SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1998
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)
978-901-9600
-------------------------------
(Registrant's Telephone Number)
---------------
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 [ ]
The number of shares outstanding of registrant's Common Stock at April 27, 1998,
was 4,461,129 shares.
<PAGE>
SAZTEC INTERNATIONAL, INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 1998
CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Operations for the
three months ended March 31, 1998 and 1997 3
Consolidated Statements of Operations for the 4
nine months ended March 31, 1998 and 1997
Consolidated Balance Sheets -- March 31, 1998
and June 30, 1997 5
Consolidated Statement of Changes in Stockholders'
Equity for the nine months ended March 31, 1998 6
Consolidated Statements of Cash Flows for the
nine months ended March 31, 1998 and 1997 7 - 8
Notes to Consolidated Financial Statements --
March 31, 1998 and 1997 9 - 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
----------- -----------
REVENUES $ 2,271,910 $ 2,374,030
Cost of services 1,716,596 1,963,917
----------- -----------
Gross profit 555,314 410,113
Selling and administrative expense 477,079 498,362
----------- -----------
Income (Loss) from operations 78,235 (88,249)
Interest expense 11,281 16,091
----------- -----------
Income (Loss) before provision for income taxes 66,954 (104,340)
Provision (benefit) for income taxes 14,368 (16,894)
----------- -----------
Net income (loss) $ 52,586 $ (87,446)
=========== ===========
Income (Loss) per share of common stock (Note 4):
Basic and diluted net income (loss) per share $ .01 $ (.02)
=========== ===========
Net income (loss) per share- assuming dilution $ .01
===========
Weighted average number of shares-basic 4,461,129 3,574,413
=========== ===========
Weighted average number of shares- diluted 4,543,927
===========
See accompanying notes.
3
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
----------- -----------
REVENUES $ 5,850,130 $ 7,391,138
Cost of services 4,616,629 5,884,083
----------- -----------
Gross profiT 1,233,501 1,507,055
Selling and administrative expense 1,483,552 1,640,552
----------- -----------
Loss from operations (250,051) (133,497)
Interest expense 35,541 63,019
----------- -----------
Loss before provision for income taxes (285,592) (196,516)
Provision (benefit) for income taxes 14,368 (38,560)
----------- -----------
Net loss $ (299,960) $ (157,956)
=========== ===========
LOSS PER SHARE OF COMMON STOCK:
Basic net loss applicable to common stockholders $ (.07) $ (.04)
=========== ===========
Weighted average number of shares 4,089,022 3,512,004
=========== ===========
See accompanying notes.
4
<PAGE>
<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND JUNE 30, 1997
ASSETS
MARCH 31, 1998 JUNE 30, 1997
-------------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 550,734 $ 386,785
Restricted cash 50,338 192,643
Accounts receivable, less allowance for doubtful accounts of $57,223 and $45,070
at March 31, 1998 and June 30, 1997 1,980,198 1,342,831
Work in process 249,283 217,518
Prepaid expenses and other current assets 133,514 134,803
Note receivable for stock subscribed (Note 2) 860,000
------------ ------------
Total current assets 2,964,067 3,134,580
Equipment, net 433,845 364,040
Other assets
Goodwill and other intangible assets, less accumulated amortization of $72,692
and $63,602 at March 31, 1998 and June 30, 1997 152,670 161,760
Deposits and other assets 118,895 170,068
------------ ------------
Total assets $ 3,669,477 $ 3,830,448
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 179,108 $ 274,512
Current portion of long-term debt and capital lease obligations 260,279 199,460
Common stock subject to repurchase (Note 2) 33,342
Accounts payable 455,297 569,716
Accrued liabilities 709,863 429,396
Customer deposits 785,760 456,989
Excess of billings over costs and estimated earnings 56,200 223,633
------------ ------------
Total current liabilities 2,446,507 2,187,048
Long-term debt and capital lease obligations 36,508 151,980
Accrued expenses, non-current 30,155 39,546
Stockholders' equity
Common stock-no par value; 10,000,000 shares authorized; 4,461,129 shares
issued at March 31, 1998, and 3,571,963 shares issued at June 30, 1997 12,430,811 11,570,811
Common stock subscribed (Note 2) 860,000
Contributed capital 14,498 14,498
Accumulated deficit (11,178,480) (10,878,520)
Cumulative translation adjustment (110,522) (114,915)
------------ ------------
Total stockholders' equity 1,156,307 1,451,874
------------ ------------
Total liabilities and stockholders' equity $ 3,669,477 $ 3,830,448
============ ============
</TABLE>
See accompanying notes.
5
<PAGE>
<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 1998
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> <C>
June 30, 1997 3,571,963 $11,570,811 860,000 $ 860,000 $14,498 $(10,878,520) $(114,915)
(1) September 10, 1997 300,000 300,000 (300,000) (300,000)
(2) October 22, 1997 8,333 -
(2) November 6, 1997 20,833 -
(1) November 14, 1997 560,000 560,000 (560,000) (560,000)
Net loss (299,960)
Translation
adjustment 4,393
--------- ----------- -------- --------- ------- ------------ ---------
4,461,129 $12,430,811 0 $0 $14,498 $(11,178,480) $(110,522)
<FN>
(1) Shares issued pursuant to a private placement completed November 14,
1997 (Note2).
(2) Shares issued pursuant to an amendment to a private placement completed
March 31, 1994 (Note 2).
