UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994.
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 0-15512
ALPNET, INC.
(Exact name of registrant as specified in its charter)
UTAH 87-0356708
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4444 SOUTH 700 EAST, SUITE #204, SALT LAKE CITY, UTAH 84107-3075
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 265-3300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
The aggregate market value (based on the average closing bid and ask prices
of the Common Stock reported on the NASDAQ System on March 17, 1995) of the
voting stock held by non-affiliates of the registrant as of March 17, 1995, was
$3,524,707.
The number of shares outstanding of the registrant's Common Stock as of
March 17, 1995, was 15,562,223.
DOCUMENTS INCORPORATED BY REFERENCE
Listed below are documents from which information is incorporated by
reference herein, and the Parts of this Form 10-K into which such incorporation
by reference is made:
Definitive Proxy Statement dated March 27, 1995 - Part III of this Form 10-
K.
TABLE OF CONTENTS
FORM 10-K
ITEM NO. NAME OF ITEM PAGE
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
SIGNATURES
PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
ALPNET, Inc., incorporated in the state of Utah in 1980, and the subsidiaries it
acquired in 1987 and 1988 (the "COMPANY" or "ALPNET"), together with its
affiliates, form a worldwide network dedicated to providing specialized language
services for businesses engaged in international trade. The Company has
combined computer translation technology with experienced human translators in
its worldwide network to provide a full spectrum of services to fulfill the
language needs of customers in international business. The following table
shows the operating companies in the network.
ALPNET, Inc. U.S.A.
Multiscript International Inc. Canada
ALPNET U.K. Ltd. U.K.
ALPNET S.A. Switzerland
Interlingua S.L. Spain
Dr. W.D. Haehl GmbH Germany
INTERDOC SARL France
Interlingua Language Services Ltd. Hong Kong
Interlingua Language Services (Singapore) Pte. Ltd. Singapore
ALPNET, Inc. Korea Branch Korea
ALPNET affiliates are independent companies in which ALPNET has no ownership
interest, but which produce work for the Company. ALPNET affiliates are located
in the following cities:
Utrecht, The Netherlands Prague, Czech Republic
Stockholm, Sweden Budapest, Hungary
Milan, Italy Moscow, Russia
Buenos Aires, Argentina Charleroi, Belgium
Sao Paulo, Brazil
In 1987 and 1988, ALPNET organized holding companies in certain countries in
connection with the formation of its network and related acquisitions. The
Korea branch of ALPNET, Inc. was formed in 1994.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENT
The Company operates in one business segment: language translation and related
services.
(C) NARRATIVE DESCRIPTION OF BUSINESS
GENERAL
The Company provides a full range of language services specifically tailored to
clients engaged in international business. ALPNET translates product
information, brochures, operating manuals, schematics, maintenance manuals,
training materials and a host of other materials for businesses engaged in
selling products and services into markets where multiple languages are
required. The Company also has specialized capabilities to help its customers
localize the actual products they sell in foreign markets. This may be as
complex as the translation of software in computer-based products, or as simple
as the translation of packaging and labels for traditional products. ALPNET
provides interpretation services for private business meetings, as well as for
business conferences, enabling delegates to meet and communicate. The Company
also provides intensive language training courses for individuals with
assignments to foreign locations. Less than 10% of the Company's revenues
derive from interpretation and language training services.
The Company has the knowledge and experience to manage a global project from a
central point, through a single contact. This eliminates the need for the client
to have to deal with several different providers in different locations in order
to receive translation and related services in multiple languages. Because of
the Company's international organization and worldwide locations, it can also
deal directly with a client's international counterparts for development of
preferred terminologies and quality reviews and ensure that the translated
product is "localized" or "customized" according to the client's standards and
preferences.
The Company has developed a set of sophisticated computer programs, collectively
called the Translation Support System ("TSS"), which it uses to differentiate
itself from other translation providers in the market. The use of TSS by
experienced translation professionals allows the Company to provide better
quality translation services at lower overall cost, by standardizing the use of
approved terminology, providing translation consistency, and preserving
formatting information for later use in desktop publishing. TSS facilitates
these functions and provides ALPNET personnel with the means to accomplish the
complete translation and desktop publishing process on an improved schedule,
thereby allowing clients to bring products to market faster.
TSS can be utilized in translation from English, French, or German, into any
Roman alphabet language, as well as Japanese, Korean, and simplified and
traditional Chinese. TSS is a proprietary asset, and the Company protects its
use with non-disclosure agreements and license agreements, as well as protection
provided by copyright and trademark law.
The Company believes that today's multinational companies do not want to be in
the translation business, and would prefer to devote their resources to managing
their principal businesses. Translation is ALPNET's principal business and it
manages that business on behalf of its client "partners."
Project management services provided by the Company eliminate the client's need
for a large and costly in-house staff to manage the translation process. The
Company coordinates the translation into as many languages as required, on one
schedule, under a common contract, and provides a single status reporting system
and point of contact.
Following translation, ALPNET can provide any form of production support needed
including layout and design, camera-ready copy, printing and magnetic media
production, together with packaging and distribution. The Company can produce
complete, final products to its clients' specifications.
The Company also has software development capabilities, allowing it to provide
software product localization services, and to develop interfaces tailored to
the client's information and document creation tools and systems if required.
This assures that the client's tools and the Company's translation system are
integrated and compatible.
The Company is keenly aware that the internationalization process is much more
than just translation and, accordingly, has organized its network to provide the
services and support required to affect this process economically and
efficiently for its clients.
TRANSLATION MARKET
Recent political and economic changes have created and expanded opportunities
for significant increases in international trade. As companies increase their
operations on a global basis, they require marketing, sales and technical
information in a wide variety of languages. Traditionally, translation services
have been supplied by in-house departments, governmental units, commercial
translation agencies and individual freelance translators. While there are
thousands of individual free-lance translators and many commercial agencies, it
appears that all but a handful of operations are too small to effectively deal
with the increasingly complex translation and multilingual publication
requirements of large corporate businesses. The Company is well positioned to
serve such companies. Multinational companies are looking for a new type of
supplier to replace the cottage labor that has historically dominated the
translation services industry. The Company has combined its proprietary
computer translation technology with established suppliers to enable it to
obtain a significant market share of this expanding industry. The Company
believes that the available market is much larger than the combined revenue of
the current providers and that no one provider accounts for a significant
portion of the commercial translation market.
MARKETING
The Company has developed and implemented a very structured, multi-phased sales
plan in several of its key markets to enable it to achieve its growth
objectives. The following information summarizes this plan.
Strategy:
o Offer basic translation services and expand revenues by providing
value-added pre- and post-translation services.
o Target key industry segments which track to the ideal client
profile.
o Identification of specific prospects in targeted industries.
o Telephone contact to establish client interest and need.
o Personalized direct-mail introduction to ALPNET.
o Consultative selling from experienced direct sales force.
o Utilize an internal sales support and project management
organization to provide support to the sales force and
interface to the ALPNET network production facilities.
Targeted industries:
o Computer Hardware and Software
o Automotive
o Chemical and Pharmaceutical
o Telecommunications and Electronics
o Aerospace and Defense
o Banking and Finance
Ideal client profile:
o Multilingual translation needs
o Translation of documentation required to support international
revenue
o Need is continuous or growing
o Information is developed "on-line"
o Has unique terminology requirements
o Recognize translation as a purchased service
o Require value-added services with translation
Other Value-Added Services:
o Pre-translation consulting including:
Organization
Planning
Developing materials for translation
Administration
Project/facilities management
Custom development, layout, design and production
o Post-translation services including:
Desktop publishing
Typesetting
Multilingual printing
Packaging
Storage
Shipping
MAJOR CUSTOMERS
Fourteen percent of the Company's 1994 revenues were for services provided to a
single customer in the computer industry. Relations with this customer are good
and management believes a significant portion of 1995 revenues will also be
attributable to this customer. No other customer accounts for more than 10% of
revenues.
MANPOWER
The Company requires both sales and project management personnel to obtain and
manage major translation projects. In all network countries, sales is one of
the primary responsibilities of the country manager and the local direct sales
personnel. The Company also has project managers dedicated to specific
clients. Project managers are introduced to potential clients as a part of
the sales planand are vital for obtaining major contracts, where the ability
to demonstrate the Company's management strengths can be as important as
the quality of translation itself.
BACKLOGS
As of December 31, 1994, the Company and its subsidiaries had a backlog of
approximately $1,900,000 of translation services orders compared with a backlog
of approximately $900,000 as of December 31, 1993. The increase in backlog in
1994 is a result of an increase in both the size and volume of customer orders
in most countries, but especially in the U.K. and the U.S.
COMPETITION
The Company experiences competition in two primary forms: (1) large commercial
translation services companies, and (2) local translation services providers.
The Company is aware of very few large commercial translation services
companies, and the Company believes that no one company accounts for a
significant portion of the commercial translation market. Certain of the
Company's principal competitors are owned by large companies in the publishing
industry.
Local translation services providers generally service the needs of specific
customers on a very localized basis. These providers typically consist of a
small number of translators who provide translation into one or two languages,
or serve only limited market segments. Although they frequently cooperate in
loosely formed networks and alliances, these competitors do not presently offer
the broad range of languages, services and support that are available from
ALPNET.
Beginning in late 1993 and continuing throughout 1994 and into early 1995, the
translation industry has been extremely price-competitive. Many competitors
adopted a policy of buying market share by cutting prices and this practice has
escalated throughout the industry as other competitors have reduced prices in an
effort to maintain their revenues. This has led to the loss of some orders and
required the Company to re-evaluate its pricing strategy and to reduce prices in
many areas, which has had a significant affect on profitability in 1994.
Cost reductions from a restructuring in late 1992 and the use of proprietary
computer translation technology has allowed the Company to compete at reduced
price levels. Nevertheless, the Company does not have the financial resources
of some of its largest competitors. Management does believe the Company is
better positioned to sustain operations at these levels than many of its smaller
competitors, and this situation could ultimately be resolved by the elimination
of some current providers which may not be able to continue in business at the
current price levels. Although the Company must effectively compete and prices
have been reduced, the Company has determined that it will not be the price
leader. ALPNET will compete by offering fair prices for superior quality
service.
1994 revenues and results have been affected by these conditions but the effect
on the first half of 1994 was much greater than it was during the last half of
the year. 1995 results will also be affected, the extent of which depends on
how quickly the competitive situation improves.
DEVELOPMENT AND CUSTOMER SUPPORT
During 1994, 1993 and 1992, the Company spent approximately $124,000 , $179,000
and $279,000, respectively, on technology development and support activities.
These amounts reflect the amounts spent on the further development and support
of technology for use within the Company. Management does not expect
significant variation from the 1994 level of expenditure.
EMPLOYEES
As of December 31, 1994, the Company employed 224 persons. Due to the nature of
its business, the Company also retains a large number of free-lance translators
on an as-needed basis.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
Financial information concerning the Company's foreign and domestic operations
is presented in Note 2 to the Consolidated Financial Statements included in Item
8 of this Form 10-K and is incorporated herein by reference.
(E) EXECUTIVE OFFICERS OF ALPNET, INC.
The following table sets forth certain information concerning the executive
officers of the Company as of March 17, 1995.
Name, Age and
Positions
with the Company Business Experience
Thomas F. Seal, 41 Mr. Seal joined the Company in January
President, Chief 1987 as its Vice President of Research
Executive Officer and Development. In June 1988, Mr. Seal
and Director assumed responsibility for the Company's
Canadian operations and he resided in
Canada from October 1988 to March 1989
where he directed the restructuring of
Canadian operations. In April 1989, Mr.
Seal returned to the U.S., and was named
President and Chief Executive Officer on
May 16, 1989. Mr. Seal was elected to
the Board of Directors in June 1989.
Mr. Seal received his B.S. degree in
Computer Science from Brigham Young
University in 1975, and since that time
has held a variety of technical and
management positions in companies
related to the computer industry.
John W. Wittwer, 49 Mr. Wittwer is one of the founders of
Executive Vice the Company. He is currently serving as
President Executive Vice President, and has been
and Director employed by the Company since 1982
serving in various positions including
Vice President of Finance and
Administration, Director of
Administration, Executive Vice
President, Chief Executive Officer,
Treasurer and Chief Financial and
Accounting Officer. Mr. Wittwer served
as Executive Vice President of R. L.
Warner Enterprises from 1978 to 1982.
Mr. Wittwer is a Certified Public
Accountant and practiced public
accounting with Ernst & Young and other
certified public accounting firms from
1968 to 1978. Mr. Wittwer has served as
a director of the Company since May
1993.
D. Kerry Stubbs, 40 Mr. Stubbs joined the Company in
Chief Financial November 1993 as Vice President Finance.
Officer, He has been Chief Financial Officer and
Treasurer and Treasurer since June 1994 and Secretary
Secretary since February 1995. His
responsibilities include coordinating
the international accounting, finance
and taxation functions of the Company as
well as managing and directing these
functions in the U.S. A Certified
Public Accountant, he practiced with
Ernst & Young for 13 years prior to
joining the Company.
There is no family relationship between any of the directors or executive
officers of the Company.
ITEM 2: PROPERTIES
<TABLE>
ALPNET's world headquarters are located in Salt Lake City, Utah. Sales and
production facilities leased by the Company are listed below.
<CAPTION>
Location Square Feet
<S> <C>
United States
Salt Lake City, Utah 5,300
Orem, Utah(1) 10,200
Other locations 400
United Kingdom
Croydon(1) 12,800
Birmingham, Nottingham, Manchester, Newcastle, Leeds and Glasgow 6,900
Spain, Barcelona(2) and Madrid 2,800
Hong Kong 2,500
Singapore 1,500
Korea 1,500
Germany
Stuttgart 9,900
Munich, Frankfurt, Dusseldorf, Hamburg and Berlin 5,000
France, Paris 1,000
Canada, Montreal 9,500
Switzerland, Zurich 400
<FN>
(1) Approximately 12,500 square feet of the Company's facilities are subleased
on contracts with remaining terms of up to four years.
(2) The Company's facility in Barcelona, Spain is owned and subject to a
mortgage as described in Note 4 to the Consolidated Financial Statements
included in Item 8 of this Form 10-K.
</FN>
</TABLE>
ITEM 3: LEGAL PROCEEDINGS
None.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter ended
December 31, 1994.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
<TABLE>
ALPNET's Common Stock trades in the over-the-counter market under the NASDAQ
symbol "AILP." The following table shows the range of high and low trading
prices as reported by the NASDAQ Stock Market for the years 1993 and 1994.
<CAPTION>
1993 HIGH LOW
<S> <C> <C>
Quarter ended March 31, 1993 $ .94 $ .31
Quarter ended June 30, 1993 1.44 .53
Quarter ended September 30, 1993 1.00 .50
Quarter ended December 31, 1993 1.19 .69
<CAPTION>
1994 HIGH LOW
<S> <C> <C>
Quarter ended March 31, 1994 $ .84 $ .31
Quarter ended June 30, 1994 .87 .31
Quarter ended September 30, 1994 .78 .41
Quarter ended December 31, 1994 .47 .28
</TABLE>
As of December 31, 1994, there were 546 shareholders of record. No dividends
have been declared on the Company's Common Stock. The Company is currently
prohibited from paying dividends under Utah corporate law.
ITEM 6: SELECTED FINANCIAL DATA
<TABLE>
The following selected financial data are derived from the Consolidated
Financial Statements of the Company. The data should be read in conjunction
with the Consolidated Financial Statements, related notes and other financial
information included herein.
OPERATING SUMMARY
Thousands of dollars, except per-share data
<CAPTION>
YEAR ENDED DECEMBER 31 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Sales of services $20,473 $19,459 $19,747 $23,118 $22,704
Net income (loss) (741) 458 (613) 378 (1,421)
Net income (loss) per share (.04) .03 (.05) .03 (0.13)
Cash provided by (used in)
operations (606) 371 (130) 1,647 (149)
<CAPTION>
FINANCIAL SUMMARY
Thousands of dollars and shares
AS OF DECEMBER 31 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Working capital (working
capital deficiency) $ 1,187 $ 125 $ (633) $ (610) $(1,838)
Total assets 13,223 12,743 12,233 15,520 17,411
Long-term debt and long-
term debt to affiliates,
less current portion 533 1,314 2,156 1,965 3,231
Shareholders' equity 7,177 6,089 5,146 6,335 4,979
Shares of Common
Stock outstanding 15,562 15,562 12,562 11,480 11,480
Shares of Convertible
Preferred Stock out-
standing:
Series B(1) 459 459 459 459 --
Series C(2) 585 -- -- -- --
<FN>
(1) Convertible at the rate of three common shares for each preferred share.
(2) Convertible at the rate of nine common shares for each preferred share.
</FN>
</TABLE>
A large majority of the Company's operations are in foreign countries.
Accordingly, the Company is significantly affected by foreign currency exchange
rate fluctuations. The following table shows what sales and results of
operations would have been for the years presented, had foreign currency
exchange rates remained at 1990 levels for all years.
<TABLE>
PRO FORMA DATA
Thousands of dollars
<CAPTION>
YEAR ENDED DECEMBER 31 1994 1993 1992 1991 1990
<S>
Pro forma sales of services at
1990 foreign currency <C> <C> <C> <C> <C>
exchange rates $22,459 $21,586 $19,836 $23,287 $22,704
Pro forma net income (loss) at
1990 foreign currency
exchange rates (906) 629 (594) 397 (1,421)
</TABLE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following Management's Discussion and Analysis should be read in conjunction
with the Consolidated Financial Statements and notes thereto.
FOREIGN OPERATIONS
The Company serves its customers from 27 offices in 10 countries. The
operations of the Company are predominantly located outside the U.S.
Accordingly, the Company is subject to the effects of foreign currency exchange
rate fluctuations among U.S. dollars, Canadian dollars, British pounds sterling,
German marks and other European and Asian currencies. For all of the Company's
foreign subsidiaries, the functional currency has been determined to be the
local currency. Accordingly, assets and liabilities are translated at year-end
exchange rates, and operating statement items are translated at average exchange
rates prevailing during the year. The resultant cumulative foreign currency
adjustments to the assets and liabilities are recorded as a separate component
of shareholders' equity. The 1994 foreign currency equity adjustment was
positive $514,000, compared to negative adjustments of $333,000 in 1993 and
$1,552,000 in 1992. As of December 31, 1994, the cumulative net effect to the
Company of the equity adjustment from movements in foreign currency exchange
rates was a reduction of $1.6 million in shareholders' equity. A significant
portion of the cumulative foreign currency adjustment relates to changes in the
recorded amount of goodwill.
Because most of the Company's operations are located outside the U.S. and its
foreign operations' financial results must be translated into U.S. dollars, the
Company's actual and reported financial results and financial condition are
susceptible to movements in foreign currency exchange rates. Furthermore, since
the Company has relatively few long-term monetary assets and liabilities
denominated in currencies other than the U.S. dollar, it does not have any
ongoing hedging programs in place to manage currency risk.
RESULTS OF OPERATIONS
The following paragraphs discuss 1994 results as compared with 1993 and 1993
results as compared with 1992, including the significant effects of fluctuating
foreign currency exchange rates.
The Company sustained a net loss of $741,000 in 1994 compared to net income of
$458,000 in 1993 and a net loss of $613,000 in 1992. If foreign currency
exchange rates for 1994 had remained unchanged from 1993, the Company would have
recorded a net loss of $733,000 instead of $741,000 and therefore currency
exchange rate fluctuations did not have a material affect on 1994 results. In
1993, however, such fluctuations did have a significant affect and the Company
would have recorded net income of $630,000 instead of $458,000 if currency
exchange rates for 1993 had remained unchanged from 1992 levels.
