SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended: September 30, 1998 Commission File Number: O-14741
------------------ -------
ASA International Ltd.
-----------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 02-0398205
- - -------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10 Speen Street, Framingham, MA 01701
- - ---------------------------------------- -----------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 508-626-2727
------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes: X No: ____
As of September 30, 1998, there were 3,373,462 shares of Common Stock of
the Registrant outstanding.
PART I
Item 1
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,141,071 $ 1,282,817
Receivables - net 8,154,070 5,926,610
Computer hardware held for resale 91,899 237,642
Other current assets 808,161 651,843
----------- -----------
TOTAL CURRENT ASSETS 12,195,201 8,098,912
PROPERTY AND EQUIPMENT (less
depreciation of $3,979,261 and
$3,617,402, respectively) 4,949,360 4,281,425
SOFTWARE (less amortization of
$7,601,568 and $6,634,296,
respectively) 3,089,183 3,496,798
COST EXCEEDING NET ASSETS ACQUIRED
(less amortization of $1,795,958
and $1,634,320, respectively) 701,207 695,755
OTHER ASSETS 1,252,985 1,252,812
----------- -----------
$22,187,936 $17,825,702
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 1,676,397 $ 2,263,573
Accrued expenses 4,285,739 1,575,813
Other current liabilities 2,678,364 2,276,734
------------ -----------
TOTAL CURRENT LIABILITIES 8,640,500 6,116,120
LONG-TERM OBLIGATIONS, NET OF CURRENT
MATURITIES 3,945,751 2,696,020
LONG-TERM LIABILITIES 283,985 -
DEFERRED TAXES 616,000 616,000
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock 43,768 40,965
Additional paid-in capital 7,793,773 7,394,281
Retained earnings 2,790,470 2,548,013
Cumulative translation adjustments 30,555 -
------------ -----------
10,658,566 9,983,259
Less: treasury stock, at cost 1,956,866 1,585,697
------------ -----------
8,701,700 8,397,562
------------ -----------
$22,187,936 $17,825,702
============ ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
September 30,
----------------------------
1998 1997
----------------------------
(Unaudited)
REVENUE
<S> <C> <C>
Services $ 4,563,399 $ 3,673,790
Product licenses 2,629,730 1,670,837
Computer and add-on hardware 2,270,466 894,520
------------ ------------
NET REVENUE 9,463,595 6,239,147
COST OF REVENUE
Services 3,124,760 2,181,041
Product licenses and development 1,118,454 795,310
Computer and add-on hardware 2,112,638 803,012
------------ ------------
TOTAL COST OF REVENUE 6,355,852 3,779,363
EXPENSES
Marketing and sales 1,708,983 1,186,327
General and administrative 882,197 718,818
Amortization of goodwill 50,130 57,589
------------ ------------
TOTAL EXPENSES 2,641,310 1,962,734
EARNINGS FROM OPERATIONS 466,433 497,050
INTEREST EXPENSE - NET (282,184) ( 78,822)
OTHER EXPENSE - 184,000
------------ ------------
EARNINGS BEFORE INCOME TAXES 184,249 234,228
INCOME TAXES 111,000 94,000
------------ ------------
NET EARNINGS $ 73,249 $ 140,228
============ ============
EARNINGS PER COMMON SHARE:
BASIC $.02 $.04
============ ============
DILUTED $.02 $.04
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended
September 30,
----------------------------
1998 1997
----------------------------
(Unaudited)
REVENUE
<S> <C> <C>
Services $13,231,288 $10,753,844
Product licenses 6,157,002 4,269,711
Computer and add-on hardware 5,241,849 2,897,394
------------ ------------
NET REVENUE 24,630,139 17,920,949
COST OF REVENUE
Services 8,402,914 6,198,880
Product licenses and development 3,330,520 2,343,262
Computer and add-on hardware 4,677,440 2,625,121
------------ ------------
TOTAL COST OF REVENUE 16,410,874 11,167,263
EXPENSES
Marketing and sales 4,344,308 3,290,995
General and administrative 2,683,341 2,174,186
Amortization of goodwill 161,637 172,768
------------ ------------
TOTAL EXPENSES 7,189,286 5,637,949
EARNINGS FROM OPERATIONS 1,029,979 1,115,737
INTEREST EXPENSE - NET (422,522) (276,846)
OTHER EXPENSE - 184,000
------------ ------------
EARNINGS BEFORE INCOME TAXES 607,457 654,891
INCOME TAXES 365,000 262,000
------------ ------------
NET EARNINGS $ 242,457 $ 392,891
============ ============
EARNINGS PER COMMON SHARE:
BASIC $.07 $.12
============ ============
DILUTED $.07 $.11
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<TABLE>
<CAPTION>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1998 1997
----------------------------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
NET EARNINGS $ 242,457 $ 392,891
ADJUSTMENTS TO RECONCILE NET EARNINGS
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
DEPRECIATION AND AMORTIZATION 1,524,041 1,318,638
CHANGES IN ASSETS AND LIABILITIES 37,913 (598,550)
LOSS ON WRITE-DOWN OF INVESTMENT - 184,000
------------ ------------
TOTAL ADJUSTMENTS 1,561,954 904,088
------------ ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 1,804,411 1,296,979
CASH FLOWS FROM INVESTING ACTIVITIES:
ADDITIONS TO PROPERTY AND EQUIPMENT (774,589) (156,121)
ADDITIONS TO SOFTWARE (5,053) (41,766)
REDUCTION IN SALES-TYPE LEASES (12,890) (34,268)
CASH RECEIVED IN ACQUISITION,
NET OF CASH PAID 98,275 -
OTHER ASSETS (8,992) 123,599
------------ ------------
NET CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES (703,249) (108,556)
CASH FLOWS FROM FINANCING ACTIVITIES:
DECREASE IN BANK AND OTHER NOTES - (795,000)
INCREASE (DECREASE) IN LONG-TERM DEBT 953,513 (37,295)
INCREASE IN LONG-TERM LIABILITIES 283,985 -
CASH PAID IN LIEU OF STOCK (140,000) -
PURCHASE OF TREASURY STOCK (371,169) -
ISSUANCE OF COMMON STOCK 206 (3,197)
------------ ------------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES 726,535 (835,492)
------------ ------------
EFFECT OF EXCHANGE RATES ON CASH &
CASH EQUIVALENTS 30,557 -
------------ ------------
CASH AND CASH EQUIVALENTS:
NET INCREASE 1,858,254 352,931
BALANCE, BEGINNING OF YEAR 1,282,817 674,239
------------ ------------
BALANCE, END OF PERIOD $ 3,141,071 $ 1,027,170
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
- - ------------------------------
As permitted by the rules of the Securities and Exchange Commission applicable
to quarterly reports on Form 10-Q, these notes are condensed and do not contain
all disclosures required by generally accepted accounting principles. Reference
should be made to the financial statements and related notes included in the
Company's Annual Report on Form 10-K.
In the opinion of management, the accompanying financial statements reflect all
adjustments which were of a normal recurring nature necessary for a fair
presentation of the Company's results of operations for the three months and
nine months ended September 30, 1998 and September 30, 1997, respectively.
The results disclosed in the Condensed Consolidated Statement of Operations for
the three months and nine months ended September 30, 1998 are not necessarily
indicative of the results expected for the full year.
<PAGE>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2 - Earnings per Share
- - ---------------------------
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
NUMERATOR:
<S> <C> <C> <C> <C>
NET INCOME $ 73,249 $140,228 $ 242,457 $ 392,891
=========== =========== =========== ===========
NUMERATOR FOR DILUTED EARNINGS
PER SHARE - INCOME AVAILABLE
TO COMMON SHAREHOLDERS $ 73,249 $140,228 $ 242,457 $ 392,891
=========== =========== =========== ===========
DENOMINATOR:
DENOMINATOR FOR BASIC EARNINGS
PER SHARE - WEIGHTED AVERAGE
SHARES 3,492,116 3,294,362 3,491,676 3,271,533
EFFECT OF DILUTIVE SECURITIES:
EMPLOYEE STOCK OPTIONS 168,723 96,300 171,206 135,472
CONTINGENTLY ISSUABLE SHARES - 80,146 - 80,146
----------- ----------- ----------- -----------
DILUTIVE POTENTIAL COMMON SHARES
DENOMINATOR FOR DILUTED
EARNINGS PER SHARE -
ADJUSTED WEIGHTED
AVERAGE SHARES AND
ASSUMED CONVERSIONS 3,660,839 3,470,808 3,662,882 3,487,151
=========== =========== =========== ===========
BASIC EARNINGS PER SHARE $.02 $.04 $.07 $.12
=========== =========== =========== ===========
DILUTED EARNINGS PER SHARE $.02 $.04 $.07 $.11
=========== =========== =========== ===========
</TABLE>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 3 - Comprehensive Income
- - -----------------------------
The Company adopted SFAS No. 130, Reporting Comprehensive Income, which requires
that all components of comprehensive income and total comprehensive income be
reported on one of the following: a statement of income and comprehensive
income, a statement of comprehensive income or a statement of stockholders'
equity. Comprehensive income is comprised of net income and all changes to
stockholders' equity, except those due to investments by owners (changes in
paid-in capital) and distributions to owners (dividends). For interim reporting
purposes, SFAS 130 requires disclosure of total comprehensive income.
