<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-15353
-----------------------------
SAZTEC INTERNATIONAL, INC.
CALIFORNIA 33-0178457
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
43 MANNING ROAD, BILLERICA, MASSACHUSETTS 01821
(Address of Principal Executive Office)
(508) 262-9600
(Registrant's Telephone Number)
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, WITHOUT PAR VALUE
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 and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Revenues for the fiscal year ended June 30, 1995, are $13,596,848.
The aggregate market value of the Common Stock held by non-affiliates (based
upon the last reported price on the NASDAQ System) on September 21, 1995 was
approximately $3,135,963. As of September 21, 1995, there were 12,543,851
shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Page 1 of 36
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Saztec International, Inc. (the "Company") is a provider of information
management services. The Company specializes in a broad range of services that
help customers manage the conversion of information (data, text, graphics) from
traditional media (paper, microform) to computer usable formats and media.
Saztec has extensive experience in creating and maintaining text and image
databases, and has been actively involved in providing these services to
customers since the Company's inception.
The Company also offers services that provide customers with an alternative to
in-house data entry for a wide range of computer processing applications. In
providing such services, the Company relies on technology and contractual
arrangements that permit the Company to have such data processing completed
offshore at substantially lower labor costs than in the U.S. or Europe.
The Company was incorporated in California in 1976. The Company's executive
offices are located at 43 Manning Road, Billerica, Massachusetts 01821, and its
telephone number is (508) 262-9600. The principal wholly-owned subsidiaries are
Advanced Automation Associates, Inc. ("AAA") and Saztec Europe, Ltd. Saztec
Europe, Ltd. has three wholly owned subsidiaries, Saztec Services, Ltd.,
Knightswade, Ltd., and Saztec Datenverabeitung GmbH.
DESCRIPTION OF BUSINESS
Saztec provides a complete range of services for the information conversion
market. The Company offers the following services which are integrated and
customized as required by the customer's application:
DATA ENTRY: Information can be captured from any format or source material,
including paper, microfilm, or microfiche. Original data capture can be
performed by traditional keyed data entry or by using Optical Character
Recognition (OCR) techniques for certain applications.
A variety of quality control procedures are used to assure character accuracy.
These procedures include key verification, sight verification, complex table and
range checking, and post-capture editing software.
TEXT CONVERSIONS: Several services are available to assist customers converting
text information from one media to another. Input is accepted in a variety of
formats including paper, microform, and magnetic tape or cartridge, floppy
disks, electronic media or cards. Clerical coding resources are available to
assign tags, photocomposition codes, or complex document definition notations
such as Standard Generalized Markup Language (SGML), a standard growing in
popularity for commercial text databases, or Machine Readable Cataloguing
(MARC), the standard for library catalog records. Original text capture can be
accomplished via traditional key entry or by OCR techniques.
IMAGE CONVERSIONS: A broad family of services are available to capture and
convert document images for use in image based storage and retrieval systems.
Equipment is used to create images at resolutions between 100 dots per inch
(dpi) and 400 dpi ranges, with variable light/dark thresholding available to
match the quality of the documents. Up to 64 levels of gray may be captured for
projects requiring this capability.
Simple and compound documents can be accommodated in a variety of formats.
Internally developed editing software provides the capability to carve images,
add or delete data from an image, rotate and scale images and change text within
an image.
2
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The output can be provided in an uncompressed or defined compressed image
format. File headers and tape formats can be matched to the image storage and
retrieval system used in the specific application.
Documents may be indexed in a variety of ways, depending on the application.
Indexes ranging from simple identification numbers to complex key word abstracts
can be accommodated.
Services can be provided either off-site, partially on-site or completely on-
site depending upon the specialized needs of each individual customer.
POST CAPTURE COMPUTER PROCESSING: Captured data generally is processed before
being output to provide for edit checks, special formatting, code explosions,
reblocking, labeling and quality control. The output can be provided on
magnetic tape, diskette, optical disk, or via telecommunications.
Custom software packages are developed as required for the manipulation of
captured information to a specialized output format. Computer processing is
used to simplify the capture of complex information, restructure existing
databases for migration to a new system, link indexes for image storage and
retrieval applications, update information or combine files from a variety of
sources into a unified format.
PROJECT MANAGEMENT: The key to managing complex conversion processes is project
management. At Saztec the following elements are made an integral part of all
projects.
Project Plan -- A formal project plan is developed to provide information for
the client and for the appropriate Saztec support and production personnel. The
plan includes items such as: a project specification to detail the requirements
of the project; a document analysis; an identification of resources and
timescales; and a definition of the responsibilities of all involved with the
project. This plan includes detailed conversion instructions which are agreed
to in advance by both Saztec and the customer.
Document Management -- All documents are tracked and logged throughout the
conversion process. From batching and sorting to combining converted data and
images for final output, the progress of each document is tracked at each step
of the production process. Adherence to pre-defined quality control standards
is strictly maintained.
Quality Control -- Saztec uses proven quality control procedures developed over
a wide range of information conversion projects over the last ten years.
Quality control processes are specifically developed for each project and are
custom tailored to meet the unique requirements of each client. Whatever the
specific measure of quality may be, care is taken to track and improve quality
at each step of the conversion process. Prior to delivery, all work is
certified by final inspection that quality control objectives have been
achieved.
OFFSHORE RESOURCES: The Company has entered into a priority Production
Agreement, renewed in April 1991 for five years, with Saztec Philippines, Inc.
("Saztec Philippines") providing for a first priority to the Company on all of
its production resources. In addition, Saztec Philippines has the "Right of
First Refusal" on all data entry and clerical coding for the Company's United
States clients that can be performed internationally, provided that Saztec
Philippines can meet the requirements of quality, expertise, turnaround and
pricing acceptable to the Company and its clients.
The Company anticipates Saztec Philippines will continue to be a primary sub-
contractor of data entry and clerical coding services. However, where it has
been necessary, the Company has utilized additional offshore vendors. Since
September, 1991, Saztec Philippines has not been affiliated with the Company.
3
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SALE OF DIVISIONS: The Company's plan to improve financial performance includes
the sale or closedown of unprofitable operations and the sale of profitable
operations that are not in line with the Company's long-term mission to service
customer needs for electronic data conversion. As a result, the Company has
recently sold the three operating divisions described below:
1. On June 8, 1995, the Company reached an agreement to sell the Financial
Transaction Processing (FTP) Division to Lloyd's Bank. The division was based
in Swindon, U.K., and provided remittance processing services to U.K. customers
utilizing OCR and key entry processes.
2. On September 1, 1995, the Company sold its Marketing Fulfillment Division to
a management group. The division was based in Billerica, Massachusetts, and
provided direct mail, rebate, and subscription services to customers in the New
England area.
3. On September 1, 1995, the Company sold its Knightswade, Ltd. Microfilm
Division to a management group. The division was based in Winchester, U.K.,
and provided a range of microfilming services to U.K. customers.
Financial information about the sale of these divisions is presented in Note 7
of the Notes to Consolidated Financial Statements.
4
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MARKETS AND MARKETING
A major challenge for the Company is the project-oriented nature of its
business. Although the Company may perform services for a client over many
years, such services may relate to one major project or to many smaller
projects. The Company is dependent on its ability to attract new projects from
new and existing clients to replace completed projects. The project-oriented
nature of the Company's business creates difficulties in planning for staffing
and equipment (principally computer) requirements, scheduling, facilities
requirements and availability of offshore resources.
During the past several years, the Company has experienced a decline in the
demand for traditional data entry and text conversion services. Management
believes the demand for image conversions will increase, based on its
discussions with hardware and software suppliers, potential clients, other
companies providing services similar to the Company, and market analysts.
However, the overall image conversion marketplace is still in the developmental
stage and, therefore, it is difficult to predict the timing and volume of the
anticipated increase in image conversion services.
The Company provides services to the electronic publishing industry consisting
of publishers, libraries, on-line information vendors, and trademark and market
research companies. The Company has performed the following specific services:
(a) for European libraries, retrospective conversion of card catalog data to a
local system, and conversion of hand printed worksheets for loading to a
national computer network for research libraries; (b) the conversion for on-line
vendors, of archival files of abstracts and indexes with monthly additions to
the database from newly published material; (c) for market researchers, ongoing
capture and processing of client billings and data for analysis and publication;
(d) CD-ROM reformatting and pre-mastering services for publishers; and (e) image
capture of graphic material imbedded in text.
Other specific services the Company has provided are: (a) data capture of
physical inventory counts, (b) name and address change requests, (c) data
capture of claim forms for medical insurance companies, and (d) data entry of
individual, corporate and partnership state income tax returns upon filing.
COMPETITION
The Company competes against many companies with respect to one or more of the
various services provided by the Company. Some of these competitors have
substantially greater financial and other resources than the Company and
aggressively compete with respect to all or some of the services provided by the
Company. Such firms compete on a price and geographic basis, charging, in some
instances, lower rates for particular services provided by the Company, and in
other instances, providing quicker turnaround to clients in a particular area.
The Company may also be considered in competition with "in-house" personnel who
may duplicate the Company's services.
The Company primarily competes on the basis of service. The Company believes
that it has developed an effective methodology for document control for projects
involving the conversion of a large number of documents. The Company
emphasizes this aspect of its service, among other components of service (such
as timeliness and accuracy) in competing for new business.
EMPLOYEES
At June 30, 1995, the Company employed 191 full-time and 66 part-time employees.
DEPENDENCE UPON MAJOR CUSTOMERS
Financial information about major customers is presented in Note 11 of the Notes
to Consolidated Financial Statements. At June 30, 1995, the Company was
conducting business with approximately 170 customers in the United States and
Europe.
FINANCIAL INFORMATION ABOUT FOREIGN OPERATIONS
Financial information about foreign operations is presented in Note 11 of the
Notes to Consolidated Financial Statements.
5
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ITEM 2. PROPERTIES
The Company occupies its principal executive offices, approximately 21,500
square feet, located in Billerica, Massachusetts, pursuant to a lease expiring
in August, 1999.
In addition, the company leases an aggregate of 50,500 square feet of office
space in South Weymouth, Massachusetts; Vernon, Connecticut; Kansas City,
Missouri; Dayton, Ohio; Ardrossan, Scotland; Regensburg, Germany; and Eton,
Winchester, and Swindon, England, pursuant to individual leases expiring between
1995 and 2001.
Management believes the current facilities are adequate to conduct the Company's
operations.
ITEM 3. LEGAL PROCEEDINGS
Information about legal proceedings is presented in Note 9 of the Notes to
Consolidated Financial Statements, under "Litigation".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
None.
6
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
The Company's common stock is traded in the over-the-counter market and is
quoted on the NASDAQ system (small cap market) under the trading symbol SAZZ.
On September 21, 1995, the Company had approximately 270 stockholders of record.
For the period of July 1 to September 21, 1995, the high and low closing price
as reported by the NASD was 3/8 and 5/32, respectively. The table below sets
forth high and low bid information by fiscal quarter as reported by the NASD.
<TABLE>
<CAPTION>
Bid Prices
----------
Fiscal Quarter Ended; High Low
--------------------- ---- ---
<S> <C> <C>
September 30, 1993 29/32 5/8
December 31, 1993 1-3/4 1-1/16
March 31, 1994 1-3/4 13/16
June 30, 1994 1-7/8 1-1/8
September 30, 1994 1-1/8 1/2
December 31, 1994 3/4 1/2
March 31, 1995 1-1/16 1/2
June 30, 1995 11/16 3/16
</TABLE>
The above mentioned over-the-counter quotations reflect inter-dealer prices,
without retail markup, mark-down or commission and may not necessarily represent
actual transactions. The Company has not paid dividends on its Common Stock and
has no present intention to pay any cash dividends.
As of September 21, the Company was not in compliance with NASDAQ's Small-Cap
Market capital and surplus requirements, however, the Company has been granted a
temporary exception from this standard, subject to meeting those conditions by
December 6, 1995. If the Company is unable to meet those conditions, it will
be delisted, however it may continue to be listed in the OTC Bulletin Board.
7
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Revenues for the year ended June 30, 1995 were $13,596,848 compared to
$17,921,721 for the year ended June 30, 1994, a decrease of $4,324,873, or
(24.1%).
Revenues from U.S. operations declined from $8,807,917 in fiscal 1994 to
$6,543,384 in 1995, a decline of $2,264,533, or (25.7%). Revenues for the
Company's European operations declined from $9,113,804 in fiscal 1994 to
$7,053,464 in 1995, a decline of $2,060,340, or (22.6%).
The decline in U.S. revenue was primarily due to a fall-off in new
scanning/imaging projects of $1,074,100, reduced key entry volume of $859,800,
and reduced marketing fulfillment sales of $192,500. Scanning/imaging
revenue was affected by the completion of a major project that generated
fiscal 1994 revenue of $1,342,400, but only $332,500 in 1995. Lower key
entry revenue was due in part to the decision of several medical claim
processing customers to move their key data entry work in-house. Marketing
fulfillment sales were affected by the loss of a single large direct mail
customer.
European revenue was primarily affected by a $1,115,700 decline in library
retrospective conversion projects, a $390,361 decline in financial transaction
processing revenues, and a $260,400 decline in revenues from microfilm
services provided by Knightswade, Ltd. Library retrospective conversion
revenues were adversely affected by the completion in fiscal 1994 or early in
fiscal 1995 of several major national library projects in Europe. The decline
in financial transaction processing revenues was due to the loss of two large
customers early in fiscal 1995, and the sale of this business in June 1995.
The decline in microfilm service revenue reflected a decline in the underlying
market for microfilm services in the U.K.
Gross profit decreased from $3,782,891 in fiscal 1994 to $2,403,452 in 1995, a
decline of $1,379,439, or (36.5%), due to the decline in revenue and a drop in
gross margins (gross profit as a percentage of revenue). Gross margin fell
from 21.1% in fiscal 1994 to 17.7% in 1995, primarily due to the concentration
of revenue losses in the area of higher-margin services.
Selling, general and administrative (SG&A) expenses of $5,160,706 in fiscal
1995 included a restructuring charge for Europe, as reported in the Company's
Form 10-QSB for the period ending March 31, 1995, of $411,134 for accelerated
amortization of goodwill for the Knightswade microfilm acquisition, and for
lease abandonment and severance costs in the U.K. In April 1995, the Company
incurred a $187,500 charge related to issuance of stock pursuant to the 1992
purchase of Scanning America, Inc. The Scanning America division was divested
by the Company in October 1993. Also, in December 1994, the Company incurred
a $72,671 charge for relocation of its Dayton, Ohio, production activity and
its Kansas City, Missouri headquarters to Billerica, Massachusetts. Excluding
these one-time charges, SG&A expense was $4,489,401 in fiscal 1995, compared
to $4,245,928 in 1994, an increase of 5.7%.
CAPITAL RESOURCES AND LIQUIDITY
In February 1993, the Company entered into a long term debt transaction of
$1,750,000 with Tallard B.V., a Netherlands corporation ("Tallard"), that was
secured by the stock of Saztec Europe and included various financial
covenants. The transaction consisted of new funding of $750,000, which was
combined with the $1,000,000 subordinated debenture issued in July 1992.
