SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended: June 30, 1997 Commission File Number: O-14741
------------- -------
ASA International Ltd.
-----------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 02-0398205
- -------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10 Speen Street, Framingham, MA 01701
- ---------------------------------------- ----------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 508-626-2727
------------
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.
X
Yes: ----- No: -----
As of June 30, 1997, there were 3,292,963 shares of Common Stock of the
Registrant outstanding.
PART I
Item 1
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 455,154 $ 674,239
Receivables - net 5,333,340 3,753,971
Computer hardware held for resale 86,690 87,750
Other current assets 762,970 710,130
----------- -----------
TOTAL CURRENT ASSETS 6,638,154 5,226,090
PROPERTY AND EQUIPMENT (less
depreciation of $3,364,649 and
$3,194,815, respectively) 4,272,418 4,352,408
SOFTWARE (less amortization of
$6,011,441 and $5,433,284,
respectively) 4,119,764 4,657,840
COST EXCEEDING NET ASSETS ACQUIRED
(less amortization of $1,519,138
and $1,403,960, respectively) 810,938 873,205
OTHER ASSETS 1,420,247 1,520,435
----------- -----------
$17,261,521 $16,629,978
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
------------- ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Revolving credit and bank note $ 345,000 $ 795,000
Accounts payable 1,449,942 1,360,585
Accrued expenses 2,024,212 1,484,794
Other current liabilities 1,735,397 1,585,796
----------- -----------
TOTAL CURRENT LIABILITIES 5,554,551 5,226,175
LONG-TERM OBLIGATIONS, NET OF CURRENT
MATURITIES 3,009,571 3,011,976
DEFERRED TAXES 380,000 380,000
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common stock 40,884 39,842
Additional paid-in capital 7,396,431 7,344,564
Retained earnings 2,412,526 2,159,863
----------- -----------
9,849,841 9,544,269
Less: treasury stock, at cost 1,532,442 1,532,442
----------- -----------
8,317,399 8,011,827
----------- -----------
$17,261,521 $16,629,978
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
June 30,
----------------------------
1997 1996
----------------------------
(Unaudited)
REVENUE
<S> <C> <C>
Computer and add-on hardware $ 1,361,438 $ 810,845
Services 3,839,739 3,668,822
Product licenses 1,400,869 1,143,996
------------ ------------
NET REVENUE 6,602,046 5,623,663
COST OF REVENUE
Computer and add-on hardware 1,269,421 726,568
Services 2,183,155 2,286,473
Product licenses and development 812,191 813,376
------------ ------------
TOTAL COST OF REVENUE 4,264,767 3,826,417
EXPENSES
Marketing and sales 1,085,373 928,746
General and administrative 744,153 953,131
Amortization of goodwill 58,251 64,718
------------ ------------
TOTAL EXPENSES 1,887,777 1,946,595
EARNINGS (LOSS) FROM OPERATIONS 449,502 (149,349)
INTEREST EXPENSE - NET (86,359) (112,352)
------------ ------------
EARNINGS (LOSS) BEFORE INCOME TAXES 363,143 (261,701)
INCOME TAXES 152,000 -
------------ ------------
NET EARNINGS (LOSS) $ 211,143 $ (261,701)
============ ============
EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
NET EARNINGS $.06 ($.06)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 3,713,089 4,287,199
============ ============
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended
June 30,
----------------------------
1997 1996
----------------------------
(Unaudited)
REVENUE
<S> <C> <C>
Computer and add-on hardware $ 2,002,874 $ 2,084,099
Services 7,080,054 8,353,353
Product licenses 2,598,874 1,910,875
------------ ------------
NET REVENUE 11,681,802 12,348,327
COST OF REVENUE
Computer and add-on hardware 1,822,109 1,771,776
Services 4,017,840 5,340,983
Product licenses and development 1,547,952 1,639,604
------------ ------------
TOTAL COST OF REVENUE 7,387,901 8,752,363
EXPENSES
Marketing and sales 2,104,668 1,774,570
General and administrative 1,455,368 1,725,593
Amortization of goodwill 115,179 129,439
------------ ------------
TOTAL EXPENSES 3,675,215 3,629,602
EARNINGS (LOSS) FROM OPERATIONS 618,686 (33,638)
INTEREST EXPENSE - NET (198,023) (236,423)
------------ ------------
EARNINGS (LOSS) BEFORE INCOME TAXES 420,663 (270,061)
INCOME TAXES 168,000 -
------------ ------------
NET EARNINGS (LOSS) $ 252,663 $ (270,061)
============ ============
EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
NET EARNINGS $.07 ($.06)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 3,690,696 4,198,337
============ ============
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
----------------------------
1997 1996
----------------------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings (loss) $ 252,663 $ (270,061)
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Depreciation and amortization 868,166 1,204,718
Changes in assets and liabilities (909,972) (440,971)
------------ ------------
Total adjustments (41,806) 763,747
------------ ------------
Net cash provided by operating
activities 210,857 493,686
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (89,842) (248,004)
Additions to software (40,082) (599,733)
Reduction (increases) in sales-type
leases (9,009) 59,678
Other assets 101,194 (31,910)
------------ ------------
Net cash used for investing
activities (37,739) (819,969)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in bank and
other notes (700,000) 550,000
Increase (decrease) in long-term
debt 250,000 (225,612)
Issuance of common stock 57,797 61,947
------------ ------------
Net cash provided by (used for)
financing activities (392,203) 386,335
------------ ------------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) (219,085) 60,052
Balance, beginning of year 674,239 404,026
------------ ------------
Balance, end of period $ 455,154 $ 464,078
============ ============
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
- ------------------------------
As permitted by the rules of the Securities and Exchange Commission applicable
to quarterly reports on Form 10-Q, these notes are condensed and do not contain
all disclosures required by generally accepted accounting principles. Reference
should be made to the financial statements and related notes included in the
Company's Annual Report on Form 10-K.
In the opinion of management, the accompanying financial statements reflect all
adjustments which were of a normal recurring nature necessary for a fair
presentation of the Company's results of operations for the six months ended
June 30, 1997 and June 30, 1996, respectively.
The results disclosed in the Condensed Consolidated Statement of Operations for
the six months ended June 30, 1997 are not necessarily indicative of the results
expected for the full year.
Note 2 - Notes Payable
- ----------------------
In April 1997, the Company received $250,000 in funding under a three- year term
note through a state agency. The note calls for monthly interest payments for
six months beginning in May 1997 and monthly payments of $8,333 for principal
plus interest at the rate of prime plus 3 1/2% commencing in November 1997. The
note, which is subordinate to the interest of the Company's existing lender, is
secured by the assets of ASA International Ltd. and is guaranteed by the
Company.
Item 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations
-----------------------------------------------------------
In addition to the historical information contained herein, the discussions
contained in this document include forward-looking statements. By way of
example, the discussions include statements regarding revenues, gross margins,
future marketing efforts, and potential acquisitions. Such statements involve a
number of risks and uncertainties, including but not limited to those discussed
below and those identified from time to time in the Company's filings with the
Securities and Exchange Commission. These risks and uncertainties could cause
actual results to differ materially from those projected. Readers are cautioned
not to place undue reliance on these forward-looking statements. The Company
assumes no obligation to update these forward- looking statements to reflect
events or circumstances arising after the date hereof.
Results of Operations
Second Quarter of 1997
compared to
Second Quarter of 1996
(000's omitted)
--------------- --------------------
Revenue Increase/(Decrease)
--------------- --------------------
1997 1996 Amount Percentage
---- ---- ------ ----------
Computer and add-on
hardware $ 1,361 $ 811 $ 550 68%
Services 3,840 3,669 171 5%
Product licenses 1,401 1,144 257 22%
-------- -------- -------- --------
Net revenue $ 6,602 $ 5,624 $ 978 17%
======== ======== ======== ========
REVENUE
Net revenue. The Company designs and develops proprietary enterprise and
point-solution software for the electronic time and labor recording market, for
catalog direct marketers, and for the automotive and legal markets. The
Company's revenues are derived from the sale of third party computer and add-on
hardware, from the licensing of the Company's software products, and from client
service and support. The Company's total revenues increased by approximately
$978,000, or 17%, for the quarter ended June 30, 1997, compared to the quarter
ended June 30, 1996. Revenue from existing businesses increased by approximately
Item 2
- continued -
$2,432,000, or 58%, for the period when compared to the second quarter of 1996
and includes no revenue from the international trade product line in the 1997
period, as compared to $1,454,000 in the 1996 period, due to the sale of this
product line in December 1996.