Total comprehensive income is as follows:
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
Net income $ 73,249 $ 140,228 $242,457 $ 392,891
Foreign currency
translation adjustments 32,258 - 30,555 -
--------- --------- --------- ---------
Comprehensive income $ 105,507 $ 140,228 $273,012 $ 392,891
========= ========= ========= =========
Note 4 - Long-Term Obligations
- - ------------------------------
In September of 1998, the Company refinanced its Corporate Headquarters in
Framingham, Massachusetts. The mortgage loan, totaling $3,000,000 at 7.24% for
10 years with 30 year amortization, provides for monthly principal and interest
payments of $20,445. The financing required the payoff of the principal on a
previous mortgage of $1,169,206 along with a prepayment fee of approximately
$248,000. The prepayment fee has been recorded as interest expense in the
Condensed Statements of Operations for the three and nine month periods ending
September 30, 1998. The proceeds of the loan were used to pay-off the Company's
Term loan with the remainder to be retained for general corporate purposes. Item
2
Management's Discussion and Analysis of Financial Condition
and Results of Operations
-----------------------------------------------------------
In addition to the historical information contained herein, the discussions
contained in this document include forward-looking statements. By way of
example, the discussions include statements regarding revenues, gross margins,
future marketing efforts, potential acquisitions, and Year 2000 implications.
Such statements involve a number of risks and uncertainties, including but not
limited to those discussed below and those identified from time to time in the
Company's filings with the Securities and Exchange Commission. These risks and
uncertainties could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these
forward-looking statements. The Company assumes no obligation to update these
forward-looking statements to reflect events or circumstances arising after the
date hereof.
Results of Operations
Third Quarter of 1998
compared to
Third Quarter of 1997
(000's omitted)
--------------- --------------------
Revenue Increase/(Decrease)
--------------- --------------------
1998 1997 Amount Percentage
---- ---- ------ ----------
Services $ 4,563 $ 3,674 $ 889 24%
Product licenses 2,630 1,671 959 57%
Computer and add-on
hardware 2,271 894 1,377 154%
-------- -------- --------
Net revenue $ 9,464 $ 6,239 $3,225 52%
======== ======== ======== ========
REVENUE
Net revenue. The Company designs and develops proprietary enterprise and
point-solution software for the electronic time and labor recording market, for
catalog direct marketers, and for the automotive, legal, and ERP (enterprise
resource planning) markets. The Company entered the ERP market in January 1998
with the acquisition of substantially all the assets of Cedes S.r.l. and SIPI-U
S.r.l., subsidiaries of the Findest Group of Padova, Italy. The Company's
revenues are derived from the sale of third party computer and add-on hardware,
from the licensing of the Company's software products, and from client service
and support. The Company's total revenues increased by approximately $3,225,000,
or 52%, for the quarter ended September 30, 1998, compared to the quarter ended
September 30, 1997. Revenue from existing businesses increased by approximately
$2,467,000, or 40%, for the period, when approximately $758,000 in revenue from
the Company's ERP systems product line, which was acquired in January 1998, is
excluded.
Services. Services are comprised of fees generated from training,
consulting, software modifications, and ongoing client support provided under
self-renewing maintenance agreements. Service revenues increased by
approximately $889,000, or 24%, for the three months ended September 30, 1998,
compared to the three months ended September 30, 1997. Service revenue from
existing businesses increased by approximately $281,000, or 8%, for the period,
when compared to the third quarter of 1997, and the service revenue from the ERP
systems product line of approximately $608,000 for the 1998 period is excluded.
Product licenses. The Company's software license revenues are derived
primarily from the licensing of the Company's enterprise and point-solution
products. Product license revenues increased by approximately $959,000, or 57%,
for the third quarter of 1998, compared to the same period in 1997. Product
license revenue from existing businesses increased by approximately $834,00, or
50%, for the period, when compared to the third quarter of 1997, and the product
license revenue from the ERP systems product line of approximately $125,000 for
the 1998 period is excluded. The increase in dollar amount was primarily due to
increased market acceptance of the Company's software products, and the
increased capacity created by growth in the Company's direct sales force and
marketing efforts.
Computer and add-on hardware. Hardware revenues are derived from the resale
of third-party hardware products to the Company's clients in conjunction with
the licensing of the Company's software. Hardware revenues increased by
approximately $1,377,000, or 154%, for the three months ended September 30,
1998, compared to the same period in 1997. Hardware revenue from existing
businesses increased by approximately $1,352,000, or 151%, when compared to the
third quarter of 1997 and the hardware revenue from the ERP systems product line
of approximately $25,000 for the 1998 period is excluded. The increase in
hardware revenues from existing businesses was due primarily to the increase of
hardware unit sales accompanying increased product license sales.
<PAGE>
Item 2
- continued -
COST OF REVENUE
Services. Cost of services consists of the costs incurred in providing
client training, consulting, and ongoing support as well as other client
service-related expenses. Cost of services increased by approximately $944,000
for the three months ended September 30, 1998, compared to the third quarter of
1997. The gross margin percentage for services for the third quarter of 1998
decreased to approximately 32% from 41% of revenue from services in the third
quarter of 1997. The Company's revenue and margin from services fluctuate from
period to period due to changes in the mix of contracts and projects.
Product licenses and development. Cost of software license revenues
consists of the costs of amortization of capitalized software costs, and the
costs of sublicensing third-party software products. The amount also includes
the expenses associated with the development of new products and the enhancement
of existing products (net of capitalized software costs), which consist
primarily of employee salaries, benefits, and associated overhead costs. Cost of
software license revenues and development increased by approximately $323,000
for the quarter ended September 30, 1998, compared to the same period in 1997.
The change primarily reflects the costs associated with license revenue
increases from the electronic time recording, tire, and legal systems product
lines. The cost of product licenses as a percentage of product license revenue
may fluctuate from period to period due to the mix of sales of third-party
software products in each period contrasted with certain fixed expenses such as
the amortization of capitalized software.
Computer and add-on hardware. Cost of hardware revenues consists primarily
of the costs of third-party hardware products. Cost of hardware revenues
increased by approximately $1,310,000, or 163%, for the three months ended
September 30, 1998, compared to the prior period. The increase in dollar amount
for the cost of hardware revenues for the three months ended September 30, 1998
was due primarily to increased unit sales of hardware products accompanying
increased product license sales and a decrease in gross margin on hardware
product sales as highlighted below.
The gross margin percentage for hardware sales decreased to 7% for the
three months ended September 30, 1998, from 10%, in the same period in 1997.
Margins on computer and add-on hardware do fluctuate based on the mix of
computer and ancillary hardware products sold. Accordingly, the Company expects
hardware gross margins to fluctuate in the future. The Company continues to
direct its efforts toward building service and license revenues to offset the
historical decline in hardware revenue and margins.
<PAGE>
Item 2
- continued -
EXPENSES
Marketing and sales. Marketing and sales expenses consist primarily of
employee salaries, benefits, commissions and associated overhead costs, and the
cost of marketing programs such as direct mailings, trade shows, seminars, and
related communication costs. Marketing and sales expenses increased by $523,000,
or 44%, for the quarter ended September 30, 1998, compared to the third quarter
in 1997. The change in marketing and sales expenses primarily reflects increases
in sales staffing, the higher sales commissions associated with increased
revenues, and the additional expenses related to the newly acquired ERP systems
product line.
General and administrative. General and administrative expenses consist
primarily of employee salaries and benefits for administrative, executive, and
finance personnel and associated overhead costs, as well as consulting,
accounting, and legal expenses. General and administrative expenses increased by
approximately $163,000, or 23%, for the three months ended September 30, 1998,
compared to the same period in 1997. The change primarily reflects additional
expenses related to the ERP and Tire systems product lines.
Net earnings for the third quarter of 1998 were approximately $73,000, as
compared to net earnings of approximately $140,000 for the third quarter of
1997. The change resulted from a decrease in earnings from operations of
approximately $31,000, and increases in income tax expense of $17,000, and an
increase in net interest expense of approximately $203,000, partially offset by
a decrease in other expense of $184,000. Interest expense for the current
quarter includes a one-time charge of approximately $248,000 related to the
early payoff of a mortgage on Company-owned real estate, which was refinanced.
<PAGE>
Item 2
- continued -
Nine Months Ended September 30, 1998
compared to
Nine Months Ended September 30, 1997
(000's omitted)
--------------- --------------------
Revenue Increase/(Decrease)
--------------- --------------------
1998 1997 Amount Percentage
---- ---- ------ ----------
Services $13,231 $10,754 $ 2,477 23%
Product licenses 6,157 4,270 1,887 44%
Computer and add-on
hardware 5,242 2,897 2,345 81%
-------- -------- --------
Net revenue $24,630 $17,921 $ 6,709 37%
======== ======== ======== ========
REVENUE
Net revenue. The Company's total revenues increased by approximately
$6,709,000, or 37%, for the period when compared to the first nine months of
1997. Revenue from existing businesses increased by approximately $4,171,000, or
23% for the period, when approximately $2,538,000 in revenue from the Company's
ERP systems product line, which was acquired in January 1998, is excluded.
Services. Service revenues increased by approximately $2,477,000, or 23%,
for the nine months ended September 30, 1998, compared to the nine months ended
September 30, 1997. Service revenue from existing businesses increased by
approximately $521,000, or 5%, for the period, when compared to the first nine
months of 1997, and the service revenue from the ERP systems product line of
approximately $1,956,000 for the 1998 period is excluded. The change was due to
increases in software license revenues which were accompanied by client
requirements for training and consulting services, and to the increase in
support revenues as a result of a larger installed client base.
Product licenses. Software license revenues increased by approximately
$1,887,000, or 44%, for the first nine months of 1998, compared to the same
period in 1997. Product license revenue from existing businesses increased by
approximately $1,440,000, or 34%, for the period, when compared to the first
nine months of 1997, and the product license revenue from the ERP systems
product line of approximately $447,000 for the 1998 period is excluded. The
increase in dollar amount was primarily due to increased market acceptance of
the Company's software products, and the increased capacity created by growth in
the Company's direct sales force and marketing efforts.
