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, 1997
[ ] 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, 1997 are $9,471,200.
The aggregate market value of the Common Stock held by non-affiliates (based
upon the last reported price on the bid-ask average on the OTC Bulletin Board)
on November 7, 1997 was approximately $1,935,981. As of November 7, 1997, there
were 15,487,851 shares of Common Stock outstanding, or approximately 3,871,963
shares outstanding on a post-reverse split basis.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Saztec International, Inc. (the "Company" or "Saztec") 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. The
Company provides such services in the U.S. and the U.K. and also relies on
technology and contractual arrangements that permit the Company to have portions
of certain data processing projects 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 now 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., incorporated in Missouri and Saztec
Europe, Ltd., registered in Scotland. Saztec Europe, Ltd. has a wholly owned
subsidiary registered in Germany, Saztec Datenverarbeitung 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 one of the following
techniques, depending upon the application: Optical Character Recognition (OCR),
Intelligent Character Recognition (ICR), or Optical Mark Recognition (OMR).
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, CD-ROM, electronic media or cards. Clerical coding resources are
available to assign tags, photocomposition codes, or complex document definition
notations such as Hyperlink Text Markup Language (HTML), the document standard
in use on the Internet; 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 1200 dpi ranges, with variable grey scale thresholding available to
match the quality of the documents. Up to 64 levels of gray or color may be
captured for projects requiring these capabilities.
Simple and compound documents can be accommodated in a variety of formats.
Internally developed editing software provides the capability to crop images,
add or delete data from an image, rotate and scale images and change text within
an image.
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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 over the
Internet, via telecommunications, or on CD-ROM, optical disk, diskette, or
magnetic tape.
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 integral parts 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.
Pilot-- The plan typically calls for the delivery of a test database to the
client to ensure that the production specification is accurate and complete and
that the deliverable satisfies the customer's requirements. The customer
formally accepts the test database before actual production begins.
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 has over twenty years' experience developing proven
quality control procedures for a wide range of information conversion projects.
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 contracts with organizations in Europe, East
Asia, the Caribbean, and the Philippines to provide data entry and clerical
coding services. Saztec Philippines, Inc. has been a primary offshore vendor.
Since 1991, they have not been affiliated in an ownership capacity with the
Company. Datamatics Technologies PVT. Ltd.("Datamatics"), has production
facilities in Bombay, India. Datamatics' ownership position in the Company was
9.6% on a fully diluted basis at June 30, 1997. Other vendors have no known
ownership position with the Company.
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 core competency.
As a result, the Company has recently sold the operating divisions described
below:
3
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1. 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.
2. 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.
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), scheduling, facilities requirements and
availability of offshore subcontract resources.
During the past several years, the Company has experienced a decline in the
demand for traditional data entry and text conversion services. However, these
services continue to be offered for their stand-alone value to customers and
also because they are an integral component of providing full service solutions
to customer compound document conversion projects. Management expects increases
in compound document conversion revenues to replace the traditional keying
services in importance.
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; (e) image
capture of graphic material imbedded in text; (f) text capture, indexing and
imaging of resumes for the human resources department of a number of companies
utilizing automated employee recruitment applications; (g) data capture and
imaging of case report forms for new drug applications for the pharmaceutical
industry and (h) facilities data capture and graphics conversion for graphical
information systems.
Other specific services the Company has provided are: (a) database maintenance
consisting of updates, changes, additions and deletions of (1) name and address
information for market researchers, and (2) data capture of claim forms for
medical insurance companies; and (b) data entry of individual, corporate and
partnership state government income tax returns from paper filings.
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 due to lower freight charges
stemming from physical proximity to the customer. In-house personnel at
potential customer companies may also duplicate the Company's services.
The Company primarily competes on the basis of service and to a lesser extent on
cost. The Company believes that it has developed an effective methodology for
document control for projects involving the conversion of a large number of
documents. Emphasis of this aspect of its service coupled with timeliness,
accuracy, and
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flexibility in satisfying customer needs, together with competitive pricing,
form a successful package for new contracts.
EMPLOYEES
At June 30, 1997, the Company employed 154 full-time and 88 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, 1997, the Company was
providing business services to approximately 90 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.
ITEM 2. PROPERTIES
The Company occupies its principal executive offices, approximately 21,500
square feet including production space, located in Billerica, Massachusetts,
pursuant to a lease expiring in August, 1999.
In addition, the company leases an aggregate of 26,809 square feet of office and
production space in South Weymouth, Massachusetts; Vernon, Connecticut;
Ardrossan, Scotland; and Regensburg, Germany, pursuant to individual leases
expiring between 1998 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
On October 31, 1997, a simple majority of shareholder votes were received
consenting to the Company's proposed four to one reverse stock split and
amendments to its Restated Articles of Incorporation. This is discussed in the
Capital Resources and Liquidity section of Management's Discussion and Analysis.
5
<PAGE>
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 under the
trading symbol SAZZ. On November 7, 1997, the Company had 235 stockholders of
record. For the period of July 1 to November 7, 1997, the high and low closing
price as reported by the NASD was $.21875 and $.125, respectively. The closing
price on November 7, 1997 was $.125. The table below sets forth high and low bid
information by fiscal quarter as reported by the OTC Bulletin Board.
BID PRICES
FISCAL QUARTER ENDED; HIGH LOW
--------------------- ----- -----
September 30, 1995 $.375 $.125
December 31, 1995 .25 .02
March 31, 1996 .34 .025
June 30, 1996 .5625 .125
September 30, 1996 .375 .15
December 31, 1996 .23 .075
March 31, 1997 .20 .13
June 30, 1997 .27 .12
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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Revenues for the year ended June 30, 1997 were $9,471,200 compared with
$10,851,555 for the year ended June 30, 1996, a decrease of $1,380,355, or
(12.7%). Net of divisions sold, revenues decreased $1,162,820, or (12.3%), from
the prior year.
Revenues from U.S. operations declined from $4,923,900 for the year ended June
30, 1996 to $4,553,796 in the current year, a reduction of $370,104, or (7.5%).
Revenues for the Company's European operations at $4,917,404 in the current year
declined $1,010,251, or (17%). Net of divisions sold, revenue decreased $152,569
and $915,255 from the prior year for U.S. and U.K. operations, respectively. The
decreases in U.S. based revenue is attributable to fewer contracts in both
Imaging and Data Capture Operations. The decrease in Data Capture Operations is
due to increased price competition, which management believes has now leveled
off . Decreases in Imaging and European-based revenue is attributable to a
smaller sales force. Management is continuing to address marketing concerns with
independent organizations and additional staff.
Gross profit decreased from $2,905,983 in 1996 net of divisions sold to
$1,715,736 in the current year, a decrease of $1,190,247 or (41%). This reflects
the decline in revenues, but is also derived from a decline in gross margin from
27.3% in the prior year, net of divisions sold, to 18.1% for the year ended June
30, 1997. These results are due to price competition and idle capacity.
Selling and administrative (S&A) expense of $2,135,412 for the year ended June
30, 1997 is $844,427 less than the $2,979,839 expense for the year ended June
30, 1996 which includes a charge of $139,839 related to litigation. The decrease
in the current year is comprised of a decrease in selling expense of $118,077
with the
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balance attributable to administrative expense. Included in administrative
expense for the year ended June 30, 1997 is other income of $62,263 from the
reversal of prior year accruals and a $8,586 negotiated reduction in the notes
payable for common stock repurchase.
The Company has analyzed its exposure to potential data processing "Year 2000"
problems. Systems compliance is planned to be effected through normal, ongoing
programs of systems enhancement and replacement mandated by efficiency
considerations, other technological obsolescence factors, and normal wear. Thus,
expenditures required for ensuring accurate date handling separate from other
systems planning is not believed to be material.
CAPITAL RESOURCES AND LIQUIDITY
In May, 1996 the Company completed a private placement of 584,000 shares and
warrants to purchase 84,000 additional shares for $136,000 to employees, members
of management, directors, and a nonemployee shareholder.
In June, 1996 an agreement was reached with two unrelated parties to purchase
1,200,000 shares of common stock and warrants to purchase 1,200,000 additional
shares for $300,000. Proceeds were received in August and September, 1996. The
shares and warrants issued were issued in September, 1996.
In June, 1997 subscription agreements for 860,000 units consisting of one share
of common stock and one warrant to purchase one share of common stock were
received from current shareholders. $860,000 was placed in escrow to cover the
subscription price. The units were to be issued on a post-reverse split basis,
so the agreements were subject to shareholder approval of a reverse stock split
whereby four (4) shares of currently issued common stock would be converted to
one (1) share of common stock. The reverse stock split reduced the number of
each shareholder's shares by a 1 to 4 ratio while retaining their current
percentage ownership. The shareholders were also asked to approve an amendment
to the Company's Restated Articles of Incorporation to increase the number of
authorized shares of Common Stock of the Company from 5,000,000 to 10,000,000 on
a post split basis. This amendment was necessary to have sufficient shares
authorized to issue to complete the placement. The shareholders consented by
simple majority of positive votes on October 31, 1997. The effective date of the
reverse split was November 7, 1997. The Company and its designated stock
transfer agent mailed a joint letter of instructions to assist shareholders in
the exchange of stock certificates.
On August 25, 1997 the subscription and escrow agreement were amended with
regard to a single subscriber. Pursuant to the amendment $300,000 was paid to
the Company out of that subscriber's escrow account to purchase 1,200,000
pre-reverse split common shares. The shares were issued September 15, 1997. The
Company received the balance of the escrow amounts of $560,000 on November 14,
1977 and issued the certificates.
At June 30, 1997 the Company had borrowed $274,512 under its revolving credit
agreement and qualified for additional borrowings of $5,488. At June 30, 1996
the Company had borrowed $389,703 under its revolving credit agreement and
qualified for an additional $10,297. The revolving credit agreement provides for
interest at the lender's prime rate plus 4.0% (12.5 % and 12.25% at June 30,
1997 and 1996, respectively). The credit agreement was secured by substantially
all domestic assets of the Company, including the stock of subsidiaries, and
expired on July 1, 1997. The agreement was renewed through October 1, 1997
providing for maximum borrowings of $270,000. Maximum borrowing under the prior
agreement declined $10,000 per month from $450,000 beginning February 1, 1996.
On October 1, 1997 the agreement was renewed, maturing April 1, 1998. Maximum
borrowing under the agreement decreases $10,000 monthly from $270,000 and
provides for borrowing at a level of 70% of outstanding domestic accounts
receivable less than ninety days old. The Company is in compliance with
covenants contained in the current agreement and was in compliance at all times
with the covenants contained in the agreements that expired July 1 and October
1, 1997.
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
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June 30, 1995). The agreement expired in December, 1995 and was not renewed. The
maximum aggregate borrowings under the agreement were approximately $795,000.
Available borrowings were determined by a specified percentage of qualified
export trade receivables.
At June 30, 1997 the Company's unrestricted cash balance was $386,785 compared
to $222,023 at June 30, 1996. The Company's working capital increased to
$947,532 from $452,928 at June 30, 1996. This increase is primarily a result of
the amounts committed to escrow accounts for the stock subscription during June,
1997.
Operations provided positive cash flow of $327,100 despite the operating loss of
$(461,887). Depreciation and amortization of $373,609 and other non-cash
adjustments reduced the net cash used in operations to $(87,987) before changes
in asset and liability accounts, which provided $415,087, net.
Proceeds of the stock placement in September, 1996 of $300,000 were exceeded by
payments on notes, leases and the line of credit by $(24,123), the net cash used
in financing activities.
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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 Certified Public Accountants 10
Consolidated Statements of Operations for the Years Ended
June 30, 1997 and 1996 11
Consolidated Balance Sheets as of June 30, 1997 and 1996 12
Consolidated Statements of Changes in Stockholders' Equity for the
Years Ended June 30, 1997 and 1996 13
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1997 and 1996 14 - 15
Notes to Consolidated Financial Statements 16 - 30
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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, 1997 and 1996, 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, 1997 and 1996, and the
consolidated results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
/s/ GRANT THORNTON LLP
----------------------
GRANT THORNTON LLP
Boston, Massachusetts
October 10, 1997 (except for Notes 2 and 12
as to which the date is November 7, 1997)
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<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30,
1997 1996
------------ ------------
<S> <C> <C>
Revenues $ 9,471,200 $ 10,851,555
Cost of services 7,755,464 7,958,077
------------ ------------
Gross profit 1,715,736 2,893,478
Selling, general & administrative expense 2,135,412 2,979,839
------------ ------------
Loss from operations (419,676) (86,361)
Interest expense (80,899) (125,086)
Gain on sale of division 231,154
------------ ------------
(Loss) income before provision for income taxes (500,575) 19,707
Income tax (benefit) expense (38,688) 63,139
------------ ------------
Net loss applicable to common stockholders $ (461,887) $ (43,432)
============ ============
Loss per share of common stock (notes 2 and 12):
Net loss applicable to common stockholders $ (.13) $ (.01)
============ ============
Weighted average number of shares 3,527,167 3,175,152
============ ============
</TABLE>
See accompanying notes.
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<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30,
ASSETS
1997 1996
------------ ------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 386,785 $ 222,023
Restricted cash 192,643 60,869
Accounts receivable, less allowance for doubtful accounts of $45,070 in
1997 and $47,755 in 1996 1,342,831 1,973,192
Costs and estimated earnings in excess of billings (Note 8) 21,490
Work in process 217,518 570,651
Prepaid expenses and other current assets 134,803 176,664
Note receivable for stock subscribed (Note 2) 860,000 300,000
------------ ------------
Total current assets 3,134,580 3,324,889
Property and equipment, net (notes 3 and 4) 364,040 598,415
other assets
Goodwill and other intangible assets, less accumulated amortization of
$63,602 in 1997 and $51,482 in 1996 161,760 173,931
Deposits and other assets 170,068 122,070
------------ ------------
Total assets $ 3,830,448 $ 4,219,305
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable (Note 4) $ 274,512 $ 389,703
Current portion long-term debt and capital lease obligations (Notes 4 and 9) 199,460 199,650
Common stock subject to repurchase (Note 2) 33,342 54,000
Income taxes payable 54,320
Accounts payable 569,716 885,692
Accrued liabilities 429,396 544,318
Customer deposits 456,989 744,278
Excess of billings over costs and estimated earnings (Note 8) 223,633
------------ ------------
Total current liabilities 2,187,048 2,871,961
Long-term debt and capital lease obligations less current portion (notes 2,
4 and 9) 151,980 241,257
Common stock subject to repurchase (note 2) 46,000
Accrued expense 39,546 34,385
Stockholders' Equity (Notes 2 And 5)
Preferred stock-no par value; 1,000,000 shares authorized; no shares issued
Common stock-no par value; 10,000,000 shares authorized; 3,571,963 and
3,274,412 shares issued at June 30, 1997 and 1996 11,570,811 11,270,811
Common stock subscribed (Note 2) 860,000 300,000
Contributed capital 14,498 14,498
Accumulated deficit (10,878,520) (10,416,633)
Cumulative translation adjustment (114,915) (142,974)
------------ ------------
Total Stockholders' Equity 1,451,874 1,025,702
------------ ------------
Total Liabilities And Stockholders' Equity $ 3,830,448 $ 4,219,305
============ ============
</TABLE>
See accompanying notes.