Computer and add-on hardware. Hardware revenues are derived from the resale
of third-party hardware products to the Company's clients in conjunction with
the licensing of the Company's software. Hardware revenues increased by
approximately $550,000, or 68%, for the three months ended June 30, 1997,
compared to the same period in 1996. The increase in hardware revenues was due
primarily to the increase of hardware unit sales accompanying increased product
license sales.
Services. Services are comprised of fees generated from training, consulting,
and ongoing client support provided under self-renewing maintenance agreements.
Service revenues increased by approximately $171,000, or 5%, for the three
months ended June 30, 1997, compared to the three months ended June 30, 1996.
Service revenue from existing businesses increased by approximately $1,071,000,
or 39%, for the period, when compared to the second quarter of 1996, and the
revenue from the international trade product line is eliminated. The change was
due to increases in software license revenues which were accompanied by client
requirements for training and consulting services, and to the increase in
support revenues as a result of a larger installed client base.
Product licenses. The Company's software license revenues are derived
primarily from the licensing of the Company's enterprise and point-solution
products. Software license revenues increased by approximately $257,000, or 22%,
for the second quarter of 1997, compared to the same period in 1996. Product
license revenue from existing businesses increased by approximately $673,000, or
93%, for the period, when compared to the second quarter of 1996, and the
revenue from the international trade product line is eliminated. The increase in
dollar amount was primarily due to increased market acceptance of the Company's
software products, and the increased capacity created by growth in the Company's
direct sales force and marketing efforts.
COST OF REVENUE
Computer and add-on hardware. Cost of hardware revenues consists primarily
of the costs of third-party hardware products. Cost of hardware revenues
increased by approximately $543,000, or 75%, for the three months ended June 30,
1997, compared to the prior period. The increase in dollar amount for the cost
of hardware revenues for the three months ended June 30, 1997 was due primarily
to increased unit sales of hardware products accompanying increased product
license sales.
Item 2
- continued -
The gross margin percentage for hardware sales decreased to 7% for the three
months ended June 30, 1997, from 10%, in the same period in 1996. Margins on
computer and add-on hardware do fluctuate based on the mix of computer and
ancillary hardware products sold. Accordingly, the Company expects hardware
gross margins to continue to fluctuate in the future. The Company continues to
direct its efforts toward building service and license revenues to offset the
historical decline in hardware revenue and margins.
Services. Cost of services consists of the costs incurred in providing
client training, consulting, and ongoing support as well as other client
service-related expenses. Cost of services decreased by approximately $103,000
for the three months ended June 30, 1997, compared to the second quarter of
1996. The decrease reflects the elimination of the cost of service related to
the international trade product line which was sold in December 1996. The gross
margin percentage for services for the second quarter of 1997 increased to
approximately 43% from 37% of revenue from services in the second quarter of
1996. The Company's revenue and margin from services fluctuate from period to
period due to changes in the mix of contracts and projects.
Product licenses and development. Cost of software license revenues
consists of the costs of amortization of capitalized software costs, and the
costs of sublicensing third-party software products. The amount also includes
the expenses associated with the development of new products and the enhancement
of existing products (net of capitalized software costs), which consist
primarily of employee salaries, benefits, and associated overhead costs. Cost of
software license revenues and development remained approximately the same for
the quarter ended June 30, 1997, compared to the same period in 1996. The change
primarily reflects the elimination of the expenses related to the international
trade product line. The cost of product licenses as a percentage of product
license revenue may fluctuate from period to period due to the mix of sales of
third-party software products in each period contrasted with certain fixed
expenses such as the amortization of capitalized software.
EXPENSES
Sales and marketing. Sales and marketing expenses consist primarily of
employee salaries, benefits, commissions and associated overhead costs, and the
cost of marketing programs such as direct mailings, trade shows, seminars, and
related communication costs. Sales and marketing expenses increased by
approximately $158,000, or 17%, for the quarter ended June 30, 1997, compared to
the second quarter in 1996. The change in sales and marketing expenses primarily
reflects increases in sales staffing and the higher sales commissions associated
with increased
Item 2
- continued -
revenues, partially offset by the expenses related to the international
trade product line.
General and administrative. General and administrative expenses consist
primarily of employee salaries and benefits for administrative, executive, and
finance personnel and associated overhead costs, as well as consulting,
accounting, and legal expenses. General and administrative expenses decreased by
approximately $201,000 for the three months ended June 30, 1997, compared to the
same period in 1996. The change primarily reflects the elimination of the
expenses related to the international trade product line and the Company's
efforts to leverage its existing infrastructure.
Net earnings for the second quarter of 1997 were approximately $211,000, as
compared to a net loss of approximately $262,000 for the second quarter of 1996.
The change resulted from an increase in earnings from operations of
approximately $599,000, a decrease in net interest expense of approximately
$26,000, partially offset by an increase in income tax expense of $152,000.
Item 2
- continued -
Six Months Ended June 30, 1997
compared to
Six Months Ended June 30, 1996
(000's omitted)
--------------- --------------------
Revenue Increase/(Decrease)
--------------- --------------------
1997 1996 Amount Percentage
---- ---- ------ ----------
Computer and add-on
hardware $ 2,003 $ 2,084 $ (81) (4%)
Services 7,080 8,353 (1,273) (15%)
Product licenses 2,599 1,911 688 36%
-------- -------- -------- --------
Net revenue $11,682 $12,348 $ (666) (5%)
======== ======== ======== ========
REVENUE
Net revenue. The Company's net revenues decreased by approximately
$666,000, or 5%, for the period ended June 30,1997, compared to the period ended
June 30, 1996. Revenue from existing businesses increased by approximately
$2,180,000, or 23%, for the period when compared to the first six months of 1996
and includes no revenue from the international trade product line in the 1997
period, as compared to $2,846,000 in the 1996 period, due to the sale of this
product line in December 1996.
Computer and add-on hardware. Hardware revenues decreased by approximately
$81,000, or 4%, for the six months ended June 30, 1997, compared to the same
period in 1996. Computer and add-on hardware revenue from existing businesses
increased by approximately $412,000, or 26%, for the period when compared to the
first six months of 1996 and revenue from international trade product line is
eliminated. The increase in hardware revenues was due primarily to the increase
of hardware unit sales accompanying increased product license sales.
Services. Service revenues decreased by approximately $1,273,000, or 15%,
for the six months ended June 30, 1997, compared to the six months ended June
30, 1996. Service revenue from existing businesses increased by approximately
$555,000, or 9%, for the period when compared to the first six months of 1996
and revenue from international trade product line is eliminated. The change was
due to increases in software license revenues that were accompanied by client
requirements for training and consulting services.
Item 2
- continued -
Product licenses. Software license revenues increased by approximately
$688,000, or 36%, for the first six months of 1997 compared to the same period
in 1996. Product license revenue from existing businesses increased by
approximately $1,212,000, or 63%, for the period when compared to the first six
months of 1996 and revenue from international trade product line is eliminated.
The increase in dollar amount was primarily due to increased market acceptance
of the Company's software products, and the increased capacity created by growth
in the Company's direct sales force and marketing efforts.
COST OF REVENUE
Computer and add-on hardware. Cost of hardware revenues increased by
approximately $50,000, or 3%, for the six months ended June 30, 1997, compared
to the prior period. The increase in dollar amount for the cost of hardware
revenues for the six months ended June 30, 1997 was due primarily to increased
unit sales of hardware products accompanying increased product license sales.
The gross margin percentage for hardware sales decreased to 9% for the six
months ended June 30, 1997, from 15%, in the same period in 1996. Margins on
computer and add-on hardware do fluctuate based on the mix of computer and
ancillary hardware products sold. Accordingly, the Company expects hardware
gross margins to continue to fluctuate in the future. The Company continues to
direct its efforts toward building service and license revenues to offset the
historical decline in hardware revenue and margins.
Services. Cost of services decreased by approximately $1,323,000, or 25%,
for the six months ended June 30, 1997, compared to the first six months of
1996. The decrease reflects the elimination of the cost of service related to
the international trade product line. The gross margin percentage for services
for the first six months of 1997 increased to approximately 43% from 36% of
revenue from services in the first six months of 1996. The Company's revenue and
margin from services fluctuate from period to period due to changes in the mix
of contracts and projects.
Product licenses and development. Cost of software license revenues and
development decreased by approximately $92,000, or 6%, for the period ended June
30, 1997, compared to the same period in 1996. The change primarily reflects the
elimination of the expenses related to the international trade product line. The
cost of product licenses as a percentage of product license revenue may
fluctuate from period to period due to the mix of sales of third-party software
products in each period contrasted with certain fixed expenses such as the
amortization of capitalized software.
