, whether in cash, property or securities,
shall be received by any holder of this Note before all Senior
Indebtedness is paid in full, or provision made for its payment,
such payment or distribution shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders
of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any
indenture pursuant to which any amendments evidencing any of such
Senior Indebtedness may have been issued ratably as aforesaid,
for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all such Senior
Indebtedness after giving effect to any concurrent payment or
distribution, or provision therefor, to the holders of such
Senior Indebtedness.
For purposes of this Note the words "cash, property or
securities" shall not be deemed to include shares of stock of the
Company as reorganized or securities of the Company or any other
corporation provided for by a plan of reorganization or
readjustment, the payment of which is subordinated at least to
the extent provided in this paragraph 1 with respect the payment
of all Senior Indebtedness which may at the time be outstanding,
provided that (x) the Senior Indebtedness is assumed by the new
corporation, if any, resulting from any such reorganization or
readjustment, and (y) the rights of the holders of the Issuer
Senior Indebtedness are not, without the consent of such holders,
altered by such reorganization or readjustment.
2. Subrogation. Subject to the payment in full of all
Senior Indebtedness, the holders of this Note shall be subrogated
to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets of the Issuer made on the
Senior Indebtedness until the principal of, premium, if any, and
interest on this Note shall be paid in full, and for purposes of
such subrogation, no such payments or distributions to the
holders of Senior Indebtedness of cash, property or securities,
which otherwise would be payable or distributable to the holder
of this Note, shall as between the Issuer, its creditors other
than the holders of Senior Indebtedness, and the holder of this
Note, be deemed to be a payment by the Issuer to or on account of
the Note, it being understood that the provisions of this
paragraph are intended solely for the purpose of defining the
relative rights of the holder of this Note, on the one hand, and
the holders of Senior Indebtedness, on the other hand.
3. Nonimpairment.
(a) General. Nothing contained in this Note is
intended to or shall impair, as between the Issuer, the Issuer's
creditors other than the holders of Senior Indebtedness, and any
holder of Senior Indebtedness, and any holder of this Note, the
obligation of the Issuer, which is absolute and unconditional, to
pay to the holder of this Note the principal of, premium, if any,
and interest on this Note, as and when the same shall become due
and payable in accordance with the terms, and which subject to
the rights under this paragraph 4 of the holders of Senior
Indebtedness, is intended to rank equally with all other general
obligations of the Issuer, or is intended to or shall affect the
relative rights of the holder of this Note and creditors of the
Issuer other than the holders of Senior Indebtedness, nor shall
anything herein or therein prevent the holder of this Note from
exercising all remedies otherwise permitted by applicable law
upon the occurrence of an event of default (as that term is
hereinafter defined), subject to the rights, if any, under this
paragraph of the holders of Senior Indebtedness in respect of
cash, property or securities of the Issuer received upon the
exercise of any such remedy.
(b) Payment of Principal. (i) No payment on account
of principal, premium, if any, or interest on this Note shall be
made by the Issuer unless full payment of amounts then due for
principal, premium, if any, sinking fund and interest on all
Senior Indebtedness has been made or duly provided for in money,
and (ii) no payment on account of principal, premium, if any, or
interest on this Note shall be made by the Issuer if, at the time
of such payment or immediately after giving effect thereto, (x)
there shall exist a default in the payment of principal, premium,
if any, sinking fund or interest with respect to any Senior
Indebtedness, or (y) there shall have occurred an event of
default (other than a default in the payment of principal,
premium, if any, sinking fund or interest) with respect to any
Senior Indebtedness, as defined therein or in the instrument
under which the same is outstanding, permitting the holders
thereof to accelerate the maturity thereof, and such event of
default shall not have been cured or waived or shall not have
ceased to exist.
4. Remedies.
(a) Events of Default. Wherever used herein, the term
"Event of Default" means any one of the following events
(whatever the reason for such Event of Default and whether it
shall be voluntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(i) default by the Issuer in the payment of any
installment of interest on this Note when such interest shall
have become due and payable and such default continues for a
period of 20 days; or
(ii) default by the Issuer in the payment of the
principal of this Note when it becomes due and payable at its
maturity; or
(iii) the entry with respect to the Issuer by
a court having competent jurisdiction of:
(A) a decree or order for relief in respect
of the Issuer in an involuntary proceeding under any
applicable bankruptcy, insolvency, reorganization or
other similar law and such decree or order shall remain
unstayed and in effect for a period of 60 consecutive
days; or
(B) a decree or order adjudging the Issuer
to be insolvent, or approving a petition seeking
reorganization, arrangement, adjustment or composition
of the Issuer and such decree or order shall remain
unstayed and in effect for a period of 60 consecutive
days; or
(C) a decree or order appointing any person
to act as a custodian, receiver, liquidator, assignee,
trustee or other similar official of the Issuer or of
any substantial part of the property of the Issuer, or
ordering the winding up or liquidation of the affairs
of the Issuer and such decree or order shall remain
unstayed and in effect for a period of 60 consecutive
days; or
(iv) the commencement by the Issuer of a voluntary
case or proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar law or of any other case or
proceeding seeking to be adjudicated bankrupt or insolvent or the
consent by the Issuer to the entry of a decree or order for
relief in an involuntary case or proceeding under any applicable
bankruptcy, insolvency, reorganization or other similar law or to
the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by the Issuer of a petition
or answer or consent seeking reorganization or relief under any
applicable law, or the consent by the Issuer to the filing of
such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or similar
official for the Issuer or for any substantial part of the
property of the Issuer, or the making by the Issuer of an
assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debts generally as they
become due or the taking of corporate action by the Issuer in
furtherance of any such action.
(b) Acceleration. If an Event of Default occurs and
is continuing, then the holders of this Note may declare the
principal of this Note, and the interest accrue thereon, to be
due and payable immediately, by notice in writing to the Issuer,
and upon such declaration such amount shall become immediately
due and payable.
(c) Non-Exclusive Rights and Remedies. No right or
remedy herein conferred upon or reserved to the holder of this
Note is intended to be exclusive of any other right or remedy,
and every right and remedy, to the extent permitted by law, shall
be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity
or otherwise. The assertion or exercise of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent
assertion or exercise of any other appropriate right or remedy.
(d) Waiver. No delay or omission of the holder of
this Note to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the
holder of this Note may be exercised from time to time, and as
often as may be deemed expedient by such holder.
5. Redemption. The Notes may be redeemed at the option of
the Issuer at any time as a whole, or from time to time in part
substantially pro rata, upon the notice referred to below, at a
redemption price of one hundred five percent (105%) of the
principal amount thereof together with interest accrued on the
principal amount redeemed to the date fixed for redemption.
6. Notice of Redemption, etc. Notice of redemption shall
be mailed to the holder of this Note not less than 30 days prior
to the date fixed for redemption, to his last address as it shall
appear upon the records of the Issuer. If this Note is redeemed
in part, the Issuer shall, at its option and without charge to
the holder hereof, either (i) execute and deliver to the holder a
Note for the unredeemed balance of the principal amount thereof,
or (ii) make note thereon of the portion of the principal amount
hereof so called for redemption and redeemed, upon surrender of
this Note at the principal office of the Issuer in St.
Petersburg, Florida. Following the date fixed for redemption,
interest shall be payable only on the portion of this Note not so
called for redemption.
7. Miscellaneous.
The Issuer agrees to pay all costs of collection of
this Note, including reasonable attorneys' fees. Reasonable
attorneys' fees are defined to include, but not be limited, all
fees and costs incurred in all matters of collection and
enforcement, construction and interpretation before, during, and
after suit, trial, proceedings, court-ordered mediation or
arbitration, and appeals, as well as appearances in and connected
with any bankruptcy proceedings or creditors or organization or
similar proceedings.
The validity, interpretation and performance of this
Note shall be governed by the laws of the State of Florida,
without giving effect to principals of comity or conflicts of law
thereof.
IN WITNESS WHEREOF, the Issuer has caused this Note to be
signed in its name by its President and attested by its
Secretary.
Dated: August 21, 1997
-----------------------
PAGES, INC.