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<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1997 AND 1996
COMMON STOCK COMMON STOCK SUBSCRIBED
----------------------------------------------------
CUMULATIVE
NUMBER OF NUMBER OF CONTRIBUTED ACCUMULATED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT
---------- ----------- --------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance At June 30, 1995 12,543,851 $11,134,811 $14,498 $(10,373,201) $(134,326)
Stock canceled pursuant to
repurchase (Note 2) (30,200)
Stock issued pursuant
to private placements (Note 2) 584,000 136,000
Stock subscribed (Note 2) 1,200,000 $ 300,000
Translation adjustment (8,648)
Net loss (43,432)
----------- ----------- ---------- --------- ------- ------------ ---------
Balance At June 30, 1996 13,097,651 $11,270,811 1,200,000 $ 300,000 $14,498 $(10,416,633) $(142,974)
Stock issued pursuant to
private placement (Note 2) 1,200,000 $ 300,000 (1,200,000) (300,000)
Stock canceled pursuant to
repurchase (Note 2) (9,800)
Common stock subscribed
(Note 2) 3,440,000 860,000
Net loss (461,887)
Translation adjustment 28,059
----------- ----------- ---------- --------- ------- ------------ ---------
Balance At June 30, 1997 14,287,851 $11,570,811 3,440,000 $ 860,000 $14,498 $(10,878,520) $(114,915)
=========== =========== ========== ========= ======= ============ =========
Balance at June 30,
1997 giving effect to
one for four reverse
stock split 3,571,963 $11,570,811 860,000 $ 860,000 $14,498 $(10,878,520) $(114,915)
=========== =========== ========== ========= ======= ============ =========
</TABLE>
See accompanying notes.
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<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30,
1997 1996
----------- ----------
<S> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities
Net loss $ (461,887) $ (43,432)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 373,609 537,052
Provision for bad debts (4,335) (35,053)
Loss (gain) on sale of assets 4,626 (30,320)
(Gain) on sale of assets of divisions sold (231,154)
Write-off of work in process related to litigation 139,839
Other (18,135)
Changes in assets and liabilities:
Accounts receivable 695,276 159,363
Work in process 356,829 (219,915)
Prepaid expenses and other current assets 55,689 (44,485)
Deposits and other assets (81,282) 6,845
Accounts payable (333,582) 143,568
Accrued liabilities (119,053) (513,438)
Customer deposits and non-current accrued expenses (104,470) 64,546
Income taxes payable (54,320) 27,075
----------- -----------
Net cash provided by (used in) operating activities 327,100 (57,644)
----------- -----------
Cash flows from investing activities
Payments received on notes receivable 33,679 17,077
Additions to property and equipment (52,955) (59,017)
Proceeds from the sale of property and equipment 38,254
Increase in restricted cash (131,774) (22,846)
----------- -----------
Net cash used in investing activities (151,050) (26,532)
----------- -----------
Cash flows from financing activities
Principal payments on debt and capital lease (208,931) (188,320)
obligations
Borrowings on revolving credit agreement 3,538,030 3,770,406
Payments on revolving credit agreement (3,653,222) (4,030,793)
Proceeds from issuance of common stock, net of
issuance costs 300,000 121,000
----------- -----------
Net cash used in financing activities (24,123) (327,707)
----------- -----------
Effect of exchange rate changes on cash 12,835 (10,195)
----------- -----------
Net increase (decrease) in cash 164,762 (422,078)
Cash and cash equivalents at beginning of year 222,023 644,101
----------- -----------
Cash and cash equivalents at end of year $ 386,785 $ 222,023
=========== ===========
</TABLE>
See accompanying notes.
14
<PAGE>
<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED JUNE 30,
1997 1996
-------- --------
<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 $ 58,560 $ 98,767
======== ========
Conversion of accounts payable into notes payable $258,730
========
Net reductions in current liabilities negotiated $ 8,586
========
Common stock issued for notes receivable $ 15,000
========
Notes receivable in exchange for common stock subscribed $860,000 $300,000
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 79,165 $132,820
======== ========
Income taxes $ 38,758
========
</TABLE>
See accompanying notes.
15
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows:
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.
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, 1997 includes a certificate of deposit
of $29,446 held as collateral pursuant to a performance bond and $163,197 held
in a collateral account for repayment of a revolving credit agreement. At June
30, 1996 these balances were $28,052 and $32,817, respectively.
WORK IN PROCESS
Work in process consists of labor and certain other costs incurred for
uncompleted and unbilled projects.
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. Internally
developed software is materially related to specific contracts, is identified
and deferred as work in process of those projects and charged to expense as
revenue is recognized. Management monitors the carrying value of assets and
recognizes an impairment loss in the period the recoverability declines.
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.
16
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
REVENUE RECOGNITION
The Company has entered into certain long-term contracts. The terms of most of
these contracts allow for billing as work on records is completed. Infrequently,
the Company enters into a contract with terms that specify billing at intervals
not coincident with the completion of work and revenue recognition. Revenue on
these long-term contracts is recognized using the percentage of completion
method. Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, and depreciation costs. Selling, and administrative costs are expensed
as incurred. Provision for estimated losses on uncompleted contracts are made in
the earliest period in which such losses can be estimated. Revenue on most
contracts (which are short-term) is recognized upon completion of identifiable
batches of records and shipment of the product.
INCOME TAXES
The Company provides for U.S. Federal, state, and foreign income taxes,
currently payable and deferred, using the asset and liability method. Deferred
tax assets and liabilities are determined based on temporary differences between
financial reporting and tax bases of assets and liabilities that will result in
taxable or deductible amounts in future years. Valuation allowances are
established, if necessary, to reduce the deferred tax asset to the amount that
will, more likely than not, be realized.
CONCENTRATION OF CREDIT RISK
The Company grants credit to customers who meet the Company's preestablished
credit requirements. Security is not required when trade credit is granted to
customers. Credit losses are provided for in the consolidated financial
statements and have been within management's expectations. The Company does not
believe it is subject to market or geographic risk based on the industries or
location of its customers (see Note 11).
FINANCIAL INSTRUMENTS
The carrying value of long-term debt approximates fair value.
USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
17
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
In February, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, EARNINGS PER SHARE. The effect of this
pronouncement is discussed in Note 12. In June, 1997, Financial Accounting
Standard No. 130, REPORTING COMPREHENSIVE INCOME was issued. The Company is
currently reporting its items of Other Comprehensive Income in its Statement of
Stockholders' Equity. Also in June, 1997 Financial Accounting Standard No. 131,
DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, was issued.
The Company will adopt these standards in a future period.
NOTE 2. STOCKHOLDERS' EQUITY
COMMON STOCK
Effective November 7, 1997 the Company's shareholders consented to a one for
four reverse stock split. All of the share and per share amounts have been
restated to reflect the reverse stock split.
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 275,000 shares of common stock and warrants to issue an additional
321,875 shares of common stock, exerciseable for a five year period at $5.50 per
share. One of the private placements of 187,500 shares was with a group of
individuals unrelated to the Company ("the Meyerson Group"). Another transaction
representing 62,500 shares was with Tallard B.V. ("Tallard"), a greater than 5%
shareholder of the Company. The remaining transaction for 25,000 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 91,666 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 $5.50 to $4.50. At June 30, 1996 and 1995,
62,500 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 250,000
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 December 31, 1993, Tallard and the other holders of the Company's preferred
stock exercised their rights to convert the preferred stock into 1,150,575
shares of common stock. The Company also issued 25,953 shares of common stock in
payment of $18,812 of interest and $85,000 of preferred dividends accrued
through December 31, 1993. Pursuant to the conversion, Tallard has certain Board
representation rights for so long as Tallard maintains certain ownership levels
in the Company. The conversion agreement prohibits the Company 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. Tallard and the other former
preferred stockholders received certain demand and piggyback registration rights
which would
18
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 2. STOCKHOLDERS' EQUITY (CONTINUED)
enable them to publicly trade the common shares received. The demand
registration rights may be exercised between October 1, 1994 and December 21,
2003. 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.
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 140,000 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 provided for annual earnings measurements during these
years. Amounts earned relating to 1996 operations were immaterial. The Company
also granted a put option to the selling shareholders to repurchase 30,000
shares at $8.00 per share. The related liability was recorded at the time of the
grant of the put option and the shares were canceled when put. At June 30, 1997
all of the shares had been put. At June 30, 1997 and 1996, $33,342 and $80,400
was payable to the selling shareholders.
In May and June of 1996 the Company conducted private placements of its common
stock. Officers and directors purchased 116,000 shares and a current shareholder
purchased 30,000 shares. A common stock subscription of $300,000 was received
for 300,000 shares of common stock and warrants to purchase an additional
300,000 shares. Consideration was received in August and September, 1996 and the
shares and warrants issued.
On June 29, 1997 subscriptions for 860,000 units consisting of one share of
common stock and one warrant to purchase one share of common stock were
received. The warrants are exercisable at $2.00 per share. $860,000 was placed
in escrow by the subscribers to cover the issuance. On August 25, 1997 the
subscription and escrow agreement were amended with regard to a single
subscriber whereby $300,000 was paid to the Company from the subscriber's escrow
account to purchase 300,000 common shares. The shares were issued September 15,
1997. The Company solicited shareholder approval of a one for four reverse stock
split and an amendment to the Company's restated Articles of Incorporation to
increase the number of authorized shares of Common Stock of the Company to
10,000,000 from 5,000,000 post-reverse split shares. The common stock
subscription agreements were subject to shareholder consent to the amendment, as
the Company had insufficient shares authorized to issue to complete the
placement. Shareholders approved the measures, which became effective November
7, 1997 and the remaining $560,000 was released from escrow.
19
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consists of:
1997 1996
---------- ----------
Computer and other equipment $2,854,885 $3,212,454
Computer and other equipment under
capitalized leases 473,304 104,487
Software 206,847 264,211
---------- ----------
3,535,036 3,581,152
Accumulated depreciation 3,170,996 2,982,737
---------- ----------
$ 364,040 $ 598,415
========== ==========
Accumulated amortization of assets under capitalized leases amounted to $245,516
and $99,055 at June 30, 1997, and 1996, respectively. During fiscal year 1997,
$186,000 of fully depreciated assets were retired and the cost and related
accumulated depreciation were removed from the ledgers.
NOTE 4. NOTES PAYABLE, LONG-TERM DEBT, AND CAPITAL LEASE OBLIGATIONS
The Company has a revolving credit agreement with a U.S. bank secured by
accounts receivable, work in process, property and equipment and other assets.
The agreement bears interest at the lender's prime rate plus 4.0% (12.5% and
12.25% at June 30, 1997 and 1996, respectively). 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 $163,197 and $32,817 as of June 30,
1997 and 1996, respectively. At June 30, 1997 the Company had total available
borrowings of $280,000 and had borrowed $274,512. At June 30, 1996 the Company
had total available borrowings of $400,000 and had borrowed $389,703. The
Company was in compliance with the covenants contained in the credit agreements
at June 30, 1997 and 1996.
The agreement in place on June 30, 1995 expired December, 1995 and was renewed
in January 1996, establishing a maximum borrowing of $450,000 which declined
$10,000 per month beginning February 1, 1996. Unpaid principal amounts were due
July 1, 1997. Security and maximum borrowing (subject to the declining ceiling)
were unchanged from the matured note. The agreement was extended on July 1, 1997
through October 1, 1997. The new agreement caps borrowing at $270,000 subject to
the same terms as the matured agreements. The Company renewed the agreement
October 1, 1997 to mature April 1, 1998. The new agreement provides for maximum
borrowing of 70% of domestic accounts receivable less than 90 days old with a
ceiling of $270,000 which declines $10,000 per month.
In January, 1995, the Company established a revolving credit agreement with a
U.K. bank secured by U.K. accounts receivable, bearing interest at the lender's
base rate plus 2.0% and which expired in December, 1995. The maximum aggregate
borrowings under the agreement were approximately $795,000, determined by a
specified percentage of qualified export trade receivables. The agreement was
not renewed after expiration.
20
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 4. NOTES PAYABLE, LONG-TERM DEBT, AND CAPITAL LEASE OBLIGATIONS
(CONTINUED)
<TABLE>
<CAPTION>
Long-term debt and capital lease obligations consist of:
1997 1996
-------- --------
<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 $ 82,786 $122,383
Unsecured notes bearing interest at rates ranging from 7.0% to
8.0%, payable in monthly installments through 1999 231,560 265,627
Capital lease obligations, bearing interest at rates ranging from
12.75% to 16.0% payable monthly through 2000. (Note 9) 37,094 52,897
-------- --------
351,440 440,907
Less: Current portion 199,460 199,650
======== ========
Noncurrent portion $151,980 $241,257
======== ========
</TABLE>
Maturities of long-term debt and capital lease obligations for years ending June
30 are:
1998 $199,460
1999 133,960
2000 18,020
--------
$351,440
========
21
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 5. EMPLOYEE BENEFIT PLANS
STOCK OPTION PLAN
As described in Note 2, effective November 7, 1997 the Company's shareholders
consented to a one for four reverse stock split. All of the share and per share
amounts have been restated to reflect the reverse stock split.
The Company has in effect a stock option plan (the Plan) under which stock
options have been granted to officers and key employees at prices equal to or
greater than the market price at the date of grant. Options expire five years
after the date of grant. Total options which were exercisable under the Plan at
June 30, 1997 and 1996, amounted to 56,650 and 35,300 shares. The number of
shares reserved for the Plan is 250,000. On June 30, 1997, 55,300 and on June
30, 1996, options for 80,300 shares remained available for grants under the
Plan. Information with respect to options granted under the Plan follows:
<TABLE>
<CAPTION>
RANGE OF WEIGHTED
NUMBER OF OPTION WEIGHTED AVERAGE AVERAGE
SHARES PRICES EXERCISE PRICE CONTRACTUAL LIFE
--------- --------- ---------------- ----------------
<S> <C> <C> <C> <C>
Outstanding at June 30, 1995 161,987 4.12-8.00 5.04
Granted 107,500 1.00 1.00
Exercised
Canceled 129,987 4.12-7.52 5.00
Expired 9,000 7.52 7.52
Outstanding at June 30, 1996 130,500 1.00-4.12 1.55
Granted 51,250 .68-1.00 .87
Exercised
Canceled 26,250 1.00-4.12 2.48
Expired
Outstanding at June 30, 1997 155,500 .68-4.12 1.20 3.18
Exercisable at June 30, 1997 56,650 .56
</TABLE>
OTHER OPTIONS
The following are not included in the Plan:
Stock options were granted to the Company's President in 1994 for 12,500
shares in aggregate expiring in fiscal year 1999. These options were
issued at the fair market value on the date of grant. Options which were
exercisable at June 30, 1997 amounted to 10,000 shares and were
exercisable at $4.12 per share.