Sales of services were $20.5 million for 1994 compared to $19.5 million for 1993
and $19.7 million for 1992. The $1.0 million increase in reported sales for
1994 consisted of an increase in sales volume of $800,000 and an increase of
$200,000 due to currency exchange rate variances. The $200,000 decrease in
reported sales for 1993 consisted of an increase in sales volume of $1.6 million
and a $1.8 million decrease due to currency exchange rate variances.
The increases in sales volume in both 1994 and 1993 are largely the result of an
increase in the need for language related services in an increasingly global
marketplace where more and more businesses are entering foreign markets and
becoming involved in worldwide trade. Management believes that international
trade agreements such as the North American Free Trade Agreement (NAFTA) and the
General Agreement on Tariffs and Trade (GATT) have also had a positive effect on
demand for the language services provided by the Company.
The Company competes on the basis of quality, service and geographical proximity
to clients and potential clients, and opened several new offices in 1994 and
1993 in order to increase its market share in what management believes has been
and will continue to be an expanding industry. While reported revenue growth
from 1993 to 1994 was 5%, management believes the actual growth in business
volume in terms of words translated was 10% to 15%. However, because of intense
price competition which the Company encountered in 1994, prices the Company
could charge in the marketplace were severely restricted.
The following table shows a comparison of sales of services in each of the
Company's significant geographic areas for 1994, 1993 and 1992, along with the
effect of foreign currency exchange rate fluctuations on the sales between
years.
<TABLE>
Thousands of dollars
<CAPTION>
Increase (Decrease) Increase (Decrease)
in Sales of Services Total in Sales of Services Total
due to 1994/1993 due to 1993/1992
Sales Currency Increase Sales Currency Increase
1994 1993 Volume Differences (Decrease) 1992 Volume Differences (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $ 2,360 $ 2,467 $(107) $ $ (107) $ 2,458 $ 9 $ $ 9
Canada 3,404 3,077 532 (205) 327 3,493 (217) (199) (416)
Europe 15,940 15,309 245 386 631 14,532 2,658 (1,881) 777
Asia 1,955 1,268 621 66 687 1,597 (334) 5 (329)
Eliminations (3,186) (2,662) (461) (63) (524) (2,333) (572) 243 (329)
TOTAL SALES $20,473 $19,459 $ 830 $ 184 $1,014 $19,747 $1,544 $(1,832) $(288)
</TABLE>
As shown in the above table, with the exception of the U.S., which experienced a
4% sales decline, every major geographical region reported increased sales in
1994 over 1993. In the U.S., sales can fluctuate widely from period to period
due to industry conditions which are often less predictable and stable than
those found in the Company's foreign markets. Such conditions are characterized
by the inexperience of many U.S. companies in international business and clients
which may be unsophisticated in the nuances of marketing to foreign countries
and the importance of related language issues. These factors, along with the
unpredictable timing and the nonrecurring nature of most large translation
projects for U.S. companies, contribute to a deficiency of "core" or repeat
business and also have a tendency to depress the profitability of work performed
by the Company for U.S. clients. Despite these conditions, U.S. sales have
remained relatively level in 1994 from 1993, and while management is hopeful
that 1995 sales will increase over 1994, there is no assurance that this will
occur.
Canada's reported sales for 1994 increased 11% over 1993, however, the increase
would have been 17% if currency exchange rates in 1994 had remained the same as
in 1993. The increase in sales in Canada was due in part to increased
international trading as well as marketing and sales efforts which were
initiated during 1993. This increase in sales has occurred despite a difficult
economic situation in Canada, which has continued into 1995 and which is
expected to eventually depress sales if the economy and the strength of the
Canadian dollar do not improve in the coming year.
In Europe, where the U.K. and Germany contributed 87% of that region's total
reported sales for 1994, a decrease in sales from 1993 of 5% in Germany was
overshadowed by a sales increase of 12% in the U.K. The overall increase in
reported European sales of 4% in 1994 was due to currency exchange rate
fluctuations as well as sales volume increases.
The decline in sales in Germany from 1993 to 1994 was primarily attributable to
lower sales to large customers, especially during the first half of 1994, due to
a general slowdown of the German economy. Sales levels during the last half of
1994 were actually higher than average 1993 levels as the German economy
improved, but were not high enough to compensate for the low sales experienced
in the first two quarters of the year. The positive results in the U.K. were
due to several factors, including enhanced sales and marketing efforts initiated
in 1993, increased core business and more large project work, all of which was
helped by an improved economic situation in that country. The Company expects
sales to continue to expand in Europe as the investments made in new offices and
in human and equipment resources in the past two years, combine with growing
demand for language services and a generally positive economic outlook.
Nevertheless, the Company's business can be impacted dramatically by changes in
the strength of the economies of the countries in which it has a presence and
results of operations are highly dependent on general economic trends.
In Asia, 1994 sales increased 54% over 1993 levels as Hong Kong and Singapore
increased sales over the prior year by a combined total of 41%. In addition,
the Company's Korean office, which was opened in July 1994, contributed to the
improved sales results. Substantially all of the increase in reported Asian
sales in 1994 over 1993 was attributable to actual volume increases, with only a
small portion of the increase due to currency exchange rate fluctuations.
Management expects the increased demand for Asian language services to continue
into 1995 as many Asian countries are experiencing very high economic growth
rates and the interest in Asia from the business communities in the U.S., Europe
and elsewhere is accelerating rapidly.
In 1993, the Company produced fewer large translation projects for multinational
clients than in 1992. Due to poor global economic conditions, which were
prevalent throughout 1992 and much of 1993, major clients significantly reduced
the size and frequency of their orders for the translation of their product
documentation and this negatively affected sales in all major geographic regions
and in most countries, with the exception of the U.K. and Germany. As a result,
1993 sales increased in Europe, and declined in Canada and Asia, while remaining
level in the U.S. compared to 1992 sales.
The 5% increase in reported sales in Europe in 1993 over 1992 was the net result
of an 18% increase in volume, offset by a 13% decrease caused by currency
exchange rate fluctuations. The volume increase in 1993 over 1992 was
attributable to high growth rates in both the U.K. (16%) and in Germany (25%).
However, these growth rates in volume were largely negated by currency exchange
rate fluctuations and, in the U.K., the increase in sales volume was more than
offset by the movement in the currency exchange rate. Likewise, currency
exchange rate fluctuations negatively affected 1993 sales of services in every
country in which the Company operates, with the exception of Singapore.
In 1993, management increased its sales and marketing efforts in several key
markets, which consisted in part of a structured, multi-phased sales plan. The
sales strategy was specifically targeted toward multinational clients with
requirements for large volumes of technical documentation to be translated into
multiple languages. The Company believes that this plan has been and will
continue to be effective, even with unfavorable business conditions.
Cost of services sold as a percentage of sales of services has fluctuated
primarily as a result of competition in the marketplace, the volume and nature
of direct production costs of large project sales in each year, and programs to
reduce direct and indirect production costs. Due to increased competition at
the end of 1993 and continuing throughout 1994, especially with regard to
pricing, the Company's gross margins deteriorated significantly from 1993 to
1994. While the Company has largely been able to contain the growth in costs of
services sold to levels consistent with growth in the volume of work produced
and at rates at or below inflationary increases, prices charged to clients,
especially in the U.S. and Europe, have been limited by competitive price
pressures which have in turn severely compressed margins. Management expects
pressures on gross margins to continue in 1995, but does not expect pricing
pressures to intensify beyond current levels. The Company does not expect to be
able to return to 1993 pricing levels in the foreseeable future and is
continuing its efforts to contain costs to offset the effects of these pricing
pressures.
Gross margins increased from 1992 to 1993 primarily because of the successful
efforts to reduce costs which were initiated during 1992. In the third quarter
of that year, the Company took action to restructure its operations with the
principal goal of reducing direct and indirect production-related costs.
Included in 1992 results were approximately $260,000 of nonrecurring expenses
related to this restructuring which reduced ongoing expenses of the Company by
approximately $50,000 per month and enabled the Company to report net income for
the fourth quarter of 1992 and for 1993.
The decreases in development costs and in selling, general and administrative
expenses for 1994 and 1993 are also the result of management's continuing cost
control measures. Total operating expenses, including cost of services sold,
increased by $2.4 million in 1994 from 1993. This increase resulted from a $2.2
million increase in actual expenses and an increase of $200,000 due to currency
exchange rate differences. Total operating expenses in 1993 decreased by $1.4
million from 1992. This decrease resulted from a $200,000 increase in actual
expenses and a decrease of $1.6 million due to currency exchange rate
differences. The increases in actual expenses for both years resulted primarily
from the increased volume of work produced. Decreases in corporate
administrative costs have been partially offset by the costs of increased
marketing efforts and the opening of new offices in the U.S., Germany and Korea
in 1994 and 1993.
Interest expense decreased approximately $160,000 in 1994 compared to 1993 and
approximately $160,000 in 1993 compared to 1992. In 1994, the decrease resulted
primarily from the capital restructuring completed in early 1994 which
eliminated approximately $1.8 million of long-term debt to affiliates, as
discussed in more detail in Note 3 to the Consolidated Financial Statements. In
1993, the decrease in interest expense resulted from lower overall borrowings
under both short-term and long-term bank obligations, and to a lesser extent,
lower interest rates worldwide over 1992 rates.
Fluctuations in the amount of goodwill amortization resulted solely from foreign
currency exchange rate fluctuations from year to year.
The U.S. parent company and each of its subsidiaries are separate legal and
taxable entities subject to the domestic or foreign taxes pertaining to
operations in their respective jurisdictions. For tax purposes, the U.S. parent
company and most of its subsidiaries have unused net operating losses from prior
years which can be utilized to reduce future years' taxable income of the
respective entities. The availability of these net operating losses is governed
by applicable domestic and foreign tax rules and regulations, some of which
limit the utilization of such losses due to minimum tax requirements and other
provisions.
Income tax expense as presented in the Consolidated Financial Statements
represents the combined income tax expense and income tax credits of each of the
entities of the Company. Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which requires the use of the asset and liability method for calculating
deferred income taxes. In 1992 and prior years, the Company used the deferred
method of accounting for income taxes as set forth in Accounting Principles
Board Opinion No. 11. Implementation of Statement No. 109 did not have a
material effect on the consolidated financial statements, which have not been
restated for any prior periods.
After consideration of the effect of the utilization of net operating loss
carryforwards, shown as an extraordinary item in 1992, income taxes were
approximately $90,000 in 1994, $80,000 in 1993 and $(150,000) in 1992.
Fluctuations in the amount of income taxes arise primarily from the varying
combinations of income and losses of the Company's subsidiaries in the various
domestic and foreign tax jurisdictions, including the utilization in various
degrees of net operating loss carryforwards in many of these jurisdictions. In
1993, the net operating loss carryforwards of the U.S. parent company expired
for state income tax purposes. The income tax credit in 1992 relates primarily
to a tax loss carryback in France for that year.
Note 6 to the Consolidated Financial Statements, "Income Taxes," contains
additional information pertaining to the computation of income taxes as well as
the Company's net operating loss carryforwards as of December 31, 1994.
LIQUIDITY AND SOURCES OF CAPITAL
In 1994, the Company had a net negative cash flow from operations of
approximately $600,000 compared with a positive cash flow from operations in
1993 of $370,000. In 1994, as in prior years, the Company's investing
activities consisted primarily of the acquisition of equipment (approximately
$490,000) needed to maintain or upgrade production capability.
The Company's 1994 financing activities were highlighted by the capital
restructuring effective as of March 31, 1994, whereby approximately $1.8 million
of current and long-term debt to affiliates was converted to a new series of
preferred stock of the Company. Additionally, in 1994, the Company increased
its borrowings from affiliates by $185,000 in order to finance a pension
obligation owed to the former owner of one of its subsidiaries. In 1993, the
Company's financing activities included an equity offering which realized net
proceeds of approximately $1.5 million, about half of which was used to retire
long-term debt. Financing activities for both years included fluctuations in
the amounts utilized under bank lines of credit used to finance the Company's
working capital needs.
The most important 1994 and 1993 transactions which affected the Company's
liquidity and sources of capital, as well as additional details of the Company's
notes payable to banks, long-term debt and long-term debt to affiliates, are
described in Note 3, "Financing Transactions," and in Note 4, "Borrowings," to
the Consolidated Financial Statements included herein.
At the end of 1994, the Company's cash and cash equivalents were approximately
$340,000, representing a decrease of approximately $670,000 during 1994.
However, at December 31, 1994, the Company had working capital of approximately
$1.2 million, compared to working capital of approximately $100,000 at December
31, 1993. One of the primary reasons for the increase in working capital during
1994 was the elimination of the current portion of long-term debt as a result of
the previously mentioned capital restructuring.
The Company's primary working capital requirements relate to the funding of
client accounts receivable. The Company funds its working capital needs with
various bank lines of credit with banks in the U.K., Canada, Spain and Germany.
Most of the lines of credit are secured by accounts receivable and other assets
of the respective subsidiaries. As of December 31, 1994, the Company has unused
amounts under these lines of credit of approximately $500,000. The Company
believes the available amounts under these lines of credit are sufficient to
fund the Company's operations at current levels as well as enable the Company to
grow at a modest level without seeking significant new sources of working
capital. Most of the Company's credit facilities are subject to annual renewals
and the Company expects them to be renewed on substantially the same terms as
those which currently exist. Some of the banks which have loaned funds to the
Company's subsidiaries under the credit facilities noted above, have placed
certain limits on the flow of cash outside the respective countries. Such
limitations have not been an undue burden to the Company in the past, nor are
they expected to be unduly burdensome in the foreseeable future.
The Company has no present significant commitments for capital expenditures,
which generally consist almost entirely of computer equipment and related
peripheral hardware and software. Such equipment purchases in future years are
not expected to vary materially from the general levels of equipment purchases
experienced in recent years. However, the Company does plan to acquire and place
additional translation services workstations in its offices worldwide in
connection with future orders from customers, as such orders are received. The
Company expects to finance a certain portion of future equipment costs through
bank and/or leasing sources. Additionally, while there are no material current
commitments, the Company may open additional offices in strategic locations
worldwide, as customer demands dictate and opportunities arise. For example, in
July 1994, the Company opened a sales and production office in Korea in order to
meet the increased demand for translation into the Korean language. The costs
of opening this office were not substantial and were almost exclusively related
to the procurement of computers and other translation-related equipment. The
costs of any additional offices are not expected to require a significant amount
of cash.
Following the capital restructuring in early 1994, the Company's long-term debt
to affiliates (including approximately $820,000 which was due in 1994) was
reduced from $2,050,000 to approximately $240,000 and outstanding preferred
stock increased by over $1.7 million. As a result of this and other
transactions since December 31, 1993, the Company's total shareholders' equity
has increased from $6.1 million to $7.2 million during 1994.
The Company believes it has the ability to issue additional equity securities if
necessary, but does not currently have any firm plans to do so. In past years,
the Company has relied on major shareholders of the Company to fund certain
obligations, but the Company does not anticipate using this source of capital in
the foreseeable future.
As a result of the financing transactions described above, current working
capital, anticipated cash flows and available lines of credit, together with
management's expectations of increased revenues and plans to control expenses,
management believes that the Company's cash flow will be adequate to meet
financial obligations during 1995. It is more difficult to assess cash flows
beyond 1995 and the ability of the Company to meet its commitments without
additional sources of capital is directly related to the Company's operations
providing a positive cash flow. Should the Company's operations fail to provide
adequate funds to enable it to meet its future financial obligations, management
has the option, because of the Company's organizational structure, to cut costs
by selectively eliminating operations which are not contributing to the Company
financially.
Inflation has not been a significant factor in the Company's operations;
competition, however, has been and is expected to remain a major factor. To the
extent permitted by competition and general economic and market conditions, the
Company will pass on increased costs from inflation and operations to customers
by increasing prices.
Due to prior years' operating losses, the Company and many of its subsidiaries
have net operating loss carryforwards available to offset future taxable income
in the various countries in which the Company operates. As a result, the
Company historically has not had significant income tax liabilities arise
requiring the expenditure of cash. Due to currently available net operating
loss carryforwards, the Company expects this general trend to continue through
1995. Substantially all of the Company's deferred tax assets at December 31,
1994 and 1993 were comprised of net operating loss carryforwards for which the
Company has provided allowances. The ability of the Company to utilize these
loss carryforwards in the future is dependent on profitable operations in the
various countries in which loss carryforwards exist and the specific rules and
regulations governing the utilization of such losses, including the timeframes
by which the losses must be used.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements: Page
Report of Independent Auditors
Consolidated Financial Statements:
Balance Sheets as of December 31, 1994 and 1993
Statements of Operations for the years ended December 31, 1994, 1993 and
1992
Statements of Shareholders' Equity for the years ended December 31, 1994,
1993 and 1992
Statements of Cash Flows for the years ended December 31, 1994, 1993 and
1992
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
ALPNET, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of ALPNET, Inc. and
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did
not audit the financial statements of Multiscript International Inc., a
subsidiary of ALPNET, Inc., which statements reflect total assets constituting
9% in 1994 and 7% in 1993, and total revenues constituting 17% in 1994, 14% in
1993 and 16% in 1992 of the related consolidated totals. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to data included for Multiscript International
Inc., is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of ALPNET, Inc. and subsidiaries at December
31, 1994 and 1993, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Salt Lake City, Utah
March 10, 1995
<TABLE>
ALPNET, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
December 31
Thousands of dollars 1994 1993
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 344 $ 1,012
Trade accounts receivable, less allowance of
$108 in 1994 and $165 in 1993 4,328 3,415
Work-in-process 227 229
Income taxes receivable 51 74
Prepaid expenses and other 660 735
Total current assets 5,610 5,465
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Office facilities and leasehold improvements 141 132
Equipment 3,471 3,177
3,612 3,309
Less accumulated depreciation and
amortization 2,682 2,575
930 734
OTHER ASSETS:
Goodwill, less accumulated amortization of
$2,492 in 1994 and $1,983 in 1993 6,449 6,327
Other 234 217
6,683 6,544
TOTAL ASSETS $13,223 $12,743
</TABLE>
<TABLE>
ALPNET, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
<CAPTION>
December 31
Thousands of dollars and shares 1994 1993
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to banks $ 1,443 $ 1,208
Accounts payable 1,561 1,056
Accrued payroll and related benefits 395 660
Other accrued expenses 822 764
Deferred revenue 78 106
Current portion of long-term debt 85 54
Current portion of long-term debt to affiliates 39 822
Guarantee liability (Note 7) 670
Total current liabilities 4,423 5,340
Long-term debt, less current portion 155 86
Long-term debt to affiliates, less current portion 378 1,228
Guarantee liability (Note 7) 1,090
Commitments and contingencies (Notes 4, 5 and 7)
SHAREHOLDERS' EQUITY:
Convertible Preferred Stock, no par value;
authorized 2,000 shares; issued and
outstanding 1,044 shares in 1994 and
459 shares in 1993 2,894 1,151
Common Stock, no par value; authorized
40,000 shares; issued and outstanding
15,562 shares in 1994 and 1993 37,846 38,274
Accumulated deficit (31,950) (31,209)
Equity adjustment from foreign currency translation (1,613) (2,127)
7,177 6,089
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,223 $12,743
See accompanying notes.
</TABLE>
<TABLE>
ALPNET, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<CAPTION>
Year Ended December 31
Thousands of dollars and shares 1994
1993 1992
<S> <C> <C> <C>
SALES OF SERVICES $20,473 $19,459 $19,747
OPERATING EXPENSES
Cost of services sold 18,399 15,969 16,855
Selling, general and administrative expenses 2,044 2,065 2,468
Development costs 124 179 279
Amortization of goodwill 351 342 386
Total operating expenses 20,918 18,555 19,988
OPERATING INCOME (LOSS) (445) 904 (241)
Interest expense 204 364 526
Income (loss) before income taxes and
extraordinary item (649) 540 (767)
Income taxes 92
82 271
Income (loss) before extraordinary item (741) 458 (1,038)
Extraordinary item - reduction of income
taxes arising from carryforward of
prior years' net operating losses
425
NET INCOME (LOSS) $ (741) $ 458 $ (613)
NET INCOME (LOSS) PER SHARE:
Income (loss) before extraordinary item $ (.04) $ .03 $ (.09)
Extraordinary item .04
Net income (loss) $ (.04) $ .03 $ (.05)
Weighted average shares of Common Stock
and Common Stock equivalents outstanding 17,235 14,712 11,846
See accompanying notes.