By: /s/ S. Robert Davis
------------------------
as President
<PAGE>
EXHIBIT 10(d)
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement is made as of the 8th day of August,
1997, by and between Pages, Inc., a Delaware corporation (the "Company")
and the person or persons who execute the signature page hereto (the
"Buyer").
1. Purchase of Securities. Subject to the terms and conditions of
this Agreement, the Buyer, intending to be legally bound, hereby
irrevocably agrees to purchase from the Company that principal amount of
12% convertible subordinated notes due August 1, 2000 (the "Notes") that is
indicated on the signature page attached hereto. Payment of the Notes is
delivered to the Company simultaneously with the execution hereof by Buyer
and is in the form of a check drawn on the account of Buyer or wire
transfer to the Company. The Notes are described in the Company's Private
Placement Memorandum dated August 12, 1997, as amended or supplemented (the
"Memorandum").
2. Issuance of Notes. The Company shall deliver to the Buyer an
original Note within a reasonable time after payment is received by the
Company.
3. Investor Notices. The Buyer acknowledges that:
(a) The Notes have not been approved or disapproved by the
Securities and Exchange Commission or any state securities commissioner,
and neither the Securities and Exchange Commission nor any state securities
commissioner has passed upon the accuracy or adequacy of the Memorandum.
(b) No person other than the Chairman of the Board and the
President of the Company is authorized to give any information or to make
any representation regarding the Company and its future prospects, and any
information or representation made by other than the Chairman of the Board
or the President of the Company must not be relied upon.
(c) The offer of Notes may be withdrawn by the Company at any
time prior to the acceptance by the Company of this Note Purchase Agreement
in writing. In connection with the offering and sale of the Notes, the
Company reserves the right, in its sole discretion, to reject any
subscription.
(d) This Note Purchase Agreement is submitted in connection with
the private placement of the Notes and does not constitute an offer or
solicitation by or to anyone in any jurisdiction in which such an offer or
solicitation is not authorized.
(e) The Company has agreed to provide to the Buyer and any of
the representatives of the Buyer the opportunity to inspect additional
documents and to inquire of, and to receive answers from, it or any person
acting on its behalf concerning the Company and the Notes. The Buyer may
also obtain any additional information from the Company, to the extent it
possesses such information or can acquire it without unreasonable effort or
expense, necessary to verify the accuracy of the information provided to
the Buyer with this Note Purchase Agreement. Any requests for information
or to examine any documents should be directed to S. Robert Davis at Pages,
Inc., 5720 Avery Road, Dublin, Ohio 43016, 800/242-8749.
4. Representations and Warranties. The Buyer hereby acknowledges,
represents, and warrants to, and agrees with, the Company as follows:
(a) The Buyer has received and reviewed the Memorandum,
including the section entitled "Risk Factors."
(b) No oral or written representations have been made or oral or
written information furnished to the Buyer or his advisor(s) in connection
with the offering of the Notes which were in any way inconsistent with the
information provided to the Buyer.
(c) The Buyer is not subscribing for the Notes as a result of or
subsequent to any advertisement, article, notice, or other communication
published in any newspaper, magazine, or similar media or broadcast over
television or radio, or presented at any seminar or meeting to which the
Buyer was invited by means of any advertisement, article, notice, or other
communication published in any newspaper, magazine, or similar media or
broadcast over television or radio.
(d) The Buyer has adequate means of providing for the Buyer's
current needs and contingencies, is able to bear the economic risks of an
investment in the Notes for an indefinite period of time and has no need
for liquidity in such investment.
(e) The Buyer has such knowledge and experience in financial and
business matters so as to enable the Buyer to utilize the information made
available to the Buyer about the Company in order to evaluate the merits
and risks of an investment in the Notes and to make an informed investment
decision with respect thereto.
(f) The Buyer is acquiring the Notes solely for the Buyer's own
account as principal, for investment purposes only and not with a view to
the resale or distribution thereof, in whole or in part, and no other
person has a direct or indirect beneficial interest in such Notes.
(g) The Buyer will not sell or otherwise transfer the Notes or
the shares of common stock $.01 par value ("Common Stock") into which the
Notes are convertible without Registration under the Securities Act of
1933, as amended (the "Act"), and applicable state securities laws or an
exemption therefrom, and fully understands and agrees that the Buyer must
bear the economic risk of his purchase for an indefinite period of time
because the Notes (and, unless registered as provided for herein, the
Shares of Common Stock into which the Notes are convertible) have not been
registered under the Act or under the securities laws of any state and,
therefore, cannot be resold unless they are subsequently registered under
the Act and under the applicable securities laws of such states or unless
an exemption from such registration is available. The Company will affix a
legend in substantially the following form to the Notes, and the
Certificates evidencing the Shares of Common Stock issued pursuant to the
conversion of the Notes (except to the extent registered under the Act):
The securities represented by this Certificate have not
been registered under the Securities Act of 1933, as
amended, and may not be sold, pledged, apothecated,
donated, or otherwise transferred, whether or not for
consideration, unless either the securities have been
registered under such Act or an exemption from such
registration requirement is available. If the
securities are to be sold or transferred pursuant to an
exemption from the registration requirement, the
Company may require a written opinion of counsel, in
form and content satisfactory to the Company, to the
effect that registration is not required or that such
transfer will not violate such Act or applicable state
securities laws.
(h) The Buyer understands that, except as provided for herein,
the Company will be under no obligation to register the Notes (or the
Shares of Common Stock into which the Notes are convertible) on behalf of
the Buyer or to assist the Buyer in complying with any exemption from
registration under the Act or under the securities laws of any state for
resales of the Notes, and shares of Common Stock into which the Notes are
convertible. The Buyer understands that except with respect to securities
registered as provided for herein, the Company will issue stop transfer
instructions to its transfer agent with respect to such securities.
(i) The Buyer understand(s) that no federal or state agency has
passed upon the Notes or made any finding or determination as to the
fairness of this investment.
(j) The Buyer is a bona fide resident of or, if an entity,
maintains its principal place of business in the State of North Carolina
and no contact with the Buyer with respect to the offer or sale of the
Notes was made except in the State(s) of North Carolina.
(k) The Buyer is an "accredited investor" under Regulation D of
the Securities and Exchange Commission because (check the applicable
box(es)):
The undersigned is a bank (as defined in
Section 3(a)(2) of the Act) or any savings and loan
association or other institution as defined in Section
3(a)(5)(A) of the Act, whether acting in its individual
or fiduciary capacity; a broker or dealer registered
pursuant to Section 15 of the Securities Exchange Act
of 1934; an insurance company (as defined in Section
2(13) of the Act); an investment company registered
under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of
that Act; a Small Business Investment Company licensed
by the U.S. Small Business Administration under Section
301(c) or (d) of the Small Business Investment Act of
1958; a plan established and maintained by a state, its
political subdivisions, or an agency or instrumentality
of a state or its political subdivisions for the
benefit of its employees with total assets in excess of
$5,000,000; an employee benefit plan within the meaning
of the Employee Retirement Income Security Act of 1974
if the investment decision is made by a plan fiduciary,
as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance
company, or registered investment adviser, or an
employee benefit plan with total assets in excess of
$5,000,000, or a self-directed plan with investment
decisions made solely by persons that are accredited
investors.
The undersigned is a private business
development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940.
The undersigned is an organization
described in Section 501(c)(3) of the Internal Revenue
Code, a corporation, a Massachusetts or similar
business trust, or a partnership, not formed for the
specific purpose of acquiring the Notes, with total
assets in excess of $5,000,000.
The undersigned is a natural person
whose individual net worth1, or joint net worth with my
spouse, at the time of purchase exceeds $1,000,000.
The undersigned is a natural person with
an individual income2 in excess of $200,000 or joint
income with my spouse in excess of $300,000 in each of
calendar years 1994 and 1995 and has a reasonable
expectation of reaching the same income level in
calendar year 1996.
The undersigned is a trust, not formed
for the specific purpose of acquiring the Notes, with
total assets in excess of $5,000,000 and whose purchase
is directed by a person who either alone or with his
purchaser representative(s) has such knowledge and
experience in financial and business matters that he is
capable of evaluating the merits and risks of the
prospective investment.