Effective December 31, 1993, Tallard exercised its right to convert the debt
into Preferred Stock. Tallard immediately exercised its right to convert the
Preferred Stock into 2,334,500 shares of Common Stock. The Company also
issued 18,812 shares of Common Stock to Tallard as payment of the interest
accrued through December 31, 1993 of $18,812.
In July 1993, the Company completed a private placement of common stock of
13,333 shares for $10,000. The participants in the private placements were
members of management.
During the quarter ended March 31, 1994, management completed three separate
private placements generating $1,051,729, net of issuance costs of $49,271, in
exchange for 1,100,000 shares of common
8
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stock and warrants to issue an additional 1,287,500 shares of common stock,
exerciseable for a five year period at $1.375 per share. One of the private
placements of 750,000 shares was with a group of individuals unrelated to the
Company ("the Meyerson Group"). Another transaction, representing 250,000
shares, was with Tallard, and the remaining transaction for 100,000 shares was
transacted with a then-member of the Company's Board of Directors. Subsequent
to the completion of these transactions, certain members of the Meyerson Group
alleged certain disclosure violations by the Company in the offering
documents. The Company denied the allegations and believes they were without
merit. However, to avoid the potential cost of litigation, the Company
agreed to issue 366,666 additional shares of unregistered common stock to the
private placement participants and agreed to decrease the warrant price for
all of the underlying warrants from $1.375 to $1.125. At June 30, 1995,
250,000 of the additional shares had been issued. In exchange for these
modifications, the participants have agreed to release the Company from all
claims arising out of the three private placements.
In October 1994, the Company agreed to sell 1,226,052 shares of common stock
to Tallard pursuant to a stock purchase agreement for $729,687, net of
expenses of $20,213. The proceeds of the sale were received in installments
through December 1994.
The Company's primary credit facility provides for borrowings based on a
percentage of outstanding domestic trade receivables. The provider of the
revolving credit agreement also has provided term debt during previous years
to purchase equipment and fund acquisitions. Management used the proceeds of
the October 1993, sale of the Company's former Scanning America division and
the Kansas City Data Entry division, as well as other sources, to pay off its
term debt in its entirety during the quarter ended December 31, 1993. At June
30, 1995, the Company had borrowed $650,091 under its revolving credit
agreement and had qualified for additional borrowings of $25,176. The
revolving credit agreement provides for interest at the lender's prime rate
plus 4.0% (13.0% in aggregate at June 30, 1995). The credit agreement is
secured by substantially all domestic assets of the Company, including the
stock of subsidiaries, and is scheduled to expire on December 31, 1995. The
credit agreement at June 30, 1995 contains various restrictive covenants which
require, among other things, the maintenance of a minimum level of
stockholders' equity. Due to the losses incurred in fiscal 1994 and 1995, the
Company is not in compliance with that minimum level. However, the lender has
waived compliance with that covenant through September 27, 1995, at which time
the lender will review the covenant. Under the most recent renewal of the
credit agreement, the maximum borrowing limit declines in steps from $650,000
on August 15, 1995, to $450,000 on November 30, 1995. The credit line will be
payable in full on December 31, 1995, unless an additional renewal is
obtained.
Additionally, in January 1995 the Company established a revolving credit
agreement with a U.K. lender, secured by U.K.-generated export trade
receivables, bearing interest at the lender's base rate plus 2.0% (7.938% in
aggregate at June 30, 1995), and expiring in December, 1995. The maximum
aggregate borrowings under the agreement were approximately $795,000.
Available borrowings are determined by a specified percentage of qualified
export trade receivables. At June 30, 1995, the Company had available
borrowings of approximately $248,235 and had no borrowings outstanding.
At June 30, 1995, the Company's unrestricted cash balance was $644,101,
compared to $386,263 on June 30, 1994. However, the Company's working capital
declined by $1,387,253 from $617,859 at June 30, 1994, to a deficit of
$769,394 at June 30, 1995. The losses and negative cash flow from operations
continue to adversely impact the Company's liquidity.
The liquidity of the Company could be adversely affected in fiscal 1996 by (i)
projected losses in the first quarter of fiscal 1996, and (ii) the scheduled
maturity of the revolving credit facility on December 31, 1995. The Company is
exploring and will continue to explore opportunities to alleviate the liquidity
pressures, including further extension of the maturity of the revolving credit
facility, additional private placements, the sale or closedown of unprofitable
business activities, and the sale of profitable business operations that are not
in line with the long-term strategy of the Company. There can be no assurance
that the Company will be successful in these or any other efforts. The failure
of the Company to solve its short-term liquidity pressures could directly affect
the ability of the Company to operate as a going concern.
9
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ITEM 7. FINANCIAL STATEMENTS
Financial statements of the Company meeting the requirements of Regulation S-B
are filed on the succeeding pages as listed below:
Page
----
Report of Independent Auditors 11
Consolidated Statements of Operations for the Years Ended
June 30, 1995 and 1994 12
Consolidated Balance Sheets as of June 30, 1995 and 1994 13
Consolidated Statements of Changes in Stockholders' Equity for the
Years Ended June 30, 1995 and 1994 14
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1995 and 1994 15
Notes to Consolidated Financial Statements 17-29
10
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REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
SAZTEC International, Inc. and Subsidiaries
Billerica, Massachusetts
We have audited the accompanying consolidated balance sheets of SAZTEC
International, Inc., and Subsidiaries as of June 30, 1995 and 1994, and the
related consolidated statements of operations, changes in stockholders' 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SAZTEC
International, Inc., and Subsidiaries at June 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that SAZTEC
International, Inc. will continue as a going concern. As more fully described
in Note 1, the Company has incurred significant recurring operating losses and
has a working capital deficiency. In addition, the Company has not complied
with certain covenants of loan agreements with banks. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to this matter are also described in Note 1. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
September 1, 1995
11
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SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
REVENUES $ 13,596,848 $ 17,921,721
Cost of services 11,193,396 14,138,830
------------ ------------
GROSS PROFIT 2,403,452 3,782,891
Selling, general & administrative expense 5,160,706 4,245,928
------------ ------------
LOSS FROM OPERATIONS (2,757,254) (463,037)
Interest expense (201,394) (260,166)
Loss on sale of divisions (302,500) ----
------------ ------------
LOSS BEFORE PROVISION FOR INCOME
TAXES AND EXTRAORDINARY ITEM (3,261,148) (723,203)
Provision for income taxes ---- 119,907
------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM (3,261,148) (843,110)
Extraordinary item: Gain on
extinguishment of debt (Note 8) ---- 71,119
------------ ------------
NET LOSS (3,261,148) (771,991)
Less preferred dividends ---- (85,000)
------------ ------------
NET LOSS APPLICABLE TO COMMON
STOCKHOLDERS $ (3,261,148) $ (856,991)
------------ ------------
------------ ------------
LOSS PER SHARE OF COMMON STOCK:
Loss before extraordinary item $ (.28) $ (.11)
Extraordinary item ---- .01
------------ ------------
Net loss (.28) (.10)
Preferred dividends ---- (.01)
------------ ------------
Net loss applicable to common stockholders $(.28) $(.11)
------------ ------------
------------ ------------
Weighted average number of shares 11,637,481 7,535,554
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
Certain amounts in the prior year have been reclassified to permit comparison.
12
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SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS 1995 1994
---- ----
<S> <C> <C>
Cash and cash equivalents $ 644,101 $ 386,263
Restricted cash 38,010 136,453
Accounts receivable, less allowance
for doubtful accounts of
$83,326 in 1995 and $43,347 in 1994 2,215,771 3,428,679
Work in process 580,842 572,944
Prepaid expenses and other current assets 160,076 364,196
------------ ------------
Total current assets 3,638,800 4,888,535
PROPERTY AND EQUIPMENT, NET (NOTES 3 AND 4) 1,164,048 2,007,078
OTHER ASSETS
Goodwill and other intangible assets,
less accumulated amortization of $819,610
in 1995 and $792,018 in 1994 208,182 507,546
Deposits and other assets 144,632 108,707
------------ ------------
TOTAL ASSETS $5,155,662 $7,511,866
------------ ------------
------------ ------------
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES 1995 1994
---- ----
<S> <C> <C>
Notes payable (Note 4) $ 650,091 $ 1,090,664
Common stock subject to repurchase
(Note 2) 100,000 80,000
Accounts payable 1,028,708 1,293,779
Accrued liabilities 1,350,596 1,029,983
Customer deposits 1,085,479 501,426
Current portion long-term debt and
capital lease obligations (Note 4) 193,320 274,824
----------- -----------
Total current liabilities 4,408,194 4,270,676
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS (NOTES 4 AND 9) 105,686 296,497
COMMON STOCK SUBJECT TO REPURCHASE (NOTE 2) ---- 80,000
STOCKHOLDERS' EQUITY (NOTES 2, 5, AND 8)
Preferred stock-no par value;
1,000,000 shares authorized;
no shares issued ---- ----
Common stock-no par value; 20,000,000
shares authorized; 12,543,851 shares
issued at June 30, 1995, and
10,687,799 shares issued at
June 30, 1994 11,134,811 10,163,998
Contributed capital 14,498 14,498
Accumulated deficit (10,373,201) (7,112,053)
Cumulative translation adjustment (134,326) (201,750)
----------- -----------
Total stockholders' equity 641,782 2,864,693
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 5,155,662 $ 7,511,866
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
13
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------ ---------------
Number of Amount Number of Amount Contributed Accumulated Cumulative
Shares Shares Capital Deficit Translation
Adjustment
----------- ----------- --------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1993 4,766,384 $ 5,275,800 1,700 $ 1,822,188 $ 14,498 $ (6,255,062) $ (276,353)
Shares issued pursuant to
stock option exercises (Note 5) 78,000 107,250
Shares canceled pursuant to
repurchase obligation (Note 2) (40,000) ----
Shares issued pursuant to a
market value guarantee 10,000 ----
Shares issued pursuant to the
conversion of convertible debt
(Note 2) 2,353,312 1,747,719
Shares issued pursuant to the
conversion of preferred stock,
plus accrued dividends of
$85,000, into common stock
(Note 2) 2,352,800 1,907,188 (1,700) (1,822,188) (85,000)
Shares issued pursuant to
private placements (Note 2) 1,113,333 1,061,729
Shares issued pursuant to the
achievement of earn-out
targets (Note 2) 43,970 55,375
Shares issued as incentive
compensation 10,000 8,937
Translation adjustment 74,603
Net loss (771,991)
----------- ----------- ----------- ------------ ----------
BALANCE AT JUNE 30, 1994 10,687,799 $10,163,998 $ 14,498 $ (7,112,053) $ (201,750)
Shares canceled pursuant to
repurchase obligation (Note 2) (40,000) ----
Shares issued pursuant to
a market value guarantee 300,000 187,500
Shares issued pursuant to
private placements (Note 2) 1,226,052 729,687
Shares issued pursuant to the
renegotiation of private
placements (Note 2) 250,000 ----
Shares issued pursuant to the
achievement of earn-out
targets (Note 2) 120,000 53,626
Translation adjustment 67,424
Net loss (3,261,148)
----------- ----------- ----------- ----------- -----------
BALANCE AT JUNE 30, 1995 12,543,851 $11,134,811 $ 14,498 $ (10,373,201) $ (134,326)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
See accompanying notes.
14
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (3,261,148) $ (771,991)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 1,288,299 1,106,567
Provision for bad debts 97,213 47,723
Extraordinary gain ---- (71,119)
Deferred income taxes ---- 75,000
(Gain) loss on sale of assets 54,122 (64,103)
Loss on sale of assets of divisions sold 33,545 ----
Issuance of common stock pursuant to a market
value guarantee 187,500 ----
Other ---- 8,937
Changes in assets and liabilities:
Accounts receivable 1,178,842 (233,973)
Work in process 2,928 227,307
Prepaid expenses and other current assets 207,486 144,601
Deposits and other assets (35,589) (35,006)
Bank overdraft ---- (147,702)
Accounts payable (287,068) (105,651)
Accrued liabilities 305,036 11,293
Customer deposits and non-current accrued
expenses 567,956 (272,294)
Income taxes payable ---- 44,910
-------------- -------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES 339,122 (35,501)
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (378,783) (279,390)
Proceeds from the sale of property and equipment 90,561 180,281
Decrease in restricted cash 98,443 173,656
Proceeds from sale of divisions 292,818 ----
-------------- -------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES 103,039 74,547
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment received on notes receivable ---- 98,997
Payments on stockholder's note ---- (40,000)
Principal payments on debt and capital lease
obligations (873,035) (931,253)
Borrowings on notes payable ---- 7,996,500
Payments on notes payable ---- (8,548,020)
Payments on stock repurchase obligation (60,000) (80,000)
Proceeds from issuance of common stock, net of
issuance costs 729,687 1,168,979
-------------- -------------
NET CASH USED IN FINANCING ACTIVITIES (203,348) (334,797)
-------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 19,025 8,389
-------------- -------------
NET INCREASE (DECREASE) IN CASH 257,838 (287,362)
CASH AT BEGINNING OF YEAR 386,263 673,625
-------------- -------------
CASH AT END OF YEAR $ 644,101 $ 386,263
-------------- -------------
-------------- -------------
</TABLE>
See accompanying notes.
15
<PAGE>
<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995 AND 1994
1995 1994
---- ----
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Purchase of property and equipment through issuance
of notes payable and capital lease obligations $ 160,147 $ 487,908
---------- ----------
---------- ----------
Conversion of preferred stock into common stock $1,822,188
Payment of accrued dividends through the issuance of
common stock 85,000
----------
Increase in common stock $1,907,188
----------
----------
Conversion of convertible debt into common stock $1,750,000
Payment of accrued interest through the issuance
of common stock 18,812
Write-off of unamortized debt issue costs (21,093)
----------
Increase in common stock $1,747,719
----------
----------
Conversion of account payable into note payable $ 316,123
----------
----------
Reduction of account payable in exchange for
investment in SAZTEC Philippines, Inc. $68,525
----------
----------
Issuance of common stock pursuant to the achievement
of earn-out targets (Note 2):
Increase in goodwill $ 53,626 $ 55,375
---------- ----------
---------- ----------
Issuance of common stock pursuant to a market value
guarantee (Note 2) $ 187,500
----------
----------
Note receivable accepted in exchange for equipment $ 240,000
----------
----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest $ 201,394 $ 307,672
---------- ----------
---------- ----------
Income taxes $ ---- $ ----
---------- ----------
---------- ----------
</TABLE>
See accompanying notes.
16
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1995 AND 1994
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company provides services for database construction and information
conversion utilizing computer processing, electronic imaging, optical character
recognition, data entry and related technologies.