Computer and add-on hardware. Hardware revenues increased by approximately
$2,345,000, or 81%, for the nine months ended September 30, 1998, compared to
the same period in 1997. Hardware revenue from existing businesses increased by
approximately $2,210,000, or 76% for the period, when approximately $135,000 in
hardware revenue from the Company's newly acquired ERP systems product line is
excluded. The increase in hardware revenues from existing businesses was due
primarily to the increase of hardware unit sales accompanying increased product
license sales.
COST OF REVENUE
Services. Cost of services increased by approximately $2,204,000 for the
nine months ended September 30, 1998, compared to the first nine months of 1997.
The increase reflects the addition of the cost of services related to the ERP
systems product line which was acquired in January 1998, along with increases in
cost of services for the tire, legal, and direct marketing product lines. The
gross margin percentage for services for the nine months ended September 30,
1998 decreased to approximately 36% from 42% of revenue from services in the
first nine months of 1997. The Company's revenue and margin from services
fluctuate from period to period due to changes in the mix of contracts and
projects.
Product licenses and development. Cost of software license revenues and
development increased by approximately $987,000 for the nine months ended
September 30, 1998, compared to the same period in 1997. The change primarily
reflects the costs associated with license revenue increases from the electronic
time recording, tire, and legal systems product lines. The cost of product
licenses as a percentage of product license revenue may fluctuate from period to
period due to the mix of sales of third-party software products in each period
contrasted with certain fixed expenses such as the amortization of capitalized
software.
Computer and add-on hardware. Cost of hardware revenues increased by
approximately $2,052,000, or 78%, for the nine months ended September 30, 1998,
compared to the prior period. The cost of hardware revenue from existing
businesses increased by approximately $1,945,000, or 74%, when approximately
$107,000 in cost of hardware from the Company's newly acquired ERP systems
product line is excluded from the results of the first nine months of 1998. The
increase in dollar amount for the cost of hardware revenues for the nine months
ended September 30, 1998 was due primarily to increased unit sales of hardware
products accompanying increased product license sales and a decrease in gross
margin on hardware product sales as highlighted below.
The gross margin percentage for hardware sales increased to approximately
11% from 9% for the nine months ended September 30, 1998, compared to the same
period in 1997. Margins on computer and add-on hardware can fluctuate based on
the mix of computer and ancillary hardware products sold. Accordingly, the
Company expects hardware gross margins to continue to fluctuate in the future.
The Company continues to direct its efforts toward building service and license
revenues to offset the historical decline in hardware revenue and margins.
EXPENSES
Marketing and sales. Marketing and sales expenses increased by $1,053,000,
or 32%, for the nine months ended September 30, 1998, compared to the first nine
months in 1997. The change in marketing and sales expenses primarily reflects
increases in sales staffing, the higher sales commissions associated with
increased revenues, and the additional expenses related to the newly acquired
ERP systems product line.
General and administrative. General and administrative expenses increased
by approximately $509,000, or 23%, for the nine months ended September 30, 1998,
compared to the same period in 1997. The change primarily reflects the
additional expenses related to the ERP and Tire systems product lines.
Net earnings for the nine months ended September 30, 1998 were
approximately $242,000, as compared to net earnings of approximately $393,000
for the first nine months of 1997. The change resulted from a decrease in
earnings from operations of approximately $86,000, an increase in income tax
expense of $103,000, and an increase in net interest expense of approximately
$146,000, partially offset by a decrease in other expense of $184,000. Interest
expense for the nine months ended September 30, 1998 includes a one-time charge
of $248,000 related to the early payoff of a mortgage on Company-owned real
estate, which was refinanced.
<PAGE>
Liquidity and Capital Resources
The Company had total cash and cash equivalents at September 30, 1998 of
approximately $3,141,000, an increase of approximately $1,858,000 from December
31, 1997. The Company and its subsidiaries had a maximum line of credit totaling
$1,500,000, all of which was available at September 30, 1998.
In September of 1998, the Company refinanced its Corporate Headquarters in
Framingham, Massachusetts. The mortgage loan, totaling $3,000,000 at 7.24% for
10 years with 30 year amortization, provides for monthly principal and interest
payments of $20,445. The financing required the payoff of the principal on a
previous mortgage of $1,169,206 along with a prepayment fee on the existing
mortgage of approximately $248,000. The proceeds of the loan were used to
pay-off the Company's Term loan with the remainder to be retained for general
corporate purposes.
The Company expects to continue to pursue strategic acquisitions. These
acquisitions have been, and are expected to continue to be, financed in a number
of ways. Management believes, subject to the conditions of the financial
markets, that it should be able to continue its program of acquisitions.
The Company has experienced significant fluctuations in its quarterly operating
results and anticipates such fluctuations in the future. Quarterly revenues and
operating results depend on the volume and timing of orders received during the
quarter which are difficult to forecast. Large orders for the Company's products
often have a lengthy sales cycle while the customer evaluates and receives
approvals for the purchase of the products. It may be difficult to accurately
predict the sales cycle of any large order. If one or more large orders fail to
close as forecasted in a fiscal quarter, the Company's revenues and operating
results could be materially adversely affected. In addition, the Company
typically receives a substantial portion of its product orders in the last month
of the quarter. Orders are shipped as received and, as a result, the Company
often has little or no backlog except for support and service revenue. The
Company acknowledges the potential adverse impact that such fluctuations and
general economic uncertainty could have on its ability to maintain liquidity and
raise additional capital.
The Company's future financial performance is also dependent in large part on
the successful development, introduction, and customer acceptance of new and
enhanced versions of its software products. Due to the rapid change in vendor
hardware platforms, operating systems, and updated versions, the complexity and
expense of developing, testing, and maintaining the Company's products has
increased. The Company intends, as it has in the past, to fund this development
primarily from its cash from operations and bank debt. There can be no assurance
that these efforts will be successful or result in significant product
enhancements.
<PAGE>
Liquidity and Capital Resources
- continued -
Subject to the foregoing, the Company believes that based on the level of
operating revenue, cash on hand, and available bank debt, it has sufficient
capital to finance its ongoing business.
Year 2000 Implications
The Company has continued to evaluate the potential impact of the Year 2000
issue, which concerns the inability of some computer hardware and software
programs to properly recognize and process date sensitive information related to
the 21st century. Certain of the Company's internal use software and existing
products are currently Year 2000 compliant, while others have required
modification so that the software will function properly with respect to dates
in the Year 2000 and thereafter. In addition, the Company has been, and is
currently providing customers upgrade alternatives to Year 2000 compliant
versions of the Company's products. The total cost of compliance measures is
not estimated to be material and is being funded through operating cash flows
and expensed as incurred. The Company presently believes that due to its use of
currently Year 2000 compliant systems along with the modification of
non-compliant software and products, the Year 2000 issue will not pose
significant operational problems for the Company or its customers. Although the
Company believes its systems and software are or will be Year 2000 compliant in
all material respects, there can be no assurance that the Company's current
systems and products do not contain undetected errors or defects with Year 2000
date functions that may result in material costs to the Company.
The Company has also contacted certain of its significant vendors to determine
the extent to which the Company's products are vulnerable to those third
parties' failure to correct their own Year 2000 issues. Generally, computer
systems and software provided by third parties and included in the Company's
systems are developed by leading suppliers with Year 2000 programs in process.
There can be no guarantee that the systems and software of other companies on
which the Company's systems rely, will be timely or properly converted. Failure
of these third party products to operate properly with regard to the Year 2000
and thereafter could require the Company to incur unanticipated expenses to
remedy any problems, which could have a material adverse effect on the Company's
business, results of operations, and financial condition.
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits -
The following exhibits are filed with this report:
10.1 Commercial Lease dated as of September 15, 1998,
between 10 Speen Street, LLC as Lessor, and ASA
International Ltd., as Lessee, for the property
located at 10 Speen Street, Framingham, MA.
10.2 Indemnification Agreement made as of September 21,
1998, by 10 Speen Street, LLC and ASA International
Ltd., as Indemnitors, for the benefit of John
Hancock Real Estate Finance, Inc., as Mortgagee.
10.3 Guaranty Agreement effective as of September 21,
1998 by ASA International Ltd., as Guarantor, in
favor of John Hancock Real Estate Finance, Inc.
27 Financial Data Schedule.
(b) Reports on Form 8-K -
The Registrant filed a report on Form 8-K on August 7,
1998, in which the Registrant announced that its Board of
Directors had authorized a share repurchase program,
pursuant to which the Registrant may purchase up to
$500,000 of its common stock in the open market.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ASA International Ltd.
------------------------------
(Registrant)
11/16/98 /s/ Alfred C. Angelone
- - ------------ ------------------------------
(Date) (Signature)
Alfred C. Angelone
Chief Executive Officer
11/16/98 /s/ Terrence C. McCarthy
- - ------------ ------------------------------
(Date) (Signature)
Terrence C. McCarthy
Vice President and Treasurer
EXHIBIT 10.1
COMMERCIAL LEASE
1. PARTIES 10 Speen Street, LLC., a Delaware limited
liability company, LESSOR, which expression shall
include its heirs, successors, and assigns where
the context so admits, does hereby lease to ASA
International Ltd., LESSEE, which expression shall
include successors, executors, administrators, and
assigns where the context so admits, the following
described premises:
2. PREMISES the entire building, containing approximately
32,673 square feet of leasable space known and
numbered as 10 Speen Street, Framingham,
Massachusetts ("the Property").
3. TERM The term of this Lease shall be for fifteen (15)
years commencing on September 15, 1998 and ending
on September 30, 2013.
4. RENT LESSEE's monthly rent payments during the term of
this Lease shall be $37,626.17, based on an annual
rent of $451,514.00, payable in advance on the
first day of each and every calendar month during
the term of this lease without deduction or setoff
of any kind unless set forth herein.
5. UTILITIES The LESSOR shall make provision for the delivery
of utilities to the Property and LESSEE shall pay
for all LESSEE's utilities and water use charges.