</FN>
</TABLE>
See accompanying notes.
6
<PAGE>
<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (299,960) $ (157,956)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 179,366 287,510
Provision for bad debts 12,062 (4,448)
Loss on sale of assets 2,333
Other 17 (17,054)
Changes in assets and liabilities:
Accounts receivable (681,434) 298,003
Work in process (165,389) 208,408
Prepaid expenses and other current assets (17,657) 32,994
Deposits and other assets 59,316 975
Accounts payable (116,871) (312,437)
Accrued liabilities 268,829 (26,775)
Customer deposits and non-current accrued expenses 327,067 (288,318)
Income taxes payable (38,560)
----------- -----------
Net cash used in operating activities (434,654) (15,325)
----------- -----------
Cash flows from investing activities:
Additions to equipment (226,714) (18,239)
Payments received on note receivable 11,937 14,113
(Increase) decrease in restricted cash 142,305 (7,433)
----------- -----------
Net cash used in investing activities (72,470) (11,559)
----------- -----------
Cash flows from financing activities:
Principal payments on debt and capital lease
obligations (101,410) (156,359)
Borrowings on revolving credit agreement 2,098,554 2,675,154
Payments on revolving credit agreement (2,193,958) (2,832,936)
Net proceeds from issuance of common stock 860,000 300,000
----------- -----------
Net cash provided by (used in) financing activities 663,186 (14,141)
----------- -----------
Effect of exchange rate changes on cash 7,887 11,766
----------- -----------
Net increase (decrease) in cash 163,949 (29,259)
Cash and cash equivalents at beginning of period 386,785 222,023
----------- -----------
Cash and cash equivalents at end of period $ 550,734 $ 192,764
=========== ===========
</TABLE>
See accompanying notes.
7
<PAGE>
<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
------- -------
<S> <C> <C>
Supplemental schedule of non-cash investing and financing activities:
Purchase of equipment through issuance of notes payable and capital
lease obligations $13,624 $ 8,910
======= =======
Partial settlement of Common Stock Repurchase obligation $14,110
=======
Supplemental disclosures of cash flow information: Cash paid during the
period for:
Interest $24,221 $60,109
======= =======
Income taxes $14,368
=======
</TABLE>
See accompanying notes.
8
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
NOTE 1. ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements include all
adjustments (consisting only of normal recurring accruals) which, in the opinion
of management, are necessary for a fair presentation of financial position,
results of operations and cash flows. Results of operations for interim periods
are not necessarily indicative of results to be expected for a full year.
Certain reclassifications have been made to the fiscal 1997 financial statements
to conform with the current year's presentation.
Effective for interim and annual periods 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. The effect of this standard is
reflected in the financial statements.
The Company's shareholders approved a one for four reverse stock split which
became effective November 7, 1997. All share and per share amounts have been
restated to account for the reverse split.
NOTE 2. COMMON STOCK
In connection with the Company's acquisition of the outstanding minority
interest of Saztec Europe, Ltd. in 1991, the Company granted a put option to the
selling shareholders to repurchase 120,000 shares at $2.00 per share. The put
option was exercisable at 10,000 shares ($20,000) per quarter through April,
1996. The options were exercised in their entirety and at June 30, 1997 $33,342
remained payable to the selling shareholders.
Subsequent to one of the three private placements of common stock completed
during the quarter ended March 31, 1994 management agreed to issue 91,666
additional shares to the participants of one of the placements. At June 30,
1995, 62,500 of the shares had been issued. On September 30, 1997 and November
6, 1997 the remaining participants filed the required agreements and on October
22 and November 6, 1997 8,333 and 20,833 shares were issued, respectively.
On June 29, 1997 the Company and several current shareholders and
shareholder/directors agreed to a private placement of 860,000 shares of common
stock and warrants to purchase 860,000 additional shares of common stock. The
cash for the shares and warrants of $860,000 was placed in escrow. The placement
was contingent on the Company's shareholders consent to a one for four reverse
stock split and an amendment to the Company's Restated Articles of
Incorporation, which amendment increases from 5,000,000 to 10,000,000 the number
of shares of common stock the Company is authorized to issue. In September 1997,
the Company and one of the participants agreed to the release of $300,000 from
the participant's escrow account and 300,000 shares and warrants were issued
September 10, 1997.
On October 31, 1997 the Company's shareholders consented to the reverse split
and the amendment, effective November 7, 1997. The remaining 560,000 shares were
issued November 14, 1997.
9
<PAGE>
NOTE 3. FOREIGN OPERATIONS AND MAJOR CUSTOMERS-SEGMENTS
United Kingdom/Western Europe amounts in the following tables 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.