BASIS OF PRESENTATION
The Company's consolidated financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has
incurred net losses of $3,261,148 and $771,991, in 1995 and 1994, respectively,
and, at June 30, 1995, has a working capital deficiency of $769,394. In
addition, the Company has not complied with certain covenants of loan agreements
with banks. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to this
matter are described in the following paragraph. If the Company is unable to
successfully achieve its plan, the Company may be unable to meet its existing
obligations and may find it necessary to undertake such other actions as
management may determine to be appropriate. The consolidated financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
The Company's ability to continue as a going concern is dependent upon its
ability to achieve its fiscal 1996 operating plan developed by management and
renew or replace its present line of credit which is scheduled to expire in
December 1995. Management's 1996 operating plan generally includes the sale or
closedown of unprofitable operations, the sale of operations that are profitable
but not in line with the Company's long-term business mission, increase in
imaging revenues, decrease in production and administration costs through staff
and fixed overhead reductions, allowing for improved operating margins, and
reduction of general and administrative costs. There can be no assurances
that the Company will be successful in these or any other efforts.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of SAZTEC
International, Inc., and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid financial instruments purchased with an
original maturity of three months or less to be cash equivalents.
RESTRICTED CASH
The restricted cash balance at June 30, 1995 includes a certificate of deposit
of $26,210 held as collateral pursuant to a performance bond and $11,800 held in
a collateral account for repayment of a revolving credit agreement. The
restricted cash balance at June 30, 1994, includes a $96,364 customer deposit
held in an escrow account and a certificate of deposit of $40,089 held as
collateral pursuant to a performance bond.
WORK IN PROCESS
Work in process consists of labor and certain other costs incurred for
uncompleted and unbilled projects.
17
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
The Company grants credit to customers who meet the Company's preestablished
credit requirements. The Company does not require security when trade credit is
granted to customers. Credit losses are provided for in the Company's
consolidated financial statements and consistently have been within management's
expectations.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciation is provided using
straight-line or accelerated methods over estimated useful lives ranging from
three to five years. Leasehold improvements are amortized over the shorter of
the useful life of the asset or the lease term. Amortization of assets recorded
under capitalized leases is included in depreciation expense. Expenditures for
maintenance and repairs which do not increase the productive capacity or extend
the useful lives of property and equipment are charged to expense as incurred;
otherwise, such expenditures are capitalized and depreciated over the remaining
estimated useful life of the property. Upon disposition of properties, the cost
and accumulated depreciation thereon are eliminated from the accounts, and the
gain or loss on disposition is credited or charged to income.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets relate to businesses acquired and consist
principally of acquisition costs, non-compete agreements and customer lists.
All intangible assets are stated at cost net of accumulated amortization.
Goodwill is being amortized using the straight-line method over 5 to 20 years.
On a continuing basis, management reviews the carrying value and period of
amortization of goodwill. During this review process, the Company reevaluates
the assumptions used in determining the original cost of acquired businesses and
related goodwill. Although the assumptions may vary from transaction to
transaction, they generally include revenue growth, operating results, cash
flows, and other indicators of value.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign operations are translated into United States
dollars at exchange rates in effect on reporting dates, and income and expenses
are translated at rates which approximate those in effect on transaction dates.
The resulting differences due to changing exchange rates are charged or credited
directly to the "Cumulative translation adjustment" account included as part of
Stockholders' equity.
INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". Under Statement No. 109, the liability method is used to account for
income taxes. Under the liability method, deferred tax assets and liabilities
are determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that are expected to be in effect when the differences are expected to reverse.
REVENUE RECOGNITION
The Company has entered into certain long-term contracts. Revenue on these
long-term contracts is recognized using the percentage of completion, units of
delivery method. Revenue on other contracts which are short-term in nature is
recognized upon completion and shipment of the final product.
18
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOSS PER SHARE
Loss per common share is computed by dividing the net loss applicable to common
stockholders by the weighted average number of shares of common stock
outstanding during each year which totaled 11,637,481, and 7,535,554, for the
years ended June 30, 1995, and 1994, respectively. For each of the named years,
common stock equivalents would have been antidilutive and, therefore, were not
included.
NOTE 2. STOCKHOLDERS' EQUITY
PREFERRED STOCK
The Series A Cumulative Preferred Stock (Preferred Stock) consisted of 1,700
shares, with cumulative annual dividends of $100 per share, effective July 1,
1993. In December 1993, the Preferred Stockholders exercised their right to
convert the Preferred Stock into an aggregate of 2,267,800 shares of common
stock. The Company also agreed to issue 85,000 shares of common stock as
payment of the dividends accrued through December 31, 1993 of $85,000.
COMMON STOCK
In July 1993, the Company completed a private placement of common stock of
13,333 shares for $10,000. The participants in the private placements were
members of management.
During the quarter ended March 31, 1994, management completed three separate
private placements generating $1,051,729, net of issuance costs of $49,271, in
exchange for 1,100,000 shares of common stock and warrants to issue an
additional 1,287,500 shares of common stock, exerciseable for a five year period
at $1.375 per share. One of the private placements of 750,000 shares was with a
group of individuals unrelated to the Company ("the Meyerson Group"). Another
transaction representing 250,000 shares was with Tallard B.V. ("Tallard"), a
greater than 5% shareholder of the Company. The remaining transaction for
100,000 shares shares was transacted with a then-member of the Company's Board
of Directors.
Subsequent to the completion of these transactions, certain members of the
Meyerson Group alleged certain disclosure violations by the Company in the
offering documents. The Company denied the allegations and believes they were
without merit. However, to avoid the potential cost of litigation, the Company
agreed to issue 366,666 additional shares of unregistered common stock to the
private placement participants and agreed to decrease the warrant price for all
of the underlying warrants from $1.375 to $1.125. At June 30, 1995, 250,000 of
the additional shares had been issued. In exchange for these modifications,
the participants have agreed to release the Company from all claims arising out
of the three private placements.
Additionally, the Company granted certain demand registration rights to the
Meyerson Group on the 1,000,000 shares that they now own. On February 1, 1995,
the Meyerson Group exercised this right and the Company filed a Form S-3
registration statement with the Securities and Exchange Commission. The
registration was under review and comment by the Commission through July 21,
1995, when the Company requested suspension of the registration process. The
Company has asked that the registration statement not be withdrawn so that the
option to proceed in the future is preserved. The Meyerson Group has not
waived the obligation of the Company to cause the registration statement to be
filed.
On October 5, 1994, the Company agreed to sell 1,226,052 shares of common stock
to Tallard pursuant to a stock purchase agreement. The proceeds from the sale
were received in installments through December 1994, and totalled $729,687, net
of expenses of $20,213.
19
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 2. STOCKHOLDERS EQUITY (CONTINUED)
Effective December 31, 1993, Tallard exercised its right to convert a $1,750,000
note payable into preferred stock. Tallard immediately exercised its right to
convert the preferred stock into 2,334,500 shares of common stock. The Company
also issued 18,812 shares of common stock as payment of $18,812 of interest
accrued through December 31, 1993.
Pursuant to the conversion of the Tallard debt described above, Tallard has
certain Board representation rights for so long as Tallard maintains certain
ownership levels in the Company. The Company is also prohibited from entering
into any merger or consolidation, sale of substantially all of its assets, or
sale of any series of stock senior to common stock without the approval of
66.6%, or more of the outstanding voting shares.
Additionally, as part of the conversion, Tallard and the Preferred Stockholders
received certain demand and piggyback registration rights which would enable
them to publicly trade the common shares received. The demand registration
rights may be exercised after September 30, 1994. The Company is not required
to effect more than one demand registration statement in any 12 month period, or
two demand registrations in the aggregate. The registration rights expire on
December 21, 2003.
In connection with the Company's acquisition of the outstanding minority
interest of Saztec Europe, Ltd. in 1991, the selling shareholders may receive up
to 560,000 additional shares if the combined operations of SAZTEC Europe, Ltd.
earn net income of 2,480,000 pounds, in aggregate, for the period ending June
30, 1996. The agreement provides for annual earnings measurements during these
years. A total of 120,000 additional shares were earned during the year ended
June 30, 1995. The fair value of these shares, $53,626, has been applied to
goodwill.
The Company has also granted a put option to the selling shareholders to
repurchase 120,000 shares at $2.00 per share. The put option is exerciseable at
10,000 shares ($20,000) per quarter through April, 1996. During the fiscal year
ended June 30, 1995, 40,000 shares of common stock totaling $80,000 were
repurchased by the Company pursuant to the terms of the put option. Of the stock
repurchased, $20,000 remained payable to the selling shareholders at June 30,
1995. Of the remaining repurchase obligation payable or scheduled to come due,
$100,000 at June 30, 1995 and $80,000 at June 30, 1994 has been classified as
current in the accompanying consolidated financial statements.
In April, 1995, the Company issued 300,000 shares of common stock to a
stockholder pursuant to the acquisition of the Scanning America, Inc. operations
in April 1992. The acquisition agreement provided for additional shares to be
issued to the seller contingent upon the market value of Saztec's stock three
years from the original acquisition date. Based on the April 1995 market value
of the stock, the seller was entitled to claim 300,000 shares of unregistered
common stock at a value of $187,500, which has been included as a charge to
earnings.
20
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consists of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Computer & other equipment $4,483,294 $3,976,749
Computer & other equipment under
capitalized leases 151,105 821,094
Software 728,307 682,339
---------- ----------
5,362,706 5,480,182
Accumulated depreciation and amortization 4,198,658 3,473,104
---------- ----------
$1,164,048 $2,007,078
---------- ----------
---------- ----------
</TABLE>
Accumulated amortization of assets under capitalized leases amounted to $40,000,
and $303,766, at June 30, 1995, and 1994, respectively.
NOTE 4. NOTES PAYABLE, LONG-TERM DEBT, AND CAPITAL LEASE OBLIGATIONS
The Company has a revolving credit agreement secured by accounts receivable,
work in process, property and equipment and other assets bearing interest at the
lender's prime rate plus 4.0% (13.0% in aggregate at June 30, 1995) expiring on
December 31, 1995. Available borrowings are determined by a specified percentage
of qualified domestic trade receivables. Repayments of the line of credit are
taken directly from a collateral account established by the lender which
contained $11,800, and $40,089 as of June 30, 1995 and 1994, respectively. At
June 30, 1995, the Company had available borrowings of $675,267 and had borrowed
$650,091. The credit agreement at June 30, 1995 contains various restrictive
covenants which require, among other things, the maintenance of a minimum level
of stockholders' equity. Due to the losses incurred in fiscal 1995 and 1994,
the Company is not in compliance with that level. However, the lender has
waived compliance with that covenant through September 27, 1995, at which time
the lender will review the covenant.
The line of credit extends through December 31, 1995, at the rate shown above,
with an aggregate maximum borrowing level that declines in steps from $650,000
on August 15, 1995, to $450,000 on November 30, 1995. The credit line will be
payable in full on December 31, 1995, unless an additional renewal is obtained.
In January, 1995, the Company established a revolving credit agreement with a
U.K. lender secured by U.K. accounts receivable bearing interest at the lender's
base rate plus 2.0% (7.938% in aggregate at June 30, 1995) expiring in December,
1995. The maximum aggregate borrowings under the agreement were approximately
$795,000. Available borrowings are determined by a specified percentage of
qualified export trade receivables. At June 30, 1995, the Company had available
borrowings of approximately $248,235 and had no borrowings outstanding.
In December, 1993, the Company converted certain trade accounts payable of
$316,123 into a note payable. The note was fully paid during fiscal year 1995.
21
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 4. NOTES PAYABLE, LONG-TERM DEBT, AND CAPITAL LEASE OBLIGATIONS
(CONTINUED)
Long-term debt and capital lease obligations consist of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Notes payable, secured by equipment, bearing interest at
rates ranging from 8.52% to 13.69%, payable in monthly
installments through 1997. $165,439 $154,908
Capital lease obligations, bearing interest at rates ranging
from 12.75% to 16.0% payable monthly through 1998.
(See Note 10) 133,567 416,413
-------- --------
299,006 571,321
Current portion 193,320 274,824
-------- --------
Noncurrent portion $105,686 $296,497
-------- --------
-------- --------
</TABLE>
The notes payable and capital lease obligations mature during each of the next
three fiscal years ending June 30 as follows:
<TABLE>
<S> <C>
1996 $ 193,320
1997 88,142
1998 17,544
--------------
$ 299,006
--------------
</TABLE>
NOTE 5. EMPLOYEE BENEFIT PLANS
STOCK OPTION PLAN
The Company has in effect a stock option plan (the Plan) under which stock
options have been discretionarily granted to officers and key employees at
prices equal to or less than the market price at the date of grant. Options
expire four to five years after the date of grant. Total options which were
exercisable under the Plan at June 30, 1995, amounted to 402,520 shares. The
number of shares reserved for the Plan is 1,000,000. On June 30, 1995, options
for 195,250 shares remained available for grants under the Plan. Information
with respect to options granted under the Plan follows:
<TABLE>
<CAPTION>
Number of Range of
Shares Option Prices
------ -------------
<S> <C> <C>
Outstanding at June, 30, 1993 546,600 $1.38-2.63
Granted 435,000 1.03-2.00
Exercised 78,000 1.38
Canceled 92,800 1.03-1.88
Expired 5,000 2.63
------------- -------------
Outstanding at June 30, 1994 805,800 1.03-2.00
Granted --- ---
Exercised --- ---
Canceled 97,850 1.03-1.88
Expired 60,000 1.75
------------- -------------
Outstanding at June 30, 1995 647,950 1.03-2.00
------------- -------------
------------- -------------
</TABLE>
22
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 5. EMPLOYEE BENEFIT PLANS (CONTINUED)
OTHER OPTIONS
Not included in the Plan are stock options granted to the Company's President
for 202,500 shares in aggregate. These options were issued at the fair market
value on the date of grant. Options which were exercisable at June 30, 1995
amounted to 91,000 shares and were exercisable at prices ranging from $.63 to
$1.88 per share.
Not included in the Plan are stock options granted to the Company's Chairman for
225,000 shares in aggregate. These options were issued at the fair market value
on the date of grant. Options which were exercisable at June 30, 1995 amounted
to 190,333 shares and were exercisable at prices ranging from $.75 to $1.03 per
share.
Not included in the Plan are stock options granted to outside members of the
Board of Directors for 45,000 shares in the aggregate. These options were
issued at fair market value on the date of grant, which was $.63 per share.
None of these options were exercisable at June 30, 1995.
EMPLOYEE SAVINGS PLAN
The Company has in effect an employee savings plan under which substantially all
U.S. employees may contribute a percentage of their annual compensation, subject
to annual Internal Revenue Code maximum limitations. The Company has
contributed 1% of the annual compensation for all participating employees who
are contributing a minimum of 2% of their compensation. In the United Kingdom,
the Company's subsidiary, Saztec Europe, Ltd. maintains a defined contribution
pension plan for employees in Scotland and England. The Company contributes a
matching amount for all participating U.K. employees who are contributing 2.5%
to 4.5% of their compensation. For the years ended June 30, 1995, and 1994,
expense related to the savings and pension plans was not significant. In July
1995, the Company suspended the discretionary 1% employer match contribution to
the U.S. savings plan.