LESSOR agrees to furnish reasonable heat to the
Property during normal business hours on regular
business days of the heating season of each year,
to furnish elevator service, and to furnish such
cleaning service as is customary in similar
buildings in said city or town, all subject to
interruption due to any accident, to the making of
repairs, alterations or improvements, to labor
difficulties, to trouble in obtaining fuel,
electricity, service or supplies from the sources
from which they are usually obtained for said
building, or to any cause beyond the LESSOR's
control.
6. USE OF The LESSEE shall use the leased premises only for
LEASED office purposes.
PREMISES
7. COMPLIANCE The LESSEE acknowledges that no trade or
WITH LAWS occupation shall be conducted in the leased
premises or use made thereof which will be
unlawful, improper, noisy or offensive, or
contrary to any law or any municipal by-law or
ordinance in force in the city or town in which
the premises are situated.
8. FIRE The LESSEE shall not permit any use of the leased
INSURANCE premises which will make voidable any insurance on
the property of which the leased premises are a
part, or on the contents of said property or which
shall be contrary to any law or regulation from
time to time established by the New England Fire
Insurance Rating Association, or any similar body
succeeding to its powers. The LESSEE shall on
demand reimburse the LESSOR, and all other
tenants, all extra insurance premiums caused by
the LESSEE's use of the premises.
9. MAINTENANCE The LESSEE agrees to maintain the leased premises
OF PREMISES in the same condition as they are at the
commencement of the term or as they may be put in
during the term of this lease, reasonable wear and
tear, damage by fire and other casualty only
excepted, and whenever necessary, to replace plate
glass and other glass therein, acknowledging that
the leased premises are now in good order and the
glass whole. The LESSEE shall not permit the
leased premises to be overloaded, damaged,
stripped, or defaced, nor suffer any waste. LESSEE
shall obtain consent of LESSOR before erecting any
sign on the premises.
10. ALTERATIONS/ The LESSEE shall not make structural alterations
ADDITIONS or additions to the leased premises, but may make
non-structural alterations provided the LESSOR
Consents thereto, which consent shall not be
unreasonable withheld or delayed. All such allowed
alterations shall be at LESSEE's expense and shall
be in quality at least equal to the present
construction. LESSEE shall not permit any
mechanics' liens, or similar liens, to remain upon
the leased premises for labor and material
furnished to LESSEE or claimed to have been
furnished to LESSEE in connection with work of any
character performed or claimed to have been
performed at the direction of LESSEE and shall
cause any such lien to be released of record
forthwith without cost to LESSOR. Any alterations
or improvements made by the LESSEE shall become
the property of the LESSOR at the termination of
occupancy as provided herein.
11. ASSIGNMENT/ The LESSEE may assign or sublet the whole or any
SUBLEASING part of the leased premises without LESSOR's prior
consent. LESSEE shall remain liable to LESSOR for
the payment of all rent and for the full
performance of the covenants and conditions of
this Lease. It shall be a condition to any such,
assignment or subletting, that the assignee or
subtenant shall agree to be bound by all the
obligations of the LESSEE hereunder, including,
without limitation, the obligation to pay rent.
Any such assignment or subletting shall not grant
to the assignee or subtenant any greater right
than those granted to the LESSEE hereunder.
12. SUBORDINATION This lease shall be subject and subordinate to any
and all mortgages, deeds of trust and other
instruments in the nature of a mortgage, now or at
any time hereafter, a lien or liens on the
property of which the leased premises are a part
and the LESSEE shall, when requested, promptly
execute and deliver such written instruments as
shall be necessary to show the subordination of
the lease to said mortgages, deeds of trust or
other such instruments in the nature of a
mortgage.
In the event of the enforcement by the mortgagee
of the LESSOR's mortgage, the LESSEE shall, upon
request of any person succeeding in the interest
to LESSOR as a result of such enforcement,
automatically become the LESSEE of said successor
in interest, without change in the terms or other
provisions of this lease, provided, however, that
said successor in interest shall not be bound by
(i) any payment of rent or additional rent for
more than one (1) month in advance, or (ii) any
amendment or modification of the lease without the
written consent of Mortgagee or such successor in
interest, or (iii) any pre-existing LESSOR
liability or obligation. LESSEE shall, upon
mortgagee's written request, execute and deliver
an instrument or instruments confirming such
attornment; provided, however, that so long as
LESSEE is not in default under the terms and
provisions of the Lease, Mortgagee covenants to
the LESSEE not to disturb the LESSEE in its
possession of the Property.
13. LESSOR'S ACCESS The LESSOR or agents of the LESSOR may, at
reasonable times, enter to view the leased
premises and may remove placards and signs not
approved and affixed as herein provided, and make
repairs and alterations as LESSOR should elect to
do and may show the leased premises to others, and
at an time within three (3) months before the
expiration of the term, may affix to any suitable
part of the leased premises a notice for letting
or selling the leased premises or property of
which the leased premises are a part and keep the
same so affixed without hindrance or molestation.
14. INDEMNIFICATION The LESSEE shall save the LESSOR harmless from all
AND LIABILITY loss and damage occasioned by the use or escape of
water or by the bursting of pipes, or any
interruption in the provision of utility services,
as well as from any claim or damage resulting from
neglect in not removing snow and ice from the roof
of the building or from the sidewalks bordering
upon the premises so leased, or by any nuisance
made or suffered on the leased premises, unless
such loss is caused by the neglect of the LESSOR.
The removal of snow and ice from the sidewalks
bordering upon the leased premises shall be
LESSOR's responsibility.
15. LESSEE'S The LESSEE shall maintain with respect to the
LIABILITY leased premises and the property of which the
INSURANCE leased premises are a part, comprehensive public
liability insurance and property insurance in a
commercially reasonable amount agreed to by the
LESSOR and the LESSEE with responsible companies
qualified to do business in Massachusetts and in
good standing therein insuring the LESSOR as well
as the LESSEE against injury persons or damage to
property as provided. LESSEE shall furnish to
LESSOR, upon request, a certificate of such
insurance policy, naming LESSOR and LESSOR's
lender as additional insureds and loss payee.
16. FIRE, CASUALTY- Should a substantial portion of the leased
EMINENT DOMAIN premises, or of the property of which they are a
part, be substantially damaged by fire or other
casualty, or be taken by eminent domain, the
LESSOR may elect to terminate this lease. When
such fire, casualty, or taking renders the leased
premises substantially unsuitable for their
intended use, a just and proportionate abatement
of rent shall be made, and the LESSEE may elect to
terminate this lease if:
(a) The LESSOR fails to give written notice
within forty-five (45) days of its
intention to restore leased premises, or
(b) The LESSOR fails to restore the leased
premises to a condition substantially
suitable for their intended use within one
hundred and twenty (120) days of said
fire, casualty, or taking.
The LESSOR reserves, and the LESSEE grants to the
LESSOR, all rights which the LESSEE may have for
damages or injury to the leased premises for any
taking by eminent domain, except for damage to the
LESSEE's fixtures, property, or equipment.
17. DEFAULT AND In the event that:
BANKRUPTCY
(a) The LESSEE shall default in the payment of
any installment of rent or other sum
herein specified and such default shall
continue for ten (10) days after written
notice thereof; or
(b) The LESSEE shall default in the observance
or performance of any other of the
LESSEE's covenants, agreements, or
obligations hereunder and such default
shall not be corrected within thirty (30)
days after written notice thereof; or
(c) The LESSEE shall be declared bankrupt or
insolvent according to law, or if any
assignment shall be made of LESSEE's
property for the benefit of creditors,
then the LESSOR shall have the right thereafter,
while such default continues, to re-enter and take
complete possession of the leased premises, to
declare the term of this lease ended, and remove
the LESSEE's effects, without prejudice to any
remedies which might be otherwise used for arrears
of rent or other default. The LESSEE shall
indemnify the LESSOR against all loss of rent and
other payments which the LESSOR may incur by
reason of such termination during the residue of
the term. If the LESSEE shall default, after
reasonable notice thereof, in the observance or
performance of any conditions of covenants on
LESSEE's part to be observed or performed under or
by virtue of any of the provision in any article
of this lease, the LESSOR, without being under any
obligation to do so and without thereby waiving
such default, may remedy such default for the
account and at the expense of the LESSEE. If the
LESSOR makes any expenditures or incurs any
obligations for the payment of money in connection
therewith, including but not limited to,
reasonable attorney's fees in instituting,
prosecuting or defending any action or proceeding,
such sums paid or obligations insured, with
interest at the rate of six (6) percent per annum
and costs, shall be paid to the LESSOR by the
LESSEE as additional rent.
18. NOTICE Any notice from the LESSOR to the LESSEE relating
to the leased premises or to the occupancy
thereof, shall be deemed duly served if mailed to
the leased premises, registered or certified mail,
return receipt requested, postage prepaid,
addressed to the LESSEE. Any notice from the
LESSEE to the LESSOR relating to the leased
premises or to the occupancy thereof, shall be
deemed duly served, if mailed to the LESSOR by
registered or certified mail, return receipt
requested, postage prepaid, addressed to the
LESSOR at such address as the LESSOR may from time
to time advise in writing. All rent and notices
shall be paid and sent to the LESSOR at ASA
PROPERTIES, INC., 10 Speen Street, Framingham,
Massachusetts 01701.
19. SURRENDER The LESSEE shall at the expiration or other
termination of this lease remove all LESSEE's
goods and effects from the leased premises,
(including, without hereby limiting the generality
of the foregoing, all signs and lettering affixed
or painted by the LESSEE, either inside or outside
the leased premises). LESSEE shall deliver to the
LESSOR the leased premises and all keys, locks
thereto, and other fixtures connected therewith
and all alterations and additions made to or upon
the leased premises, in the same condition as they
were at the commencement of the term, or as they
were put in during the term hereof, reasonable
wear and tear and damage by fire or other casualty
only excepted. In the event of the LESSEE's
failure to remove any of LESSEE's property from
the premises, LESSOR is hereby authorized, without
liability to LESSEE for loss or damage thereto,
and at the sole risk of LESSEE, to remove and
store any of the property at LESSEE's expense, or
to retain same under LESSOR's control or to sell
at public or private sale, without notice any or
all of the property not so removed and to apply
the net proceeds of such sale to the payment of
any sum due hereunder, or to destroy such
property.
