<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended Commission file number:
December 31, 1996 0-14741
- ------------------------- ----------------------
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 No.)
10 Speen Street, Framingham, MA 01701
- ----------------------------------------- ----------
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 626-2727
- ------------------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
- ----------------------------------------------------------
Title of each class Name of each exchange
- ------------------- on which registered
---------------------
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
- -----------------------------------------------------------
Common Stock, $.01 par value
----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
As of March 27, 1997, 3,292,963 shares of Common Stock, $.01 par value per
share, were outstanding. The aggregate market value, held by non-affiliates, of
shares of the Common Stock, based upon the average of the bid and ask prices for
such stock on that date was approximately $3,061,857.
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DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Document Part of Form 10-K Annual
- -------- Report in which Document
is Incorporated
Definitive Proxy Statement to be
supplied to Shareholders in conjunction
with the 1997 Annual Meeting of Shareholders Part III
Report on Form 8-K filed on November 27, 1996 Part IV
Registration Statement on Form S-18
(File number 33-3832-B) Part IV
Registration Statement on Form S-1
(File number 33-15381) Part IV
Registration Statement on Form S-8
(File number 33-312933) Part IV
3
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PART I
ITEM 1. Business
--------
GENERAL
ASA International Ltd. (the "Registrant" or the "Company") provides
networked automation systems and ongoing monthly support to approximately 900
businesses in the United States, Canada and Australia. 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
legal and tire dealer markets. The Company installs this software on a variety
of computers and networks, including Digital Equipment Corporation ("DEC"), IBM
Corporation ("IBM"), Hewlett Packard ("HP"), and Unix/Open Systems hardware
platforms, and provides implementation, training, and long-term software and
hardware support to its clients.
The Company is comprised of four operating groups and a corporate services
group. The Company's Business Systems Group provides electronic time recording
solutions for payroll and pay rules for companies with more than 500 employees
and over $10 million in sales. The Tire Systems Group provides integrated
hardware and software solutions to independent tire dealers, wholesalers, and
retreaders. The Legal Systems Group provides integrated accounting and practice
management solutions to law firms. Lastly, the Direct Marketing Systems Group,
acquired in August 1993, specializes in delivering turnkey management systems
to consumer and business direct marketing firms.
The Company, founded in 1969, was organized as a Massachusetts corporation
on December 15, 1982 and was reincorporated as a Delaware corporation on May 5,
1986. As used in this Report, the term "Company" includes ASA International Ltd.
and its wholly owned subsidiaries, ASA Properties, Inc. ("Properties"), and ASA
International Ventures, Inc. ("Ventures"). In 1995, the Company's Massachusetts
predecessor and its wholly owned subsidiaries, ASA Incorporated ("ASA, Inc."),
ASA Legal Systems Company, Inc. ("Legal") were merged.
The Company's consulting and general business systems operations began in
1969 under the direction of the Company's founder and Chief Executive Officer,
Alfred C. Angelone. The Company is a Value-Added Reseller for DEC and its
Business Systems and Direct Marketing Systems Groups are IBM Authorized Industry
Remarketers for the data collection and catalog direct marketing industry
segments.
In December 1996, the Company completed the disposition of substantially
all of the assets and liabilities of the Company's International Trade and
Transportation Systems Group, (the "International Group") to TradePoint Systems
LLC ("TradePoint"), a New Hampshire limited liability company. In exchange for
the assets of the International Group and the assumption of the International
Group's liabilities, the Company received a 16% membership interest in
TradePoint and a subordinated promissory note in the face amount of $600,000
from TradePoint (the "Note"). The remaining 84% interest in
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TradePoint is owned by Christopher J. Crane, the former president of and a
former director of the Company. Simultaneously with the completion of this
transaction, Mr. Crane resigned all of his positions with the Company. In
exchange for his interest in TradePoint, Mr. Crane (i) contributed all of the
Company's common stock, $.01 par value per share (the "Common Stock") owned by
him, totaling 665,597 shares; (ii) assigned to the Company a 16% partnership
interest in the ASA Investment Partnership, a partnership by and among Mr.
Crane, the Company, and Alfred C. Angelone, the Company's Chief Executive
Officer and Chairman; and (iii) canceled all of his options to purchase 245,000
shares of Common Stock. The consideration to be paid was determined by
negotiations between the parties and was independently evaluated on behalf of
the Company by Shields & Company, Inc. The Company will account for its
investment in TradePoint under the cost method.
In connection with the transaction, TradePoint granted to the Company an
irrevocable proxy covering the Company's Common Stock owned by TradePoint. The
Company has the right to cause TradePoint to redeem the 16% membership interest
in TradePoint held by the Company by notice given on or after March 1, 2002, in
exchange for the Company's Common Stock held by TradePoint and the fair market
value of the 16% membership interest in TradePoint. TradePoint has the right to
redeem the Company's membership interest by notice given on or after December
31, 2001 in exchange for the Company's Common Stock held by it and the greater
of $400,000 or the fair market value of the 16% membership interest in
TradePoint.
Except as set forth above, during the past year, there have been no
bankruptcy proceedings, receivership, or similar proceedings with respect to the
Registrant, nor has there been any merger or consolidation of the Registrant,
and there has been no disposition of any material amount of the Registrant's
assets.
BUSINESS
The following paragraphs describe in greater detail the business conducted
by the Registrant.
Business Systems
- ----------------
The Company designs, develops, markets, implements and supports Client/
Server Enterprise-Wide software that manages the "source to gross" payroll
process of its clients. The Company's SmartTime(R) product (first introduced in
1993) facilitates the electronic collection of time, attendance, and labor data
(the source), which is then processed against the unique pay rules of the client
to produce gross hours for payroll processing. The Company's SmartRules(TM)
product, an object oriented developed tool that interfaces with SmartTime,
allows clients who are in a dynamic, complex pay rule environment to maintain
those pay rules without the need for custom programming.
The Company offers a comprehensive set of professional and consulting
services to all of its clients, including training, implementation support,
operations support, and custom software development.
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The Company also continues to maintain, upgrade, and support legacy
manufacturing management and control and accounting software based primarily on
the DEC hardware platform.
Tire Systems
- ------------
The Company provides integrated hardware and software multi-user solutions
on DEC and Unix-based systems to independent tire dealers, wholesalers, and
retreaders in the United States, Canada and Latin America for point-of-sale,
work orders, inventory control, purchasing, and accounting functions. The
systems range in price between approximately $15,000 and $200,000.
In September 1988, July 1989, September 1990, and November 1996,
respectively, the Company acquired Associated Software Consultants Organization,
Inc., Snyder Computing Systems, Computers Northwest, and certain assets of
Progressive Computer Systems, Inc., all of which specialized in supplying
systems to independent tire dealers. In recent years, the Company has
consolidated its position in the independent tire dealer marketplace. The
Company believes that it has the largest installed base of independent tire
retailer and distributor multi-user systems in the United States.
Legal Systems
- -------------
The Company provides integrated networked and client/server-based financial
management systems for law firms throughout the United States. The Company's
Pyramid product is a powerful, fully integrated set of legal specific
applications designed to run on PC networks. The product is written in a fourth
generation, fully relational, SQL compliant database. Targeted at the small to
mid-sized law firm, the product compliments the Company's existing offerings to
high-end market segments. In the high-end market, the Company provides
client/server based systems which operate on servers such as the DEC VAX running
Open VMS, the DEC Alpha running OSF1, and the HP 9000 running UX. The software
applications form a comprehensive set of all the components necessary to run a
modern legal firm, including accounting, word processing, practice management,
and litigation support. Systems range in price between approximately $25,000 and
$500,000.
The Company entered the legal systems marketplace in June 1991 by acquiring
Quorum Legal Systems of Plymouth Meeting, Pennsylvania from Control Data
Corporation. In January 1992, the Company acquired the fixed assets of Legal
Data Systems of Boston, Massachusetts. In November 1994, the Company acquired
certain software products of Precedent Technologies Incorporated of New Hope,
Pennsylvania. The Company has approximately 250 clients in this market.
Direct Marketing Systems
- ------------------------
The Company provides turnkey order management systems to consumer, business
catalog, direct marketing and electronic commerce firms.
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Utilizing the IBM AS/400, the Company's Mozart(TM) product is a leading
industry standard for order fulfillment, customer service, and decision support
systems. The Company entered this marketplace in August 1993 when it acquired
CommercialWare, Inc. of Norwood, Massachusetts. The Company now believes it has
an estimated 3% market share in this marketplace.
Marketing
- ---------
The Company markets its products and services to new prospects and existing
clients primarily using the Company's direct sales force, assisted by technical
personnel. These personnel are trained in the Company's product and service
offerings and in the operations of the Company's clients. The Company uses its
own personnel, rather than third-party distributors, because prospects and the
Company's clients often lack comprehensive computer and systems technical
expertise and require a "consultative" selling approach, involving a long
selling cycle.
More importantly, the Company's objective is to develop a direct, long-term
relationship with each client. This marketing approach requires substantial,
specialized knowledge of the requirements of the Company's clients generally not
available from third-party distribution arrangements. These requirements result
from the intangible nature of applications software and related services, the
sophistication of the Company's products and the need for each client to
understand how the Company's products and services will work to meet its
requirements. The Company's sales force is supported by marketing personnel who
develop advertising and marketing campaigns; produce product literature,
periodic newsletters, and direct mail campaigns; arrange attendance at trade
shows and conventions; and sponsor seminars.
Marketing to a new prospect consists of identifying the prospect,
qualifying the prospect and, if the prospect is qualified, preparing and
presenting a sales proposal. In the tire, direct marketing, and legal markets
served by the Company, the total domestic market is well defined through the
respective industry and professional organizations. In these markets, trade
shows and direct contacts are used to determine how prospects are satisfying
their information processing requirements. For the time and attendance product
line, the prospects for the Company's products are more diverse and difficult to
target. In these markets, the Company engages in "prospecting" to identify
interest in the Company's products by companies who are currently seeking
products or services of the type offered by the Company. The prospecting process
includes trade publication advertising, purchased mailing lists, telemarketing,
direct mail, seminars, and trade shows to generate appointments for the direct
sales force with qualified prospects.
Once a prospect is qualified as to interest in the Company's products
and/or services, the direct sales and, as required, support personnel, visit the
prospect to understand the prospect's specific requirements. This process
usually results in the preparation of a written proposal which describes the
hardware, software, and services that will meet the prospect's requirements.
This sales cycle can be long, ranging from six months to beyond one year. The
Company believes the success of its sales activities depends upon this
consultative approach.
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The Company believes that its client base presents continuing opportunities
for sales of additional software and services. The Company's products and
services generally become an integral part of the client's business. As a
result, the quality of customer support is essential to selling to existing
clients.
The Company maintains frequent contact with clients through sales and
service representatives. The Company provides customer support lines to handle
client system operational issues within a prescribed response time, and
continually communicates with its clients through newsletters and client
seminars. Through frequent contact with its clients by marketing and service
activities, the Company believes that it can better understand client
requirements and direct its product development activities toward developing and
enhancing products that should be well accepted by both existing clients and new
prospects.
Sources and Availability of Raw Materials
- -----------------------------------------
The Company's systems operate on computer hardware supplied by leading
hardware manufacturers pursuant to Original Equipment Manufacturer or Value
Added Reseller Agreements. These agreements are renewable on a year-to-year
basis, and entitle the Company to purchase equipment at various discounts based
upon volume and the type of equipment. The loss of the Company's ability to
purchase equipment from the manufacturer would not have an adverse effect on the
Company's business. The Company's products have been ported to run under the
Unix operating system. The Company could also continue to purchase from hardware
distributors, but on terms less favorable than from the original manufacturer.
The Company believes that its relationship with the hardware manufacturers is
satisfactory.
The Company purchases IBM hardware for certain of the Company's market
segments from IBM under Industry Remarketer Agreements. The Company believes
that its relationship with IBM is satisfactory based upon IBM's selection of the
Company as an Authorized Industry Remarketer for these segments.
The Company also purchases HP hardware for certain of the Company's market
segments from HP under a Value-Added Reseller Program. The Company believes that
its relationship with HP is satisfactory given the selection of the Company as a
Value-Added Reseller for these markets.
The Company purchases all of its computer hardware and peripheral equipment
from IBM, HP, or other vendors, and performs only software installation,
testing, final system configuration, and quality control. With the exception of
multi-user systems purchased from IBM and HP, the Company believes there are
several alternative suppliers for system components used by the Company.
Patents and Proprietary Technology
- ----------------------------------
The Company does not believe that patents are material to its business. The
Company relies primarily upon trade secrets, unpatented
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proprietary know-how, and continuing technological innovation to develop and
maintain its competitive position. In particular, the Company generally provides
only "run time" code for its software to its tire and legal clients, although
manufacturing systems and certain legal clients may also purchase "source" code.
In addition, most catalogue direct marketing clients purchase source code
licenses. Insofar as the Company relies on trade secrets and unpatented
know-how, there can be no assurance that others may not independently develop
similar technology or that secrecy will not be breached. Certain product names
of the Company are recognized as trademarks in interstate commerce and are or
may be registered trademarks.
Seasonality
- -----------
The Company has not experienced material seasonality in its business, other
than that due to the economic fluctuation of the economies of the United States
and Canada.
Working Capital Items
- ---------------------
The Company does not have any unusual trade practices which would require
restrictions on working capital.
Customers
- ---------
During fiscal year-ended December 31, 1996, the Company's revenue by
product line was approximately as follows:
<TABLE>
<CAPTION>
Product Line Revenue ($) %
- ------------ ----------- -----------
<S> <C> <C>
International Trade $ 6,718,000 26%
Business Systems 4,109,000 16
Tire Systems 3,698,000 15
Legal Systems 4,417,000 17
Direct Marketing Systems 6,529,000 26
----------- -----------
$25,471,000 100%
=========== ===========
</TABLE>
Backlog
- -------
Set forth below is information concerning the Company's backlog at
December 31, 1996 and 1995, respectively:
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<TABLE>
<CAPTION>
Backlog at December 31,
-----------------------
1996 1995
---- ----
Support Support
Product Line Total Contracts Total Contracts
- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Business Systems $1,600,000 $1,000,000 $2,900,000 $1,400,000
Tire Systems 2,600,000 2,000,000 1,700,000 1,400,000
Legal Systems 2,400,000 1,600,000 2,600,000 1,600,000
Direct Marketing
Systems 1,300,000 800,000 2,200,000 800,000
---------- ---------- ---------- ----------
$7,900,000 $5,400,000 $9,400,000 $5,200,000
========== ========== ========== ==========
</TABLE>
Support contracts are generally cancelable by the Company or the Company's
customers upon 90 days written notice.
Competition
- -----------
The Company's primary competitors for time and attendance and labor
reporting software are Kronos, JeTech, InTime Systems, FasTech and EAS. The
Company believes the principal competitive factors in this market are:
management of complex pay rules; technological sophistication and vision;
scaleability; platform independence; and rapid application deployment and
development. The Company believes it competes favorably with respect to all of
these factors.
The Company's primary competitors for tire systems are Madden Co., Signal
Software and TireMaster. The Company believes the principal competitive factors
for tire systems are: complete point of sale functionality to assist sales
personnel to maximize gross margin on each sale; the ability to post data
automatically to the accounting system; the ability to track the manufacturing
process of tire retreaders; and the availability of marketing products which
assist in retaining and increasing existing customer business. The Company
believes it competes favorably with respect to all of these factors.
The legal systems market is highly competitive and includes a number of
independent software vendors and service bureaus. The Company's primary
competitors for legal systems are CMS/DATA Corp., Elite Data Processing,
Barrister, Juris, and Omega. The Company believes that the principal competitive
factors in the legal systems business are: completeness and sophistication of
software products; vendor reputation and references; price/performance ratio;
the ability to expand and upgrade a system; the ability to provide an open
systems solution; the ability to run both the "front office" and the "back
office" applications on a single network; product reliability; and service and
support. The Company believes it competes favorably with respect to all of these
factors.
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The direct marketing systems market is highly competitive. The Company's
major competitors are Smith-Gardner, Sigma Micro, and Computer Solutions. The
direct marketing product competes on price/performance, ease of use, and
sophistication of software. The Company believes it competes favorably with
respect to all these factors. The next generation product, Mozart, unveiled in
1994, is CASE-developed and competes favorably with the products of competitors,
as well as provides a foundation for future development.
Research and Development
- ------------------------
During the last three fiscal years, the amounts spent by the Company on
Company-sponsored research and development activities and on customer-sponsored
research activities relating to the development of new products, services, or
techniques or the improvement of existing products, services, or techniques were
not material.
Government Regulation
- ---------------------
There is presently no material government regulation with respect to the
Company's business. Approvals for computer hardware from Underwriter's
Laboratories and the Federal Communications Commission are obtained by the
hardware manufacturer. However, the extent to which future federal, state, or
local governmental regulations may regulate the Company's activities cannot be
predicted, and the Company may be subject to restrictions on export of its
computer systems to other countries if it seeks to expand into non-U.S. markets.
Employees
- ---------
As of December 31, 1996, the Company had 151 full time employees. Of these
employees, 7 are executive officers or senior managers, 22 were engaged in
marketing and sales, 61 in customer support and training, 38 in product/custom
development or engineering and 23 in general and administrative positions. The
Company's ability to develop, market and sell products and to establish and
maintain its competitive position in light of new technological developments
will depend, in large part, on its ability to attract and retain qualified
personnel. The Company believes that it has been successful to date in
attracting skilled personnel critical to its business. No employees are covered
by collective bargaining agreements. Management of the Company believes that
its relationship with its employees is satisfactory.