Item 2
- continued -
EXPENSES
Sales and marketing. Sales and marketing expenses increased by
approximately $330,000, or 19%, for the period ended June 30, 1997, compared to
the first six months in 1996. The change in sales and marketing expenses
primarily reflects increases in sales staffing and the higher sales commissions
associated with increased revenues, partially offset by the expenses related to
the international trade product line, that was sold in December 1996.
General and administrative. General and administrative expenses decreased
by approximately $270,000, or 16%, for the six months ended June 30, 1997,
compared to the same period in 1996. The change primarily reflects the
elimination of the expenses related to the international trade product line and
the Company's efforts to leverage its existing infrastructure.
Net earnings for the six months ended June 30, 1997 was approximately $253,000,
as compared to a net loss of approximately $270,000 for the comparable period in
1996. The change resulted from an increase in earnings from operations of
approximately $652,000, and a decrease in net interest expense of approximately
$39,000, which were partially offset by an increase in income tax expense of
approximately $168,000.
Liquidity and Capital Resources
The Company had total cash and cash equivalents at June 30, 1997 of
approximately $455,000, a decrease of approximately $219,000 from December 31,
1996. The Company and its subsidiaries currently have a maximum line of credit
totaling $2,000,000, of which approximately $1,665,000 was available at June 30,
1997.
In April 1997, the Company received $250,000 in funding under a three- year term
note through a state agency. The note calls for monthly interest payments for
six months beginning in May 1997 and monthly payments of $8,333 for principal
plus interest at the rate of prime plus 3 1/2% commencing in November 1997. The
note, which is subordinate to the interest of the Company's existing lender, is
secured by the assets of ASA International Ltd. and is guaranteed by the
Company.
The Company expects to continue to pursue strategic acquisitions. These
acquisitions have been, and are expected to continue to be, financed in a number
of ways. Management believes, subject to the conditions of the financial
markets, that it should be able to continue its program of acquisitions.
Over the past two years, the Company has expended significant working capital on
the development of a new generation of software products. The level of these
expenditures decreased by approximately $560,000, or 93%, in the first six
months of 1997, compared to the same period in 1996. However, as rapid change in
software technology continues, the Company will fund further product development
in order to retain existing clients and to attract new clients. The Company
intends, as it has in the past, to fund this development primarily from its cash
from operations and bank debt.
The Company has experienced significant fluctuations in its quarterly operating
results and anticipates such fluctuations in the future. Quarterly revenues and
operating results depend on the volume and timing of orders received during the
quarter which are difficult to forecast. Large orders for the Company's products
often have a lengthy sales cycle while the customer evalutes and receives
approvals for the purchase of the products. It may be difficult to accurately
predict the sales cycle of any large order. If one or more large order fails to
close as forecasted in a fiscal quarter, the Company's revenues and operating
results could be materially adversely affected. In addition, the Company
typically receives a substantial portion of its product orders in the last month
of the quarter. Orders are shipped as received and, as a result, the Company
often has little or no backlog except for support and service revenue. The
Company acknowledges the potential adverse impact that such fluctuations and
general economic uncertainty could have on its ability to maintain liquidity and
raise additional capital.
Liquidity and Capital Resources
- continued -
The Company's future financial performance is also dependent in large part on
the successful development, introduction, and customer acceptance of new and
enhanced versions of its software products. Due to the rapid change in vendor
hardware platforms, operating systems, and updated versions, the complexity and
expense of developing, testing, and maintaining the Company's products has
increased. There can be no assurance that these efforts will be successful or
result in significant product enhancements.
Subject to the foregoing, the Company believes that based on the level of
operating revenue, cash on hand, and available bank debt, it has sufficient
capital to finance its ongoing business.
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
---------------------------------------------------
On May 9, 1997, the Company held an Annual Meeting of Stockholders (the "Annual
Meeting") to vote on the following proposals:
1. To elect five (5) members to the Board of Directors. Nominees for
Director were: (a) Alfred C. Angelone; (b) William A. Kulok; (c) James P.
O'Halloran; (d) Gordon J. Rollert; and (e) Robert L. Voelk; and
2. To ratify and confirm the appointment of BDO Seidman, LLP, as the
independent accountants for the Company for the fiscal year ending December 31,
1997 ("Proposal No. 2"); and
3. Share owner proposal regarding executive compensation limits ("Proposal
No. 3").
Of the 4,087,706 shares of the Company's Common Stock of record as of March 27,
1997 able to be voted at the Annual Meeting, a total of approximately 3,321,810
shares were voted, or approximately 81.26% of the Company's issued and
outstanding shares of Common Stock entitled to vote on these matters. Proposals
No. 1 and No. 2 were adopted, and Proposal No. 3 was rejected, with the vote
totals as follows:
<TABLE>
<CAPTION>
Shares
Shares Voting Shares Shares
Proposal Voting For Against Abstaining Not Voted
- -------- ---------- ------- ---------- ---------
Proposal No. 1
--------------
<S> <C> <C> <C> <C>
(a) Alfred C. Angelone 3,191,934 50,204 79,672
(b) William A. Kulok 3,198,854 43,484 79,472
(c) James P. O'Halloran 3,231,834 10,504 79,472
(d) Gordon J. Rollert 3,196,954 45,484 79,372
(e) Robert L. Voelk 3,221,954 20,484 79,372
Proposal No. 2 3,201,433 69,891 50,486
--------------
Proposal No. 3 341,383 1,729,704 23,697 1,227,026
--------------
</TABLE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits -
The following exhibits are filed with this report:
10-1 Secured Term Note between ASA International Ltd.
and the Economic Stabilization Trust, dated
April 10, 1997.
10-2 Loan and Security Agreement between ASA
International Ltd. and the Economic Stabilization
Trust, dated April 10, 1997.
27 Financial Data Schedule.
(b) Reports on Form 8-K - None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ASA International Ltd.
------------------------------
(Registrant)
8/08/97 /s/ Alfred C. Angelone
- ------------ ------------------------------
(Date) (Signature)
Alfred C. Angelone
Chief Executive Officer
8/08/97 /s/ Terrence C. McCarthy
------------ ------------------------------
(Date) (Signature)
Terrence C. McCarthy
Vice President and Treasurer
EXHIBIT 10-1
SECURED TERM NOTE
-----------------
$250,000.00 April 10, 1997
Boston, Massachusetts
For value received, ASA International Ltd., a Delaware corporation, with a
principal place of business at 10 Speen Street, Framingham, Massachusetts, 01701
(the "Borrower"), promises to pay to Economic Stabilization Trust with a
principal place of business at The Schrafft Center, 529 Main Street, Suite 400,
Boston, Massachusetts 02129 (the "Lender") or order, at said place of business
or at such other place as the holder hereof may designate, the principal sum of
Two Hundred Fifty Thousand ($250,000) Dollars in lawful money of the United
States of America without setoff, deduction or counterclaim.
Payments under this Note shall be made as follows:
(1) Commencing June 1, 1997 continuing on the first day of each calendar
month thereafter until the Maturity Date, the Borrower shall make monthly
payments of interest on the aggregate principal balance outstanding hereunder at
the Prime Rate plus three one-half (3.5%) percent per annum. Interest shall be
calculated on the basis of actual days elapsed on a 365-day year and shall be
payable monthly in arrears.
(2) Commencing November 1, 1997, and continuing on the first day of each
calendar month thereafter until April 1, 2000, the Borrower shall make
twenty-nine (29) consecutive monthly payments of principal, each in the amount
of Eight Thousand Three Hundred Thirty Three and 33/00 ($8,333.33) Dollars.
(3) On May 1, 2000 (the "Maturity Date"), the Borrower shall make one final
payment of all outstanding principal and interest, as well as any unpaid costs
and expenses incurred in connection with the collection of this Note.
"Prime Rate" shall mean the rate as publicly announced by The First
National Bank of Boston from time to time as its Prime Rate, or, as the case may
be, the base, reference or other rate then designated by The First National Bank
of Boston for general commercial loan reference purposes, it being understood
that such a rate is a reference rate, not necessarily the lowest, established
from time to time which serves as the basis upon which effective interest rates
are calculated for loans making reference thereto. The effective interest rate
applicable to the Borrower's loan shall be adjusted on the first day of each
calendar quarter. If such rate is not available, then Lender shall elect another
comparable measure of such interest rate.
Any payments received by the Lender on account of this Note prior to
acceleration shall be applied first, to any costs, expenses, or charges then
owed to the Lender by the Borrower, second, to accrued and unpaid interest, and
third, to the unpaid principal balance hereof. Any payments so received after
acceleration shall be applied in such manner as the Lender may determine.