<TABLE>
<CAPTION>
SEP 30, 1997 DEC 31, 1997 MAR 31, 1998 TOTAL
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Revenue
United States $ 818,662 $ 982,126 $ 1,168,268 $ 2,969,056
United Kingdom/Western Europe 794,809 982,623 1,103,642 2,881,074
----------- ----------- ----------- -----------
$ 1,613,471 $ 1,964,749 $ 2,271,910 $ 5,850,130
=========== =========== =========== ===========
Income (loss) before income taxes
United States $ (148,309) $ (34,704) $ 70,080 $ (112,933)
United Kingdom/Western Europe (63,252) (106,281) (3,126) (172,659)
----------- ----------- ----------- -----------
$ (211,561) $ (140,985) $ 66,954 $ (285,592)
=========== =========== =========== ===========
Depreciation
United States $ 24,682 $ 23,730 $ 23,457 $ 71,869
United Kingdom/Western Europe 34,418 32,542 31,447 98,407
Amortization-U.S. only 3,030 3,030 3,030 9,090
=========== =========== =========== ===========
$ 62,130 $ 59,302 $ 57,934 $ 179,366
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SEP 30, 1996 DEC 31, 1996 MAR 31, 1997 TOTAL
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Revenue
United States $ 1,044,706 $ 1,030,578 $ 1,043,130 $ 3,118,414
United Kingdom/Western Europe 1,330,436 1,611,388 1,330,900 4,272,724
=========== =========== =========== ===========
$ 2,375,142 $ 2,641,966 $ 2,374,030 $ 7,391,138
=========== =========== =========== ===========
Income (loss) before income taxes
United States $ 21,492 $ (57,541) $ (87,834) $ (123,883)
United Kingdom/Western Europe (39,248) (16,879) (16,506) (72,633)
=========== =========== =========== ===========
$ (17,756) $ (74,420) $ (104,340) $ (196,516)
=========== =========== =========== ===========
Depreciation
United States $ 48,255 $ 45,710 $ 44,390 $ 138,355
United Kingdom/Western Europe 50,913 47,072 42,029 140,014
Amortization-U.S. only 3,081 3,030 3,030 9,141
=========== =========== =========== ===========
$ 102,249 $ 95,812 $ 89,449 $ 287,510
=========== =========== =========== ===========
</TABLE>
MAR 31, 1998 JUN 30, 1997
------------ ------------
Identifiable Assets
United States $ 1,887,536 $ 2,415,816
United Kingdom 1,781,941 1,414,632
=========== ===========
$ 3,669,477 $ 3,830,448
=========== ===========
10
<PAGE>
NOTE 4. EARNINGS (LOSS) PER SHARE
During the nine month periods ended March 31, 1998 and 1997 the following
potentially dilutive securities were outstanding:
<TABLE>
<CAPTION>
1998 1997
NUMBER PRICE RANGE NUMBER PRICE RANGE
$ $
<S> <C> <C> <C> <C>
Employee options 394,500 .315 - 4.13 155,500 .68 - 4.13
Other options 358,750 .315 - 4.13 106,250 .68 - 4.13
Warrants 1,641,000 2.00 446,000 2.00 - 6.00
</TABLE>
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue for the nine months ended March 31, 1998, declined to $5,850,130 from
$7,391,138 for the nine months ended March 31, 1997, a decrease of $1,541,008 or
(20.8%). The decrease is due mainly to lower revenue from library conversion
projects in the U.K. and Western Europe. This decline has been partially offset
by sales of British Library card catalogue sets on CD/ROM. Revenue from projects
utilizing scanning services in the United States in the current year was
$215,476 higher than earned in the prior year.
Revenue for the quarter ended March 31, 1998 was $102,120 (4.3%) short of the
same quarter in the prior year. U.S. revenue for the quarter ended March 31,
1998 was $125,138 higher than the figure for the same period in the prior year,
but European revenue was $227,258 lower than the figure posted in the same
quarter of the prior year.
Gross margin for the quarter ended March 31, 1998 of 24.4% compares favorably
with the prior year quarter margin of 17.3% of sales. The prior year margin
reflected one-time workforce training costs and pricing pressures on projects
which have been completed.
Selling and administrative expenses of $477,079 for the quarter was $21,283 less
than the same period in the prior year. Selling expense for the quarter ended
March 31, 1998 of $199,194 was consistent with selling expense incurred in the
first two quarters of the current year, which averaged $199,167 per quarter.
Administrative expense of $277,885 for the current quarter is $26,184 less than
the per quarter average expensed in the first six months of the current year.
Cash contributed by operations for the quarter amounted to $66,720, despite
increases in current asset balances which exceeded increases in current
liability balances by $56,561. However, cash purchases during the quarter of
$120,251 for operating equipment and net payments on notes and capital lease
obligations of $12,525 offset the increase from operating activities and other
adjustments by $30,405, the net decrease in cash for the quarter's activities.
CAPITAL RESOURCES AND LIQUIDITY
At June 30, 1997, the Company had a revolving credit agreement secured by
accounts receivable, work in process, property and equipment and other assets,
bearing interest at the lender's prime rate plus 4.0% (12.5% at June 30, 1997).
Available borrowings were 70% of domestic trade receivables less than 90 days
old, with an aggregate maximum borrowing level that declined $10,000 per month
to $280,000 on June 30, 1997. The credit line was renewed on July 1 and October
1, 1997 and April 1, 1998. The current renewal incorporates the same terms as
the prior agreements, with the exception that the maximum borrowings decline
$10,000 per month from $210,000 on April 1, 1998. The current and prior
agreements contain covenants that require, among other things, a minimum
consolidated net stockholders' equity of $500,000 and a ratio of consolidated
total indebtedness to consolidated net worth not to exceed 8:1. The Company was
in compliance with all covenants contained in the agreements at April 1, 1998.
Outstanding borrowings at March 31, 1998 were $179,108 with $30,892 available.
The Company's unrestricted cash balance of $550,734 on March 31, 1998 is
$163,949 more than the $386,785 figure of June 30, 1997. Working capital at
March 31, 1998 of $517,560 is $429,972 less than the June 30, 1997 working
capital amount of $947,532, but $45,816 higher than the March 31, 1997 balance.