</TABLE>
<TABLE>
ALPNET, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
<CAPTION> Equity
Adjustment
from Foreign
Preferred Stock Common Stock Accumulated Currency
Thousands of dollars and shares Shares Amount Shares Amount Deficit Translation Total
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1992 459 $1,151 11,480 $36,480 $(31,054) $ (242) $6,335
Exercise of employee stock options 31 25 25
Retirement of Common Stock (17) (25) (25)
Issuance of Common Stock for
minority interest 1,068 963 963
Detachable stock warrants issued 13 13
Net loss (613) (613)
Foreign currency translation adjustment
(1,552) (1,552)
BALANCES AT DECEMBER 31, 1992 459 1,151 12,562 37,456 (31,667) (1,794) 5,146
Issuance of Common Stock for cash,
net of offering costs of $45 3,000 1,488 1,488
Guarantee liability (670) (670)
Net income 458 458
Foreign currency translation adjustment
(333) (333)
BALANCES AT DECEMBER 31, 1993 459 1,151 15,562 38,274 (31,209) (2,127) 6,089
Issuance of Preferred Stock in exchange
for long-term debt to affiliates, net
of costs of $25 585 1,743 1,743
Costs related to 1993 issuance of
Common Stock (8) (8)
Adjustment to guarantee liability (420) (420)
Net loss (741) (741)
Foreign currency translation adjustment
514 514
BALANCES AT DECEMBER 31, 1994 1,044 $2,894 15,562 $37,846 $(31,950) $(1,613) $7,177
See accompanying notes.
</TABLE>
<TABLE>
ALPNET, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<CAPTION> Year Ended December 31
Thousands of dollars 1994 1993 1992
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (741) $ 458 $ (613)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization of property, equipment
and leasehold improvements 319 306 452
Amortization of goodwill 351 342 386
Other (69) (37) (12)
Changes in operating assets and liabilities:
Trade accounts receivable (690) (574)
Accounts payable and accrued expenses 426 (161) 64
Other (202) 37 (407)
Net cash provided by (used in) operating activities (606) 371 (130)
INVESTING ACTIVITIES
Purchase of property, equipment and leasehold improvements (491) (293) (226)
FINANCING ACTIVITIES
Proceeds from notes payable to banks 245 105 250
Principal payments on notes payable to banks (78) (308) (177)
Proceeds from long-term debt 136 47 148
Principal payments on long-term debt (40) (618) (427)
Proceeds from long-term debt to affiliates 185 243
Principal payments on long-term debt to affiliates (19)
Sale of Common Stock for cash, net of offering costs (8) 1,488
Net cash provided by financing activities 421 714 37
Effect of exchange rate changes on cash 8 (7) (27)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (668) 785 (346)
Cash and cash equivalents at beginning of year 1,012 227 573
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 344 $1,012 $ 227
Cash paid during the year for:
Interest $ 222 $ 393 $ 502
Income taxes 88 28 40
Cash received during the year for income taxes 17 14 162
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In March 1994, the Company issued 584,257 shares of Convertible Preferred Stock in exchange for long-term debt to affiliates.
In September 1992, the Company issued 1,068,076 shares of Common Stock in exchange for the minority interest in its Canadian
subsidiary.
See accompanying notes.
</TABLE>
ALPNET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994
1. SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
ALPNET, Inc. and its subsidiaries (the "Company"), together with its independent
affiliates, form a worldwide network dedicated to providing specialized language
services for businesses engaged in international trade. The Company has
combined computer translation technology with experienced human translators in
its worldwide network to provide a full spectrum of services to fulfill the
language needs of customers in international business.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of ALPNET, Inc. and
its wholly-owned subsidiaries or branches located in the United States, Canada,
United Kingdom, Switzerland, Spain, Germany, France, Hong Kong, Singapore and
Korea. Significant intercompany accounts and transactions have been eliminated
in consolidation.
For all of the Company's foreign subsidiaries, the functional currency has been
determined to be the local currency. Accordingly, assets and liabilities are
translated at year-end exchange rates, and operating statement items are
translated at average exchange rates prevailing during the year. The resultant
cumulative translation adjustments to the assets and liabilities are recorded as
a separate component of shareholders' equity. Exchange adjustments resulting
from foreign currency transactions are included in the determination of net
income. Such amounts are immaterial for all years presented.
In accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows," cash flows from the Company's foreign subsidiaries
are calculated based upon the local currencies. As a result, amounts related to
assets and liabilities reported on the statements of cash flows will not
necessarily agree with changes in the corresponding balances on the balance
sheets.
CASH AND CASH EQUIVALENTS
The Company considers cash equivalents to be all highly liquid investments with
a maturity of three months or less when purchased.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements are recorded at cost.
Depreciation and amortization are calculated using the straight-line method over
estimated useful lives of 3 to 25 years.
GOODWILL
Goodwill consists of the excess of the purchase price over the fair value of net
assets of purchased subsidiaries and is amortized on the straight-line method
over a 25-year period.
The Company periodically reviews goodwill for impairment by comparing
undiscounted projected income over the remaining amortization period for each
acquired subsidiary to the unamortized balance of goodwill for each subsidiary.
No impairments have been recorded for any of the years presented.
REVENUE RECOGNITION
Revenue from translation services is recognized as work is performed. Customers
are billed according to the terms of their purchase orders. Work-in-process
represents costs on incomplete and unbilled projects as well as revenues
recognized in excess of amounts billed. Deferred revenue arises when payments
are received prior to being earned under the terms of customer purchase orders.
Such revenue is subsequently recognized as the requirements specified in the
purchase orders are completed.
Collateral is not required for receivables and reserves are provided for bad
debts.
INCOME TAXES
The Company files a consolidated U.S. Federal income tax return which includes
all domestic operations. Tax returns for states within the U.S. and for foreign
subsidiaries are filed in accordance with applicable laws.
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("Statement No. 109"), which
requires use of the asset and liability method for calculating deferred income
taxes. Implementation of Statement No. 109 did not have a material effect on
the consolidated financial statements. In 1992 and prior years, the Company
used the deferred method of accounting for income taxes as set forth in
Accounting Principles Board Opinion No. 11.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is based upon the average shares of Common Stock and
Common Stock equivalents outstanding during the respective years, to the extent
they are dilutive. Common Stock equivalents consist of the Company's series B
and series C Preferred Stock. Other Common Stock equivalents, consisting of
warrants and employee stock options, have not been included in the calculation
as their effect is antidilutive or immaterial for the years presented.
RECLASSIFICATIONS
Certain prior-year amounts have been reclassified to conform to the 1994
presentation.
2. GEOGRAPHICAL DATA
<TABLE>
The following selected financial data summarizes the Company's domestic and
foreign operations for financial reporting purposes. Allocations of corporate
and country overheads to domestic and foreign operations are based upon the
Company's policies for financial reporting consistently applied during the
periods. Intercompany sales are normally billed on a profit-sharing basis. All
intercompany sales are eliminated in determining the totals.
<CAPTION>
Thousands of dollars 1994 1993 1992
<S> <C> <C> <C>
Net sales:
United States $ 2,360 $ 2,467 $ 2,458
Canada 3,404 3,077 3,493
Europe 15,940 15,309 14,532
Asia 1,955 1,268 1,597
Eliminations (3,186) (2,662) (2,333)
$20,473 $19,459 $19,747
Income (loss) before income taxes:
United States $ (337) $ (111) $ (89)
Canada 85 (61) (104)
Europe (408) 578 (619)
Asia 11 134 45
$ (649) $ 540 $ (767)
Identifiable assets:
United States $ 761 $ 1,406 $ 678
Canada 1,211 937 1,071
Europe 10,493 9,821 9,865
Asia 758 579 619
$13,223 $12,743 $12,233
</TABLE>
Fourteen percent of the Company's 1994 revenues were for services provided to a
single customer in the computer industry. No other customer accounts for more
than 10% of revenues.
3. FINANCING TRANSACTIONS
In 1990, the Company completed certain refinancing transactions with three of
its principal shareholders. One of these shareholders is a former chairman of
the board of directors (the "Chairman"), another is also a former director (the
"Shareholder"), and the third is a corporate affiliate of another former
director and a current director (the "Corporate Affiliate"). The terms of the
agreements arising from these 1990 transactions were revised in 1991, 1992 and
1994 as discussed in more detail below and in Note 4.
1992 TRANSACTIONS
In September 1992, the Company entered into the following major transactions
with respect to its long-term debt to a Swiss bank and its long-term debt to
affiliates:
(1) Obtained a 300,000 Swiss franc (approximately $243,000) long-term loan
from a shareholder, who is also a director of the Company (the
"Director") (see Note 4);
(2) Entered into loan modification agreements with the Shareholder and the
Chairman which provided for loan principal payments scheduled for 1992
and 1993 to be deferred under a revised repayment schedule; and
(3) Entered into a loan modification agreement with the Swiss bank which
granted a one-year deferral on the repayment schedule. The Swiss bank
loan was subsequently repaid in full during 1993.
Warrants to purchase 373,000 shares of Common Stock were issued in September
1992 to the Director in connection with the 300,000 Swiss franc loan.
1993 TRANSACTIONS
During 1993, the Company entered into a stock purchase agreement whereby the
Company sold 3,000,000 shares of Common Stock to a Liechtenstein company. The
net proceeds of $1,488,000 were used to retire the Company's remaining
obligations under the Swiss bank debt discussed above and for operating
purposes. The terms of the stock purchase agreement included an option for the
purchaser to acquire up to 1,500,000 additional shares at various prices
depending on the exercise date. The option expired on its own terms without any
additional shares being purchased.
<TABLE>
As a result of the above transactions and earlier transactions with affiliates,
the Company's long-term debt to affiliates consisted of the following at
December 31, 1993:
<CAPTION>
Thousands of dollars
<S> <C>
Secured note payable to the Shareholder $1,632
Secured note payable (300,000 Swiss francs) to the Director 243
Unsecured note payable to the Corporate Affiliate (formerly due
to the Chairman) 175
$2,050
</TABLE>
1994 TRANSACTIONS
Effective March 31, 1994, the Company completed a capital restructuring with all
three of the shareholders holding the debt described above. The agreements with
these shareholders provided for the following:
(1) Conversion of $1,807,000 of long-term debt due to the Shareholder and
the Corporate Affiliate into a new series of convertible Preferred
Stock (series C) of the Company;
(2) Deferral of the due dates for repayment of the 300,000 Swiss franc
(approximately $243,000) note payable to the Director; and
(3) Elimination of all of the outstanding warrants currently held by these
shareholders to purchase up to 8,390,000 additional shares of the
Company's Common Stock.
The conversion of $1,807,000 of debt ($1,743,000, net of related costs) to
preferred shares resulted in the issuance of 584,257 shares of series C
Preferred Stock (see Note 5).
Substantially all of the Company's assets were encumbered under the former debt
agreements with affiliates. Following the March 1994 transactions, the only
assets which remain as security for long-term debt to affiliates are the
accounts receivable and inventory, if any, of ALPNET, Inc. (the U.S. parent
company).
In conjunction with the capital restructuring described above, the Company
entered into a "financial monitoring agreement" with the Shareholder which
requires the Company, among other things, to obtain prior approval for major
financing transactions, significant asset purchases or sale of a major portion
of the Company's assets.
In July 1994, the Company entered into an agreement with a current shareholder
(who is also the former owner of the Company's German subsidiary) to finance a
portion of a pension obligation owed to this shareholder. In connection with
this agreement, the Company signed a 300,000 Deutsche mark (approximately
$185,000) note payable (see Note 4).
4. BORROWINGS
NOTES PAYABLE TO BANKS
<TABLE>
Notes payable to banks consisted of the following at December 31:
<CAPTION>
Thousands of dollars 1994 1993
<S> <C> <C>
Credit facility with a U.K. bank, interest at 9.75%,
collateralized by the assets of the U.K. subsidiary,
guaranteed by the Company $ 736 $ 731
Credit facility with a Canadian bank, interest at 8.25%,
collateralized by the accounts receivable of the
Canadian subsidiary, guaranteed by the Company 314 119
Two credit facilities with Spanish banks, interest at 12% and
15%, one of which is guaranteed by the Company's U.K.
subsidiary 95 104
Credit facility with a German bank, interest at 10%,
collateralized by the accounts receivable of the
German subsidiary 181 174
Unsecured credit facility with a German bank, interest at 10.25% 78 80
Credit facility with a French bank, interest at 12.8%,
collateralized by the accounts receivable of the
French subsidiary 39
$1,443 $1,208
</TABLE>
All of the above credit facilities have variable interest rates. The interest
percentages shown are the actual rates at December 31, 1994.
The credit facility with the U.K. bank has a maximum limit of Pounds700,000
(approximately $1,095,000) at December 31, 1994 and intercompany debts have been
subordinated to the bank. The note agreement requires the U.K. subsidiary to
maintain net equity of Pounds750,000 (approximately $1,175,000) and a 2:1 ratio
of accounts receivable to outstanding borrowings under the facility.
The credit facility with the Canadian bank has a maximum limit of Canadian
$450,000 (approximately $320,000) at December 31, 1994 and intercompany debts
have been subordinated to the bank. The credit facilities with the Spanish
banks have a maximum limit of PTS 14.2 million (approximately $110,000) at
December 31, 1994.
The secured credit facility with the German bank has a maximum limit of DM
500,000 (approximately $325,000) at December 31, 1994 and intercompany debts
have been subordinated to the bank. The unsecured credit facility has a maximum
limit of DM 100,000 (approximately $65,000) at December 31, 1994. The credit
facility with the French bank had a maximum limit of FF 300,000 (approximately
$55,000) at December 31, 1994 but this facility expired in January 1995.
Most of the Company's credit facilities are subject to annual renewals and,
except as noted above, the Company expects them to be renewed on substantially
the same terms as exist at December 31, 1994. The weighted average interest
rate on notes payable to banks was 9.8% at December 31, 1994 and 1993, and 10.8%
at December 31, 1992.
LONG-TERM DEBT
<TABLE>
Long-term debt consisted of the following at December 31:
<CAPTION>
Thousands of dollars 1994 1993
<S> <C> <C>
Mortgage with a bank in Spain payable in monthly installments
through March 31, 1997, interest at 17% $ 52 $ 63
Obligations to financial institutions due at various dates through
1998, secured by certain equipment 188 77
240 140
Less current portion 85 54
$155 $ 86
</TABLE>
LONG-TERM DEBT TO AFFILIATES
<TABLE>
Long-term debt to affiliates consisted of the following at December 31:
<CAPTION>
Thousands of dollars 1994 1993
<S> <C> <C>
Secured note payable to the Director, due in quarterly installments
commencing September 30, 1996 through December 31, 1998,
interest at 9% payable monthly $243 $ 243
Unsecured note payable to a current shareholder (who is also the
former owner of the Company's German subsidiary), due in
monthly installments of approximately $3,000 plus interest
through June 1999, interest at 8% 174
Secured note payable to the Shareholder, including accrued interest
converted to debt, interest at prime plus 1.5%, exchanged for
527,691 shares of series C Preferred Stock in March 1994 1,632
Unsecured note payable to the Corporate Affiliate, interest
at prime plus 3%, exchanged for 56,566 shares of series C
Preferred Stock in March 1994 175
417 2,050
Less current portion 39 822
$378 $1,228
</TABLE>
Interest expense on notes payable to affiliates was approximately $61,000 in
1994, $156,000 in 1993, and $147,000 in 1992. The note payable to the Director
is collateralized by a security position in the accounts receivable and
inventory, if any, of ALPNET, Inc. (the U.S. parent company).
DEBT MATURITIES
<TABLE>
The aggregate maturities of long-term debt and long-term debt to affiliates as
of December 31, 1994 were as follows:
<CAPTION>
Long-Term
Long-Term Debt to
Thousands of dollars Debt Affiliates Total
<S> <C> <C> <C>
Year Ending December 31
1995 $ 85 $ 39 $124
1996 79 87 166
1997 52 136 188
1998 24 136 160
1999 19 19
$240 $417 $657
</TABLE>
5. CAPITAL STOCK
CONVERTIBLE PREFERRED STOCK
The Company has 1,043,668 outstanding shares of Preferred Stock, of which
459,411 shares are designated as series B and 584,257 shares are designated as
series C. The series B Preferred Stock is convertible at the option of the
holder into three shares of the Company's Common Stock, has voting rights as if
the shares were already converted, and features a 10% non-cumulative dividend
subject to the discretion of the Board of Directors. All of the outstanding
shares of series B Preferred Stock were issued in 1991.
The series C Preferred Stock is convertible at the option of the holder into
nine shares of the Company's Common Stock and otherwise has the same general
terms as the series B Preferred Stock. All of the outstanding shares of series
C Preferred Stock were issued in 1994 as described in Note 3.
COMMON STOCK
In addition to the 1993 sale of Common Stock described in Note 3, the Company
issued 1,068,076 shares of Common Stock, valued at Canadian $1.2 million
(approximately $960,000), in September 1992 in exchange for all of the minority
interest in the Company's Canadian subsidiary. With the completion of this
transaction, all of the Company's subsidiaries became wholly-owned.
As discussed in more detail in Note 7, the Company has a guarantee liability
related to the purchase of its German subsidiary which could result in the
issuance of additional shares of Common Stock.
The Company is currently prohibited from paying dividends under Utah corporate
law.
STOCK OPTIONS
The Company has an incentive stock option plan and a nonstatutory stock option
plan whereby 136,577 and 1,063,423 shares, respectively, of the Company's
authorized but unissued Common Stock are reserved for ultimate issuance under
the plans.
<TABLE>
Activity for the incentive stock option plan was immaterial for all years
presented and there were no outstanding options under this plan as of December
31, 1994, 1993 and 1992. The following table is a summary of activity for the
Company's nonstatutory stock option plan for the years ended December 31:
<CAPTION>
Thousands of shares 1994 1993 1992
<S> <C> <C> <C>
Outstanding at beginning of year 888 801 656
Granted 31 325 227
Cancelled (89) (238) (51)
Exercised (31)
Outstanding at end of year 830 888 801
Exercisable at end of year 430 323 444
Option price range per share:
Granted $.44 $.75 to $.94 $.42 to $1.13
Outstanding at end of year $.42 to $1.13 $.42 to $1.13 $.42 to $3.25
</TABLE>
The exercise terms of the options provide that the options expire six years
after date of grant and cannot be exercised during the first year. No more than
20% of the options can be exercised in any one year; however, any unexercised
options may be accumulated and exercised in succeeding years. The exercise price
of options exercised during 1992 was $.81 per share.
6. INCOME TAXES
<TABLE>
As discussed in Note 1, the Company adopted Statement No. 109 effective January
1, 1993. The following summarizes for income tax purposes, the domestic and
foreign components of income (loss) before income taxes and extraordinary item.
<CAPTION>
Thousands of dollars
Year Ended December 31 1994 1993 1992
<S> <C> <C> <C>
Domestic $ 807 $1,118 $1,087
Foreign (1,456) (578) (1,854)
$ (649) $ 540 $ (767)
</TABLE>
<TABLE>
Income tax expense (credit), including the effect of net operating loss
carryforwards, consisted of the following for the year ended December 31:
<CAPTION>
Thousands of dollars 1994 1993 1992
<S> <C> <C> <C>
Current income tax expense (credit):
Domestic income taxes:
Federal $ 5 $16 $ 390
State 45 57
Foreign income taxes 42 66 (176)
92 82 271
Extraordinary item - reduction of income
taxes arising from carryforward of
prior years' net operating losses (425)
Net income tax expense (credit) $92 $82 $(154)
</TABLE>
In 1993, the net operating loss carryforwards of the U.S. parent company expired
for state income tax purposes. The income tax credit in 1992 relates primarily
to a tax loss carryback in France for that year.