At the option of the holder, this Note shall become immediately due and
payable without notice or demand upon the occurrence at any time of any events
of default as defined in that certain Loan and Security Agreement of even date
between Borrower and Lender (the "Loan Agreement").
The Borrower agrees to pay all of Lender's expenses incurred in connection
with enforcing or seeking payment on this Note and realizing on the collateral
for this Note including all costs of collection, and reasonable fees of
attorneys. Prior to acceleration of the amounts due under this Note, the
Borrower shall also pay to the Lender a late charge in the amount of Twenty-Five
($25.00) Dollars for any payment due and unpaid five (5) days from the due date
thereof. After an event of default or acceleration of the amounts due under this
Note, Borrower shall also pay to the Lender interest on the amounts not paid at
a default rate per annum equal to the Prime Rate plus four (4%) percent per
annum; provided, however, that in the event that Lender charges a default rate
of interest after an event of default or acceleration hereunder, the Borrower
shall not incur a late charge in addition thereto.
The Borrower shall be entitled to prepay the entire outstanding balance of
this Note in whole or in part, at any time during the term of this Note without
penalty. Any such prepayment shall be credited first to costs, expenses or
charges then owed by Borrower to Lender, second to the payment of accrued
interest through the date of the prepayment, and then to unpaid installments in
the inverse order of their maturity.
The Borrower shall indemnify, defend and hold the Lender harmless against
any claim brought or threatened against the Lender by the Borrower, or by any
other persons (as well as from reasonable attorneys' fees and expenses in
connection therewith) on account of the Lender's relationship with the Borrower
(each of which may be defended, compromised, settled or pursued by the Lender
with counsel of the Lender's selection, but at the expense of the Borrower and
any endorser or guarantor hereof), unless such claim has been determined by a
court of competent jurisdiction to have arisen as a consequence of Lender's
gross negligence or willful misconduct.
Subject to the rights of secured creditors having a prior lien thereon, any
and all deposits or other sums at any time credited by or due the Borrower from
Lender or any of its banking or lending affiliates, or any lender acting as a
participant under any loan arrangement between the Lender and the Borrower, any
cash, securities, instruments or other property of the undersigned in the
possession of Lender, or any of its banking or lending affiliates, or any lender
acting as a participant under any loan arrangement between the Lender and the
Borrower, whether for safekeeping or otherwise, or in transit to or from Lender
or any of its banking lending affiliates or any such participant, or in the
possession of any third party acting on Lender's behalf (regardless of the
reason Lender had received same or whether Lender has conditionally released the
same) shall at all times constitute security for all of the liabilities and
obligations of the undersigned to Lender and may be applied or set off against
such liabilities and obligations of the undersigned to Lender at any time,
whether or not such are then due, whether or not demand has been made and
whether or not other collateral is then available to Lender.
The liabilities of the Borrower and any endorser or guarantor of this Note
are joint and several; provided, however, the release by Lender or the Borrower
or any one or more endorser or guarantor shall not release any other person
obligated on account of this Note. Neither the Borrower nor any endorser or
guarantor of this Note may seek contribution from any other person also
obligated hereunder unless and until all liabilities, obligations, and
indebtedness to Lender of the entity or person from whom contribution is sought
have been satisfied in full.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right of such
holder, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or any other right on any future occasion. The
Borrower and every endorser or guarantor of this Note regardless of the time,
order or place of signing waives presentment, demand, protest, and notices of
every kind and assents to any one or more extensions or postponements of the
time of payment or any other indulgences, to any substitutions, exchanges or
releases of collateral if at any time there be available to the holder
collateral for this Note, and to the additions or releases of any other parties
or persons primarily or secondarily liable.
The Borrower and each endorser and guarantor hereof each authorizes the
Lender to complete this Note if delivered incomplete in any respect and each
acknowledges that the holder's record of all payments, interest, assessments,
and related costs, charges and expenses relating to this Note shall, absent
manifest error, be conclusive.
The Borrower represents to Lender that the proceeds of this Note will not
be used for personal, family or household purposes.
This Note is delivered to the Lender at its offices in Massachusetts, shall
be governed by the laws of The Commonwealth of Massachusetts, and shall take
effect as a sealed instrument. The Borrower submits to the jurisdiction of the
courts of The Commonwealth of Massachusetts for all purposes with respect to
this Note, any collateral given to secure its liabilities, obligations, and
indebtedness to the Lender, and its relationship with the Lender.
THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND AFTER AN
OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, WAIVES ANY AND ALL RIGHTS TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING IN CONNECTION WITH THIS NOTE, THE
OBLIGATIONS HEREUNDER, AND ALL MATTERS CONTEMPLATED HEREBY AND DOCUMENTS
EXECUTED IN CONNECTION HEREWITH.
Witness: BORROWER:
ASA INTERNATIONAL LTD.
By: /s/ Terrence C. McCarthy
- ----------------------------- --------------------------------
Terrence C. McCarthy, Controller
and Vice President
EXHIBIT 10-2
Economic Stabilization Trust
The Schrafft Center
529 Main Street
Suite 400
Boston, MA 02129
LOAN AND SECURITY AGREEMENT
(ALL ASSETS)
with
ASA INTERNATIONAL LTD.
Dated: April 10, 1997
Economic Stabilization Trust (the "Lender") with an address of The Schrafft
Center, 529 Main Street, Suite 400, Boston, MA 02129 was awarded a grant from
the Revolving Loan Fund for sudden and severe economic dislocation
implementation project ("RLF") pursuant to the terms of a (i) certain
application dated ------------ --, 199-, (ii) RLF standard terms and conditions,
(iii) RLF Special Terms and Conditions, and (iv) RLF Further Assurances all of
which shall be furnished to Lender to Borrower on request and are incorporated
herein by reference (collectively, the "RLF Terms and Conditions"), and is as of
this date entering into a business loan arrangement with ASA International Ltd.,
a Massachusetts corporation with a principal place of business at 10 Speen
Street, Framingham, Massachusetts 01701 (the "Borrower") for a loan (the "Loan")
to be evidenced by a certain Secured Term Note in the original principal amount
of Two Hundred Fifty Thousand and No/100 ($250,000.00) Dollars, dated of even
date herewith and incorporated herein by reference (the "Note"), which shall be
secured by, among other things, a second priority security interest in the all
assets of the Borrower, including without limitation, accounts receivable,
inventory and certain equipment and machinery of the Borrower pursuant to the
terms of this Agreement. The Note, this Loan and Security Agreement and all
other loan documents executed in connection with the Loan shall hereinafter be
referredto as the "EST Loan Documents". The purpose of the RLF is to support
business activities for which credit is not otherwise available on terms and
conditions which permit the continuation of the Borrowers' business in the
Commonwealth of Massachusetts. Lender reserves a right to recall the Loan if the
terms and conditions set forth in RLF guidelines are not met.
NOW THEREFORE, for good and valuable consideration the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. SECURITY INTEREST
The Loan is being made for the purpose of providing the Borrower with
additional working capital. To induce Lender to grant the Loan, Borrower hereby
grants to Lender a continuing security interest in the following:
All of Borrower's tangible and intangible personal property, whether now
owned or hereafter acquired, including all materials, equipment, goods,
inventory, accounts, accounts receivable, contract rights, chattel paper,
general intangibles and amounts owed by other customers, regardless of whether
or not they constitute proceeds of other collateral; all choses in action, cash,
securities, documents, documents of title, instruments, deposits, debts,
refunds, policies and certificates of insurance, obligations and liabilities in
whatever form owing from any person, corporation, or other legal entity,
including all replacements and substitutions therefor or accessions thereto; all
books, records, evidences of title, good will and all papers pertaining to the
operation of the Borrower's business; all federal, state and local tax refunds
and/or abatements and any loss carry-back tax refunds; all patents, patent
rights, copyrights, trade secrets, know-how, trade names, trademarks, service
marks, logos, registrations, customer lists, computer programs, and assignments
of patents; all fixtures, leases, any and all equipment leases, rentals and
other sums payable thereunder, other chattel paper, purchase option payments,
lessor's interest in leased equipment and insurance proceeds; any replacements
or substitutions thereof, whether now existing or hereafter acquired by lessor;
licenses, if any; all liens, guaranties, securities, rights, remedies and
privileges pertaining to all of the foregoing, all property allocable to
unshipped orders, and all merchandise returned by or reclaimed by or repossessed
from customers, all rights of stoppage in transit, replevin, repossession and
reclamation, and all other rights of an unpaid vendor or lienor; and all
interest of the Borrower in goods or merchandise as to which an account
receivable for goods sold or delivered has arisen (collectively, the
"Collateral").