The undersigned is an entity in which
all of the equity owners are accredited investors.
(l) The foregoing representations, warranties, and agreements
shall be true and correct in all respects on and as of the date of the
issuance of the Notes to the Buyer as if made on and as of such date and
shall survive such date.
(m) If the Buyer is a corporation, partnership, trust, or other
entity, it is authorized and qualified to purchase the Notes and the person
signing this Note Purchase Agreement on behalf of such entity has been duly
authorized by such entity to do so.
(n) If the Buyer is purchasing Notes subscribed for hereby in a
representative or fiduciary capacity, the representations and warranties
contained herein and in any other written statement or document delivered
to the Company in connection herewith shall be deemed to have been made on
behalf of the person or persons for whom such Notes are being purchased.
5. Indemnification. The Buyer agrees to indemnify and hold harmless
the Company and its officers, directors, and affiliates against any and all
loss, liability, claim, damage, and expense whatsoever (including, but not
limited to, any and all expenses, including attorney's fees, reasonably
incurred in investigating, preparing, or defending against any litigation
commenced or threatened or any claim whatsoever) arising out of or based
upon any false representations or warranty or breach or failure by the
Buyer to comply with any covenant or agreement made by the Buyer herein.
6. Irrevocability; Binding Effect. Subject to applicable state
securities laws, the undersigned hereby acknowledges and agrees that the
subscription hereunder is irrevocable, that the undersigned is not entitled
to cancel, terminate, or revoke this Note Purchase Agreement or any
agreements of the undersigned thereunder, and that this Note Purchase
Agreement and such other agreements shall survive the death or disability
of the undersigned and shall be binding upon and inure to the benefit of
the parties and their heirs, executors, administrators, successors, legal
representatives, and assigns.
7. Registration Rights.
(a) For purposes of this paragraph 7:
(i) The term "Register," "Registered," and "Registration"
refer to a Registration effected by preparing and filing with the
Securities and Exchange Commission (the "Commission") a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document;
(ii) The term "Registrable Securities" means the shares of
Common Stock into which the Notes are convertible and any Common Stock
issued as a dividend or other distribution with respect to or in exchange
for or in replacement of the Common Stock issued or issuable upon
conversion of the Notes.
(iii) The term "Majority Holders" means those persons
who own Notes in the aggregate principal amount of greater than 50% of the
aggregate principal amount then outstanding.
(b) Whenever the Company proposes to Register any of its Common
Stock under the Act for a public offering of Common Stock (but not
convertible debt securities) for cash, the Company shall give the Buyer
written notice of its intent to do so. Upon the written request of the
Buyer delivered to the Company within ten (10) business days after receipt
of such notice, the Company shall use its best efforts to cause to be
included in such Registration all of the Registrable Securities owned by
the Buyer which the Buyer requests to be Registered; provided (i) the Buyer
agrees to sell the Registrable Securities in the same manner and on the
same terms and conditions as the other Common Stock which the Company
proposes to Register, (ii) the proposed managing underwriter (which shall
be selected by the Company in its sole discretion) does not advise the
Company that in its opinion the inclusion of the Buyer's Registrable
Securities (and the Registrable Securities held by others who purchased
their Notes pursuant to the offering described in the Memorandum ["Other
Buyers"], and who have given written request to have their Registrable
Securities included in the registration statement) is likely to effect
adversely the success of the offering by the Company or the price it would
receive, in which case the rights of the Buyer shall be as provided in
Paragraph 7(e), below, (iii) the Buyer shall be entitled to include in such
Registration not more than one-half of its Registrable Securities if the
Registration is reasonably expected to become effective after the
expiration of the time period which, under Rule 144(d), would permit public
resales of the Registrable Securities, (iv) the Buyer shall not be entitled
to include in such Registration any Registrable Securities which are freely
tradable under Rule 144(k), and (v) the registration right under this
paragraph 7(b) expires as to all Registrable Securities July 1, 2000, after
which the Buyer shall have no right to have any Registrable Securities
Registered.
(c) In connection with any offering involving any underwriting
of shares of Common Stock being issued by the Company, the Company shall
not be required under Paragraph 7(b) to include any of the Buyer's
Registrable Securities therein unless the Buyer accepts and agrees to the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as will not, in
the opinion of the underwriters, jeopardize the success of the offering by
the Company. If the total number of Registrable Securities which the Buyer
and all Other Buyers request to be included in any offering exceeds the
number of such Registrable Securities which the underwriters believe
compatible with the success of the offering, the Company shall only be
required to include in the offering so many of the Registrable Securities
of the Buyer and the Other Buyers as the underwriters believe will not
jeopardize the success of the offering. The shares so included shall be
apportioned pro rata among the Buyer and the Other Buyers according to the
total number of shares requested to be included in such offering by the
Buyer and the Other Buyers, or in such proportions as shall be mutually
agreed to by the Buyer and the Other Buyers, provided that no such
reduction shall be made with respect to any securities offered by the
Company for its own account.
(d) As long as the Company has given any notice required by
Paragraph 7(b), the Buyer shall not have the right to take any action to
restrain, enjoin, or otherwise delay any Registration as the result of any
controversy which might arise with respect to the interpretation or
implementation of this Paragraph 7.
(e) (i) Commencing on January 1, 1997, if the Company shall
receive a written request (specifying that it is being made pursuant to
this paragraph 7(e)) from the Majority Holders that the Company file a
registration statement under the Act, covering the Registrable Securities,
then the Company shall, within ten (10) days after the receipt thereof,
give written notice of such request to all holders of Registrable
Securities and shall, subject to the limitations contained in subparagraphs
(e)(ii) and (e)(iii) below, effect as soon as practicable, the Registration
under the Act of all Registrable Securities which the Buyer and the Other
Buyers request to be Registered within twenty (20) days after the mailing
of such notice by the Company in accordance with subparagraph 8(h).
Provided, however (A) in the event that Buyer does not request that its
Registrable Securities be included in such Registration, Buyer shall be
deemed to have waived all Registration rights under this paragraph 7, (B)
Buyer shall be entitled in such Registration to register not more than one-
half of its Registrable Securities if the Registration is reasonably
expected to become effective after the expiration of the time period which,
under Rule 144(d), would permit public resales of the Registrable
Securities, (C) the Buyer shall not be entitled to include in such
Registration any Registrable Securities which are freely tradable under
Rule 144(k), and (D) the Registration right under this paragraph 7(e)
expires as to all Registrable Securities on July 1, 2000, after which the
Buyer shall have no right to have any Registrable Securities registered.
(ii) Notwithstanding the foregoing, (A) the Company shall
not be obligated to effect a Registration pursuant to this paragraph 7(e)
during the period starting with the date sixty (60) days prior to the
Company's estimated date of filing of, and ending three (3) months
following the effective date, of a registration statement pertaining to an
underwritten public offering of securities for the account of the Company,
provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective
and that the Company's estimate of the date of filing such registration
statement is made in good faith; and (B) if the Company shall furnish to
Buyer and the other buyers a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors
it would be detrimental to the Company or its shareholders for a
registration statement to be filed in the near future, then the Company's
obligation to use its best efforts to file a registration statement shall
be deferred for a period during which such filing would be detrimental,
provided that this period will not exceed nine (9) months.
(iii) The Company shall be obligated to effect no more
than one Registration pursuant to this subparagraph 7(e).
(f) Whenever required under this paragraph 7 to effect the
Registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its
reasonable best efforts to case such registration statement to become
effective, and, upon the request of the Majority Holders, keep such
registration statement effective for not less than ninety (90) days or such
earlier date as all securities offered are sold.
(ii) Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
(iii) Furnish to the selling Buyers such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(iv) Use its reasonable best efforts to Register and qualify
the securities covered by such registration statement under such selling
Buyers securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the selling Buyers, provided that the Company shall
not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process
in any such states or jurisdiction.
(g) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this paragraph 7 that the selling
Buyers shall furnish to the Company such information regarding themselves,
the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to effect the
Registration of their Registrable Securities.