20. QUIET LESSOR agrees that upon LESSEE's paying the rent
ENJOYMENT and performing and observing the agreements,
conditions and other provisions on its part to be
performed and observed, LESSEE shall and may
peaceably and quietly have, hold and enjoy the
premises during the Lease Term without any manner
of hindrance or molestation from LESSOR or anyone
claiming under LESSOR, subject, however, to the
terms of the Lease.
21. LIMITATION After the commencement date, no owner of the
OF LESSOR'S premises shall be liable under this Lease except
LIABILITY for breaches of Landlord's obligations occurring
while owner of the premises. Including any injury
or property damage to LESSEE, it's employees or
guests which occur as a result of the negligence
of LESSOR, it's agents, or employees.
22. LESSOR'S DEFAULT LESSOR shall not be deemed to be in default in the
performance of any of its obligations hereunder
unless it shall fail to perform such obligations
and such failure shall fail to perform such
obligations and such failure shall continue for a
period of thirty days or such additional time as
is reasonably required to correct any such default
after written notice has been given by LESSEE to
LESSOR specifying the nature of LESSOR's alleged
default. LESSEE shall have no right to terminate
this Lease for any default by LESSOR hereunder,
but shall have the right to cure the default and
set off the reasonable costs of curing said
default against rental payments arising after the
completion of the curing of the default provided
that LESSEE has sent LESSOR written notice of the
default and LESSOR shall not have undertaken to
rectify such default within thirty (30) days after
receipt of written notice thereof, and thereafter
proceeded diligently to remedy such default.
23. TAXES, LESSEE shall pay directly to the taxing authority
ASSESSMENTS AND any and all real estate taxes, including
OTHER CHARGES betterment's and other assessments (whether
ordinary or extraordinary), water rents, sewer and
other charges which shall be imposed, assessed or
levied upon the Property.
24. APPLICABLE This Lease shall be governed by and construed in
LAW AND accordance with the laws of the Commonwealth of
CONSTRUCTION Massachusetts, and, if any provisions of this
Lease shall to any extent be invalid, the
remainder of the Lease shall not be affected
thereby. There are no oral or written agreements
between LESSOR and LESSEE affecting this Lease.
This Lease may be amended, and the provisions
hereof may be waived or modified, only by
instruments in writing executed by LESSOR and
LESSEE. If there shall be more than one LESSEE,
the obligations imposed by this Lease upon LESSEE
shall be joint and several.
25. RENEWAL LESSOR grants LESSEE an option to extend this
Lease for an additional five (5) years, provided
the LESSEE gives the LESSOR six (6) months' notice
of its exercise of this option, prior to the
expiration of the original fifteen-year term. The
renewal term will be at the-then- prevailing
rental rate for this building.
26. Notwithstanding anything contained herein to the contrary, this Lease is
contingent upon LESSOR closing on the acquisition and financing of the
Property. This Lease shall be null and void in the event LESSOR does not
close on the acquisition and financing of the Property and the Lease dated
September 28, 1993, by and between ASA Properties, Inc., as LESSOR, and ASA
International Ltd., as LESSEE, shall remain in full force and effect.
NOTE: All additional pages should be initialed by LESSOR and LESSEE.
IN WITNESS WHEREOF, the LESSOR and LESSEE have hereunto set their hands and
common seals this fifteenth day of September, 1998.
/s/ Terrence C. McCarthy
Vice President & Treasurer
ASA Properties, Inc.
Managing Member
LESSOR: 10 SPEEN STREET LLC
/s/ Terrence C. McCarthy
Vice President & Treasurer
LESSEE: ASA INTERNATIONAL LTD.
EXHIBIT 10.2
Loan No. 3212462
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT made as of September 21, 1998, by 10
SPEEN STREET, LLC, with a principal place of business at 10 Speen Street,
Framingham, Massachusetts 01701 and ASA INTERNATIONAL, LTD., with a mailing
address at 10 Speen Street, Framingham, Massachusetts 01701, (hereinafter,
together, "INDEMNITOR"), to and for the benefit of JOHN HANCOCK REAL ESTATE
FINANCE, INC., a Delaware corporation, having its principal place of business at
John Hancock Place, T-53, 200 Clarendon Street, Boston, Massachusetts 02116
("MORTGAGEE"),
W I T N E S S E T H:
WHEREAS, 10 Speen Street, LLC has applied to Mortgagee for a real
estate mortgage loan in the amount of THREE MILLION AND 00/100 DOLLARS
($3,000,000.00) (the "LOAN"), to be evidenced by its note (the "NOTE") in that
amount of even date herewith, secured by a real estate mortgage (the "MORTGAGE")
on property now known as ASA Building and located at 10 Speen Street,
Framingham, Middlesex County, Massachusetts (the "MORTGAGED PROPERTY"), bearing
the same date as the Note; and
WHEREAS, Mortgagee is unwilling to make said Loan unless Indemnitor
agrees to indemnify and hold Mortgagee harmless from and against certain
matters;
WHEREAS, Indemnitor desires to give such indemnification to Mortgagee
in order to induce Mortgagee to make the Loan; and
WHEREAS, Indemnitor has full authority and power to execute and
deliver this Indemnification Agreement and to assume liability hereunder;
NOW, THEREFORE, for the purpose of inducing Mortgagee to make the Loan
to Indemnitor, which Indemnitor acknowledges is good, valuable, and sufficient
consideration:
1. INDEMNITIES.
(a) Notwithstanding any provisions in the Note or Mortgage
or any other instrument evidencing, securing, guaranteeing or executed
in connection with the Loan (collectively the "LOAN DOCUMENTS")
limiting or negating Indemnitor's personal liability, Indemnitor
agrees to unconditionally and absolutely indemnify and hold Mortgagee
(as defined in Section 12 hereof), its officers, directors, employees,
agents and attorneys harmless from and against any loss, cost,
liability, damage, claim or expense, including attorneys' fees,
suffered or incurred by Mortgagee in connection with the Mortgaged
Property at any time, whether before, during or after enforcement of
Mortgagee's rights and remedies upon default under the Loan Documents,
under or on account of, or as a result of (i) any Environmental Laws,
as that term is defined in Section 13 hereof, (ii) any presence,
release, or threat of release of Hazardous Materials, as defined in
Section 13 hereof, at, upon, under or within the Mortgaged Property,
(iii) the presence of asbestos or asbestos-containing materials,
PCB's, radon gas, urea formaldehyde foam insulation or lead (whether
in paint, water, soil, or plaster) at the Mortgaged Property, (iv) any
breach of the covenants and warranties made in Section 2 hereof or in
Paragraph 39 of the Mortgage or in that certain Environmental
Certificate (the "ENVIRONMENTAL CERTIFICATE") executed in connection
with Indemnitor's application for the Loan, (v) the falsity of any of
the representations made in Section 2 hereof or in Paragraph 39 of the
Mortgage or in the Environmental Certificate, whether or not caused by
Indemnitor or (vi) the failure of Indemnitor to duly perform the
obligations or actions set forth in Section 2 hereof and in Paragraph
39 of the Mortgage, including, without limitation, for all parts of
this subsection 1(a), with respect to: (A) the imposition by any
governmental authority of any lien upon the Mortgaged Property, (B)
clean-up costs, (C) liability for personal injury or property damage
or damage to the environment, (D) any diminution in the value of the
Mortgaged Property and (E) fines, penalties and punitive damages.
(b) Indemnitor further agrees that Mortgagee shall not
assume any liability or obligation for loss, damage, fines, penalties,
claims or duty to clean up or dispose of wastes or materials on or
relating to the Mortgaged Property as a result of any conveyance of
title to the Mortgaged Property to the Mortgagee or otherwise or as a
result of any inspections or any other actions made or taken by
Mortgagee on the Mortgaged Property. Indemnitor agrees to remain fully
liable and shall indemnify and hold harmless Mortgagee from any costs,
expenses, clean-up costs, waste disposal costs, litigation costs,
fines and penalties, including without limitation any costs, expenses,
penalties and fines within the meaning of any Environmental Laws.
(c) Indemnitor shall assume the burden and expense of
defending Mortgagee, with counsel satisfactory to Mortgagee, against
all legal and administrative proceedings arising out of the
occurrences set forth in the Indemnification Agreement. Mortgagee
shall have the right, but not the obligation, to participate in the
defense of any such proceedings. Indemnitor may compromise or settle
any such proceedings without the consent of Mortgagee only if the
claimant agrees as part of the compromise or settlement that Mortgagee
shall have no responsibility or liability for the payment or discharge
of any amount agreed upon or obligation to take any other action.
(d) Indemnitor shall pay when due any judgments against
Mortgagee which have been indemnified under this Indemnification
Agreement and which are rendered by a final order or decree of a court
of competent jurisdiction from which no further appeal may be taken or
has been taken within the applicable appeal period. In the event that
such payment is not made, Mortgagee, in its sole discretion, may pay
any such judgments, in whole or in part, and look to Indemnitor for
reimbursement pursuant to this Indemnification Agreement, or may
proceed to file suit against Indemnitor to compel such payment.