Stock options granted were granted to the Company's Chairman in 1993 and
1994 for 56,250 shares in aggregate expiring in fiscal year 1999. These
options were issued at the fair market value on the date of grant.
Options which were exercisable at June 30, 1997 amounted to 55,000 shares
and were exercisable at prices ranging from $3.00 to $4.12 per share.
Stock options were granted to outside members of the Board of Directors
in fiscal years 1994-1997 for 37,500 shares in the aggregate expiring in
fiscal years 1999 to 2002. These options were issued at fair market value
on the date of grant at prices ranging from $.68 to $4.12 per share.
Options for 15,000 shares were exercisable at June 30, 1997.
22
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 5. EMPLOYEE BENEFIT PLANS (CONTINUED)
ACCOUNTING FOR STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION, effective for the financial statements of the Company
for the fiscal year beginning July 1, 1996. The Company has chosen to continue
to apply the current accounting requirements in its financial statements.
The weighted-average grant-date fair value of options granted during the year
ended June 30, 1997 amounted to $5,951. The Black-Scholes option pricing model
was used to develop the fair value of options granted. Assumptions applied
include a risk-free interest rate of 7.8%, an expected life of the option equal
to the five year vesting period, an expected volatility of .8, and no dividends
paid.
The fair value of options vesting in the years ended June 30, 1997 and 1996 from
prior year grants resulted in compensation cost of $8,744 and $21,569 for years
ended June 30, 1997 and 1996, respectively. The cost for the current year is net
of forfeitures of $6,129 from options canceled during the year which are
included in the prior year figure. These amounts would affect earnings per share
("EPS") as follows:
YEAR ENDED JUNE 30, EPS AS REPORTED EPS AS ADJUSTED
------------------- --------------- ---------------
1997 $(.13) $(.13)
1996 $(.01) $(.02)
Statement 123 also applies to equity instruments issued for goods or services
provided by persons other than employees. Those transactions would be accounted
for based on the fair value of the goods or services received or the fair value
of the equity instrument issued, whichever is more reliably measurable. The
Company did not enter into any transactions whereby equity instruments were
issued for goods or services in the years ended June 30, 1997 and 1996.
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, 1997 and 1996,
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. The match was reinstated October 1, 1995.
NOTE 6. INCOME TAXES
At June 30, 1997, the Company had net operating loss carryforwards of
approximately $5,700,000 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, 1997, net
operating loss carryforwards relating to the operations of Saztec Europe, Ltd.
were immaterial due to the non-deductibility of certain operating expenses
incurred.
23
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 6. INCOME TAXES(CONTINUED)
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:
1997 1996
----------- -----------
Deferred tax assets:
Accrued vacation $ 51,316 $ 49,908
Net operating loss carryforwards 2,294,612 2,488,330
Other - net 126,068 30,596
----------- -----------
Total deferred tax assets 2,471,996 2,568,834
Valuation allowance (2,397,761) (2,485,834)
----------- -----------
Net deferred tax assets 74,235 83,000
Deferred tax liability:
Book basis in excess of tax basis of
intangible assets 70,714 69,552
Other - net 3,521 13,448
----------- -----------
Total deferred tax liabilities 74,235 83,000
----------- -----------
Net deferred tax asset $ 0 $ 0
=========== ===========
The sources of the Company's consolidated income (loss) before income taxes for
the years ended June 30 consist of:
1997 1996
--------- ---------
United States $ (53,409) $(115,249)
Foreign (447,166) 134,956
--------- ---------
Loss before income tax expense $(500,575) $ 19,707
========= =========
24
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 6. INCOME TAXES(CONTINUED)
A reconciliation of the Company's income tax provision for fiscal 1997 and 1996
and the amount computed by applying the statutory United States income tax rate
of 34% consists of:
1997 1996
--------- --------
Federal income taxes at statutory rate $(170,196) $ 4,000
Foreign income taxes 113,348 63,139
Change in valuation allowance 88,073 (14,400)
Officers life insurance 6,800 6,800
Goodwill and other non-deductible amortization 1,285 1,800
Other items (77,998) 1,800
--------- --------
Total income taxes $ (38,688) $ 63,139
========= ========
The provision for income taxes for fiscal 1997 and 1996 consists of the
following:
CURRENT DEFERRED TOTAL
--------- --------
1997
----
Federal -- -- --
State -- -- --
Foreign $(38,688) -- $(38,688)
-------- -------- --------
$(38,688) -- $(38,688)
======== -------- ========
1996
----
Federal -- -- --
State -- -- --
Foreign $ 63,139 -- $ 63,139
-------- -------- --------
$ 63,139 -- $ 63,139
======== ======== ========
25
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 7. SALES OF DIVISIONS
On September 1, 1995, the Company completed the sale of the Knightswade
Microfilm Division ("KM") based in Winchester, U.K.. The loss resulting from the
sale of KM was recognized in the financial statements for the year ended June
30, 1995. Also on September 1, 1995, the Company sold the Marketing Fulfillment
Division ("FS") based in Billerica, Massachusetts. The operating results for FS
for the year ended June 30, 1996 to the date of sale were:
FS
--------
Revenue $217,535
Gross profit (loss) (12,505)
Operating (loss) (22,152)
Gain on sale of division $231,154
NOTE 8. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
The following relates to separate contracts being accounted for using a
percentage of completion method for the years ended June 30:
1997 1996
-------- --------
Costs incurred on uncompleted contracts $139,955 $308,895
Estimated earnings 161,412 112,595
-------- --------
301,367 421,490
Less: Billings to date 525,000 400,000
-------- --------
Amount shown on balance sheet:
Billings in excess of costs and estimated earnings $223,633
========
Costs and estimated earnings in excess of billings $21,490
=======
26
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
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.
Management and counsel believe that the future effect of any appeal of the
decision 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 companies.
On December 14, 1995, an order was entered granting the Summary Judgment motion
of DEC. The decision effectively terminated the Company's claim. While the
Company believed that its case was meritorious, it determined during the period
for appeal, that it would be an imprudent use of the Company's resources to
pursue an appeal. The loss of the claim resulted in the Company's writing off
$139,839 of work in process in connection with the contract in fiscal year 1996.
LEASE COMMITMENTS
Rent expense charged to operations under operating leases for office space,
computer equipment and software for the years ended June 30, 1997 and 1996 was
$282,501 and $622,322, respectively.
At June 30, 1997, the Company had capital and operating lease obligations for
office space and equipment used in operations payable during the fiscal years
ending June 30 as follows:
CAPITAL OPERATING LEASES TOTAL
LEASES PROPERTY EQUIPMENT COMMITMENTS
------- --------- -------- -----------
1998 $21,413 $238,366 $16,010 $275,789
1999 11,704 228,814 11,479 251,997
2000 9,753 175,952 1,323 187,028
2001 98,960 98,960
2002 70,741 70,741
---------- -------- ------- --------
$42,870 $812,833 $28,812 $884,515
======== ======= ========
Less amount
representing
interest 5,776
-----
Net obligations under
capital leases
(Note 4) $37,094
=======
27
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 10. QUARTERLY FINANCIAL DATA (UNAUDITED)
The results of operations by quarter for the years ended June 30, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
EARNINGS
NET INCOME (LOSS)
REVENUES GROSS PROFIT (LOSS) PER SHARE(1)
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Year ended June 30, 1997
Quarter ended-
September 30, 1996 $ 2,375,142 $ 539,624 $ 3,910 $ .001
December 31, 1996 2,641,965 557,317 (74,420) (.021)
March 31, 1997 2,374,030 410,113 (87,446) (.025)
June 30, 1997 2,080,063 208,682 (303,931) (.085)
----------- ----------- --------- ---------
$ 9,471,200 $ 1,715,736 $(461,887) $ (.13)
=========== =========== ========= =========
Year ended June 30, 1996
Quarter ended-
September 30, 1995 $ 2,359,115 $ 490,746 $(233,994) $ (.07)
December 31, 1995 2,997,179 926,372 13,885 .004
March 31, 1996 2,685,100 832,478 115,742 .037
June 30, 1996 2,810,161 643,882 60,935 .019
----------- ----------- --------- ---------
$10,851,555 $ 2,893,478 $ (43,432) $ (.01)
=========== =========== ========= =========
<FN>
- ----------
(1) Amounts are shown after effect of one for four reverse stock split.
</FN>
</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 first quarter of fiscal 1996 is a gain of $231,154 on sale of
the Fulfillment Marketing Division. Included in the second quarter of fiscal
1996 is a write-off of $139,839 of work in process related to litigation.
28
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 11. FOREIGN OPERATIONS AND MAJOR CUSTOMERS
Revenues, income (loss) before taxes, and identifiable assets by geographic area
are shown below. United Kingdom amounts relate solely to Saztec Europe, Ltd. and
its subsidiaries, whose customers are located in England, Scotland, Germany,
Italy, Spain, and Belgium. Identifiable assets of Saztec Europe Ltd. located
outside of Ardrossan, Scotland are immaterial.
1997 1996
------------ ------------
Revenue
United States $ 4,553,796 $ 4,923,900
United Kingdom/Western Europe 4,917,404 5,927,655
------------ ------------
$ 9,471,200 $ 10,851,555
============ ============
Income (loss) before income taxes
United States $ (53,409) $ (115,248)
United Kingdom/Western Europe (408,478) 134,955
------------ ------------
$ (461,887) $ 19,707
============ ============
Identifiable Assets
United States $ 2,415,816 $ 1,937,421
United Kingdom/Western Europe 1,414,632 2,281,884
------------ ------------
$ 3,830,448 $ 4,219,305
============ ============
Depreciation
United States $ 182,825 $ 264,267
United Kingdom/Western Europe 178,664 241,826
Amortization 12,120 30,959
------------ ------------
$ 373,609 $ 537,052
============ ============
MAJOR CUSTOMERS
One customer in Germany accounted for 16% and 13% of fiscal year 1997 and 1996
consolidated revenue.
29
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 12. 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 14,108,670 and 12,700,609 for the
years ended June 30, 1997, and 1996, respectively. These amounts were divided by
four to give effect to the four to one reverse stock split to which shareholders
consented effective November 7, 1997 (Note 2). The inclusion of common stock
equivalents would have been antidilutive and were not included.
Effective for years ending after December 15, 1997, the Financial Accounting
Standards Board has issued Statement of Financial Accounting Standards No. 128,
EARNINGS PER SHARE. The standard amends the computation of earnings per share to
provide for two measures, Basic Earnings Per Share and Dilutive Earnings Per
Share. Under this standard, the Company would have reported the following, on a
post reverse split basis, for years ended June 30:
BASIC EPS DILUTIVE EPS
--------- ------------
1997 $(.13) $(.13)
1996 $(.01) $(.01).
30
<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:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
<S> <C> <C>
Robert P. Dunne 68 Chairman of the Board of Directors, Director
Gary N. Abernathy 57 President, Director, Chief Executive Officer
Tom W. Olofson 56 Director
Lee R. Petillon 68 Director
Pradeep Barthakur 49 Director
Robert W. Forsyth 57 Director
Timothy E. Mahoney 40 Director
Kent L. Meyer 53 Vice President, Sales and Secretary
Thomas K. O'Loughlin 45 Vice President and Treasurer
Sean J. O'Regan 35 Vice President, Data Capture Operations
</TABLE>
Mr. Dunne has been a director of the Company since March 1985. On November 8,
1990, Mr. Dunne was appointed Chairman of the Board of Directors. 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. 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. 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.
31
<PAGE>
Mr. Barthakur was elected director at the regular meeting of the Board of
Directors on September 12, 1996. Mr. Barthakur is Executive Vice President &
Secretary of Datamatics (America) Inc., where he has been employed since 1992.
Datamatics (America) Inc. is a part of the Datamatics Group of Companies.
Mr. Mahoney was elected director at the regular meeting of the Board of
Directors on February 20, 1997. He founded the Union Atlantic LC merchant bank
in 1994. The bank provides management and capital to emerging technology
companies. From 1991 to 1994 he was President of the SyDOS Division of SyQuest
Technology.
Mr. Forsyth was elected director by unanimous vote of the Board at the regular
quarterly meeting of the Board of Directors held June 5, 1997. He was elected to
replace Mr. Claus Stenbaek, who resigned on June 4, 1997. Mr. Forsyth is
President and CEO of Travelogix, a travel technology company located in Houston,
Texas, since October 1995. Prior to joining Technologix, he was President of the
Outsourcing Marketing Division of Computer Sciences Corporation, from 1992.
Mr. Meyer has been a Vice President of the Company since 1987 and served as a
director from November 1983 through January 1995.
Mr. O'Loughlin, a Certified Public Accountant, joined the Company in July 1995.
He practiced as an independent certified public accountant in California and
Massachusetts.
Mr. O'Regan has been Vice President, Data Capture Operations since September
1995. He was employed in the Sales Department from 1986 to 1995 with Advanced
Automation Associates, Inc., a wholly owned subsidiary.
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, 1997, 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, 1997 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, or would have exceeded $100,000 if they
had been employed by the Company for the entire year.
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION AWARD
--------------------- -----------------------------------------
NAME AND PRINCIPAL SECURITIES UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) OPTIONS (#)(1) COMPENSATION($)
-------- ---- --------- -------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
GARY N. ABERNATHY 1997 142,339 10,000 20,000
President and Chief 1996 110,881 12,500
Executive Officer 1995 115,375 25,000
<FN>
- ----------
(1) Amounts are shown after effect of one for four reverse stock split.
</FN>
</TABLE>
32
<PAGE>
STOCK OPTIONS ISSUED
As shown in the above table, Mr. Abernathy was granted options for 20,000 shares
on a post reverse split basis of common stock during the year ended June 30,
1997:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
NUMBER OF SECURITIES % OF TOTAL OPTIONS/SARS EXERCISE OR
UNDERLYING OPTIONS/ GRANTED TO EMPLOYEES BASE EXPIRATION
NAME SARS GRANTED(1) IN FISCAL YEAR PRICE ($/SH) DATE
- ----------------- -------------------- ----------------------- ------------ -------------
<S> <C> <C> <C> <C>
Gary N. Abernathy 20,000 76.2 .17 Oct. 29, 2001
<FN>
- ----------
(1) Amounts are shown after effect of one for four reverse stock split.
</FN>
</TABLE>
STOCK OPTIONS EXERCISED
During the year ended June 30, 1997 no stock options were exercised by the named
executive. For the fiscal year ended June 30, 1997 no stock options previously
awarded to the named executive were repriced. The following table sets forth, as
of June 30, 1997 the exercisable and unexercisable portions of stock options
held by the named executive.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT FISCAL YEAR END (#)(1)
SHARES ACQUIRED VALUE --------------------------------------------
NAME ON EXERCISE ($) REALIZED ($) EXERCISEABLE UNEXERCISABLE
----------------- --------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Gary N. Abernathy -0- -0- 28,000 42,000
<FN>
- ----------
(1) Amounts are shown after effect of one for four reverse stock split.