(h) All expenses (other than underwriting discounts and
commissions) incurred in connection with a Registration pursuant to
subparagraph 7(e), including (without limitation) all Registration, filing
and qualification fees, printer's and accounting fees, and fees and
disbursements of counsel for the Company (but not counsel for the selling
Buyers), shall be borne by the Company; provided, however, that the Company
shall not be required to pay the cost of any special audits required for a
Registration effected pursuant to subparagraph 7(e) hereof, or any expenses
of any Registration proceeding begun pursuant to subparagraph 7(e) if the
Registration request is subsequently withdrawn at the request of the
Majority Holders, unless the Majority Holders agree to forfeit a right to
demand Registration pursuant to subparagraph 7 (e) (in which event such
right shall be deemed to be forfeited by all Buyers). In the absence of
such an agreement to forfeit, the Buyers requesting withdrawal of the
Registration request shall bear all such expenses pro rata on the basis of
the Registrable Securities to have been Registered by such Buyers.
(i) The Company shall bear and pay all costs of and incidental
to any Registration, filing or qualification of Registrable Securities with
respect to the Registration pursuant to subparagraph 7(b) for each Buyer,
including all Registration, filing, and qualification fees, printer's and
accounting fees relating or apportionable thereof except that Buyers shall
pay all legal fees and disbursements of their counsel, if any, and the
Buyers will bear and pay their pro rata portion of any underwriting
discounts and commissions.
(j) In connection with any Registration of the Registrable
Securities, Buyer shall provide to the Company such information as may be
reasonably required by the Company to prepare and file such registration
statement in accordance with applicable provisions of the Act and the Rules
and Regulations thereunder. Buyer shall furnish such information in
writing within five business days after written request by the Company.
The Company shall have sole control of the preparation, filing, amendment,
and supplementation of any registration statement to be filed on behalf of
the Buyer.
(k) In the event that any of the Notes shall at any time be
transferred of record by the Buyer, the rights herein conferred shall not
extend to any such transferee.
(l) In the event of (i) the Registration of any Registrable
Securities under the Act pursuant to the provisions of this Agreement and
to the extent permitted by applicable law, the Company agrees to indemnify
and hold harmless Buyer, and each other person, if any, who controls Buyer
within the meaning of the Act, from and against any and all losses, claims,
damages, or liabilities (or actions in respect thereof) which arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Registrable Securities were Registered under the Act or any prospectus
contained therein, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse Buyer, and each such controlling person, for any legal or
any other expenses reasonably incurred by Buyer, or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability, or action provided, however, that the Company will not be liable
in any such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement or such prospectus in reliance upon, and in conformity with,
information furnished to the Company by Buyer or such controlling person,
specifically for use in preparation thereof; (ii) the Registration of any
Registrable Securities under the Act pursuant to the provisions of this
Agreement and to the extent permitted by applicable law, Buyer, and each
other person, if any, who controls Buyer within the meaning of the Act,
agrees to indemnify and hold harmless the Company, each person who controls
the Company within the meaning of the Act, and each officer and director of
the Company from and against any losses, claims, damages, or liabilities,
joint or several, to which the Company, such controlling person, or any
such officer or director may become subject under the Act or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such Registrable Securities were Registered under the
Act or any prospectus contained therein, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, which untrue statement or alleged untrue statement or omission
or alleged omission was made therein in reliance upon, and in conformity
with, information furnished to the Company by Buyer or such controlling
person specifically for use in connection with the preparation thereof; and
will reimburse the Company, each such controlling person and each such
officer or director for any legal or any other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability, or action; (iii) the Registration of any Registrable
Securities under the Act pursuant to the provisions of this Agreement,
promptly after receipt by an indemnified party of notice of the
commencement of any action or the assertion of a claim which may be subject
to indemnification hereunder, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written
notice to such indemnifying party of the commencement or assertion thereof,
but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party otherwise
than pursuant to the provisions of this paragraph 7(l). In case any such
action is brought or such assertion made against any indemnified party, and
it notifies any indemnifying party of such commencement or assertion made
against any indemnified party, the indemnifying party will be entitled to
participate in and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, and to assume the defense thereof,
with counsel satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof,
other than the reasonable cost of investigation.
8. Miscellaneous.
(a) Neither this Note Purchase Agreement nor any provisions
hereof shall be waived, modified, discharged, or terminated except by an
instrument in writing signed by the party against whom any such waiver,
modification, discharge, or termination is sought.
(b) This Note Purchase Agreement contains the entire agreement
of the parties with respect to the subject matter hereof and there are no
representations, covenants, or other agreements except as stated or
referred to herein or in contemporaneously signed written agreements.
(c) Each provision of this Note Purchase Agreement is intended
to be severable from every other provision, and the invalidity or
illegality of any portion hereof shall not affect the validity or legality
of the remainder hereof.
(d) This Note Purchase Agreement is not transferable or
assignable by the undersigned.
(e) This Note Purchase Agreement shall be governed by and
construed in accordance with the laws of the State of Florida as applied to
residents of that state executing contracts wholly to be performed in that
state.
(f) Each party hereto agrees to submit to the personal
jurisdiction and venue of the state and federal courts in the State of
Florida, in the judicial circuit including Pinellas County, for resolution
of all disputes and causes of action arising out of this Agreement, and
each party hereby waives all questions of personal jurisdiction and venue
of such courts, including, without limitation, the claim or defense therein
that such courts constitute an inconvenient forum.
(g) If any legal proceeding is brought to enforce this Agreement
or any provision of it or because of any default in any representation,
warranty, covenant, indemnity, or provision of it, the successful or
prevailing party shall be paid all costs and expenses, including reasonable
attorneys' fees through all proceedings, trials, or appeals.
(h) All notices or other communications provided for herein to
be given or sent to a party by the other party shall be deemed validly
given or sent if in writing and mailed, postage prepaid, by Registered or
certified United States mail, addressed to the parties at their addresses
herein below set forth. Either party may give notice to the other party at
any time, by the method specified above, of a change in the address at
which, or the person to whom, notice is to be addressed.
Principal Amount of Notes Purchased:
--------------------
BUYER:
---------------------------
[Signature of Buyer]
---------------------------
[Print Name]
Mailing Address of Buyer:
--------------------------------
--------------------------------
Taxpayer Identification Number
or Social Security Number:
--------------------------------
ACCEPTED BY:
PAGES, INC.
By: /s/ S. Robert Davis
-------------------------
As President
Address: Pages, Inc.
5720 Avery Road
Dublin, Ohio 43016
(1) For purposes of this Agreement, "net worth" (except as otherwise
specifically defined) means the excess of total assets at fair market
value, including home and personal property, over total liabilities,
including mortgages and income taxes on unrealized appreciation of assets.
(2) For purposes of this Agreement, "individual income" means "adjusted
gross income" as reported for federal income tax purposes, less any income
attributable to a spouse or to property owned by a spouse, increased by the
following amounts (but not including any amounts attributable to a spouse
or to property owned by a spouse): (i) the amount of any interest income
received which is tax-exempt under Section 103 of the Internal Revenue Code
of 1986, as amended (the "Code"); (ii) the amount of losses claimed as a
limited partner in a limited partnership (as reported on Schedule E of Form
1040); (iii) any deduction claimed for depletion under Section 611 et seq.
of the Code; and (iv) any amount by which income from long-term capital
gains has been reduced in arriving at adjusted gross income pursuant to the
provisions of Section 1202 of the Internal Revenue Code of 1986, as
amended.
<PAGE>
The securities represented by this Note have not been
Registered under the Securities Act of 1933, as
amended, and may not be sold, pledged, by apothecated,
donated, or otherwise transferred, whether or not for
consideration, unless either the securities have been
Registered under such Act or an exemption from such
Registration requirement is available. If the
securities are to be sold or transferred pursuant to an
exemption from the Registration requirement, the
Company may require a written opinion of counsel, in
form and content satisfactory to the Company, to the
effect that Registration is not required or that such
transfer will not violate such Act or applicable state
securities laws.
PAGES, INC.