The security interest of Lender in the Collateral and all other security
granted to the Lender as collateral for the Loan shall secure the payment and
performance of all liabilities and obligations of Borrower to Lender of every
kind and description, direct, absolute or contingent, due or to become due,
pursuant to and in connection with the Note and all other obligations of the
Borrower to the Lender whether now existing or hereinafter acquired (all
hereinafter called "Obligations").
SECTION 2. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants as follows:
2.1 Organization. Borrower is a duly organized, validly existing
corporation under the laws of the State of Delaware with full power and
authority to own its property and assets and to conduct its business in the
manner and in the places in which it has been and is now being conducted.
Borrower is qualified to do business in, and is in good standing under the laws
of the Commonwealth of Massachusetts and each other state where failure to
qualify would materially adversely affect its business.
2.2 Authority. Borrower has taken all action which may be required by its
Articles of Incorporation, By-laws, the laws of the state of incorporation and
all other applicable laws to authorize the execution, delivery and performance
of this Agreement and the EST Loan Documents.
2.3 No Obstacles to Transaction. The execution, delivery and performance by
Borrower of this Agreement and the other documents executed in connection
herewith will not violate any provision of Borrower's Articles of Organization,
By-laws, the laws of the state of its incorporation or any other applicable law,
rule, regulation or order and will not conflict with or result in any breach of
any provision of, or constitute a default under, or result in the imposition of
any lien or charge upon any asset of Borrower under, or result in the
acceleration of any obligation under the terms of any agreement or document
binding upon Borrower.
2.4 Ownership of Assets. Borrower has good and marketable title to all its
properties and assets including, but not limited to, those reflected on its
balance sheet except as such properties or assets have been disposed of in the
ordinary course of business since the date of the balance sheet, and all
Borrower's properties and assets are free and clear of all liens, restrictions
and encumbrances except as set forth on Exhibit A attached hereto.
2.5 Litigation; Compliance with Law. There are no actions, suits,
proceedings or investigations threatened or pending against or affecting
Borrower, its agents, servants, employees, while in the course of the Borrower's
business and arising out of that business, or Borrower's assets whether Borrower
is plaintiff or defendant. Borrower is not in default with respect to any order,
judgment, decree or award of any court, agency or governmental authority, except
as set forth in Exhibit B annexed hereto.
2.6 Accuracy of Financial Information. Borrower has furnished to Lender
such tax returns, financial statements, including balance sheets and statements
of profit (or loss) and other information about Borrower's financial condition
as the Lender shall have requested. These tax returns, financial statements and
other information fairly present the financial condition of Borrower for the
periods then ended, reflect all known liabilities, direct or contingent, and its
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis. There has been no material
adverse change in the assets, liabilities, financial condition or business of
the Borrower since the date of any financial statements, tax returns or other
information delivered to Lender before or after the date of this Agreement.
2.7 Borrower s Principal Place of Business. Borrower warrants that:
(a) Borrower's principal place of business is located at the
address set forth on the first page hereof.
(b) Borrower has no other place of business except as set
forth above except as set forth on Exhibit C (attached
hereto).
(c) All the records concerning Borrower's business and the
Collateral are located and shall remain at the aforesaid
address.
Borrower covenants to notify Lender prior to discontinuance of 10 Speen
Street, Framingham, Massachusetts, as its corporate offices and main operation
location or the addition of any place of business where Collateral is located.
2.8 Environmental Representations. Borrower hereby warrants and represents
to Lender that to its knowledge there exists no hazardous materials or oils or
other pollutants on any property owned (if any), operated or occupied by
Borrower that would cause the owner and/or operator to incur any liability or
otherwise form the basis of any claim, liability, action, investigation or the
like under M.G.L. Chapter 21E, as amended, or any other applicable environmental
law (federal, state or local) and further represents that it is not aware of the
existence or presence of asbestos or underground oil tanks on any of the
premises owned, operated or occupied by Borrower. Borrower hereby further agrees
to indemnify and hold Lender harmless from all liability, loss, costs, damages
and expenses, including, without limitation, all attorneys' fees and costs of
litigation arising from and all violations of M.G.L. Chapter 21E and related
regulations, including, but not limited to, those arising from any lien on any
premises owned, operated or occupied by Borrower.
2.9 Other Indebtedness. Borrower warrants and represents to Lender that as
of the date hereof, no loans, advances or other indebtedness have been obtained
by Borrower from any person, firm or corporation other than CoreStates Bank (the
"Senior Lender") as described in an "Intercreditor Agreement" between Lender and
Senior Lender executed on or about the date of this Agreement, purchase money
equipment financing existing as of the date of this Agreement, indebtedness
incurred in the ordinary course of business, an unlimited guaranty of a certain
loan in the amount of $1,450,000 from the Berkshire Life Insurance Company to
ASA Properties Inc. dated September 28, 1993, unless such indebtedness has been
or will be fully subordinated to Lender pursuant to written subordination
agreements with such subordinated lenders, in a form acceptable to Lender.
SECTION 3. AFFIRMATIVE COVENANTS
3.1 Payments of Liabilities. Borrower shall pay all liabilities as they
become due to any creditor of the Borrower provided, however, that Borrower will
not be obligated to pay any such liability if the validity thereof is being
contested in good faith by appropriate proceedings diligently pursued.
3.2 Conduct of Business. Borrower shall keep in full force and effect its
existence and all rights, licenses, permits, patents, leases, franchises and
governmental approvals necessary for the conduct of its business and shall
comply with all applicable federal, state and local laws and regulations.
Borrower shall not engage in any business substantially different from its
present business, without Lender's prior written consent, which shall not be
unreasonably withheld.
3.3 Maintenance of Collateral and Other Property. Borrower shall (i) keep
all of its Collateral and other property in good order and condition, and shall
make all necessary repairs, replacements, additions and improvements thereto so
that its business may be properly and advantageously conducted, (ii) maintain a
level of inventory sufficient to meet the needs of the business, (iii) pay all
taxes, assessments or other charges on the Collateral when due, and (iv) take
commercially reasonable steps to collect all Accounts (as defined herein).
3.4 Insurance. Borrower shall maintain insurance including, but not limited
to insurance covering the Collateral against such risks, with such insurers, in
such form, and in such amounts as shall from time to time be required by Lender
including, but not limited to, property and casualty insurance and fire and
extended form coverage for one hundred (100%) percent replacement value. All
insurance policies shall be written so as to be payable in an amount equal to
the outstanding balance of the Obligations and any costs and expenses in
connection therewith in the event of loss to Lender as its interests may appear
and shall provide for thirty (30) days' written notice to Lender of cancellation
or modification. Copies of all insurance policies shall be furnished to Lender
upon Lender's request for same. Subject to and subordinate to the rights of
CoreStates Bank, N.A., Borrower hereby assigns to Lender return premiums,
dividends and other amounts which may be or become due upon cancellation of any
such policies for any reason whatsoever and directs the insurers to pay Lender
any sums so due when cancelled in the ordinary course of business and Borrower
will be allowed to use any returned premium toward payment of premium on a new
policy with a new company. Lender is hereby appointed as attorney irrevocable to
collect return premiums, dividends and other amounts due on any insurance policy
and the proceeds of such insurance, to participate in a reasonable fashion to
settle any claims with the insurers in the event of loss or damage, to endorse
settlement drafts and in the event of a default under this Agreement to cancel,
assign or surrender any insurance policies. In the event of a default hereunder,
the proceeds of any insurance resulting from any loss with respect to the
Collateral shall be paid to the Lender. However, if no event of default exists
hereunder, the Lender shall release all or any portion of such proceeds to the
Borrower to replace or repair the Collateral, provided that the Borrower
establishes to the satisfaction of the Lender that such proceeds are adequate
for said purpose and provides the Lender with reasonable assurances that the
proceeds shall be used for such purpose. Any insurance proceeds paid to the
Borrower shall be held in trust for the Lender. The foregoing rights of Lender
and obligations of Borrower with respect to insurance proceeds shall be subject
to the rights of the Senior Lender.
3.5 Financial Records; Inspection. Borrower shall at all times keep proper
books of records and account, in which correct and complete entries shall be
made of all its dealings, in accordance with generally accepted accounting
practices. Borrower shall specifically maintain its books and records relating
to the receipt and disbursement of the proceeds of the Note. Lender shall from
time to time also be entitled to visit and inspect the Collateral and any of the
properties and financial records of Borrower.