ITEM 2. Description of Properties
-------------------------
The Company's Corporate Headquarters are located in a 32,000 square foot
office building at 10 Speen Street, Framingham, Massachusetts. The Business
Systems and Direct Marketing Systems product operations are also located at this
facility. The Company occupies approximately 80% of the space in the building,
while tenants lease the remainder of the space. The carrying costs for the
building, which was acquired in October 1991,
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include monthly principal and interest payments of $14,815 on a fifteen-year
mortgage note along with operating costs and taxes.
The Company's Tire Systems operations are located in approximately 7,000
square feet of a 24,000 square foot office building at 615 Amherst Street,
Nashua, New Hampshire, purchased in December 1992. Approximately 12,000 square
feet of the facility is leased to TradePoint Systems, LLC under a long-term
lease. The carrying costs for the facility include approximately $10,000 per
month for principal and interest on twenty-year mortgage notes plus operating
costs and taxes.
The Company maintains the following additional offices:
<TABLE>
<CAPTION>
Current Date of Lease
Location Monthly Rent Office Area Expiration
- -------- ------------ ----------- ----------------
<S> <C> <C> <C>
Tucker, Georgia $ 1,569 1,395 s.f. July 31, 1997
Blue Bell, Pennsylvania(1) $12,891 9,214 s.f. February 1, 1999
Kirkland, Washington $ 5,913 3,720 s.f. October 31, 2001
</TABLE>
(1) These amounts are net of $13,541 per month in rent collected on a sublease
of approximately 11,206 square feet of space. The sublease is
noncancellable through April 30, 1997 with additional consideration due
upon cancellation.
ITEM 3. Legal Proceedings
-----------------
In November 1995, the Company commenced an action against a customer for
breach of contract and other charges for an amount in excess of $2,000,000. In
answering the complaint, the client alleged counterclaims for alleged breach of
contract and other charges seeking damages and attorneys' fees of an unspecified
amount. The Company intends to vigorously pursue its claim and defend the
counterclaim. In the opinion of management of the Company, this action can be
successfully defended without material adverse effect on the financial condition
of the Company.
ITEM 4. Submission of Matters to a Vote of Security-Holders
---------------------------------------------------
(a) No matter was submitted to a vote of security-holders during the fourth
quarter of the fiscal-year ended December 31, 1996, through the solicitation of
proxies or otherwise.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
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PART II
ITEM 5. Market Price of and Dividends on the Company's Common
Equity and Related Stockholder Matters
-------------------------------------------------------
The Company's Common Stock has been traded on the over-the-counter market
(NASDAQ symbol: ASAA) since June 25, 1986. The following table shows the range
of low and high sales prices for the Company's Common Stock on the NASDAQ System
for the periods indicated, as furnished to the Company by NASDAQ.
<TABLE>
<CAPTION>
Calendar Year 1995 Low High
------------------ ------- --------
<S> <C> <C>
First Quarter $ .906 $1.250
Second Quarter $ .875 $1.438
Third Quarter $1.250 $2.625
Fourth Quarter $1.250 $1.938
<CAPTION>
Calendar Year 1996 Low High
------------------ ------- --------
<S> <C> <C>
First Quarter $1.438 $2.688
Second Quarter $1.375 $6.500
Third Quarter $1.375 $2.563
Fourth Quarter $ .875 $1.813
</TABLE>
These quotations represent prices between dealers and do not include retail
markups, markdowns, or commissions, and may not necessarily represent actual
transactions. There were 1,384 holders of record of the Company's outstanding
Common Stock as of March 27, 1997.
Under the terms of a share repurchase program authorized by the Company's
Board of Directors in June 1990, the Company is authorized to repurchase up to
$500,000 of its Common Stock. In December 1991, the Company repurchased 25,000
shares at a cost of approximately $1.06 per share. The Company also repurchased
shares as follows for the months indicated:
<TABLE>
<CAPTION>
1992 Number of Shares Per Share Purchase Price
---- ---------------- ------------------------
<S> <C> <C>
March 5,000 $1.15
May 10,000 $1.53
July 3,000 $1.81
August 6,700 $1.81
8,100 $2.00
September 45,000 $1.94
15,000 $2.00
5,000 $1.99
October 5,000 $1.88
</TABLE>
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<TABLE>
<CAPTION>
1993 Number of Shares Per Share Purchase Price
---- ---------------- ------------------------
<S> <C> <C>
March 5,000 $1.54
August 10,000 $2.93
September 1,800 $3.02
</TABLE>
Although it is not obligated to do so, the Company may continue to
repurchase shares of Common Stock when market conditions for the purchase of its
stock meet its requirements.
Since its organization, the Company has not paid any dividends on its
Common Stock and its Board of Directors does not contemplate declaring any
dividends in the foreseeable future. The declaration and payment of dividends in
the future will be determined by the Board of Directors in light of conditions
then existing, including the Company's earnings, its financial condition and
requirements (including working capital needs), any agreements restricting the
payment of dividends and other factors. The Company's current banking
arrangements prohibit the payment of dividends by the Company.
ITEM 6. Selected Consolidated Financial Data
----------------------------------------
(in thousands, except per share amounts)
The following selected consolidated financial data are derived from the
consolidated financial statements of the Company. The statement of operations
data for the years ended December 31, 1996 and 1995 and the balance sheet data
as of December 31, 1996 and 1995 are derived from and qualified by reference to
the consolidated financial statements and notes thereto included herein and
audited by BDO Seidman, LLP, the Company's independent certified public
accountants, as set forth in their report and also included elsewhere herein.
The statement of operations data for the year ended December 31, 1994 is
derived from the consolidated financial statements and notes thereto included
herein and audited by Deloitte & Touche LLP, the Company's then independent
auditors, as set forth in their report and also included elsewhere herein. The
statement of operations data for the years ended December 31, 1993 and 1992,
and the balance sheet data as of December 31, 1994, 1993, and 1992 are derived
from financial statements audited by Deloitte & Touche LLP not presented
herein.
The financial information set forth below should be read in conjunction
with, and is qualified in its entirety by, the detailed information in the
consolidated financial statements and notes thereto appearing elsewhere herein.
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<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Operating Data:
- ---------------
<S> <C> <C> <C> <C> <C>
Revenues $ 25,471 $ 31,032 $ 27,111 $ 27,863 $ 31,448
Costs and Expenses 26,362 29,983 26,545 27,555 30,553
Earnings (Loss)
from Operations (144) 1,502 920 569 1,057
Earnings (Loss)
Before Cumulative Effect
of Adopting SFAS No. 109 (649) 457 166 98 400
Net Earnings (Loss) (649) 457 166 742 775
Earnings (Loss) per share
Before Cumulative Effect
of Adopting SFAS No. 109 (.17) .11 .04 .02 .10
Net Earnings (Loss) per share (.17) .11 .04 .18 .19
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Balance Sheet Data:
- -------------------
<S> <C> <C> <C> <C> <C>
Total Assets $16,630 $19,515 $20,131 $20,826 $19,073
Long-Term Obligations 3,012 2,707 3,112 3,366 2,096
Shareholders' Equity 8,012 10,110 9,652 9,486 8,614
</TABLE>
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
Results of Operations
- ---------------------
Compare 1996 to 1995
- ---------------------
<TABLE>
<CAPTION>
(000's omitted)
------------------------------------------
Revenue Increase/(Decrease)
------------------ -------------------
1996 1995 Amount Percentage
---- ---- ------ ----------
<S> <C> <C> <C> <C>
Computer and add-on hardware $ 4,808 $ 8,444 $(3,636) (43%)
Services 15,832 16,654 (822) (5%)
Product licenses 4,831 5,934 (1,103) (19%)
Net Revenue 25,471 31,032 (5,561) (18%)
Revenue net of hardware costs $21,397 $24,112 $(2,715) (11%)
</TABLE>
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Comparison of revenues and revenues net of hardware costs
- ---------------------------------------------------------
In December 1996, the Company completed the disposition of its
International Trade and Transportation Systems Group. In the three years ended
December 31, 1996, 1995, and 1994, this group's revenues totalled approximately
$6,718,000, $6,968,000, and $6,507,000, or 26%, 22%, and 24% of total Company
revenue, respectively.
The decrease in computer and add-on hardware revenue of approximately
$3,636,000 for the year ended December 31, 1996, compared to the same period in
1995, resulted primarily from a decrease in revenue from the international
trade, electronic time recording, legal and direct marketing systems product
lines. This decrease was partially offset by an increase for the same period in
computer and add-on hardware revenue from the tire systems product line.
Hardware margins decreased to approximately 15% for the year ended December
31, 1996, from approximately 18% in 1995. Margins on computer and add-on
hardware do fluctuate based on the mix of computer hardware and add-on hardware
products sold. Accordingly, the Company expects hardware gross margins in the
future to continue to fluctuate. The Company continues to direct its efforts
toward building service and product license revenue to offset the historical
decline in hardware revenue and margins.
Revenue from services decreased approximately $822,000, or 5%, for the
year. Service revenue decreases for the international trade, electronic time
recording and legal systems product lines were offset by revenue increases in
the tire and direct marketing systems product lines. Gross margin from services
increased to approximately 36% from 27%. The Company's revenue and margin from
services fluctuate from period to period due to the mix of contracts and
projects.
Product license revenue decreased by approximately $1,103,000, or 19%, for
the year ended December 31, 1996, compared to the same period in 1995. The
change was a result of revenue decreases from the international trade and
electronic time recording products lines, partially offset by increases from the
tire, legal and direct marketing systems product lines.
Sales and marketing expenses decreased by approximately $236,000, or 5%.
This change primarily reflects a decrease in advertising, marketing, and
commission-related expenses for the international trade, electronic time
recording and tire systems product lines. General and administrative expenses
for the year ended December 31, 1996 increased by approximately $366,000, or
11%, compared to the prior year. The change is the result of severance costs for
the international trade product line, increases in property taxes for
Company-owned facilities, and increased expense for computer equipment rental
and maintenance for the direct marketing systems product line.
Pretax loss from operations was approximately $144,000 for 1996, compared
to earnings of approximately $1,502,000 for 1995. The decrease in earnings
results from a decrease in contribution from the Company's international trade,
electronic time recording and direct marketing systems product lines.
Contribution increased in the tire and legal systems product lines.
The net loss for the year ended December 31, 1996 was approximately
$649,000, as compared to net earnings of approximately $457,000 for the
comparable period in 1995. The change results from the decrease in
16
<PAGE> 16
earnings from operations of approximately $1,646,000, along with the loss on the
sale of TradePoint Systems, LLC of approximately $322,000. These changes were
partially offset by decreases in net interest and income tax expense of
approximately $28,000 and $834,000, respectively.
Compare 1995 to 1994
- ---------------------
<TABLE>
<CAPTION>
(000's omitted)
---------------------------------------
Revenue Increase/(Decrease)
------------------ -------------------
1995 1994 Amount Percentage
---- ---- ------ ----------
<S> <C> <C> <C> <C>
Computer and add-on hardware $ 8,444 $ 5,553 $ 2,891 52%
Services 16,654 16,138 516 3%
Product licenses 5,934 5,420 514 9%
Net Revenue 31,032 27,111 3,921 14%
Revenue net of hardware costs $24,112 $22,153 $ 1,959 9%
</TABLE>
Comparison of revenues and revenues net of hardware costs
- ---------------------------------------------------------
The increase in computer and add-on hardware revenue of approximately
$2,891,000 for the year ended December 31, 1995, compared to the same period in
1994, resulted primarily from an increase in revenue from the international
trade and direct marketing systems product lines. This increase was partially
offset by a decrease for the same period in computer and add-on hardware revenue
from the electronic time recording, tire, and legal systems product lines.
Hardware margins increased to approximately 18% for the year ended
December 31, 1995, from approximately 11% in 1994. Margins on computer and
add-on hardware do fluctuate based on the mix of computer hardware and add-on
hardware products sold. Accordingly, the Company expects hardware gross margins
in the future to continue to fluctuate. The Company continues to direct its
efforts toward building service and product license revenue to offset the
historical decline in hardware revenue and margins.
Revenue from services increased approximately $516,000, or 3%, for the
year. Service revenue increases for the electronic time recording and direct
marketing systems product lines were offset by revenue decreases in the
international trade, tire, and legal systems product lines. Gross margin from
services decreased to approximately 27% from 36%. The Company's revenue and
margin from services fluctuate from period to period due to the mix of contracts
and projects.
Product license revenue increased by approximately $514,000, or 9%, for the
year ended December 31, 1995, compared to the same period in 1994. The change
was a result of revenue increases from the
17
<PAGE> 17
international trade, electronic time recording, and direct marketing systems
products lines, partially offset by decreases from the tire and legal systems
product lines.
Sales and marketing expenses decreased by approximately $409,000, or 9%.
This change primarily reflects a decrease in advertising, marketing, and
commission-related expenses for the electronic time recording, tire, and legal
systems product lines. General and administrative expenses for the year ended
December 31, 1995 decreased by approximately $703,000, or 18%, compared to the
prior year. These changes reflect the cost reductions and controls enacted by
the Company in the prior year. The cost reductions and controls included
severing specific employees, not replacing employees as they left voluntarily,
delaying hiring decisions previously budgeted, changing long-distance carriers,
combining of functions between divisions at the point in time when an employee
left, and hiring temporary employees as opposed to full-time employees (thus
reducing employee benefits costs).
Pretax earnings from operations were approximately $1,502,000 for 1995,
compared to approximately $920,000 for 1994. The increase in earnings results
from an increase in contribution from the Company's legal systems and direct
marketing systems product lines. Contribution decreased in the electronic time
recording and tire systems product lines.
The net earnings for the year ended December 31, 1995 were approximately
$457,000, as compared to net earnings of approximately $166,000 for the
comparable period in 1994. The change results from the increases in net interest
expense and net income tax expense of approximately $99,000 and $192,000,
respectively. These changes were partially offset by an increase in earnings
from operations of approximately $582,000.
Liquidity and Capital Resources
- -------------------------------
The Company had total cash and cash equivalents at December 31, 1996 of
approximately $674,000, an increase of $270,000 from December 31, 1995. The
Company and its subsidiaries currently have a maximum line of credit totaling
$2,000,000 of which approximately $1,205,000 was available at December 31, 1996.
This line is scheduled to expire in 1997. The Company expects to renew the line
under approximately the same terms.
Over the past three years, the Company has expended significant working
capital on the development of a new generation of software products. The level
of these expenditures has decreased in the current year. However, due to the
continuing rapid changes in software technology, the Company will have to
continue to fund 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.
The Company's hardware and software license revenues can fluctuate as a
result of a number of factors, particularly trends in the overall
18
<PAGE> 18
economy, client buying patterns, and hardware and software technological
developments. Consequently, the Company could be subject to material variations
in operating results. As the uncertainties of the economy are incalculable, the
Company acknowledges the potential adverse impact that economic uncertainty
could have on its ability to maintain liquidity and raise additional capital.
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.
Inflation
- ---------
General inflation over the last three years has not had a material effect
on the Company's cost of doing business.
New Accounting Standards
- -------------------------
Effective January 1, 1996, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation." The Company has elected to continue to account for stock
options at their intrinsic value with disclosure of the effects of fair value
accounting on net earnings (loss) and earnings (loss) per share on a pro forma
basis.
Statement of Financial Accounting Standards No. 128, "Earnings per Share,"
issued by the Financial Accounting Standards Board is effective for financial
statements for fiscal years ending after December 15, 1997. The new standard
establishes standards for computing and presenting earnings per share.
The effect of adopting Statement of Financial Accounting Standards No. 128,
"Earnings per Share," ("FAS No. 128") has not been estimated. The Company is
required to adopt the disclosure requirements of FAS No. 128 during the year
ended December 31, 1997.
ITEM 8. Supplementary Financial Information
-----------------------------------
Not applicable.
ITEM 9. Disagreements with Accountants on Accounting and
Financial Disclosure
------------------------------------------------
Effective August 28, 1995, the Company retained as its new independent
accountants BDO Seidman, LLP, replacing its prior independent accountants,
Deloitte & Touche LLP ("Deloitte & Touche"). Deloitte & Touche's report on the
financial statements for the two most recent fiscal years contained no adverse
opinion or a disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope, or accounting principles. No action on the decision to
change accountants has been taken by the Board of Directors of the Company.
During the period in the last two fiscal years in which Deloitte &
Touche LLP served as the Company's independent accountants, and the subsequent
interim period preceding such replacement, there were no disagreements between
the Company and Deloitte & Touche LLP on any matters of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which disagreement, if not resolved to the satisfaction of
19
<PAGE> 19
Deloitte & Touche LLP, would have caused it to make a reference to the subject
matter of the disagreements in connection with its reports.
None of the "reportable events" described in Item 304(a)(1)(v) occurred
with respect to the Company within the last two fiscal years and the subsequent
interim period to the date of the change in accountants.
PART III
Items 10-13 are incorporated herein by reference from the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commission.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports On
Form 8-K
------------------------------------------------------
(a)1. Financial Statements.
---------------------
The Consolidated Financial Statements required to be filed herein are as
follows:
Reports of Independent Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flow
Notes to Consolidated Financial Statements
(a)2. Financial Statement Schedules.
-----------------------------
None
(a)3. Exhibits.