12% CONVERTIBLE SUBORDINATED NOTE DUE 2000
$500,000.00 NO. 4
Pages, Inc. a Delaware corporation (herein called the
"Issuer") , for value received, hereby promises to pay to S.
Robert Davis or permitted assigns, ("Payee"), the principal sum
of Five Hundred Thousand Dollars on August 1, 2000, and to pay
interest on the unpaid principal balance hereof at a rate of
twelve percent (12%) per annum from the date hereof or from the
most recent interest payment date to which interest has been
paid, on each January 1, April 1, July 1, and October 1
commencing October 1, 1997 (each an "Interest Payment Date"),
until the principal hereof is paid in full. Payment of the
principal of and interest on this Note will be made to Payee by
check mailed to the address of Payee set forth above or at such
other address as Payee designates by written notice received by
Issuer not less than fifteen days prior to a payment date.
This note is one of a duly authorized issue of the Notes of
the Issuer designated as its 12% Convertible Subordinated Notes
due 2000 (herein called the "Notes"), limited in aggregate
principal amount to $2,800,000 and the following is a statement
of the rights of the holder of this Note and the conditions to
which this Note is subject, to which the holder hereof
("Holder"), by the acceptance of this Note, assents:
1. Equal Rank. All Notes of this issue rank equally and
ratably without priority over one another.
2. Subordination.
(a) General. The indebtedness evidenced by the Notes
is and shall remain subordinate and subject in right of payment,
to the extent and in the manner hereinafter set forth, to the
prior payment in full of all of the Senior Indebtedness. "Senior
Indebtedness" means the principal of (and premium, if any) and
unpaid interest on (i) indebtedness of the Issuer or with respect
to which the Issuer is a guarantor, whether outstanding on the
date hereof or hereafter created, to banks, insurance companies
or other lending institutions regularly engaged in the business
of lending money, which is for money borrowed by the Issuer or a
subsidiary of the Issuer, whether or not secured, including but
not limited to that certain Second Amended and Restated Loan
Agreement dated as of December 31, 1996, between the Issuer and
The Huntington National Bank, a National Banking Association and
(ii) any deferrals, renewals or extensions of any such
indebtedness or any debentures, notes or other evidence of
indebtedness issued in exchange for such Senior Indebtedness.
(b) Distribution of Assets, Liquidation or
Reorganization. Upon any payment or distribution of the assets
of the Issuer upon any dissolution or winding up or total
liquidation or reorganization of the Issuer (whether in
bankruptcy, insolvency, reorganization or receivership
proceedings, or upon an assignment for the benefit or creditors,
or any other marshaling of the assets and liabilities of the
Issuer, or otherwise):
(i) all Senior Indebtedness shall first be paid
in full in cash, or provision made for such payment, before any
holder of this Note shall be entitled to receive any payments or
distributions from or by the Issuer on account of the principal
of and premium, if any, or interest on the indebtedness evidenced
by this Note;
(ii) any payments or distribution of assets of the
Issuer of any kind or character, whether in cash, property or
securities, to which any holder of this Note would be entitled
except for the provisions of this subparagraph (b) shall be paid
or delivered by the Issuer or by any trustee in bankruptcy,
receiver, assignee for benefit of creditors, or other liquidating
agent making such payment or distribution, directly to the
holders of Senior Indebtedness or their representative or
representatives, or to such trustee or trustees under any
indenture pursuant to which any instruments evidencing any of
such Senior Indebtedness may have been issued, ratably according
to the aggregate amounts remaining unpaid on account of the
Senior Indebtedness held or represented by each, to the extent
necessary to pay all Senior Indebtedness in full after giving
effect to any concurrent payment or distribution, or provision
therefor, to the holders of such Senior Indebtedness; and
(iii) in the event that, notwithstanding the
foregoing, any payment or distribution of assets of the Issuer of
any kind or character, whether in cash, property or securities,
shall be received by any holder of this Note before all Senior
Indebtedness is paid in full, or provision made for its payment,
such payment or distribution shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders
of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any
indenture pursuant to which any amendments evidencing any of such
Senior Indebtedness may have been issued ratably as aforesaid,
for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all such Senior
Indebtedness after giving effect to any concurrent payment or
distribution, or provision therefor, to the holders of such
Senior Indebtedness.
For purposes of this Note the words "cash, property or
securities" shall not be deemed to include shares of stock of the
Company as reorganized or securities of the Company or any other
corporation provided for by a plan of reorganization or
readjustment, the payment of which is subordinated at least to
the extent provided in this paragraph 2 with respect the payment
of all Senior Indebtedness which may at the time be outstanding,
provided that (x) the Senior Indebtedness is assumed by the new
corporation, if any, resulting from any such reorganization or
readjustment, and (y) the rights of the holders of the Issuer
Senior Indebtedness are not, without the consent of such holders,
altered by such reorganization or readjustment.
3. Subrogation. Subject to the payment in full of all
Senior Indebtedness, the holders of the Notes shall be subrogated
to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets of the Issuer made on the
Senior Indebtedness until the principal of, premium, if any, and
interest on the Notes shall be paid in full, and for purposes of
such subrogation, no such payments or distributions to the
holders of Senior Indebtedness of cash, property or securities,
which otherwise would be payable or distributable to the holders
of the Notes, shall as between the Issuer, its creditors other
than the holders of Senior Indebtedness, and the holders of the
Notes, be deemed to be a payment by the Issuer to or on account
of the Notes, it being understood that the provisions of this
paragraph are intended solely for the purpose of defining the
relative rights of the holders of the Notes, on the one hand, and
the holders of Senior Indebtedness, on the other hand.
4. Nonimpairment.
(a) General. Nothing contained in this Note is
intended to or shall impair, as between the Issuer, the Issuer's
creditors other than the holders of Senior Indebtedness, and any
holder of Senior Indebtedness, and any holder of Notes, the
obligation of the Issuer, which is absolute and unconditional, to
pay to the holders of the Notes the principal of, premium, if
any, and interest on the Notes, as and when the same shall become
due and payable in accordance with the terms, and which subject
to the rights under this paragraph 4 of the holders of Senior
Indebtedness, is intended to rank equally with all other general
obligations of the Issuer, or is intended to or shall affect the
relative rights of the holders of the Notes and creditors of the
Issuer other than the holders of Senior Indebtedness, nor shall
anything herein or therein prevent the holders of the Notes from
exercising all remedies otherwise permitted by applicable law
upon the occurrence of an event of default (as that term is
hereinafter defined), subject to the rights, if any, under this
paragraph of the holders of Senior Indebtedness in respect of
cash, property or securities of the Issuer received upon the
exercise of any such remedy.
(b) Payment of Principal. (i) No payment on account
of principal, premium, if any, or interest on the Notes shall be
made by the Issuer unless full payment of amounts then due for
principal, premium, if any, sinking fund and interest on all
Senior Indebtedness has been made or duly provided for in money,
and (ii) no payment on account of principal, premium, if any, or
interest on the Notes shall be made by the Issuer if, at the time
of such payment or immediately after giving effect thereto, (x)
there shall exist a default in the payment of principal, premium,
if any, sinking fund or interest with respect to any Senior
Indebtedness, or (y) there shall have occurred an event of
default (other than a default in the payment of principal,
premium, if any, sinking fund or interest) with respect to any
Senior Indebtedness, as defined therein or in the instrument
under which the same is outstanding, permitting the holders
thereof to accelerate the maturity thereof, and such event of
default shall not have been cured or waived or shall not have
ceased to exist.