The decrease in working capital results mainly from the year to date net loss of
$299,960 and purchases of equipment in the first three quarters of $226,714.
12
<PAGE>
SAZTEC INTERNATIONAL, INC.
MARCH 31, 1998 FORM 10-QSB
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
On November 7, 1997 the shareholders of the Company approved a four for one
reverse stock split. The reverse stock split does not change the rights or
ownership interests of any of the stockholders. On April 1, 1998 the Company
executed a new note to its prime lender to replace its revolving line of credit
agreement. The new agreement does not change the rights of any holders of its
securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held February 19, 1998. All directors
were re-elected for one year. Tallard B.V. nominated two directors, Robert W.
Forsyth and Hans Lindroth, to fill the two seats which were vacated by the prior
representatives in June, 1995. Both nominees were elected. There was no
solicitation in opposition to management nominees. One other proposal was
presented for shareholder vote:
1. Proposal to ratify appointment of Grant Thornton LLP as independent
certifying accountants for the year ended June 30, 1998:
For: 4,027,979
Against: 5,263
Abstain: 2,900
ITEM 5. OTHER INFORMATION
Christopher Parker joined the Company as Chief Executive Officer of the Company.
He was elected to the Board of Directors at the Board's regular quarterly
meeting on February 19, 1998. The Board elected Gary N. Abernathy to the
positions of President and Chief Operating Officer-U.S. Division.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following Exhibits are filed by attachment to this Form 10-QSB:
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT PAGE
- -------------- ---------------------- -------
2.1 Amendment to By-Laws of Saztec International, Inc. 15 - 16
10.15 Employment Contract, Christopher Parker 17 - 22
10.16 Renewal of Revolving Credit Agreement dated
April 1, 1998 23 - 31
27 Financial Data Schedule 32
(b) Reports on Form 8-K:
None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements 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: April 27, 1998
SAZTEC INTERNATIONAL, INC.
--------------------------
(Registrant)
By: /s/ THOMAS K. O'LOUGHLIN
------------------------
Thomas K. O'Loughlin
Treasurer
14
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
2.1 Amendment to By-Laws of Saztec International, Inc.
10.15 Employment Contract, Christopher Parker
10.16 Renewal of Revolving Credit Agreement dated April 1, 1998
27 Financial Data Schedule
EXHIBIT 2.1
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
SAZTEC INTERNATIONAL, INC.
Pursuant to Section 905 the General Corporation Law of the State of
California, Gary N. Abernathy and Kent L. Meyer, President and Secretary of
Saztec International, Inc., a California corporation, hereby certify as follows:
1. That Gary N. Abernathy is the President and Kent L. Meyer is the
Secretary of Saztec International, Inc., a California corporation (the
"Corporation").
2. That on April 30, 1997, pursuant to Section 902 of the General
Corporation Law of the State of California, the Board of Directors of the
Corporation duly adopted the following resolution, declared its advisability and
directed its submission to the stockholders for consideration and approval:
WHEREAS, the Board of Directors of the Corporation have decided that it is
in the best interests of the Corporation to effect a reverse stock split
of the common stock of the Corporation and, in conjunction therewith, an
increase in the authorized number of shares of common stock of the
Corporation;
NOW, THEREFORE, BE IT RESOLVED, that the Articles of Incorporation of the
corporation shall be amended by deleting the present Article FOURTH
thereof in its entirety, and inserting in its place a new Article FOURTH
as follows:
"FOURTH:
(a) Upon the effectiveness of this amendment each of the issued and
outstanding shares of common stock of the Corporation shall be, and hereby
is, automatically reclassified as and converted into shares of common
stock of the Corporation on the basis of one (1) share of newly issued
common stock for each four (4) shares of common stock held by the
Corporation's shareholders prior to the filing of this amendment. Any
fractional shares created by this 1-for-4 reverse stock split shall be
canceled and paid in cash to the shareholder upon the issuance of the
shareholder's stock certificate, calculated in accordance with the closing
trading price for the Corporation's common stock on the date this
amendment is filed.
(b) The Corporation shall have authority to issue two classes of stock,
1,000,000 shares of preferred stock ("Preferred Stock"), and 10,000,000
shares of common stock ("Common Stock").
(c) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to fix the number of shares
of any series of Preferred Stock and to determine the designation of any
such series. The Board of Directors is also authorized to determine or
alter the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly-unissued series of Preferred Stock and, within the
limits and restrictions stated in any resolution or resolutions of the
Board of Directors originally fixing the number of shares constituting any
series, to increase or decrease (but not below the number of shares of
such series then outstanding) the number of shares of any such series
subsequent to the issue of shares of that series."
FURTHER RESOLVED, that the proposed amendment to Article FOURTH of the
Corporation's Articles of Incorporation be submitted to a vote or consent
of the shareholders of the Corporation in accordance with Sections 601 and
603 of the California General Corporation Law;
FURTHER RESOLVED, that the Board of Directors recommends to the
shareholders that they vote or consent in favor of the proposed amendment;
FURTHER RESOLVED, that the officers of the Corporation are hereby
authorized and directed to prepare a Consent Solicitation Statement for
the solicitation of consents in favor of the proposed amendment to Article
FOURTH of the Corporation's Articles of Incorporation in accordance with
Sections 601 and 603 of the California General Corporation Law, to file
the Consent Solicitation Statement and any other solicitation materials
with the Securities and Exchange Commission, and to take such other
actions and to prepare and file such other consents, notices, filings and
certificates as may be necessary or desirable in the judgment of any
officer of the Corporation to effectuate the consent solicitation and to
obtain approval of the shareholders of the proposed amendment.