<TABLE>
Income tax expense varied from the expected statutory domestic federal income
tax amount as follows for the year ended December 31:
<CAPTION>
Thousands of dollars 1994 1993 1992
<S> <C> <C> <C>
Tax expense (benefit) on consolidated
income (loss) computed at the domestic
statutory federal income tax rate $(227) $189 $(261)
Effect of foreign losses on the computation
of tax expense (benefit) at domestic
statutory rates 611 556 455
Utilization of U.S. net operating losses
from prior years (270) (375)
Utilization of foreign net operating losses
from prior years (60) (288)
Domestic state income taxes 45 57
Other (7) 20
$ 92 $ 82 $ 271
</TABLE>
<TABLE>
The approximate tax effect of the temporary differences that give rise to
significant portions of the deferred tax assets and liabilities are as follows
for the year ended December 31:
<CAPTION>
Thousands of dollars 1994 1993
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $8,700 $ 8,500
Tax credit carryforwards 400 400
Other 100 100
Total deferred tax assets 9,200 9,000
Less valuation allowances (8,900) (8,700)
Net deferred tax assets $ 300 $ 300
Deferred tax liabilities:
Intangible assets book basis in excess of tax basis $ 200 $ 200
Other 100 100
Total deferred tax liabilities $ 300 $ 300
</TABLE>
The change in the valuation allowances during 1994 and 1993 was not significant.
<TABLE>
Due to prior years' operating losses, the Company and many of its subsidiaries
have net operating loss carryforwards available to offset future taxable income
in the various countries in which the Company operates. The following table
summarizes by country the available operating loss carryforwards and the related
expiration dates.
<CAPTION>
Operating
Loss Expiration
Thousands of dollars Carryforwards Dates
<S> <C> <C>
United States $17,500 1998 through 2003
Canada 2,000 1995 through 2000
United Kingdom 2,000 None
Spain 800 1995 through 1999
Germany 2,500 None
France 200 1999
Hong Kong 100 None
Singapore 100 None
</TABLE>
The Company's Swiss subsidiary has been granted an exemption from Swiss taxes
until 1996.
The Company has approximately $400,000 of general business tax credit
carryforwards available to offset future U.S. federal income taxes which expire
beginning in 1997 through 2001.
7. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
Substantially all of the Company's office space and various equipment is rented
under leases which are classified as operating leases. These leases have
remaining terms of up to 20 years. Certain of the leases for office space
contain renewal options and adjustment clauses based on consumer price indices.
Total rental expense for all operating leases was approximately $1.6 million in
1994, $1.6 million in 1993 and $1.8 million in 1992.
Certain office space is subleased under agreements with remaining terms of up to
four years with various renewal options. Total sublease rental income was
approximately $248,000 in 1994, $229,000 in 1993 and $293,000 in 1992.
<TABLE>
At December 31, 1994, future minimum payments under noncancelable operating
leases with initial terms of one year or more and future sublease income under
noncancelable subleases with initial terms of one year or more, are as follows:
<CAPTION>
Lease Sublease
Thousands of dollars Payments Income
<S> <C> <C>
Year ending December 31
1995 $1,063 $134
1996 835 48
1997 836 48
1998 818 48
1999 856
Thereafter 1,951
Total minimum lease payments $6,359 $278
</TABLE>
EMPLOYEE BENEFIT PLANS
ALPNET, Inc. has a contributory profit sharing plan ("Plan") which is designed
to meet the requirements for qualification under Section 401(k) of the U.S.
Internal Revenue Code. Under this provision, contributions by U.S. employees are
excluded from their taxable income. The Plan provides retirement benefits for
U.S. employees meeting certain eligibility requirements. Employer contributions
are discretionary and become fully vested after two years. Employer
contributions of $1,700 were made in 1994, but no employer contributions were
made to the Plan in 1993 or 1992. Total employer and employee contributions may
not exceed specified limits.
The Company's U.K. subsidiary has two defined contribution plans which cover
substantially all of its employees. Contributions are based upon percentages of
participating employees' compensation. The cost of these plans was
approximately $81,000 in 1994, $61,000 in 1993 and $96,000 in 1992.
ACQUISITION GUARANTEE
In 1988, the Company acquired its German subsidiary for a combination of cash
and shares of the Company's Common Stock. The acquisition agreement required
the Company to give additional consideration if the value of the shares of
Common Stock did not reach an agreed-upon level within a specified period
following the acquisition, and remain at that level until the former owner was
able to sell the shares of the Company's Common Stock for an amount equal to the
stipulated purchase price in the acquisition agreement. As a result of this
requirement, the Company issued additional shares to the former owner in 1990.
In 1993, the Company and the former owner entered into an agreement which
amended the original acquisition agreement. This agreement waives the
requirement to pay any additional consideration if the value of all shares of
Common Stock previously issued reached the stipulated purchase price on or
before September 30, 1994 (which date was subsequently extended to September 30,
1996, in conjunction with the capital restructuring discussed in Note 3). If
the stock value does not reach such amount, the Company is required to pay
interest on the stock value deficiency beginning on September 30, 1996.
Alternatively, the Company could settle such deficiency by making additional
payments (in cash or stock) to the former owner.
As a result of this waiver agreement, the Company recorded a guarantee liability
in the consolidated balance sheets for the stock value deficiency calculated
based on the trading value per share of the Company's Common Stock as compared
to the guaranteed value at the balance sheet dates. A decrease in shareholders'
equity has also been recorded for the same amounts.
8. RELATED PARTY TRANSACTIONS
Related party transactions not previously disclosed are as follows.
The Company incurred legal costs of approximately $53,000 in 1994, $57,000 in
1993 and $27,000 in 1992 for services performed by a law firm whose Chairman of
the Board was a director and also the secretary of the Company. Approximately
$25,000 in 1994 and $36,000 in 1993 of these legal fees related to financing
transactions discussed in Note 3.
As of December 31, 1994, the Company has a $76,000 unsecured promissory note
receivable, bearing interest at prime plus 3%, from an officer and director of
the Company. The note balance was $84,000 at December 31, 1993 and $93,000 at
December 31, 1992.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to directors required by Item 10 of Form 10-K is
presented in the section titled "Information About Directors" in the Company's
definitive Proxy Statement dated March 27, 1995 and is incorporated herein by
reference. The information with respect to Executive Officers is presented in
the section titled "Executive Officers of ALPNET, Inc." in Item 1 hereof. The
information with respect to other significant employees is presented in the
section titled "Certain Significant Employees" in the Company's definitive Proxy
Statement dated March 27, 1995 and is incorporated herein by reference.
ITEM 11: EXECUTIVE COMPENSATION
Information required by Item 11 of Form 10-K is presented in the sections titled
"Compensation of Directors," "Executive Compensation" and "Compensation Pursuant
to Plans" in the Company's definitive Proxy Statement dated March 27, 1995 and
is incorporated herein by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by Item 12 of Form 10-K is presented in the sections titled
"Principal Shareholders" and "Information About Directors" in the Company's
definitive Proxy Statement dated March 27, 1995 and is incorporated herein by
reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 13 of Form 10-K is presented in the section titled
"Certain Relationships and Related Transactions" in the Company's definitive
Proxy Statement dated March 27, 1995 and is incorporated herein by reference.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) (1)FINANCIAL STATEMENTS:
The financial statements are included in Item 8, Financial Statements and
Supplementary Data, as listed in the Index to Consolidated Financial
Statements at the beginning of Item 8.
(2) FINANCIAL STATEMENT SCHEDULES:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions and therefore have been omitted or are not
presented because the information required is included in the financial
statements or notes thereto.
<TABLE>
(3) LISTING OF EXHIBITS:
<CAPTION>
Exhibit Filing
No. Description Status
<S> <C>
3.1 Restated Articles of Incorporation (i)
3.2 Articles of Amendment dated June 11, 1987 (i)
3.3 Articles of Amendment dated June 27, 1988 (i)
3.4 Articles of Amendment dated August 29, 1989 (i)
3.5 Articles of Amendment dated June 6, 1991 (ii)
3.6 Articles of Amendment dated March 31, 1994 and related Specimen
Series C Preferred Stock Certificate (iv)
3.7 Designation of Preferred Shares dated July 31, 1991 (ii)
3.8 By-Laws (i)
10.1 Loan Agreement dated 18 September 1992 between ALPNET, Inc. and
Michael F. Eichner, with Exhibits (ii)
10.2 Stock Purchase Agreement between ALPNET, Inc. and Benitex A.G.
dated 1 July 1993, with Exhibits (iii)
10.3 Debt Conversion Agreement dated 31 March 1994 between ALPNET, Inc.
and H.F. Boeckmann, II (iv)
10.4 Debt Conversion Agreement dated 31 March 1994 between ALPNET, Inc.
and NFT Ventures, Inc. (iv)
10.5 Modification Agreement dated 31 March 1994 between ALPNET, Inc.
and Michael F. Eichner (iv)
11 Statement Re: Computation of Per Share Earnings (iv)
20 Opinion of Friedman & Friedman, Independent Auditors for Multiscript
International Inc. (iv)
21 Subsidiaries of Registrant (ii)
23.1 Consent of Ernst & Young LLP, Independent Auditors (iv)
23.2 Consent of Friedman & Friedman, Independent Auditors for Multiscript (iv)
International Inc.
27 Financial Data Schedules (iv)
(i) Previously filed on April 16, 1990 with the Securities and Exchange Commission as an Exhibit to Form 10-K for the
year ended December 31, 1989, and incorporated herein by reference.
(ii) Previously filed on March 31, 1993 as an Exhibit to Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference.
(iii) Previously filed on March 30, 1994 as an Exhibit to Form 10-K for the year ended December 31,
1993, and incorporated herein by reference.
(iv) Filed herewith.
</TABLE>
(b) REPORTS ON 8-K:
The following reports on Form 8-K were filed during the fourth quarter of
the year ended December 31, 1994, which are incorporated herein by
reference:
Financial
Date of Statements
Report Item Reported Filed
11/10/94 ALPNET Announces Third Quarter
1994 Results N/A
(C) EXHIBITS:
The response to this portion of Item 14 is submitted as a separate section
of this report. See Item 14(a)(3) above.
(D) FINANCIAL STATEMENT SCHEDULES:
The response to this portion of Item 14 is submitted as a separate section
of this report. See Item 14(a)(2) above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALPNET, INC.
By: \s\ Thomas F. Seal
Thomas F. Seal, President
Date: 27 March 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons onbehalf of the registrant
and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
\s\ Thomas F. Seal President, Chief Executive Officer 27 March 1995
Thomas F. Seal and Director
\s\ John W. Wittwer Executive Vice President and Director 27 March 1995
John W. Wittwer
\s\ D. Kerry Stubbs Chief Financial and Accounting Officer 27 March 1995
D. Kerry Stubbs
\s\ James R. Morgan Chairman of the Board of Directors 27 March 1995
James R. Morgan
\s\ Michael F. Eichner Director 27 March 1995
Michael F. Eichner
</TABLE>
Exhibit 3.6
ARTICLES OF AMENDMENT
TO RESTATED ARTICLES OF INCORPORATION
OF
ALPNET, INC.
THESE ARTICLES OF AMENDMENT are executed in duplicate effective the
31st day of March 1994 by the president and the secretary of ALPNET, Inc., a
Utah corporation (the "CORPORATION"), pursuant to and in compliance with (a)
Articles Fourth and Eighth of the "Restated Articles of Incorporation of
Automated Language Processing Systems, Inc." dated 21 April 1986, as
subsequently amended (the "RESTATED ARTICLES"); (b) Utah Code Ann.
sectionsection16-10a-1001 and 16-10a-1002(1)(e) (1953, as amended); and (c) the
authorization and direction of the Corporation's board of directors (the
"BOARD").
ARTICLE I
NAME
The name of the Corporation is ALPNET, INC.
ARTICLE II
AMENDMENT ADOPTED
The following paragraphs are hereby inserted at the end of Article
Fourth of the Restated Articles:
Unless otherwise designated by the Board of Directors
at the time a series of preferred stock is established:
1. All shares of preferred stock of all series shall
be of equal rank.
2. If the stated dividends or distributions for each
series of preferred stock are not declared in full, are not
set apart for payment in full or are not paid in full, then
the shares of all series of preferred stock shall share
ratably in the payment of available distributions or
dividends in proportion to the amounts that would be payable
with respect to the shares if all dividends or distributions
were declared and paid in full.
3. In any given fiscal year, unless and until a full
dividend or distribution has been declared and paid for all
series of preferred stock, the Corporation shall not (a)
declare or pay any dividends on its common stock; (b) make
any distributions with respect to its common stock; or (c)
redeem, retire or otherwise acquire for a valuable
consideration any of its common stock.
4. If the assets of the Corporation that are
available for distribution to stockholders of preferred
stock upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation or upon a
reduction in the capital of the Corporation (collectively a
"LIQUIDATION") are insufficient to pay in full the amounts
payable to the holders of all series of preferred stock upon
Liquidation, then the shares of all series of preferred
stock shall share ratably in any available distribution of
assets in proportion to the amounts that would be payable
with respect to the shares if the Corporation's assets were
sufficient to permit the payment in full of those amounts.
5. The holders of voting preferred shares that can be
converted into the Corporation's common stock shall have the
right to vote the number of shares of common stock into
which the preferred stock can be converted. The holders of
the Corporation's common stock and the holders of such
voting, convertible preferred stock shall all vote as one
class.
The Corporation is authorized to issue 459,411 shares
of $2.55 convertible, voting, non-cumulative 10% preferred
stock, series B, without par value (the "SERIES B PREFERRED
STOCK"), having the preferences, limitations and relative
rights set forth in the specimen Series B Preferred Stock
certificate that is attached hereto and that is incorporated
herein by reference. The Series B Preferred Stock shall
take priority over the Series C Preferred Stock as to rank,
dividend preference and liquidation preference, as set forth
in paragraphs 2 and 3 of the specimen Series B Preferred
Stock certificate that is attached hereto.
The Corporation is authorized to issue 584,257 shares
of $3.09 convertible, voting, non-cumulative 10% preferred
stock, series C, without par value (the "SERIES C PREFERRED
STOCK"), having the preferences, limitations and relative
rights set forth in the specimen Series C Preferred Stock
certificate that is attached hereto and that is incorporated
herein by reference.
ARTICLE III
DATE OF ADOPTION OF AMENDMENT
The Board adopted the amendment (the "AMENDMENT") described in Article
II above effective 31 March 1994.
ARTICLE IV
SHAREHOLDER APPROVAL NOT REQUIRED
Pursuant to the authority granted to the Board by the Fourth Article
of the Restated Articles and by Utah Code Ann. sectionsection16-10a-602(1)(b)
and 16-10a-1002(1)(e), the Board, without shareholder action, may amend the
Restated Articles, and these Articles of Amendment have been so adopted,
approved and authorized by the Board.
ALPNET, INC.,
a Utah corporation
ATTEST:
By:\s\ Thomas F. Seal
THOMAS F. SEAL
Its President
By:\s\ Leo A. Jardine
LEO A. JARDINE
Its Secretary
S P E C I M E N
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS, IN RELIANCE UPON
EXEMPTIONS FROM REGISTRATION FOR NON-PUBLIC OFFERINGS. THIS SECURITY MAY
NOT BE SOLD OR TRANSFERRED UNLESS IT IS REGISTERED UNDER THE ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER RECEIVES AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO IT THAT AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
ALPNET, INC.
INCORPORATED UNDER THE LAWS OF THE
STATE OF UTAH
$3.09 CONVERTIBLE, VOTING, NON-CUMULATIVE 10%
PREFERRED STOCK, SERIES C, WITHOUT PAR VALUE
TOTAL AUTHORIZED ISSUE: 584,257 SHARES
CERTIFICATE NUMBER *000,000*
*PC000* SHARES OF SERIES C PREFERRED STOCK
THIS IS TO CERTIFY THAT, FOR VALUE RECEIVED, ________________ (the
"HOLDER"), is the registered holder of *000,000* shares of the $3.09
convertible, voting, non-cumulative 10% preferred stock, series C, without par
value (the "SERIES C PREFERRED STOCK") of ALPNET, INC., a Utah corporation (the
"COMPANY"), which stock is fully paid and nonassessable and which stock is
transferable on the books of Company by Holder in person or by Holder's attorney
upon surrender of this certificate (the "CERTIFICATE") properly endorsed.
In this Certificate, the term "COMMON STOCK" shall refer to the common
stock, no par value per share, of Company. The Series C Preferred Stock
represented by this Certificate is subject to the following terms and conditions
:
1. DESIGNATION. The shares of Series C Preferred Stock shall have
such designations, powers and preferences and related voting, dividend,
conversion and other rights, qualifications, limitations and restrictions as are
set forth herein. Subject to the provisions of paragraph 13 relating to
Company's Series B Preferred Stock (as defined herein), all shares of Company's
preferred stock of all series shall be of equal rank.
2. DIVIDEND PREFERENCE. Holder shall be entitled to receive a cash
dividend or distribution (the "DIVIDEND") for each share of Series C Preferred
Stock at the rate of ten percent (10%) per annum on the original $3.09 issue
amount of such share, subject to the following terms and conditions:
2.1. Dividends shall be declared and paid, in full or in part,
only when funds for payment of the same are legally available and if, when and
as the board of directors (the "BOARD") of Company, in its sole discretion,
shall deem the same to be advisable. The determination by the Board of the
amount available for payment of Dividends shall be binding and conclusive on the
holders of all stock of Company outstanding at the time.
2.2. Dividends on Series C Preferred Stock shall be non-
cumulative, so that if the full amount of Dividends have not been paid on the
Series C Preferred Stock for any particular fiscal year of Company (the "FISCAL
YEAR"), then Holder shall not be entitled to receive a Dividend payment in later
Fiscal Years to make up for the earlier shortage.
2.3. If the stated dividends or distributions for each series of
Company's preferred stock are not declared in full, are not set apart for
payment in full or are not paid in full, then subject to the provisions of
paragraph 13 the shares of all series of Company's preferred stock shall share
ratably in the payment of available distributions or dividends in proportion to
the amounts that would be payable with respect to the shares if all dividends or
distributions were declared and paid in full.
2.4. In any given Fiscal Year, unless and until a full dividend
or distribution has been declared and paid for all series of preferred stock,
Company shall not (a) declare or pay any dividends on its Common Stock; (b) make
any distributions with respect to its Common Stock; or (c) redeem, retire or
otherwise acquire for a valuable consideration any of its Common Stock.
3. LIQUIDATION PREFERENCE. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of Company, or any reduction
in Company's capital resulting in any distribution of assets to its stockholders
(collectively the "LIQUIDATION"), Holder shall be entitled to receive the
amount of $3.09 for each share of Series C Preferred Stock owned by Holder, plus
an amount equal to all declared, but unpaid dividends, if any, on such shares,
before any amount shall be paid to the holders of Common Stock but subject to a
ratable sharing with holders of other series of Company's preferred stock as
described below. Such payment may be in cash or out of the assets of Company,
and may be from Company's capital or earnings, but only to the extent that the
same are legally available. For the purposes of this paragraph, the following
events shall not be deemed to be a liquidation, dissolution or winding up of
Company: (a) a consolidation or merger of Company with or into any other
corporation or corporations; and (b) a disposition by Company of all or
substantially all of its assets. Holder shall not be entitled to receive any
amounts with respect to Series C Preferred Stock upon any Liquidation other than
the amounts that are specifically provided for in this paragraph. Not-
withstanding the foregoing, if the assets of Company that are available for
distribution to stockholders of preferred stock upon a Liquidation are
insufficient to pay in full the amounts payable to the holders of all series of
Company's preferred stock upon Liquidation, then subject to the provisions of
paragraph 13 the shares of all series of Company's preferred stock shall share
ratably in any available distribution of assets in proportion to the amounts
that would be payable with respect to the shares if Company's assets were
sufficient to permit the payment in full of those amounts.