(e) It is understood that the presence and/or release of
substances referred to in section 1(a) hereof does not pertain to a
presence and/or release which first occurs solely after (A) repayment
of the Loan in full accordance with the Loan Documents or (B) taking
possession of or acquisition of title to the Mortgaged Property by
Mortgagee upon a foreclosure or acceptance of a deed in lieu of
foreclosure and surrender of possession and occupancy of the Mortgaged
Property by Indemnitor, its agents, affiliates, employees and
independent contractors, or (C) acquisition of title to the Mortgaged
Property by a Transferee (as defined in the Mortgage) in connection
with a transfer complying with the provisions of Paragraph 9(f) of the
Mortgage, including, without limitation, the provisions of Paragraph
9(f)(ix) thereof requiring the delivery to Mortgagee of an
environmental indemnity agreement in form and substance acceptable to
Mortgagee from an approved indemnitor. Indemnitor shall have the burden
of proving that the conditions in this subsection (e) were satisfied by
clear and convincing evidence and shall continue to defend with counsel
satisfactory to Mortgagee and shall indemnify and hold Mortgagee
harmless for all matters set forth in Section 1(a) hereof, unless and
until a court of competent jurisdiction finds that Indemnitor has met
such burden.
2. INDEMNITOR'S REPRESENTATIONS AND WARRANTIES. Indemnitor hereby
represents and warrants to Mortgagee as follows:
(a) Indemnitor is solvent and the execution of this
Indemnification Agreement does not render Indemnitor insolvent. Any
and all financial statements, balance sheets, net worth statements and
other financial data which have heretofore been furnished to Mortgagee
with respect to Indemnitor fairly and accurately present the financial
condition of Indemnitor as of the date they were furnished to
Mortgagee and, since that date, there has been no material adverse
change in the financial condition of Indemnitor.
(b) There are no legal proceedings or material claims or
demands pending against or, to the best of Indemnitor's knowledge,
threatened against Indemnitor or any of its assets.
(c) The execution and delivery of this Indemnification
Agreement and the assumption of liability hereunder have been in all
respects authorized and approved by Indemnitor and, if applicable,
each constituent party or owner of Indemnitor; Indemnitor has full
authority and power to execute this Indemnification Agreement and to
perform its obligations hereunder; and this Indemnification Agreement
constitutes a legal, valid and binding obligation of Indemnitor and is
fully enforceable in accordance with its terms.
(d) Neither the execution nor the delivery of this
Indemnification Agreement nor the fulfillment and compliance with the
provisions hereof will conflict with or result in a breach of or
constitute a default under or result in the creation of any lien,
charge or encumbrance upon any property or assets of Indemnitor under
any agreement or instrument to which Indemnitor is now a party or by
which it may be bound.
(e) (i) As evidenced by the Phase I Environmental Site
Assessment Report delivered to Lender in connection with the
Loan, Indemnitor has performed reasonable investigations,
studies and tests as to any possible environmental
contamination, liabilities or problems with respect to the
Mortgaged Property and such investigations, studies and tests
have disclosed no Hazardous Materials or possible violations
of any Environmental Laws.
(ii) To the best of Indemnitor's knowledge, there
have been no releases of Hazardous Materials either at, upon,
under or within the Mortgaged Property and no Hazardous
Materials have migrated to the Mortgaged Property. No
Hazardous Materials are located on or have been stored,
processed or disposed of on or released or discharged from
(including ground water contamination) the Mortgaged Property,
and no above or underground storage tanks exist on the
Property.
(iii) Indemnitor shall not allow any Hazardous
Materials to exist or be stored, located, discharged,
released, possessed, managed, processed or otherwise handled
on the Mortgaged Property or any other property currently or
subsequently owned or operated by Indemnitor or any affiliate
of Indemnitor (except materials which (a) are ordinarily and
customarily used in the regular operation of the Mortgaged
Property as an office project by the Mortgagor or any current
tenant or any future tenant, which tenant and its lease have
been approved by the Mortgagee, and (b) are used, stored,
disposed of and handled in compliance with and in quantities
permitted by all applicable Environmental Laws), and shall
strictly comply with all Environmental Laws affecting the
Mortgaged Property or such other property currently or
subsequently owned or operated by Indemnitor, including those
laws regarding the generation, storage, disposal, release and
discharge of Hazardous Materials. Without limiting the
generality of the foregoing, Indemnitor has not been, is not
and will not become involved in operations at the Mortgaged
Property or any other property currently or subsequently owned
or operated by Indemnitor which could lead to imposition on
Indemnitor of liability under any Environmental Law.
Indemnitor expressly warrants, represents and covenants that
Indemnitor shall strictly comply with all requirements of
applicable Environmental Laws and shall immediately notify
Mortgagee of any releases of Hazardous Materials at, upon,
under or within the Mortgaged Property.
(iv) Neither Indemnitor, the Mortgaged Property nor
any other property currently or previously owned or operated
by Indemnitor or any affiliate of Indemnitor (A) has received
notice of or is subject to any private or governmental lien or
judicial or administrative notice, order or action relating to
Hazardous Materials or environmental problems, impairments or
liabilities with respect to the Mortgaged Property or such
other property or (B) is in or, with any applicable notice or
lapse of time or failure to take certain curative or remedial
actions, will be in either direct or indirect violation of any
Environmental Laws.
(v) Indemnitor shall strictly comply with the
requirements of all Environmental Laws affecting the Mortgaged
Property and any other property currently or subsequently
owned or operated by Indemnitor.
(vi) Indemnitor hereby warrants and represents that
all of the answers on the Environmental Certificate are true
and complete as of the date hereof. Indemnitor shall
immediately notify Mortgagee in writing should Indemnitor
become aware that any of the answers on the Environmental
Certificate either (A) was not true at the time the
Environmental Certificate was executed or (B) becomes untrue
during the term of the Loan.
3. WAIVERS. Indemnitor hereby waives the following: (a) notice of
Mortgagee's acceptance of this Indemnification Agreement; (b) notice of
Indemnitor's grant to Mortgagee of a security interest lien or encumbrance in
any of Indemnitor's assets; (c) Mortgagee's release, waiver, modification or
amendment of any Loan Document or any security interest, lien or encumbrance in
any other party's assets given to Mortgagee to secure any Loan Document; (d)
presentment, demand, notice of default, non-payment, partial payment and protest
and all other notices or formalities to which Indemnitor may be entitled; (e)
extensions of time of payment of the Note granted to Indemnitor or any other
forbearances in Mortgagee's enforcement of the Loan Documents; (f) acceptance
from Indemnitor (or any other party) of any partial payment or payments of the
Note or any collateral securing the payment thereof or the settlement,
subordination, discharge or release of the Note; (g) notice of any of the
matters set forth in parts (c) through (f) of this Section 3; (h) all suretyship
defenses of every kind and nature; and (i) the defense of the statute of
limitations in any action brought to enforce this Indemnification Agreement.
Indemnitor agrees that Mortgagee may have done, or at any time may do, any or
all of the foregoing actions in such manner, upon such terms and at such times
as Mortgagee, in its sole discretion, deems advisable, without in any way
impairing, affecting, reducing or releasing Indemnitor from Indemnitor's
obligations under this Indemnification Agreement and Indemnitor hereby consents
to each of the foregoing actions.
4. ENFORCEMENT.
(a) Indemnitor agrees that this Indemnification Agreement
may be enforced by Mortgagee without first resorting to or exhausting
any other security or collateral or without first having recourse to
the Note or any of the property covered by the Mortgage through
foreclosure proceedings or otherwise; provided, however, that nothing
herein contained shall prevent Mortgagee from suing on the Note or
foreclosing the Mortgage or from exercising any other rights
thereunder.
(b) Indemnitor agrees that the indemnifications set forth
herein are separate, independent of and in addition to Indemnitor's
undertakings under the Note. Indemnitor agrees that a separate action
may be brought to enforce the provisions of this Indemnification
Agreement which shall in no way be deemed to be an action on the Note,
whether or not Mortgagee would be entitled to a deficiency judgment
following a judicial foreclosure or sale under the Mortgage.
(c) This Indemnification Agreement shall be enforced and
construed in accordance with the laws of the state in which the
Mortgaged Property is located. Indemnitor hereby submits to personal
jurisdiction in said state for the enforcement of this Indemnification
Agreement and hereby waives any claim or right under the laws of any
other state or of the United States to object to such jurisdiction. If
such litigation is commenced, Indemnitor agrees that service of
process may be made by serving a copy of the summons and complaint
upon Indemnitor, through any lawful means, including upon its
registered agent within said state, whom Indemnitor hereby appoints as
its agent for these purposes. Nothing contained herein shall prevent
Mortgagee's bringing any action or exercising any rights against
Indemnitor personally or against any property of Indemnitor within any
other county, state, or country. The means of obtaining personal
jurisdiction and perfecting service of process set forth above are not
intended to be exclusive but are in addition to all other means of
obtaining personal jurisdiction and perfecting service of process now
or hereafter provided by applicable law.
5. DURATION. Subject to Section 1(e) hereof, Indemnitor agrees that
this Indemnification Agreement shall survive a foreclosure or the taking of a
deed in lieu of foreclosure, the discharge of Indemnitor's obligations under any
of the Loan Documents, or any transfer of the Mortgaged Property.
6. NOTICE BY INDEMNITOR. Indemnitor shall promptly after obtaining
knowledge thereof advise Mortgagee in writing of (a) any governmental or
regulatory actions instituted or threatened in writing under any Environmental
Law affecting the Mortgaged Property or the matters indemnified hereunder,
including without limitation any notice of inspection, abatement or
non-compliance; (b) all claims made or threatened in writing by any third party
against Indemnitor or the Mortgaged Property relating to damage, contribution,
cost recovery, compensation, loss or injury resulting from the presence,
release, threat of release or discharge on or from the Mortgaged Property of any
Hazardous Materials; and (c) Indemnitor's discovery of the presence of Hazardous
Materials on the Mortgaged Property or on any real property adjoining or in the
vicinity of the Mortgaged Property, or of any occurrence or condition on any
such property which could subject Indemnitor or the Mortgaged Property to a
claim under any Environmental Law or to any restrictions on ownership,
occupancy, transferability or use of the Mortgaged Property under any
Environmental Law. Indemnitor shall deliver to Mortgagee any documentation or
records as Mortgagee may request and which are susceptible of being obtained by
Indemnitor without undue cost or expense and without the necessity for
initiating legal proceedings to obtain the same in connection with all such
actions, claims, discoveries, notices, inquiries and communications and shall
advise Mortgagee of any subsequent developments regarding the same.