---------
The following exhibits are filed with this report:
10-1 Amendment Letter dated December 10, 1996 to the Loan Agreement between
ASA International Ltd., ASA Incorporated and ASA Legal Systems Company,
Inc., and CoreStates Bank, N.A., dated November 3, 1994.
10-2 Promissory Note (Term) between ASA International Ltd. and
CoreStates Bank, N.A., dated December 10, 1996.
10-3 Promissory Note (Revolver) between ASA International Ltd. and
CoreStates Bank, N.A., dated December 10, 1996.
10-4 Security Agreement between ASA International Ventures, Inc. and
CoreStates Bank, N.A., dated December 10, 1996.
20
<PAGE> 20
10-5 Guaranty between ASA International Ltd. and CoreStates Bank,
N.A., dated December 10, 1996.
11 Statement of Computation of Net Earnings per Share.
21 Subsidiaries of Registrant.
23 Consent of BDO Seidman, LLP, independent certified public
accountants.
27 Financial Data Schedule
A) The following exhibits were filed with the Registrant's Form 8-K
on November 27, 1996 and are incorporated herein by reference:
2(a) First Amendment to the Asset Purchase Agreement (the "Purchase
Agreement") by and between the Company and Progressive Computer
Systems, Inc. dated October 18, 1996.
2(b) Second Amendment to the Purchase Agreement dated
November 15, 1996.
B) The following exhibits were filed with the Registrant's Form 8-K
on September 20, 1996 and are incorporated herein by reference:
2 Agreement by and between the Registrant and Progressive Computer
Systems, Inc. dated as of August 30, 1996.
C) The following documents are incorporated by reference to the
Registrant's Report on Form 10-K filed on March 28, 1996:
2-1 The Commonwealth of Massachusetts Articles of Merger Merging
ASA Incorporated and ASA Legal Systems Company, Inc. into ASA
International Ltd., dated December 28, 1995.
2-2 Certificate of Ownership and Merger Merging ASA Incorporated and
ASA Legal Systems Company, Inc. into ASA International Ltd.,
dated December 28, 1995.
3a Certificate of Incorporation of ASA International Ventures, Inc.,
dated December 28, 1995.
3b ByLaws of ASA International Ventures, Inc.
10-2 Lease for DeKalb Corners Office Center, Tucker, Georgia.
10-3 Consent to Assignment of Lease for 960 Harvest Drive, Blue Bell,
Pennsylvania.
10-4 Agreement for Purchase and Sale of Assets between ASA
International Ventures, Inc. and ASA Incorporated, dated
December 29, 1995.
21
<PAGE> 21
10-5 Agreement for Purchase and Exchange of Assets between ASA
International Ventures, Inc. and ASA International Ltd., dated
December 29, 1995.
10-6 Agreement for Exchange of Intangibles between ASA International
Ventures, Inc. and ASA International Ltd., dated December 29,
1995.
D) The following document is incorporated by reference to the
Registrant's Form 8-K filed on August 31, 1995:
16 The Registrant announced that it had retained BDO Seidman, LLP, as its
new independent accountants, replacing its prior independent accountants,
Deloitte & Touche LLP.
E) The following documents are incorporated by reference to the
Registrant's Report on Form 10-K filed on March 30, 1995:
10-1 Loan Agreement between ASA International Ltd., ASA Incorporated
and ASA Legal Systems Company, Inc., and CoreStates Bank, N.A.,
dated November 3, 1994.
10-4 Security Agreement between ASA International Ltd. and CoreStates
Bank, N.A., dated November 3, 1994.
F) The following documents are incorporated by reference to the
Registrant's Report on Form 10-K filed on March 30, 1994:
10-1 Promissory Note between ASA Properties, Inc., and Berkshire Life
Insurance Company, dated September 28, 1993.
10-2 Mortgage and Security Agreement between ASA Properties, Inc. and
Berkshire Life Insurance Company, dated September 28, 1993.
10-3 Collateral Assignment of Leases between ASA Properties, Inc., and
Berkshire Life Insurance Company, dated September 28, 1993.
10-4 Collateral Assignment and Security Agreement between ASA
Properties, Inc., and Berkshire Life Insurance Company, dated
September 28, 1993.
10-5 Promissory Note between ASA Properties, Inc., and Granite State
Development Corporation, dated December 23, 1992.
10-6 Servicing Agent Agreement between ASA Properties, Inc., and
Colson Services Corporation, dated May 12, 1993.
10-15 Amendment to Merger Agreement by and among the Company, ASA Incorporated,
CommercialWare, Donald Askin and Jonathan Ellman, dated September 15,
1993.
G) The following documents are incorporated by reference to the
Registrant's Report on Form 10-K filed on March 30, 1993:
10-3 Lease for 960 Harvest Drive, Blue Bell, Pennsylvania.
22
<PAGE> 22
10-4 Mortgage and Security Agreement between ASA Properties, Inc. and
Sun Life Assurance Company of Canada.
10-5 Promissory Note of ASA Properties, Inc. in favor of Sun Life
Assurance Company of Canada.
H) The following document is incorporated by reference to the
Registrant's Form 8-K filed on September 29, 1993:
10-1 Agreement and Plan of Merger by and among the Company, ASA Incorporated,
CommercialWare, Donald Askin, and Jonathan Ellman, dated as of August 31,
1993.
I) The following documents are incorporated by reference to the
Registrant's Report on Form 10-K filed on March 31, 1988:
3b Bylaws, as amended.
10-8 Directors' and Officers' Insurance Policy.
J) The following documents are incorporated by reference to the
Company's Registration Statement on Form S-18 (File number 33-5832-B):
4c Specimen Convertible Note.
K) The following documents are incorporated by reference to the
Company's Registration Statement on Form S-1 (File number 33-15381):
3a Certificate of Incorporation, as amended.
(b) Reports on Form 8-K.
--------------------
During the year ended December 31, 1996, the Company filed the following
Reports:
1. On November 27, 1996, the Registrant filed a current report on Form 8-K
reporting the purchase of certain assets from Progressive Computer
Systems, Inc.
2. On September 20, 1996, the Registrant filed a current report on Form 8-K
reporting that it had entered into an asset purchase agreement with
Progressive Computer Systems, Inc.
23
<PAGE> 23
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.
ASA INTERNATIONAL LTD.
By /s/ Alfred C. Angelone
-----------------------------------
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, report
has been signed below by the following persons on the dates indicated.
Name Capacity Date
- ---- -------- ----
/s/ Alfred C. Angelone Director, Chief March 31, 1997
- -------------------------- Executive Officer,
Alfred C. Angelone President and Treasurer
(principal executive
officer and principal
accounting officer)
/s/ James P. O'Halloran Director March 31, 1997
- --------------------------
James P. O'Halloran
/s/ Gordon J. Rollert Director March 31, 1997
- --------------------------
Gordon J. Rollert
/s/ William A. Kulok Director March 31, 1997
- --------------------------
William A. Kulok
/s/ Robert L. Voelk Director March 31, 1997
- --------------------------
Robert L. Voelk
24
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
ASA INTERNATIONAL LTD.
We have audited the accompanying consolidated balance sheets of ASA
International Ltd. and subsidiaries as of December 31, 1996 and 1995 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on 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 the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ASA International
Ltd. and subsidiaries at December 31, 1996 and 1995 and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ BDO Seidman, LLP
Boston, Massachusetts
March 7, 1997
25
<PAGE> 25
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
ASA INTERNATIONAL LTD.
We have audited the accompanying consolidated statements of operations,
statements of shareholders' equity and cash flows of ASA International Ltd.
and subsidiaries for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of ASA
International Ltd. and subsidiaries for the year ended December 31, 1994, in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
March 16, 1995
Boston, Massachusetts
26
<PAGE> 26
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 674,239 $ 404,026
Receivables -- net 3,753,971 5,085,172
Computer hardware held for resale 87,750 238,624
Other current assets 710,130 748,221
----------- -----------
TOTAL CURRENT ASSETS 5,226,090 6,476,043
----------- -----------
PROPERTY AND EQUIPMENT:
Land and buildings 3,857,021 3,804,194
Computer equipment 2,548,511 4,137,949
Office furniture and equipment 842,659 1,077,060
Leasehold improvements 36,574 36,574
Vehicles 262,458 261,703
----------- -----------
7,547,223 9,317,480
Accumulated depreciation
and amortization 3,194,815 4,612,375
----------- -----------
NET PROPERTY AND EQUIPMENT 4,352,408 4,705,105
----------- -----------
SOFTWARE
(less cumulative amortization
of $5,433,284 and $7,689,103) 4,657,840 6,193,625
COST EXCEEDING NET ASSETS ACQUIRED
(less cumulative amortization
of $1,403,960 and $1,362,750) 873,205 1,537,673
OTHER ASSETS 1,520,435 602,755
----------- -----------
$16,629,978 $19,515,201
=========== ===========
</TABLE>
See notes to consolidated financial statements.
27
<PAGE> 27
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit note $ 795,000 $ 1,025,000
Accounts payable 1,360,585 1,157,573
Accrued expenses 1,484,794 2,292,514
Customer deposits 377,550 822,365
Deferred revenue 813,371 344,693
Current maturities of
long-term obligations 394,875 439,005
----------- -----------
TOTAL CURRENT LIABILITIES 5,226,175 6,081,150
----------- -----------
LONG-TERM OBLIGATIONS,
NET OF CURRENT MATURITIES 3,011,976 2,707,459
----------- -----------
DEFERRED INCOME TAXES 380,000 617,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, par value
$.01 per share: Authorized
and unissued, 1,000,000 shares -- --
Common stock, par value
$.01 per share: Authorized, 6,000,000
shares; issued 3,984,237 and 3,917,316
shares; outstanding, 3,188,841
and 3,787,517 shares 39,842 39,173
Additional paid-in capital 7,344,564 7,681,675
Retained earnings 2,159,863 2,809,186
----------- -----------
9,544,269 10,530,034
Less treasury stock, at cost 1,532,442 420,442
----------- -----------
8,011,827 10,109,592
----------- -----------
$16,629,978 $19,515,201
=========== ===========
</TABLE>
See notes to consolidated financial statements.
28
<PAGE> 28
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
--Years Ended December 31,--
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES
Computer and add-on hardware $ 4,808,082 $ 8,443,995 $ 5,553,320
Services 15,831,948 16,654,125 16,137,785
Product licenses 4,830,947 5,934,237 5,420,224
------------ ------------ ------------
NET REVENUE 25,470,977 31,032,357 27,111,329
------------ ------------ ------------
COST OF REVENUE
Computer and add-on hardware 4,073,528 6,920,796 4,958,818
Services 10,093,562 12,136,916 10,306,546
Product licenses and development 3,442,981 2,598,035 1,938,125
------------ ------------ ------------
TOTAL COST OF REVENUE 17,610,071 21,655,747 17,203,489
------------ ------------ ------------
EXPENSES
Marketing and sales 4,126,394 4,362,178 4,771,300
General and administrative 3,617,931 3,252,290 3,954,673
Amortization of goodwill 260,833 260,523 262,215
------------ ------------ ------------
TOTAL EXPENSES 8,005,158 7,874,991 8,988,188
------------ ------------ ------------
EARNINGS (LOSS) FROM OPERATIONS (144,252) 1,501,619 919,652
INTEREST EXPENSE (424,738) (463,199) (375,241)
INTEREST INCOME -- 10,894 21,493
OTHER EXPENSE (322,333) -- --
------------ ------------ ------------
EARNINGS (LOSS) BEFORE
INCOME TAXES (CREDIT) (891,323) 1,049,314 565,904
INCOME TAXES (CREDIT) (242,000) 592,000 400,000
------------ ------------ ------------
NET EARNINGS (LOSS) $ (649,323) $ 457,314 $ 165,904
============ ============ ============
EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE:
NET EARNINGS (LOSS) $ (.17) $ .11 $ .04
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 3,934,893 4,224,503 4,179,298
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
29
<PAGE> 29
ASA INTERNATIONAL LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Treasury Stock
--------------------------- ----------------------------
Additional
Paid-in Retained
Shares Amount Capital Earnings Shares Amount Total
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES,
1/1/94 3,917,268 $ 39,173 $ 7,681,632 $ 2,185,968 129,799 $ (420,442) $ 9,486,331
Net earnings -- -- -- 165,904 -- -- 165,904
------------ ------------ ------------ ------------ ------------ ------------ ------------
BALANCES,
12/31/94 3,917,268 39,173 7,681,632 2,351,872 129,799 (420,442) 9,652,235
Exercise of
stock options 48 -- 43 -- -- -- 43
Net earnings -- -- -- 457,314 -- -- 457,314
------------ ------------ ------------ ------------ ------------ ------------ ------------
BALANCES,
12/31/95 3,917,316 39,173 7,681,675 2,809,186 129,799 (420,442) 10,109,592
Exercise of
stock options 66,921 669 61,589 -- -- -- 62,258
Reacquisition
of stock on sale
of TradePoint -- -- -- -- 665,597 (1,112,000) (1,112,000)
Surrender of
stock options
on sale of
TradePoint -- -- (398,700) -- -- -- (398,700)
Net Loss -- -- -- (649,323) -- -- (649,323)
------------ ------------ ------------ ------------ ------------ ------------ ------------
3,984,237 $ 39,842 $ 7,344,564 $ 2,159,863 795,396 $(1,532,442) $ 8,011,827
============ ============ ============ ============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
30
<PAGE> 30
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
---Years Ended December 31,---
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (649,323) $ 457,314 $ 165,904
----------- ----------- -----------
Adjustments to reconcile net
earnings (loss) to net cash provided
by operating
activities:
Depreciation and amortization 2,397,313 2,167,419 1,823,072
Deferred taxes (237,000) 500,000 372,000
Doubtful receivables provision 32,546 (62,621) (252,571)
Loss on sale of TradePoint 322,333 -- --
Changes in assets and liabilities,
net of effects of acquisitions:
Receivables 604,265 122,798 878,150
Computer hardware held for resale 150,874 75,212 (73,486)
Other current assets (55,759) 450,421 52,058
Accounts payable 316,633 (836,530) (810,212)
Accrued expenses (427,170) (431,211) (87,321)
Other current liabilities 47,427 (180,863) 254,266
----------- ----------- -----------
Total adjustments 3,151,462 1,804,625 2,155,956
----------- ----------- -----------
Net cash provided by operating
activities 2,502,139 2,261,939 2,321,860
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (302,729) (429,637) (254,788)
Additions to software (1,506,559) (1,054,043) (2,119,113)
Reductions of
sales-type leases 146,002 112,152 93,161
Cash transferred upon
sale of TradePoint (718,197) -- --
Other assets 56,912 (50,127) 28,958
----------- ----------- -----------
Net cash used in investing
activities (2,324,571) (1,421,655) (2,251,782)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in bank and
other notes (230,000) 50,000 25,000
Reduction in long-term debt (414,613) (496,682) (1,099,843)
Increase in long-term debt 675,000 -- 650,000
Issuance of common stock 62,258 43 --
----------- ----------- -----------
Net cash provided by (used for)
financing activities 92,645 (446,639) (424,843)
----------- ----------- -----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) 270,213 393,645 (354,765)
Balance, beginning of year 404,026 10,381 365,146
----------- ----------- -----------
Balance, end of year $ 674,239 $ 404,026 $ 10,381
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
31
<PAGE> 31
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
A. Summary of Significant Accounting Policies:
Business description and principles of consolidation
The Company develops, markets, and provides services for its proprietary
enterprise and point solution software products and distributes computer
hardware to its software customers. The consolidated financial statements
include the accounts of ASA International Ltd. and its wholly owned
subsidiaries, ASA Properties, Inc. and ASA International Ventures, Inc. after
elimination of all material intercompany balances and transactions.
Cash equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. On a cash basis,
interest income received approximates the amounts reported on the
statements of operations.
Concentration of credit risks
Concentration of credit risk with respect to accounts receivable is limited due
to the large number of customers comprising the Company's customer base. Ongoing
credit reviews of customers' financial condition are performed, and collateral
is not required. The Company maintains reserves for potential credit losses and
such losses, in the aggregate, have not exceeded management's expectations.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Many of the Company's estimates and assumptions used in the financial statements
relate to the Company's products, which are subject to rapid technological
change. It is possible that changes may occur in the near term that would affect
management's estimates with respect to capitalized software.
Computer hardware held for resale
Inventory is stated at the lower of cost (first-in, first-out method) or market.
Property and equipment
Property and equipment are stated at cost. Depreciation for equipment and
vehicles is recorded on the straight-line method, based on the estimated useful
lives of the related assets (ranging from 5 to 7 years). Buildings are
depreciated over 40 years. Equipment under capital leases and leasehold
improvements are amortized over the shorter of the lease term or the estimated
useful lives of the assets.
32
<PAGE> 32
ASA INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
Costs exceeding net assets acquired
Costs exceeding net assets of businesses acquired are amortized on a
straight-line basis over periods of 10 and 20 years. On an annual basis, the
Company reviews the carrying value of the costs exceeding net assets acquired
against projections of undiscounted cash flows and, if necessary, records
impairment.
Revenue recognition
Computer hardware revenue is recognized upon shipment of the product to the
client. Product license revenue is recognized upon shipment to the client
provided that no significant vendor obligations remain in connection with the
software being licensed and the collectability of the sale is probable in
accordance with Statement of Position 91-1 "Accounting for Software Revenue
Recognition."
Service revenues include post-contract client support, consulting, and training
support. Post-contract client support is generally provided under self-renewing
maintenance agreements. Revenue on these maintenance agreements is recognized
ratably over the contract term. Consulting and training services revenue is
recognized in the period the service is rendered.