3.6 Monthly Reports. Borrower shall provide 10-Q's on a quarterly basis to
the Lender. In addition, Borrower shall provide Lender with monthly accounts
receivable aging reports. Borrower shall deliver to Lender within thirty (30)
days of the last day of each month, copies of all financial information and
reports furnished to the Senior Lender and shall, in any event, deliver an
internally prepared financial statement for the Borrower's SmarTime System's
Division, certified by the Chief Financial Officer, of such Division's financial
condition and the results of its operations for the period ending with the close
of the subject month. The financial statements shall include, at a minimum, a
balance sheet, an income statement and statement of profit and loss, and an
aging of accounts receivable communicating, among other things, the names of
each respective account debtor, and the amount of each account, in a form
acceptable to the Lender and certified by Borrower's Chief Financial Officer to
fairly present the financial condition of such Division at the end of such
period.
3.7 Annual Reports. Borrower shall deliver to Lender annual audited
financial statements within ninety (90) days after the end of each fiscal year.
Such financial statements shall include, at a minimum, balance sheets, profit
and loss statements and statements of cash flow. The annual statements shall be
reviewed by certified public accountants and prepared in accordance with
generally accepted accounting principles, consistently applied.Borrower shall
also submit to Lender, within ninety (90) days of the close of each fiscal year,
an annual budget for the following fiscal year comprised of twelve (12) month
income statement and cash flow analysis in the form similar to the 1997 budget
previously delivered to Lender by Borrower.
3.8 Additional Financial Information. Borrower shall from time to time
deliver to Lender such other financial data and information as Lender may
reasonably request.
3.9 Maintenance of Records. Borrower covenants to keep accurate and
complete records listing and describing the Collateral. When requested by
Lender, Borrower shall give Lender a certificate listing and describing the
Collateral and setting forth the total value of the Collateral. Lender shall
have the right at any time to inspect the Collateral and to review and make
copies of any records or other writings which relate to the Collateral or the
general financial condition of Borrower at the expense of the Borrower. Lender
may copy such records and access to copying facilities shall be provided by
Borrower.
3.10 Financing Statements and Other Action. Borrower agrees to do all acts
which Lender reasonably deems necessary or desirable to protect the security
interests of the Lender or to otherwise carry out the provisions of this
Agreement including, but not limited to, the execution of financing,
continuation, amendment and termination statements and similar instruments.
Borrower hereby appoints Lender as Borrower's irrevocable attorney in order to
perform acts necessary to carry out the provisions of this Agreement.
3.11 Location. Borrower shall maintain the present business operations and
its business operations and its executive office within the Commonwealth of
Massachusetts. In addition, Borrower may maintain other business locations
including but not limited to those listed on Exhibit C attached hereto. Borrower
shall furnish Lender with landlord waivers for its Massachusetts locations, and
shall use its best efforts to provide Lender with landlord waivers for all other
locations where material amounts of Collateral are maintained.
3.12 Social Compact. Borrower agrees to comply with all terms and
provisions of the Massachusetts laws applicable to "plant closings" and "partial
plant closings" (as defined by MGL ch.151A) and comply with the "Social Compact"
to be executed by Borrower of even date herewith and incorporated herein by
reference.
3.13 Compliance with Requirements of RLF Terms and Conditions. Borrower
hereby covenants and agrees that it shall at all times during the term of the
Loan comply with RLF Terms and Conditions and further agrees to indemnify and
hold Lender harmless from any liability, loss, cost, damages or expenses
incurred by Lender as a result of Borrower's failure to comply with the
aforesaid RLF Terms and Conditions or any other requirements of the RLF in
connection therewith.
3.14 Notice of Loss. Borrower shall notify Lender promptly of any loss of
assets or assertion of liability outside the ordinary course of business
involving more than One Hundred Thousand ($100,000.00) Dollars, including but
not limited to, any loss from theft, fire or other casualty or the occurrence of
any personal injury whether or not covered by insurance.
3.15 Direct Debit of Borrower's Account. In order to facilitate the prompt
payment by Borrower of Loan payments to Lender, the Borrower has authorized
Lender to make arrangements with its depository bank to automatically debit its
operating account for loan payments when due; Borrower agrees in the event that
it changes its primary depository bank, to make similar arrangements for direct
debits of EST loan payments, and in connection therewith to execute such
additional documents and furnish such information as may reasonably be requested
by Lender, Lender's depository bank, and Borrower's depository bank, including
but not limited to furnishing Lender with a voided check on its primary
operating account.
SECTION 4. NEGATIVE COVENANTS
4.1 Distribution or Redemption. Borrower shall not pay or accrue any
dividend or make any other distribution either in cash or in kind with respect
to its securities of any class, except for dividends issued in stock of the
Borrower, nor shall Borrower redeem, retire or purchase, either directly or
indirectly any of its securities of any class without prior written consent from
Lender. In addition, Borrower's stock or securites shall not be transferred or
sold to the extent that such transfer or sale would result either singly or in
the aggregate in the loss of majority control of Borrower, without the prior
written consent of Lender.
4.2 Sale or Consolidation. After the date hereof, Borrower shall not merge
or consolidate with any other entity unless the Borrower is the surviving entity
and such merger or consolidation does not result in Borrower's assuming
additional labilities in excess of assets (excluding goodwill) being acquired,
and does not adversely impact Borrower's resulting financial condition or sell
or divest any of its assets, including but not limited to the Collateral,
(except for the sale of assets in the ordinary course of Borrower's business) to
any corporation or other business entity nor may it sell or transfer or allow a
controlling interest in Borrower's capital stock to be sold or transferred.
4.3 Encumbrances. Except as set forth on Exhibit A, Borrower hereby
warrants that Borrower has title to the Collateral and that there are no sums
owed or claims, liens, security interests or other encumbrances against the
Collateral except those in favor of Lender as they exist as of the date hereof.
Borrower will not grant or suffer to exist any mortgage, pledge, security
interest, lien, or encumbrance on the Collateral without Lender's prior written
consent except for such mortgages, pledges, security interests, liens or
encumbrances which are (i) described in the Intercreditor Agreement or (ii)
within the parameters of Section 4.8 hereof. Borrower covenants to notify Lender
of any claim, lien, security interest or other encumbrance made against the
Collateral and shall otherwise defend the Collateral against any claim, lien,
security interest or other encumbrance adverse to Lender.
4.4 Loans and Investments. Borrower shall not make any loans, investments,
advances, or other extraordinary payment to any person, firm or corporation
except in the ordinary course of business. Salary or Bonus Advances to Executive
Personnel not in excess of Two Hundred Thousand ($200,000) Dollars consistent
with past practices shall be deemed in the ordinary course of business. Borrower
shall not make any guaranty or endorse the indebtedness of any person, firm or
corporation without Lender's prior written consent other than the present
guaranty of the obligations of ASA Properties, Inc. to Berkshire Life Insurance
Corporation.
4.5 Borrowing. Borrower shall not borrow any funds or become indebted to
any person, firm or corporation, whether directly, indirectly or contingently,
in excess of an aggregate amount of One Hundred Thousand ($100,000.00) Dollars
outstanding at any time without Lender's prior express written approval, other
than (i) for trade obligations arising in the ordinary course of business, (ii)
the obligations to Lender, or (iii) the obligations to other creditors set forth
on Exhibit A attached hereto, upon such terms and conditions as they exist as of
the date of this Agreement.
4.6 Executive Personnel. The following "Executive Personnel" shall devote
full time to the conduct of Borrower's business:
Alfred C. Angelone
Borrower shall not make any change in its Executive Personnel without the
prior written approval of Lender. Any such unapproved change in Borrower's
Executive Personnel shall cause Lender to have the immediate right to accelerate
any and all obligations from Borrower to Lender.
4.7 Sale of Collateral. Borrower shall not sell or otherwise dispose of any
item of the Collateral except in the ordinary course of business and shall not
use the Collateral in violation of any law.
4.8 Fixed Asset Limitation. Borrower will not make capital expenditures for
the purchase of fixed assets in any single calendar year in excess of One
Hundred Thousand ($100,000.00) at any one time or in an amount that would cause
Borrower's capital expenditures during that calendar year to be in the aggregate
One Hundred Thousand ($100,000.00) Dollars, without Lender's prior written
conesnt, which shall not be unreasonably withheld. For the purposes of this
section the word "capital expenditure" shall refer to the entire purchase price
of any fixed asset in the event of purchase and the entire rental for the term
in the case of a lease. For the purposes of this section, the acquisition of any
fixed asset under a lease shall be deemed a purchase of a fixed asset. Without
limiting the foregoing provision, the One Hundred Thousand Dollar ($100,000.00)
limitation shall not apply to expenditures contemplated in any current budget
which the Borrower hereby represents have been previously submitted to and
approved by Lender and which projects refer to obligations on which the Borrower
is not in default.