15
<PAGE>
3. The foregoing amendment to the Articles of Incorporation of the
Corporation has been approved by the required vote of the outstanding shares of
the Corporation, pursuant to the shareholder consent solicitation described in
the foregoing resolutions, in accordance with Section 903 of the General
Corporation Law of the State of California.
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this Certificate are true and
correct.
This Certificate of Amendment was executed this 24th day of October, 1997.
/s/ GARY N. ABERNATHY
- ---------------------
Gary N. Abernathy,
President
ATTEST:
/s/ KENT L. MEYER
- ---------------------
Kent L. Meyer,
Secretary
16
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 7th day of February, 1998, by
and between CHRISTOPHER PARKER, an individual ("Parker") and SAZTEC
INTERNATIONAL, INC., a California corporation (the "Company").
1. Employment. The Company agrees to employ Parker and Parker agrees to
serve the Company as Chief Executive Officer for a term of forty-one (41)
months, commencing on February 9, 1998 and continuing thereafter until June 30,
2001, unless earlier terminated in accordance with the terms hereof. This
Employment Agreement may be extended or renewed by mutual written agreement of
the parties hereto.
2. Duties. Parker shall perform and be responsible for all of the usual and
customary duties of a Chief Executive Officer of the Company, and such other
duties as may be reasonably assigned to him from time to time by the Board of
Directors of the Company. Parker shall report to, and be responsible to, the
Board of Directors of the Company. Parker shall perform all of his work to his
highest standards of skill, competence, and efficiency; and Parker shall give
his best efforts and skill to further the best interests of the Company.
3. Board of Directors. For so long as Parker is employed under this
Employment Agreement, Parker shall have the right to be designated as a
candidate at each election of the Board of Directors of the Company, or its
successors, and the Company and its successors shall use its best efforts to
cause Parker to be elected to its Board of Directors, including, without
limitation, placing Parker's name in nomination, recommending him to its
shareholders, and including him on proxy solicitations for the election of
directors sent to its shareholders.
4. Business Plans. Parker shall prepare or cause to be prepared, for the
Fiscal Years beginning July 1, 1998, July 1, 1999 and July 1, 2000, Business
Plans for the Company and its subsidiaries, containing such information and
projections as are required by the Board of Directors of the Company. The
Business Plans shall be submitted to the Board of Directors for their review and
approval, in the sole discretion of the Board of Directors, prior to the
commencement of each of the foregoing Fiscal Years.
5. Full Time and Attention. Parker shall devote his full business time,
attention and energy to the performance of his duties on behalf of the Company
exclusively, other than certain charitable work, or as specifically allowed in
writing by the Company; provided that Parker may serve as a member of the Boards
of Directors of entities other than the Company, if such other entities are not
engaged in activities that are competitive with the activities of the Company,
and such service does not adversely impact upon the ability of Parker to perform
his duties on behalf of the Company, as set forth herein.
6. Relocation. Parker shall perform his duties hereunder at the Company's
headquarters in Billerica, Massachusetts; provided that Parker may maintain his
residence at his present home until no later than September 1, 1998, at which
date he shall have relocated his residence to the headquarters area. Failure of
Parker to relocate his residence as set forth herein shall constitute grounds
for termination of this Employment Agreement by the Company, for cause. The
Company shall reimburse Parker for the ordinary and reasonable costs of his
relocation including closing costs pertaining to the sale of his current
residence and the purchase of a new residence in the vicinity of the Company's
headquarters in Massachusetts, and of his travel and living expenses occasioned
by his maintaining his residence outside of the headquarters area until no later
than September 1, 1998. Reimbursement for Parker's cost of moving his personal
property to the headquarters area shall not exceed Nine Thousand Dollars
($9,000), and shall be determined by his obtaining bids from no less than three
(3) reputable moving companies, one of which shall be acceptable to him and the
Company.
7. Compensation.
(a) Base Salary. Parker's Base Salary will be One Hundred Forty
Thousand
17
<PAGE>
Dollars ($140,000) per annum for the term of this Agreement, which Base
Salary shall be payable every two (2) weeks in arrears. Parker's Base
Salary shall be subject to review by the Board of Directors of the Company
on an annual basis, and may be increased, but not decreased, by the Board
of Directors, at its sole discretion. The Company will take into
consideration any significant difference in the cost of living between
Parker's current residence area and the area of his new residence.
(b) Incentive Compensation. Parker shall receive Incentive Compensation
as follows:
(i) If and in the event that the Company shall attain the goals
and objectives set forth in the Business Plans approved by the Board of
Directors, including attaining not less than seventy-five percent (75%)
of the Pre-Tax Net Income projected by the Business Plan for the Fiscal
Year in question, the company shall pay Parker Incentive Compensation,
with respect to such Fiscal Year, in the following amount: For each one
percentage point (1%) by which the Pre-Tax Net Profit of the Company
exceeds seventy-five percent (75%) of the amount in the Business Plan,
Parker will receive bonus compensation equal to two percentage points
(2%) of his Base Salary; provided that such amount shall not exceed
fifty percent (50%) of the amount of Parker's Base Salary for such
Fiscal Year. The amount as determined above shall be paid to Parker
within ninety (90) days of the end of the fiscal year. In the event the
audited results are not known within ninety (90) days, Parker shall be
paid fifty percent (50%) of the anticipated amount of the Incentive
Compensation on the ninetieth (90') day, and the balance when known.