Research and development
The Company expenses research and development costs as incurred. Costs incurred
other than capitalized costs for software were not material.
Software
The Company accounts for the costs of computer software developed in accordance
with Statement of Financial Accounting Standard No. 86. Accordingly, the costs
of purchased software and of that software developed internally (once
technological feasibility is established) associated with coding new
applications or modules and enhancing and porting existing applications software
are capitalized. Amortization of these costs is based on the greater of the
charge resulting from the application of either the straight-line method over
five years or the proportion of current sales to estimated future revenues of
each product. Total amortization of software charged to operations was
approximately $1,655,000, $1,346,000 and $984,000 for the years ended
December 31, 1996, 1995, and 1994, respectively.
Capitalized interest
Interest costs incurred on borrowed funds during the period of software
capitalization are capitalized as a component of the costs of software. Interest
costs capitalized in 1996 and 1995 amounted to approximately $25,000 and
$60,000, respectively.
33
<PAGE> 33
ASA INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
Income taxes
Deferred tax assets or liabilities are recognized for the estimated tax effects
of temporary differences between the tax and financial reporting basis of the
Company's assets and liabilities and for loss carryforwards based on enacted tax
laws and rates.
Net earnings per share
Net earnings per common share are computed using the weighted average number of
common and common equivalent shares outstanding during the year as calculated
under the treasury stock method. Common equivalents include outstanding
warrants and options, when dilutive, as well as contingent shares issuable as a
result of a business acquisition. The number of contingent shares issuable are
determined based upon the difference between the market value of the stock at
the end of the year and the guaranteed minimum value of that stock.
New Accounting Standards
Effective January 1, 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation". The Company has elected to continue to account for stock options
at their intrinsic value with disclosure of the effects of fair value
accounting on net earnings (loss) and earnings (loss) per share on a pro forma
basis.
Statement of Financial Accounting Standards No. 128, "Earnings per Share,"
issued by the Financial Accounting Standards Board is effective for financial
statements for fiscal years ending after December 15, 1997. The new standard
establishes standards for computing and presenting earnings per share.
The effect of adopting Statement of Financial Accounting Standards No. 128,
"Earnings per Share," ("FAS No. 128") has not been estimated. The Company is
required to adopt the disclosure requirements of FAS No. 128 during the year
ended December 31, 1997.
B. Business Acquisitions and Divestitures:
Acquisitions
The Company has consummated the following business combination using the
purchase method of accounting during the three years ended December 31, 1996.
The Company's consolidated statements of operations include the operating
results of this entity from its acquisition date.
In November 1994, the Company completed the acquisition of certain software
products of Precedent Technologies Incorporated. The purchase agreement called
for an initial payment of $297,000 ($70,000 in cash and $227,000 in short-term
notes) and potential contingent consideration of an additional $400,000 over
three years, based upon a percentage of the gross revenues received by the
Company through the licensing of these
34
<PAGE> 34
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
software products. As of December 31, 1996 the Company has not exceeded the
gross revenues necessary for the payment of additional consideration.
The acquisition price of CommercialWare, Inc. (CWI) in December 1993,
contemplated a contingent future payment in Company stock or cash (an adjustment
to purchase price) based on the future performance of CWI and the market value
of the Company's stock. Up to 100,000 additional shares are issuable to the
former owners of CWI over the three years ending December 31, 1996, based upon
CWI attaining at least 80% of yearly targeted contribution levels. As of
December 31, 1996, CWI has not met the targeted contribution level and,
therefore, no contingent payments were made. Certain former owners of CWI
received a deficiency payment in company stock based on the difference between
the December 31, 1996 market price and $5 per share. The remaining former CWI
owners will receive a deficiency payment, if any, in cash or stock, on or before
March 31, 1998, based on the Company's stock price at December 31, 1997. In
March 1997, the Company issued a total of 104,122 shares as a deficiency payment
to certain former owners of CWI based on the Company's stock price at
December 31, 1996.
Divestitures
In December 1996 the Company disposed of substantially all of the assets and
liabilities of the Company's international trade product line (Product).
Product's revenues totaled approximately $6,718,000, $6,968,000, and
$6,507,000, or 26%, 22% and 24% of total Company revenue for the three years
ended December 31, 1996, 1995, and 1994, respectively. In exchange for the
assets of Product and the assumption of its liabilities, the Company received a
16% membership interest in TradePoint Systems, LLC (Trade), the acquiring
corporation, and a subordinated promissory note in the face amount of $600,000
from Trade which is included in other assets at December 31, 1996. The
remaining 84% interest in Trade is owned by the former president and director
of the Company (Buyer). In exchange for his interest in Trade, Buyer (i)
contributed all of the Company's common stock, $.01 par value per share (the
"Common Stock") owned by him, totaling 665,597 shares; (ii) assigned to the
Company a 16% partnership interest in the ASA Investment Partnership, a
partnership by and among Buyer, the Company, and the Company's Chief Executive
Officer and Chairman; and (iii) canceled all of his options to purchase 245,000
shares of Common Stock. The Company recorded a loss on the transaction of
$322,333 based on the fair value of the consideration received less the book
value of the net assets exchanged. The consideration to be paid was determined
by negotiations between the parties and was independently evaluated on behalf
of the Company by an investment banking firm. The Company's investment in
Trade, which is valued at $500,000, will be accounted for under the cost method
and is included in other assets at December 31, 1996.
In connection with the transaction, Trade granted to the Company an irrevocable
proxy covering the Company's Common Stock owned by Trade. The Company has the
right to cause Trade to redeem the 16% membership interest in Trade held by the
Company by notice given on or after March 1, 2002, in exchange for the Company's
Common Stock held by Trade and
35
<PAGE> 35
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
the fair market value of the 16% membership interest in Trade. Trade has the
right to redeem the Company's membership interest by notice given on or after
December 31, 2001 in exchange for the Company's Common Stock held by it and the
greater of $400,000 or the fair market value of the 16% membership interest in
Trade.
In 1990, the Company sold the assets of its BIT unit which provided computer
systems to the hardgoods distribution market segment. A portion of the
consideration paid consisted of a promissory note for $300,000 with a five-year
term at 6% interest (discounted value of $272,000 at 10% interest) and 10,000
shares of Class B Non-Voting Stock of the acquiring corporation, Distribution
Management Systems, Inc. (DMS). The DMS shares, valued at $334,000 as of
December 31, 1996, are recorded at cost and are included under the category of
Other Assets on the Balance Sheet, since the investment is intended by
management to be of a long-term nature. The note was paid in full during 1995.
C. Receivables:
<TABLE>
<CAPTION>
December 31,
------------
1996 1995
---------- ----------
<S> <C> <C>
Trade $3,801,041 $4,774,530
Amounts due from officers
and employees 42,689 270,982
Other 3,033 99,906
---------- ----------
3,846,763 5,145,418
Less allowance for
doubtful accounts 92,792 60,246
---------- ----------
$3,753,971 $5,085,172
========== ==========
</TABLE>
Amounts due from officers and employees represent unsecured periodic advances
reduced by repayments. There is no interest charged on these advances.
The allowance for doubtful accounts at December 31, 1993 was $375,438. During
the three years ending December 31, 1996, 1995, and 1994, the provisions for
doubtful accounts were $236,830, $357,161 and $118,016, and write-offs were
$204,284, $419,782 and $370,587, respectively.
36
<PAGE> 36
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
D. Notes Payable, Long-Term Obligations, Commitments, and
Contingencies:
<TABLE>
<CAPTION>
December 31,
------------
1996 1995
---------- ----------
<S> <C> <C>
Revolving credit note $ 795,000 $1,025,000
========== ==========
Long-term obligations
Term loans $1,000,000 $ 602,292
Mortgage notes 2,307,172 2,390,845
Equipment loans -- 4,554
Capital lease obligations 99,679 136,374
Other -- 12,399
---------- ----------
3,406,851 3,146,464
Less current maturities 394,875 439,005
---------- ----------
$3,011,976 $2,707,459
========== ==========
</TABLE>
The current carrying value of long-term obligations approximate their fair
market value.
Revolving credit note
The Company has a revolving credit agreement for $2,000,000 (which cannot exceed
80% of acceptable accounts receivable). The agreement, which extends through
June 30, 1997, stipulates interest at prime (8.25% at December 31, 1996), plus
1%. At December 31, 1996, $795,000 was outstanding and $1,205,000 was available
under the agreement. The weighted average interest rates on outstanding
borrowings for the years ended December 31, 1996, 1995, and 1994 were 9.29%,
9.79% and 8.41%, respectively.
This credit facility, which includes the Company's $1,000,000 term loan,
requires the Company to maintain a stated tangible net worth amount and debt
service coverage. Payment of dividends is prohibited under the terms of this
agreement. This note is secured by the personal property of the Company.
Term loans
The term loan outstanding at December 31, 1996, dated December 10, 1996 is due
on December 1, 2000 and is payable in monthly installments of $20,833 plus
interest at 10%. This loan is secured by the personal property of the Company.
Mortgage notes
The Company has three mortgage notes outstanding at December 31, 1996. In
September 1993, the Company completed the refinancing of its Corporate
Headquarters in Framingham, Massachusetts. The mortgage note,
37
<PAGE> 37
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
in the original amount of $1,450,000 at 9.125% for 15 years, provides for
monthly principal and interest payments of $14,815. A note on a second building
acquired in December 1992 requires monthly principal and interest (at 9.5%)
payments of $5,710 over twenty years. In May 1993, the Company received $507,000
in mortgage financing for the improvement and updating of this facility under a
note from the Small Business Administration. The twenty year note with interest
at approximately 6.6% calls for monthly principal and interest payments of
$4,277. Each of these notes is collateralized by the buildings which they
financed.
Equipment loans and capital lease obligations
The Company purchases or leases various vehicles and computer equipment under
loan and capital lease agreements. The agreements require monthly or quarterly
payments of varying amounts and expire through 1999.
Interest paid was approximately $425,000, $523,000 and $505,000 for the years
ended December 31, 1996, 1995, and 1994, respectively. The Company and its
subsidiaries lease office and warehouse facilities under operating leases
expiring on various dates through October 31, 2001. Total rent expense charged
to operations approximated $229,000, $356,000 and $411,000 in 1996, 1995 and
1994, respectively.
At December 31, 1996, long-term obligations and minimum rental commitments under
noncancellable operating and capital leases with initial terms of one year or
more are as follows:
<TABLE>
<CAPTION>
Capital Leases Long-Term Obligations Operating Leases
---------- ---------- ----------
<S> <C> <C> <C>
1997 $ 54,676 $ 348,242 $ 248,809
1998 33,946 353,604 395,022
1999 24,279 363,070 96,240
2000 -- 373,413 57,660
2001 -- 134,713 48,050
Thereafter -- 1,734,130 --
---------- ---------- ----------
112,901 3,307,172 845,781
Less
imputed
interest 13,222 -- --
---------- ---------- ----------
$ 99,679 $3,307,172 $ 845,781
========== ========== ==========
</TABLE>
Amounts recorded under capital leases included in computer equipment are
approximately, $255,000 and $466,000 at December 31, 1996 and 1995,
respectively. Accumulated depreciation and amortization was approximately
$186,000 and $232,000, at December 31, 1996 and 1995, respectively.
38
<PAGE> 38
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Litigation
In November 1995, the Company commenced an action against a customer for breach
of contract and other charges for an amount in excess of $2,000,000. In
answering the complaint, the client alleged counterclaims for alleged breach of
contract and other charges seeking damages and attorneys' fees of an unspecified
amount. The Company intends to vigorously pursue its claim and defend the
counterclaim. In the opinion of management of the Company, this action can be
successfully defended without material adverse effect on the financial condition
of the Company.
E. Income Taxes (Credits):
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ (5,000) $ 28,000 $ --
State -- 64,000 28,000
Deferred (237,000) 500,000 372,000
--------- --------- ---------
$(242,000) $ 592,000 $ 400,000
========= ========= =========
</TABLE>
On a cash basis, income taxes paid in 1996, 1995, and 1994 were
approximately $60,300, $33,700 and $73,700, respectively.
Income taxes are reconciled with the federal statutory rate as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Income taxes (credits) at
statutory federal rate $(303,000) $ 357,000 $ 192,000
State income tax (credit),
net of federal income
tax benefit (30,000) 66,000 34,000
Non-deductible amortization
of intangibles 86,000 88,000 105,000
Other, net 5,000 81,000 69,000
--------- --------- ---------
$(242,000) $ 592,000 $ 400,000
========= ========= =========
</TABLE>
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts for income tax purposes
39
<PAGE> 39
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
and (b) operating loss and tax credit carryforwards. The tax effects of
significant items comprising the Company's net deferred tax liability as of
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Software development
deducted for tax, not book $ 1,555,000 $ 1,798,000
Differences between book
and tax basis of property 118,000 4,000
Deferred gain on divestiture 275,000 --
Other 18,000 241,000
----------- -----------
1,966,000 2,043,000
Deferred tax assets:
Operating loss carryforwards 1,017,000 866,000
Tax credit carryforwards 515,000 494,000
Other 54,000 66,000
----------- -----------
1,586,000 1,426,000
----------- -----------
Net deferred tax liability $ (380,000) $ (617,000)
=========== ===========
</TABLE>
The Company has available operating loss carryforwards primarily for Federal
purposes of $2,526,000 at December 31, 1996, that expire through 2011, some of
which are losses of purchased subsidiaries and whose use is limited.
F. Capital Transactions:
Approximately $343,000 of the balance in treasury stock represents the Company's
75% investment in a partnership which consists of shares of its own common
stock. The Chief Executive Officer holds the remaining 25% of the investment.
40
<PAGE> 40
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Stock options
At December 31, 1996, the Company has four stock-based compensation plans, which
are described below. The Company applies APB Opinion 25, Accounting for Stock
Issued to Employees, and related Interpretations in accounting for its plans.
Accordingly, no compensation cost has been recognized for its stock option
plans. Had compensation cost for the Company's four stock option plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of FASB Statement 123, Accounting for
Stock-Based Compensation, the Company's net income (loss) and earnings (loss)
per share would have been adjusted to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C> <C>
Net income (loss) As reported $(649,323) $ 457,314
Pro forma (680,665) 454,555
Earnings (loss)
per share As reported $ (.17) $ .11
Pro forma (.17) .11
</TABLE>
The Company's four stock option plans, the 1986, 1988, 1993 and 1995 Stock
Option Plans, provide for the granting of incentive stock options and
nonqualified stock options to purchase an aggregate of 980,000 shares of common
stock at a price not less than fair market value on the date the option is
granted.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995, respectively: dividend yield of 0%
for both years and expected volatility of 30% for both years, risk free rates
ranging from 5.88% to 6.67% for 1996, and 7% to 7.75% for 1995, and expected
lives ranging from 18 to 24 months for 1996, and 12 to 19 months for 1995.
A summary of the status of the Company's stock option plans as of December 31,
1996, 1995, and 1994, and changes during the years ending on those dates is
presented below:
41
<PAGE> 41
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
1996 1995 1994
------------------------ ------------------------ ------------------------
Weighted Average Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------ ---------------- ------ ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding
at beginning
of year 387,186 $1.51 395,236 $1.51 390,793 $1.52
Granted 101,700 1.47 8,150 .99 9,050 1.14
Exercised 66,921 .93 48 .89 -- --
Canceled 165,868 1.61 16,152 1.37 4,607 1.75
------- ----- ------- ----- ------- -----
Outstanding at
end of year 256,097 $1.58 387,186 $1.51 395,236 $1.51
======= ===== ======= ===== ======= =====
Options
exercisable
at year-end 208,613 353,438 331,356
Weighted-
average fair
value of
options
granted
during the
year $.72 $.55
</TABLE>
As of December 31, 1996 the 256,097 options outstanding under the Plan have
exercise prices between $.88 and $2.66 and a weighted-average remaining
contractual life of 5.4 years.
The Chairman of the Company has additional nonqualified options outstanding to
purchase an aggregate of 110,000 shares at $.89 per share. These options are
fully vested but can be used only to purchase unregistered stock.
Common stock reserved
At December 31, 1996, the Company has reserved 1,046,022 shares of its common
stock for incentive and nonqualified stock options.
G. Employee Benefit Plan:
The Company maintains a defined contribution benefit plan covering substantially
all its employees. The Company makes contributions to the plan at the discretion
of the Board of Directors based upon a percentage of employee compensation as
provided by the terms of the plan. Contributions charged to operations in 1996
and 1995 were approximately $168,000 and $63,000, respectively. The Company did
not make a contribution to the plan in 1994.
H. Transactions with Major Suppliers:
In 1996, 1995 and 1994, the Company purchased a significant amount of hardware
from two suppliers totaling approximately $3,581,000, $6,129,000 and $5,667,000,
respectively.
42
<PAGE> 1
CoreStates Bank, N.A.
FC 1-8-4-2
1345 Chestnut Street
PO Box 7618
Philadelphia PA 19101-7618
215 973 8033
Fax 215 973 5831
R Thomas Esser
Vice President
Division Manager
New England Division
December 10, 1996
ASA International Ltd.
ASA International Ventures, Inc.
10 Speen Street
Framingham, MA 01701
Attn: Alfred C. Angelone, Chief Executive Officer
Dear Mr. Angelone:
We refer to that certain Loan Agreement dated November 3, 1994, to the Loan
Documents defined therein and to that certain Agreement of Amendment, dated
December 10, 1996 (together, the "Amended Loan Agreement and Loan Documents") to
which ASA International Ltd. ("Borrower") and the lender ("Bank") are parties.