4.9 Compensation. Borrower will not increase the compensation whether in
the form of salary, bonus or other benefits, by more than ten (10%) percent
annually, paid in the aggregate to personnel employed at the management level of
the Borrower without Lender's prior written consent which consent will not be
unreasonably withheld. Compensation to management employees of the Borrower
shall be limited to reasonable amounts for services performed.
4.10 Loans from Related Parties. Borrower shall not make any payments
respecting any debt or obligation of the Borrower to any officers of the
Borrower or related parties to the Borrower without the prior written approval
of the Lender, which shall not be unreasonably withheld. All inside creditors,
lenders (excluding Corestates Bank) and investors of and to the Borrower shall
enter into a Subordination Agreement, in form satisfactory to Lender, pursuant
to which all loans and investments of such parties are subordinated to the
interests of the Lender hereunder and under the EST Loan Documents.
SECTION 5. USE OF PROCEEDS AND PURPOSE OF LOAN ARRANGEMENT
Borrower shall use the proceeds of the Note for working capital purposes in
connection with Borrower's business, and shall conduct is business strictly in
accordance with the terms of the RLF Terms and Conditions. Pursuant to the RLF
Terms and Conditions, the proceeds of the Note shall not be used to (i) purchase
or finance equity in Borrower; (ii) subsidize interest payments on existing
loans; (iii) refinance loans made by other lenders; (iv) provide equity
contributions required by principals of Borrower participating in other Federal
loan programs: (v) purchase equity by the Borrower; or (vi) assist in the
relocation of jobs from another commuting area or the removal of Borrower to
another community area to the detriment of local workers. Any violation of these
specific terms and conditions shall be an event of default hereunder.
SECTION 6. NOTICE OF ASSIGNMENT; COLLECTION; EXPENSES
Upon the occurrence of any event of default as defined in Section 7 under
this Agreement and subject to the rights of the Senior Lender under the
Intercreditor Agreement:
6.1 Borrower will, upon the request of Lender and in such form and at such
times as Lender shall request, notify its account debtors of the granting of a
security interest to Lender in all or any of the Borrower's accounts (as that
term is defined by the Uniform Commercial Code, the "Accounts"), and Lender may
itself give such notice at any time and from time to time in Lender's or
Borrower's name, without notice to Borrower, requiring such account debtors to
pay the Account directly to Lender.
6.2 Borrower irrevocably appoints Lender its true and lawful attorney, with
power of substitution, in the name of Borrower or in the name of Lender or
otherwise for the use and benefit of Lender, but at the cost and expense of
Borrower, without notice to Borrower or any of its representatives or
successors, to repair, alter or supply goods, if any, necessary to fulfill in
whole or in part the purchase order of any account debtor from which any
Collateral has arisen; to demand, collect, receipt for and give renewals,
extensions, discharges and releases of any Collateral; to institute and to
prosecute legal and equitable proceedings to realize upon the Collateral; to
settle, compromise, compound or adjust claims in respect of any Collateral or
any legal proceedings brought in respect thereof; and generally to sell in whole
or in part for cash, credit or property to others or to itself at any public or
private sale, assign, make any agreement with respect to or otherwise deal with
any of the Collateral as fully and completely as though Lender were the absolute
owner thereof for all purposes.
6.3 Borrower also hereby irrevocably appoints Lender its true and lawful
attorney, with power of substitution, to take control in any manner of any cash
or non-cash items of payment or proceeds thereof; to endorse the name of
Borrower upon any notes, acceptances, checks, drafts, money orders, bills of
lading, freight bills, chattel paper or other evidences of payment or Collateral
that may come into Lender's possession; to sign Borrower's name on any invoices
relating to any Accounts, on drafts against account debtors and notices to
account debtors; to sign Borrower's name on any proof of claim in any bankruptcy
proceeding for any account debtors; and to do all other acts and things
necessary, in Lender's sole judgment, to carry out this Agreement. At any time
or times when Borrower is in default hereunder, Lender shall have the right to
enter upon Borrower's premises and to receive and open all mail directed to
Borrower; provided, however, that Lender shall turn over to Borrower all of such
mail not relating to Collateral. In the event of default, Lender shall have the
right, in the name of Borrower, to notify the Post Office authorities to change
the address for the delivery of mail addressed to Borrower to such address as
Lender may designate, and Borrower shall make no subsequent change of address
without the Lender's written permission. Lender shall have the right also to
turn over mail either to Borrower, or to any trustee in bankruptcy, receiver,
assignee for the benefit of creditors of Borrower, in Lender's sole discretion.
All checks and other forms of remittance received as provided by Borrower shall
be endorsed in such manner as Lender may designate. Borrower's signature or name
may be inserted by Lender in longhand, in typewriting or by rubber stamp. Every
such endorsement, however signed or made, shall be deemed to be a valid
endorsement of Borrower.
6.4 Borrower shall have the privilege of collecting the Accounts for the
account of and in trust for Lender. Such privilege may be revoked by Lender at
its option, at any time by giving notification of its assignment of, or security
interest in the Accounts to the account debtors. All moneys, checks, notes,
drafts and other items of payment together with any and all relating vouchers,
identifications, communications or other data received from account debtors
collected or received by Borrower (or by any receiver, trustee or successor in
interest of Borrower, or by any person acting on behalf of Borrower) in
reference to the Accounts shall belong to Lender and shall be immediately
transmitted by Borrower to Lender at its office (or, directed by Lender,
deposited in Lender's account in a bank designated by Lender) in the original
form in which the same are received and endorsed by Borrower. Borrower shall
have no right and agrees not to commingle with its own funds or to use, divert
or withhold any of the proceeds of any collections. Borrower hereby divests
itself of all dominion over the Accounts and the proceeds thereof and
collections received thereon. Borrower shall make entries on its books and
records in form satisfactory to Lender disclosing the absolute and unconditional
assignment of Accounts to Lender and shall keep a separate account on its record
books of all collections received thereon. Should any suit or proceeding be
instituted by or against Lender or Borrower upon any of the Collateral or for
the collection or enforcement of any Account, Borrower shall, without expense to
Lender, make available such of its officers, employees, agents, books, records
and files as Lender may deem necessary to make proper proof in Court.
6.5 Lender shall be entitled to recover from Borrower (i) all damages
sustained by Lender by reason of any misrepresentation, breach of warranty or
breach of covenant of Borrower herein, express or implied, whether caused by the
acts or defaults of Borrower, account debtors or others, (ii) all reasonable
expenses which may be incurred by Lender in enforcing payment of any Account or
in attempting to enforce payment, or in realizing upon any Collateral, whether
against any debtor, Borrower or others, (iii) in supervising the records and
proper management and disposition of the collection of Accounts, and (iv) in
prosecuting or defending any proceeding arising from the efforts of Lender to
recover any money or other thing of value or otherwise to enforce or protect any
of Lender's rights hereunder.
SECTION 7. DEFAULT
7.1 Default. The occurrence of any one or more of the following events
shall constitute a default hereunder:
(a) Failure of Borrower to pay in full any amounts due
hereunder or in connection with any other obligations to
the Lender;
(b) Failure by the Borrower to perform, observe or comply
with any other covenant, agreement, term or condition set
forth in the EST Loan Documents;
(c) If any material representation or warranty made by the
Borrower in this Note or in any certificate, statement,
information or furnished to the Lender by, on behalf of
or at the request of the Borrower proves to be untrue and
incorrect when made or furnished;
(d) The (i) occurrence of any material loss, theft, damage or
destruction of Lender's security to the extent not
adequately covered by insurance, or (ii) issuance or
making of any levy, seizure, attachment, execution or
similar process on any of Lender's security for this Note
which levy, seizure, attachment, execution or similar
process remains undischarged for a period of thirty (30)
days;
(e) Either the Borrower shall (i) apply for or consent to the
appointment of a receiver, conservator, trustee or
liquidator of all or a substantial part of any of its
assets; (ii) file or permit the filing of any petition,
case, arrangement, reorganization, or the like under any
insolvency or bankruptcy law, or the adjudication of it
as a bankrupt, or the making of an assignment for the
benefit of creditors or the consenting to any form of
arrangement for the satisfaction, settlement or delay of
debt or the appointment of a receiver for all or any part
of its properties; or (iii) take any action for the
purpose of effecting any of the foregoing;
(f) An order, judgment or decree shall be entered, or a case
shall be commenced, against the Borrower, without the
application, approval or consent of the Borrower by or in
any court of competent jurisdiction, approving a petition
or permitting the commencement of a case seeking
reorganization or liquidation of the Borrower, or
appointing a receiver, trustee, conservator or liquidator
of the Borrower, or of all or a substantial part of its
assets and the Borrower, by any act, indicates its
approval thereof, consent thereto, or acquiescence
therein, and such order, judgment, decree or case shall
continue unstayed and in effect for a period of sixty
(60) consecutive days;
(g) The dissolution, termination of existence, business
failure, or death, merger or consolidation (except as
permitted in Section 4.2) of Borrower;
(h) Sale of any material assets of Borrower except in the
ordinary course of business, without the prior written
consent of the Lender; or
(i) Failure of Borrower to pay when due any tax or any
premium of any life insurance policy assigned to Lender
as collateral or any premium of any life insurance policy
assigned to Lender as collateral;
(j) A judgment or judgments for the payment of money shall be
rendered against Borrower and any such judgment shall
remain unsatisfied and in effect for a period of thirty
(30) consecutive days without a stay of execution;
(k) The occurrence of an event of default or demand under any
loan arrangement with any other creditor, or any material
adverse modification or alteration to or any increase in
the outstanding loan arrangements of Borrower without
Lender's written approval.