</FN>
</TABLE>
As of June 30, 1997 there was no unrealized value with respect to the
exercisable or unexercisable portions of the options held by the above-named
executive.
LONG-TERM INCENTIVE PLAN AWARDS
The Company has no Long-term Incentive Plan Awards currently in effect.
COMPENSATION OF DIRECTORS
Outside directors receive compensation of $2,000 per quarter plus actual
expenses to attend regular quarterly meetings. For the quarters ended September
30 and December 31, 1995 the Compensation Committee voted to reduce the
quarterly compensation to $1,000 per quarter. The Chairman of the Board of
Directors receives $6,000 per quarter, plus actual expenses to attend regular
meetings.
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.
33
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of November 7, 1997 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. The numbers of shares are shown
estimated for the effect of the one for four reverse stock split (Note 2).
<TABLE>
<CAPTION>
NAME AND ADDRESS NO. OF SHARES PERCENT OWNED (1)
---------------- ------------- -----------------
<S> <C> <C>
Gary N. Abernathy (2)
43 Manning Road
Billerica, MA 01821 56,789 1.2
Robert P. Dunne (3)
928 Southwest Tenth Street
Miami, FL 33130 217,082 4.5
Lee R. Petillon
21515 Hawthorne Blvd., #1260
Torrance, CA 90503 29,500 *
Tom W. Olofson (4)
501 Kansas Ave
Kansas City, KS 66105 99,000 2.1
Richard P. Kiphart (5)
222 West Adams
Chicago, IL 60603 391,446 8.2
Tallard B.V. (6)
c/o Peder G. Wallenberg
Amsteldijk 166 Rivierstaete
1079 LH Amsterdam 1,653,174 34.7
Datamatics Technologies PVT. LTD. (7)
c/o Dr. Lalit S. Kanodia, Chairman
Unit #118-120, SDF 4,
SEEPZ Andheri (East)
Bombay 400 096, India 400,000 8.4
Pradeep Barthakur (8)
26 Derby Lane
Tyngsboro, MA 01879 205,750 4.3
All Directors and Officers
as a Group (9 persons) 654,121 13.7
* Less than one percent (1%)
<FN>
- ----------
(1) Based on 3,901,129 shares outstanding on November 7, 1997, 136,650
exercisable options and warrants to issue an additional 721,000 shares, in
aggregate, at such date, for a total of 4,758,779, after effect of the one for
four reverse stock split.
34
<PAGE>
(2) The shares beneficially owned by Mr. Abernathy are issued in the following
manner: 2,689 shares in the name of Information Control, Inc. which is
wholly-owned by Mr. Abernathy, a vested right to acquire 28,000 shares pursuant
to stock options, 16,100 shares owned directly, and warrants for 10,000 shares.
(3) The shares beneficially owned by Mr. Dunne consist of: 23,641 shares in the
name of Robertson Corporation (of which Mr. Dunne is the sole owner), a vested
right to acquire 62,250 shares pursuant to stock options, warrants to purchase
30,000 shares, 75 shares held by the Amy Schneeberger Trust, of which Mr. Dunne
is a trustee, 100 shares held by Mrs. Dunne's Individual Retirement Account, and
101,016 shares owned directly.
(4) The shares beneficially owned by Mr. Olofson consist of 56,500 shares owned
directly, vested options to purchase 7,500 shares, and warrants to purchase
35,000 shares.
(5) The shares beneficially owned by Mr. Kiphart are issued in the following
manner: 325,686 shares owned directly, warrants to purchase 30,000 shares, and
35,760 shares held in total by three trusts for Mr. Kiphart's children, of which
Mrs. Kiphart is the trustee.
(6) The shares beneficially owned by Tallard B.V. are held in the following
manner: 1,353,174 shares owned directly by Tallard Infologix, N.V., a wholly
owned subsidiary of Tallard, B.V., and warrants to purchase 300,000 shares in
the name of Tallard Infologix, N.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. and Tallard Infologix N.V.
(7) The shares beneficially owned by Datamatics Technologies PVT. LTD. consist
of 200,000 shares owned directly and warrants to purchase 200,000 shares.
Datamatics Technologies PVT. LTD. is wholly owned by Dr. Lalit S.
Kanodia, and he may be deemed to be the beneficial owner of these shares.
(8) The shares held by Mr. Barthakur consist of 105,000 shares owned directly,
vested rights to purchase 750 shares pursuant to stock options and warrants to
purchase 100,000 shares.
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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
-------
10.13 Renewal of credit agreement dated July 1, 1997
10.14 Renewal of credit agreement dated October 7, 1997
21 Subsidiaries of the registrant
27 Financial Data Schedule
35
<PAGE>
In addition to those Exhibits shown above, the Company incorporates the
following Exhibits by reference to the filing set forth below,
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION FILED AS EXHIBIT:
- ----------- ----------- -----------------
<S> <C> <C>
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 security 4 to Form 10-K for the year
holders including indentures ended June 30, 1990
4.1 Ten Year Convertible Debenture Note 4 to Form 10-K for the year
Agreement ended June 30, 1992
4.2 Certificate of Determination for the 4 to Form 8-K dated
establishment of the Series A Cumulative February 19, 1993
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 Saztec 10 to Form 8-K dated
International, Inc., and Tallard B.V. October 5, 1994
10.2 Agreement dated January 9, 1995 between 10 to Form 10-Q for the
Saztec International, Inc. the Meyerson Quarter ended December 31,
Group and the Placement Warrant Holders 1994
10.3 The rescission of the purchase of CFL, Ltd. 2 to Form 8-K dated
common stock February 17, 1993
10.4 Loan Agreement between Tallard B.V. and 10 to Form 8-K dated
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
10.8 1995 Employee Stock Option Plan 10.8 to Form 10K-SB, dated
September 22, 1993
10.9 1995 Non-Employee Directors Stock Option 10.9 to Form 10K-SB, dated
Plan September 22, 1995
36
<PAGE>
10.10 Employment Agreement for Gary N. 10.10 to Form 10K-SB, dated
Abernathy of January 1, 1995 September 22, 1995
10.11 Renewal of Revolving Credit Agreement dated 10.11 to Form 10K-SB, dated
August 12, 1995 September 22, 1995
10.12 Renewal of Revolving Credit Agreement dated 10.12 to Form 10K-SB, dated
January 29, 1996 December 9, 1996
16 Change in certifying public accountants 1 to Form 8-K dated January
26,1996
99 Delisting of common stock by NASDAQ Stock 1 to Form 8-K dated November
Market, Inc. 21, 1995
</TABLE>
(B) REPORTS ON FORM 8-K:
None.
37
<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: November 14, 1997
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 November 14, 1997.
SIGNATURE CAPACITY
--------- --------
/s/ ROBERT P. DUNNE Chairman of the Board and Director
-------------------------------
Robert P. Dunne
/s/ GARY N. ABERNATHY President, Chief Executive
------------------------------- Officer and Director
Gary N. Abernathy
/s/ THOMAS K. O'LOUGHLIN Vice President and Treasurer
-------------------------------
Thomas K. O'Loughlin
/s/ KENT L. MEYER Secretary
-------------------------------
Kent L. Meyer
/s/ TOM W. OLOFSON Director
-------------------------------
Tom W. Olofson
/s/ LEE R. PETILLON Director
-------------------------------
Lee R. Petillon
/s/ PRADEEP BARTHAKUR Director
-------------------------------
Pradeep Barthakur
/s/ TIMOTHY E. MAHONEY Director
-------------------------------
Timothy E. Mahoney
/s/ ROBERT W. FORSYTH Director
--------------------------------
Robert W. Forsyth
38
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
10.13 Renewal of Credit Agreement dated July 1, 1997
10.14 Renewal of Credit Agreement dated October 7, 1997.
21 List of subsidiaries.
27 Financial Data Schedule.
EXHIBIT 10.13
UMB
B A N K
June 26,1997
Mr. Gary Abernathy, President
Saztec International, Inc.
43 Manning Road
Billerica, Massachusetts 01821
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 expires on July 1,
1997. In that connection, you had requested that this bank's Discount Committee
consider continuing to extend a revolving credit facility to Saztec.
The Discount Committee of UMB Bank, n.a. has favorably 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 amount of
$270,000 beginning July 1, 1997.
Any remaining outstanding balance is payable in full on October 1, 1997. The
above listed amount 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 not
later than October 1, 1997. Accrued interest will be due and payable monthly.
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.
<PAGE>
UMB
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, fixtures and all common stock of all
subsidiaries of Saztec now owned or hereafter acquired or created.
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 in 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 receivables.
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
$500,000, 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 8.00:1, 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 listing 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 certified by borrower. Such financial statements to include,
at a minimum, a balance sheet and an income statement. Year end statements are
to be prepared by a certified public accounting firm acceptable to the Bank and
be of an audit quality.
<PAGE>
UMB
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 letter 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. 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
matter 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.
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 July 7, 1997.
Sincerely,
UMB Bank, n.a.
<PAGE>
UMB
By: /s/ TRAVIS J. BURNS
-----------------------------
Travis J. Burns, Assistant Vice President
The undersigned hereby acknowledges and agrees to all the terms and conditions
stated in the foregoing letter.
SAZTEC INTERNATIONAL, INC.
By: /s/ GARY ABERNATHY
-----------------------------
Gary N. Abernathy, President
Dated: July 1, 1997
ADVANCED AUTOMATION ASSOCIATES, INC.
By: /s/ GARY ABERNATHY
----------------------------
Gary N. Abernathy, President
Dated: July 1, 1997
<PAGE>
UMB
B A N K
UMB BANK n.a.
BANKING CENTER
1010 GRAND BLVD.
KANSAS CITY MO 64106
"Lender"
BORROWER
SAZTEC INTERNATIONAL, INC.,
ADVANCED AUTOMATION ASSOCIATES, INC.
43 MANNING RD.
BILLERICA, MA 01821
UMB 2020300 (R 6/93) All States
UMB MASTER NOTE
OFFICER INITIALS TJB
INTEREST RATE 12.500%
PRINCIPAL AMOUNT/CREDIT LIMIT $270,000.00
FUNDING DATE 07/01/97
MATURITY DATE 10/01/97
CUSTOMER NUMBER 3904321
LOAN NUMBER 82658
FOR VALUE RECEIVED, the undersigned Borrower (the 'Undersigned" means each
maker and each endorser, and If more than one, each shall be jointly and
severally liable hereunder) promises to pay to the order of Lender, at the
offices set forth above or at such other place as the holder hereof may from
time to time designate in writing, ON DEMAND, but if no Demand, on OCTOBER 1,
1997, the principal amount of TWO HUNDRED SEVENTY THOUSAND AND NO/1OO DOLLARS
($270,000.00), or such other lesser amount as shall be noted as the Unpaid
Principal Balance on the Schedule of Disbursements and Payments of Principal
included herein or attached hereto pursuant to the authority set forth herein,
together with Interest on the unpaid principal balance hereof from time to time
outstanding from date(s) of disbursement(s) until Maturity (as herein defined)
at the rate (the "Loan Interest Rate") indicated below: Daily Variable Rate.
From the date hereof until the first Adjustment Date (as herein defined) the
Loan Interest Rate shall be TWELVE AND 500/1000 percent ( 12. 500 %) per annum.
The Loan Interest Rate shall be adjusted each day to a rate equal to FOUR AND
NO/1000 percentage points ( 4. 000 %) Above the Index Rate (as herein defined)
in effect as of that day. The Lender's Index Rate for this Note shall be defined
as: UMB BANK, n.a. PRIME RATE.
Accrued interest shall be payable Monthly. The term "Maturity' shall mean
OCTOBER 1, 1997, or any earlier date on which payment hereunder is due pursuant
to any demand or acceleration rights provided in this Note. The term "Index
Rate", if applicable to this Note, shall mean that rate of interest per annum
determined from time to time by Lender as its base or index rate for loans to
commercial borrowers. Such base or index rate does not necessarily reflect the
rate that Lender charges its best or most creditworthy customers. If the Lender
is precluded by law or otherwise from using the above base
<PAGE>
or index rate, the term "index Rate" shall mean that substitute index rate
selected by Lender in place of its base or index rate, which substitute Index
rate shall be comparable to Lender's base or Index rate provided for herein.
Interest hereunder shall be computed on the basis of days elapsed and assuming
a 360-day year. Each payment received shall be applied first to accrued
interest, and then to a reduction of the principal sum and any expense or other
sums owed under this Note, or In any other order as determined by Lender in
Lender's sole discretion and as permitted by law. Any sum remaining unpaid after
Maturity shall thereafter bear interest at a rate (the "Default Interest Rate")
which shall be at all times TWO AND NO/1000 percentage points ( 2.000 %) In
excess of the Loan Interest Rate (adjusted, if applicable, as provided above)
that would have been applicable but for such Maturity. If not paid at Maturity,
interest thereafter shall be compounded monthly.
The privilege is hereby reserved to prepay without penalty all or any part
of the outstanding amount due hereunder at any time prior to Maturity. If at any
time prior to Maturity the outstanding principal balance due hereunder is less
than the face amount of this Note, the undersigned, or any of them, may from
time to time until Maturity request, and Lender may in its sole discretion, make
further disbursements hereunder which shall be evidenced by this Note; provided,
however, the aggregate amount of all principal amounts outstanding hereunder
shall at no time exceed the face amount of this Note; and provided further, that
each and every disbursement made under this Note shall be at the Lender's sole
discretion, Lender having made no commitment to make any such disbursements. The
principal amount due hereunder shall be the last amount stated to be the Unpaid
Principal Balance on the Schedule of Disbursements and Payments of Principal,
and the undersigned hereby authorizes any officer of the Lender to make
notations on the Schedule of Disbursements and Payments of Principal from time
to time to evidence payments and disbursements hereunder. The Lender is hereby
directed by the undersigned to credit all future disbursements, if any, under
this Note to account number(s) carried on the books of Lender In the name(s) of
SAZTEC INTERNATIONAL; INC., ADVANCED AUTOMATION ASSOCIATES, INC. and the
undersigned agrees that the Lender or holder hereof may make disbursements, at
its discretion, upon oral or written instructions of any of the undersigned, or
any other person(s) authorized by any of the undersigned.
Notwithstanding anything contained herein to the contrary, in no event shall
interest accrue under this Note, before or after Maturity, at a rate in excess
of the highest rate permitted by applicable law, and if Interest (including any
charge or fee held to be interest by a court of competent jurisdiction) in
excess thereof shall be paid, then the excess shall constitute a payment of, and
be applied to, the principal balance hereof, or at Lender's option, shall be
repaid to the undersigned.
The undersigned warrants and represents that all proceeds of the loan
evidenced by this Note are to be used solely for business or agricultural
purposes, and not for personal, family or household purposes. The undersigned
agrees that If the proceeds are to be used for agricultural purposes, such
proceeds will be used only for the specific operating purposes described to
Lender by the undersigned, and not for the acquisition of fixed assets or
capital expenditures. No collateral security securing this Note will be sold
unless Lender is first notified and approves in writing of such sale.