We understand and have relied upon the fact that in December 1995 Borrower
engaged in a series of inter-corporate transactions whereby
- - ASA, Incorporated and ASA Legal Systems Company, Inc. were merged into
Borrower
- - Borrower organized a new wholly-owned Delaware subsidiary, ASA
International Ventures, Inc. ("Ventures") in which Borrower invested
$5,200,000 by purchase of Ventures' common stock
- - As a result of the aforesaid mergers and swaps of assets between Borrower
and Ventures, Borrower now holds the customer intangibles known as CWI and
BSD, and Ventures holds the customer intangibles known as International
Trade, Legal Data and Tire
- - Ventures is indebted to borrower under a promissory note of $5,200,000
- - Borrower is obligated to pay an annual royalty fee to Ventures of $100,000
<PAGE> 2
In consideration of Bank's continuing the loan facility with Borrower as
amended under the Amended Loan Agreement and loan Documents, Ventures and
Borrower hereby agree with Bank as follows:
- - Ventures will become a party to the Amended Loan Agreement and Loan
Documents by executing a counterpart of this letter.
- - Ventures will execute and deliver to Bank (i) separate Guaranty of
Borrower's Obligations to Bank, and (ii) a separate Security Agreement to
secure its Guaranty and other Obligations.
- - Borrower and Ventures hereby represent to Bank that Ventures assets are
free and clear of all liens, security interests, and encumbrances.
- - Ventures will execute and deliver to Bank such UCC Form 1 financing
statements as Bank may request for filing in order to perfect Bank's
security in Ventures' assets. In this regard, Borrower and Ventures hereby
represent and warrant to Bank that Ventures' chief executive office and
location of Ventures' assets are and will be in Framingham, Massachusetts
and at no other location.
- - Ventures will deliver to Bank such certificates of corporate resolutions
and such other certificates and documents as Bank may request, including,
without limitation, certification of banking resolutions and of officers'
and directors' incumbency, and provide Bank from time to time with such
additional documentation as Bank may request evidencing the foregoing
transactions and confirming Bank's security interest.
Please indicate your agreement to the foregoing by executing a counterpart
of this letter agreement and returning it to Bank.
Very truly yours,
CORESTATES BANK, N.A.
/s/ R. Thomas Esser
By: -------------------------
R. Thomas Esser
Vice President
ASA International Ltd. hereby agrees to be bound by the foregoing.
/s/ Alfred C. Angelone
By: -------------------------
Alfred C. Angelone
Chief Executive Officer
ASA International Ventures, Inc. hereby agrees to be bound by the foregoing
and hereby becomes a party to the Amended Loan Agreement and Loan Documents.
/s/ Alfred C. Angelone
By: -------------------------
Alfred C. Angelone
Chief Executive Officer
<PAGE> 1
For Bank Use Only
- ---------- -------------- ------------------ --------------------------------
/s/ R. Thomas Esser
- ---------- -------------- ------------------ --------------------------------
LIS NO. LOAN NO. BORROWER APPROVAL SIGNATURE
- --------------------------------------------------------------------------------
COMMERCIAL PROMISSORY NOTE CoreStates
TERM NOTE
$1,000,000.00 December 10, 1996
FOR VALUE RECEIVED, each of the undersigned, jointly and severally if more
than one (hereinafter collectively referred to as "Borrower"), promises to pay
to the order of CORESTATES BANK, N.A.*, a national banking association (the
"Bank"), at any of its banking offices in Pennsylvania, the principal amount of
ONE MILLION and 00/100 DOLLARS ($1,000,000), in lawful money of the United
States, plus interest, to be paid as follows:
Said principle shall be payable in 48 consecutive monthly installments, payable
on the first business day of each month commencing on the first such day to
occur after the date, hereof, as follows: 47 payments of principal in the amount
of $20,833.33 followed by a 48th and final installment in the amount of
$20,833.49.
Each such installment shall be accompanied by a payment of accured interest.
Interest shall accrue at the rate of 10% per annum. The amount of final payment
will be that amount which is necessary to pay in full all of outstanding
principal plus accrued and unpaid interest on this Note on the date hereof.
This Note is in substitution and amendment of Borrower's Commerical Promissory
Term Note Dated November 3, 1994 and is secured by a Security Agreement
(Accounts, Inventory, and Equipment) of said date.
ADDITIONAL TERMS OF THIS NOTE - Each of the following provisions shall apply to
this Note, to any extension of modification hereof and to the indebtedness
evidenced hereby, except as otherwise expressly stated above or in a separate
writing signed by Bank and Borrower.
INTEREST - Interest shall be calculated on the basis of a 360-day year and shall
be charged for the actual number of days elapsed. Accrued interest shall be
payable monthly. Accrued interest shall also be payable when the entire
principal balance of this Note becomes due and payable (whether by demand,
stated maturity or acceleration) or, if earlier, when such principal balance is
actually paid to Bank. If the rate at which interest accrues is based on the
"Prime Rate," that term is defined as the rate of interest for loans established
by Bank from time to time as its prime rate. Said per annum rate of interest
shall change each time Bank's prime rate shall change, effective on and as of
the date of the change. Interest shall accrue on each disbursement hereunder
from the date such disbursement is made by Bank, provided however, that to the
extent this Note represents a replacement, substitution, renewal or refinancing
of existing indebtedness, interest shall accrue from the date hereof. Interest
shall accrue on the unpaid
<PAGE> 2
balance hereof at the rate provided for in this Note until the entire unpaid
balance has been paid in full, notwithstanding the entry of any judgment against
Borrower.
PREPAYMENT - If this Note bears interest at a floating or variable rate and no
floor or minimum rate is specified, Borrower may prepay all or any portion of
the principal balance of this Note at any time, without premium or penalty. If
not permitted under the preceding sentence, any prepayment of principal
(including any principal repayment as a result of acceleration by Bank of this
Note) shall require immediate payment to Bank of a prepayment fee equal to the
amount, if any, by which the aggregate present value of scheduled principal and
interest payments eliminated by the prepayment exceeds the principal amount
being prepaid. Said present value shall be calculated by application of a
discount rate determined by Bank in its reasonable judgment to be the
yield-to-maturity at the time of prepayment on U.S. Treasury securities having a
maturity which most closely approximates the final maturity date of the
principal balance then outstanding. Whether or not a prepayment fee is required
hereunder, prepayments shall be applied to scheduled installments of principal
in the inverse order of their maturity, shall be accompanied by payment of
accrued interest on the principal amount being prepaid and, unless this Note has
been accelerated by Bank, shall not be permitted in an amount less than the
scheduled principal installment immediately prior to final maturity of the
outstanding principal balance.
COLLATERAL - As security for all indebtedness to Bank now or hereafter incurred
by Borrower, under this Note or otherwise, Borrower grants Bank a lien upon and
security interest in any securities, instruments or other personal property of
Borrower now or hereafter in Bank's possession and in any deposit balances now
or hereafter held by Bank for Borrower's account, and in all proceeds of any
such personal property or deposit balances. Such liens and security interest
shall be independent of Bank's right of setoff. This Note and the indebtedness
evidenced hereby shall be additionally secured by any lien or security interest
evidenced by a writing (whether now existing or hereafter executed) which
contains a provision to the effect that such lien or security interest is
intended to secure (a) this Note or indebtedness evidenced hereby or (b) any
category of liabilities, obligations or indebtedness of Borrower to Bank which
included this Note or the indebtedness evidenced hereby, and all property
subject to any such lien or security interest shall be collateral for this Note.
EVENTS OF DEFAULT - Each of the following shall be an Event of Default
hereunder: a) Within 10 days of becoming due, the nonpayment of any amount
payable under this Note or under any obligation or indebtedness to Bank of
Borrower or any person liable, either absolutely or contingently, for payment of
any indebtedness evidenced hereby, including endorsers, guarantors and sureties
(each such person is referred to as an "Obligor"); (b) if Borrower or any
Obligor has failed to observe or perform any other existing or future agreement
with Bank of any nature whatsoever; (c) if any representation, warranty,
certificate, financial statement or other information made or given by Borrower
or any Obligor to Bank is materially incorrect or misleading; (d) if Borrower or
any Obligor shall become insolvent or make an
<PAGE> 3
assignment for the benefit of creditors or if any petition shall be filed by or
against Borrower or any Obligor under any bankruptcy or insolvency law; (e) the
entry of any uninsured judgement greater than $100,000 against Borrower or any
Obligor which remains unsatisfied for 15 days or the issuance of any attachment,
tax lien, levy or garnishment against any property of material value in which
Borrower or any Obligor has an interest; (f) if any attachment, levy,
garnishment or similar legal process is served upon Bank as a result of any
claim against Borrower or any Obligor or against any property of Borrower or any
Obligor; (g) the dissolution, merger, consolidation or change in control (as
control is defined in Rule 12b-2 under the Securities Exchange Act of 1934), of
any Borrower which is a corporation or partnership, or the sale or transfer of
any substantial portion of any of Borrower's assets, or if any agreement for
such dissolution, merger, or consolidation, change in control, sale or transfer
is entered into by Borrower without the written consent of Bank; (h) the death
of any Borrower or Obligor who is a natural person; (i) if Bank determines
reasonably and in good faith that an event has occurred or a condition exists
which has had, or is likely to have, a material adverse effect on the financial
condition or creditworthiness of Borrower or any Obligor, or on the ability of
Borrower or any Obligor to perform its obligation evidenced by this Note; (j) if
Borrower shall fail to remit promptly when due to the appropriate government
agency or authorized depository, any amount collected or withheld from any
employee of Borrower for payroll taxes, Social Security payments or similar
payroll deductions; (k) if any Obligor shall attempt to terminate or disclaim
such Obligor's liability for the indebtedness evidenced by this Note; (l) if
Bank shall reasonably and in good faith determine and notify Borrower that any
collateral for his Note or for the indebtedness evidenced hereby is insufficient
as to quality or quantity; (m) if Borrower shall fail to pay when due any
material indebtedness for borrowed money other than to Bank; or (n) if Borrower
shall be notified of the failure of Borrower or any Obligor to provide financial
and other information promptly when reasonably requested by Bank. If this Note
is payable on demand, Bank's right to demand payment hereof shall not be
restricted or impaired by the absence, non-occurrence or waiver of an Event of
Default, and it is understood that if this Note is payable on demand, Bank may
demand payment at any time.
BANK'S REMEDIES - Upon the occurrence of one or more Events of Default
(including, if this Note is payable on demand, any Event of Default resulting
from Borrower's failure to make any payment hereunder when demanded), unless
Bank elects otherwise, the entire unpaid balance of this Note and all accrued
interest shall be immediately due and payable without notice to Borrower or any
Obligor, and Bank may, immediately or at any time thereafter, exercise any or
all of its rights and remedies hereunder or under any agreement or otherwise
under applicable law against Borrower, any Obligor and any collateral. Bank may
exercise its rights and remedies in any order and may, at its option, delay in
or refrain from exercising some or all of its rights and remedies without
prejudice thereto. Upon the occurrence of any such Event of Default or at any
time thereafter, Bank may, at its option, and upon five days written notice to
Borrower, begin accruing interest on this Note, at a rate not to exceed five
percent (5%) per annum in excess of the greater of (a) the rate of interest
provided for above, or (b) the Prime Rate in
<PAGE> 4
effect from time to time on the unpaid principal balance hereof; provided,
however, that no interest shall accrue hereunder in excess of the maximum rate
permitted by law. All such additional interest shall be payable on demand.
NOTICE TO BORROWER - Any notice required to be given by Bank under the
provisions of this Note shall be effective as to each Borrower and each Obligor
when addressed to Borrower and deposited in the mail, postage prepaid, for
delivery by first class mail at Borrower's mailing address as it appears on
Bank's records.
DISBURSEMENTS AND PAYMENTS - The proceeds of this Note, or any portion thereof,
may be credited by Bank to the deposit account of Borrower, or disbursed in any
other manner requested by Borrower and approved by Bank. If Borrower so
requests, Bank may, at its option, disburse the proceeds of this Note in more
than one disbursement on the same or different dates, but except as otherwise
agreed by Bank in writing, no action taken by Bank in response to any such
request shall be deemed to create or shall imply the existence of any commitment
or obligation to pay or credit the undisbursed portion of this Note. All
payments due under this Note are to be made in immediately available funds. If
Bank accepts payment in any other form, such payment shall not be deemed to have
been made until the funds comprising such payment have actually been received by
or made available to Bank. If Borrower is not an individual, Borrower authorizes
Bank (but Bank shall have no obligation) to charge any deposit account in
Borrower's name for any and all payments of principal, interest, or any other
amounts due under this Note.
PAYMENT OF COSTS - In addition to the principal and interest payable hereunder,
Borrower agrees to pay Bank, on demand, all costs and expenses (including
reasonable attorney's fees and disbursements) which may be incurred by Bank in
the collection of this Note or the enforcement of Bank's rights and remedies
hereunder.
REPRESENTATIONS BY BORROWER - If Borrower is a corporation or a general or
limited partnership, Borrower represents and warrants that it is validly
existing and in good standing in the jurisdiction under whose laws it was
organized. If Borrower is a corporation, Borrower represents and warrants that
the execution, delivery and performance of this Note are within Borrower's
corporate powers, have been duly authorized by all necessary action by
Borrower's Board of Directors, and are not in contravention of the terms of
Borrower's charter, by-laws, or any resolution of its Board of Directors. If
Borrower is a general or limited partnership, Borrower represents and warrants
that the execution, delivery and performance of this Note have been duly
authorized and are not in conflict with any provision of Borrower's partnership
agreement or certificate of limited partnership. Borrower further represents and
warrants that this Note has been validly executed and is enforceable in
accordance with its terms, that the execution, delivery and performance by
Borrower of this Note are not in contravention of law and do not conflict with
any indenture, agreement of undertaking to which Borrower is a party or is
otherwise bound, and that no consent or approval of any governmental authority
or any third
<PAGE> 5
party is required in connection with the execution, delivery and performance of
this Note.
WAIVERS, ETC. - Borrower and each Obligor waive presentment, dishonor, notice of
dishonor, protest and notice of protest. Neither the failure nor any delay on
the part of Bank to exercise any right, remedy, power or privilege hereunder
shall operate as a waiver or modification thereof. No modification or waiver of
the terms of this note shall be effective unless set forth in writing signed by
Bank and Borrower. All rights and remedies of Bank are cumulative and concurrent
and no single or partial exercise of any power or privilege shall preclude any
other or further exercise of any right, power or privilege.
MISCELLANEOUS - This Note is the unconditional obligation of Borrower, and
Borrower agrees that Bank shall not be required to exercise any of its rights or
remedies against any collateral in which it holds a lien or security interest or
against which it has a right of setoff or against any particular Obligor. All
representations, warranties and agreements herein are made jointly and severally
by each Borrower. If any provision of this Note shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision hereof. To the extent that this Note represents a replacement,
substitution, renewal or refinancing of a pre-existing note or other evidence of
indebtedness, the indebtedness represented by such pre-exiting note or other
instrument shall not be deemed to have been extinguished hereby. In the event
that any due date specified or otherwise provided for in this Note shall fall on
a day on which Bank is not open for business, such due date shall be postponed
until the next banking day, and interest and any fees or similar charges shall
continue to accrue during such period of postponement. This Note has been
delivered in and shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania without regard to the law of conflicts. This
Note shall be binding upon each Borrower and each Obligor and upon their
personal representatives, heirs, successors and assigns, and shall benefit Bank
and its successors and assigns.
CONSENT TO JURISDICTION AND VENUE - IN ANY LEGAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE OR THE
RELATIONSHIP EVIDENCED HEREBY, EACH UNDERSIGNED PARTY HEREBY IRREVOCABLY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN ANY
COUNTY OR THE COMMONWEALTH OF MASSACHUSETTS AND AGREES NOT TO RAISE ANY
OBJECTION TO SUCH JURISDICTION OR TO THE LAYING OR MAINTAINING OF THE VENUE OF
ANY SUCH PROCEEDING IN SUCH COUNTY. EACH UNDERSIGNED PARTY AGREES THAT SERVICE
OF PROCESS IN ANY SUCH PROCEEDING MAY BE DULY EFFECTED UPON IT BY MAILING A COPY
THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO EACH UNDERSIGNED PARTY.
WAIVER OF JURY TRIAL - EACH UNDERSIGNED PARTY HEREBY WAIVES, AND BANK BY ITS
ACCEPTANCE HEREOF THEREBY WAIVES, TRIAL BY JURY IN ANY LEGAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO THIS NOTE OR THE
RELATIONSHIP EVIDENCED HEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK
TO ENTER INTO, ACCEPT OR RELY UPON THIS NOTE.
<PAGE> 6
IN WITNESS WHEREOF, Borrower, intending this to be a sealed instrument and
intending to be legally bound hereby, has executed and delivered this Note as of
the day and year first above written.
- --------------------------------------------------------------------------------
Name of Corporation
or Partnership ASA International LTD.