5. Remedies.
(a) Events of Default. Wherever used herein, the term
"Event of Default" means any one of the following events
(whatever the reason for such Event of Default and whether it
shall be voluntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(i) default by the Issuer in the payment of any
installment of interest on any Note when such interest shall have
become due and payable and such default continues for a period of
20 days; or
(ii) default by the Issuer in the payment of the
principal of any Note when it becomes due and payable at its
maturity; or
(iii) the entry with respect to the Issuer by
a court having competent jurisdiction of:
(A) a decree or order for relief in respect
of the Issuer in an involuntary proceeding under any
applicable bankruptcy, insolvency, reorganization or
other similar law and such decree or order shall remain
unstayed and in effect for a period of 60 consecutive
days; or
(B) a decree or order adjudging the Issuer
to be insolvent, or approving a petition seeking
reorganization, arrangement, adjustment or composition
of the Issuer and such decree or order shall remain
unstayed and in effect for a period of 60 consecutive
days; or
(C) a decree or order appointing any person
to act as a custodian, receiver, liquidator, assignee,
trustee or other similar official of the Issuer or of
any substantial part of the property of the Issuer, or
ordering the winding up or liquidation of the affairs
of the Issuer and such decree or order shall remain
unstayed and in effect for a period of 60 consecutive
days; or
(iv) the commencement by the Issuer of a voluntary
case or proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar law or of any other case or
proceeding seeking to be adjudicated bankrupt or insolvent or the
consent by the Issuer to the entry of a decree or order for
relief in an involuntary case or proceeding under any applicable
bankruptcy, insolvency, reorganization or other similar law or to
the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by the Issuer of a petition
or answer or consent seeking reorganization or relief under any
applicable law, or the consent by the Issuer to the filing of
such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or similar
official for the Issuer or for any substantial part of the
property of the Issuer, or the making by the Issuer of an
assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debts generally as they
become due or the taking of corporate action by the Issuer in
furtherance of any such action.
(b) Acceleration. If an event of Default occurs and
is continuing, then the holders of not less than twenty-five
percent (25%) in principal amount of the outstanding Notes may
declare the principal of all the Notes, and the interest accrue
thereon, to be due and payable immediately, by notice in writing
to the Issuer, and upon such declaration such amount shall become
immediately due and payable. At any time after such a
declaration has been made and before a judgment order or decree
for payment of the amount due has been obtained, the holders of
not less than a majority in principal amount of the outstanding
Notes, by written notice to the Issuer, may rescind and annul
such declaration and its consequences if: (i) the Issuer has paid
a sum of money sufficient to pay all overdue installments of
interest on all Notes, the principal of all Notes if after August
1, 2000, all sums advanced as costs of collection and reasonable
attorney's fees incurred in collection; and (ii) all events of
default shall have been cured or waived in writing by the holders
less than a majority in principal amount of the outstanding
Notes.
If a declaration has been made as set forth above and
has not been rescinded and annulled, and the Issuer has not paid
all amounts then due under all the Notes, the holders of not less
than twenty-five percent (25%) in principal amount of the
outstanding Notes may in their names, for the benefit of all
holders of outstanding Notes, institute a judicial proceeding for
the collection of the money due and unpaid under all Notes, may
prosecute such proceeding to judgment or final decree, and may
enforce the same against the Issuer.
The holders of not less than twenty-five percent (25%)
in principal amount of the outstanding Notes may prosecute and
enforce all rights of action and claim given to such holders
without the possession of any of the Notes or the production
thereof in any proceeding relating thereto and any recovery of
judgment, after provision for or payment of the reasonable
compensation and expenses of counsel, shall be for the ratable
benefit of each and every holder of an outstanding Note in
respect of which such the judgment has been recovered.
(c) Restriction on Holders. No holder of any Note
shall (except in conjunction with other holders who, together
with such holders constitute the holders of not less than twenty-
five percent (25%) in principal amount of the outstanding Notes)
have any rights to institute any proceeding, judicial or
otherwise, with respect to the Note, or for appointment of a
receiver or trustee, or for any other remedy hereunder unless:
(i) such holder has previously given written notice of such Event
of Default to the Company and (ii) the holders of not less than
twenty-five percent (25%) of the outstanding Notes have not
instituted a judicial proceeding under paragraph 5(b) hereof for
collection, it being understood and intended that no one or more
of such holders shall have any right in any manner whatever by
virtue of, or by availing of, any provision of any Note to
effect, disturb or prejudice the rights of any other holders of
the Notes, or to obtain or to seek to obtain priority or
preference over any other holders of the Notes or to enforce any
right under this Note, except in the manner herein provided and
for the equal and ratable benefit of all such holders.
(d) Absolute Right to Payment. Notwithstanding any
other provision in this Note, the holder of this Note shall have
the right, which is absolute and unconditional, to receive
payment of the principal of and interest on such Note on the
stated maturity therefor specified above and to institute suit
for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such holder.
(e) Non-Exclusive Rights and Remedies. No right or
remedy herein conferred upon or reserved to each and every holder
of a Note is intended to be exclusive of any other right or
remedy, and every right and remedy, to the extent permitted by
law, shall be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or exercise of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or exercise of any other appropriate right or remedy.
(f) Waiver. No delay or omission of any holder of any
Note to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to any
holder of a Note may be exercised from time to time, and as often
as may be deemed expedient by such holder.
(g) List of Noteholders. The Issuer shall furnish or
cause to be furnished to each holder of a Note, within thirty
(30) days after the receipt by the Issuer of a written request
therefor, a list of all holders of Notes including the name and
last known address of such holder and the outstanding principal
amount of the Note(s) held by such holder.
6. Redemption. The Notes may be redeemed at the option of
the Issuer at any time as a whole, or from time to time in part
substantially pro rata, upon the notice referred to below, at a
redemption price of one hundred five percent (105%) of the
principal amount thereof together with interest accrued on the
principal amount redeemed to the date fixed for redemption.
7. Notice of Redemption, etc. Notice of redemption shall
be mailed to the holders of the Notes not less than 30 days prior
to the date fixed for redemption, to their last addresses as they
shall appear upon the records of the Issuer. If this Note is
redeemed in part, the Issuer shall, at its option and without
charge to the holder hereof, either (i) execute and deliver to
the holder a Note for the unredeemed balance of the principal
amount thereof, or (ii) make note thereon of the portion of the
principal amount hereof so called for redemption and redeemed,
upon surrender of this Note at the principal office of the Issuer
in St. Petersburg, Florida. Following the date fixed for
redemption, interest shall be payable only on the portion of this
Note not so called for redemption.
8. Conversion of Securities.
(a) Conversion Privilege and Conversion Price. At any
time after the expiration of twelve months after this Note was
purchased from the Company, subject to and upon compliance with
the provisions of this paragraph 8, at the option of the Holder
thereof, up to 85% of the original principal amount of any Note
or any portion thereof which equals $1,000 or any integral
multiple thereof may be converted into fully paid and
nonassessable shares (calculated as to each conversion to the
nearest whole share) of the Issuer's common stock, $.01 per share
("Common Stock"), at the conversion price set forth below. Such
conversion right shall expire at the close of business on July
31, 2000. In case a Note or portion thereof is called for
redemption, such conversion right in respect of the Note or
portion so called shall expire at the close of business on the
business day immediately preceding the date fixed for redemption,
unless the Company defaults in making the payment due upon
redemption.
The price at which shares of Common Stock shall be
delivered upon conversion (herein called the "conversion price")
shall be initially $1.875 per share of Common Stock. The
conversion price shall be adjusted in certain instances as
provided in subparagraphs (d)(i), (d)(ii), (d) (iii) and (d)(vii)
of this paragraph 8.
(b) Exercise of Conversion Privilege. In order to
exercise the conversion privilege, the Holder of any Note shall
surrender such Note, duly endorsed or assigned to the Company or
in blank, at the principal executive office of the Company ,
accompanied by written notice to the Company at such office that
the Holder elects to convert such Note or, if less than the
entire principal amount thereof is to be converted, the portion
thereof to be converted. In the case of any Note which is
converted, accrued interest payable after the date of conversion
of such Note shall be prorated to the date of conversion.
Notes shall be deemed to have been converted
immediately prior to the close of business on the day of
surrender of such Notes for conversion in accordance with the
foregoing provisions, and at such time the rights of the Holders
of such Notes as Holders shall cease, and the person or persons
entitled to receive the Common Stock issuable upon conversion
shall be treated for all purposes as the record holder or holders
of such Common Stock as an after such time. As promptly as
practicable on or after the conversion date, the Company shall
issue and shall deliver to the Holder a certificate or
certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in lieu of any
fraction of a share, as provided in subparagraph 8(c).