<PAGE>
As security for payment of all amounts due under this Note and all renewals
and extensions hereof, and for the payment of all other present or future
indebtedness and obligations to the Lender of any party liable hereon, however
and whenever created, arising or evidenced, direct or indirect, contingent,
secured, unsecured, matured or not yet due, the undersigned pledges and grants
to Lender a lien and security Interest In all indebtedness of Lender to any of
the undersigned, including (without limitation) any moneys, credit balances or
deposits (general or special) due from or standing on deposit with the Lender,
which belongs to, is in the name of, or is subject to withdrawal by, any party
liable hereon, whether now existing or hereafter arising or deposited, and in
all items, moneys, instruments, certificates of deposit, securities and other
personal property of or In the name of any of the undersigned now or hereafter
in the possession or control of, or in transit to, the Lender for any purpose
and in any capacity (but excluding however from the foregoing any accounts or
deposits held in or by any trust qualified under sections 401 (a) or 408 of the
Internal Revenu Lender's rights of setoff. This Note may also be secured by
other collateral in which the undersigned or others may have granted a security
interest or lien to Lender, Including, without limitation, the following: ALL
ACCOUNTS RECEIVABLE, INVENTORY, MACHINERY, EQUIPMENT, FURNITURE AND FIXTURES AS
FURTHER DESCRIBED IN SECURITY AGREEMENTS DATED 4-7-92, 9-25-92 AND 2-15-93. ALL
STOCK CERTIFICATES, BONDS, RECEIPTS, CONFIRMATION AND SIMILAR DOCUMENTS AS
FURTHER DESCRIBED IN SECURITY AGREEMENTS DATED 9-25-92 AND 12-15-94. ALL
COMMISSION RECEIVABLES AS FURTHER DESCRIBED IN SECURITY AGREEMENT DATED 10-8-93.
All security interests and liens granted to the Lender by the undersigned,
together with all other provisions relating thereto, shall be deemed a
continuing agreement and shall continue in full force and effect (and Lender may
retain any and all of the aforesaid collateral security and proceeds thereof,
irrespective of the payment in full of the indebtedness evidenced by this Note)
until all Indebtedness secured thereby has been repaid and performed in full. It
Is intended that the above security interests and liens secure all of each of
the undersigned's existing end future indebtedness to Lender of all types and
nature, including indebtedness unrelated or dissimilar to the indebtedness
evidenced by this Note. If this Note Is secured by mortgage(s) or deed(s) of
trust, such mortgage(e) or deed(s) of trust is dated and Is a lien on real
property described therein, located In the State of ________________________
and, if previously recorded, recorded as Document Number Inwith the
________________________________ of Deeds of County,
________________________________________ . The undersigned agrees to give to
Lender upon Lender's request, from time to time, such other and further security
as Lender, in its sole discretion, may
<PAGE>
deem necessary or appropriate, such additional security to become collateral
security for this Note under the provisions hereof.Presentment, demand, notice
of nonpayment, dishonor, protest, notice of protest, notice of dishonor or
default, and any and all lack of diligence and suit are hereby waived by all
parties liable hereon. The undersigned and each endorser, guarantor, surety or
other person who may now or hereafter be liable for the payment of this Note, by
executing, endorsing, guaranteeing or assuming this Note, Jointly and severally
consent and agree to all of the terms and conditions herein, and without
limitation of the foregoing and without affecting their liabilities hereunder or
under any other document or Instrument, agree and consent without further notice
to (i) all renewals, deferrals, extensions and modifications hereof, (ii) the
impairment, alteration, compromise, acceleration, extension or change in the
time or manner of the payment of any of the undersigned's indebtedness to
Lender, (lit) the impairment, substitution, exchange or release at any time of
alt or any part of any collateral security or any guaranty for this Note, (iv)
the release of, or impairment of, the right of recourse against, any of the
undersigned or any endorser, guarantor, surety or any other person now or
hereafter liable herein, iv) the substitution of extension or renewal notes for
this Note, and (vii the modification of any terms hereof or of any mortgage,
deed of trust or other agreement now or hereafter given in connection with or as
security for this Note. To the full extent (If any) permitted by applicable law,
the undersigned agrees to pay, and to Indemnify the Lender from and against, all
costs, charges, expenses, judgments, fines, penalties, collection agency fees
and reasonable attorneys' fees incurred by the holder In: (a) collecting this
Note; (b) enforcingrights with respect to or realizing upon any collateral
security therefor', (c) defending any action brought against the Lender with
respect to this Note, say matter relating thereto or to any relationship or
transaction between Lender and any cable law, the undersigned agrees to pay, and
to Indemnify the Lender from and against, all costs, charges, expenses,
judgments, fines, penalties, collection agency fees and reasonable attorneys'
fees incurred by the holder In: (a) collecting this Note; (b) enforcing rights
with respect to or realizing upon any collateral security therefor', (c)
defending any action brought against the Lender with respect to this Note, say
matter relating thereto or to any relationship or transaction between Lender and
any of the undersigned; or (d) complying with, or failing to comply with, any
Environmental Regulations (as herein defined) including abatement and cleanup
costs. Any sums paid by the holder for any such expenses shall be immediately
due and payable by the undersigned and shall bear interest at the rate then
applicable to any outstanding principal hereunder from the date advanced until
paid. The occurrence of any of the following shall constitute an "Event of
Default": (i) default in the payment of any sum due hereunder, or in the payment
or performance of any other obligation of any of the undersigned to Lender or
the occurrence of any default by any of the undersigned pursuant to any
obligation or undertaking under any security agreement, assignment, pledge
agreement, deed of trust, mortgage or other instrument or document governing or
relating to the indebtedness evidenced hereby or granting or providing for a
security interest, pledge or other lien as security for any obligations of any
of the undersigned to Lender [including, but not limited to, the indebtedness
evidenced by this Note); (ii) the occurrence of any adverse development with
respect to the financial condition of any of the undersigned or any other person
or entity ("Guarantor') who Is directly or indirectly liable for any of
indebtedness evidenced by this Note, which materially affects the ability of any
of the undersigned or such Guarantor to perform their respective obligations to
Lender; (iii) any material representation or warranty made by any of the
undersigned or any Guarantor to Lender being untrue, inaccurate or Incomplete as
of the day it was made or given; (iv) the death, dissolution or termination of
existence of any of the undersigned or any Guarantor or the failure of
<PAGE>
any of the undersigned or any Guarantor to pay debts as they mature, the
appointment of a receiver for any part of the property of any of the undersigned
or any Guarantor, an assignment for the benefit of creditors by any of the
undersigned or any Guarantor, or the commencement of any proceedings under
bankruptcy or insolvency laws by or against any of the undersigned or any
Guarantor; (v] a levy, attachment, restraint or other legal process filed
against any of the undersigned or any Guarantor or any collateral security
securing this Note; (vi) as a result of its reasonable determination that any
collateral security given for this Note is impaired or has a value insufficient
to adequately secure the obligations of the undersigned secured thereby, Lender
has requested additional collateral and such additional collateral has not been
promptly provided by the undersigned or a Guarantor, of a type and in the manner
satisfactory to Lender', (vii) that subsequent to the date of this Note (or any
predecessor note[s) for which this Note constitutes a renewal, extension or
refinancing) there has occurred "Change of Control" in any of the undersigned
that is a Corporation or Partnership (for purposes of this Note, a "Change of
Control" is deemed to have occurred upon the transfer, directly or indirectly,
in one or more transactions, of any general partnership interest or of TEN AND
NO/1,000 percentage points ( 10. 000 %) or more of any class of voting stock of
a corporation or the right to vote or control such stock or partnership
interest, or if the percentage of a corporation's issued and outstanding shares
that are held by any one shareholder changes (for any reason) by more than TEN
AND NO/1000 percentage points (10.000 %)) or (viii) Lender has deemed itself
insecure with respect to the Undersigned's indebtedness under this Note or with
respect to any of the undersigned's other obligations to Lender.
Upon the occurrence of any Event of Default, Lender may, at its sole option
and without limitation on the demand feature of this Note and without notice or
demand: (A) declare the entire principal sum owed hereunder and all other
indebtedness of the undersigned to Lender, immediately due and payable; (B)
appropriate and apply toward the payment of the undersigned's obligations to
Lender (including, but not limited to, the indebtedness evidenced by this Note),
in such order of application as it elects, any or all balances, credits,
deposits, accounts or moneys of or in the name of any of the undersigned then or
thereafter with Lender in any capacity; and (C) exercise, in addition to all
other rights hereunder or under any other applicable agreements and instruments,
its rights under applicable law, including those of a secured party under the
Uniform Commercial Code of the state in which Lender's office identified above
is located. Upon the occurrence of an Event of Default described in clause (iv}
of the immediately preceding paragraph, this Note shall automatically and
immediately become due and payable without notice or demand. The failure of the
Lender to exercise any option or right or remedy shall not preclude the Lender
from exercising any other right or remedy Lender may be entitled to exercise
upon the occurrence of any Event of Default hereunder, and shall not constitute
a waiver of such option or any other right at any time thereafter. Lender's
acceptance of a partial payment of any sum due hereunder after any Event of
Default or after Maturity, shall not rescind, waive or otherwise affect any such
Event of Default or Maturity or any acceleration or any other exercise by Lender
of any of its rights hereunder or under any other documents or applicable law.
The undersigned agrees that time is of the essence. If any provision of
<PAGE>
this Note violates the law or is unenforceable, the other provisions of this
Note shall remain valid.
The undersigned shall furnish to Lender such information and reports
regarding any collateral security, the undersigned's financial condition and
operations. and such other matters as Lender may from time to time reasonably
request. Specifically, and without limitation on the foregoing, the undersigned
shall provide to Lender upon reasonable request, current financial statements
for each of the undersigned and each Guarantor including, but not limited
balance sheets and profit and loss statements.
The undersigned shall comply with all federal, state and local laws,
statutes, rules, regulations, standards. ordinances and orders pertaining to the
environment, hazardous substances, pollutants or contaminants ("Environmental
Regulations") and shall immediately deliver to Lender copies of any notice or
other communication received by any of the undersigned alleging a violation of,
or a failure to maintain any permit or license required by, any Environmental
Regulations. The undersigned covenants, represents and warrants to Lender that
any property now or hereafter or previously owned or operated by any of the
undersigned, has not been, and will not be, used by any of the undersigned, or
to the best knowledge and belief of each of the undersigned, by any prior owner
or operator, to refine, produce. store, handle, process or transport any
hazardous substance. pollutant or contaminant except In full compliance with
applicable Environmental Regulations, and that any substance disposed of
off-site by any of the undersigned have been. and will be, disposed of in
accordance with all applicable Environmental Regulations.
The loan evidenced hereby has been made, and this Note has been delivered,
at Lender's office at the address indicated above, and such loan, this Note and
the rights, obligations and remedies of Lender and the undersigned shall be
governed by and construed in accordance with the laws of the state in which
Lender's office identified above is located. All obligations of the undersigned,
an the rights, powers and remedies of Lender, expressed herein shall be in
addition to, and not in limitation of, those provided by law or in any written
agreements or instruments (other than this Note) relating to any obligation of
any of the undersigned to Lender, the loan evidenced by this Note or any
collateral security. Borrower shall not a) voluntarily transfer any assets into
trust or, b) if already owned in trust, shall not voluntarily transfer title to
such trust assets to any other person or entity, without giving Lender at least
30 days prior written notice thereof,
It is the intent hereof that each of the undersigned (if more than one)
remain liable as principal until the full amount of all indebtedness evidenced
by this Note has been paid, notwithstanding any act, omission or event that
might otherwise operate as a legal or equitable discharge or defense with
respect to any of the undersigned.
No setoff or counterclaim of any kind claimed by any person liable under
this Note shall stand as a defense to the enforcement of this Note against any
such person, it being agreed that any such setoff or counterclaim must be
maintained by separate suit.
The undersigned and Lender hereby agree to trial by court and Irrevocably
waive Jury trial In any action or proceeding (Including, but not limited to, any
counterclaim) arising out of or In any way relating to or connected to this
Note, any relationship or transaction between any of the undersigned and Lender,
the origination, administration or enforcement of the Indebtedness evidenced or
secured by this Note, or any other matter, Additional Terms:
<PAGE>
UMB
B A N K
October 7, 1997
Mr. Gary Abernathy, President
Saztec International, Inc.
43 Manning Road
Billerica, Massachusetts 01821
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 October 1,
1997. Tom O'Loughlin had requested that this bank's Discount Committee consider
continuing to extend a revolving credit facility to Saztec.
The Discount Committee of UMB Bank, n.a. has 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 $270,000. Furthermore, the Authority to Loan will decrease $10,000 on
the first of each month beginning November 1, 1997.
Any remaining outstanding balance is payable in full on April 1, 1998. The above
listed amount 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 70% of Saztec's qualified accounts receivable. Qualified accounts receivable
shall have the meaning as set forth in a Security Agreement to be 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 not
later than April 1, 1998. Accrued interest will be due and payable monthly.
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 70%
of qualified accounts receivable basis for making advances, and by all
inventory, machinery, equipment, furniture, fixtures and all common stock of all
subsidiaries of Saztec now owned or hereafter acquired or created.
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.
<PAGE>
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 in 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 receivables.
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
$500,000, 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 8.00:1, 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 listing 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 certified by borrower. Such financial statements to include,
at a minimum, a balance sheet and an income statement. Year end statements are
to be prepared by a certified public accounting firm acceptable to the Bank and
be of an audit quality.
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 letter 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. 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
<PAGE>
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.
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.
Sincerely,
UMB Bank, n.a.
By: /s/ TRAVIS J. BURNS
----------------------------
Travis J. Burns, Assistant Vice President
The undersigned hereby acknowledges and agrees to all the terms and conditions
stated in the foregoing letter.
SAZTEC INTERNATIONAL, INC.
By: /s/ GARY N. ABERNATHY
----------------------------
Gary N. Abernathy, President
Dated: October 7, 1997
ADVANCED AUTOMATION ASSOCIATES, INC.
By: /s/ GARY N. ABERNATHY
----------------------------
Gary N. Abernathy, President
Dated: October 7, 1997
<PAGE>
<TABLE>
<CAPTION>
UMB 2020300 (R 6/93) All States
<S> <C> <C>
UMB SAZTEC INTERNATIONAL, INC.