- --------------------------------------------------------------------------------
By: /s/ Terrence C. McCarthy By:
- ----------------------------------- -----------------------------------------
(Signature of Authorized Signer} (Signature of Authorized Signer}
Terrence C. McCarthy
Vice President and Controller
- ----------------------------------- -----------------------------------------
(Print or Type Name and Title of (Print or Type Name and Title of
Signer Above) Signer Above)
INDIVIDUALS SIGN BELOW
- -------------------------------- ---------------------------------------(Seal)
(Signature of Witness) (Signature of Individual Borrower)
- -------------------------------- ---------------------------------------------
(Print or Type Name of Above (Print or Type Name of Borrower
Witness) Signing Above)
- -------------------------------- ---------------------------------------(Seal)
(Signature of Witness) (Signature of Individual Borrower)
- -------------------------------- ---------------------------------------------
(Print or Type Name of Above (Print or Type Name of Borrower
Witness) Signing Above)
- --------------------------------------------------------------------------------
*CoreStates Bank, N.A. also conducts business as Philadelphia National Bank, as
CoreStates First Pennsylvania Bank and as CoreStates Hamilton Bank.
8979-C 10/93
<PAGE> 1
For Bank Use Only
- ---------- -------------- ------------------ --------------------------------
/s/ R. Thomas Esser
- ---------- -------------- ------------------ --------------------------------
LIS NO. LOAN NO. BORROWER APPROVAL SIGNATURE
- --------------------------------------------------------------------------------
COMMERCIAL PROMISSORY NOTE CoreStates
$2,000,000.00 December 10, 1996
FOR VALUE RECEIVED, each of the undersigned, jointly and severally if more
than one (hereinafter collectively referred to as "Borrower"), promises to pay
to the order of CORESTATES BANK, N.A.*, a national banking association (the
"Bank"), at any of its banking offices in Pennsylvania, the principal amount of
TWO MILLION and 00/100 DOLLARS ($2,000,000), in lawful money of the United
States, plus interest, to be paid as follows:
Said principal or the aggregated unpaid principal amount of all loans then
outstanding under this note shall be payable in full on June 30, 1997. Interest
shall accrue at the Prime Rate plus 1% and shall be payable on the first day of
each month commencing August 1, 1996, with a final payment on June 30, 1997.
This Note is in substitution and amendment of Borrower's Commerical Promissory
Note dated November 3, 1994 and is secured by a Security Agreement (Accounts,
Inventory, and Equipment) of said date.
ADDITIONAL TERMS OF THIS NOTE - Each of the following provisions shall apply to
this Note, to any extension of modification hereof and to the indebtedness
evidenced hereby, except as otherwise expressly stated above or in a separate
writing signed by Bank and Borrower.
INTEREST - Interest shall be calculated on the basis of a 360-day year and shall
be charged for the actual number of days elapsed. Accrued interest shall be
payable monthly. Accrued interest shall also be payable when the entire
principal balance of this Note becomes due and payable (whether by demand,
stated maturity or acceleration) or, if earlier, when such principal balance is
actually paid to Bank. If the rate at which interest accrues is based on the
"Prime Rate," that term is defined as the rate of interest for loans established
by Bank from time to time as its prime rate. Said per annum rate of interest
shall change each time Bank's prime rate shall change, effective on and as of
the date of the change. Interest shall accrue on each disbursement hereunder
from the date such disbursement is made by Bank, provided however, that to the
extent this Note represents a replacement, substitution, renewal or refinancing
of existing indebtedness, interest shall accrue from the date hereof. Interest
shall accrue on the unpaid balance hereof at the rate provided for in this Note
until the entire unpaid balance has been paid in full, notwithstanding the entry
of any judgment against Borrower.
<PAGE> 2
PREPAYMENT - If this Note bears interest at a floating or variable rate and no
floor or minimum rate is specified, Borrower may prepay all or any portion of
the principal balance of this Note at any time, without premium or penalty. If
not permitted under the preceding sentence, any prepayment of principal
(including any principal repayment as a result of acceleration by Bank of this
Note) shall require immediate payment to Bank of a prepayment fee equal to the
amount, if any, by which the aggregate present value of scheduled principal and
interest payments eliminated by the prepayment exceeds the principal amount
being prepaid. Said present value shall be calculated by application of a
discount rate determined by Bank in its reasonable judgment to be the
yield-to-maturity at the time of prepayment on U.S. Treasury securities having a
maturity which most closely approximates the final maturity date of the
principal balance then outstanding. Whether or not a prepayment fee is required
hereunder, prepayments shall be applied to scheduled installments of principal
in the inverse order of their maturity, shall be accompanied by payment of
accrued interest on the principal amount being prepaid and, unless this Note has
been accelerated by Bank, shall not be permitted in an amount less than the
scheduled principal installment immediately prior to final maturity of the
outstanding principal balance.
COLLATERAL - As security for all indebtedness to Bank now or hereafter incurred
by Borrower, under this Note or otherwise, Borrower grants Bank a lien upon and
security interest in any securities, instruments or other personal property of
Borrower now or hereafter in Bank's possession and in any deposit balances now
or hereafter held by Bank for Borrower's account, and in all proceeds of any
such personal property or deposit balances. Such liens and security interest
shall be independent of Bank's right of setoff. This Note and the indebtedness
evidenced hereby shall be additionally secured by any lien or security interest
evidenced by a writing (whether now existing or hereafter executed) which
contains a provision to the effect that such lien or security interest is
intended to secure (a) this Note or indebtedness evidenced hereby or (b) any
category of liabilities, obligations or indebtedness of Borrower to Bank which
included this Note or the indebtedness evidenced hereby, and all property
subject to any such lien or security interest shall be collateral for this Note.
EVENTS OF DEFAULT - Each of the following shall be an Event of Default
hereunder: a) Within 10 days of becoming due, the nonpayment of any amount
payable under this Note or under any obligation or indebtedness to Bank of
Borrower or any person liable, either absolutely or contingently, for payment of
any indebtedness evidenced hereby, including endorsers, guarantors and sureties
(each such person is referred to as an "Obligor"); (b) if Borrower or any
Obligor has failed to observe or perform any other existing or future agreement
with Bank of any nature whatsoever; (c) if any representation, warranty,
certificate, financial statement or other information made or given by Borrower
or any Obligor to Bank is materially incorrect or misleading; (d) if Borrower or
any Obligor shall become insolvent or make an assignment for the benefit of
creditors or if any petition shall be filed by or against Borrower or any
Obligor under any bankruptcy or insolvency law; (e) the entry of any unisured
judgement greater than $100,000 against Borrower or any Obligor which remains
unsatisfied for
<PAGE> 3
15 days or the issuance of any attachment, tax lien, levy or garnishment against
any property of material value in which Borrower or any Obligor has an interest;
(f) if any attachment, levy, garnishment or similar legal process is served upon
Bank as a result of any claim against Borrower or any Obligor or against any
property of Borrower or any Obligor; (g) the dissolution, merger, consolidation
or change in control (as control is defined in Rule 12b-2 under the Securities
Exchange Act of 1934), of any Borrower which is a corporation or partnership, or
the sale or transfer of any substantial portion of any of Borrower's assets, or
if any agreement for such dissolution, merger, or consolidation, change in
control, sale or transfer is entered into by Borrower without the written
consent of Bank; (h) the death of any Borrower or Obligor who is a natural
person; (i) if Bank determines reasonably and in good faith that an event has
occurred or a condition exists which has had, or is likely to have, a material
adverse effect on the financial condition or creditworthiness of Borrower or any
Obligor, or on the ability of Borrower or any Obligor to perform its obligation
evidenced by this Note; (j) if Borrower shall fail to remit promptly when due to
the appropriate government agency or authorized depository, any amount collected
or withheld from any employee of Borrower for payroll taxes, Social Security
payments or similar payroll deductions; (k) if any Obligor shall attempt to
terminate or disclaim such Obligor's liability for the indebtedness evidenced by
this Note; (l) if Bank shall reasonably and in good faith determine and notify
Borrower that any collateral for his Note or for the indebtedness evidenced
hereby is insufficient as to quality or quantity; (m) if Borrower shall fail to
pay when due any material indebtedness for borrowed money other than to Bank; or
(n) if Borrower shall be notified of the failure of Borrower or any Obligor to
provide financial and other information promptly when reasonably requested by
Bank. If this Note is payable on demand, Bank's right to demand payment hereof
shall not be restricted or impaired by the absence, non-occurrence or waiver of
an Event of Default, and it is understood that if this Note is payable on
demand, Bank may demand payment at any time.
BANK'S REMEDIES - Upon the occurrence of one or more Events of Default
(including, if this Note is payable on demand, any Event of Default resulting
from Borrower's failure to make any payment hereunder when demanded), unless
Bank elects otherwise, the entire unpaid balance of this Note and all accrued
interest shall be immediately due and payable without notice to Borrower or any
Obligor, and Bank may, immediately or at any time thereafter, exercise any or
all of its rights and remedies hereunder or under any agreement or otherwise
under applicable law against Borrower, any Obligor and any collateral. Bank may
exercise its rights and remedies in any order and may, at its option, delay in
or refrain from exercising some or all of its rights and remedies without
prejudice thereto. Upon the occurrence of any such Event of Default or at any
time thereafter, Bank may, at its option, and upon five days written notice to
Borrower, begin accruing interest on this Note, at a rate not to exceed five
percent (5%) per annum in excess of the greater of (a) the rate of interest
provided for above, or (b) the Prime Rate in effect from time to time on the
unpaid principal balance hereof; provided, however, that no interest shall
accrue hereunder in excess of the maximum rate permitted by law. All such
additional interest shall be payable on demand.
<PAGE> 4
NOTICE TO BORROWER - Any notice required to be given by Bank under the
provisions of this Note shall be effective as to each Borrower and each Obligor
when addressed to Borrower and deposited in the mail, postage prepaid, for
delivery by first class mail at Borrower's mailing address as it appears on
Bank's records.
DISBURSEMENTS AND PAYMENTS - The proceeds of this Note, or any portion thereof,
may be credited by Bank to the deposit account of Borrower, or disbursed in any
other manner requested by Borrower and approved by Bank. If Borrower so
requests, Bank may, at its option, disburse the proceeds of this Note in more
than one disbursement on the same or different dates, but except as otherwise
agreed by Bank in writing, no action taken by Bank in response to any such
request shall be deemed to create or shall imply the existence of any commitment
or obligation to pay or credit the undisbursed portion of this Note. All
payments due under this Note are to be made in immediately available funds. If
Bank accepts payment in any other form, such payment shall not be deemed to have
been made until the funds comprising such payment have actually been received by
or made available to Bank. If Borrower is not an individual, Borrower authorizes
Bank (but Bank shall have no obligation) to charge any deposit account in
Borrower's name for any and all payments of principal, interest, or any other
amounts due under this Note.
PAYMENT OF COSTS - In addition to the principal and interest payable hereunder,
Borrower agrees to pay Bank, on demand, all costs and expenses (including
reasonable attorney's fees and disbursements) which may be incurred by Bank in
the collection of this Note or the enforcement of Bank's rights and remedies
hereunder.
REPRESENTATIONS BY BORROWER - If Borrower is a corporation or a general or
limited partnership, Borrower represents and warrants that it is validly
existing and in good standing in the jurisdiction under whose laws it was
organized. If Borrower is a corporation, Borrower represents and warrants that
the execution, delivery and performance of this Note are within Borrower's
corporate powers, have been duly authorized by all necessary action by
Borrower's Board of Directors, and are not in contravention of the terms of
Borrower's charter, by-laws, or any resolution of its Board of Directors. If
Borrower is a general or limited partnership, Borrower represents and warrants
that the execution, delivery and performance of this Note have been duly
authorized and are not in conflict with any provision of Borrower's partnership
agreement or certificate of limited partnership. Borrower further represents and
warrants that this Note has been validly executed and is enforceable in
accordance with its terms, that the execution, delivery and performance by
Borrower of this Note are not in contravention of law and do not conflict with
any indenture, agreement of undertaking to which Borrower is a party or is
otherwise bound, and that no consent or approval of any governmental authority
or any third party is required in connection with the execution, delivery and
performance of this Note.
<PAGE> 5
WAIVERS, ETC. - Borrower and each Obligor waive presentment, dishonor, notice of
dishonor, protest and notice of protest. Neither the failure nor any delay on
the part of Bank to exercise any right, remedy, power or privilege hereunder
shall operate as a waiver or modification thereof. No consent, modification, or
waiver of the terms of this Note shall be effective unless set forth in writing
signed by Bank and Borrower. All rights and remedies of Bank are cumulative and
concurrent and no single or partial exercise of any power or privilege shall
preclude any other or further exercise of any right, power or privilege.
MISCELLANEOUS - This Note is the unconditional obligation of Borrower, and
Borrower agrees that Bank shall not be required to exercise any of its rights or
remedies against any collateral in which it holds a lien or security interest or
against which it has a right of setoff or against any particular Obligor. All
representations, warranties and agreements herein are made jointly and severally
by each Borrower. If any provision of this Note shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision hereof. To the extent that this Note represents a replacement,
substitution, renewal or refinancing of a pre-existing note or other evidence of
indebtedness, the indebtedness represented by such pre-exiting note or other
instrument shall not be deemed to have been extinguished hereby. In the event
that any due date specified or otherwise provided for in this Note shall fall on
a day on which Bank is not open for business, such due date shall be postponed
until the next banking day, and interest and any fees or similar charges shall
continue to accrue during such period of postponement. This Note has been
delivered in and shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania without regard to the law of conflicts. This
Note shall be binding upon each Borrower and each Obligor and upon their
personal representatives, heirs, successors and assigns, and shall benefit Bank
and its successors and assigns.
CONSENT TO JURISDICTION AND VENUE - IN ANY LEGAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE OR THE
RELATIONSHIP EVIDENCED HEREBY, EACH UNDERSIGNED PARTY HEREBY IRREVOCABLY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN ANY
COUNTY OR THE COMMONWEALTH OF MASSACHUSETTS AND AGREES NOT TO RAISE ANY
OBJECTION TO SUCH JURISDICTION OR TO THE LAYING OR MAINTAINING OF THE VENUE OF
ANY SUCH PROCEEDING IN SUCH COUNTY. EACH UNDERSIGNED PARTY AGREES THAT SERVICE
OF PROCESS IN ANY SUCH PROCEEDING MAY BE DULY EFFECTED UPON IT BY MAILING A COPY
THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO EACH UNDERSIGNED PARTY.
WAIVER OF JURY TRIAL - EACH UNDERSIGNED PARTY HEREBY WAIVES, AND BANK BY ITS
ACCEPTANCE HEREOF THEREBY WAIVES, TRIAL BY JURY IN ANY LEGAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO THIS NOTE OR THE
RELATIONSHIP EVIDENCED HEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK
TO ENTER INTO, ACCEPT OR RELY UPON THIS NOTE.
<PAGE> 6
IN WITNESS WHEREOF, Borrower, intending this to be a sealed instrument and
intending to be legally bound hereby, has executed and delivered this Note as of
the day and year first above written.
- --------------------------------------------------------------------------------
Name of Corporation
or Partnership ASA International LTD.
- --------------------------------------------------------------------------------
By: /s/ Terrence C. McCarthy By:
- -------------------------------- -----------------------------------------
(Signature of Authorized Signer} (Signature of Authorized Signer}
Terrence C. McCarthy
Vice President and Controller
- -------------------------------- -----------------------------------------
(Print or Type Name and Title of (Print or Type Name and Title of
Signer Above) Signer Above)
INDIVIDUALS SIGN BELOW
- -------------------------------- ---------------------------------------(Seal)
(Signature of Witness) (Signature of Individual Borrower)
- -------------------------------- ---------------------------------------------
(Print or Type Name of Above (Print or Type Name of Borrower
Witness) Signing Above)
- -------------------------------- ---------------------------------------(Seal)
(Signature of Witness) (Signature of Individual Borrower)
- -------------------------------- ---------------------------------------------
(Print or Type Name of Above (Print or Type Name of Borrower
Witness) Signing Above)
- --------------------------------------------------------------------------------
*CoreStates Bank, N.A. also conducts business as Philadelphia National Bank, as
CoreStates First Pennsylvania Bank and as CoreStates Hamilton Bank.
8979-C 10/93
<PAGE> 1
SECURITY AGREEMENT
(Intangibles, Accounts, Fees, Inventory and Equipment)
SECURITY AGREEMENT, dated December 10, 1996 between ASA INTERNATIONAL
VENTURES, INC., a Delaware corporation (herein called "Debtor"), with its
principal place of business at 10 Speen Street, Framingham, Massachusetts and
CORESTATES BANK, N.A., a national banking association (herein called "Secured
Party").
WHEREAS, Debtor's parent corporation, ASA International, Ltd. ("ASA"), has
executed and delivered a Commercial Promissory Note [Revolver] and a Commercial
Promissory Note [Term] to the Secured Party (the "Notes"); and
WHEREAS, Debtor is a guarantor of the Notes under a written Guaranty and
has also become a party under a Letter Agreement to the Amended Loan Agreement
between ASA and Secured Party and the Loan Documents referred to therein.
NOW THEREFORE, Borrower and Bank agree as follows:
Terms used herein without definition shall have the meanings ascribed to
them in the Loan Documents or the Uniform Commercial Code.
"Obligations" means the aforesaid Letter Agreement, Notes, Guaranty, the
Amended Loan Agreement and the Loan Documents, and any and all obligations,
liabilities, indebtedness, advances and loans owing by the Debtor to the Secured
Party of every kind and description, direct or indirect, absolute or contingent,
primary or secondary, secured or unsecured, due or to become due, now existing
or hereafter arising, regardless of how they arise or by what agreement or
instrument they may be evidenced or whether evidenced by any agreement or
instrument, and includes obligations to perform acts and refrain from taking
action as well as obligations to pay money.