4. VOTING RIGHTS. For each share of Series C Preferred Stock, Holder
shall have the right to that number of votes equal to the number of votes
appurtenant to the number of shares of Common Stock issuable upon conversion of
said share of Series C Preferred Stock into Common Stock. Holders of Series C
Preferred Stock, holders of other series of Company's voting preferred shares
that can be converted into Common Stock (voting the number of shares of Common
Stock into which the preferred stock could be converted) and holders of Common
Stock shall vote as a single class, except as otherwise provided by law or by
Company's articles of incorporation.
5. VOLUNTARY CONVERSION. Holder shall have the right, at its option,
to convert shares of Series C Preferred Stock into fully paid and nonassessable
shares of Common Stock (or to stock of Company to which said Common Stock may be
changed from time to time hereafter) on the following terms and conditions:
5.1. The conversion ratio (the "CONVERSION RATIO") shall be nine
shares of Common Stock for each one share of Series C Preferred Stock (rounded
to the nearest whole number of shares); provided, however, that the Conversion
Ratio shall be subject to adjustment from time to time as provided in
subparagraph 5.4.
5.2. No fractional shares or scrip representing fractional
shares shall be issued upon conversion of Series C Preferred Stock into Common
Stock.
5.3. Holder may effect a conversion of all or part of the Series
C Preferred Stock into Common Stock at any time or from time to time on or after
the date hereof by presentation and surrender of this Certificate to Company,
together with a written election to exercise such conversion option. If the
conversion option is exercised in part only, then upon surrender of this
Certificate for cancellation, Company shall execute and deliver a new
Certificate for the remaining Series C Preferred Stock in form and substance
otherwise identical to the Certificate. Upon receipt by Company of this
Certificate, in proper form for exercise of the conversion option, Holder shall
be deemed to be the holder of record of the shares of Common Stock issuable upon
such conversion, notwithstanding that the stock transfer books of Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to Holder.
5.4. The Conversion Ratio shall be subject to adjustment in
accordance with the following terms and conditions:
5.4.1. If at any time, or from time to time, Company shall
(a) subdivide its outstanding shares of Common Stock into a greater number of
shares, (b) pay a dividend in shares of its Common Stock or (c) make a
distribution in shares of its Common Stock, then the number of shares of Common
Stock then deliverable upon conversion of Series C Preferred Stock into Common
Stock shall be proportionately increased, and, conversely, if the outstanding
shares of the Common Stock shall be combined into a smaller number of shares,
then the number of shares of Common Stock then deliverable upon conversion of
Series C Preferred Stock into Common Stock shall be proportionately decreased.
5.4.2. In the case of (a) any classification,
reclassification or other reorganization of the capital stock of Company, (b)
the consolidation or merger of Company with or into another corporation or (c)
the conveyance to another corporation of all or any major portion of the assets
of Company (collectively referred to herein as the "RECONFIGURATION"), then as
part of such Reconfiguration:
5.4.2.1. Adequate provision shall be made whereby
Holder, upon conversion of Series C Preferred Stock as herein provided, shall be
entitled to receive on the same basis and conditions as holders of Common Stock,
the stock, securities or other property which Holder would have been entitled to
receive upon such Reconfiguration, if Holder had converted the Series C
Preferred Stock into Common Stock immediately prior to the Reconfiguration.
5.4.2.2. Appropriate provision shall be made with
respect to the rights and interests of Holder to the end that the provisions of
this paragraph 5 shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or other property thereafter
deliverable upon the conversion of Series C Preferred Stock as herein provided.
5.4.2.3. As a condition of any such Reconfiguration,
any corporation which shall become successor to Company by reason of such
Reconfiguration shall expressly assume the obligation to deliver, upon the
conversion of Series C Preferred Stock as herein provided, such shares of stock,
securities or other consideration as Holder shall be entitled to receive
pursuant to the provisions hereof.
The foregoing provisions shall similarly apply to successive Reconfigurations of
or by any such successor.
5.4.3. Notwithstanding anything in this subparagraph 5.4 to
the contrary, Company shall not be required to give effect to any adjustment in
the Conversion Ratio unless and until the net effect of one or more adjustments,
determined as provided above, shall have resulted in a change of the Conversion
Ratio by at least five percent (5%), but when the cumulative net effect of more
than one adjustment so determined shall be to change the Conversion Ratio by at
least five percent (5%), then such change in the Conversion Ratio shall
thereupon be given effect.
5.4.4. Upon any adjustment to the Conversion Ratio, Holder
shall surrender the Certificate to Company, and Company shall issue a new
Certificate to Holder reflecting such adjustments; provided, however, that
nothing contained herein shall modify or restrict such adjustments if the
Certificate is not so surrendered.
5.4.5. Whenever the Conversion Ratio is adjusted as herein
provided, Company shall promptly file with Company's transfer agent for the
Common Stock of Company a statement signed by appropriate officers of Company
setting forth the adjusted Conversion Ratio. The statement shall set forth in
reasonable detail the reason for and the manner of computing such adjustment.
5.4.6. Company shall pay any and all taxes which may be
imposed upon it with respect to the issuance and delivery of Common Stock upon
conversion of Series C Preferred Stock as herein provided. However, in no event
shall Company be required to pay any transfer or other taxes by reason of the
issuance of such Common Stock in names other than those in which the Series C
Preferred Stock surrendered for conversion may stand, and no conversion or
issuance of Common Stock in such case shall be made unless and until the person
requesting such issuance has paid to Company the amount of any such tax, or has
established to the satisfaction of Company and its transfer agent, if any, that
such tax has been paid. Upon any conversion of Series C Preferred Stock, as
herein provided, no adjustment or allowance shall be made for future Dividends
on the Series C Preferred Stock so converted, and all rights to future
Dividends, if any, shall cease and be deemed satisfied; provided, however, that
nothing contained herein shall relieve Company from its obligation to pay any
dividends which shall have been declared and shall be payable to Holder with
respect to the Series C Preferred Stock being converted as of a date prior to
the date of such conversion even though the payment date for such dividend is
subsequent to the date of conversion.
5.4.7. Series C Preferred Stock that is surrendered upon
conversion into Common Stock shall not be reissued, and no Series C Preferred
Stock shall be issued in lieu thereof or in exchange thereof.
5.5. At all times Company shall reserve for issuance and/or
delivery upon conversion of Series C Preferred Stock into Common Stock such
number of authorized but unissued shares of Common Stock as shall be required
for issuance or delivery upon such conversion.
5.6. All shares of Common Stock which may be issued upon
conversion of the shares of Series C Preferred Stock evidenced hereby will upon
issuance by Company be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance thereof, and
Company shall take no action which shall cause a contrary result.
6. EXCHANGE, ASSIGNMENT OR LOSS OF CERTIFICATE. This Certificate is
exchangeable, without expense, at the option of Holder, upon presentation and
surrender hereof to Company for other certificates of different denominations.
This Certificate may only be transferred, assigned or hypothecated subject to
the provisions of paragraph 8. Any such assignment shall be made by surrender
of this Certificate to Company with such documentation as Company shall require
and funds sufficient to pay any transfer tax; whereupon Company shall, without
charge, execute and deliver a new Certificate in the name of the assignee named
in such instrument of assignment, and this Certificate shall promptly be
cancelled. This Certificate may be divided or combined with other certificates
which carry the same rights upon presentation hereof at the office of Company,
together with a written notice signed by Holder specifying the names and
denominations in which new certificates are to be issued. The term
"CERTIFICATE" as used herein includes any Certificates issued in substitution
for or replacement of this Certificate, or into which this Certificate may be
divided or exchanged. Upon receipt by Company of evidence satisfactory to it of
the loss, theft, destruction or mutilation of this Certificate, and in the case
of loss, theft or destruction, of an indemnification reasonably satisfactory to
Company, and in the case of mutilation, upon surrender and cancellation of this
Certificate, Company will execute and deliver a new Certificate of like tenor.
Any such new Certificate executed and delivered shall be the legal, valid and
binding obligation of Company, whether or not this Certificate so lost, stolen,
destroyed, or mutilated shall be at any time enforceable by anyone.
7. EXCLUSION OF ADDITIONAL RIGHTS. The shares of Series C Preferred
Stock shall have no preemptive or subscription rights.
8. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
8.1. Neither the Series C Preferred Stock nor the Common Stock
or any other security issued or issuable upon an exercise of the conversion
option hereunder may be sold, transferred or otherwise disposed of except to a
person who, in the reasonable opinion of counsel for Company, is a person to
whom the Series C Preferred Stock or the Common Stock may legally be transferred
(pursuant to paragraph 6 or otherwise) without registration and without the
delivery of a current prospectus under the Act with respect thereto and then
only against receipt of an agreement of such person to comply with the
provisions of this paragraph with respect to any resale or other disposition of
such securities.
8.2. Company may, if it so elects, cause the following legend
(or one similar to it) to be set forth on each certificate representing the
Common Stock or any other security issued or issuable upon an exercise of the
conversion option hereunder, which security has not theretofore been registered
for distribution to the public unless counsel for Company is of the reasonable
opinion as to any such certificate that such legend is unnecessary:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS, IN
RELIANCE UPON EXEMPTIONS FROM REGISTRATION FOR NON-PUBLIC OFFERINGS.
THIS SECURITY MAY NOT BE SOLD OR TRANSFERRED UNLESS IT IS REGISTERED
UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR UNLESS THE
ISSUER RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT
THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
9. REGISTRATION.
9.1. Upon the written request of Holder, Company agrees to
register with the United States Securities and Exchange Commission (the
"S.E.C.") and to qualify under any applicable Blue Sky or other state securities
laws, from time to time, the offer and sale by Holder of the Common Stock
issued, from time to time, as a result of the conversion of shares of Series C
Preferred Stock into Common Stock. Said registration and qualification shall be
accomplished within 90 days after Company files its next annual Form 10-K report
with the S.E.C. following the exercise of Holder's conversion option hereunder;
provided, however, Company shall not be obligated to register and/or qualify on
behalf of Holder fewer than an aggregate of 200,000 such shares in any one
registration and/or qualification.
9.2. All expenses incurred in connection with any registration
or qualification pursuant to this paragraph 9, including, without limitation,
all registration, filing, and qualification fees, printing expenses, fees and
disbursements of counsel for Company, and expenses of any special audits
incidental to or required by such registration, shall be borne by Company.
9.3. In the case of each registration and qualification effected
by Company pursuant to this paragraph 9, Company will keep Holder advised in
writing as to the initiation of each such registration and qualification and as
to the completion thereof. At its expense Company will:
9.3.1. Keep such registration and qualification effective
for a period of 120 days or until the distribution described in the registration
statement relating thereto has been completed, whichever first occurs; and
9.3.2. Furnish such number of prospectuses and other
documents incident thereto as Holder from time to time may reasonably request.
9.4. Company and Holder shall be entitled to the following
rights of indemnification in connection with this Certificate:
9.4.1. Company will indemnify Holder with respect to any
registration and qualification effected pursuant to this paragraph 9 against all
claims, losses, damages, and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration or qualification, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
Company of any rule or regulation promulgated under the Act or any state
securities law applicable to Company and relating to action or inaction required
of Company in connection with any such registration or qualification, and will
reimburse Holder for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, provided that Company will not be liable in any such case
to the extent that any such claim, loss, damage or liability arises out of or is
based on any untrue statement or omission based upon written information
furnished to Company in an instrument duly executed by Holder specifically for
use therein.
9.4.2. Holder will indemnify Company, each of its directors
and officers who sign such registration statement, and each person who controls
Company within the meaning of the Act, with respect to any registration and
qualification effected pursuant to this paragraph 9, against all claims, losses,
damages, and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement of a material fact contained in any registration
statement, prospectus, offering circular or other document incident to any such
registration or qualification or any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse Company, and such other directors, officers or
other persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the extent, that
such untrue statement or omission is made in such registration statement,
prospectus, offering circular, or other document in reliance upon and in
conformity with written information furnished to Company in an instrument duly
executed by Holder specifically for use therein.
9.4.3. Each party entitled to indemnification under this
paragraph 9 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this paragraph. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
9.5. Holder shall furnish to Company such written information
relating to him or it and the distribution proposed by him or it as Company may
request in writing and as shall be required in connection with any registration
or qualification referred to in this paragraph 9.
10. NO REDEMPTION PROVISIONS. The shares of Series C Preferred Stock
are not subject in any way to voluntary or involuntary redemption by Company.
11. PROTECTIVE PROVISIONS. The unanimous consent of each holder of
Series C Preferred Stock shall be required for any action which (a) alters or
changes the rights, preferences, privileges, designations, powers,
qualifications, limitations or restrictions of the Series C Preferred Stock
adversely; (b) increases the authorized number of shares of Series C Preferred
Stock; or (c) creates any new class or series of shares having preference over
or being on a parity with the Series C Preferred Stock.
12. APPLICABLE LAW. This Certificate shall be governed by, and
construed in accordance with, the laws of the State of Utah.
13. SERIES B PREFERRED STOCK. Company has previously issued 459,411
shares of its $2.55 convertible, voting, non-cumulative 10% preferred stock,
series B, without par value (the "SERIES B PREFERRED STOCK"). Notwithstanding
any provisions of this Certificate to the contrary, the Series B Preferred Stock
shall take priority over the Series C Preferred Stock as to rank, dividend
preference and liquidation preference, as set forth in Company's articles of
incorporation, as amended.
DATED effective 31 March 1994.
ALPNET, INC., a Utah corporation
By:\s\ Thomas F. Seal
THOMAS F. SEAL
President
ATTEST:
\s\ Leo A. Jardine
LEO A. JARDINE
Secretary
__________________________________________________________________
ELECTION OF CONVERSION OPTION
The undersigned irrevocably elects to convert _______________ shares
(all shares shall be presumed if the foregoing blank is not completed) of the
Series C Preferred Stock represented by this Certificate into Common Stock and
requests that the certificate for such shares be issued in the name of_________
_______________________________________________________________ at
______________________________________________________________ and be delivered
to: ______________________________________________ at
__________________________________________________________________ and, if the
number of shares of Series C Preferred Stock that are converted shall not be all
of the shares of Series C Preferred Stock evidenced by this Certificate, that a
new certificate for the balance of shares of the Series C Preferred Stock be
registered in the name of, and delivered to, ___________________________________
_______________________________________________________________ at
_________________________________________________________________.
DATED: ______________ 19_____ ______________________________
Signature
ASSIGNMENT
For value received, ________________________________________ does
hereby sell, assign and transfer unto ______________________
_________________________________________________________________
___________________________ shares of the Series C Preferred Stock represented
by this Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint
_________________________________________________________
as attorney to transfer said shares on the books of Company, with full power of
substitution.
DATED: _______________ 19____ _______________________________
Signature
Signature Guaranteed:
_______________________________
___________________________________________________________________
SEE NOTES ON FOLLOWING PAGE
__________________________________________________________________
NOTES:
1. SIGNATURES FOR THE ELECTION OF CONVERSION AND ASSIGNMENT ABOVE MUST BE
GUARANTEED BY A COMMERCIAL BANK, A TRUST COMPANY OR A MEMBER FIRM OF A
NATIONAL STOCK EXCHANGE.
2. ALL CAPITALIZED TERMS USED IN THE FOREGOING ELECTION OF CONVERSION
OPTION AND ASSIGNMENT SHALL HAVE THE MEANINGS FOR SUCH TERMS THAT ARE
SET FORTH IN THE SERIES C PREFERRED STOCK CERTIFICATE TO WHICH THE
ELECTION AND ASSIGNMENT PAGE IS ATTACHED.
3. THE SIGNATURE ON ANY ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR MODIFICATION.
EXHIBIT 10.3
DEBT CONVERSION AGREEMENT
This Debt Conversion Agreement (the "AGREEMENT") is made effective as
of 31 March 1994 by and between H. F. Boeckmann II ("BOECKMANN") and ALPNET,
Inc., a Utah corporation ("ALPNET" or the "COMPANY").
R E C I T A L S :
A. ALPNET has heretofore issued in favor of Boeckmann a promissory
note in the principal amount of $2,157,544, dated April 16, 1990, a copy of
which note is attached hereto as Exhibit "A" (the "NOTE").
B. As of 31 March 1994, $1,632,544.90 of the principal balance of the
Note remains unpaid; accrued interest through that date has been paid in full.
C. ALPNET has requested and Boeckmann has agreed to (1) convert all
of the principal balance of the debt evidenced by the Note, in the amount of
$1,632,544.90, into "ALPNET Preferred Stock" (as herein defined), and ALPNET
desires to issue to Boeckmann such ALPNET Preferred Stock; and (2) surrender
warrants to purchase 4,416,171 additional shares of "ALPNET Common Stock" (as
herein defined), all on the terms and conditions as herein set forth.
NOW, THEREFORE, for and in consideration of the mutual promises and
other consideration herein set forth, it is agreed by the parties as follows:
1. CONVERSION OF NOTE TO EQUITY.
1.1. CONVERSION PREFERRED SHARES. Contemporaneously herewith, ALPNET
shall deliver to Boeckmann 527,691 newly issued shares of ALPNET Preferred Stock
(the "CONVERSION PREFERRED SHARES"). It is understood and agreed that the total
number of Conversion Preferred Shares has been determined by (i) dividing the
principal amount of the Note converted to equity, $1,632,544.90, by the
conversion per share price of $0.34375, and (ii) dividing that quotient
(4,749,219) by nine.
1.2. SATISFACTION OF NOTE. Delivery of the Conversion Preferred
Shares to Boeckmann shall constitute payment in full satisfaction of the total
amount due on the Note. Contemporaneously herewith, Boeckmann shall deliver to
ALPNET the Note marked "Paid in Full."
1.3. CONSENT TO ISSUE CONVERSION PREFERRED SHARES. Boeckmann is the
holder of 205,882 shares of ALPNET $2.55 convertible, voting, non-cumulative 10%
preferred stock, series B, without par value (the "SERIES B PREFERRED STOCK"),
represented by Certificate PB001 (the "CERTIFICATE"). Pursuant to the
provisions of Paragraph 11 of the Certificate, Boeckmann hereby consents to the
creation of the new ALPNET Preferred Stock (as defined herein).
1.4. DEFINITION OF CAPITAL STOCK.
1.4.1. The term "ALPNET PREFERRED STOCK" for purposes of this
Agreement shall mean ALPNET $3.09 convertible, voting, non-cumulative 10%
preferred stock, series C, without par value in the form attached hereto as
Exhibit "B."
1.4.2. The term "ALPNET COMMON STOCK" for purposes of this
Agreement shall mean ALPNET common, voting, no par value stock.
2. RELEASE OF SECURITY INTERESTS, DEBT COVENANTS AND LOAN AGREEMENTS. In
conjunction with the execution of the Note, ALPNET, as borrower, and Boeckmann,
as lender, entered into that certain Loan and Security Agreement dated 16 April
1990, as subsequently amended (the "LOAN AGREEMENT"). All capitalized terms
used in this Paragraph 2 shall have the meanings for such terms that are set
forth in the Loan Agreement, unless otherwise defined in this Agreement.