BANK ADVANCED AUTOMATION ASSOCIATES, INC. UMB
1010 GRAND BLVD. 43 MANNING RD. MASTER
KANSAS CITY MO 64106 BILLERICA, MA 01821 NOTE
"Lender" ** SEE ATTACHED ADDENDUM
OFFICER INITIALS INTEREST RATE PRINCIPAL AMOUNT /CREDIT LIMIT FUNDING DATE MATURITY DATE CUSTOMER NUMBER
TJB 12.500% $270,000.00 10/07/97 04/01/98 3904321
</TABLE>
FOR VALUE RECEIVED, the undersigned Borrower (the 'Undersigned' means each maker
and each endorser, and If more than one, each shall be jointly and severally
liable hereunder) promises to pay to the order of Lender, at the offices set
forth above or at such other place as the holder hereof may from time to time
designate in writing, ON DEMAND, but if no Demand, on APRIL 1, 1998 the
principal amount of TWO HUNDRED SEVENTY THOUSAND AND NO /100 ** DOLLARS ($
270,000.00 ** ), or such other lesser amount as shall be noted as the Unpaid
Principal Balance on the Schedule of Disbursements and Payments of Principal
included herein or attached hereto pursuant to the authority set forth herein,
together with interest on the unpaid principal balance hereof from time to time
outstanding from date (s) of disbursement(s) until Maturity (as herein defined)
at the rate (the 'Loan Interest Rate') indicated below:
Daily Variable Rate. From the date hereof until the first Adjustment Date (as
herein defined) the Loan Interest Rate shall be TWELVE AND 500/1000 to a rate
equal to FOUR AND NO/ 1000 percent (12 .500 %) per annum. The Loan Interest Rate
shall be adjusted each day FOUR AND NO/1000 percentage points Above the Index
Rate (as herein defined) in effect as of that day. The Lender's Index Rate for
this Note shall be defined as: UMB BANK, N.A. PRIME RATE. Accrued interest shall
be payable Monthly. The term maturity shall mean April 1, 1998, or any earlier
date on which payment hereunder is due pursuant to any demand or acceleration
rights provided in this Note. The term "Index Rate", if applicable to this Note,
shall mean that rate of interest per annum determined from time to time by
Lender as its base or Index rate for loans to commercial borrowers. Such base or
Index rate does not necessarily reflect the rate that Lender charges its best or
most creditworthy customers. If the Lender is precluded by law or otherwise from
using the above base or Index rate, the term 'Index Rate' shall mean that
substitute index rate selected by Lender in place of Its base or index rate,
which substitute Index rate shall be comparable to Lender's base or index rate
provided for herein.
Interest hereunder shall be computed on the basis of days elapsed and assuming a
360-day year. Each payment received shall be applied first to accrued interest,
and then to a reduction of the principal sum and any expense or other sums owed
under this Note, or in any other order as determined by Lender In Lender's sole
discretion and as permitted by law. Any sum remaining unpaid after Maturity
shall thereafter bear interest at a rate (the 'Default Interest Rate') which
shall be at all times TWO AND NO/1000 percentage points (2.000%) in excess of
the Loan
<PAGE>
Interest Rate (adjusted, if applicable, as provided above that would
have been applicable but for such Maturity. If not paid at Maturity, interest
thereafter shall be compounded monthly.
The privilege is hereby reserved to prepay without penalty all or any part of
the outstanding amount due hereunder at any time prior to Maturity. If at any
time prior to Maturity the outstanding principal balance due hereunder is less
than the face amount of this Note, the undersigned, or any of them, may from
time to time until Maturity request, and Lender may in its sole discretion, make
further disbursements hereunder which shall be evidenced by this Note; provided,
however, the aggregate amount of all principal amounts outstanding hereunder
shall at no time exceed the face amount of this Note; and provided further, that
each and every disbursement made under this Note shall be at the Lender's sole
discretion, Lender having made no commitment to make any such disbursements. The
principal amount due hereunder shall be the last amount stated to be the Unpaid
Principal Balance on the Schedule of Disbursements and Payments of Principal,
and the undersigned hereby authorizes any officer of the Lender to make
notations on the Schedule of Disbursements and Payments of Principal from time
to time to evidence payments and disbursements hereunder. The Lender is hereby
directed by the undersigned to credit all future disbursements, If any, under
this Note to account number(s)carried on the books of Lender in the name(s) of
SAZTEC INTERNATIONAL, INC., ADVANCED AUTOMATION ASSOCIATES, INC., and the
undersigned agrees that the Lender or holder hereof may make disbursements, at
its discretion, upon oral or written instructions of any of the undersigned, or
any other person(s) authorized by any of the undersigned. Notwithstanding
anything contained herein to the contrary, in no event shall interest accrue
under this Note, before or after Maturity, at a rate in excess of the highest
rate permitted by applicable law, and If interest (including any charge or fee
hold to be interest by a court of competent jurisdiction) in excess thereof
shall be paid, then the excess shall constitute a payment of, and be applied to,
the principal balance hereof, or at Lender's option, shall be repaid to the
undersigned.
The undersigned warrants and represents that all proceeds of the loan evidenced
by this Note are to be used solely for business or agricultural purposes, and
not for personal, family or household purposes. The undersigned agrees that if
the proceeds are to be used for agricultural purposes, such proceeds will be
used only for the specific operating purposes described to Lender by the
undersigned, and not for the acquisition of fixed assets or capital
expenditures. No collateral security securing this Note will be sold unless
Lender is first notified and approves in writing of such sale.
As security for payment of all amounts due under this Note and all renewals and
extensions hereof, and for the payment of all other present or future
indebtedness and obligations to the Lender of any party liable hereon, however
and whenever created, arising or evidenced, direct or indirect, contingent,
secured, unsecured, matured or not yet due, the undersigned pledges and, grants
to Lender a lien and security interest in all indebtedness of Lender to any of
the undersigned, including (without limitation) any moneys, credit balances or
deposits (general or special) due from or standing on deposit with the Lender,
which belongs to, is in the name of, or is subject to withdrawal by, any party
liable hereon, whether now existing or hereafter arising or deposited, and in
all items, moneys, instruments, certificates of deposit. securities and other
personal
<PAGE>
property of or in the name of any of the undersigned now or hereafter in the
possession or control of, or in transit to, the Lender for any purpose and in
any capacity (but excluding however from the foregoing any accounts or deposits
held in or by any trust qualified under sections 401 (a) or 408 of the Internal
Revenue Code of 1986), including all proceeds and products thereof and all
accessions and accruals thereto and all dividends, rights, payments, shares and
property received in respect thereto, the undersigned further agreeing that the
aforesaid indebtedness (if any) of Lender to any of the undersigned may, at any
time that all or any part of this Note remains unpaid (whether before or after
Maturity), be held or applied to the payment of 'this Note by the holder hereof.
Nothing herein shall in any way limit any of Lender's rights of setoff. This
Note may also be secured by other collateral in which the undersigned or others
may have granted a security interest or lien to Lender, including, without
limitation, the following:
ALL ACCOUNTS RECEIVABLE & INVENTORY AS FURTHER DESCRIBED IN SECURITY AGREEMENT
DATED 10-7-97, EQUIPMENT, FURNITURE & FIXTURES AS FURTHER DESCRIBED IN SECURITY
AGREEMENTS DATED 4-7-92, 9-25-92, & 2-15-93. ALL STOCK CERTIFICATES, BONDS,
RECEIPTS, CONFIRMATIONS AND SIMILAR DOCUMENTS AS FURTHER DESCRIBED IN SECURITY
AGREEMENTS DATED 9-25-92 & 12-15-94. ALL COMMISSION RECEIVABLES AS FURTHER
DESCRIBED IN SECURITY AGREEMENT DATED 10-8-93.
All security Interests and liens granted to the Lender by the undersigned,
together with all other provisions relating thereto, shall be deemed a
continuing agreement and shall continue in full force and effect (and Lender may
retain any and all of the aforesaid collateral security and proceeds thereof,
irrespective of the payment in full of the indebtedness evidenced by this Note)
until all indebtedness secured thereby has been repaid and performed in full. It
is intended that the above security interests and liens secure all of each of
the undersigned's existing and future indebtedness to Lender of all types and
nature, including indebtedness unrelated or dissimilar to the indebtedness
evidenced by this Note. If this Note is secured by mortgage(s) or deed(s) of
trust, such mortgage(s) or deed (s) of trust is dated ___and is a lien on real
property described therein, located in the State of ___ and, if previously
recorded; recorded as Document Number ___ in ___with the ___ Deeds of County,___
The undersigned agrees to give to Lender upon Lender's request, from time to
time, such other and further security as Lender, in its sole discretion may deem
necessary or appropriate, such additional security to become collateral security
for this Note under the provisions hereof.
Presentment, demand notice of nonpayment, dishonor, protest, notice of protest,
notice of dishonor or default, and any and all lack of diligence and suit are
hereby waived by all parties liable hereon. The undersigned and each endorser,
guarantor, surety or other person who may now or hereafter be liable for the
payment of this Note, by executing, endorsing, guaranteeing or assuming this
Note, jointly and severally consent and agree to all of the terms and conditions
herein, and without limitation of the foregoing and without affecting their
liabilities hereunder or under any other document or instrument, agree and
consent without further 'notice to (i) all renewals', deferrals, extensions and
modifications hereof, (ii) the impairment, alteration, compromise, acceleration,
extension or change in the time or manner of the payment of any of the
undersigned's indebtedness to Lender, (iii) the impairment, substitution,
exchange or release at any time of all
<PAGE>
or any part of any collateral security, or any guaranty for this Note, (iv) the
release of, or impairment of, the right of recourse against, any of the
undersigned or any endorser, guarantor, surety or any other person now or
hereafter, liable herein, (v) the substitution of extension or renewal notes for
this Note, and (vi) the modification of any terms hereof or of any mortgage,
deed of trust or other agreement now or hereafter given in connection with or as
security for this Note.
To the full extent (if any) permitted by applicable law, the undersigned agrees
to pay, and to indemnify the Lender from and against, all costs, charges,
expenses, judgments, fines, penalties, collection agency fees and reasonable
attorneys' fees Incurred by the holder in: (a) collecting this Note; (b)
enforcing rights with respect to or realizing upon any collateral security
therefor; (c) defending any action brought against the Lender with respect to
this Note, any matter relating thereto or to any relationship or transaction
between Lender and any of the undersigned; or (d) complying with, or falling to
comply with, any Environmental Regulations (as herein defined) including
abatement and cleanup costs. Any sums paid by the holder for any such expenses
shall be immediately due and payable by the undersigned and shall bear interest
at the rate then applicable to any outstanding principal hereunder from the date
advanced until paid. The occurrence of any of the following shall constitute an
'Event of Default': (i) default in the payment of any sum due hereunder, or in
the payment or performance of any other obligation of any of the undersigned to
Lender or the occurrence of any default by any of the undersigned pursuant to
any obligation or undertaking under any security agreement, assignment, pledge
agreement, deed of trust, mortgage or other instrument or document governing or
relating to the indebtedness evidenced hereby or granting or providing for a
security interest, pledge or other lien as security for any obligations of any
of the undersigned to Lender (including, but not limited to, the indebtedness
evidenced by this Note); (ii) the occurrence of any adverse development With
respect to the financial condition of any of the undersigned or any other person
or entity Guarantor') who is directly or indirectly liable for any of
indebtedness evidenced by this Note, which materially affects the ability of any
of the undersigned or such Guarantor to perform their respective obligations to
Lender; (iii) any material representation or warranty made by any of the
undersigned or any Guarantor to Lender being untrue, inaccurate or incomplete as
of the day it was made or given; (iv) the death, dissolution or termination of
existence of any of the undersigned or any Guarantor or the failure of any of
the undersigned or any Guarantor to pay debts as they mature, the appointment of
a receiver for any part of the property of any of the undersigned or any
Guarantor, an assignment for the benefit of creditors by any of the undersigned
or any Guarantor, or the commencement of any proceedings under bankruptcy or
insolvency laws by or against any of the undersigned or any Guarantor; (v) a
levy, attachment, restraint or other legal process filed against any of the
undersigned or any Guarantor or any collateral security securing this Note; (vi)
as a result of its reasonable determination that any collateral security given
for this Note is impaired or has a value insufficient to adequately secure the
obligations of the undersigned secured thereby, Lender has requested additional
collateral and such additional collateral has not been promptly provided by the
undersigned or a Guarantor, of a type and in the manner satisfactory to Lender;
(vii) that subsequent to the date of this Note (or any predecessor note(s)
<PAGE>
for which this Note constitutes a renewal, extension or refinancing) there has
occurred a 'Change of Control' in any of the undersigned that is a Corporation
or Partnership (for purposes of this Note, a 'Change of Control' is deemed to
have occurred upon the transfer, directly or indirectly, in one or more
transactions, of any general partnership interest or of TEN AND NO/1000
percentage points (10.000%) or more of any class of voting stock of a
corporation or the right to vote or control such stock or partnership interest,
or if the percentage of a corporation's issued and outstanding shares that are
held by any one shareholder changes (for any reason)by TEN AND NO/1000
percentage points (10.000%) or (viii) Lender has deemed itself insecure with
respect to the undersigned's indebtedness under this Note or with respect to any
of the undersigned's other obligations to Lender.
Upon the occurrence of any Event of Default, Lender may, at its sole option and
without limitation on the demand feature of this Note and without notice or
demand: (A) declare the entire principal sum owed hereunder and all other
indebtedness of the undersigned to Lender, immediately due and payable; (B)
appropriate and apply toward the payment of the undersigned's obligations to
Lender (including, but not limited to, the indebtedness evidenced by this Note),
in such order of application as it elects, any or all balances, credits,
deposits, accounts or moneys of or in the name of any of the undersigned then or
thereafter with Lender in any capacity; and (C) exercise, in addition to all
other rights hereunder or under any other applicable agreements and Instruments,
its rights under applicable law, including those of a secured party under the
Uniform Commercial Code of the state in which Lender's office identified above
is located. Upon the occurrence of an Event of Default described in clause (iv))
of the immediately preceding paragraph, this Note shall automatically and
immediately become due and payable without notice or demand. The failure of the
Lender to exercise any option or right or remedy shall not preclude the Lender
from exercising any other right or remedy Lender may be entitled to exercise
upon the occurrence of any Event of Default hereunder, and shall not constitute
a waiver of such option or any other right at any time thereafter. Lender's
acceptance of a partial payment of any sum due hereunder after any Event of
Default or after Maturity, shall not rescind, waive or otherwise affect any such
Event of Default or Maturity or any acceleration or any other exercise by Lender
of any of its rights hereunder or under any other documents or applicable law.
The undersigned agrees that time is of the essence. If any provision of this
Note violates the law or is unenforceable, the other provisions of this Note
shall remain valid.
The undersigned shall furnish to Lender such information and reports regarding
any collateral security, the undersigned's financial condition and operations,
and such other matters as Lender may from time to time reasonably request.
Specifically, and without limitation on the foregoing, the undersigned shall
provide to Lender upon reasonable request, current financial statements for each
of the undersigned and each Guarantor including, but not limited to, balance
sheets and profit and loss statements.