(ii) If and in the event that the Company shall attain the goals
and objectives set forth in the Business Plans approved by the Board of
Directors, including attaining more than one hundred percent (100%) of
the Pre-Tax Net Income projected by the Business Plan for the Fiscal
Year in question, then Parker shall receive additional Incentive
Compensation equal to five percent (5%) of the amount by which the
Pre-Tax Net Income exceeds the Pre-Tax Net Income in the Business Plan
for the Fiscal Year in question.
(iii) For the purposes hereof, the Pre-Tax Net Income of the
Company shall be as determined by the audit of the books and records of
the Company by its independent Certified Public Accountants, after
allowance for all bonuses and incentive compensation payable, including
the Incentive Compensation payable to Parker hereunder.
(iv) The Board of Directors of the Company, in its sole
discretion, may grant to Parker, Incentive Compensation in addition to
that set forth herein, regardless of the financial or operating
performance of the Company. Said additional Incentive Compensation may
be in the form of cash, stock options, deferred compensation or other
form.
(c) Automobile Expense. Employee will use an automobile in the
discharge of his duties under this Agreement and shall be entitled to a
Five Hundred Dollar ($500) per month car allowance to be paid to Employee
in addition to the Base Salary.
(d) Stock Options. The Company shall, as of February 9, 1998, grant to
Parker, options to purchase One Hundred Forty Thousand (140,000) shares of
common stock of the Company pursuant to and in accordance with the terms
of, the Company's 1995 Stock Option Plan adopted by the Company's Board of
Directors by resolution dated December 9, 1994, including with respect to
the Option Price. The Stock Options granted hereunder shall vest as
follows:
35,000 Shares February 1, 1999
45,000 Shares February 1, 2000
18
<PAGE>
60,000 Shares February 1, 2001
(e) Expenses. The duties of employment may require that Parker incur
expenses for meals, lodging, travel and entertainment in the interest of
the business. Accordingly, the Company will reimburse Parker for all
reasonable expenses incurred by him in connection with the performance of
his duties under this Employment Agreement.
8. Termination of Employment by the Company. The Company may terminate this
Employment Agreement immediately only for good cause in which case all of
Parker's compensation rights as set forth herein which have not vested, shall be
terminated, and shall be null and void, and of no further force or effect.
Termination of this Employment Agreement by the Company for any reason other
than good cause shall be a breach hereof by the Company and Parker shall be
entitled to all applicable rights and remedies in connection therewith. For the
purposes of this Employment Agreement, good cause shall be deemed to include,
but shall not in any manner be limited to, the following acts of Parker:
(a) recurring absence from company business without cause acceptable to
the Board of Directors of the Company;
(b) material breach of any provision of this Agreement;
(c) repeated, material and willful failure to communicate with the
Board of Directors of the Company regarding the business of the Company;
(d) material, willful failure to properly respond to and implement
appropriate, express directives of the Board of Directors of the Company;
(e) any material act of deceit, misrepresentation or dishonesty in the
discharge of Parker's duties;
(f) material, improper use or diversion of Company fiunds to personal
use;
(g) conviction of a felony; provided that good cause shall also include
the Company's reasonable determination, following an appropriate
investigation, that the Company would suffer material, adverse consequences
arising from Parker's indictment for a felony or involvement in any other
act of moral turpitude; and;
(h) abusive use of drugs and/or alcohol.
(i) Prior to any termination hereunder, Parker shall have reasonable
written notice and at least thirty (30) days in which to cure the breach,
except for instances involving moral turpitude.
9. Termination of Employment by Parker.
(a) "Parker may terminate this Employment Agreement in the event the
Company should materially breach any provision hereunder including, but not
limited to the failure to timely pay any compensation owned to Parker. In
such event, Parker shall give the Company reasonable written notice of the
claimed breach and at least thirty (30) days in which to cure the same.
(b) Parker may also terminate this Employment Agreement if control of
the Company should be sold or transferred to another party and Parker shall
not be retained or is retained with material or diminished changes in his
responsibilities. In such case, the restrictive covenants in Paragraphs 13,
14 and 15 shall be null and void. In the event of sale or transfer of
control and Parker is not retained, fifty (50%) of any shares not
previously vested under Paragraph 7(d) shall be considered fully vested and
earned.
10. Fringe Benefit and Health Care Plans. Parker shall be entitled to
participate in the various incentive or "fringe benefit" plans offered by the
Company to its executive employees pursuant to the normal policies of the
Company, including vacation benefits, disability, life and other insurance
benefits and such participation shall not be deemed to reduce or affect the
compensation payable to Parker under this Employment Agreement. Specifically,
but not in limitation of the foregoing, the Company shall pay the full premium
on Parker's behalf for family coverage for Parker and Parker's family under the
Company's Health Care Plan.
19
<PAGE>
11. Death or Incapacity. Parker's death, illness or incapacity such that he
shall be unable to perform his duties hereunder for a period of six (6)
consecutive months or more, shall result in automatic termination of his
employment hereunder. In the event of termination of Parker's employment
hereunder due to death, illness or incapacity, any stock options or grants
earned pursuant this Employment Agreement, as of such date, shall be considered
to have fully vested as of the date of such death, illness or incapacity.