2.1. SECURITY INTERESTS IN COLLATERAL. As security for the prompt
satisfaction of the Note, Boeckmann was granted a lien upon and a security
interest in the following Collateral:
2.1.1. US HOLDING COMPANY SHARES. The US Holding Company
Shares;
2.1.2. EUROPEAN SHARES. The British Holding Company Shares, the
British Operating Company Shares, the French Holding Company Shares, the French
Operating Company Shares, the German Holding Company Shares and the German
Operating Company Shares;
2.1.3. LANGUAGE CODE SALE PROCEEDS. Certain proceeds from the
sale, disposition, master leasing or licensing of ALPNET's computer software
language source codes and operating codes, and documentation related thereto, as
described more fully in the Collateral Pledge Agreement;
2.1.4. FURNITURE, FIXTURES AND EQUIPMENT. All furniture,
fixtures and equipment (collectively the "EQUIPMENT") that are owned by ALPNET,
including, without limitation, the equipment that is described on Exhibit D
attached to the Loan Agreement, but excluding any equipment (including a
telephone system) that is being leased by ALPNET;
2.1.5. ACCOUNTS RECEIVABLE AND INVENTORY. All accounts
receivable and inventory (collectively the "ACCOUNTS") that are owned by ALPNET;
and
2.1.6. OTHER COLLATERAL. Other collateral that is more
particularly described in that certain Collateral Pledge Agreement, the
Copyright Assignment (as defined below) and the Loan Agreement.
2.2. DOCUMENTATION OF SECURITY INTEREST. Simultaneously with the
execution of the Loan Agreement, ALPNET and Boeckmann entered into a Collateral
Pledge Agreement, certain Affiliate Pledge Agreements, a Copyright Collateral
Assignment (the "COPYRIGHT ASSIGNMENT") and other documents to document and
evidence the liens and security interests granted in the Collateral to
Boeckmann.
2.3. RELINQUISHMENT OF SECURITY POSITION. In conjunction with the
debt conversion effected by this Agreement, Boeckmann does hereby (a) relinquish
and terminate his liens and security interests in all of the Collateral and in
any and all other assets of ALPNET or its subsidiaries in which Boeckmann may
hold a security interest; and (b) confirm that the Loan, the Indebtedness and
the Obligations under the Loan Agreement and all amounts secured by the Loan
Agreement, the Collateral Pledge Agreement and the Copyright Assignment have
been satisfied in full. Boeckmann agrees that he shall do such further acts and
things and shall execute and deliver such additional documents and instruments
that might be reasonably necessary, or as ALPNET, or its counsel, may reasonably
require, in order to release and terminate his liens and security interests in
all of the Collateral and in any and all other assets of ALPNET or its
subsidiaries in which he holds a security interest.
2.4. DEBT COVENANTS. In Section 6 of the Loan Agreement, ALPNET and
its subsidiaries covenanted and agreed with Boeckmann that, so long as any of
the Obligations (as defined therein) remained unsatisfied and without obtaining
the prior written consent of Boeckmann, ALPNET would comply with each and every
covenant set forth in said Section 6 (the "DEBT COVENANTS").
2.5. RELEASE OF DEBT COVENANTS AND RELATED AGREEMENTS. In
conjunction with the debt conversion effected by this Agreement, Boeckmann does
hereby (a) relinquish his right to enforce, and does hereby release ALPNET from,
each and every Debt Covenant; and (b) terminate, and release all of his
continuing rights under, the Loan Agreement, the Collateral Pledge Agreement,
the Copyright Assignment, all Collateral Documents, the Affiliate Pledge
Agreements, a "Subordination Agreement" that is dated 18 September 1992 and that
was executed by Boeckmann, ALPNET and Michael F. Eichner ("EICHNER"), legal
charges of shares for the British Companies and pledges of shares for the French
Companies and the German Companies. Boeckmann shall do such further acts and
things and shall execute and deliver such additional documents and instruments
that might be reasonably necessary, or as ALPNET, or its counsel, may reasonably
require, in order to relinquish his rights to enforce, and to release ALPNET
from, any and all obligations under the Debt Covenants, and to evidence further
the foregoing terminations and releases.
3. CONVERSION PREFERRED SHARES.
3.1. FUTURE ADJUSTMENTS. In case ALPNET shall at any time (i)
subdivide its outstanding shares of ALPNET Common Stock into a greater number of
shares or (ii) pay a dividend in shares of ALPNET Common Stock or make a
distribution in shares of ALPNET Common Stock, the conversion of Conversion
Preferred Shares into ALPNET Common Stock shall be proportionately increased,
and, conversely, in case the outstanding shares of the ALPNET Common Stock shall
be combined into a smaller number of shares, the conversion of the Conversion
Preferred Shares into ALPNET Common Stock shall be proportionately decreased.
In case of any classification, reclassification, or other
reorganization of the capital stock of ALPNET, or in case of the consolidation
or merger of ALPNET with or into another corporation, or the conveyance to
another corporation of all or any major portion of the assets of ALPNET, then,
as part of such classification, reclassification, reorganization, consolidation,
merger, or conveyance, adequate provision shall be made whereby Boeckmann upon
the conversion of the Conversion Preferred Shares into ALPNET Common Stock shall
be entitled to receive on the same basis and conditions as holders of the ALPNET
Common Stock, the stock, securities or other property which Boeckmann would have
been entitled to receive upon such classification, reclassification or other
reorganization, consolidation, merger or conveyance, if Boeckmann had converted
the Conversion Preferred Shares immediately prior to such classification,
reclassification or other reorganization, consolidation, merger or conveyance;
and, in any such case, appropriate provision shall be made with respect to the
rights and interests of Boeckmann to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the conversion of
the Conversion Preferred Shares into ALPNET Common Stock) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or other property thereafter deliverable upon the conversion of the Conversion
Preferred Shares into ALPNET Common Stock; and, as a condition of any such
consolidation, merger, or conveyance, any corporation which shall become
successor to ALPNET by reason of such consolidation, merger or conveyance shall
expressly assume the obligation to deliver, upon the conversion of the
Conversion Preferred Shares into ALPNET Common Stock, such shares of stock,
securities or other consideration as Boeckmann shall be entitled to receive
pursuant to the provisions hereof. The foregoing provisions shall similarly
apply to successive classifications, reclassifications, or other reorganizations
and to successive consolidations, mergers, and conveyances of or by any such
successor.
3.2. RESTRICTIONS. The Conversion Preferred Shares, shall bear a
restrictive legend (the "RESTRICTIVE LEGEND") that is substantially in the
following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS IN RELIANCE UPON
EXEMPTIONS FROM REGISTRATION FOR NON-PUBLIC OFFERINGS. THIS SECURITY MAY
NOT BE SOLD OR TRANSFERRED UNLESS IT IS REGISTERED UNDER THE ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER RECEIVES AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO IT THAT AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
3.3. INVESTMENT REPRESENTATION. Boeckmann does hereby represent and
warrant to ALPNET that all shares and securities acquired or to be acquired by
Boeckmann hereunder are being acquired for investment purposes only, for his own
account and not with a view to resale or redistribution.
3.4. REGISTRATION. Upon the written request of Boeckmann, ALPNET
does hereby agree to register with the United States Securities and Exchange
Commission (the "S.E.C.") and to qualify under any applicable Blue Sky or other
state securities laws, from time to time, the offer and sale by Boeckmann of
ALPNET Common Stock issued, from time to time, as a result of the conversion of
the Conversion Preferred Shares. Any registrations and qualifications provided
for herein shall be accomplished within 90 days after ALPNET files its next
annual Form 10-K report with the S.E.C. following the conversion of the
Conversion Preferred Shares into ALPNET Common Stock; provided, however, that
ALPNET shall not be required to register fewer than 200,000 shares in any one
registration and/or qualification.
3.4.1. All expenses incurred in connection with any registration
or qualification pursuant to this Paragraph 3.4, including, without limitation,
all registration, filing, and qualification fees, printing expenses, fees and
disbursements of counsel for ALPNET, and expenses of any special audits
incidental to or required by such registration, shall be borne by ALPNET.
3.4.2. In the case of each registration and qualification
effected by ALPNET pursuant to this Paragraph 3.4, ALPNET will keep Boeckmann
advised in writing as to the initiation of each such registration and
qualification and as to the completion thereof. At its expense ALPNET will:
3.4.2.1. Keep such registration and qualification effective
for a period of 120 days, or until the distribution described in the
registration statement relating thereto has been completed, whichever first
occurs; and
3.4.2.2. Furnish such number of prospectuses and other
documents incident thereto as Boeckmann from time to time may reasonably
request.
3.4.3. INDEMNIFICATION. ALPNET will indemnify Boeckmann with
respect to any registration and qualification effected pursuant to this
Paragraph 3.4 against all claims, losses, damages, and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration or qualification, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by ALPNET of any rule or regulation promulgated
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any
state securities law applicable to ALPNET and relating to action or inaction
required of ALPNET in connection with any such registration or qualification,
and will reimburse Boeckmann for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, provided that ALPNET will not be liable in any such
case to the extent that any such claim, loss, damage or liability arises out of
or is based on any untrue statement or omission based upon written information
furnished to ALPNET by an instrument duly executed by Boeckmann specifically for
use therein.
Boeckmann will indemnify ALPNET, each of its directors and
officers who sign such registration statement, and each person who controls
ALPNET within the meaning of the Securities Act, with respect to any
registration and qualification effected pursuant to this Paragraph 3.4, against
all claims, losses, damages, and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement of a material fact contained in
any registration statement, prospectus, offering circular or other document
incident to any such registration or qualification or any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse ALPNET, and such other
directors, officers or other persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability, or action, in each case to the extent, but only
to the extent, that such untrue statement or omission is made in such
registration statement, prospectus, offering circular, or other document in
reliance upon and in conformity with written information furnished to ALPNET by
an instrument duly executed by Boeckmann specifically for use therein.
Each party entitled to indemnification under this Paragraph 3.4.3
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying party of
its obligations under this paragraph. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
3.4.4. Boeckmann shall furnish to ALPNET such written
information relating to him and the distribution proposed by him as ALPNET may
reasonably request in writing and as shall be required in connection with any
registration or qualification referred to in this Paragraph 3.4.
3.5. RESERVATION OF SHARES. There have been reserved, and ALPNET
shall at all times keep reserved, out of its authorized and unissued ALPNET
Common Stock a number of shares of ALPNET Common Stock sufficient to provide for
the exercise of the rights of conversion of the issued and outstanding ALPNET
Preferred Stock. The transfer agent for the ALPNET Common Stock (the "TRANSFER
AGENT") and every subsequent transfer agent for any shares of ALPNET's capital
stock issuable upon the exercise of any of the rights of purchase aforesaid will
be irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be requisite for such purpose. ALPNET will keep a
copy of this Agreement on file with the Transfer Agent and with every subsequent
transfer agent for any shares of ALPNET's capital stock issuable upon the
exercise of the rights of conversion of the ALPNET Preferred Stock.
4. SURRENDER OF WARRANTS.
4.1. WARRANTS OUTSTANDING. Boeckmann presently holds three
outstanding warrants (L013, L014, and L015) to purchase a cumulative total of
4,416,171 shares of ALPNET Common Stock for the purchase price of $0.85 per
share (the "OUTSTANDING WARRANTS"). Copies of the three Outstanding Warrants
are attached hereto as Exhibits C-1, C-2 and C-3, respectively. Boeckmann
hereby represents and warrants to ALPNET that he does not own or hold any other
warrants to purchase ALPNET Common Stock other than the Outstanding Warrants.
4.2. SURRENDER FOR CONSIDERATION. For ten dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, contemporaneously herewith Boeckmann shall surrender and deliver
to ALPNET the Outstanding Warrants, duly endorsed for cancellation.
4.3. INABILITY TO SURRENDER ALL OUTSTANDING WARRANTS. Boeckmann
expressly agrees that if he is unable to surrender and deliver all three Out-
standing Warrants to ALPNET for any reason, then (a) Boeckmann shall execute and
deliver to ALPNET a lost instrument agreement in form reasonably satisfactory to
ALPNET for each misplaced Outstanding Warrant; and (b) upon receipt by ALPNET of
such evidence satisfactory to it of the loss, theft or destruction of any
Outstanding Warrant, the Company will execute a new Warrant of like tenor which
will then be endorsed by Boeckmann, surrendered to the Company on behalf of
Boeckmann and cancelled.
5. FINANCIAL MONITORING AGREEMENT. The parties agree that, as soon as is
reasonably possible after the execution of this Agreement, they shall enter into
a financial monitoring agreement (the "MONITORING AGREEMENT") whereby:
5.1. APPROVAL RIGHTS. Boeckmann will be given the right to approve
each and every major transaction of ALPNET, including, but not limited to,
equity and financing transactions and asset purchases and dispositions. For
purposes of this Paragraph 5, the term "MAJOR TRANSACTION" shall mean each and
every transaction where the aggregate amount involved for ALPNET exceeds ten
percent (10%) of the then current assets of the Company and its subsidiaries
determined on a consolidated basis.
5.2. LEGAL EXISTENCE AND LAWS. ALPNET will agree to guarantee and
annually certify to Boeckmann (i) its compliance with all material applicable
laws, and with all material contracts and corporate agreements to which it is a
party, and (ii) that it is keeping and maintaining insurance to such extent and
against such risks as is customary for companies of comparable size in the same
or similar business and property in the same general area.
5.3. IAB DELEGATE. Boeckmann will be given the right to have a
delegate of his choice participate in ALPNET's International Advisory Board
meetings, once per quarter, at ALPNET's expense.
6. CONDITIONS OF CONVERSION. The performance of Boeckmann under this
Agreement is conditioned upon the occurrence of the following events, or the
waiver thereof in writing by Boeckmann:
6.1. NFT VENTURES AGREEMENT. ALPNET shall have consummated with NFT
Ventures, Inc. ("NFT VENTURES"), an agreement whereby (i) NFT Ventures will
convert $175,000 of debt into ALPNET Preferred Stock on the same basis as the
Boeckmann conversion, and (ii) NFT Ventures will surrender for cancellation its
warrants to purchase 3,600,810 additional shares of ALPNET Common Stock which
NFT Ventures currently holds; and
6.2. EICHNER AGREEMENT. ALPNET shall have consummated with Eichner
an agreement whereby (i) Eichner shall delay principal payments on the
SFR300,000 of debt owed by the Company to him for a period of 30 months so that
the first principal payment will be due 30 September 1996, and (ii) Eichner will
surrender for cancellation his warrants to purchase 372,626 additional shares of
ALPNET Common Stock which he currently holds; and
6.3. HAEHL AGREEMENT. ALPNET shall have consummated with Dr. W.D.
Haehl ("HAEHL") an agreement whereby Haehl will defer the 30 September 1994 due
date for the guaranteed value of his ALPNET shares to be worth DM2,000,000 for a
period of two years; and
6.4. LEGAL OPINION. ALPNET shall have obtained an opinion for the
Company upon which Boeckmann may rely, from its legal counsel, that, given the
fact that Boeckmann has sold approximately 100,000 shares of ALPNET common stock
within six months of the effective date of this Agreement, and Boeckmann intends
to sell additional shares of ALPNET common stock within the six months following
the effective date of this Agreement, the conversion of debt to equity as
described in paragraphs 1.1 and 6.1 hereof will be exempt from Section 16(b) of
the U.S. Securities Exchange Act of 1934, as amended.
7. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company hereby
represents and warrants to Boeckmann that on and as of the date hereof:
7.1. DUE INCORPORATION AND STANDING. The Company is duly
incorporated and validly existing in good standing under the laws of the state
of Utah, with full corporate power to own its properties and conduct its
business as currently conducted. The Company is not qualified, nor to its
knowledge is it required under applicable local law to be qualified, to do
business in any other jurisdiction.
7.2. AUTHORIZATION. The execution, delivery and performance of this
Agreement and each of the transactions contemplated hereby have been duly and
validly authorized by the board of directors of the Company, and the Company has
taken all other necessary corporate action to authorize and approve this
Agreement and the consummation of the transactions contemplated hereby.
7.3. RESTRICTED SECURITIES. The securities issued or to be issued
under this Agreement will be issued as restricted securities in a private
offering pursuant to an exemption from registration therefor under the
Securities Act.
7.4. MATERIAL CONTRACTS. Except for those items set forth in the
Waiver Agreement between ALPNET and Boeckmann dated 31 December 1993, the
Company is not in violation of any material provision of any material contract
or agreement to which Company is a party, by which it is bound or to which its
property is subject (collectively the "MATERIAL CONTRACTS").
7.5. ABSENCE OF CONFLICT. The execution and delivery of this
Agreement by the Company and the consummation of the transactions contemplated
hereby do not conflict with or breach any provision of the articles of
incorporation or bylaws of the Company or of any Material Contract, and the
Company does not know of any other breach of its articles of incorporation.
7.6. LITIGATION. There are no existing or pending, and the Company
does not know of any threatened, material claims of any kind or any material
actions, suits, proceedings or investigations against (i) the Company, (ii) any
director, officer, agent or employee of the Company, in his or her business
capacity as such, or (iii) the business or properties of the Company.
7.7. AUTHORIZED CAPITAL. The Company is authorized to issue
40,000,000 shares of ALPNET Common Stock, of which 15,562,223 shares are issued
and outstanding. The Company is authorized to issue 2,000,000 shares of
preferred stock (in different series, as authorized by the Company's board of
directors, from time to time), of which 459,411 shares of Series B Preferred
Stock are presently issued and outstanding; provided, however, that the Company
has agreed to issue 584,257 shares of ALPNET Preferred Stock in connection with
this Agreement and that certain agreement ALPNET is entering into with NFT
Ventures simultaneously with this Agreement. The Company has issued warrants to
purchase 8,389,607 shares of ALPNET Common Stock, which warrants are being
simultaneously surrendered and cancelled pursuant to this Agreement, the NFT
Ventures agreement and that certain agreement ALPNET is entering into with
Eichner. The Company has reserved 1,200,000 shares of Common Stock for issuance
under employee stock option plans, of which approximately 888,089 shares are
presently subject to outstanding options which have not been exercised. There
are no other shares of the Company's capital stock issued and outstanding and,
except for the Series B Preferred Stock and the ALPNET Preferred Stock, there
are not outstanding (i) any other securities convertible into or exchangeable
for any of the Company's capital stock or (ii) any other rights to purchase or
subscribe for capital stock, or securities convertible into or exchangeable for
capital stock, of Company.
8. REPRESENTATIONS AND WARRANTIES BY BOECKMANN. Boeckmann hereby
represents and warrants to ALPNET that as of the date of executing and
delivering this Agreement, Boeckmann has not assigned, and is the lawful holder
of, the following securities or instruments, free and clear of the rights and
claims of others: (a) the Note; (b) the Outstanding Warrants; and (c) 253,529
shares of Series B Preferred Stock evidenced by the Certificate.
9. MISCELLANEOUS PROVISIONS.
9.1. NOTICES. Notice required by this Agreement shall be given in
writing sent by U.S. Mail, Federal Express (or equivalent courier service) or
facsimile telecopy addressed as follows (or to such other address or facsimile
number subsequently provided in writing by such party):
Boeckmann: 15505 Roscoe Boulevard
Sepulveda, CA 94313
Fax No. (818) 892-7367
ALPNET: 4444 South 700 East, #204
Salt Lake City, UT 84107-3075
Fax No. (801) 265-3310
Any notice sent pursuant to this paragraph shall be deemed effective: (i) if by
certified U.S. mail or Federal Express, on the date of the first attempted
delivery (excluding Saturdays, Sundays and holidays); and (ii) if by facsimile
transmission, immediately upon confirmed transmission.
9.2. ASSIGNMENT. Except as herein provided, this Agreement may not
be assigned by either party without the written consent of the other party first
had and obtained; provided, however, notwithstanding any other provision of this
Agreement, including without limitation, the provisions of this Paragraph 8.2,
the rights granted to Boeckmann in Paragraph 3.4 to cause ALPNET to register the
shares of ALPNET Common Stock issuable upon the conversion of the Conversion
Preferred Shares into ALPNET Common Stock may be assigned by Boeckmann to a
transferee or assignee of any of such securities, provided that ALPNET is given
written notice by Boeckmann at the time of or within a reasonable time after
said transfer, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being assigned.