1. Grant of Security Interest. As collateral security for the payment,
performance and observance of all of the Debtor's Obligations to Secured Party,
Debtor hereby grants to Secured Party a continuing security interest in and a
right of setoff against the following property (including the proceeds and
insurance proceeds thereof) of Debtor whether now existing or owned by the
Debtor or hereafter owned, acquired, created or arising (the "Collateral").
(a) All general intangibles, including, without limitation, all
information regarding customer lists, markets, market shares relating to all of
Debtor's product lines; all product lines, secrets, patents, trade names and
marks, customer lists, goodwill, Debtor's name, and all contract rights,
including but not limited to all of Debtor's interest in licenses, software,
programs, agreements with end-user customers for software and programs, source
codes, all fees paid to Debtor, and all other intangible and intellectual
property of every kind and description.
<PAGE> 2
(b) All accounts receivable of the Debtor, all contract rights of
the Debtor with regard to such accounts receivable; all rights of the Debtor to
the payment of fees money from any person, firm, corporation or governmental
agency; all tax refunds; all interest of the Debtor in goods as to which an
account receivable shall have arisen; all files, records (including without
limitation computer programs, tapes and related electronic data processing
software) and writings of the Debtor or in which it has an interest in any way
relating to the foregoing property; all goods, instruments, documents of title,
policies and certificates of insurance, securities, chattel paper, deposits,
cash or other property owned by the Debtor or in which it has an interest which
are now or may hereafter be in the possession of the Secured Party or as to
which the Secured Party may now or hereafter control possession by documents of
title or otherwise; all notes receivable of the Debtor; all property rights of
the Debtor to retrieval from third parties of electronically processed and
recorded information pertaining to any of the foregoing property; and all
proceeds and products of all of the foregoing.
(c) All inventory of the Debtor including, without limitation, any
and all goods, wares, merchandise and other tangible personal property including
raw materials, work in process, supplies and components, office supplies, paper,
shipping supplies and finished goods whether or not held by the Debtor for sale
or other disposition, and also including any returned or repossessed goods,
wares, merchandise and other tangible personal property, all rights to stoppage
in transit, all products of and accessions to any and all of the foregoing and
including documents of title, whether negotiable or nonnegotiable, representing
any of the foregoing items.
(d) All machinery and equipment and other tangible personal
property with related accessories and parts, molds, office furniture,
furnishings and fixtures and trade fixtures whether now owned or hereafter
acquired by Debtor and any and all additions, substitutions, accessions and
proceeds thereto or thereof, and all leases and rental agreements relating
thereto.
Although proceeds are covered by this Agreement, the Secured Party has not
and does not authorize the sale or transfer of any of the Collateral by the
Debtor.
2. Representations, Warranties and Covenants. Debtor hereby
represents, warrants and covenants that:
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the corporate power and authority to own its properties and to transact the
business in which it is engaged, and is qualified to do business in every
jurisdiction in which the conduct of its business requires such qualification;
2
<PAGE> 3
(b) It has the corporate power and authority to execute and
deliver, and to perform its Obligations under the Letter Agreement, Guaranty,
the Amended Loan Agreement and the Loan Documents and under this Security
Agreement, and has taken all necessary corporate action to authorize the
execution, delivery and performance of each of the aforesaid;
(c) The Letter Agreement, Guaranty, the Amended Loan Agreement, the
Loan Documents and this Security Agreement constitute the legal, valid and
binding obligations of the Debtor, enforceable in accordance with their terms;
(d) The execution, delivery and performance of the Letter
Agreement, Guaranty, the Amended Loan Agreement, the Loan Documents and this
Security Agreement will not (1) require any consent or approval of the
shareholders of any such corporation; (2) contravene such corporation's charter
or bylaws; (3) violate any provision of or cause or result in a breach of or
constitute a default under any law, rule, regulation (including, without
limitation, Regulation U of the Board of Governors of the Federal Reserve
System), order writ, judgment, injunction, decree, determination, or award
presently in effect having applicability to such corporation; (4) cause or
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease, or instrument to which such
corporation is a party or by which it or its properties may be bound or
affected; or (5) cause or result in, or require, the creation or imposition of
any Lien, upon or with respect to any of the properties now owned or hereafter
acquired by such corporation except as contemplated by this Security Agreement,
except where such violation or contravention in each instance would not
adversely affect Debtor and would not have any effect on the enforceability of
the Guaranty; and
(e) No consent of any other person (including, without limitation,
stockholders and creditors of the Debtor) and no consent, license, permit,
approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental instrumentality is
required in connection with the execution, delivery, performance, validity or
enforceability of any of the Obligations.
(f) The chief executive office of the Debtor and the office where
Debtor keeps its books and records relating to the Collateral, and the location
of Collateral are as set forth in the first paragraph of this Security Agreement
and have been located at such addresses at all times during the four-month
period prior to the date hereof;
(g) Debtor will not change its chief executive office, office where
its books and records are kept or any locations of Collateral without prior
written notice to Secured party;
3
<PAGE> 4
(h) Except for liens in favor of Secured Party, the Collateral is
free and clear of all liens, security interests and encumbrances, and Debtor
will not create or suffer to exist any lien, security interest or encumbrance on
any of the Collateral;
(i) Debtor will not assign, transfer, sell, lease or otherwise
dispose of any Collateral;
(j) The Collateral is being used, and will continue to be used, in
Debtor's business and not for personal, family, household or farming use;
(k) Debtor will use the Collateral for lawful purposes only, with
all reasonable care and caution and in conformity with all applicable laws,
ordinances and regulations;
(l) The Collateral is now and shall remain personal property, and
Debtor will not permit any Collateral to become a fixture without prior written
notice to and consent of Secured Party and without first making all
arrangements, and delivering, or causing to be delivered, to Secured Party all
instruments and documents, including, without limitation, waivers and
subordination agreements by any landlords or mortgagees, requested by and
satisfactory to Secured Party to preserve and protect the security interests
granted herein, and to effectuate and maintain the priority thereof, against all
persons;
(m) Debtor will insure the Collateral with insurance of the nature
and in the amount customary in Debtor's industry, such insurance naming Secured
Party as a secured party; all insurance policies relating thereto shall provide
for at least 20 days' prior notice of any cancellation or termination thereof to
secured Party;
(n) Debtor will, at its sole cost and expense, perform all acts and
execute all documents reasonably required by Secured Party from time to time to
evidence, perfect, maintain or enforce Secured Party's security interest granted
herein, and to effectuate and maintain the priority thereof or otherwise to
carry out the provisions and purposes of this Security Agreement;
(o) In its discretion, Secured Party may, at any time and from time
to time, for the account of Debtor, pay any amount or do any act required of
Debtor hereunder and which Debtor fails to do or pay, and any such payment shall
be deemed an Obligation payable on demand together with interest at the highest
rate then payable on any of the Obligations;
(p) Debtor has not, during the five-year period prior to the date
hereof, been known by or used any tradename, fictitious name or any corporate
name other than Debtor's name as set forth on Page 1 hereof, and all invoices in
connection with or which evidence accounts receivable are billed under such
corporate name;
4
<PAGE> 5
(q) If any of the Collateral at any time consists of instruments,
documents, chattel paper or letters of credit, but specifically excluding leases
of inventory, Debtor shall, immediately upon receipt or creation of such
Collateral, deliver such Collateral in its original form to Secured Party, duly
endorsed to Secured Party or in blank or accompanied by appropriate stock or
bond powers;
(r) After any Event of Default, Debtor will pay all reasonable fees
and expenses incurred by Secured Party in enforcing its rights hereunder and
under the Letter Agreement, Guaranty, the Notes, the Amended Loan Agreement and
any of the other Loan Documents;
(s) The Borrower agrees that the Secured Party shall have the
right, not more than twice in any 12 month period, to cause the Borrower for the
Secured Party's benefit to confirm orders and to verify any or all of the
Borrower's Accounts, directly by the Borrower, or through any public accountants
and at such times to require Borrower to deliver to the Secured Party copies of
purchase orders, invoices, contracts, shipping and delivery receipts and any
other document or instrument which evidences or gives rise to an Account.
(t) If any proceeds of Collateral are received by Debtor which,
pursuant to the provisions hereof are to be received by or turned over to
Secured Party, Debtor shall not commingle such proceeds with any of its other
property, shall hold such proceeds in trust for Secured Party and shall
immediately deliver the same to Secured Party in the form received; and
(u) If Debtor shall use any tradename, Debtor shall notify Secured
Party thereof at least 30 days prior to the commencement of such use.
3. Remedies Upon Default. Upon the occurrence of any Event of Default
under this Security Agreement, the Letter Agreement, Guaranty, the Notes, the
Amended Loan Agreement, the Loan Documents or of any other Obligation, and at
any time thereafter, Secured Party may, without notice to or demand upon Debtor,
declare any and all Obligations immediately due and payable and Secured Party
shall have the following rights and remedies (to the extent permitted by
applicable law), in addition to all rights and remedies of Secured Party under
the Letter Agreement, Guaranty, the Notes, the Amended Loan Agreement and the
Loan Documents, and all rights and remedies of a secured party under the Uniform
Commercial Code, all such rights and remedies being cumulative, not exclusive
and enforceable alternatively, successively or concurrently:
(a) Secured Party may at its sole option directly notify Debtor's
account debtors or others who pay fees to Debtor to remit payments to one or
more post office boxes maintained by Secured Party;
5
<PAGE> 6
(b) Secured Party may at any time and from time to time, with or
without judicial process or the aide and assistance of others, enter upon any
premises in which any Collateral may be located and, without resistance or
interference by Debtor, take possession of the Collateral, and/or dispose of any
Collateral on any such premises, and/or require Debtor to assemble and make
available to Secured Party at the expense of Debtor any Collateral at any place
and time designated by Secured Party which is reasonably convenient to both
parties, and/or remove any Collateral from any such premises for the purpose of
effecting sale or other disposition thereof (and if any of the Collateral
consists of motor vehicles, Secured Party may use Debtor's license plates),
and/or sell, resell, lease, license, assign and deliver, grant options for or
otherwise dispose of any Collateral in its then condition without or following
any commercially reasonable preparation or processing, at public or private sale
or proceedings or otherwise, by one or more contracts, in one or more parcels or
lots, at the same or different times, with or without having the Collateral at
the place of sale or other disposition, for cash and/or credit, and upon any
terms, at such place(s) and time(s) and to such person(s) as Secured Party deems
best, all without demand, notice or advertisement whatsoever except that where
an applicable statute requires reasonable notice of sale or other disposition.
Debtor hereby agrees that the sending of ten (10) days' notice (as provided in
Section 8 hereof) shall be deemed reasonable notice thereof. If any Collateral
is sold by Secured Party upon credit or for future delivery, Secured Party shall
not be liable for the failure of the purchaser to pay for same and in such event
Secured Party may resell such Collateral. Secured Party may buy any Collateral
at any public sale and, if any Collateral is of a type customarily sold in a
recognized market or is of the type which is subject to widely distributed
standard price quotations, Secured Party may buy such Collateral at private sale
and in each case may make payment therefor by any means, provided that payment
is made in full by Secured Party upon the later of the time of such sale and the
taking of delivery of such Collateral.
(c) Secured Party may apply the cash proceeds actually received
from any sale or other disposition of Collateral to the reasonable expense of
retaking, holding, preparation and processing for sale, selling, leasing,
licensing and the like, to reasonable attorneys' fees and all legal, travel and
other expenses which may be incurred by Secured Party in attempting to collect
the Obligations or to enforce this Security Agreement, or in the prosecution or
defense of any action or proceeding related to the subject matter of this
Security Agreement; and then to the Obligations in such order and as to
principal or interest as Secured Party may determine; and Debtor shall remain
liable and will pay Secured Party, on demand, any deficiency remaining after the
application of such cash proceeds, together with interest thereon at the highest
rate then payable on the Obligations and the balance of any expenses unpaid,
with any surplus to be paid to Debtor, subject to any duty of Secured Party
imposed by law to the holder of any other security interest in the Collateral
known to Secured Party. Within a reasonable
6
<PAGE> 7
time following the application of cash proceeds, Secured Party shall provide
Debtor with a reasonable accounting of the Obligations to which such proceeds
have been applied.
(d) Secured Party may appropriate, set off and apply to the payment
of the Obligations, any Collateral in or coming into the possession of Secured
Party or its agents, without prior notice to Debtor and in such manner as
Secured Party may in its discretion determine.
4. Power of Attorney. Upon the occurrence of any Event of Default by
Debtor under this Security Agreement, the Letter Agreement, Guaranty, the
Amended Loan Agreement, the Loan Documents or under any other Obligation, to
effectuate the terms and provisions hereof, Debtor hereby designates and
appoints Secured Party and each of its designees or agents as attorney-in-fact
of Debtor, irrevocably and with power of substitution, with authority to: (1)
endorse the name of Debtor on any notes, acceptances, checks, drafts, money
orders, instruments or other evidences of Collateral that may come into Secured
Party's possession; (ii) sign the name of Debtor on any invoices, documents,
drafts against and notices to account debtors or obligors of Debtor, assignments
and requests for verification of accounts; (iii) sell, assign, compromise,
discharge or extend the time for payment of any account or obligation; (iv) to
institute legal action for the collection of any account or obligation; (v)
execute proofs of claim and loss; (vi) execute endorsements, assignments,
licenses or other instrument of conveyance or transfer; (vii) adjust and
compromise any claims under insurance policies or otherwise; (viii) execute
releases; (ix) receive, open and dispose of all mail addressed to Debtor and
notify the Post Office authorities to change the address for delivery of mail
addressed to Debtor to such address as Secured Party may designate and date and
deliver to the Post Office the executed order of Debtor; and (x) do all other
acts and things necessary or advisable, in the sole discretion of Secured Party,
to carry out and enforce this Security Agreement and the Obligations. All acts
done under the foregoing authorization are hereby ratified and approved by
Debtor to the maximum extent permitted by law and neither Secured Party nor any
designee or agent thereof shall be liable for any acts of commission or
omission, for any error of judgment or for any mistake of fact or law. This
power of attorney, being coupled with an interest, is irrevocable while any
Obligation shall remain unpaid, unobserved or unperformed.
5. Care of Collateral. Secured Party shall have the duty to exercise
reasonable care in the custody and preservation of any Collateral in its
possession, which duty shall be fully satisfied if Secured Party accords such
Collateral treatment substantially the same as that which it accords similar
property owned by it. Except for any claims, causes or action or demands arising
out of Secured Party's failure to perform its agreements set forth in the
preceding sentence, Debtor releases Secured Party from any claims, causes of
action and demands at any time arising out of or with respect to this Security
7
<PAGE> 8
Agreement, any of the Obligations, the Collateral and its use and/or any actions
taken or omitted to be taken by Secured Party with respect thereto, and Debtor
hereby agrees to hold Secured Party harmless from and with respect to any and
all such claims, causes of action and demands. Secured Party's prior recourse to
any Collateral shall not constitute a condition of any demand, suit or
proceeding for payment or collection of the Obligations.
6. Waivers. No act, omission or delay by Secured Party in exercising
any right or remedy shall constitute a waiver of such right or remedy. No single
or partial waiver by Secured Party of any default or right or remedy which on
one occasion shall operate as a waiver of the same or any other default, right
or remedy on any other occasion. Debtor hereby waives presentment, notice of
dishonor and protest of all instruments included in or evidencing any Obligation
or Collateral, and all other notices and demands whatsoever (except as expressly
provided herein).
7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts (without giving
effect to the conflict of laws principles thereof).
8. Notices. All notices and other communications to any party
hereunder shall be in writing and shall be delivered in hand, mailed by United
States registered or certified first-class mail, return receipt requested,
postage prepaid, addressed as follows:
if to Debtor: ASA International Ventures, Inc.
10 Speen Street
Framingham, MA 01701
Attn: Alfred C. Angelone
if to the Secured Party: CoreStates Bank, N.A.
1345 Chestnut Street
Philadelphia, PA 19101-7618
Attn: R. Thomas Esser
or such other address as such party may hereafter specify by notice to the
Secured Party and the Debtor. Each such notice, request or other communication
shall be effective (i) if given by certified mail, 72 hours after such
communication is deposited with the post office, addressed as aforesaid, or (ii)
if given by any other means (including, without limitation, by air courier),
when delivered at the address specified in this Paragraph.
9. Amendments and Waivers; Partial Invalidity; Acknowledgment of
Receipt. No provision hereof shall be modified, altered or limited except by a
written instrument expressly referring to this Security Agreement and to such
provision, and executed by the party to be charged. If any term of this Security
Agreement shall be held to be
8
<PAGE> 9
invalid, illegal or unenforceable, the validity of all other terms hereof shall
in no way be affected thereby. Debtor acknowledges receipt of a copy of this
Security Agreement.
10. Benefit of Agreement; Continuing Security Interest. This Security
Agreement and all Obligations shall be binding upon the heirs, executors,
administrators, successors and assigns of Debtor and shall, together with the
rights and remedies of Secured Party hereunder, inure to the benefit of Secured
Party, its successors, endorsees and assigns. This Agreement shall create a
continuing security interest in the Collateral which shall remain in full force
and effect until payment in full of the Obligations.
11. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original and all of which
shall together constitute one and the same agreement.
12. Captions. The captions of the Paragraphs of this Security
Agreement have been inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this Security Agreement.
IN WITNESS WHEREOF, the undersigned have executed or caused this
Security Agreement to be executed as of the date first above set forth, as a
sealed instrument.
ASA INTERNATIONAL VENTURES, INC.