In the case of any Note which is converted in part
only, upon such conversion the Company shall execute and deliver
to the Holder thereof, at the expense of the Company, a new Note
or Notes of authorized denominations in aggregate principal
amount equal to the unconverted portion of the principal amount
of such Note.
(c) Fractions of Shares. No fractional share of
Common Stock shall be issued upon conversion of Notes. If more
than one Note shall be surrendered for conversion at one time by
the same holder, the number of full shares which shall be
issuable upon conversion thereof shall be computed on the basis
of the aggregate principal amount of the Notes (or specified
portions thereof) so surrendered. Instead of any fractional
share of Common Stock which would otherwise be issuable upon
conversion of any Note or Notes (or specified portions thereof),
the Company shall pay a cash adjustment in respect of such
fractional share in an amount equal to such fraction multiplied
by the Closing Price (as hereinafter defined) at the close of
business on the day of conversion (or, if such day is not a
trading day, on the trading day immediately preceding such day).
(d) Adjustment of Conversion Price.
(i) In case the Company shall (A) issue Common
Stock as a dividend or distribution on its capital stock,
including the Common Stock, (B) combine its outstanding shares of
Common Stock into a smaller number of shares, (C) subdivide its
outstanding shares of Common Stock into a greater number of
shares, or (D) issue by reclassification of its Common Stock any
shares of capital stock of the Company, the conversion price in
effect immediately prior to such action shall be adjusted so that
the Holder of any Note thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock
or other capital stock of the Company that it would have owned or
been entitled to receive immediately following such action had
such Note been converted immediately prior to the occurrence of
such action. An adjustment made pursuant to this subparagraph
(d)(i) shall become effective immediately after the record date,
in the case of a dividend or distribution, or immediately after
the effective date, in the case of a subdivision, combination or
reclassification.
(ii) In case the Company shall issue rights,
warrants or options to all holders of its outstanding shares of
Common Stock entitling them to subscribe for or purchase shares
of Common Stock (or securities convertible into Common Stock) at
a price per share less than the Current Market Price per share
(as determined pursuant to subparagraph (iv) of this paragraph
8(d)) of the Common Stock, the conversion price in effect
immediately prior thereto shall be adjusted so that it shall
equal the price determined by multiplying the conversion price in
effect immediately prior to the date of issuance of such rights,
warrants or options by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding on the date of
issuance of such rights, warrants or options (immediately prior
to such issuance) plus the number of shares that the aggregate
offering price of the total number of shares so offered would
purchase at such Current Market Price, and of which the
denominator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights, warrants or
options immediately prior to such issuance) plus the number of
additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall be made successively whenever
any rights, warrants or options are issued, and shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such rights, warrants or
options. In determining whether any rights, warrants or options
entitle the holders to subscribe for or purchase shares of Common
Stock at less than such Current Market Price, and in determining
the aggregate offering price of such shares of Common Stock,
there shall be taken into account any consideration received by
the Company for such rights, warrants or options, the value of
such consideration, if other than cash, to be determined by the
Company's Board of Directors (whose determination shall be
conclusive); provided, however, that rights, warrants or options
issued by the Company to all holders of its Common Stock
entitling the holders thereof to subscribe for or purchase shares
of Common Stock, which rights, warrants or options (A) are deemed
to be transferred with such shares of Common Stock, (B) are not
exercisable and (C) are also issued in respect of future issuance
of Common Stock, in each case in clauses (A) through (C) until
the occurrence of a specified event or events, shall, for
purposes of this subparagraph 8(d)(ii), not be deemed issued
until the occurrence of the earliest such specified event.
(iii) In case the Company shall distribute to
all holders of its outstanding Common Stock any shares of a
capital stock (other than Common stock), evidences of its
indebtedness or assets (including securities and cash, but
excluding any regular periodic cash dividend paid from surplus of
the Company and dividends or distributions payable in stock for
which adjustment is made pursuant to subsection (i) of this
paragraph 8(d)) or rights, warrants or options to subscribe for
or purchase securities of the Company (excluding those referred
to in subparagraph (ii) of this paragraph 8(d)), then in each
such case the conversion price shall be adjusted so that the same
shall equal the price determined by multiplying the conversion
price in effect immediately prior to the record date of such
distribution by a fraction of which the numerator shall be the
Current Market Price per share (as determined pursuant to the
subparagraph (iv) of this paragraph 8(d) of the Common Stock less
the fair market value on such record date (as determined by the
Board of Directors, whose determination shall be conclusive) of
the portion of the capital stock or the evidences of indebtedness
or the assets so distributed to the Holder of one share of Common
stock or of such rights, warrants or options applicable to one
share of Common Stock, and of which the denominator shall be such
Current Market Price per share of Common Stock. Such adjustment
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such
distribution; provided, however, that rights, warrants or options
issued by the Company to all holders of its Common Stock
entitling the holders thereof to subscribe for or purchase shares
of securities of the Company (excluding those referred to in
subsection (ii) of this paragraph 8(d)), which rights, warrants
or options (A) are deemed to be transferred with such shares of
Common Stock, (B) are not exercisable and (C) are also issued in
respect of future issuance of Common Stock, in each case in
clauses (A) through (C) until the occurrence of a specified event
or events, shall, for purposes of this paragraph 8(d), not be
deemed issued until the occurrence of the earliest such specified
event.
(iv) For the purpose of any computation under
subparagraphs (ii) and (iii) of this paragraph 8(d), the Current
Market Price per share of Common stock on any date shall be
deemed to be the average of the Daily Market Prices (as defined
herein) for the shorter of (A) 30 consecutive business days
ending on the last full trading day on the exchange or market
referred to in determining such daily market prices prior to the
Time of Determination (as defined herein) or (B) the period
commencing on the date next succeeding the first public
announcement of the issuance of such rights or warrants or such
distribution, as the case may be, through such last full trading
day prior to the Time of Determination. "Daily Market Price"
means the price of a share of Common Stock on the relevant date,
determined on the basis of the last reported sale price regular
way of the Common Stock as reported on the Nasdaq National
Market, or if there is no such reported sale on the day in
question, on the basis of the average bid and asked quotations
regular way as so reported. "Time of Determination" means for
purposes of paragraph 8(d)(ii) or (iii), the record date for
determining stockholders entitled to receive the rights, warrants
or distributions referred to in paragraph 8(d)(i) and (ii).
(v) In any case in which this paragraph 8(d)
shall require that an adjustment be made immediately following a
record date or an effective date, the Company may elect to defer
(but only for ten business days) issuing to the Holder of any
Note converted after such record date or effective date the
shares of Common Stock issuable upon such conversion over and
above the shares of Common Stock issuable upon such conversion on
the basis of the conversion price prior to adjustment and paying
to such Holder any amount of cash in lieu of a fractional share.
(vi) No adjustment in the conversion price shall
be required to be made unless such adjustment would require an
increase or decrease of at least 1% of such price; provided,
however, that any adjustments that by reason of this subparagraph
(vi) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this paragraph 8(d) shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case
may be. Anything in this paragraph 8(d) to the contrary
notwithstanding, the Company shall be entitled to make such
reduction in the conversion price, in addition to those
adjustments required by this paragraph 8(d), as it in its
discretion shall determine to be advisable in order that any
stock dividend, subdivision of shares, distribution of rights to
purchase stock or securities or distribution of securities
convertible into or exchangeable for stock hereafter made by the
Company to its shareholders shall not be taxable to the
recipients.
(vii) In the event that at any time as a
result of an adjustment made pursuant to subparagraph (i) of this
paragraph 8(d), the holder of any Security thereafter surrendered
for conversion shall become entitled to receive any shares of the
Company other than shares of Common Stock, thereafter the
conversion price of such other shares so receivable upon
conversion of any Security shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock
contained in this paragraph 8.