9.3. ENTIRE AGREEMENT. The parties acknowledge that this Agreement
and the instruments referred to herein contain their entire understanding with
respect to the specific matters referred to herein and supersede all prior
understandings, correspondence, memoranda, representations, negotiations,
letters of intent or other prior agreements with respect thereto and that this
Agreement may not be amended or modified except by a written instrument signed
by all parties affected thereby.
9.4. APPLICABLE LAW. It is understood and agreed that the laws of
the State of Utah shall apply to all aspects of this transaction which may
relate to the issuance, purchase, sale or transfer of securities. As to all
other aspects of this transaction, the substantive laws of the State of
California (or at the sole option of Boeckmann, the laws of the State of Utah)
shall govern the construction and interpretation of this Agreement and the
rights and remedies of the parties. In that regard the parties expressly submit
themselves to the jurisdiction of (i) California state courts and/or the United
States District Court of the Central District of California (if Boeckmann elects
California law); or (ii) Utah state courts and/or the United States District
Court for the District of Utah, Central Division (if Boeckmann elects Utah law),
in any action or proceeding arising out of this Agreement.
9.5. WAIVER. No waiver of any breach or default by any party to this
Agreement shall be considered to be a waiver of any other breach or default.
9.6. SEVERABILITY. Whenever possible, each provision of this
Agreement and every related document shall be interpreted in such manner as to
be valid under applicable law; however, if any provision of any of the foregoing
is invalid or prohibited under applicable law, then such provision shall be
ineffective to the extent of such invalidity or prohibition without invalidating
the remainder of such provision or the remaining provisions of this Agreement.
9.7. COUNTERPARTS. For the convenience of the parties, this
Agreement may be executed in counterparts, each of which shall be deemed to be
an original, but all of which taken together shall constitute one and the same
instrument. The counterparts are in all respects identical, and each of the
counterparts shall be deemed to be complete in itself so that any one may be
introduced in evidence or used for any other purpose without the production of
the other counterparts. This Agreement shall be effective when one or more of
such counterparts has been executed by each party and delivered. If a party
receives a facsimile transmission of this Agreement from another party, which
transmission bears the signature of the other party, then it shall be deemed
that (i) the Agreement that is sent by facsimile transmission conforms to the
original, (ii) the original Agreement bears a genuine signature of the other
party and (iii) the Agreement has been delivered by the other party. In such
event, the other party shall send an original of the Agreement to the receiving
party by regular mail.
9.8. AUTHORIZATION. Each individual executing this Agreement does
thereby represent and warrant to any other individual so signing (and to each
other entity for which another individual is signing) that the individual has
been duly authorized to deliver this Agreement in the capacity and for the
entity that is set forth where he signs.
9.9. COSTS AND ATTORNEYS' FEES. In the event that either party shall
be required to engage legal counsel to enforce the provisions of this Agreement,
the prevailing party shall be entitled to recover all cost and expenses,
including reasonable attorneys' fees, whether suit be instituted or not, and
whether at trial or on appeal.
IN WITNESS WHEREOF, the parties have signed this Agreement effective as of
the day and year first set forth above.
\s\ H.F. Boeckmann, II
H. F. BOECKMANN, II
ALPNET, INC., a Utah Corporation
By:\s\ Thomas F. Seal
THOMAS F. SEAL
President
ATTEST:
\s\ Leo A. Jardine
LEO A. JARDINE
Secretary
Schedule of Exhibits
to
Debt Conversion Agreement
Referred to
Exhibit Description in Paragraph
Exhibit A $2,157,544 Promissory Note,
dated April 16, 1990 A
Exhibit B Form of ALPNET Preferred Stock
Certificate, Series C 1.4.1
Exhibit C Warrants Being Surrendered
C-1 Warrant L013 for 1,544,115 shares
@ .85/share, expires 31 July
2003 4.1
C-2 Warrant L014 for 2,052,801 shares
@ .85/share, expires 31 July
2003 4.1
C-3 Warrant L015 for 819,255 shares
@ .85/share, expires 5 years
after Note is satisfied 4.1
EXHIBIT 10.4
DEBT CONVERSION AGREEMENT
This Debt Conversion Agreement (the "AGREEMENT") is made effective as of 31
March 1994 by and between NFT Ventures, Inc., a Utah corporation ("NFT") and
ALPNET, Inc., a Utah corporation ("ALPNET" or the "COMPANY").
R E C I T A L S :
A. ALPNET has heretofore issued in favor of Richard L. Warner ("WARNER") a
promissory note in the principal amount of $250,000, dated 31 March 1990 (the
"1990 NOTE"), which 1990 Note was issued as a renewal of a promissory note in
the principal amount of $250,000, dated 15 May 1989 (the "1989 NOTE"). The 1990
Note and the 1989 Note are collectively referred to herein as the "WARNER
NOTES." A copy of the Warner Notes are attached hereto as Exhibit "A."
B. NFT is the holder in due course of the Warner Notes.
C. As of 31 March 1994, $175,000 of the principal balance of the Warner
Notes remains unpaid; accrued interest through that date has been paid in full.
D. ALPNET has heretofore issued to Dialogic Systems Corporation, a
California corporation ("DIALOGIC"), Warrant No. L016 to purchase 1,544,115
shares of ALPNET Common Stock (as herein defined) and Warrant No. L017 to
purchase 1,649,342 shares of ALPNET Common Stock (collectively the "DIALOGIC
WARRANTS").
E. ALPNET has heretofore issued to Warner Warrant No. L018 to purchase
357,353 shares of ALPNET Common Stock (as herein defined) and Warrant No. L019
to purchase 50,000 shares of ALPNET Common Stock (the "WARNER WARRANTS").
F. NFT is the lawful holder of the Dialogic Warrants and the Warner
Warrants.
G. ALPNET has requested and NFT has agreed to (1) convert all of the
principal balance of the debt evidenced by the Warner Notes, in the amount of
$175,000, into "ALPNET Preferred Stock" (as herein defined), and ALPNET desires
to issue to NFT such ALPNET Preferred Stock; and (2) surrender the Dialogic
Warrants and the Warner Warrants to purchase, in the aggregate, 3,600,810
additional shares of "ALPNET Common Stock" (as herein defined), all on the terms
and conditions as herein set forth.
NOW, THEREFORE, for and in consideration of the mutual promises and other
consideration herein set forth, it is agreed by the parties as follows:
1. CONVERSION OF NOTE TO EQUITY.
1.1. CONVERSION PREFERRED SHARES. Contemporaneously herewith, ALPNET
shall deliver to NFT 56,566 newly issued shares of ALPNET Preferred Stock (the
"CONVERSION PREFERRED SHARES"). It is understood and agreed that the total
number of Conversion Preferred Shares has been determined by (i) dividing the
principal amount of the Note converted to equity, $175,000, by the conversion
per share price of $0.34375, and (ii) dividing that quotient (509,090.909) by
nine.
1.2. SATISFACTION OF NOTE. Delivery of the Conversion Preferred
Shares to NFT shall constitute payment in full satisfaction of the total amount
due on the Warner Notes. Contemporaneously herewith, NFT shall deliver to
ALPNET the Warner Notes each marked "Paid in Full."
1.3. CONSENT TO ISSUE CONVERSION PREFERRED SHARES. NFT is the holder
in due course of 253,529 shares of ALPNET $2.55 convertible, voting, non-
cumulative 10% preferred stock, series B, without par value (the "SERIES B
PREFERRED STOCK"), represented by Certificates PB002 and PB003 (the "CERTIFI-
CATES"). Pursuant to the provisions of Paragraph 11 of the Certificates, NFT
hereby consents to the creation of the new ALPNET Preferred Stock (as defined
herein).
1.4. DEFINITION OF CAPITAL STOCK.
1.4.1. The term "ALPNET PREFERRED STOCK" for purposes of this
Agreement shall mean ALPNET $3.09 convertible, voting, non-cumulative 10%
preferred stock, series C, without par value in the form attached hereto as
Exhibit "B."
1.4.2. The term "ALPNET COMMON STOCK" for purposes of this
Agreement shall mean ALPNET common, voting, no par value stock.
2. CONVERSION PREFERRED SHARES.
2.1. FUTURE ADJUSTMENTS. In case ALPNET shall at any time (i)
subdivide its outstanding shares of ALPNET Common Stock into a greater number of
shares or (ii) pay a dividend in shares of ALPNET Common Stock or make a
distribution in shares of ALPNET Common Stock, the conversion of Conversion
Preferred Shares into ALPNET Common Stock shall be proportionately increased,
and, conversely, in case the outstanding shares of the ALPNET Common Stock shall
be combined into a smaller number of shares, the conversion of the Conversion
Preferred Shares into ALPNET Common Stock shall be proportionately decreased.
In case of any classification, reclassification, or other
reorganization of the capital stock of ALPNET, or in case of the consolidation
or merger of ALPNET with or into another corporation, or the conveyance to
another corporation of all or any major portion of the assets of ALPNET, then,
as part of such classification, reclassification, reorganization, consolidation,
merger, or conveyance, adequate provision shall be made whereby NFT upon the
conversion of the Conversion Preferred Shares into ALPNET Common Stock shall be
entitled to receive on the same basis and conditions as holders of the ALPNET
Common Stock, the stock, securities or other property which NFT would have been
entitled to receive upon such classification, reclassification or other
reorganization, consolidation, merger or conveyance, if NFT had converted the
Conversion Preferred Shares immediately prior to such classification,
reclassification or other reorganization, consolidation, merger or conveyance;
and, in any such case, appropriate provision shall be made with respect to the
rights and interests of NFT to the end that the provisions hereof (including,
without limitation, provisions for adjustment of the conversion of the
Conversion Preferred Shares into ALPNET Common Stock) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or other property thereafter deliverable upon the conversion of the Conversion
Preferred Shares into ALPNET Common Stock; and, as a condition of any such
consolidation, merger, or conveyance, any corporation which shall become
successor to ALPNET by reason of such consolidation, merger or conveyance shall
expressly assume the obligation to deliver, upon the conversion of the
Conversion Preferred Shares into ALPNET Common Stock, such shares of stock,
securities or other consideration as NFT shall be entitled to receive pursuant
to the provisions hereof. The foregoing provisions shall similarly apply to
successive classifications, reclassifications, or other reorganizations and to
successive consolidations, mergers, and conveyances of or by any such successor.
2.2. RESTRICTIONS. The Conversion Preferred Shares, shall bear a
restrictive legend (the "RESTRICTIVE LEGEND") that is substantially in the
following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS IN RELIANCE UPON
EXEMPTIONS FROM REGISTRATION FOR NON-PUBLIC OFFERINGS. THIS SECURITY MAY
NOT BE SOLD OR TRANSFERRED UNLESS IT IS REGISTERED UNDER THE ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER RECEIVES AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO IT THAT AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
2.3. INVESTMENT REPRESENTATION. NFT does hereby represent and
warrant to ALPNET that all shares and securities acquired or to be acquired by
NFT hereunder are being acquired for investment purposes only, for its own
account and not with a view to resale or redistribution.
2.4. REGISTRATION. Upon the written request of NFT, ALPNET does
hereby agree to register with the United States Securities and Exchange
Commission (the "S.E.C.") and to qualify under any applicable Blue Sky or other
state securities laws, from time to time, the offer and sale by NFT of ALPNET
Common Stock issued, from time to time, as a result of the conversion of the
Conversion Preferred Shares. Any registrations and qualifications provided for
herein shall be accomplished within 90 days after ALPNET files its next annual
Form 10-K report with the S.E.C. following the conversion of the Conversion
Preferred Shares into ALPNET Common Stock; provided, however, that ALPNET shall
not be required to register fewer than 200,000 shares in any one registration
and/or qualification.
2.4.1. All expenses incurred in connection with any registration
or qualification pursuant to this Paragraph 2.4, including, without limitation,
all registration, filing, and qualification fees, printing expenses, fees and
disbursements of counsel for ALPNET, and expenses of any special audits
incidental to or required by such registration, shall be borne by ALPNET.
2.4.2. In the case of each registration and qualification
effected by ALPNET pursuant to this Paragraph 2.4, ALPNET will keep NFT advised
in writing as to the initiation of each such registration and qualification and
as to the completion thereof. At its expense ALPNET will:
2.4.2.1. Keep such registration and qualification effective
for a period of 120 days (or for successive 12-month periods, as necessary,
for preregistrations), or until the distribution described in the
registration statement relating thereto has been completed, whichever first
occurs; and
2.4.2.2. Furnish such number of prospectuses and other
documents incident thereto as NFT from time to time may reasonably request.
2.4.3. INDEMNIFICATION. ALPNET will indemnify NFT with respect
to any registration and qualification effected pursuant to this Paragraph 2.4
against all claims, losses, damages, and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration or qualification, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by ALPNET of any rule or regulation promulgated under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), or any state
securities law applicable to ALPNET and relating to action or inaction required
of ALPNET in connection with any such registration or qualification, and will
reimburse NFT for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, provided that ALPNET will not be liable in any such case to
the extent that any such claim, loss, damage or liability arises out of or is
based on any untrue statement or omission based upon written information
furnished to ALPNET by an instrument duly executed by NFT specifically for use
therein.
NFT will indemnify ALPNET, each of its directors and officers who
sign such registration statement, and each person who controls ALPNET within the
meaning of the Securities Act, with respect to any registration and
qualification effected pursuant to this Paragraph 2.4, against all claims,
losses, damages, and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement of a material fact contained in any
registration statement, prospectus, offering circular or other document incident
to any such registration or qualification or any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse ALPNET, and such other directors,
officers or other persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement or omission is made in such registration
statement, prospectus, offering circular, or other document in reliance upon and
in conformity with written information furnished to ALPNET by an instrument duly
executed by NFT specifically for use therein.
Each party entitled to indemnification under this Paragraph 2.4.3
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying party of
its obligations under this paragraph. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
2.4.4. NFT shall furnish to ALPNET such written information
relating to him and the distribution proposed by him as ALPNET may reasonably
request in writing and as shall be required in connection with any registration
or qualification referred to in this Paragraph 2.4.
2.5. RESERVATION OF SHARES. There have been reserved, and ALPNET
shall at all times keep reserved, out of its authorized and unissued ALPNET
Common Stock a number of shares of ALPNET Common Stock sufficient to provide for
the exercise of the rights of conversion of the issued and outstanding ALPNET
Preferred Stock. The transfer agent for the ALPNET Common Stock (the "TRANSFER
AGENT") and every subsequent transfer agent for any shares of ALPNET's capital
stock issuable upon the exercise of any of the rights of purchase aforesaid will
be irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be requisite for such purpose. ALPNET will keep a
copy of this Agreement on file with the Transfer Agent and with every subsequent
transfer agent for any shares of ALPNET's capital stock issuable upon the
exercise of the rights of conversion of the ALPNET Preferred Stock.
3. SURRENDER OF WARRANTS.
3.1. WARRANTS OUTSTANDING. NFT presently holds the Dialogic Warrants
and the Warner Warrants to purchase a cumulative total of 3,600,810 shares of
ALPNET Common Stock for the purchase price of $0.85 per share (the "OUTSTANDING
WARRANTS"). Copies of the four Outstanding Warrants are attached hereto as
Exhibits C-1, C-2, C-3 and C-4. NFT hereby represents and warrants to ALPNET
that it does not own or hold any other warrants other than the Outstanding
Warrants.
3.2. SURRENDER FOR CONSIDERATION. For ten dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, contemporaneously herewith NFT shall surrender and deliver to
ALPNET the Outstanding Warrants, duly endorsed for cancellation.
3.3. INABILITY TO SURRENDER ALL OUTSTANDING WARRANTS. NFT expressly
agrees that if it is unable to surrender and deliver all four Outstanding
Warrants to ALPNET for any reason, then (a) NFT shall execute and deliver to
ALPNET a lost instrument and indemnification agreement in form reasonably
satisfactory to ALPNET for each misplaced Outstanding Warrant; and (b) upon
receipt by ALPNET of such evidence satisfactory to it of the loss, theft or
destruction of any Outstanding Warrant, and of such indemnification reasonably
satisfactory to ALPNET, the Company will execute a new Warrant of like tenor
which will then be endorsed by NFT, surrendered to the Company on behalf of NFT,
and cancelled.
4. CONDITIONS OF CONVERSION. The performance of NFT under this Agreement
is conditioned upon the occurrence of the following events, or the waiver
thereof in writing by NFT:
4.1. BOECKMANN AGREEMENT. ALPNET shall have consummated with H. F.
Boeckmann II ("MR. BOECKMANN"), an agreement whereby (i) Mr. Boeckmann will
convert $1,632,544 of debt into ALPNET Preferred Stock on the same basis as the
NFT conversion, (ii) Mr. Boeckmann will surrender for cancellation his warrants
to purchase 4,416,171 additional shares of ALPNET Common Stock which he
currently holds, (iii) Mr. Boeckmann will relinquish his liens and security
position in all of the assets of ALPNET and its subsidiaries and will release
ALPNET from the covenants contained in that certain "Loan and Security
Agreement" dated 16 April 1990. In addition, Mr. Boeckmann and ALPNET will
enter into a financial monitoring agreement whereby:
4.1.1. APPROVAL RIGHTS. Mr. Boeckmann will be given the right
to approve major transactions of ALPNET, including, but not limited to, equity
and financing transactions and asset purchases and dispositions;
4.1.2. LEGAL EXISTENCE AND LAWS. ALPNET will agree to guarantee
and annually certify to Mr. Boeckmann its compliance with all material laws,
contracts, corporate agreements and its maintenance of appropriate insurance
coverage; and
4.1.3. IAB DELEGATE. Mr. Boeckmann will be given the right to
have a delegate of his choice participate in ALPNET's International Advisory
Board meetings, once per quarter, at ALPNET's expense.
4.2. EICHNER AGREEMENT. ALPNET shall have consummated with Michael
Eichner ("MR. EICHNER") an agreement whereby (i) Mr. Eichner shall delay
principal payments on the SFR300,000 of debt owed by the Company to him for a
period of 30 months so that the first principal payment will be due 30 September
1996, and (ii) Mr. Eichner will surrender for cancellation his warrants to
purchase 372,626 additional shares of ALPNET Common Stock which he currently
holds; and
4.3. HAEHL AGREEMENT. ALPNET shall have consummated with Dr. W.D.
Haehl ("DR. HAEHL") an agreement whereby Dr. Haehl will defer the 30 September
1994 due date for the guaranteed value of his ALPNET shares to be worth
DM2,000,000 for a period of two years; and
4.4. LEGAL OPINION. ALPNET shall have obtained an opinion for the
Company upon which NFT may rely, from its legal counsel, that this conversion of
debt to equity as described in paragraphs 1.1 and 4.1 hereof will be exempt from
Section 16(b) of the U.S. Securities Exchange Act of 1934, as amended.
5. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company hereby
represents and warrants to NFT that on and as of the date hereof:
5.1. DUE INCORPORATION AND STANDING. The Company is duly
incorporated and validly existing in good standing under the laws of the state
of Utah, with full corporate power to own its properties and conduct its
business as currently conducted. The Company is not qualified, nor to its
knowledge is it required under applicable local law to be qualified, to do
business in any other jurisdiction.
5.2. AUTHORIZATION. The execution, delivery and performance of this
Agreement and each of the transactions contemplated hereby have been duly and
validly authorized by the board of directors of the Company, and the Company has
taken all other necessary corporate action to authorize and approve this
Agreement and the consummation of the transactions contemplated hereby.
5.3. RESTRICTED SECURITIES. The securities issued or to be issued
under this Agreement will be issued as restricted securities in a private
offering pursuant to an exemption from registration therefor under the
Securities Act.