12. Business Conduct. During Parker's employment by the Company, Parker
will not:
(a) willfully act contrary to the best interests of the Company, its
parent, subsidiary, or affiliated companies, or its employees, in a manner
that has a direct, material, adverse impact upon the Company;
(b) (other than as specifically allowed in writing by the Company)
engage in, or have any financial or other interest in, or render any
service in any capacity to any competitor, customer, or supplier of the
Company;
(c) solicit or encourage a customer of the Company to take its
business. elsewhere; or
(d)(other than as specifically allowed in writing by the Company)
solicit or encourage a Company employee to work elsewhere.
13. Covenant Not to Compete with Company. Parker agrees that:
(a) if the Company terminates Parker for good cause at any time during
the term of this Employment Agreement; or
(b) if Parker terminates his employment with the Company for any reason
during the term of this Employment Agreement, then for a period of one (1)
year immediately following the termination of Parker's active employment
with the Company, Parker will not engage or participate, directly or
indirectly, in (i) data conversion and imaging involving the conversion of
information from traditional media including paper, microfilm, microfiche
and aperture cards to computer usable formats and media; or (ii) any other
business activity in which the Company is actively engaged during the
course of Parker's employment with the Company, in competition with the
business conducted by the Company within the United States of America or
the United Kingdom. Said restriction shall not prohibit Parker from owning
up to two percent (2%) of the stock of any public company.
14. Agreement of Non-Solicitation. Parker further agrees that for a period
of one (1) year immediately following the termination described in Paragraph 8,
Parker will not, directly or indirectly, or in concert with any other person or
persons, firm, corporation or other entity or in any other manner, solicit,
divert or handle or attempt to solicit, divert or handle any active customers of
the Company, or entities that were active customers of the Company within one
(1) year prior to the date of Termination of Parker's employment with the
Company, regardless of where such customers might be located , with respect to
any business that consists of or relates or pertains in any way to the business
described in paragraph 13(i) and (ii), above.
15. Agreement of Non-Disclosure. Parker agrees that he will not at any time
impart to any competitor of the Company or otherwise use for the purpose of
competing with the Company any customer lists or other customer information or
any confidential information which he may have acquired as an officer, director
or shareholder of the Company unless the same shall have otherwise become known
to competitors of the Company.
16. Severance. If, and in the event that, Parker's employment hereunder
shall be terminated for any reason other than good cause, as defined above,
including termination without good cause, or expiration of the term hereof or of
any extended term, Parker shall be entitled to severance payments equal to six
(6) months of his base salary payable in lump sum within thirty (30) days
following the termination of his employment hereunder. Such severance shall be
in full satisfaction of Parker's rights hereunder, including those set forth in
Paragraph 8 hereof. The Company will provide outsourcing placement services to
Parker for a reasonable period of time after termination, to be determined by
Company in its sole discretion.
17. Indemnification. The Company agrees to defend any cause of action
against
20
<PAGE>
Parker as an Officer or Director of the Company and to indemnify and hold him
harmless from any loss resulting from such action which is related to the
conducting of this responsibilities under the Employment Agreement, to the full
extent permitted under the Bylaws of the Company and the Laws of the State of
California. The Company shall attempt to obtain Directors and Officers liability
insurance at such time as it is judged to be financially reasonable by the Board
of Directors of the Company.
18. Equitable Remedies. It is recognized by the parties hereto that
irreparable damage will result to Company from any violation of Paragraphs 12,
13, 14 or 15 hereof by Parker. Therefore, Parker agrees that, in addition to any
and all other remedies available to the Company, it shall have the remedy of
restraining order, injunction, and other equitable relief as may be declared or
issued by a court to enforce the provisions of said Paragraphs, and Parker, in
any such equitable proceeding agrees not to claim that a remedy at law is
available to the Company.
19. Construction. It is agreed that the terms and provisions hereof are
severable, and that should any clause or provisions hereof be unenforceable or
be declared invalid for any reason whatsoever, this Employment Agreement shall
be construed and read as if such invalid or unenforceable clause or provisions
were omitted.
20. Savings Clause. Notwithstanding anything to the contrary herein
contained and if, and only if, provisions of the type contained in this
Paragraph 20 are enforceable in the jurisdiction in question, if any one or more
of the provisions contained in Paragraphs, 12, 13, 14 or 15 of this Employment
Agreement shall for any reason be held to be excessively broad as to time,
duration, geographical scope, activity or subject, said provisions shall be
construed by limiting and reducing them so as to be enforceable to the extent
compatible with the applicable law as it should then be determined.
21. Company Policies. Parker will be subject to and will adhere to all of
the Company's policies applicable to the Company's employees generally,
including, but not limited to, all policies relating to standards of conduct,
conflicts of interest, and compliance with the Company's rules and obligations.
Parker represents that he has no agreements with or obligations to others that
in any way conflict with any of his obligations contained in this Employment
Agreement.
22. Recovery of Expenses. In the event a dispute arises with respect to
this Employment Agreement, the party prevailing in such dispute shall be
entitled to recover all expenses including, without limitation, reasonable
attorneys' fees and expenses incurred in ascertaining such party's rights, in
preparing to enforce, or in enforcing such party's rights under this Employment
Agreement, whether or not it was necessary for such party to institute suit.
23. Governing Law. This Employment Agreement shall be governed by and
construed in accordance with the laws of the State of Massachusetts. Any claim
arising hereunder shall be heard in a court of competent jurisdiction in the
State of Massachusetts.