23
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 6. INCOME TAXES
At June 30, 1995, the Company has net operating loss carryforwards of
approximately $6,000,000 for income tax purposes that expire in varying amounts
through 2010. These operating losses may be used to offset future taxable
income in the United States. For financial reporting purposes, a valuation
allowance has been recognized to offset the deferred tax assets related to those
carryforwards due to the uncertainty of their realization. At June 30, 1995,
net operating loss carryforwards relating to the operations of Saztec Europe,
Ltd. were immaterial due to the non-deductibility of certain operating expenses
incurred during fiscal 1995. All net operating loss carryforwards in existence
prior to June 30, 1994 were fully used to offset taxable income in the United
Kingdom during fiscal 1994.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Accrued vacation $ 88,900 $ 79,100
Net operating loss carryforwards 2,430,300 1,544,400
Income from foreign subsidiary ---- 170,600
Other - net 33,400 28,100
-------------- --------------
Total deferred tax assets 2,552,600 1,822,200
Valuation allowance (2,500,200) (1,715,000)
-------------- --------------
Net deferred tax assets 52,400 107,200
Deferred tax liability:
Book basis in excess of tax basis of
acquired assets 9,200 64,700
Other - net 43,200 42,500
-------------- --------------
Total deferred tax liabilities 52,400 107,200
-------------- --------------
Net deferred tax asset $ 0 $ 0
-------------- --------------
-------------- --------------
</TABLE>
The sources of the Company's consolidated income (loss) before income taxes
and extraordinary item for the years ended June 30 consist of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
United States $ (1,998,362) $ (1,046,861)
Foreign (1,262,786) 323,658
-------------- --------------
Loss before income tax expense and extraordinary
item. $ (3,261,148) $ (723,203)
-------------- --------------
-------------- --------------
</TABLE>
24
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 6. INCOME TAXES(CONTINUED)
A reconciliation of the Company's income tax provision for fiscal 1994 and the
amount computed by applying the statutory United States income tax rate of 34%
consists of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Federal income taxes at statutory rate $ (679,400) $ (221,700)
Foreign income taxes ---- 9,907
State income taxes ---- ----
Change in valuation allowance 667,400 320,900
Capital loss carryforward ---- ----
Net operating loss carryforward ---- ----
Officers life insurance 6,800 6,500
Goodwill and other non-deductible amortization 2,200 2,800
Other items 3,000 1,500
------------ -----------
Total income taxes $ ---- $ 119,907
------------ -----------
</TABLE>
The provision for income taxes for fiscal 1994 consists of the following:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
$ --- $ --- $ ---
Federal --- --- ---
State --- --- ---
Foreign 44,907 75,000 119,907
---------- ---------- ---------
$ 44,907 $ 75,000 $ 119,907
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
25
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 7. SALES OF DIVISIONS
In February 1995, management decided to sell the assets of the Financial
Transaction Processing Division ("FTP"). The sale was completed in June 1995.
The operating results for FTP for the years ended June 30, 1995, and 1994 were
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenue $ 1,113,360 $ 1,503,751
Gross loss (92,635) (24,380)
Operating loss (296,110) $ (35,550)
Loss on sale of division (157,500) ----
</TABLE>
The loss of $157,500 includes lease abandonment and severance costs and the loss
on sale of assets.
On September 1, 1995, the Company completed the sale of the Knightsbridge
Microfilm Division based in Winchester, U.K. For the years ended June 30,
1995 and June 30, 1994, the division generated revenues of $519,012 and
$837,610, respectively. For the same periods, the division generated net
losses of $284,357 and $79,010. A loss of $145,000 on the sale of assets of
the division is recognized in the results of operations for the year ended June
30, 1995. The net book value of the total assets of the division was $297,273
on June 30, 1995.
Also, on September 1, 1995, the Company completed the sale of the Marketing
Fulfillment Division based in Billerica, Massachusetts. For the years ended
June 30, 1995 and June 30, 1994, the division generated revenues of $2,186,963
and $2,174,332, respectively. For the same periods, the division generated
net profits of $208,932 and $139,190. An aggregate gain of approximately
$219,800 on the sale of assets of the division will be recognized in the results
of operations for the quarter ended September 30, 1995. The net book value of
the total assets of the division was approximately $236,100 on June 30, 1995.
In October, 1993, the Company completed two separate transactions to sell
certain assets, customer lists and personal property of two divisions. For the
year ended June 30, 1994, the divisions generated revenue of $331,900 and net
losses of $34,200. An aggregate loss of $33,700 on the sale was recognized in
the Company's results of operations for the year ended June 30, 1993. The net
book value of total assets of the two divisions sold was $423,883.
NOTE 8. EXTRAORDINARY ITEM
During the fourth quarter of fiscal 1994, the Company chose to use a portion of
the proceeds of one of the private placements listed in Note 2 to retire, for
less than their recorded value, the remaining capital lease obligations on
equipment used in providing services to the telephone utility industry. The
transaction resulted in a gain of $71,119. This gain has been classified as
an extraordinary item. There was no related tax effect due to the Company's net
operating loss.
26
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 9. COMMITMENTS AND CONTINGENCIES
LITIGATION
In July, 1995, an action against the Company in connection with the employment
of an individual was decided in favor of the Company by the State Court. At
present, management and counsel believe that the future effect of this action on
the Company will be immaterial.
In August, 1994, the Company filed suit against Digital Equipment Company (DEC)
based upon termination by DEC of a contractual agreement between the Company and
DEC. The matter is now set for trial in January, 1996.
LEASE COMMITMENTS
Rent expense charged to operations under operating leases for office space,
computer equipment and software for the years ended June 30, 1995, and 1994 was
$716,959, and $867,343, respectively.
At June 30, 1995, the Company had capital and operating lease obligations for
office space and equipment used in operations that mature during the fiscal
years ending June 30 as follows:
<TABLE>
<CAPTION>
Capital Operating Leases Total
Leases Property Equipment Commitments
------------- ------------------------- -------------
<S> <C> <C> <C> <C>
1996 $ 88,497 $ 396,196 $ 45,484 $ 530,177
1997 47,298 243,994 39,326 330,618
1998 9,709 163,057 19,322 192,088
1999 ---- 113,091 4,348 117,439
2000 and later ---- 78,877 ---- 78,877
------------- ------------ ---------- -------------
$ 145,504 $ 995,215 $ 108,480 $ 1,249,199
------------ ---------- -------------
------------ ---------- -------------
Less amount
representing
interest 11,937
-------------
Net obligations
under capital
leases (Note 4) $ 133,567
-------------
-------------
</TABLE>
27
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995, AND 1994
NOTE 10. QUARTERLY FINANCIAL DATA (UNAUDITED)
The results of operations by quarter for the years ended June 30, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
Net income
(loss)
applicable to Earnings
common (Loss)
Revenues Shareholders Per Share
-------- ------------ ---------
<S> <C> <C> <C>
Year ended June 30, 1995
Quarter ended --
September 30, 1994 $ 3,446,796 $ (520,909) $ (.05)
December 31, 1994 3,720,648 (378,787) (.03)
March 31, 1995 3,501,719 (1,304,863) (.11)
June 30, 1995 2,927,685 (1,056,589) (.08)
------------- ---------------
Total $13,596,848 $ (3,261,148) (.28)
------------- ---------------
------------- ---------------
Year ended June 30, 1994
Quarter ended --
September 30, 1993 $ 4,537,572 $ (225,369) $ (.05)
December 31, 1993 5,038,264 66,656 .01
March 31, 1994 4,277,463 (178,738) (.02)
June 30, 1994 4,068,422 (519,540) (.05)
-------------- ---------------
Total $ 17,921,721 $ (856,991) (.11)
-------------- ---------------
-------------- ---------------
</TABLE>
The above quarterly financial data is unaudited, but in the opinion of
management, all adjustments necessary for a fair presentation of the selected
data for these interim periods presented have been included.
Included in the fourth quarter of fiscal 1995 are charges of $187,500 for the
issuance of stock pursuant to a market value guarantee related to a 1992
acquisition agreement and $145,000 to provide for a loss on the sale of assets
of the Knightsbridge Microfilm Division on September 1, 1995.
Included in the fourth quarter of fiscal 1994 is a charge of $62,711 for the
acceleration of rent expense on an abandoned facility. The provision (benefit)
for income taxes for the first three quarters of fiscal 1994 has been adjusted
to give effect to the annualized effective tax rate.
28
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 11. FOREIGN OPERATIONS AND MAJOR CUSTOMERS
Revenues, earnings before taxes and extraordinary items, and identifiable assets
by geographic area are shown below. United Kingdom amounts relate solely to
SAZTEC Europe, Ltd. and its subsidiaries.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Total Revenues
United States $6,543,384 $8,807,917
United Kingdom 7,053,464 9,113,804
-------------- --------------
$ 13,596,848 $ 17,921,721
-------------- --------------
-------------- --------------
Income (loss) before income taxes and
extraordinary items
United States $(1,998,362) $(1,046,861)
United Kingdom (1,262,786) 323,658
-------------- --------------
$ (3,261,148) $ (723,203)
-------------- --------------
-------------- --------------
Identifiable Assets
United States $ 2,681,426 $ 3,227,361
United Kingdom 2,474,236 4,284,505
-------------- --------------
$ 5,155,662 $ 7,511,866
-------------- --------------
-------------- --------------
</TABLE>
MAJOR CUSTOMERS
For the year ended June 30, 1995, the Company had two customers in the United
Kingdom that accounted for 15% and 9% respectively, of consolidated revenues.
For the years ended June 30, 1994, the same two customers accounted for 8% and
13% respectively, of consolidated revenues.
29
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS, COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
OFFICERS AND DIRECTORS
The officers and directors of the Company are as follows:
Name Age Position with Company
---- --- ---------------------
Robert P. Dunne 66 Chairman of the Board of Directors, Director
Gary N. Abernathy 55 President, Director, Chief Executive Officer
Tom W. Olofson 54 Director
Lee R. Petillon 66 Director
Elvin E. Smith 52 Senior Vice President, Sales
Donald J. Campbell 55 Vice President, Secretary, and Treasurer
Mr. Dunne has been a director of the Company since March 1985. On November 8,
1990, Mr. Dunne was appointed Chairman of the Board. Since 1974 Mr. Dunne has
also been President and Chief Executive Officer, a director and the principal
shareholder of Robertson Corporation. Mr. Dunne is a Certified Public
Accountant.
Mr. Abernathy was Group Vice President of the Company from May 1, 1987 to
February 1, 1988; President and Chief Operating Officer from February 1, 1988,
until May 1990, when he became Vice Chairman and Chief International Officer.
On December 9, 1994, Mr. Abernathy was appointed Chief Executive Officer. Mr.
Abernathy was elected as a Director of the Company in March, 1985. From 1985 to
April 1994, Mr. Abernathy was an officer, director and a principal shareholder
of Robertson Corporation, which is also a shareholder of the Company.
Mr. Petillon was elected to the Company's Board of Directors in August 1988.
Since 1978 Mr. Petillon has been in private law practice, dealing primarily in
the areas of business, corporation, securities, mergers and acquisitions and
corporate finance. Mr. Petillon served as the Company's legal counsel from June
1983 to June 1988.
Mr. Olofson was elected to the Company's Board of Directors in November 1991.
Mr. Olofson has been Chairman and Chief Executive Officer of Electronic
Processing, Inc. since July 1988. Mr. Olofson also serves as a member of the
Board of Directors of various private companies in which he is an investor.
Mr. Smith has been Senior Vice President, Sales, of the Company since December
1986. Prior to joining the Company, Mr. Smith was President of Dataphase, Inc.
Mr. Campbell was appointed Vice President, Secretary, and Treasurer of the
Company in April 1995. Prior to joining the Company, Mr. Campbell was Vice
President of European Operations for Information Dimensions, Inc. Mr. Campbell
is a Certified Public Accountant.
30
<PAGE>
All directors hold office until the next annual meeting of shareholders and
until their successors are duly elected and qualified. Officers are elected on
an annual basis by the Board of Directors and serve at the discretion of the
Board.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company believes that during the fiscal year ended June 30, 1995, all
Section 16(a) filing requirements applicable to its officers, directors, and
greater than 10% beneficial owners were satisfied.
ITEM 10. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following tables set forth, for the fiscal year ended June 30, 1995, the
compensation received by the Company's Chief Executive Officer and each of the
most highly compensated executive officers whose compensation exceeded $100,000
for services rendered to the Company.
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION AWARD
------------ ------------------
NAME AND SECURITIES UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SAR'S (#) COMPENSATION($)(1)
------------------ ---- --------- -------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
GARY N. ABERNATHY 1995 115,375 ---- 100,000 55,000 (2)
President and Chief 1994 109,000 ---- 50,000 4,990 (1)
Executive Officer 1993 106,000 15,000 ---- ----
ELVIN E. SMITH 1995 106,093 ---- ---- ----
Senior Vice President 1994 97,156 18,937 25,000 ----
Sales 1993 90,737 ---- ---- ----
</TABLE>
(1) Comprised of the taxable portion of split dollar life insurance premiums
for the named executives.
(2) Market value of 80,000 shares of common stock given to Mr. Abernathy in an
employment agreement with the Company dated January 1, 1995, and authorized
to be issued as of September 21, 1995.
STOCK OPTIONS ISSUED
The following table sets forth the stock options issued to the named executives
during the year ended June 30, 1995:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
NUMBER OF SECURITIES % OF TOTAL OPTIONS/SARS EXERCISE
UNDERLYING OPTIONS/ GRANTED TO EMPLOYEES OR BASE EXPIRATION
SARS GRANTED (#1) IN FISCAL YEAR PRICE ($/SH.) DATE
NAME ---------------- -------------- ------------- ----
<S> <C> <C> <C> <C>
Gary N. Abernathy 100,000 100.0% 0.625 February 22,
2000
</TABLE>
31
<PAGE>
STOCK OPTIONS EXERCISED
During the year ended June 30, 1995, no stock options were exercised by the
named executives. For the fiscal year ended June 30, 1995, no stock options
previously awarded to any of the named executives were repriced. The following
table sets forth, as of June 30, 1995, the exercisable and unexercisable
portions of stock options held by the named executives.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS/SARS AT FISCAL YEAR END (#)
SHARES ACQUIRED VALUE -----------------------------------------------
NAME ON EXERCISE ($) REALIZED ($) EXERCISEABLE UNEXERCISEABLE
- - ---- --------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Gary N. Abernathy -0- -0- 91,000 111,500
Elvin E. Smith -0- -0- 67,000 22,000
</TABLE>
As of June 30, 1995, there was no unrealized value with respect to the
exercisable or unexercisable portions of the options held by the above-named
executives.
LONG-TERM INCENTIVE PLAN AWARDS
The Company has no Long-term Incentive Plan Awards currently in effect.
EMPLOYMENT CONTRACTS
Mr. Abernathy has an employment contract entered into with the Company on
January 1, 1995 under which he will perform the duties of the office to which he
is elected by the Board of Directors. The contract is for a three year term
ending December 31, 1997.