The undersigned shall comply with all federal, state and local laws, statutes,
rules, regulations, standards, ordinances and orders pertaining to the
environment, hazardous substances, pollutants or contaminants ("Environmental
Regulations") and shall immediately deliver to Lender copies of any notice or
other communication received by any of the undersigned alleging a violation of,
or a failure to
<PAGE>
maintain any permit or license required by, any Environmental Regulations. The
undersigned covenants, represents and warrants to Lender that any property now
or hereafter or previously owned or operated by any of the undersigned, has not
been, and will not be, used by any of the undersigned, or to the best knowledge
and belief of each of the undersigned, by any prior owner or operator, to
refine, produce, store, handle, process or transport any hazardous substance,
pollutant or contaminant except in full compliance with all applicable
Environmental Regulations, and that any substance disposed of off-site by any of
the undersigned have been, and will be, disposed of in accordance with all
applicable Environmental Regulations.
The loan evidenced hereby has been made, and this Note has been delivered, at
Lender's office at the address indicated above, and such loan, this Note and the
rights, obligations and remedies of Lender and the undersigned shall be governed
by and construed in accordance with the laws of the state in which Lender's
office identified above is located. All obligations of the undersigned, and the
rights, powers and remedies of Lender, expressed herein shall be in addition to,
and not in limitation of, those provided by law or in any written agreements or
instruments (other than this Note) relating to any obligation of any of the
undersigned to Lender, the loan evidenced by this Note or any collateral
security. Borrower shall not a) voluntarily transfer any assets Into trust or,
b) if already owned In trust, shall not voluntarily transfer title to such trust
assets to any other person or entity, without giving Lender at least 30 days
prior written notice thereof.
It is the intent hereof that each of the undersigned (if more than one) remain
liable as principal until the full amount of all indebtedness evidenced by this
Note has been paid, notwithstanding any act, omission or event that might
otherwise operate as a legal or equitable discharge or defense with respect to
any of the undersigned.
No setoff or counterclaim of any kind claimed by any person liable under this
Note shall stand as a defense to the enforcement of this Note against any such
person, it being agreed that any such setoff or counterclaim must be maintained
by separate suit.
The undersigned and Lender hereby agree to trial by court and irrevocably waive
jury trial in any action or proceeding (including, but not limited to, any
counterclaim) arising out of or in any way relating to or connected to this
Note, any relationship or transaction between any of the undersigned and Lender,
the origination, administration or enforcement of the indebtedness evidenced or
secured by this Note, or any other matter.
Additional Terms:
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENTS OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER(S)) AND US (LENDER) FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING
TO MODIFY IT.
Borrower: SAZTEC INTERNATIONAL, INC., ADVANCED AUTOMATION ASSOCIATES, INC.
By:/s/ GARY N. ABERNATHY
-----------------------
Gary N. Abernathy, President
Address:43 MANNING RD., BILLERICA, MA 01821
EXHIBIT 10.14
<TABLE>
<CAPTION>
<S> <C> <C>
BORROWER
UMB BANK, N.A. SAZTEC INTERNATIONAL, INC. Inventory And
1010 GRAND BLVD. ADVANCED AUTOMATION ASSOCIATES, INC. Accounts Security
KANSAS CITY, MO 64106 43 MANNING RD. Agreement
"Lender" BILLERICA, MA 01821
</TABLE>
This Agreement made this 7TH day of OCTOBER, 1997 between UMB BANK, N.A. (the
"Bank") , and the Borrower identified above.
1. DEFINITIONS.
(a) Generally. All words used in this Agreement shall have the same meaning
applicable thereto under pertinent provisions of the Uniform Commercial Code as
in effect in the state in which Bank's office identified above is located,
unless otherwise herein provided.
(b) Inventory. The term 'Inventory' means all goods held for sale, for
lease, or to be furnished under contracts of service, and all goods being leased
together with all leases and rental agreements pertaining thereto, and all goods
being manufactured or processed for sale of for lease or for furnishing under
contracts of service, including (without limitation) all raw materials, goods in
process and finished goods, and all supplies to be used or consumed, or being
used or consumed, in Borrower's business as now or hereafter conducted.
(c) Qualified Account. The term 'Qualified Account' means an account owing
to the Borrower which met the following specifications at the time it came into
existence and continues to meet the same until it is collected in full:
(i) The account is due and payable not more than THIRTY days from the
date of the invoice or other equivalent statement or record rendered with
respect thereto, and is not more than SIXTY days past due;
(ii) The account arose from any of the following activities of
Borrower: the leasing of property; the furnishing of goods in connection with
the performance of services; the sale of goods; or the performance of services;
(iii) The account is not subject to any prior assignment, claim, lien,
or security interest, and the Borrower has not made any further assignment
thereof or created any further security interest therein, nor permitted
Borrower's rights therein to be reached by attachment or similar process;
(iv) The account is not subject to set-off, credit, allowance or
adjustment by or to the purchaser obligated for payment thereof, except such
customary trade discounts as may be allowed by Borrower for prompt payment, and
said purchaser has finally accepted all goods and/or services purchased without
dispute;
(v) The account arose in the ordinary course of Borrower's business and
the Borrower is not aware of any impending or active bankruptcy or insolvency
proceeding by or against the purchaser, nor of any imminent financial
embarrassment of the purchaser; and
(vi) The Bank has not notified Borrower that the account is, for any
reason in the Bank's discretion, unsatisfactory.
(d)Collateral. The term "Collateral" wherever used in this subparagraph and
elsewhere in this Agreement means each and all of the following, whether now
existent, hereafter coming into existence, or hereafter created or acquired:
(i) All accounts of Borrower (including, but not limited to, the
Qualified Accounts);
(ii) All contract rights of Borrower;
<PAGE>
(iii)All of Borrower's general intangibles;
(iv) All of Borrower's Inventory,
(v) All goods returned to or repossessed by Borrower and all right,
title and interest of Borrower in all other goods the sale or lease of which or
the furnishing of which in the performance of services gave rise to Collateral;
(vi) All of Borrower's documents; all of Borrower's chattel paper and
all promissory notes, trade acceptances and other instruments for the payment of
money evidencing any right of Borrower to such payment and;
(vii) All proceeds of, and all additions and accessions to, all of the
foregoing.
(e) Records. The term "Records" means all records of the Borrower, now
existent, hereafter coming into existence, or hereafter created or acquired,
which pertain to the Collateral and includes without limitation all data and all
written and photographic matter of whatever description or variety, all ledger
sheets, files, tapes, discs, computer printouts, microfilm and microfiche, and
all papers, documents and electronic records. The term 'Records' also includes
but is not limited to all data organized, created, or compiled by or for
electronic means of creation, maintenance or processing and all necessary
information, and all right, title and interest of Borrower in all programming
and software, required to utilize such data and such means of creation,
maintenance or processing.
2. BORROWER'S PLACE(S) OF BUSINESS.
Borrower represents and warrants that Borrower's sole place of business or
(if Borrower has more than one place of business) Borrower's chief executive
office, and the office where Borrower keeps all Records is the address appearing
immediately after Borrower's signature on page 3 of this Agreement. If the
address of the office where Borrower keeps the Records is other than that
appearing under Borrower's signature, that address is as follows:
All other offices or business locations of the Borrower, if any, are listed
on the schedule labeled Exhibit A attached hereto and made a part hereof and on
such additional sheets attached hereto which may be required to list all
Borrower's offices or business locations. Such additional sheets, if any, are
also marked Exhibit A and are hereby made a part of this Agreement by reference.
Borrower agrees to notify the Bank in writing and promptly (in advance, if
possible, or within 10 days of change in all other cases) of all changes in the
information furnished and represented and warranted to be true in accordance
with this paragraph including (without limiting such changes to) the
establishment of additional places of business and all changes of address.
3.LOANS. Subject to the terms and conditions hereof and of any note given
herewith and such additional note or notes as are hereafter provided, the Bank
may make such loans to Borrower as the Bank may from time to time elect, all to
be secured by the Collateral, Borrower's Records and other collateral as
hereinafter provided. In all events, the aggregate unpaid principal amount of
all loans made by the Bank to the Borrower shall not exceed n/a percent (n/a%)
or $n/a, whichever is less of the cost or market value, whichever is lower, of
all Borrower's Inventory, plus SEVENTY percent (70%) of the unpaid face amount
of Borrower's Qualified Accounts, or such other percentages as may from time to
time be fixed by the Bank upon notice to the Borrower, the aggregate dollar
amount of said percentages at any time prevailing is called hereinafter the Loan
Value. If the aggregate principal balance of all outstanding loans hereunder
ever
<PAGE>
exceeds the Loan Value, Borrower shall immediately make a payment and
reduction of the unpaid principal amount of such loans in an amount equal to the
amount of such excess. All loans made pursuant to this Agreement shall be
evidenced by notes, in form satisfactory to the Bank, bearing interest at the
rate agreed upon from time to time by the parties hereto.
4. BANK'S SECURITY INTEREST.
As security for the payment of all loans now or in the future made under
this Agreement, and for payment of all expenses and obligations assumed by
Borrower hereunder, and for payment of all notes and other obligations and
indebtedness of Borrower to the Bank, now existing or hereafter incurred,
whether matured or unmatured, direct, indirect or contingent, including any
extensions or renewals thereof, Borrower hereby assigns and pledges to the Bank,
and grants to the Bank a security interest in (a) all Collateral, (b) all
Records, and (c) all indebtedness of Bank to Borrower, including (without
limitation) any moneys, credit. balances or deposits due from or standing on
deposit with Bank which belongs to or is in the name of or is subject to
withdrawal by Borrower, whether now existing or hereafter arising or deposited.
It is intended that the above assignment, pledge and security interest in the
Collateral, Records and other collateral secure each of the Borrower's existing
and future obligations and indebtedness to Bank of all types and nature,
including obligations and indebtedness unrelated or dissimilar to any
obligations or indebtedness in existence or contemplated at the time this
Agreement was executed, and irrespective of whether such obligations or
indebtedness was contemplated by Borrower at such time.
5. RIGHTS AS TO COLLATERAL; COLLECTION AND VERIFICATION
The Bank shall have the right to notify parties obligated on any or all
obligations constituting Collateral hereunder (all such obligors hereinafter
called "account debtors") to make payment directly to the Bank. The Bank may
take control of all proceeds arising from and constituting Collateral and may in
the Bank's, in Borrower's or in any other name contact account debtors to verify
the validity, amount, and any other matter respecting the Collateral. All of the
foregoing rights the Bank may exercise at any time and from time to time without
first giving notice to Borrower, whether or not the Borrower is then in default
hereunder.
So long as Borrower is not in default hereunder, Borrower shall have the
right in the regular course of business to manufacture or process, sell or lease
Inventory, or furnish Inventory under contracts of service. Borrower shall not
return any Inventory to any suppliers without the prior written consent of the
Bank to do so.
Borrower irrevocably designates, makes, constitutes and appoints the Bank
(and any agent, designated by the Bank) as Borrower's true and lawful attorney,
with power, without notice to Borrower and at such time or times hereafter as
the Bank may in its sole election determine whether or not any event of default
has occurred hereunder, in Borrower's name or in the Bank's name, and at
Borrower's expense:
(a) to demand payment of any items of Collateral;
(b) to enforce payment of the same by legal proceedings or otherwise;
(c) to exercise all of Borrower's rights and remedies with respect to
collection;
(d) to settle, adjust, compromise, extend, renew, discharge or release
any of the Collateral;
(e) to settle, adjust or compromise any legal proceedings brought with
respect to any of the Collateral;
<PAGE>
(f) to sell or assign any of the Collateral upon such terms for such
amount and at such price or prices as the Bank deems advisable;
(g) to prepare, file and sign Borrower's name on any Proof of Claim in
Bankruptcy or similar document against an account debtor;
(h) to prepare, file and sign Borrower's name on any of the following
or similar documents: Notice of Lien, Claim of Mechanic's Lien, Assignment or
Satisfaction of Lien or Mechanic's Lien;
(i) to endorse the name of the Borrower upon any of the items set forth
at subparagraph 6(a) or (g) of this Agreement or as provided in the remainder of
this paragraph;
(j) to sign the name of the Borrower to any verification and notices
directed to account debtors. Until such time as the Bank elects to exercise its
rights to collect and enforce items of Collateral, Borrower is authorized, as
agent of the Bank, to collect and enforce the same. All costs of collection and
enforcement, including attorneys' fees and out-of-pocket expenses, shall be
borne solely by Borrower whether the same are incurred by the Bank or Borrower.
All credit memos issued by the Borrower's suppliers with respect to
goods included in Borrower's Inventory shall be delivered to the Bank, shall be
subject to this Agreement and, upon demand by the Bank, Borrower shall pay the
Bank (for application as the Bank elects in discharge of Borrower's indebtedness
to the Bank) amounts equaling the amounts of such credit memos.
Should the Bank require Borrower to adopt such practice, Borrower shall
forthwith upon receipt of all checks, drafts, cash and other remittances in
payment of, or in payment or on account of, and constituting, Collateral,
deposit the same in a special bank account maintained with the Bank, over which
the Bank alone shall have power of withdrawal. The funds in said account shall
be held by the Bank as security for all loans made hereunder and all other
indebtedness of Borrower to the Bank secured hereby. Said proceeds shall be
deposited in precisely the form received, except for the endorsement of Borrower
where necessary to permit collection of items, which endorsement Borrower agrees
to make, and which the Bank is also hereby authorized to make on Borrower's
behalf. If such deposits are required by the Bank, Borrower agrees that pending
deposit it will not commingle any such checks, drafts, cash and other
remittances with any of Borrower's funds or property, but will hold them
separate and apart therefrom and upon an express trust for the Bank until
deposit thereof is made in the special account. The Bank will periodically apply
the whole or any part of the collected funds on deposit in the special account
against the principal and/or interest of any loans made hereunder and/or on
Borrower's other indebtedness secured hereby, the order and method of such
application to be in the discretion of the Bank. Any portion of said funds on
deposit in the special account which the Bank elects not to so apply may be paid
over by the Bank to Borrower.
6. OTHER AGREEMENTS, WARRANTIES AND REPRESENTATIONS OF BORROWER.
(a) Borrower agrees to deliver to the Bank, forthwith upon
receipt, appropriately endorsed to the order of the Bank, or otherwise endorsed
or assigned as the Bank may determine necessary to vest complete title and
possession in the Bank, all instruments and chattel paper and, upon the Bank's
request, all documents and invoices which pertain to or constitute Collateral or
Records and regardless of the form of such endorsement, or other form of
endorsement or assignment, Borrower hereby waives presentment, demand, notice of
dishonor, protest and notice of protest and all other notices with respect to
such items.
(b) Borrower will at all times keep accurate and complete Records
satisfactory to the Bank, and the Bank, by any of its employees, agents or
independent auditors, shall have the right, at the expense of Borrower, to call
at Borrower's place or places of business, at such intervals as determined by
the Bank, to inspect, audit, check and make extracts from the books, journals,
files, correspondence, computer printouts, and other data relating to the
Collateral and constituting Records, all without hindrance or delay.