(l) Such a change in the condition or affairs (financial or
otherwise) of Borrower, which, in the reasonable opinion
of a duly authorized representative of Lender, materially
impairs Lender's security or increases its risk;
(m) The service upon Lender of a writ in which Lender is
named a trustee of the Borrower;
(n) Failure of Borrower to maintain its present business
operations and its executive office within Commonwealth
of Massachusetts.
then, in each such event, Lender may declare Borrower in default and exercise
the Rights on Default as hereinafter defined.
7.2 Rights on Default. In the event of a default under this Agreement,
without further notice, or demand to Borrower Lender may, subject to the terms
and conditions of the Intercreditor Agreement with Corestates Bank (if
applicable):
(a) immediately accelerate the amounts outstanding under the
Note;
(b) perform any warranty, covenant or agreement which
Borrower has failed to perform under this Agreement;
(c) take any other action which Lender deems reasonably
necessary or desirable to protect its interest, including
but not limited to exercising its rights as set forth in
Section 6; and
(d) take any other action available to a secured party under
the Uniform Commercial Code of Massachusetts, including
without limitation, the right to take possession of the
Collateral and/or sell the Collateral at public auction
or private sale, in lots or in bulk, for cash or for
credit, enter upon the Borrower's premises for the
purpose thereof.
No course of dealing or delay or in taking or failing to take any other
action with respect to any event of default shall affect Lender's right to take
such action at a later time. No waiver as to any one default shall affect
Lender's rights upon any other default.
Lender may exercise any or all of its rights on default concurrently with
or independently of and without regard to the provisions of any other document
which secures the Borrower's obligations to Lender.
After default, Borrower, upon demand by Lender, shall assemble the
Collateral at Borrower's cost and make it available to Lender at a place to be
reasonably designated by Lender.
The requirement of the Uniform Commercial Code that Lender give Borrower
reasonable notice of any proposed sale or disposition of the Collateral shall be
met if such notice is given to Borrower at least five (5) days before the time
of such sale or disposition.
7.3 Expenses. Any payment made or expense incurred by Lender (including,
without limitation, reasonable attorney's fees and disbursements) in connection
with the preparation of the EST Loan Documents, interpretation or maintenance of
EST Loan Documents or the exercise of any right under the EST Loan Documents
shall be payable on demand and shall be secured pursuant to the terms of this
Agreement, and if not paid when requested, shall be added to the indebtedness
and obligations of Borrower to Lender and shall earn interest at the rate set
forth in the Note.
SECTION 8. MISCELLANEOUS PROVISIONS
8.1 Governing Law; Submission to Jurisdiction. The validity,
interpretation, enforcement and effect of this Agreement shall be governed by
the laws of the Commonwealth of Massachusetts. Borrower hereby consents to the
jurisdiction of all courts in said Commonwealth.
8.2 Severability. In the event that any provision hereof be deemed to be
invalid by reason of the operation of any law or by reason of the interpretation
placed thereon by any court, this Agreement shall be construed as not containing
such provision and the invalidity of such provision shall not affect the
validity of any provision hereof and any and all other provisions hereof which
are otherwise lawful and valid shall remain in full force and effect.
8.3 Waiver of Notice. Borrower waives any and all notice or demand which
Borrower might be entitled to receive with respect to this Agreement by virtue
of any applicable statute or law, and waives demand, protest, notice of protest,
notice of default or dishonor, notice of payments and nonpayments, or of any
default, release, compromise, settlement, extension or renewal of all commercial
paper, accounts, contract rights, instruments, chattel paper, guaranties, and
otherwise, at any time held by Lender on which Borrower may in any way be
liable, notice of nonpayment at maturity of any and all Accounts, instruments or
chattel paper, notice of any action taken by Lender unless expressly required by
this Agreement.
8.4 Materiality. All covenants, agreements, representations and warranties
made by Borrower in the EST Loan Documents, notwithstanding any investigation by
Lender, shall be deemed to be material and relied upon by Lender and shall
survive the execution and delivery of this Agreement.
8.5 Successors and Assigns. This Agreement and all documents executed in
connection herewith shall bind and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors and assigns of each party.
8.6 Modification. This Agreement and the obligations of the parties hereto
may not be modified without the written approval of Lender.
8.7 Interpretation. Reference to the singular or the plural shall be deemed
to include the other where the context requires.
8.8 Jury Trial. LENDER AND BORROWER IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL
BY JURY IN ANY PROCEEDING HEREAFTER INSTITUTED BY OR AGAINST LENDER OR BORROWER
IN RESPECT OF THIS AGREEMENT, THE EST LOAN DOCUMENTS OR ANY OTHER DOCUMENT,
INSTRUMENT OR AGREEMENT EVIDENCING, GOVERNING OR SECURING THE OBLIGATIONS.
This Agreement represents the entire Agreement between the parties and
shall have the effect of an instrument under seal.
Borrower: ASA INTERNATIONAL LTD.
By:
----------------------------------
Terrence C. McCarthy, Controller
and Vice President
Lender: ECONOMIC STABILIZATION TRUST
By:
----------------------------------
Suzanne Teegarden, Chief Executive
Officer, Board of Trustees
<PAGE>
EXHIBIT A
(Other liens and encumbrances)
----------------------------
Corestates Bank, N.A. Security interest in all assets,
accounts, inventory, proceeds
Sun Data, Inc. leased equipment and proceeds
(several)
Mitel Financial Services leased equipment and proceeds
Pacific Atlantic Systems leased equipment and proceeds
<PAGE>
EXHIBIT B
Outstanding Orders, judgments, decrees or awards or litigation
--------------------------------------------------------------
None other than disclosed in notes to Borrower's 1996 annual report
<PAGE>
EXHIBIT C
Other places of business
------------------------
10 Speen Street
Framingham, MA 01701
615 Amherst Street
Nashua, NH 03063
960-C Harvest Drive
Union Meeting Corporate Center
Blue Bell, PA 19422
Dekalb Corners Office Center
3469 Lawrenceville Highway
Suite 103
Tucker, GA 30085
12515 Willows Road, N.E.
Suite 500
Kirkland, WA 98034
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1997 CONDENSED CONSOLIDATED
INCOME STATEMENT FOR SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B)
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Jun-30-1997
<EXCHANGE-RATE> 1
<CASH> 455,154
<SECURITIES> 0
<RECEIVABLES> 5,443,837
<ALLOWANCES> 110,497
<INVENTORY> 86,690
<CURRENT-ASSETS> 6,638,154
<PP&E> 7,637,067
<DEPRECIATION> 3,364,649
<TOTAL-ASSETS> 17,261,521
<CURRENT-LIABILITIES> 5,554,551
<BONDS> 3,009,571
0
0
<COMMON> 40,884
<OTHER-SE> 8,276,515
<TOTAL-LIABILITY-AND-EQUITY> 17,261,521
<SALES> 11,681,802
<TOTAL-REVENUES> 11,681,802
<CGS> 1,822,109
<TOTAL-COSTS> 7,387,901
<OTHER-EXPENSES> 3,675,215
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 198,023
<INCOME-PRETAX> 420,661
<INCOME-TAX> 168,000
<INCOME-CONTINUING> 252,663
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 252,663
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