32
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of September 21, 1995 information concerning
the beneficial ownership of the Common Stock of the Company by (i) each person
who is known by the Company to own beneficially more than 5% of the Company's
Common Stock, (ii) each director of the Company, and (iii) all directors and
executive officers of the Company as a group.
NAME AND ADDRESS NO. OF SHARES PERCENT OWNED (1)
---------------- ------------- -----------------
Gary N. Abernathy (2)
43 Manning Road
Billerica, MA 01821 206,169 1.4
Robert P. Dunne (3)
928 Southwest Tenth Street
Miami, FL 33130 569,665 3.9
Lee R. Petillon
21515 Hawthorne Blvd., #1260
Torrance, CA 90503 24,000 *
Tom W. Olofson
501 Kansas Ave
Kansas City, KS 66105 92,000 *
Richard P. Kiphart (4)
222 West Adams
Chicago, IL 60603 1,325,786 9.0
Tallard B.V. (5)
c/o Peder G. Wallenberg
Amsteldijk 166 Rivierstaete
1079 LH Amsterdam 4,562,697 30.9
Elvin E. Smith
6700 Corporate Drive Suite 100
Kansas City, MO 64120 91,433 *
Donald J. Campbell
43 Manning Road
Billerica, MA 01821 ---- *
All Directors and Officers
as a Group (7 persons) 983,167 6.7
* Less than one percent (1%)
(1) Based on 12,543,851 shares outstanding on September 21, 1995, 196,666 shares
authorized to be issued, and exercisable options and warrants to issue an
additional 2,024,353 shares, in aggregate, at such date, for a total of
14,764,870.
(2) The shares beneficially owned by Mr. Abernathy are issued in the following
manner: 10,769 shares in the name of Information Control, Inc. which is wholly-
owned by Mr. Abernathy, a vested right to acquire 91,000 shares pursuant to
stock options, 24,400 shares owned directly, and 80,000 shares authorized to be
issued.
33
<PAGE>
(3) The shares beneficially owned by Mr. Dunne are issued in the following
manner: 94,565 shares in the name of Robertson Corporation (of which Mr. Dunne
is the sole owner), a vested right to acquire 190,333 shares pursuant to stock
options, 300 shares held by the Amy Schneeberger Trust, of which Mr. Dunne is a
trustee, 400 shares held by Mrs. Dunne's Individual Retirement Account, and
284,067 shares owned directly.
(4) The shares beneficially owned by Mr. Kiphart are issued in the following
manner: 1,182,746 shares owned directly, and 143,040 shares in the aggregate,
held by three trusts for Mr. Kiphart's children, of which Mrs. Kiphart is the
trustee.
(5) The shares beneficially owned by Tallard B.V. are held in the following
manner: 4,129,364 shares owned directly by Tallard B.V., 83,333 shares
authorized to be issued, and a right to acquire 350,000 shares pursuant to stock
warrants held by Tallard B.V. Tallard B.V. is wholly owned by Mr. Wallenberg,
and he may be deemed to be the beneficial owner of all shares held by Tallard
B.V.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 5, 1994, the Company agreed to sell 1,226,052 shares of unregistered
Common Stock of the Company for $750,000 to Tallard B.V. ("Tallard") pursuant to
a Stock Purchase Agreement. The transaction was consummated at a price
approximating then current quoted market prices.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
The following Exhibits are filed by attachment to this Annual Report on
Form 10-KSB:
EXHIBIT
NUMBER
------
10.8 1995 Employee Stock Option Plan
10.9 1995 Non-Employee Directors Stock Option Plan
10.10 Employment Agreement for Gary N. Abernathy of January 1, 1995
10.11 Renewal of Revolving Credit Agreement, dated August 12, 1995
22 Subsidiaries of the registrant (disclosed on page 3 in Item 1 of
this 10-KSB)
34
<PAGE>
In addition to those Exhibits shown above, the Company incorporates the
following Exhibits by reference to the filings set forth below:
EXHIBIT NO. DESCRIPTION FILED AS EXHIBIT:
- - ----------- ----------- ----------------
2 Plan of Recapitalization 2 to Form 8-K dated
February 19, 1993
3 Articles of Incorporation and By-Laws 3 to Form 10-K for the
year ended June 30, 1990
4 Instruments defining the rights of 4 to Form 10-K for the
security holders including indentures. year ended June 30, 1990
4.1 Ten Year Convertible Debenture Note 4 to Form 10-K for the
Agreement year ended June 30, 1992
4.2 Certificate of Determination for the 4 to Form 8-K dated
establishment of the Series A February 19, 1993
Cumulative Preferred Stock
4.3 Registration Rights Agreement dated 4 to Form 8-K dated
December 31, 1993 among Saztec December 31, 1993
International, Inc., Tallard B.V.,
Barry Craig, and the Preferred
Shareholders
10.1 Stock Purchase Agreement between 10 to Form 8-K dated
Saztec International, Inc., and October 5, 1994
Tallard B.V
10.2 Agreement dated January 9, 1995 10 to Form 10-Q for the
between Saztec International, Inc., Quarter ended December
the Meyerson Group and the Placement 31, 1994
Warrant Holders
10.3 The rescission of the purchase of CFL, 2 to Form 8-K dated
Ltd. common stock February 17, 1993
10.4 Loan Agreement between Tallard B.V. 10 to Form 8-K dated
and Saztec Europe, Ltd. February 19, 1993
10.5 Conversion Agreement dated December 31, 10 to Form 8-K dated
1993 among Saztec International, Inc., December 31, 1993
Tallard B.V., and the Preferred
Shareholders
10.6 Renewal of Revolving Credit Agreement 10 to Form 8-K dated
June 2, 1995
10.7 Renewal of Revolving Credit Agreement 10 to Form 8-K dated
June 19, 1995
(B) REPORTS ON FORM 8-K:
During the three months ended June 30, 1995, Form 8-K's dated June 2, 1995, and
June 19, 1995, were filed with respect to the extension of the revolving credit
facility.
35
<PAGE>
SIGNATURES
Pursuant to the requirement 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.
Dated: September 22, 1995
SAZTEC INTERNATIONAL, INC.
--------------------------
By: /s/ Robert P. Dunne
--------------------------------------------
Robert P. Dunne
Chairman of the Board and Director
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on September 22, 1995.
Signature Capacity
--------- --------
/s/ Robert P. Dunne Chairman of the Board and Director
---------------------------
Robert P. Dunne
/s/ Gary N. Abernathy President, Director, Chief Executive
--------------------------- Officer and Director
Gary N. Abernathy
/s/ Donald J. Campbell Vice President, Secretary/Treasurer,
--------------------------- and Chief Financial Officer
Donald J. Campbell
/s/ Tom W. Olofson Director
---------------------------
Tom W. Olofson
/s/ Lee R. Petillon Director
---------------------------
Lee R. Petillon
36
<PAGE>
SAZTEC INTERNATIONAL, INC. FORM 10-KSB FOR JUNE 30, 1995 -- EXHIBIT 10.8
SAZTEC INTERNATIONAL, INC.
1995 STOCK OPTION PLAN
I. PURPOSE
The purposes of the Saztec International, Inc. 1995 Stock Option Plan (the
"Plan") are to: (1) closely associate the interests of officers and other key
executive and management employees of Saztec International, Inc. and its
subsidiaries (collectively referred to as the "Corporation") with the interests
of the shareholders by reinforcing the relationship between participants rewards
and shareholder gains; (2) provide officers and other key executive and
management employees with an equity ownership in the Corporation commensurate
with corporate performance, as reflected in increased shareholder value; (3)
maintain competitive compensation levels; and (4) provide an incentive to
officers and other key executive and management employees for continuous
employment with the Corporation.
II. ADMINISTRATION
(a) The Plan shall be administered by the Stock Option Plan Committee
("Committee") of the Board of Directors of the Corporation ("Board") which
Committee shall be composed of not less than two members of the Board who are
not employees, full time of part time, of the Corporation and who otherwise
qualify as "disinterested persons" under Rule 16b-3 or its successors
promulgated under the Securities Exchange Act of 1934, as amended ("Rule 16b-
3"). In addition to its duties with respect to the Plan stated elsewhere in the
Plan, the Committee shall have full authority, consistent with the Plan, to
interpret the Plan, to promulgate such rules and regulations with respect to the
Plan as it deems desirable, to delegate its ministerial responsibilities
hereunder to appropriate persons and to make all other determinations necessary
or desirable for the administration of the Plan. All decisions, determinations
and interpretations of the Committee shall be binding upon all persons.
(b) Stock options granted pursuant to the Plan ("Options") shall be either
incentive stock options ("ISOs") intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or nonqualified stock
options ("NSOs') not intended to quality under Section 422 of the Code.
References in this Plan to Options shall include both ISOs and NSOs.
(c) The Committee shall administer the Plan in a manner necessary to
establish and maintain the Options intended to constitute ISOs as ISOs, and the
Options intended to constitute NSOs as NSOs. However, the Corporation makes no
representation that the Options designated as ISOs and the Options designated as
NSOs will qualify at the time of grant as ISOs and NSOs, respectively, or will
continue to qualify as ISOs and NSOs respectively. Nor does the Corporation
make any representation concerning the tax
<PAGE>
consequences to an employee or any other person upon receipt or exercise of any
Option hereunder or the subsequent sale of Common Stock acquired thereunder.
III. SHARES SUBJECT TO THE PLAN
Shares of Common Stock that may be issued under the Plan shall be the
common stock, no par value, of the Corporation ("Common Stock"). The aggregate
number of shares of Common Stock, subject to adjustment pursuant to Article XVI,
which may be delivered on exercise of the Options is 1,000,000 and such amounts
of shares of Common Stock shall be, and hereby are reserved for such purpose.
Such shares may be previously issued shares reacquired by the Corporation or
authorized but unissued shares. If any Option expires, terminates or is
canceled for any reason, without having been exercised in full, the shares
covered by the unexercised portion of such Option shall again be available for
Options, within the limit specified above.
IV. PARTICIPANTS
The Committee shall determine the class of key employees, including
employees, who are members of the Board of the Corporation and its subsidiary
corporations, which shall be eligible for participation in the Plan and shall
from time to time in its discretion select from among them those to whom Options
shall be granted ("Participants"). (For purposes of the Plan, the term
"Participant(s)" shall, when appropriate, include any person permitted to
exercise an Option in accordance with the terms of the Plan.) A member of the
Board who is not an employee of the Corporation shall not be eligible to receive
an Option.
V. GRANTS OF OPTIONS
(a) The Committee shall in its discretion determine the time or times when
Options shall be granted and the number of shares of Common Stock to be subject
to each Option, except that no Option may be granted more than ten years after
the effective date hereof.
(b) The Committee may in its discretion grant either ISOs, NSOs or a
combination of both and shall at the time the Option is granted designate
whether the Option is an ISO or NSO.
(c) At any given time, a share of Common Stock may be subject to only one
of the two types of Options that may be issued under the Plan.
(d) With respect to ISOs granted under the Plan, the aggregate fair market
value (determined as of the date the Option is granted) of the Common Stock with
respect to which ISOs are exercisable for the first time by the Participant
during any calendar year under all stock option plans of the Corporation and its
subsidiaries shall not exceed $100,000. Notwithstanding the provisions for
acceleration of the date an Option is first
<PAGE>
exercisable in Article VII and Article VIII, in no event shall the date that an
ISO is first exercisable be accelerated under this Plan if the acceleration
would cause an ISO of a Participant to exceed the limit set forth in this
paragraph.
(e) No Option intended to constitute an ISO shall be granted to an
employee who, at the time the Option is granted, owns (within the meaning of
Section 422(b)(6) of the Code) Common Stock possessing more than 10 percent of
the total combined voting power of all classes of stock of the Corporation or
any of its subsidiaries (hereinafter referred to as a "Ten Percent Shareholder")
unless (1) the purchase price of the Common Stock subject to such Option shall
be, subject to adjustment pursuant to Article XVI, at least 110 percent of the
fair market value of the Common Stock on the day the Option is granted
determined in accordance with Article VI which relates to the method for
determining the fair market value of the Common Stock on the date an ISO is
granted, and (2) the Option by its terms is not exercisable after the expiration
of five years from the date such Option is granted.
(f) Each Option shall be evidenced by a written Option Agreement which
shall (1) state the terms and conditions of the Option in accordance with the
Plan; and (2) contain such additional provisions as may be required under
applicable laws, regulations, and rules or otherwise consistent with the terms
of the Plan as the Committee may determine.
VI. OPTION PRICE
(a) The purchase price of a share of Common Stock subject to an NSO shall
be, subject to adjustment pursuant to Article XVI, determined by the Committee
and may be less than the fair market value of the Common Stock on the date the
NSO is granted.
(b) Except as provided in paragraph (e) of Article V relating to ISOs
issued to Ten Percent Shareholders, the purchase price of a share of Common
Stock subject to an ISO shall be, subject to adjustment pursuant to Article XVI,
an amount equal to the fair market value of the Common Stock on the day the ISO
is granted.
(c) The fair market value shall be the closing price at which the Common
Stock is traded on the day the ISO is granted. For this purpose, the closing
price of the Common Stock on any business day shall be (i) if such Common Stock
is listed or admitted for trading on any United States national securities
exchange, or if actual transactions are otherwise reported on a consolidated
transaction reporting system, the last reported sale price of Common Stock on
such exchange or reporting system, as reported in any newspaper of general
circulation, (ii) if the Common Stock is quoted on the National Association of
Securities Dealers Automated Quotations System ("NASDAQ"), or any similar system
of automated dissemination of quotations of securities prices in common use, the
closing bid quotation for such day of the Common Stock on such system, or (iii)
if neither clause (i) or (ii) is applicable, the mean between the high bid and
low ask quotations for the Common Stock as reported by the National
<PAGE>
Quotation Bureau, Incorporated if at least two securities dealers have inserted
both bid and ask quotations for the Common Stock on at least 5 of the 10
preceding days.
VII. OPTION PERIOD; EXERCISE RIGHTS
(a) Except as provided in paragraph (e) of Article V relating to ISOs
issued to Ten Percent Shareholders, each Option shall be exercisable for a term
as the Committee shall determine, but not more than 10 years from the date it is
granted, and shall be subject to earlier termination as provided in Article
VIII.
(b) Unless specifically provided by the Committee in its sole discretion,
an Option shall become exercisable upon its grant.
VIII. EXERCISE RIGHTS UPON TERMINATION OF EMPLOYMENT
(a) If a Participant terminates employment on account of becoming
disabled, the Participant may exercise the Option in whole or in part within one
year after the date of disability, but in no event later than the date on which
it would have expired if the Participant had not become disabled.
For this purpose, a Participant shall be deemed to be disabled if he or she
is determined to be disabled for purposes of meeting any insurance requirements
under policies provided by the Corporation. If no such policies are in effect,
disability shall have the same meaning as set forth in Section 22(e) of the
Code.