(c) If any of Borrower's accounts or other Collateral arise out of
contracts with the Federal Government or any department or agency thereof,
Borrower will immediately notify the Bank thereof and cooperate with the Bank in
taking whatever action is required in order to satisfy the Bank that all sums
due and to become due under such contracts are properly assigned to the Bank.
(d) Borrower represents and warrants that no financing statement
covering all or any part of the Collateral or the Records is presently effective
and on file with any public office. On request of the Bank, Borrower agrees to
execute such financing statements as the Bank determines appropriate in order to
perfect and maintain the Bank's first and prior security interest hereunder. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement executed in connection herewith shall be deemed sufficient
as a financing statement regardless of whether the original thereof has been
filed in the jurisdiction where the carbon, photographic or other reproduction
is filed. The Secured Party may execute financing statements on behalf or
instead of the Borrower to the extent authorized by the Uniform Commercial Code
of the state in which Bank's office identified above is located. If any part of
the Collateral is a motor vehicle(s), Borrower will execute and deliver
application(s) for and certificate(s) of title or such other form(s) as may be
necessary to cause the Bank to be shown as a lienholder on said application(s)
for and certificate(s) of title and any such other form(s). Borrower will pay
all costs of filing or recording required by the Bank. Borrower further
represents and warrants that no security interest or other lien or encumbrance
in favor of any person, or party, other than the Bank exists in the Collateral
or the Records as of the date hereof, and Borrower agrees that no such interest,
other lien or encumbrance will be given or perfected with respect to, or allowed
to attach to, any of the Collateral or the Records while this Agreement remains
in effect.
(e) Borrower agrees to provide the Bank with such information and data
relating to the Collateral and the Records as may be requested by the Bank. At
the time of each borrowing hereunder, but in all events no less often than once
each MONTH while this Agreement remains in effect, Borrower will provide to the
Bank the following: (i) true and accurate copies of all invoices pertaining to
Borrower's accounts or a schedule by computer printout (or in such other form
which the Bank has approved in advance) identifying by account debtor each of
Borrower's accounts and showing both the face and the currently unpaid amount
thereof; (ii) an aging of all of Borrower's accounts at intervals of 30-days,
60-days, 90-days, and over-90-days as of the last day of the immediately
preceding calendar month; and (iii) Records satisfactory to the Bank listing and
describing as of the last day of the immediately preceding calendar month
Borrower's Inventory and stating as of the same date the lower of cost or market
value of the same. Each time the Borrower submits to the Bank information and
data described in the preceding sentence, Borrower shall also provide to the
Bank a certificate in form acceptable to the
<PAGE>
Bank completed by the Borrower or by an officer of the Borrower (if Borrower is
a corporation) specifically authorized by Borrower's Board of Directors for this
purpose, and stating as of the date the certificate is forwarded to the Bank
that: (1) the Bank has a perfected, first security interest in all of Borrower's
Inventory and accounts, including the Qualified Accounts, and in all other items
of Collateral and in Borrower's Records; (2) the accounts are evidenced by
invoices or by schedule which, together with an aging of accounts as herein
provided, have been delivered to the Bank concurrently with the delivery of the
certificate; and (3) the Borrower is not in default under this Agreement, any
loans made hereunder, or on any other liability to the Bank. Said certificate
shall also state as of the same date: (4) the lower of cost or market value of
Borrower's Inventory; (5) the unpaid face amount of all of Borrower's accounts,
of all of Borrower's accounts classified as unqualified. and of all of
Borrower's Qualified Accounts; and (6)the total of Borrower's Inventory at the
lower of cost or market value and of the unpaid face amount of Borrower's
Qualified Accounts.
(f) The Borrower agrees to place on the Records such legends as shall
be necessary to disclose the Bank's security interest in the Collateral and the
Records and to make such revisions and additions to such legends as the Bank may
from time to time require.
(g) Borrower will at all times keep the Inventory insured in an amount
equal to the full insurable value thereof with such companies and against such
risks as shall be satisfactory to the Bank with all loss payments thereunder
payable to the Bank. Borrower shall pay the cost of all such insurance and
deliver to the Bank certificates evidencing the same. Borrower hereby assigns to
the Bank all of Borrower's rights to receive the proceeds of such insurance,
directs any insurer to pay all proceeds directly to the Bank and authorizes the
Bank to endorse any draft or other Instrument issued in payment of such
proceeds. The Bank shall have the right, but shall not be obligated, to procure
any or all such insurance at Borrower's expense if Borrower fails to do so.
(h) Borrower's Inventory is presently valued for accounting purposes on
the basis of FIFO, LIFO, Other (Specify:) Said valuation method for accounting
purposes shall be followed for all purposes hereunder, and Borrower shall not
change such method without first obtaining the advance written consent of the
Bank.
(i) Borrower agrees to pay promptly as due all taxes, levies,
assessments and governmental charges, of whatever nature, upon or relating to
Borrower or Borrower's business, or the ownership or use, sale, lease or other
disposition of any of Borrower's assets, or the income or gross receipts of
Borrower or said business. Borrower shall not permit to arise or remain in
effect, and shall promptly discharge, all liens, claims or encumbrances upon any
of Borrower's assets arising from any such tax, assessment, levy or charge. The
Bank, at Borrower's expense, shall have the right, but shall not be obligated,
to pay such taxes, levies, assessments or charges, or to discharge such liens,
claims or encumbrances not paid or discharged by Borrower as provided by this
subsection.
(j) All expenses incurred, and payments made, by the Bank and which are
to be paid by the Borrower under the provisions of this Agreement shall be
deemed loans to the Borrower and shall beer interest so long as they remain
unpaid at the same rate applicable to Borrower's other loans from the Bank.
(k) Borrower shall at all times comply with all Environmental
Regulations (as hereinafter defined) and shall not deposit, install or
<PAGE>
permit to be deposited or installed on or about any of the Collateral any
Hazardous Material (as hereinafter defined), except for materials which are
commonly-used household products properly and lawfully handled and disposed of
by Borrower. As used herein, the term 'Environmental Regulations" shall refer to
all federal, state and local laws, rules, regulations, codes, governmental
restrictions and requirements, ordinances and orders (whether now existent or
hereafter arising) pertaining to, or imposing liability or a standard of conduct
regarding, the environment, Hazardous Material, pollutants, petroleum products,
radioactive materials or contaminants, or any use, storage, holding, existence,
emission, discharge, generation, handling, abatement, removal, disposition or
transport thereof. The term "Hazardous Material" means any substance which is a
"hazardous substance", "pollutant" or "contaminant" as those terms are defined
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980 ("CERCLA"), as amended from time to time, and regulations pursuant thereto,
any hazardous substance regulated or controlled under any Environmental
Regulations, or any other substance or material defined, designated, classified
or considered as hazardous, radioactive or toxic waste or material. Borrower
covenants to keep the Collateral free and clear of all unpaid charges, liens,
(including a statutory or equitable lien, or an administrative claim, in favor
of any governmental entity or agency or a bankruptcy trustee for reimbursement,
cleanup, response or remedial action costs, damages, penalties or fines in
connection with any Hazardous Material), and security interests (other than the
security interests granted herein). Bank may, in its sole discretion, advance
funds to satisfy any encumbrances against the Collateral, to maintain and
preserve the Collateral (which preservation, at Bank's election, may include
removing, conducting a remedial action or other response to the release of any
Hazardous Material or other contaminated materials). Any advances by Bank for
such purpose shall be secured by this Agreement, provided, however, the
foregoing shall not restrict or impair the Bank from seeking subrogation to the
environmental lien or claim rights of any governmental entity or agency or
bankruptcy trustee to the extent of such advancement. No liability shall arise
against Bank from any act, or the omission of any act, pertaining to the
collection or failure to collect any Collateral, and Borrower agrees that Bank
may elect to abandon its interest in any portion of any Collateral if Bank has
any reason to suspect that such Collateral may be contaminated with any
Hazardous Material. Borrower shall immediately deliver to Bank copies of any
notice or other communication received by Borrower alleging a violation of any
Environmental Regulations or that any facility is being operated without all
licenses or permits required for Hazardous Material or by Environmental
Regulations.
Neither the Collateral nor any property previously or now or hereafter
occupied or owned by Borrower has ever been, or will be used by Borrower, or to
the best of Borrower's information and belief, by previous owners and/or
operators, to refine, produce, store, handle, transfer, process or transport any
Hazardous Material (other than in full compliance with all Environmental
Regulations and other applicable laws) or petroleum products stored in
underground storage tanks, or as a landfill, resource recovery facility or
system, solid waste processing facility, hazardous waste facility or abandoned
or uncontrolled hazardous waste site, as defined in any Environmental
Regulations.
7. EVENTS OF DEFAULTS.
<PAGE>
The occurrence of any of the following events constitutes default
hereof: (a) Failure to pay when due any amount owned pursuant to a loan made
hereunder or other indebtedness secured hereby; (b) a breach of, or failure to
observe, comply with, perform or see to the performance of any covenant,
agreement, representation or warranty herein or of any notes or other obligation
secured hereby; (c) a suspension or termination of the ordinary course of
business conducted by Borrower, or the filing of a petition of bankruptcy either
by or against Borrower, or Borrower's execution of an assignment for the benefit
of creditors, or Borrower's providing for an arrangement among Borrower's
creditors or (d) Borrower's failure to comply in any material respect with any
Environmental Regulations which would subject an owner or holder of the
Collateral to any damages, penalties or liabilities.
8. RIGHTS AND REMEDIES OF BANK.
Upon the occurrence of any of the aforementioned events of default and
at any time thereafter, provided such default has not been cured, or whenever
the Bank shall deem itself insecure with respect to the loans made hereunder due
to any act or failure to act by Borrower or due to a determination by the Bank
respecting the operations, prospects or financial condition of Borrower, all of
the loans made hereunder and all other indebtedness secured hereby shall become
immediately due and payable at the Bank's option without notice to Borrower, and
the Bank may proceed to enforce payment of same and to exercise any or all
rights and remedies afforded to the Bank by the Uniform Commercial Code of the
state in which Bank's office identified above is located, or otherwise provided
the Bank, and further, in addition to such rights and remedies, the Bank shall
also have the right to apply in reduction of the sums secured hereby, by way of
set-off, the then balance of any account with the Bank in Borrower's name, all
without any notice to the Borrower of any kind whatsoever.
To the full extent, if any, permitted by applicable law, Borrower
agrees to pay, and indemnify Bank against, all costs, fees and expenses
(including reasonable attorneys' fees) incurred by Bank in enforcing rights
respecting and realizing upon any of the Collateral, and any and all claims,
demands, judgments, penalties, fines, liabilities, costs, damages and expenses
incurred by Bank, directly or indirectly, from the existence of any Hazardous
Material upon or emanating from any of the Collateral, including abatement and
cleanup costs and any fines imposed by reason thereof.
9. DURATION.
The term of this Agreement shall commence with the date hereof and
shall end on the date when all of the events described in (a) of this paragraph
have occurred and either the events described in (b) or in W have occurred:
(a) Borrower pays in full all outstanding loans made hereunder and all
other indebtedness of Borrower secured hereby;
(b) Borrower has given and the Bank has received written notice that no
further loans are to be made hereunder; (c) the Bank has determined that no
further loans are to be made hereunder.
10. APPLICABLE LAW.
This Agreement and the rights and duties of the parties hereto shall be
governed in all respects by the law of the state in which Bank's office
identified above is located.
11. NO WAIVER.
<PAGE>
Any failure of the Bank to exercise any right hereunder shall not be
construed as a waiver of the right to exercise the same or any other right at
any time and from time to time thereafter.
12. BENEFITS AND BURDENS.
All rights of the Bank hereunder shall inure to the benefit of its
successors and assigns and all obligations of Borrower shall bind Borrower's
heirs, executors, administrators, successors or assigns. This Agreement may not
be assigned by Borrower.
13. OTHER AGREEMENTS.
Any agreements or instruments other than this Agreement, now or
hereafter in effect, which provide a security interest or other rights of the
Bank in all or any part of the Collateral or the Records as herein defined or
which otherwise provide rights or remedies of the Bank with respect to the
Borrower or any of Borrower's property shall subsist and continue in full force
and effect notwithstanding the execution of or any provisions contained in this
Agreement, until such other agreements or instruments terminate in accordance
with their respective terms. All rights and obligations arising under said other
agreements or instruments or under this Agreement, or both, shall be cumulative
and independently applicable in all respects and shall not be limited in any
fashion owing to the fact that provisions of said other agreements or
instruments and this Agreement may differ.
BORROWER: SAZTEC INTERNATIONAL, INC., ADVANCED AUTOMATION ASSOCIATES, INC.
BY: /s/GARY N. ABERNATHY BORROWER'S ADDRESS
-------------------------- 43 MANNING RD.
Gary N. Abernathy, President BILLERICA, MA 01821
BANK: UMB BANK, N.
BY: /s/Travis J. Burns
---------------------
Assistant Vice President
<PAGE>
ADDENDUM
It is hereby agreed by UMB Bank, n.a. and Saztec International, Inc. and
Advanced Automation Associates, Inc. that the dollar availability of this Master
Note shall decrease Ten Thousand dollars on the first business day of each month
beginning November 1, 1997, until maturity at April 1, 1998.
UMB Bank, n.a.
By /s/ TRAVIS J. BURNS
-----------------------------
Travis J. Burns, Assistant Vice President
Saztec International, Inc.
By: /s/ GARY N. ABERNATHY
----------------------------
Gary Abernathy, President
Advanced Automation Associates, Inc.
By: /s/ GARY N. ABERNATHY
----------------------------
Gary Abernathy, President
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENTS OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER(S)) AND US (LENDER) FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING
TO MODIFY IT.
Borrower: SAZTEC INTERNATIONAL, INC., ADVANCED AUTOMATION ASSOCIATES, INC.
By: /s/ GARY N. ABERNATHY
--------------------------
Title: President
Address: 43 MANNING RD.
BILLERICA, MA 01821
EXHIBIT 21
SUBSIDIARY NAME AND JURISDICTION OF INCORPORATION
TRADE NAME OR ORGANIZATION
- -----------------------------------------------------------------------------
Advanced Automation Associates, Inc. Missouri
Saztec Europe, Ltd. Scotland
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 386,785
<SECURITIES> 0
<RECEIVABLES> 1,342,831
<ALLOWANCES> 45,070
<INVENTORY> 289,518
<CURRENT-ASSETS> 3,206,580
<PP&E> 3,535,036
<DEPRECIATION> 3,170,996
<TOTAL-ASSETS> 3,830,448
<CURRENT-LIABILITIES> 2,187,048
<BONDS> 151,980
11,570,811
0
<COMMON> 0
<OTHER-SE> (100,417)
<TOTAL-LIABILITY-AND-EQUITY> 3,830,448
<SALES> 0
<TOTAL-REVENUES> 9,471,200
<CGS> 0
<TOTAL-COSTS> 7,755,464
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80,899
<INCOME-PRETAX> (500,575)
<INCOME-TAX> (38,688)
<INCOME-CONTINUING> (461,887)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (461,887)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