(e) Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted as herein provided:
(i) the Company shall compute the adjusted
conversion price in accordance with paragraph 8(d) and it shall
prepare a certificate signed by the Treasurer or Chief Financial
Officer of the Company setting forth the adjusted conversion
price and showing in reasonable detail the facts upon which such
adjustment is based; and
(ii) such certificate and a notice stating that
the conversion price has been adjusted and setting forth the
adjusted conversion price shall forthwith be prepared, and as
soon as practicable after it is prepared, shall be mailed by the
Company at its expense to all Holders at their last addresses as
they shall appear on the Company's records.
(f) Taxes on Conversions. The Company will pay any
and all original issuance, transfer, stamp and other similar
taxes that may be payable in respect of the issue or delivery of
shares of Common Stock on conversion of Notes pursuant hereto.
The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue
and delivery of shares of Common Stock in a name other than that
of the Holder of the Note or Notes to be converted, and no such
issue or delivery shall be made unless and until the person
requesting such issue has paid to the Company the amount of any
such tax, or has established to the satisfaction of the Company
that such tax has been paid.
(g) Covenant as to Common Stock. The Company
covenants that all shares of Common Stock which may be issued
upon conversion of Notes will upon issue be validly issued, fully
paid and nonassessable.
(h) Cancellation of Converted Notes. All Notes
delivered for conversion shall be canceled by the Company.
(i) Provisions as to Consolidation, Merger or Sale of
Assets. Notwithstanding any other provision herein to the
contrary, in case of any consolidation or merger to which the
Company is a party (other than a merger or consolidation in which
the Company is the continuing corporation and in which the
Company's Common Stock outstanding immediately prior to the
merger or consolidation is not exchanged for cash or the
securities or other property of another corporation), or in case
of any sale or conveyance to another corporation of the property
of the Company as an entirety or substantially as an entirety, or
in the case of any statutory exchange of securities with another
corporation (other than in connection with a merger or
acquisition) the corporation formed by such consolidation or the
corporation whose securities, cash or other property will
immediately after the merger or consolidation be owned, by virtue
of the merger or consolidation by the holders of Common Stock of
the Company immediately prior to the merger, or the corporation
that shall have acquired such assets or securities of the
Company, as the case may be, shall promptly execute and deliver
to the Holders an agreement providing that the holder of each
Note then outstanding shall have the right thereafter to convert
such Note into the kind and amount of securities, cash or other
property receivable upon such consolidation, merger, statutory
exchange, sale or conveyance by a holder of the number of shares
of Common Stock into which such Note might have been converted
immediately prior to such consolidation, merger, statutory
exchange, sale or conveyance assuming such holder of Common Stock
did not exercise its rights of election, if any, as to the kind
or amount of securities, cash or other property receivable upon
such consolidation, merger, statutory exchange, sale or
conveyance (provided that, if the kind or amount of securities,
cash or other property receivable upon such consolidation,
merger, statutory exchange, sale or conveyance is not the same
for each share of Common Stock in respect of which such rights of
election shall not have been exercised (a "non-electing share"),
then for the purposes of this paragraph 9, the kind and amount of
securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance for
each non-electing share shall be deemed to be the kind and amount
so receivable per share by a plurality of the non-electing
shares). Such Agreement shall provide for appropriate adjustment
with respect to the rights of the holders of the Notes, to the
end that the provisions set forth in this paragraph 8 shall
thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other
securities or property thereafter deliverable on the conversion
of the Notes.
The above provisions of this paragraph 8(i) shall similarly
apply to successive consolidations, mergers, statutory exchanges,
sales or conveyances.
9. Miscellaneous.
The Issuer agrees to pay all costs of collection of the
Notes, including reasonable attorneys' fees. Reasonable
attorneys' fees are defined to include, but not be limited, all
fees and costs incurred in all matters of collection and
enforcement, construction and interpretation before, during, and
after suit, trial, proceedings, court-ordered mediation or
arbitration, and appeals, as well as appearances in and connected
with any bankruptcy proceedings or creditors or organization or
similar proceedings.
The validity, interpretation and performance of the
Notes shall be governed by the laws of the State of Florida,
without giving effect to principals of comity or conflicts of law
thereof.
IN WITNESS WHEREOF, the Issuer has caused this Note to be
signed in its name by its President and attested by its
Secretary.
Dated: July 16, 1997
ATTEST: PAGES, INC.
/s/ Jean P. Davis By: /s/ S. Robert
Davis
Asst. Secretary as President
0016417.01
<PAGE>
EXHIBIT 11
PAGES, INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- -----------------------------
1997 1996 1997 1996
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Primary
Weighted average number of common shares
outstanding 6,360,000 5,483,000 6,251,000 5,366,000
Adjustment for stock options which have a dilutive
effect based upon the average market price for
common stock:
Add dilutive stock options - - - -
Deduct shares that could be repurchased
from the proceeds of dilutive options - - - -
--------- --------- --------- ----------
Weighed average common and common equivalent shares 6,360,000 5,483,000 6,251,000 5,366,000
========= ========= ========= ==========
Net income(loss) $(1,767,220) $(2,057,547) (2,852,123) $465,460
Earnings adjustment (20% rule) - - - -
--------- --------- --------- ----------
Net income(loss) for computation purposes $(1,767,220) $(2,057,547) $(2,852,123) $ 465,460
========= ========= ========= ==========
Income(loss) per common and common equivalent share $ (.28) $ (.38) $ (.46) $ .09
========= ========= ========= ==========
Fully diluted
Weighted average number of common shares
outstanding 6,360,000 5,483,000 6,251,000 5,366,000
Adjustment for stock options which have a dilutive
effect based upon the market price for common stock
at the end of the period:
Add dilutive stock options 967,000 368,000
Deduct shares that could be repurchased
from the proceeds of dilutive options (706,000) (265,000) --
--------- --------- --------- ----------
Fully diluted shares 6,621,000 5,483,000 6,354,000 5,366,000
========= ========= ========= ==========
Net income(loss) $(1,767,220) $(2,057,547) $(2,852,123) $ 465,460
Earnings adjustment (20% rule) -- -- -- --
--------- --------- --------- ----------
Net income(loss) for computation purposes $(1,767,220) $(2,057,547) $(2,852,123) $ 465,460
========= ========= ========= ==========
Income(loss) per common and common equivalent share
assuming full dilution $ (.27) $ (.38) $ (.45) $ .09
========= ========= ========= ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 177,282
<SECURITIES> 0
<RECEIVABLES> 3,780,638
<ALLOWANCES> 278,000
<INVENTORY> 16,566,546
<CURRENT-ASSETS> 22,268,184
<PP&E> 3,834,819
<DEPRECIATION> 1,437,893
<TOTAL-ASSETS> 34,325,161
<CURRENT-LIABILITIES> 24,595,260
<BONDS> 2,177,312
0
0
<COMMON> 67,627
<OTHER-SE> 7,484,962
<TOTAL-LIABILITY-AND-EQUITY> 34,325,161
<SALES> 17,209,109
<TOTAL-REVENUES> 17,209,109
<CGS> 10,317,484
<TOTAL-COSTS> 10,317,484
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 614,889
<INCOME-PRETAX> (2,852,123)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,852,123)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,852,123)
<EPS-PRIMARY> (.46)
<EPS-DILUTED> (.45)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 177,404
<SECURITIES> 0
<RECEIVABLES> 5,970,614
<ALLOWANCES> 499,000
<INVENTORY> 21,593,383
<CURRENT-ASSETS> 29,350,972
<PP&E> 8,924,952
<DEPRECIATION> 2,400,650
<TOTAL-ASSETS> 42,676,268
<CURRENT-LIABILITIES> 30,656,076
<BONDS> 1,378,267
0
0
<COMMON> 64,007
<OTHER-SE> 10,577,918
<TOTAL-LIABILITY-AND-EQUITY> 42,676,268
<SALES> 19,469,969
<TOTAL-REVENUES> 19,469,969
<CGS> 11,475,914
<TOTAL-COSTS> 11,475,914
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 733,777
<INCOME-PRETAX> 48,134
<INCOME-TAX> 0
<INCOME-CONTINUING> 48,134
<DISCONTINUED> (577,338)
<EXTRAORDINARY> 0
<CHANGES> 994,664
<NET-INCOME> 465,460
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