(b) If a Participant dies during a period in which he or she is entitled
to exercise an Option (including the periods referred to in paragraph (a) and
(b) of this Article), the Option may be exercised at any time within its
remaining term as shall be prescribed in the Option Agreement, but in no event
later than the date on which it would have expired if the Participant had lived,
or one year after the participant's death, whichever date if earlier, by the
Participant's executor or administrator or by any person or persons who shall
have acquired the Option directly from the Participant by will or the laws of
descent and distribution. The Option may be exercised in whole or in part.
(c) If a Participant's employment with the Corporation or a subsidiary
shall be terminated for cause, he or she shall forfeit any and all outstanding
Option rights and such rights shall be deemed to have lapsed for purposes hereof
as of the date of the participant's termination of service.
(d) If a Participant ceases to be employed by the Corporation or a
subsidiary for any reason other than disability, death or termination for cause
during a period in which he or she is entitled to exercise an Option, the
Participant's Option shall terminate three months after the date of such
cessation of employment, but in no event later than the date on which it would
have expired if such cessation of employment had not occurred. During such
period the Option may be exercised only to the extent that the Participant
<PAGE>
was entitled to do so at the ate of cessation of employment. The employment of
a Participant shall not be deemed to have ceased upon his or her absence from
the Corporation or a subsidiary on a leave of absence granted in accordance with
the usual procedures of the Corporation or such subsidiary.
(e) No acceleration of the exercise date of an ISO shall occur pursuant to
this Article if such earlier exercise would cause an ISO to violate paragraph
(d) of Article V.
IX. METHOD OF EXERCISE
An Option shall be deemed exercised when (i) the Corporation has received
written notice of such exercise in accordance with the terms of the Option, (ii)
full payment of the aggregate exercise price of the shares of Common Stock as to
which the Option is exercised has been made, and (iii) arrangements that are
satisfactory to the Committee in its sole discretion have been made for the
Participant's payment to the Corporation of the amount that is necessary for the
Corporation to withhold taxes in accordance with applicable Federal, state of
local tax withholding requirement. The exercise price of any share of Common
Stock purchased, and any required tax payment, shall be paid in cash, by the
tender of shares of Common Stock, or both. If payment is made in cash, it may
be made by certified or official bank check, personal check or money order. If
payment is made by the tender of shares of Common Stock, the fair market value
of each such share shall be determined as of the day the shares are tendered for
payment, in a manner consistent with the determination of fair market value
under paragraph (b) of Article VI. Any excess of the value of the tendered
shares over the purchase price will be returned to the Participant as follows"
(i) Any whole shares remaining in excess of the purchase price will be
returned to the Participant in kind, and may be represented by one or more
certificates as determined by the Corporation in its sole discretion.
(ii) Any partial Shares remaining in excess of the purchase price will be
returned to the Participant in cash.
No Participant shall be deemed to be a holder of any shares of Common Stock
subject to an Option unless and until a stock certificate or certificates for
such shares are issued to such person(s) under the terms of the Plan. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
expressly provided in Article XVI.
X. WITHHOLDING TAXES
Whenever the Corporation proposes or is required to issue or transfer
shares of Common Stock under the Plan, the Corporation shall have the right to
require the Participant to remit to the Corporation an amount sufficient to
satisfy any Federal, state
<PAGE>
and/or local withholding tax requirements prior to the delivery of any
certificate or certificates for such shares. Alternatively, the Corporation may
issue or transfer such shares of Common Stock net of the number of shares
sufficient to satisfy the withholding tax requirements. For withholding tax
purposes, the shares of Common Stock shall be valued on the date the withholding
obligation is incurred.
XI. NONTRANSFERABILITY OF OPTIONS
Each Option shall be nonassignable and nontransferable by the Participant
other than by will or the laws of descent and distribution. Each Option shall
be exercisable during the Participant's lifetime only by the Participant.
XII. REPURCHASE OF SHARES BY CORPORATION
The Corporation is under no obligation to repurchase Common Stock acquired
pursuant to the exercise of an Option hereunder.
XIII. USE OF PROCEEDS
The proceeds received by the Corporation from the sale by it of shares of
Common Stock to Participants exercising Options pursuant to the Plan will be
used for the general purposes of the Corporation.
XIV. LAWS AND REGULATIONS
(a) If any provision of the Plan should be held invalid or illegal for any
reason, such determination shall not affect the remaining provisions hereof, but
instead the Plan shall be construed and enforced as if such provision had never
been included in the Plan. Without limiting the generality of the foregoing,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent any provision of the Plan or action by
the Committee hereunder is inconsistent with the foregoing requirements, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
(b) The determinations and the interpretation and construction of any
provision of the Plan by the Committee shall be final and conclusive. This Plan
shall be governed by the laws of the State of California. Headings contained in
this Plan are for convenience only and shall in no manner be construed as part
of this Plan. Any reference to the masculine, feminine, or neuter gender shall
be a reference to such other gender as is appropriate.
XV. ISSUANCE OF SHARES OF COMMON STOCK
As a condition of any sale or issuance of shares of Common Stock upon
exercise of any Option, the Committee may require such agreements or
undertakings, if any, as
<PAGE>
the Committee may deem necessary or advisable to assure compliance with any
applicable law or regulation include, but not limited to, the following:
(a) a representative and warranty by the Participant to the Corporation,
at the time any Option is exercised, the optionee is acquiring the shares of
Common Stock to be issued for investment and not with a view to, or for sale in
connection with, the distribution of any such shares; and
(b) a representation, warranty and/or agreement to be bound by any legends
that are, in the opinion of the Committee, necessary or appropriate to comply
with the provisions of any securities law deemed by the Committee to be
applicable to the issuance of the shares of Common Stock and are endorsed upon
the share certificates.
XVI. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
(a) Options granted under the Plan shall be subject to adjustment by the
Committee as to the number and price of shares subject to such Options in the
event of changes in the outstanding shares of Common Stock by reason of stock
dividends, stock splits, recapitalization, reorganizations, mergers,
consolidations, combinations, exchanges, or other relevant changes in
capitalization occurring after the date of grant of any such Option. In the
event of any such change in the outstanding shares of Common Stock, the
aggregate number of shares available under the Plan shall be approximately
adjusted by the Committee, whose determination shall be conclusive.
(b) Except as otherwise expressly provided herein, the issuance by the
Corporation of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection with
a direct sale or upon the exercise of rights or warrants to subscribe therefore,
or upon conversion of shares or obligations of the Corporation convertible into
such shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of exercise price of the
shares of Common Stock then subject to outstanding Options granted under the
Plan.
(c) Without limiting the generality of the foregoing, the existence of
outstanding Options granted under the Plan shall not affect in any manner the
right or power to the Corporation to make, authorize or consummate (i) any or
all adjustments, recapitalizations, reorganizations or other changes in the
Corporation's capital structure or its business; (ii) any merger or
consolidation of the Corporation; (iii) any issue by the Corporation of debt
securities, or preferred or preference stock that would rank above the shares of
Common Stock subject to outstanding Options; (iv) the dissolution or liquidation
of the Corporation; (v) any sale, transfer or assignment of all or any part of
the assets or business of the Corporation; or (vi) any other corporation act or
proceedings, whether of a similar character or otherwise.
XVII. NO EMPLOYMENT RIGHTS
<PAGE>
Nothing in the Plan shall confer upon any employee of the Corporation or of
a subsidiary any right to continued employment, or interfere with the right of
the Corporation or a subsidiary to terminate his or her employment at any time,
for any reason.
XVIII. TERM OF PLAN; TERMINATION; AMENDMENTS
(a) This Plan is effective as of December 9, 1994 (the "Effective Date"),
the date of its original adoption by the Board, subject to approval by the
affirmative vote of the holders of a majority of the shares of Common Stock
present or represented and entitled to vote at the Annual Meeting of
Shareholders of the Corporation, which is scheduled to be held on February 15,
1995. This Plan shall continue in effect until all Options granted hereunder
have expired or been exercised, unless sooner terminated under the provisions
relating thereto. No Option shall be granted after 10 years from the Effective
Date.
(b) The Board may from time to time amend, terminate or suspend the Plan
or an Option, provided, however that, except to the extent provided in Article
XVI, no such amendment may (i) without approval by the Corporation's
shareholders, increase the number of shares of Common Stock reserved for Options
or change the class of persons eligible to receive Options or involve any other
change or modification requiring shareholder approval under Rule 16b-3, (ii)
permit the granting of Options that expire beyond the maximum period described
in Article V, (iii) extend the termination date of the Plan as set forth in
Article V; or (iv) cause the Plan to be ineligible to issue ISOs, (v) reduce the
purchase price of an outstanding ISO, (vi) without approval by the Corporation's
shareholders, materially increase in any other way the benefits accruing to
Participants or (vii) except to the extent otherwise specifically provided in
the Plan, substantially impair any Option previously granted to a Participant
without the consent of such Participant. Any termination or suspension of the
Plan shall not affect Options already granted and such Options shall remain in
full force and effect as if this Plan had not been terminated or suspended. No
Option may be granted while the Plan is suspended or after it is terminated.
(c) Except as set forth herein, the Board or the Committee, as the case
may be, may at any time or times amend the Plan, or amend any outstanding Option
or Options for the purpose of satisfying the requirement of any changes in
applicable laws or regulations or for any other purpose which at the time may be
permitted by law. In the event that applicable rules or regulations are
promulgated by the Internal Revenue Service which permit the acceleration of the
date an Option is first exercisable without violating the $100,000 limit
described in paragraph (d) of Article V, the Committee is authorized to act on
behalf of the Board in amending the Plan to permit acceleration in conformity
with such rules or regulations.
(d) Nothing contained in this Plan shall be construed to prevent the
Corporation or any subsidiary from taking any corporate action which is deemed
by the Corporation
<PAGE>
or any such subsidiary to be appropriate or in its best interest, whether or not
such action would have an adverse effect on the plan or any award made under the
Plan. No employee, beneficiary, or other person shall have any claim against
the Corporation or any subsidiary as a result of any such action.
XIX. INDEMNIFICATION OF COMMITTEE AND BOARD
The Corporation may, consistent with applicable law, indemnify members of
the Committee against any liability, loss or other financial consequence
suffered by them with respect to any act or omission of the Committee or its
members relating to the Plan to the same extent and subject to the same
conditions as specified in the indemnity provisions contained in the By-Laws of
the Corporation.
XX. INTERPRETATION
(a) If any provision of the Plan should be held invalid or illegal for any
reason, such determination shall not affect the remaining provisions hereof, but
instead the Plan shall be construed and enforced as if such provision had never
been included in the Plan. Without limiting the generality of the foregoing,
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors promulgated under the Securities
Exchange Act of 1934 and, in the case of ISOs, with all applicable conditions of
Section 422 of the Code or its successors and regulations promulgated
thereunder. To the extent any provision of the Plan or action by the Committee
or Board hereunder is inconsistent with the foregoing requirements, it shall be
deemed null and void.
(b) The determinations and the interpretation and construction of any
provision of the Plan by the Committee shall be final and conclusive. SAZTEC
INTERNATIONAL, INC.
<PAGE>
SAZTEC INTERNATIONAL, INC. FORM 10-KSB FOR JUNE 30, 1995 -- EXHIBIT 10.9
SAZTEC INTERNATIONAL, INC.
1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
1. PURPOSE. The purpose of this Plan is to help attract, retain and
compensate highly qualified individuals who are not employees of Saztec
International, Inc. (the "Corporation") as members of the Board of Directors of
the Corporation and to encourage ownership of stock in the Corporation by such
Directors in order to gain for the Corporation the advantages inherent in
Directors having a greater personal financial investment in the Corporation.
2. DEFINITIONS. As used herein, the following terms shall have the
meanings indicated:
"Annual Meeting Date" means the date of the annual meeting of the
Corporation's shareholders at which the Directors are elected.
"Board" means the Corporation's Board of Directors.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, no par value, of the Corporation.
"Corporation" means Saztec International, Inc., a California corporation.
"Director" means a member of the Board.
"Effective Date" is the date specified in Section 16.1.
"Eligible Director" means any person who is a member of the Board and who
is not an employee, full time or part time, of the Corporation.
"Fair Market Value" of the Common Stock on any date of reference means the
closing price of the Common Stock on the business day immediately preceding such
date. For these purposes, the closing price of the Common Stock on any business
day shall be (i) if such Common Stock is listed or admitted for trading on any
United States national securities exchange, or if actual transactions are
otherwise reported on a consolidated transaction reporting system, the last
reported sale price of Common Stock on such exchange or reporting system, as
reported in any newspaper of general circulation, (ii) if the Common Stock is
quoted on the National Association of Securities Dealers Automated Quotations
System ("NASDAQ"), or any similar system of automated dissemination of
quotations of securities prices in common use, the closing bid quotation for
such day of the Common Stock on such system, or (iii) if neither clause (i) or
(ii) is applicable, the mean between the high bid and low ask quotations for the
Common Stock as reported by the National Quotation Bureau, Incorporated if at
least two securities dealers have inserted both bid and ask quotations for the
Common Stock on at least 5 of the 10 preceding days.
<PAGE>
"Option" (when capitalized) means any stock option granted under this Plan.
"Option Agreement" means the agreement between the Corporation and the
Optionee for the grant of an Option.
"Option Period" means the five year period between the date an Option is
granted and the expiration date of the Option.
"Optionee" means a person to whom an Option is granted under this Plan or
any person who succeeds to the rights of such person under this Plan by reason
of the death or disability of such person.
"Plan" shall mean this 1994 Non-Employee Directors Stock Option Plan for
the Corporation.
"Share(s)" shall mean a share or shares of the Common Stock.
3. SHARES AND OPTIONS. The aggregate number of Shares of Common Stock,
subject to adjustment pursuant to Section 9, which may be delivered on exercise
of the Options is 750,000 and such amounts of Shares of Common Stock shall be,
and hereby are reserve for such purpose. Such Shares may be previously issued
Shares. If any Option expires, terminates or is canceled for any reason,
without having been exercised in full, the Shares covered by the unexercised
portion of such Option shall again be available for Options, within the limit
specified above.
4. GRANTS OF OPTIONS. Commencing January 1, 1995, each Eligible Director
who is serving as a Director immediately after the Annual Meeting Date for any
given year, shall be granted an option to purchase 15,000 Shares for that year
on the day after the Annual Meeting Date. Upon the grant of each Option, the
Corporation and the Eligible Director shall enter into a written Option
Agreement, which shall specify the grant date and the exercise price and shall
include or incorporate by reference the substance of this Plan and such
additional provisions as may be required under applicable laws, regulations and
rules or otherwise consistent with the provisions of this Plan as the Board may
determine.
5. EXERCISE PRICE. The exercise price per Share of any Option shall be
the Fair Market Value of the Shares underlying such Option on the date such
Option is granted.