24. Entire Agreement: Amendments. This Employment Agreement is intended to
be a complete and exclusive statement of the terms of the agreements between the
parties, superseding all prior agreements, and may not be changed or terminated
orally. Subject to applicable law, this Employment Agreement may be amended only
by a writing executed by all parties hereto. Waiver of any part of this
Employment Agreement shall not constitute a waiver of any other part of this
Employment Agreement and shall not operate as any future waiver of the same
part.
25. Counterparts. This Employment Agreement may be executed in any number
of counterparts, all of which, taken together, shall constitute one agreement.
IN WITNESS WHEREOF, the undersigned have executed this Employment Agreement
as of the day and year first set forth above.
21
<PAGE>
COMPANY:
SAZTEC INTERNATIONAL, INC.,
a California Corporation
By- /s/ Robert P. Dunne
-----------------------
Robert P. Dunne, Chairman
PARKER:
/s/ Christopher Parker
-----------------------
Christopher Parker
22
EXHIBIT 10.16
UMB
BANK
March 27, 1998
Mr. Gary Abernathy, President
Saztec International, Inc.
43 Manning Road
Billerica, Massachusetts 01821
Dear Mr. Abernathy:
The Discount Committee of UMB Bank, n.a. has reviewed the Authority to
Loan (the "Authority to Loan") for Saztec International, Inc. and all
of its subsidiaries ("Saztec") 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 $210,000. Furthermore, the Authority to Loan
will decrease $10,000 on the first of each month beginning May 1,
1998.
Any remaining outstanding balance is payable in full on October 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 October 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.
PO. Box 419226.
Kansas City, Missouri
64141-6226
(816)860-7000
Internet:
http://www.umb.com
23
<PAGE>
UMB
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.
24
<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 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.
25
<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 N. ABERNATHY
---------------------
Gary N. Abernathy, President
Dated: 4/1/98
ADVANCED AUTOMATION ASSOCIATES, INC.
By: /S/ GARY N. ABERNATHY
---------------------
Gary N. Abernathy, President
Dated: 4/1/98
26
<PAGE>
BORROWER UMB 2020300 (R 6191) All States
SAZTEC INTERNATIONAL, INC., ADVANCED UMB
AUTOMATION ASSOCIATES, INC. MASTER.
43 MANNING RD NOTE
BILLERICA, MA 01821 **See attached addendum
<TABLE>
<CAPTION>
OFFICER INTEREST PRINCIPAL FUNDING MATURITY CUSTOMER LOAN NUMBER
INITIALS RATE AMOUNT/CREDIT LIMIT DATE DATE NUMBER
<S> <C> <C> <C> <C> <C> <C>
TJB 12.500% $210,000.00 04/01/98 10/01/98 3904321 82658
RENEWAL #82658
</TABLE>
FOR VALUE RECEIVED, the undersigned Borrower (the "Undersigned" means each maker
and each endorser, and if more than one, each shall be jointly and severally
liable hereunder) promises to pay to the order of Lender, at the offices set
forth above or at such other place as the holder hereof may from time to time
designate In writing, ON DEMAND, but If no Demand, on OCTOBER 1, 1998 the
principal amount of TWO HUNDRED TEN THOUSAND AND N01100 DOLLARS ($ 210,000.00),
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 NOI 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, 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. It 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
Interest Rate (adjusted, if applicable, as provided abov6) 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.
27
<PAGE>
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.
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 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 mortgages) or deed(s) of
trust, such mortgages) 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 _____________ 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 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 of 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 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
28
<PAGE>
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 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 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 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 more than TEN AND
N0/1000 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.
29
<PAGE>
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 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, 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 of counterclaim of any kind claimed by any person liable under this
Note shall stand as a defense to the enforcement 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. Borrower: Advanced Automation
Associates, Inc.
By: /s/ GARY N. ABERNATHY By: /s/ GARY N. ABERNATHY
--------------------- ---------------------
Title: President Title: President
Address: 43 MANNING RD.
BILLERICA, MA 01821
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 May 1, 1998 until maturity at October 1, 1998.
30
<PAGE>
UMB Bank, n.a. Saztec International, Inc.
By /s/ TRAVIS J. BURNS /s/ GARY ABERNATHY
------------------------ ------------------
Travis J. Burns, Gary Abernathy,
Assistant Vice President President
Advanced Automation Associates, Inc.
By /s/ GARY N. ABERNATHY
-------------------------
Gary N. Abernathy, President
31
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 550,734
<SECURITIES> 0
<RECEIVABLES> 2,037,421
<ALLOWANCES> 57,223
<INVENTORY> 249,283
<CURRENT-ASSETS> 2,964,067
<PP&E> 2,533,367
<DEPRECIATION> 3,099,522
<TOTAL-ASSETS> 3,669,477
<CURRENT-LIABILITIES> 2,446,507
<BONDS> 36,508
0
0
<COMMON> 12,430,811
<OTHER-SE> (96,024)
<TOTAL-LIABILITY-AND-EQUITY> 3,669,477
<SALES> 0
<TOTAL-REVENUES> 5,850,130
<CGS> 0
<TOTAL-COSTS> 4,616,629
<OTHER-EXPENSES> 1,483,552
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,541
<INCOME-PRETAX> (283,592)
<INCOME-TAX> 14,368
<INCOME-CONTINUING> (299,960)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (299,960)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