By: /s/ Terrence C. McCarthy
-----------------------------
Title: Vice President and
Controller
CORESTATES BANK, N.A.
By: /s/ R. Thomas Esser
------------------------------
Title: Vice President
9
<PAGE> 1
GUARANTY
CoreStates
This Guaranty is made and entered into by the undersigned, and by each of them
if more than one (the "Guarantor"), for the benefit of CoreStates Bank, N.A.*, a
national banking association (the "Bank").
1. Obligor. The "Obligor" means the following person or entity, and if more
than one, any or all of the following persons or entities:
ASA International Ltd.
- ------------------------------------------------------------------------
2. Obligations. The "Obligations" means all existing and hereafter incurred or
arising indebtedness, obligations and liabilities of the Obligor to the Bank,
whether absolute or contingent, direct or indirect and out of whatever
transactions arising, and includes without limitation, all matured and unmatured
indebtedness, obligations and liabilities of the Obligor under or in connection
with existing and future loans and advances evidenced by promissory notes or
otherwise, letters of credit, acceptances, all other extensions of credit,
repurchase agreements, security agreements, mortgages, overdrafts, foreign
exchange contracts and all other contracts for payment or performance,
indemnities, and all indebtedness, obligations and liabilities under any
guaranty or surety agreement, or as co-maker or co-obligor with any person for
any of the foregoing, including without limitation all interest, expenses, costs
(including collection costs) and fees (including reasonable attorney's fees and
prepayment fees) incurred, arising or accruing (whether prior or subsequent to
the filing of any bankruptcy petition by or against any Obligor) under or in
connection with any of the foregoing. If the term "Obligor" includes more than
one person or entity, the Obligations shall include all Obligations of any one
or more of such persons or entities, whether such Obligations are individual,
joint, several or joint and several.
3. Unconditional Guaranty. In consideration of any existing Obligations and any
Obligations which may hereafter arise or be incurred, each Guarantor, intending
to be legally bound, absolutely and unconditionally (and jointly and severally
if more than one) guaranties to Bank the payment, performance and satisfaction
when due (whether by stated maturity, demand, acceleration or otherwise) of all
Obligations. The obligations of the Guarantor hereunder shall continue in full
force and effect irrespective of the validity, legality or enforceability of any
agreements, notes, or documents pursuant to which any of the Obligations arise,
or the existence, value or condition of any collateral for any of the
Obligations, or of any other guaranty of the Obligations, or any other
circumstance which might otherwise constitute a legal or equitable discharge of
a surety or guarantor.
4. Cost of Enforcement. Each Guarantor agrees (jointly and severally if more
than one) to pay Bank all costs and expenses (including reasonable attorney's
fees) at any time incurred by Bank in the enforcement of the Obligations or in
the enforcement of this Guaranty against any Guarantor.
<PAGE> 2
5. Payment by Guarantor. Payment by each Guarantor is due upon demand by Bank
and is payable in immediately available funds in lawful money of the United
States of America.
6. Continuing Guaranty. This Guaranty shall continue in full force and effect
with respect to each Guarantor and may not be revoked until all existing
Obligations and all Obligations hereafter incurred or arising have been paid,
performed and satisfied in full. Notwithstanding the foregoing, any Guarantor
may, by written notice to Bank, terminate its liability hereunder with respect
to Obligations which are not Pre-Termination Obligations as hereinafter defined.
Such notice shall be ineffective unless sent via certified mail to: Special
Notices Section, Loan Accounting Department, CoreStates Bank, N.A., 1500 Market
Street, Centre Square, West, FC:1-3-18-64, Philadelphia, PA 19102.
The burden of establishing (i) that Bank has received any termination notice
hereunder and (ii) the day on which such notice was received shall be on
Guarantor. In the event that Bank receives an effective termination notice from
Guarantor in accordance with the provisions of this paragraph, such termination
shall not affect Guarantor's liability (a) for Obligations incurred or arising
on or prior to the tenth day following receipt by Bank of such termination
notice, or any earlier day, on which Bank determines in good faith that the
appropriate Bank officers have actual knowledge of Bank's receipt of such notice
(the "Termination Effective Date"), (b) for Obligations which are renewals,
modifications, amendments, extensions, substitutions, replacements or rollovers
of, or which consist of accrued interest on, Obligations incurred or arising on
or prior to the Termination Effective Date, or (c) for Obligations incurred or
arising pursuant to a commitment existing on the Termination Effective Dare
under which Bank was obligated to extend credit or make payments to Obligor or
for Obligor's account, all Obligations referred to in this sentence being
hereinafter collectively called "Pre-Termination Obligations." It is understood
that for purposes of this Guaranty and regardless of any conflicting agreement
between Bank and any Obligor, all payments on and other reductions of the
Obligations subsequent to the Termination Effective Date (other than payments
made by Guarantor in respect of the Guaranty itself) shall, unless Bank elects
otherwise in writing, be applied first to Obligations other than Pre-Termination
Obligations, and then to Pre-Termination Obligations. It is further understood
that the provisions of the preceding sentence shall be applicable regardless of
the amount of any new Obligations incurred or arising subsequent to the
Termination Effective Date.
7. Waivers and Consents By Guarantors. Each Guarantor unconditionally consents
to, and waives as a defense to liability hereunder, each of the following: (a)
any waiver, inaction, delay or lack of diligence by Bank in enforcing its rights
against any Obligor or in any property, or the unenforceability of any such
rights, including any failure to perfect, protect or preserve any lien or
security interest which may be intended directly or indirectly to secure any of
the Obligations, and the absence of notice thereof to any Guarantor, (b) the
absence of any notice of the incurrence or existence of any Obligation and of
any default thereon, (c) any action, and the absence of notice thereof to any
Guarantor, taken by Bank or any Obligor with respect to any of the Obligations,
<PAGE> 3
including any release, subordination or substitution of any collateral or
release, termination, compromise, modification or amendment of any instrument
executed by or applicable to any Obligor or of any claim, right or remedy
against any Obligor or any property, (d) any impairment of Guarantor's right to
reimbursement by way of subrogation, indemnification or contribution, (e) any
other action taken or omitted by Bank in good faith with respect to the
Obligations, (f) the absence or inadequacy of any formalities of every kind in
connection with enforcement of the Obligations, including presentment, demand,
notice and protest, and (g) the waiver of any rights of Bank under or any action
taken or omitted by Bank with respect to any other guaranty of the Obligations.
8. Other Agreements By Guarantor. Each Guarantor agrees that there shall be no
requirement that Bank document its acceptance of this Guaranty, evidence its
reliance thereon, or that Bank take any action against any person or any
property prior to taking action against any Guarantor. Each Guarantor further
agrees that Bank's rights and remedies hereunder shall not be impaired or
subject to any stay, suspension or other delay as a result of Obligor's
insolvency or as a result of any proceeding applicable to Obligor or Obligor's
property under any bankruptcy or insolvency law. Each Guarantor also agrees that
payments and other reductions on the Obligations may be applied to such of the
Obligations and in such order as Bank may elect.
9. Subrogation and Similar Rights. No Guarantor will exercise any rights with
respect to Bank or any Obligor related to or acquired in connection with or as a
result of its making of this Guaranty which it may acquire by way of
subrogation, indemnification or contribution, by reason of payment made by it
hereunder or otherwise, until after the date on which all of the Obligations
shall have been satisfied in full. Until such time, any such rights against the
Obligor shall be fully subordinate in lien and payment to any claim in
connection with the Obligations which Bank now or hereafter has against the
Obligor. If any amount shall be paid to any Guarantor on account of such
subrogation, indemnification, or contribution at any time when all of the
Obligations and all other expenses guaranteed pursuant hereto shall not have
been paid in full, such amount shall be held in trust for the benefit of Bank,
shall be segregated from the other funds of Guarantor and shall forthwith be
paid over to Bank to be applied in whole or in part by Bank against the
Obligations, whether matured or unmatured, in such order as the Bank shall
determine in it sole discretion. If Guarantor shall make payment to the Bank of
all or any portion of the Obligations and all of the Obligations shall be paid
in full, Guarantor's right of subrogation shall be without recourse to and
without any implied warranties by Bank and shall remain fully subject and
subordinate to Bank's right to collect any other amounts which may thereafter
become due to the Bank by the Obligor in connection with the Obligations.
10. Reinstatement of Liability. If any claim is made upon the Bank for repayment
or recovery of any amount or amounts received by Bank in payment or on account
of any Obligations and Bank repays all or part of said amount by reason of (a)
any judgment, decree or order of any court or administrative body having
jurisdiction over the Bank or any of its property, or (b) any settlement or
compromise in good faith with any
<PAGE> 4
such claimant (including Obligor), then and in such event each Guarantor agrees
that any such judgment, decree, order, settlement or compromise shall be binding
upon the Guarantor, notwithstanding any termination hereof or the cancellation
of any note or other instrument evidencing any Obligation, and each Guarantor
shall remain liable to the Bank hereunder for the amount so repaid or recovered
to the same extent as if such amount had never originally been received by Bank.
11. Security Interest. Each Guarantor hereby assigns to the Bank and grants to
the Bank a security interest in any balance or assets in any deposit or other
account of such Guarantor in or with the Bank whenever and so long as any of the
Obligations shall be outstanding and unpaid and agrees that the security
interest hereby granted shall be independent of the right of setoff.
12. Financial Information on Guarantor. Each Guarantor hereby agrees to provide
the Bank with such information on the business affairs and financial condition
of such Guarantor as the Bank from time to time may reasonably request and to
notify the Bank of any change in the address of such Guarantor. In the event
that such Guarantor fails to comply with a request for information as herein
agreed, within ten (10) days after receipt of the request, such Guarantor upon
demand by the Bank agrees to purchase from the Bank without representation,
warranty or recourse the Obligations and to pay therefor the unpaid principal
amount of all such Obligations, including interest thereon to the date of
purchase.
13. Effect of Other Agreements. The provisions of the Guaranty are cumulative
and concurrent with Bank's rights and remedies against Guarantor under any
existing or future agreement pertaining or evidencing any of the Obligations. No
such additional agreement shall be deemed a modification or waiver hereof unless
expressly so agreed by Bank in writing. If Bank holds any other guaranty or
surety agreement applicable to any of the Obligations, the liability of each
Guarantor hereunder shall be joint and several with each party obligated on such
other guaranty or surety agreement, unless otherwise agreed by Bank in writing.
(See Addendum)
14. Guarantor's Address. Guarantor warrants and represents that the address set
forth below is Guarantor's correct mailing address and agrees immediately to
notify Bank in the event of any change therein.
15. Miscellaneous. (a) No amendment of any provision of the Guaranty shall be
effective unless it is in writing and signed by each Guarantor and Bank, and no
waiver of any provisions of this Guaranty, and no waiver or consent to any
departure by the Guarantor therefrom, shall be effective unless it is in writing
and signed by Bank, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. (b) Any
provision of this Guaranty which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or affecting the validity or enforceability of such provisions in any
other jurisdiction. (c) The obligations of each Guarantor hereunder shall not be
subject to any counterclaim, setoff,
<PAGE> 5
deduction or defense based upon any related or unrelated claim which such
Guarantor may now or hereafter have against Bank or any Obligor, except payment
of the Obligations, and shall not be affected by any change in Obligor's legal
status or ownership or by any change in corporate, partnership or other
organizational structure applicable to Obligor. (d) This Guaranty shall (i) be
binding on each Guarantor and its personal representatives, estate, heirs,
successors and assigns, and (ii) inure, together with all rights and remedies of
Bank hereunder, to the benefit of the Bank and its successors, transferees and
assigns. Notwithstanding the foregoing clause (i), none of the rights or
obligations of any Guarantor hereunder may be assigned or otherwise transferred
without the prior written consent of the Bank. (e) This Guaranty shall be
governed by and construed in accordance with the internal laws, and not the law
of conflicts, of the Commonwealth of Pennsylvania.
16. CONSENT TO JURISDICTION AND VENUE. IN ANY LEGAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS GUARANTY OR
THE RELATIONSHIP EVIDENCED HEREBY, EACH UNDERSIGNED PARTY HEREBY IRREVOCABLY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
IN ANY COUNTY IN THE COMMONWEALTH OF MASSACHUSETTS AND AGREES NOT TO RAISE ANY
OBJECTION TO SUCH JURISDICTION OR TO THE LAYING OR MAINTAINING OF THE VENUE OF
ANY SUCH PROCEEDING IN SUCH COUNTY. EACH UNDERSIGNED PARTY AGREES THAT SERVICE
OF PROCESS IN ANY SUCH PROCEEDING MAY BE DULY EFFECTED UPON IT BY MAILING A COPY
THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO EACH UNDERSIGNED PARTY.
17. WAIVER OF JURY TRIAL. EACH UNDERSIGNED PARTY HEREBY WAIVES, AND BANK BY ITS
ACCEPTANCE HEREOF THEREBY WAIVES, TRIAL BY JURY IN ANY LEGAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO THIS GUARANTY OR
THE RELATIONSHIP EVIDENCED HEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
BANK TO ENTER INTO, ACCEPT OR RELY UPON THIS GUARANTY.
<PAGE> 6
IN WITNESS WHEREOF, each Guarantor has executed this Guaranty as of the
10TH day of DECEMBER, 1996.
ASA International Ventures, Inc.
- --------------------------------------------------------------------------------
NAME OF CORPORATION OR PARTNERSHIP GUARANTOR
- --------------------------------------------------------------------------------
ADDRESS
By: /s/Terrence C. McCarthy By:
-------------------------- ----------------------------------------
INDIVIDUALS OR PROPRIETORS SIGN BELOW
-------------------- ------------------------ -------------------------------
WITNESS ADDRESS OF GUARANTOR SIGNATURE OF GUARANTOR
-------------------- ------------------------ -------------------------------
WITNESS ADDRESS OF GUARANTOR SIGNATURE OF GUARANTOR
- --------------------------------------------------------------------------------
* CoreStates Bank, N.A. also conducts business as Philadelphia National Bank,
as CoreStates First Pennsylvania Bank, and as CoreStates Hamilton Bank.
9009-C 10/93
<PAGE> 7
ADDENDUM TO GUARANTY
13. Guarantor also warrants and represents that the execution, delivery and
performance of the Guarantor of this Guaranty has been duly authorized by
all necessary corporate action, is in furtherance of the corporate purposes
of the Guarantor, and will not violate any provision of the certificate of
Incorporation or by-laws of the Guarantor or result in the breach of or
constitute a default or, other than the Agreement by and between the
Guarantor and Economic Stabilization Trust attached hereto, require any
consent under, or result in the creation of any lien, charge or encumbrance
upon any property or assets of the Guarantor pursuant to any indenture or
other agreement or instrument to which the Guarantor is a party or by which
it may be bound and that this Guaranty is the legal, valid and binding
obligation of the Guarantor, enforceable in accordance with its terms.
<PAGE> 1
ASA INTERNATIONAL LTD.
STATEMENT OF COMPUTATION OF
NET EARNINGS (LOSS) PER SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Weighted Average Number of
Shares Outstanding:
Common Stock 3,934,893(c) 3,787,497 3,787,469
Common equivalent shares resulting
from stock options
(Treasury Stock Method) (a) 112,432 (b)
Shares contingently issuable
based on market price (a) 324,574 391,829
----------- ----------- -----------
3,934,893 4,224,503 4,179,298
=========== =========== ===========
Net earnings (Loss) $ (649) $ 457 $ 166
=========== =========== ===========
Earnings (loss) per common and
common equivalent share:
Net Earnings (Loss) $ (.17) $ .11 $ .04
</TABLE>
(a) Effect is antidilutive.
(b) Dilution is less than 3%; therefore, earnings per share is based on
weighted average number of shares outstanding and shares contingently
issuable based on market price.
(c) In the year ended December 31, 1996, Common Stock includes 104,122 shares
previously treated as contingent to be issued in fiscal 1997 based on a
December 31, 1996 market price.
<PAGE> 1
ASA INTERNATIONAL LTD.
SUBSIDIARIES OF THE REGISTRANT
ASA Properties, Inc. a Massachusetts Corporation
ASA International Ventures, Inc., a Delaware Corporation
<PAGE> 1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ASA International Ltd.
Framingham, Massachusetts
We hereby consent to the incorporation by reference in Registration
Statement No. 33-312933 of ASA International Ltd. on Form S-8 of our report
dated March 7, 1997, relating to the consolidated financial statements of ASA
International Ltd. appearing in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Boston, Massachusetts
March 31, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONDENSED CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1996 CONDENSED CONSOLIDATED
INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B)
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 674,239
<SECURITIES> 0
<RECEIVABLES> 3,846,763
<ALLOWANCES> 92,792
<INVENTORY> 87,750
<CURRENT-ASSETS> 5,226,090
<PP&E> 7,547,223
<DEPRECIATION> 3,194,815
<TOTAL-ASSETS> 16,629,978
<CURRENT-LIABILITIES> 5,226,175
<BONDS> 3,011,976
0
0
<COMMON> 39,842
<OTHER-SE> 7,971,985
<TOTAL-LIABILITY-AND-EQUITY> 16,629,978
<SALES> 25,470,977
<TOTAL-REVENUES> 25,470,977
<CGS> 4,073,528
<TOTAL-COSTS> 17,610,071
<OTHER-EXPENSES> 8,005,158
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 424,738
<INCOME-PRETAX> (891,323)
<INCOME-TAX> (242,000)
<INCOME-CONTINUING> (649,323)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (649,323)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