6. EXERCISE OF OPTION. An Option shall be deemed exercised when (i) the
Corporation has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate exercise price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to the Board in its sole discretion have been made for the
Optionee's payment to the Corporation of the amount that is necessary for the
Corporation to withhold taxes in accordance with applicable Federal, state or
local tax withholding requirements. The exercise price of any Shares purchased,
and any required tax payment, shall be paid in cash, by the tender of Shares, or
both. If payment is made in cash, it
<PAGE>
may be made by certified or official bank check, personal check or money order.
If payment is made by the tender of Shares, the Fair Market Value of each such
Share shall be determined as of the day the Shares are tendered for payment in a
manner consistent with the provisions of this Plan. Any excess of the value of
the tendered Shares over the purchase price will be returned to the Optionee as
follows:
(I) Any whole Shares remaining in excess of the purchase price will be
returned to the Optionee in kind, and may be represented by one or more
certificates as determined by the Corporation in its sole discretion.
(ii) Any partial Shares remaining in excess of the purchase price will be
returned to the Optionee in cash.
No Optionee shall be deemed to be a holder of any Shares subject to an Option
unless and until a stock certificate or certificates for such Shares are issued
to such person(s) under the terms of the Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as expressly provided in
Section 9 hereof.
7. EXERCISE OF SCHEDULE FOR OPTIONS.
7.1 Each Option granted hereunder shall be vested and may be exercised in
accordance with the following schedule:
Percentage of
Number of Shares Vesting Schedule
---------------- ----------------
20% One day and six months from the date of grant
40% One year after the date of grant
60% Two years after the date of grant
80% Three years after the date of grant
100% Four years after the date of grant
7.2 Notwithstanding the foregoing provision, each outstanding Option shall
become fully exercisable immediately:
(a) if there occurs any transaction (which shall include a series of
transactions occurring within 60 days or occurring pursuant to a plan), that has
the result that shareholders of the Corporation immediately before such
transaction cease to own at least 51 percent of the voting stock of the
Corporation or of any entity that results from the participation of the
Corporation in a reorganization, recapitalization, consolidation, merger, share
exchange, liquidation or any other form of corporate transaction;
(b) if the shareholders of the Corporation shall approve a plan of merger,
consolidation, share exchange, reorganization, recapitalization, liquidation or
dissolution in which the Corporation does not survive, unless (i) the approved
merger, consolidation, share exchange,
<PAGE>
reorganization, recapitalization, liquidation or dissolution is subsequently
abandoned, or (ii) the entity surviving or resulting from such transaction (x)
is controlled by substantially the same persons as was the Corporation (y)
assumes all obligations of the Corporation under the Option, and (z) has a
financial condition and operations substantially equivalent or superior to those
of the Corporation immediately prior to the transaction; or
(c) if the shareholders of the Corporation shall approve a plan for the
sale, lease, exchange or other disposition of all or substantially all the
property and assets of the Corporation (unless such plan is subsequently
abandoned).
7.3 The expiration date of an Option shall be five years from the date of
grant of the Option, subject to earlier termination pursuant to Section 8.
8. TERMINATION OF OPTION PERIOD. An Optionee whose directorship
terminates for any reason other than death or disability, as determined by the
Board which determination shall be conclusive, shall be entitled to exercise any
Options which are then exercisable only within the thirty day period after the
date of Optionee ceases to serve as a Director; and after such thirty day
period, such Options shall be null and void. In the case of termination of the
directorship by reason of the Director's death or disability, as determined by
the Board which determination shall be conclusive, the Option or any portion
thereof which was not exercisable on the date of termination shall be
accelerated and become immediately exercisable, and the period to exercise such
Option shall be twelve months from the date of termination, subject to the
earlier expiration of the Option Period. The estate of an Optionee who dies, or
a person who acquires the right to exercise an Option, including any portion of
such Option which was not exercisable at the time of death, by will or the laws
of descent and distribution or by reason of the death of the Optionee, may
exercise the Option only within the twelve-month period after the death of the
Optionee, subject to the earlier expiration of the Option Period. The estate of
an Optionee who dies, or a person who acquires the right to exercise an Option,
including any portion of such Option which was not exercisable at the time of
death, by will or the laws of descent and distribution or by reason of the death
of the Optionee, may exercise the Option only within the twelve-month period
after the death of the Optionee, subject to the earlier expiration of the Option
Period.
9. ADJUSTMENT OF SHARES.
9.1 Option Agreements evidencing Options shall be subject to adjustment by
the Board as to the number and price of Shares subject to such Options in the
event of changes in the outstanding Shares by reason of stock dividends, stock
splits, recapitalization, reorganizations, merger, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the date
of grant of any such Option. In the event of any such change in the outstanding
Shares, the aggregate number of Shares available under the Plan shall be
appropriately adjusted by the Board, whose determination shall be conclusive.
9.2 Except as otherwise expressly provided herein, the issuance by the
Corporation of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any
<PAGE>
class, either in connection with a direct sale of upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Corporation convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or exercise price of the Shares then subject to outstanding Options
granted under the Plan.
9.3 Without limiting the generality of the foregoing, the existence of
outstanding Options granted under the Plan shall not affect in any manner the
right or power of the Corporation to make, authorize or consummate (i) any or
all adjustments, recapitalization, reorganizations or other changes in the
Corporation's capital structure or its business; (ii) any merger or
consolidation of the Corporation, (iii) any issue by the Corporation of debt
securities, or preferred or preference stock that would rank above the Shares
subject to outstanding Options; (iv) the dissolution or liquidation of the
Corporation: (v) any sale, transfer or assignment of all or any part of the
assets or business of the Corporation; or (vi) any other corporate act or
proceedings, whether of a similar character or otherwise.
10. TRANSFERABILITY OF OPTIONS. Each Option shall not be transferable by
the Optionee otherwise than by will or the laws of descent and distribution, and
each Option shall be exercisable during the Optionee's lifetime only by the
Optionee except that in the case of Optionee's disability, Optionee's duly
appointed legal representative may exercise said Option.
11. REPURCHASE OF SHARES BY CORPORATION. The Corporation is under no
obligation to repurchase Shares acquired pursuant to the exercise of an Option
hereunder.
12. USE OF PROCEEDS. The proceeds received by the Corporation from the
sale by it of Shares to persons exercising Options pursuant to the Plan will be
used for the general purposes of the Corporation.
13. ISSUANCE OF SHARES. As a condition of any sale or issuance of Shares
upon exercise of any Option, the Board may require such agreements or
undertakings, if any, as the Board may deem necessary or advisable to assure
compliance with any applicable law or regulation including, but not limited to,
the following:
(a) a representation and warranty by the Optionee to the Corporation, at
the time any Option is exercised, that Optionee is acquiring the Shares to be
issued for investment and not with a view to, or for sale in connection with,
the distribution of any such Shares; and
(b) a representation, warranty and/or agreement to be bound by any legends
that are, in the opinion of the Board, necessary or appropriate to comply with
the provisions of any securities law deemed by the Board to be applicable to the
issuance of the Shares and are endorsed upon the Share certificates.
14. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board, which shall have the authority to adopt such rules and regulations and to
make such determinations as are not inconsistent with the Plan and as are
necessary or desirable for the implementation and
<PAGE>
administration of the Plan, provided that the Board does not have any discretion
with respect to the grant of Options under the Plan.
15. INTERPRETATION.
15.1 If any provision of the Plan should be held invalid or illegal for
any reason, such determination shall not affect the remaining provisions hereof,
but instead the Plan shall be construed and enforced as if such provision had
never been included in the Plan. Without limiting the generality of the
foregoing, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors promulgated under the
Securities Exchange Act of 1934, as amended (the "1934 Act:), and this Plan is
intended to constitute a "Formula Award Plan" pursuant to Rule 16b-3(c)(2)(ii).
To the extent any provision of the Plan or action by the Board hereunder is
inconsistent with the foregoing requirements, it shall be deemed null and void.
15.2 The determinations and the interpretation and construction of any
provision of the Plan by the Board shall be final and conclusive. This Plan
shall be governed by the laws of the State of California. Headings contained in
this Plan are for convenience only and shall in no manner be construed as part
of this Plan. Any reference to the masculine, feminine, or neuter gender shall
be a reference to such other gender as is appropriate.
16. TERM OF PLAN; AMENDMENT AND TERMINATION OF THE PLAN.
16.1 This Plan is effective as of December 9, 1994, the date of its
original adoption by the Board, subject to approval by the affirmative vote of
the holders of a majority of the Shares present of represented and entitled to
vote at the Annual Meeting of Shareholders of the Corporation, which is
scheduled to be held on February 15, 1995. This Plan shall continue in effect
until all Options granted hereunder have expired or been exercised, unless
sooner terminated under the provisions relating thereto. No Option shall be
granted after 10 years from the Effective Date.
16.2 The Board may from time to time amend, terminate or suspend the Plan
or any Option; provided, however that, except to the extent provided in Section
9, no such amendment may (i) without approval by the Corporation's shareholders,
increase the number of Shares reserved for Options or change the class of
persons eligible to receive Options or involve any other change or modification
requiring shareholder approval under Rule 16b-3 of the 1934 Act, (ii) permit the
granting of Options that expire beyond the maximum five-year period described in
Section 7.3; (iii) extend the termination date of the Plan as set forth in
Section 16.1; or (iv) give the Board discretion with respect to the grant of
Options; and, provided further, that, except to the extent otherwise
specifically provided in Section 8, no amendment, termination or suspension of
the Plan or any Option issued hereunder shall substantially impair any Option
previously granted to any Optionee without the consent of such Optionee. Any
termination or suspension of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if this Plan had not
been terminated or suspended. No Option may be granted while the Plan is
suspended or after it is terminated.
<PAGE>
16.3 Notwithstanding anything else contained herein, the provisions of
this Plan which govern the definition of Eligible Directors, the number of
Options to be awarded to Eligible Directors, the exercise price per share under
each such Option, when and under what circumstances an Option will be granted,
and the period within which each Option may be exercised, shall not be amended
more than once every six months (even with shareholder approval), other than to
conform to changes in the Code, or the rules promulgated thereunder, and under
the Employee Retirement Income Security Act of 1974, as amended, or the rules
promulgated thereunder, or with rules promulgated by the Securities and Exchange
Commission.
<PAGE>
SAZTEC INTERNATIONAL, INC. FORM 10-KSB FOR JUNE 30, 1995 -- EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of the 1st day of January, 1995, by and between
GARY N. ABERNATHY ("Employee") and SAZTEC INTERNATIONAL, INC., a California
corporation (the "Company").
1. EMPLOYMENT. Company agrees to employ Employee and Employee agrees to
serve Company as Chief Executive Officer for a three (3) year term commencing on
the day and year first set forth above and ending December 31, 1997. This
Employment Agreement shall be extended for additional terms of one (1) year
each, unless notice is given at least six (6) months prior to the end of the
original or any extended term hereof.
2. DUTIES. Employee will perform all the usual and customary duties of a
Chief Executive Officer, and other duties that may be assigned from time to
time. Employee will perform all of his work to his highest standards of skill,
competence, and efficiency; Employee will devote his full business time,
attention, and energy to Company exclusively (other than as specifically allowed
in writing by the Company); and Employee will give his best efforts and skill to
further the best interests of Company.
3. COMPENSATION.
(a) BASE SALARY. Employee's Base Salary will be at the rate of One
Hundred Twenty Thousand Dollars ($120,000) per annum for each year of the
three (3) year term which Base Salary shall be payable every two (2) weeks
in arrears. Annual increases in Employee's Base Salary shall be
determined, during the term hereof, by the Board of Directors of Company.
(b) INCENTIVE COMPENSATION. It is the intent of the Company that an
incentive compensation program shall be established with respect to
Employee, which shall provide performance criteria, pursuant to which, upon
achieving such criteria, or defined components thereof, Employee shall be
entitled to incentive compensation in an amount up to and equalling one-
third (1/3) of his then current Base Salary; provided, however, that if and
in the event that the title and duties of Employee are altered as set forth
in Section 4 below then raises in Base Salary and Employee's incentive
compensation shall be subject to the discretion of the Board of Directors
of Company.
(c) AUTOMOBILE EXPENSE. Employee will use an automobile in the
discharge of his duties under this Agreement and shall be entitled to a
Five Hundred Dollar ($500) per month car allowance to be paid to Employee
in addition to the Base Salary.
(d) RELOCATION LOAN. Employee will receive a relocation loan of
Twenty-five Thousand Dollars ($25,000) seven (7) days prior to the closing
of escrow on a permanent residence in the Boston area. The loan will be
interest-free, evidenced by a promissory note executed by Employee and
secured by a second deed of trust or mortgage (whichever is
<PAGE>
applicable) on Employee's new permanent residence. The loan will be repaid
in five annual installments of Five Thousand Dollars ($5,000) with the
first installment due one year after the loan is made. Each annual payment
will be forgiven as long as Employee has not resigned as an employee of
Company. If Employee is terminated without cause, the entire unpaid
principal balance of such loan shall immediately be forgiven. If Employee
voluntarily resigns or is terminated for cause prior to the expiration of
the loan, the remaining balance will become fully payable upon the
effective date of the resignation or termination for cause, with interest
accruing from such date at the then prime rate as reflected in THE WALL
STREET JOURNAL.
(e) MOVING EXPENSES. Company agrees to pay Employee a one-time
moving expense allowance in the amount of Nine Thousand Dollars ($9,000) at
Employee's request after Employee establishes his new residence in the
Boston area which amount shall be paid in lieu of Employee's actual costs
of moving his household furnishings.
(f) STOCK OPTIONS. Company hereby grants Employee an option to
purchase 100,000 shares of common stock of Company pursuant to Company's
1995 Stock Option Plan adopted by Company's Board of Directors by
resolution dated December 9, 1994 at a price equal to Sixty-Two and One-
Half Cents (62.5 cents) per share, which options shall vest twenty percent
(20%) per year beginning on the day and year first set forth above and
continuing on each anniversary of this Agreement. The options granted
hereunder are subject to the Stock Option Agreement between the parties
incorporated herein by reference and attached hereto as EXHIBIT A.
(g) GRANT OF STOCK. Company agrees to grant, transfer and convey to
Employee, concurrently with the execution hereof, Eighty Thousand (80,000)
shares of stock of Company. All certificates representing such shares
shall be marked with a legend indicating that the stock is unregistered
stock subject to substantial restrictions on transferability. Certificates
representing one-half (1/2) of the shares of common stock shall be marked
with a legend indicating that the stock is subject to substantial risk of
forfeiture by Employee to Company in accordance with the terms and
conditions of this Agreement, which forfeiture provisions are set forth in
detail in the next paragraph hereof.
This grant of stock is subject to and forfeitable by Employee in the
event that Company fails to meet the following financial criteria which
shall be certified by Company's regularly retained independent accountants:
(i) CRITERIA #1: Company's consolidated pre-tax net income for
the first two quarters of the 1996 fiscal year, which quarters end
December 31, 1995, shall be greater than Seven Hundred Thousand
Dollars ($700,000).
<PAGE>
(ii) CRITERIA #2: Company's consolidated pre-tax net income for
the second two quarters of the 1996 fiscal year, which quarters end
June 30, 1006, shall be greater than Seven Hundred Thousand Dollars
($700,000).