5.4. MATERIAL CONTRACTS. Except for those items set forth in the
Waiver Agreement between ALPNET and Boeckmann dated 31 December 1993, the
Company is not in violation of any material provision of any material contract
or agreement to which Company is a party, by which it is bound or to which its
property is subject (collectively the "MATERIAL CONTRACTS").
5.5. ABSENCE OF CONFLICT. The execution and delivery of this
Agreement by the Company and the consummation of the transactions contemplated
hereby do not conflict with or breach any provision of the articles of
incorporation or bylaws of the Company or of any Material Contract, and the
Company does not know of any other breach of its articles of incorporation.
5.6. LITIGATION. There are no existing or pending, and the Company
does not know of any threatened, material claims of any kind or any material
actions, suits, proceedings or investigations against (i) the Company, (ii) any
director, officer, agent or employee of the Company, in his or her business
capacity as such, or (iii) the business or properties of the Company.
5.7. AUTHORIZED CAPITAL. The Company is authorized to issue
40,000,000 shares of ALPNET Common Stock, of which 15,562,223 shares are issued
and outstanding. The Company is authorized to issue 2,000,000 shares of
preferred stock (in different series, as authorized by the Company's board of
directors, from time to time), of which 459,411 shares of Series B Preferred
Stock are presently issued and outstanding; provided, however, that the Company
has agreed to issue 584,257 shares of ALPNET Preferred Stock in connection with
this Agreement and that certain agreement that ALPNET is entering into with Mr.
Boeckmann simultaneously with this Agreement. The Company has issued warrants
to purchase 8,389,607 shares of ALPNET Common Stock, which warrants are being
simultaneously surrendered and cancelled pursuant to this Agreement, the
Boeckmann agreement and that certain agreement ALPNET is entering into with Mr.
Eichner. The Company has reserved 1,200,000 shares of Common Stock for issuance
under employee stock option plans, of which approximately 888,089 shares are
presently subject to outstanding options which have not been exercised. There
are no other shares of Company's capital stock issued and outstanding and,
except for the Series B Preferred Stock and the ALPNET Preferred Stock, there
are not outstanding (i) any other securities convertible into or exchangeable
for any of the Company's capital stock or (ii) any other rights to purchase or
subscribe for capital stock, or securities convertible into or exchangeable for
capital stock, of Company.
6. REPRESENTATIONS AND WARRANTIES BY NFT. NFT hereby represents and
warrants to ALPNET that on and as of the date of executing and delivering this
Agreement, NFT has not assigned, and is the lawful holder of, the following
securities or instruments, free and clear of the rights and claims of others:
(a) the Warner Notes; (b) the Outstanding Warrants; and (c) 253,529 shares of
Series B Preferred Stock evidenced by the Certificates.
7. MISCELLANEOUS PROVISIONS.
7.1. NOTICES. Notice required by this Agreement shall be given in
writing sent by U.S. Mail, Federal Express (or equivalent courier service) or
facsimile telecopy addressed as follows (or to such other address or facsimile
number subsequently provided in writing by such party):
NFT: 76 West 800 South
Salt Lake City, Utah 84101
Fax No. (801) 355-3739
ALPNET: 4444 South 700 East, #204
Salt Lake City, UT 84107-3075
Fax No. (801) 265-3310
Any notice sent pursuant to this paragraph shall be deemed effective: (i) if by
certified U.S. mail or Federal Express, on the date of the first attempted
delivery (excluding Saturdays, Sundays and holidays); and (ii) if by facsimile
transmission, immediately upon confirmed transmission.
7.2. ASSIGNMENT. Except as herein provided, this Agreement may not
be assigned by either party without the written consent of the other party first
had and obtained; provided, however, notwithstanding any other provision of this
Agreement, including without limitation, the provisions of this Paragraph 6.2,
the rights granted to NFT in Paragraph 2.4 to cause ALPNET to register the
shares of ALPNET Common Stock issuable upon the conversion of the Conversion
Preferred Shares into ALPNET Common Stock may be assigned by NFT to a transferee
or assignee of any of such securities, provided that ALPNET is given written
notice by NFT at the time of or within a reasonable time after said transfer,
stating the name and address of said transferee or assignee and identifying the
securities with respect to which such registration rights are being assigned.
7.3. ENTIRE AGREEMENT. The parties acknowledge that this Agreement
and the instruments referred to herein contain their entire understanding with
respect to the specific matters referred to herein and supersede all prior
understandings, correspondence, memoranda, representations, negotiations,
letters of intent or other prior agreements with respect thereto and that this
Agreement may not be amended or modified except by a written instrument signed
by all parties affected thereby.
7.4. APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with the laws of the State of Utah.
7.5. WAIVER. No waiver of any breach or default by any party to this
Agreement shall be considered to be a waiver of any other breach or default.
7.6. SEVERABILITY. Whenever possible, each provision of this
Agreement and every related document shall be interpreted in such manner as to
be valid under applicable law; however, if any provision of any of the foregoing
is invalid or prohibited under applicable law, then such provision shall be
ineffective to the extent of such invalidity or prohibition without invalidating
the remainder of such provision or the remaining provisions of this Agreement.
7.7. COUNTERPARTS. For the convenience of the parties, this
Agreement may be executed in counterparts, each of which shall be deemed to be
an original, but all of which taken together shall constitute one and the same
instrument. The counterparts are in all respects identical, and each of the
counterparts shall be deemed to be complete in itself so that any one may be
introduced in evidence or used for any other purpose without the production of
the other counterparts. This Agreement shall be effective when one or more of
such counterparts has been executed by each party and delivered. If a party
receives a facsimile transmission of this Agreement from another party, which
transmission bears the signature of the other party, then it shall be deemed
that (i) the Agreement that is sent by facsimile transmission conforms to the
original, (ii) the original Agreement bears a genuine signature of the other
party and (iii) the Agreement has been delivered by the other party. In such
event, the other party shall send an original of the Agreement to the receiving
party by regular mail.
7.8. AUTHORIZATION. Each individual executing this Agreement does
thereby represent and warrant to any other individual so signing (and to each
other entity for which another individual is signing) that the individual has
been duly authorized to deliver this Agreement in the capacity and for the
entity that is set forth where he signs.
7.9. COSTS AND ATTORNEYS' FEES. In the event that either party shall
be required to engage legal counsel to enforce the provisions of this Agreement,
the prevailing party shall be entitled to recover all cost and expenses,
including reasonable attorneys' fees, whether suit be instituted or not.
IN WITNESS WHEREOF, the parties have signed this Agreement effective as of
the day and year first set forth above.
NFT VENTURES, INC., a Utah
Corporation
By:\s\ James R. Morgan
Its Vice President
ALPNET, INC., a Utah Corporation
By:\s\ Thomas F. Seal THOMAS F.
SEAL
President
ATTEST:
\s\ Leo A. Jardine
LEO A. JARDINE
Secretary
Schedule of Exhibits
to
Debt Conversion Agreement
Referred to
Exhibit Description in Paragraph
Exhibit A $250,000 Promissory Note,
dated 31 March 1990 A
Exhibit B Form of ALPNET Preferred Stock
Certificate, Series C 1.4.1
Exhibit C Warrants Being Surrendered
C-1 Warrant L016 (originally issued
to Dialogic Systems Corporation)
for 1,544,115 shares @ .85/share,
expires 31 July 2003 3.1
C-2 Warrant L017 (originally issued
to Dialogic Systems Corporation)
for 1,649,342 shares @ .85/share,
expires 31 July 2003 3.1
C-3 Warrant L018 (originally issued
to Richard L. Warner) for 357,353
shares @ .85/share, expires
31 July 2003 3.1
C-4 Warrant L019 (originally issued
to Richard L. Warner) for 50,000
shares @ .85/share, expires
31 July 2003 3.1
Exhibit 10.5
MODIFICATION AGREEMENT
THIS AGREEMENT (the "AGREEMENT") is entered into effective as of 31 March
1994 by ALPNET, INC., a Utah corporation ("ALPNET"), and MICHAEL F. EICHNER
("EICHNER").
R E C I T A L S :
A. LOAN AGREEMENT. On or about 18 September 1992, ALPNET, as borrower,
and Eichner, as lender, entered into that certain loan agreement (the "LOAN
AGREEMENT") relating to a future advances loan in the original principal amount
of SFR300,000.
B. NOTE. Pursuant to the Loan Agreement, on or about 18 September 1992,
ALPNET, as maker, executed and delivered to Eichner, as holder, a "Future
Advance Promissory Note" (the "NOTE") that was in the original principal amount
of SFR300,000.
C. SECURITY AGREEMENT. As part of the security for payment of the Note,
ALPNET, as debtor, executed and delivered to Eichner, as secured party, a
security agreement (the "SECURITY AGREEMENT") dated 18 September 1992.
D. INTENT OF PARTIES. In order to allow ALPNET to expand its worldwide
translation network through acquisition, ALPNET has requested Eichner to
reschedule principal and interest payments due under the Note.
NOW, THEREFORE, for ten dollars and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. RESCHEDULING OF PRINCIPAL PAYMENTS. The quarterly payment schedule
that is set forth in paragraph 2 of the Note is modified in its entirety to read
as follows:
2. QUARTERLY PRINCIPAL PAYMENTS. Within five days after the
last day of each calendar quarter (i.e., within five days after each
31 March, 30 June, 30 September and 31 December) commencing with the
third calendar quarter of 1996, Maker shall pay Holder a principal
payment in the amount of SFR30,000 (Swiss francs), which principal
payment shall be in addition to the monthly interest payment that is
due by the same date pursuant to the provisions of paragraph 1 of this
Note.
Nothing that is contained in this paragraph shall defer the quarterly interest
payments that are due under the Note. Eichner shall make a notation on the
original Note of the rescheduling of the principal payments that has been made
pursuant to the provisions of this Agreement and shall provide ALPNET with a
copy of such modified page of the Note.
2. FINAL MATURITY. The final maturity date set forth in paragraph 3 of
the Note shall be extended to 31 December 1998.
3. OPTIONAL PREPAYMENTS. The handwritten portion of paragraph 5 of the
Note regarding the application of prepayment funds is hereby deleted in its
entirety.
4. SECURITY AGREEMENT. Paragraph 8.3 of the Security Agreement is hereby
deleted in its entirety.
5. SURRENDER OF WARRANT.
5.1. OUTSTANDING WARRANT. Eichner represents and warrants that he is
the lawful holder of an outstanding warrant (L020) to purchase a total of
372,626 shares of ALPNET common stock for the purchase price of $0.8373 per
share (the "OUTSTANDING WARRANT"). A copy of the Outstanding Warrant is
attached hereto as Exhibit A. Eichner hereby represents and warrants to ALPNET
that he does not own or hold any other warrants to purchase ALPNET common stock
other than the Outstanding Warrant.
5.2. SURRENDER FOR CONSIDERATION. For ten dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, contemporaneously herewith Eichner shall surrender and deliver to
ALPNET the Outstanding Warrant, duly endorsed for cancellation.
5.3. INABILITY TO SURRENDER OUTSTANDING WARRANT. Eichner expressly
agrees that if he is unable to surrender and deliver the Outstanding Warrant to
ALPNET for any reason, then (a) Eichner shall execute and deliver to ALPNET a
lost instrument and indemnification agreement in form reasonably satisfactory to
ALPNET; (b) upon receipt by ALPNET of such evidence satisfactory to it of the
loss, theft or destruction of the Outstanding Warrant, and of such
indemnification reasonably satisfactory to ALPNET, the Company will execute a
new Warrant of like tenor which will then be endorsed by Boeckmann, surrendered
to the Company on behalf of Eichner and cancelled.
6. CONDITIONS OF EXTENSION. The performance of Eichner under this
Agreement is conditioned upon the occurrence of the following events, or the
waiver thereof in writing by Eichner:
6.1. BOECKMANN AGREEMENT. ALPNET shall have consummated with H. F.
Boeckmann II ("MR. BOECKMANN"), an agreement whereby (i) Mr. Boeckmann will
convert $1,632,544 of debt into ALPNET $3.09 convertible, voting, non-cumulative
10% preferred stock, series C, without par value (the "SERIES C PREFERRED
STOCK"); (ii) Mr. Boeckmann will surrender for cancellation his warrants to
purchase 4,416,171 additional shares of ALPNET common stock which he currently
holds, and (iii) Mr. Boeckmann will relinquish his liens and security position
in all of the assets of ALPNET and its subsidiaries and will release ALPNET from
the covenants contained in that certain "Loan and Security Agreement" dated 16
April 1990 among Mr. Boeckmann, ALPNET and others. In addition, Mr. Boeckmann
and ALPNET shall have entered into a financial monitoring agreement whereby:
6.1.1. APPROVAL RIGHTS. Mr. Boeckmann will be given the right
to approve major transactions of ALPNET, including, but not limited to, equity
and financing transactions and asset purchases and dispositions;
6.1.2. LEGAL EXISTENCE AND LAWS. ALPNET will agree to guarantee
and annually certify to Mr. Boeckmann its compliance with all material laws,
contracts, corporate agreements and maintain appropriate insurance coverage; and
6.1.3. IAB DELEGATE. Mr. Boeckmann will be given the right to
have a delegate of his choice participate in ALPNET's International Advisory
Board meetings, once per quarter, at ALPNET's expense; and
6.2. NFT VENTURES AGREEMENT. ALPNET shall have consummated with NFT
Ventures, Inc. ("NFT VENTURES"), an agreement whereby (i) NFT Ventures will
convert $175,000 of debt into Series C Preferred Stock on the same basis as the
Boeckmann conversion, and (ii) NFT Ventures will surrender for cancellation its
warrants to purchase 3,600,810 additional shares of ALPNET common stock which
NFT Ventures currently holds; and
6.3. HAEHL AGREEMENT. ALPNET shall have consummated with Dr. W.D.
Haehl (DR. HAEHL") an agreement whereby Dr. Haehl will defer the 30 September
1994 due date for the guaranteed value of his ALPNET shares to be worth
DM2,000,000 for a period of two years; and
6.4. LEGAL OPINION. ALPNET shall have obtained an opinion for
ALPNET, from its legal counsel, that the conversion of debt to equity as
described in paragraphs 6.1 and 6.2 hereof will not constitute a violation of
Section 16 of the U.S. Securities Exchange Act of 1934, as amended.
7. RELIANCE BY ALPNET. Eichner hereby acknowledges that ALPNET is relying
on Eichner's covenants under this Agreement to make (a) commitments for
acquisition of additional assets, and (b) disclosures in connection with
ALPNET's filings with the U.S. Securities and Exchange Commission.
8. EFFECT OF AGREEMENT ON LOAN DOCUMENTS. Except as specifically modified
by the provisions of this Agreement, all of the terms and provisions of the Loan
Agreement and the Note shall remain in full force and effect.
9. COUNTERPARTS. For the convenience of the parties, this Agreement may
be executed in counterparts, each of which shall be deemed to be an original,
but all of which taken together shall constitute one and the same instrument.
The counterparts are in all respects identical, and each of the counterparts
shall be deemed to be complete in itself so that any one may be introduced in
evidence or used for any other purpose without the production of the other
counterparts. This Agreement shall be effective when one or more of such
counterparts has been executed by each party and delivered. If a party receives
a facsimile transmission of this Agreement from another party, which
transmission bears the signature of the other party, then it shall be deemed
that (a) the Agreement that is sent by facsimile transmission conforms to the
original, (b) the original Agreement bears a genuine signature of the other
party and (c) the Agreement has been delivered by the other party. In such
event, the other party shall send an original of the Agreement to the receiving
party by regular mail.
ALPNET, INC., a Utah corporation
By:\s\ Thomas F. Seal
THOMAS F. SEAL
President
\s\ Michael F. Eichner
MICHAEL F. EICHNER
<TABLE>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
Thousands of dollars and shares 1994 1993 1992
<S> <C> <C> <C>
Net income (loss) $ (741) $ 458 $ (613)
Weighted average shares of
Common Stock outstanding 15,562 13,334 11,846
Weighted average shares of
Common Stock issuable upon
conversion of convertible
Preferred Stock (2) 1,673 1,378
Total shares of Common Stock and
Common Stock equivalents 17,235 14,712 11,846
Net income (loss) per share:
Loss before extraordinary item $ (.04) $.03 $(.09)
Extraordinary item - reduction of
income taxes arising from
carryforward of prior years'
net operating losses--See Note 6
to the Consolidated Financial
Statements .04
Net income (loss) per share $ (.04) $.03 $(.05)
<FN>
(1) Primary and fully diluted per share earnings (loss) are substantially the same for each year presented.
(2) Common Stock issuable upon conversion of Preferred Stock was anti-dilutive in 1992 and for certain quarters in 1994.
</FN>
</TABLE>
EXHIBIT 20
AUDITORS' REPORT
To the shareholder of
MULTISCRIPT INC.
We have audited the balance sheets of MULTISCRIPT INC. as at December 31, 1994
and 1993 and the statements of earnings, deficit and changes in financial
position for each of the years ended December 31, 1994, 1993 and 1992. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1994 and 1993
and the results of its operations and the changes in its financial position for
each of the years in the three year period ended December 31, 1994 in accordance
with generally accepted accounting principles.
\S\ FRIEDMAN & FRIEDMAN
Chartered Accountants
Montreal, Quebec
February 6, 1995
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-5404) pertaining to the 1981 Incentive Stock Option Plan and The 1983
Non-Statutory Stock Option Plan of ALPNET, Inc. and subsidiaries of our report
dated March 10, 1995, with respect to the consolidated financial statements of
ALPNET, Inc. and subsidiaries included in the Annual Report (Form 10-K) for the
year ended December 31, 1994.
\s\ ERNST & YOUNG LLP
Salt Lake City, Utah
March 24, 1995
Exhibit 23.2 - Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-5404) pertaining to the 1981 Incentive Stock Option Plan and the 1983
Non-Statutory Stock Option Plan of ALPNET, Inc. and subsidiaries; of our
Auditors' Report dated February 6, 1995 with respect to the balance sheets of
Multiscript Inc. as at December 31, 1994 and 1993 and the statements of
earnings, deficit and changes in financial position for each of the years ended
December 31, 1994, 1993 and 1992, which we have been advised is included in this
Annual Report (Form 10-K) of ALPNET, Inc. for the year ended December 31, 1994.
\S\ FRIEDMAN & FRIEDMAN
Chartered Accountants
Montreal, Quebec
March 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1994 AND
1993 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1994 SEP-30-1994 DEC-31-1993
<PERIOD-END> DEC-31-1994 SEP-30-1994 DEC-31-1993
<CASH> 344 659 1012
<SECURITIES> 0 0 0
<RECEIVABLES> 4436 4234 3580
<ALLOWANCES> 108 160 165
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 5610 5678 5465
<PP&E> 3612 3708 3309
<DEPRECIATION> 2682 2758 2575
<TOTAL-ASSETS> 13223 13427 12743
<CURRENT-LIABILITIES> 4423 4428 5340
<BONDS> 1623 1486 1314
<COMMON> 37846 37946 38274
0 0 0
2894 2894 1151
<OTHER-SE> (33563) (33327) (33336)
<TOTAL-LIABILITY-AND-EQUITY> 13223 13427 12743
<SALES> 20473 14631 19459
<TOTAL-REVENUES> 20473 14631 19459
<CGS> 18399 13309 15969
<TOTAL-COSTS> 18399 13309 15969
<OTHER-EXPENSES> 2519 1752 2586
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 204 150 364
<INCOME-PRETAX> (649) (580) 540
<INCOME-TAX> 92 66 82
<INCOME-CONTINUING> (741) (646) 458
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (741) (646) 458
<EPS-PRIMARY> (.043) (.036) .031
<EPS-DILUTED> (.043) (.036) .031
</TABLE>