If Company meets both criteria then Employee's grant of stock under
this subparagraph shall be fully vested and nonforfeitable. One-half (1/2)
of the shares granted to Employee under this subparagraph shall be
forfeited and returned to Company if Company fails to reach 80% of either
Criteria #1 (i.e. 1996 FY (First Half) income less than $560,000) or 80%
of Criteria #2 (i.e. 1996 FY ( 2nd half) income less than $560,000). If
Company performs or achieves between 80% and 100% of either or both
criteria, the stock granted to Employee under this subparagraph shall be
forfeited and returned to Company as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
---------------------------------------------------------------------
SATISFACTION OF INCOME PERCENTAGE OF
CRITERIA #1 BETWEEN STOCK FORFEITED
---------------------------------------------------------------------
<S> <C> <C>
90% - 99% $630,000 - 7.5%
700,000
80% - 89% $550,000 - 15.0%
629,000
0% - 79% Less than 25.0%
$559,000
---------------------------------------------------------------------
---------------------------------------------------------------------
<CAPTION>
---------------------------------------------------------------------
---------------------------------------------------------------------
SATISFACTION OF INCOME SHARES OF
CRITERIA #2 BETWEEN STOCK FORFEITED
---------------------------------------------------------------------
<S> <C> <C>
0% - 99% $630,000 - 7.5%
700,000
80% - 89% $560,000 - 15.0%
629,000
0% - 79% Less than 25.0%
$553,000
---------------------------------------------------------------------
---------------------------------------------------------------------
</TABLE>
(h) EXPENSES. The duties of employment may require that Employee
incur expenses for meals, lodging, travel and entertainment in the interest of
the business. Accordingly, the Company will reimburse Employee for all
reasonable expenses incurred by Employee in connection with the performance of
Employee's duties under this Agreement.
4. CHANGE OF TITLE; DUTIES. Company specifically reserves the right to
remove Employee from the position of Chief Executive Officer at any time after
December 31, 1995 if, and in the event that (i) Employee fails to meet the
financial criteria which have been agreed to by the parties as provided in
paragraph 3(g), and (ii) if the Board has concluded that changes are in the best
interest of Company; or (iii) for other good cause. In such event, Company may
employ a Chief
<PAGE>
Executive Officer from outside of the Company or it may promote one from within
the Company, but under such circumstances Employee shall be appointed to a
senior management position with management responsibilities and with duties
commensurate with Employee's seniority, education and experience and Employee
shall continue to receive Employee's Base Salary as provided herein.
5. TERMINATION OF EMPLOYMENT. Company may terminate this Agreement
immediately ONLY for good cause in which case all of Employee's compensation
rights as set forth herein which have not vested, shall be terminated, and shall
be null and void, and of no further force or effect. Termination of this
Agreement by Company for any reason other than good cause shall be a breach
hereof by Company and Employee shall be entitled to all applicable rights and
remedies in connection therewith. For the purposes of this Agreement, good
cause shall be deemed to include, but shall not in any manner be limited to, the
following acts of Employee:
a) recurring absence from work without cause acceptable to the Board
of Directors of Company;
b) material breach of any provision of this Agreement;
c) repeated, material and wilful failure to communicate with the
Board of Directors of Company regarding the business of the
Company;
d) material, wilful failure to properly respond to and implement
appropriate, express directives of the Board of Directors of
Company;
e) any act of deceit, misrepresentation or dishonesty in the
discharge of Employee's duties;
f) improper use or diversion of Company funds to personal use;
g) indictment for a felony or involvement in any other act of moral
turpitude; and
h) improper use of drugs and/or alcohol.
Prior to any termination hereunder, Employee shall have reasonable notice
and right to cure, except for instances involving moral turpitude.
6. FRINGE BENEFIT AND HEALTH CARE PLANS. Employee shall be entitled to
participate in various incentive or "fringe benefit" plans offered by the
Company to its executive employees pursuant to the normal policies of the
Company, including vacation benefits, disability, life and other insurance
benefits and such participation shall not be deemed to reduce or affect the
compensation payable to Employee under this Agreement. Specifically, but not in
limitation of the foregoing, Company shall pay the full premium on Employee's
behalf for family coverage for Employee and Employee's family under Company's
Health Care Plan. In addition to such other fringe benefits, Employee's current
life insurance plan shall remain in place.
<PAGE>
7. DEATH OR INCAPACITY. Employee's death shall result in automatic
termination of his employment hereunder. In the event of termination of
Employee due to death, illness or incapacity, the Company shall forgive the
relocation loan referred to in paragraph 3(d) of this Agreement and any stock
options or grants earned pursuant to paragraph 3(f) or 3(g) as of such date
shall be considered to have fully vested as of the date of termination.
8. BUSINESS CONDUCT. During Employee's employment by the Company,
Employee will not:
(a) wilfully act contrary to the best interests of the Company, its
parent, subsidiary, or affiliated companies, or its employees, in a manner
that has a direct, material, adverse impact upon Company;
(b) (other than as specifically allowed in writing by the Company)
engage in, or have any financial or other interest in, or render any
service in any capacity to any competitor, customer, or supplier of the
Company;
(c) solicit or encourage a customer of the Company to take its
business elsewhere; or
(d) (other than as specifically allowed in writing by the Company)
solicit or encourage a Company employee to work elsewhere.
9. EMPLOYEE NOT TO COMPETE WITH COMPANY. Employee agrees that:
(a) if Company terminates Employee for good cause at any time during
the term of this Agreement; or
(b) if Employee terminates employment with Company for any reason
during the term of this Agreement,
then for a period of one (1) year immediately following termination, Employee
will not engage or participate, directly or indirectly, in any business which is
in competition with the business conducted by Company on the date of termination
within the United States of America or the United Kingdom.
10. AGREEMENT OF NON-SOLICITATION. Employee further agrees that for a
period of one (1) year immediately following the termination described in
paragraph 9, Employee will not, directly or indirectly, or in concert with any
other person or persons, firm, corporation or other entity or in any other
manner, solicit, divert or handle or attempt to solicit, divert or handle any of
the past or present customers of Company regardless of where such customers
might be located or whether such customers are persons being placed for
temporary employment or companies requesting temporary personnel, with respect
to any business that consists of or relates or pertains in any way to the
business conducted by Company.
<PAGE>
11. AGREEMENT OF NON-DISCLOSURE. Employee agrees that he will not at any
time impart to any competitor of Company or otherwise use for the purpose of
competing with Company any customer lists or other customer information or any
confidential information which he may have acquired as an officer, director or
shareholder of Company unless the same shall have otherwise become known to
competitors of Company.
12. EQUITABLE REMEDIES. It is recognized by the parties hereto that
irreparable damage will result to Company from any violation of paragraphs 9, 10
or 11 hereof by Employee. Therefore, Employee agrees that, in addition to any
and all other remedies available to Company, it shall have the remedy of
restraining order, injunction, and other equitable relief as may be declared or
issued by a court to enforce the provisions of said paragraphs, and Employee in
any such equitable proceeding agrees not to claim that a remedy at law is
available to Company.
13. CONSTRUCTION. It is agreed that the terms and provisions hereof are
severable, and that should any clause or provisions hereof be unenforceable or
be declared invalid for any reason whatsoever, this Agreement shall be construed
and read as if such invalid or unenforceable clause or provisions were omitted.
14. SAVINGS CLAUSE. Notwithstanding anything to the contrary herein
contained and if, and only if, provisions of the type contained in this
paragraph 14 are enforceable in the jurisdiction in question, if any one or more
of the provisions contained in Sections 9 or 10 of this Agreement shall for any
reason be held to be excessively broad as to time, duration, geographical scope,
activity or subject, said provisions shall be construed by limiting and reducing
them so as to be enforceable to the extent compatible with the applicable law as
it should then be determined.
15. COMPANY POLICIES. Employee will be subject to and will adhere to all
of the Company's policies applicable to the Company's employees generally
including, but not limited to, all policies relating to standards of conduct,
conflicts of interest, and compliance with the Company's rules and obligations.
Employee represents that he has no agreements with or obligations to others that
in any way conflict with any of his obligations contained in this Agreement.
16. RECOVERY OF EXPENSES. In the event a dispute arises with respect to
this Agreement, the party prevailing in such dispute shall be entitled to
recover all expenses including, without limitation, reasonable attorneys' fees
and expenses incurred in ascertaining such party's rights, in preparing to
enforce, or in enforcing such party's rights under this Agreement, whether or
not it was necessary for such party to institute suit.
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Massachusetts. Any claim arising
hereunder shall be heard in a court of competent jurisdiction in the State of
Massachusetts.
18. ENTIRE AGREEMENT; AMENDMENTS. This Agreement is intended to be a
complete and exclusive statement of the terms of the Agreement between the
parties, superseding all prior agreements, and may not be changed or terminated
orally. Subject to applicable law, this Agreement
<PAGE>
may be amended only by a writing executed by all parties hereto. Waiver of any
part of this Agreement shall not constitute a waiver of any other part of this
Agreement and shall not operate as any future waiver of the same part.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which, taken together, shall constitute one Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement the date
and year first set forth above.
COMPANY:
SAZTEC INTERNATIONAL, INC.,
a California corporation
By:
-----------------------------------
Robert P. Dunne, Chairman
By:
-----------------------------------
Barry G. Craig, Director
EMPLOYEE:
----------------------------------------
Gary N. Abernathy
<PAGE>
SAZTEC INTERNATIONAL, INC. FORM 10-KSB FOR JUNE 30, 1995 - EXHIBIT 10.11
United Missouri Bank
PO. Box 419949
Kansas City, Missouri 64141-6949
(816) 860-7000
August l0, 1995
Mr. Gary Abernathy, President
Saztec International, Inc.
6700 Corporate Drive
Kansas City, Missouri 64120
Dear Mr. Abernathy:
As you know, the Authority to Loan previously extended to Saztec International,
Inc. and all of its subsidiaries ("Saztec") by this bank expired on July 14,
1995. In that connections you had requested that this bank's Discount Committee
consider continuing to extend revolving credit to Saztec until December 31,
1995.
In consideration of your expressed desire to still consummate a credit line with
another financial institution, the Discount Committee of UMB Bank, n.a. has
favorable considered your request and approved an Authority to Loan (the
"Authority to Loan") on the terms and conditions set forth in this letter.
1. UMB Bank, n.a. hereby extends to Saztec an Authority to Loan in the
initial amount of $650,000 with a stipulation for decreases as follows:
August 31, 1995, $600,000
September 30, 1995, $550,000
October 31, 1995, $500,000
November 30, 1995, $450,000
Any remaining outstanding balance is due on December 31, 1995. The above
listed amounts will be available provided that the outstanding principal
amount of all advances under such Authority to Loan at no time exceeds an
amount equal to 80% of Saztec's qualified accounts receivable. Qualified
accounts receivable shall have the meaning as set forth in a Security
Agreement previously executed by Saztec.
2. All advances under the Authority to Loan will be evidenced by a Master
Revolving Note on this bank's standard form. Such Note shall be payable on
demand but, if no demand, not later than December 31, 1995. Accrued
interest will be payable on a monthly basis starting September 15, 1995 and
be due and payable monthly thereafter.
3. All advances under the Authority to Loan are subject to Saztec being in
full and complete compliance with all terms and conditions stated in this
letter at the time of each such advance and the continuation of extensions
of credit are subject to Saztec being in full compliance with all terms
hereof at all times.
4. All advances under the Authority to Loan will be secured by all accounts
receivables of Saztec, now owned or hereafter existing, notwithstanding the
80% of qualified accounts receivable basis for making advances, and by all
inventory, machinery, equipment, furniture and fixtures of Saztec now owned
or hereafter acquired or created.
<PAGE>
5. Saztec will continue to maintain a lockbox for the receipt of all
accounts receivable payments over which this bank has sole access and also
a cash collateral account with this bank into which all accounts receivable
payments will be deposited.
6. All advances under the Authority to Loan shall bear interest per annum at
4% over this bank's prime rate of interest, adjusted daily. For purposes
hereof, this bank's prime rate of interest shall be that rate of interest
which it states, from time to time, to be its prime rate of interest.
7. Each extension of credit under the Authority to Loan shall be subject and
the sole discretion of this bank, to the occurrence of no adverse material
change in (i) the financial condition of Saztec or (ii) the aging or
collectability of its accounts receivable.
8. This bank must at all times have a first priority perfected security
interest in all personal property of Saztec and all proceeds of all the
foregoing and all common stock of all subsidiaries of Saztec.
9. At all times, the consolidated net worth of Saztec must be at least equal
to $1,000,000, the calculation of such to be performed in accordance with
generally accepted accounting principals, consistently applied.
10. At all times, the ratio of consolidated total indebtedness to
consolidated net worth shall not exceed 4.0:1, the calculation of such to
be performed in accordance with generally accepted accounting principals
consistently applied.
11. Saztec must provide this bank with monthly financial statements and
accounts receivable listings and agings and a borrowing base certificate in
form and substance acceptable to this bank not later than twenty (20) days
following the end of each month. Such financial statements to include,
at a minimum, a balance sheet, an income statement.
12. Should the terms of this letter and any terms of any Promissory Note or
Security Agreement executed or continued in conjunction herewith be in
conflict, then the terms of any such Note or Security Agreement shall
prevail.
13. All documentation evidencing the Authority to Loan and any collateral
therefore shall be on this bank's standard forms and must be satisfactory
in all respects to this bank and its attorneys.
14. All costs incurred by this bank in extending credit under the Authority
to Loan must be paid by Saztec.
15. This latter supersedes any and all prior agreements, whether written or
verbal, between Saztec and this bank relating to the subject matter hereof
except existing Promissory Notes, Security Agreements and financing
statements. By signing below, you and this bank agree that there are no
unwritten agreements between us relating to the transactions proposed
hereunder.
16. STATUTORY STATEMENT MADE PURSUANT TO MO. REV. STAT. SEC. 432.045. Oral
agreements or commitments to loan money, extend credit or to forebear from
enforcing payment of a debt, including promises to extend or renew such
debt, are not enforceable. To protect Saztec International, Inc. and to
protect UMB Bank, n.a. from misunderstanding or disappointment, any
agreements we reach concerning such matters are contained in this letter
and the documents referred to herein, which are the complete and exclusive
statements of the agreement between us, except as we may later agree in
writing to modify it.
<PAGE>
If you agree to the above terms and conditions, kindly acknowledge the same by
signing in the space provided for that purpose below and return the original of
this letter to the undersigned not later than August 15, 1995.
Sincerely,
UMB BANK, n.a.
By: ----------------------------------------------
Ned C. Voth, Community Bank President
NCV:am
The undersigned hereby acknowledges and agrees to all the terms and conditions
stated in the foregoing letter.
SAZTEC INTERNATIONAL, INC.
AND ALL SUBSIDIARIES
By: ----------------------------------------------
Gary Abernathy, President
Dated: August 15, 1995