7. PAYMENT OF MORTGAGEE'S EXPENSES. If Mortgagee retains counsel for
advice or other representation (a) in any litigation, contest, dispute, suit, or
proceeding (whether instituted by Mortgagee, Indemnitor, or any other party)
relating to any of the occurrences for which indemnification is given in this
Indemnification Agreement or otherwise relating in any way to this
Indemnification Agreement and the indemnities described herein or (b) to enforce
Indemnitor's obligations hereunder, the attorneys' fees arising from such
services and all related expenses and court costs shall be paid by Indemnitor
upon demand of Mortgagee.
8. NO WAIVER.
(a) Indemnitor's obligations hereunder shall in no way be
impaired, reduced or released by reason of (i) Mortgagee's omission or
delay to exercise any right described herein or (ii) any act or
omission of Mortgagee in connection with any notice, demand, warning or
claim regarding violations of codes, laws or ordinances governing the
Mortgaged Property.
(b) Nothing contained herein shall constitute or be construed
as a waiver of any statutory or judicial federal, state or local law
which may provide rights or remedies to Mortgagee against Indemnitor or
others in connection with any claim relating to the Mortgaged Property
and pertaining to the presence and/or release, threatened release,
storage, disposal, generating or removal of any Hazardous Materials or
to the failure to comply with any Environmental Laws now or hereafter
enacted.
9. NOTICE. All notices hereunder shall be given at the following
address. If to Indemnitor, c/o 10 Speen Street, LLC, 10 Speen Street,
Framingham, Massachusetts 01701, Attention: Terrence C. McCarthy; if to
Mortgagee, John Hancock Real Estate Finance, Inc., 200 Clarendon Street, T-53,
Boston, Massachusetts 02116, Re: Loan No. 3212462. Either party may change their
address for notice purposes upon giving fifteen (15) days prior notice thereof
in accordance with this section. All notices given hereunder shall be in writing
and shall be considered properly given if delivered either personally to such
other party, or sent by nationally recognized overnight courier delivery service
or by certified mail of the United States Postal Service, postage prepaid return
receipt requested, addressed to the other party as set forth above (or to such
other address or person as either party entitled to notice may by notice to the
other party specify). Unless otherwise specified, notices shall be deemed given
as follows: (i) if delivered personally, when delivered, (ii) if delivered by
nationally recognized overnight courier delivery service, on the day following
the day such material is sent or (iii) if delivered by certified mail, on the
third day after the same is deposited in the United States Postal Service as
provided above.
10. AMENDMENT AND WAIVER. This Indemnification Agreement may be
amended and observance of any term of this Indemnification Agreement may be
waived only with the written consent of Mortgagee.
11. SEVERABILITY. All provisions contained in this Indemnification
Agreement are severable, and the invalidity or unenforceability of any provision
shall not affect or impair the validity or enforceability of the remaining
provisions of this Indemnification Agreement.
12. SUCCESSORS AND ASSIGNS. This Indemnification Agreement shall inure
to the benefit of and may be enforced by, and the term "Mortgagee" as used in
this Agreement shall include, John Hancock Real Estate Finance, Inc. and its
successors and assigns, including (a) any subsequent holder of the Note and
Mortgage, and (b) any person or entity that acquires the Mortgaged Property at a
foreclosure sale or by deed in lieu of foreclosure and the immediate grantee of
such person or entity. This Agreement shall be binding upon and enforceable
against Indemnitor and its legal representatives or successors. This Agreement
may not be assigned or transferred by Indemnitor, in whole or in part.
13. DEFINITIONS. "HAZARDOUS MATERIALS" shall mean and include, but
shall not be limited to, any petroleum product and all hazardous or toxic
substances, wastes or substances, any substances which because of their
quantitative concentration, chemical, radioactive, flammable, explosive,
infectious or other characteristics, constitute or may reasonably be expected to
constitute or contribute to a danger or hazard to public health, safety or
welfare or to the environment, including, without limitation, any asbestos
(whether or not friable) and any asbestos-containing materials, waste oils,
solvents and chlorinated oils, polychlorinated biphenyls (PCBs), toxic metals,
etchants, pickling and plating wastes, explosives, reactive metals and
compounds, pesticides, herbicides, radon gas, urea formaldehyde foam insulation
and chemical, biological and radioactive wastes, or any other similar materials
or any hazardous or toxic wastes or substances which are included under or
regulated by any federal, state or local law, rule or regulation (whether now
existing or hereafter enacted or promulgated, as they may be amended from time
to time) pertaining to environmental regulations, contamination, clean-up or
disclosures and any judicial or administrative interpretation thereof, including
any judicial or administrative orders or judgments, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. section 9601 et SEQ. ("CERCLA"); The Federal Resource
Conservation and Recovery Act, 42 U.S.C. section 6901 ET SEQ. ("RCRA");
Superfund Amendments and Reauthorization Act of 1986, Public Law No. 99-499
("SARA"); Toxic Substances Control Act, 15 U.S.C. section 2601 ET SEQ. ("TSCA");
the Hazardous Materials Transportation Act, 49 U.S.C. section 1801 ET SEQ.; and
any other state superlien or environmental clean-up or disclosure statutes (all
such laws, rules and regulations being referred to collectively as
"ENVIRONMENTAL LAWS").
14. JOINT AND SEVERAL LIABILITY. If more than one person is included
in the definition of Indemnitor, the liability of all such persons hereunder
shall be joint and several.
15. SPECIAL STATE PROVISIONS.
(a) In the event of any inconsistencies between the other
paragraphs of the Indemnification Agreement and this PARAGRAPH 15, the
terms and conditions of this PARAGRAPH 15 shall control and be binding.
(b) The term "ENVIRONMENTAL LAWS" shall be deemed to include,
without limitation, the following statutes: Massachusetts Oil and
Hazardous Materials Release Prevention and Response Act (G.L. c. 21E),
Massachusetts Hazardous Waste Management Act (G.L. c. 21C),
Massachusetts Wetlands Protection Act (G.L. c. 121, ss.40),
Massachusetts Clean Waters Act (G.L. c. 21, ss.ss.26-53),
Massachusetts Clean Air Act (G.L. c. 111, ss.142) and the
Massachusetts Environmental Policy Act (G.L. c. 30 ss.61).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE(S) FOLLOW(S)]
<PAGE>
IN WITNESS WHEREOF, Indemnitor has executed this instrument under seal
the day and year first above written.
10 SPEEN STREET, LLC
By: ASA Properties, Inc., its
Managing Member
By: /S/ TERRENCE C. MCCARTHY
---------------------------
Name: Terrence C. McCarthy
Its: Vice President and
Treasurer
ASA INTERNATIONAL, LTD.
By: /S/ TERRENCE C. MCCARTHY
--------------------------------
Name: Terrence C. McCarthy
Its: Vice President and Treasurer
EXHIBIT 10.3
Loan No. 3212462
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("GUARANTY"), is entered into effective as of
September 21, 1998 by INTERNATIONAL, LTD. with a mailing address at 10 Speen
Street, Framingham, Massachusetts 01701 ("GUARANTOR"), in favor of JOHN HANCOCK
REAL ESTATE FINANCE, INC., a Delaware corporation ("LENDER"), and the subsequent
owners and holders of the herein below defined Note.
RECITALS:
A. 10 Speen Street, LLC, a Delaware limited liability company
("BORROWER") has requested a loan (the "LOAN") from Lender in the amount of
$3,000,000.00 to be evidenced by the Mortgage Note of even date herewith
executed by Borrower, payable to Lender in the original principal sum of
$3,000,000.00 (the "NOTE"), and secured by, INTER ALIA, the Mortgage, Assignment
of Leases and Rents and Security Agreement of even date herewith executed by
Borrower in favor of Lender covering certain property in Framingham, Middlesex
County, Massachusetts (the "MORTGAGE");
B. Section 19 of the Note sets forth certain amounts, obligations and
other liabilities for which Borrower is fully liable to Lender (the
"NON-RECOURSE CARVEOUT OBLIGATIONS"), notwithstanding limitations on Borrower's
liability pursuant to said Section 19 of the Note;
C. Guarantor is the owner of a direct or indirect interest in
Borrower, and Guarantor will directly benefit from Lender's making the Loan to
Borrower; and
D. As a condition to making the Loan, Lender has required that
Guarantor guarantee the payment of the Non-Recourse Carveout Obligations and
performance of the obligations set forth in Section 1 below (the "GUARANTEED
OBLIGATIONS").
AGREEMENT:
NOW, THEREFORE, as a material inducement to Lender to agree to make
the Loan to Borrower, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Guarantor hereby does
irrevocably and unconditionally warrant and represent unto and covenant with
Lender as follows:
1. GUARANTY. Guarantor hereby (a) guarantees unto Lender the full and
timely payment of the amounts due, or to become due, to Lender under the
Non-Recourse Carveout Obligations and (b) agrees with Lender to pay to Lender
(i) the amounts due under the Non- Recourse Carveout Obligations within five (5)
days from the date Lender notifies Guarantor of Borrower's failure to pay the
same, if and when the same becomes due, and at the place specified in the Note
for payment and (ii) Lender's reasonable attorneys' fees and all court costs
incurred by Lender in enforcing or protecting any of Lender's rights, remedies
or recourses hereunder. Guarantor is not hereby guaranteeing payment of any
portion of the indebtedness or performance of any portion of the obligations
under the documents evidencing, securing, guaranteeing or executed in connection
with the Loan (the "LOAN DOCUMENTS"), other than the Non-Recourse Carveout
Obligations.
2. GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor hereby
warrants and represents unto Lender as follows:
(a) that this Guaranty constitutes the legal, valid and
binding obligation of Guarantor and is fully enforceable against Guarantor in
accordance with its terms;
(b) that there are no legal proceedings or material claims or
demands pending against or, to the best of Guarantor's knowledge threatened
against, Guarantor or any of its assets;
(c) that the execution and delivery of this Guaranty and the
assumption of liability hereunder have been in all respects authorized and
approved by Guarantor and, if applicable, each constituent party or owner of
Guarantor; Guarantor has full authority and power to execute this Guaranty and
to perform its obligations hereunder; and
(d) that neither the execution nor the delivery of this
Guaranty nor the fulfillment and compliance with the provisions hereof will
conflict with, result in a breach of, constitute a default under or result in
the creation of any lien, charge, or encumbrance upon any property or assets of
Guarantor under any agreement or instrument to which Guarantor is now a party or
by which it may be bound.
3. WAIVER. Guarantor hereby waives (a) all notices of acceptance
hereof, protest, demand and dishonor, presentment, notice of nonpayment, notice
of intention to accelerate maturity, notice of acceleration of maturity and all
notices and demands of any kind now or hereafter provided for by any statute or
rule of law other than the five (5) day notice referred to in PARAGRAPH 1 above,
(b) any and all requirements that Lender institute any action or proceeding, or
exhaust or attempt to enforce any or all of Lender's right, remedies or
recourses against Borrower or anyone else or in respect of any mortgaged
property or collateral covered by any Loan Documents, or join Borrower or any
other persons liable on the Non-Recourse Carveout Obligations in any action to
enforce this Guaranty as a condition precedent to bringing an action against
Guarantor upon this Guaranty, it being expressly agreed that the liability of
Guarantor hereunder shall be primary and not secondary, (c) any defense arising
by reason of any disability, insolvency, lack of authority or power, death,
insanity, minority, dissolution or any other defense of Borrower, or any other
surety, co-maker, endorser or guarantor of the Non-Recourse Carveout Obligations
(even though rendering same void, unenforceable or otherwise uncollectible), it
being agreed that Guarantor shall remain liable hereon regardless of whether
Borrower or any other such person be found not liable thereon for any reason,
(d) all suretyship defenses of every kind and nature and (e) any claim Guarantor
might otherwise have against Lender by virtue of Lender's invocation of any
right, remedy or recourse permitted it hereunder or under the Loan Documents.
This is a guaranty of payment and not a guaranty of collection.
4. SUBSEQUENT ACTS. Guarantor hereby agrees with Lender that (a) the
payments called for and provisions contained in the Loan Documents, including
specifically (but without limitation) the Note, may be renewed, extended,
rearranged, modified, released or canceled, (b) all or any part of any mortgaged
property and collateral for the indebtedness may be released from, and any new
or additional security may be added to, the lien and security interest of the
Loan Documents, (c) any additional parties who may become personally liable for
repayment of the Note may hereafter be released from their liability hereunder
and thereon and (d) Lender may take, or delay in taking or refuse to take, any
and all action with reference to the Note and the other Loan Documents
(regardless of whether same might vary the risk or alter the rights, remedies or
recourse of Guarantor), including specifically (but without limitation) the
settlement or compromise of any amount allegedly due thereunder, all without
notice or consideration to or the consent of Guarantor, and no such acts shall
in any way release, diminish or affect the absolute nature of Guarantor's
obligations and liabilities hereunder. It is the intent of Guarantor and Lender
that such obligations and liabilities hereunder are primary, absolute and
unconditional under any and all circumstances and that, until the Non-Recourse
Carveout Obligations are fully and finally satisfied, such obligations and
liabilities shall not be discharged or released, in whole or in part, by any act
or occurrence which, but for this PARAGRAPH 4, might be deemed a legal or
equitable discharge or release of Guarantor.
5. REMEDIES CUMULATIVE. Guarantor hereby agrees with Lender that all
rights, remedies and recourses afforded to Lender by reason of this Guaranty or
otherwise are (a) separate and cumulative and may be pursued separately,
successively or concurrently, as occasion therefor shall arise, and (b)
non-exclusive and shall in no way limit or prejudice any other legal or
equitable right, remedy or recourse which Lender may have.
6. SUBORDINATION AND NO SUBROGATION. If, for any reason whatsoever,
Borrower now is or hereafter becomes indebted to Guarantor, such indebtedness
and all interest thereon, shall, at all times, be subordinate in all respects to
the Loan Documents, and Guarantor shall not be entitled to enforce or receive
payment thereof until the Non-Recourse Carveout Obligations have been fully
satisfied. Notwithstanding anything to the contrary contained in this Guaranty
or any payments made by Guarantor hereunder, Guarantor shall not have any right
of subrogation in or under the Loan Documents or to participate in any way
therein or in any right, title or interest in and to any mortgaged property or
any collateral for the Loan, all such rights of subrogation and participation,
together with any other contractual, statutory or common law right which
Guarantor may have to be reimbursed for any payments Guarantor may make to
Lender pursuant to this Guaranty, being hereby expressly waived and released.
7. LAW GOVERNING AND SEVERABILITY. This Guaranty shall be governed by
and construed in accordance with the laws of the Commonwealth of Massachusetts
and is intended to be performed in accordance with, and only to the extent
permitted by, such laws. If any provision of this Guaranty or the application
thereof to any person or circumstances, for any reason and to any extent, shall
be invalid or unenforceable, neither the remainder of this Guaranty nor the
application of such provision to any other persons or circumstances shall be
affected thereby, but rather the same shall be enforced to the greatest extent
permitted by law.
8. SUCCESSORS AND ASSIGNS. This Guaranty and all the terms, provisions
and conditions hereof shall be binding upon Guarantor and the Guarantor's heirs,
legal representatives, successors and assigns and shall inure to the benefit of
Lender, its successors and assigns and all subsequent holders of the Note.
9. PARAGRAPH HEADING. The paragraph headings inserted in this Guaranty
have been included for convenience only and are not intended, and shall not be
construed, to limit or define in any way the substance of any paragraph
contained herein.
10. EFFECT OF BANKRUPTCY. This Guaranty shall continue to be effective
or reinstated, as the case may be, if at any time payment to Lender of all or
any part of the Non-Recourse Carveout Obligations is rescinded or must otherwise
be restored or refunded by Lender pursuant to any insolvency, bankruptcy,
reorganization, receivership or other debtor relief proceeding involving
Borrower. In the event that Lender must rescind or restore any payment received
by Lender in satisfaction of the Non-Recourse Carveout Obligations, set forth
herein, any prior release or discharge of the terms of this Guaranty given to
Guarantor by Lender shall be without effect and this Guaranty shall remain in
full force and effect.
11. NOTICES. All notices hereunder shall be given at the following
address:
If to Guarantor: ASA International, LTD.
10 Speen Street
Framingham, Massachusetts 01701
If to Lender: John Hancock Real Estate Finance, Inc.
John Hancock Place, T-53
200 Clarendon Street
Boston, Massachusetts 02116
Re: Loan No. 3212462.
All notices given hereunder shall be in writing and shall be
considered properly given if delivered either personally to such other party, or
sent by nationally recognized overnight courier delivery service or by certified
mail of the United States Postal Service, postage prepaid return receipt
requested, addressed to the other party as set forth above (or to such other
address or person as either party entitled to notice may by notice to the other
party specify). Unless otherwise specified, notices shall be deemed given as
follows: (i) if delivered personally, when delivered, (ii) if delivered by
nationally recognized overnight courier delivery service, on the day following
the day such material is sent or (iii) if delivered by certified mail, on the
third day after the same is deposited in the United States Postal Service as
provided above.
12. BENEFIT. Guarantor warrants and represents that Guarantor has
received, or will receive, direct or indirect benefit from the execution and
delivery of this Guaranty.
13. NO REPRESENTATIONS BY LENDER. Neither Lender nor anyone acting on
behalf of Lender has made any representation, warranty or statement to Guarantor
to induce Guarantor to execute and deliver this Guaranty.
14. APPLICATION OF FORECLOSURE PROCEEDS. In the event of any
foreclosure sales of the mortgaged property and collateral covered by the Loan
Documents, the proceeds of such sales shall be applied first to the discharge of
that portion of the indebtedness then remaining unpaid as to which Guarantor is
not fully personally liable pursuant to this Guaranty, it being the express
intention of the parties that the application of the proceeds of such
foreclosure sales shall be in such a manner as not to extinguish or reduce
Guarantor's personal liability hereunder until all of the indebtedness as to
which Guarantor is not personally liable hereunder has been paid in full.
Nothing contained in this Paragraph 14 shall be construed to require that lender
foreclose the liens and security interests created in the Loan Documents as a
condition precedent to bringing an action against Guarantor upon this Guaranty,
or as an agreement that Guarantor's liability is limited to any deficiency
remaining after such foreclosure.
15. JOINT AND SEVERAL LIABILITY. If more than one person is included
in the definition of Guarantor, the liability of all such persons hereunder
shall be joint and several.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE(S) FOLLOW(S)]
<PAGE>
EXECUTED under seal to be effective as of the date first above
written.
Witnessed by: ASA INTERNATIONAL, LTD.
/S/ PETER WITTENBORG By: /S/ TERRENCE C. MCCARTHY
- - ---------------------- ---------------------------
Name: Terrence C. McCarthy
Its: Vice President and Treasurer
- - --------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1998, CONDENSED
CONSOLIDATED INCOME STATEMENT FOR NINE MONTHS ENDED SEPTEMBER 30, 1998, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Sep-30-1998
<EXCHANGE-RATE> 1
<CASH> 3,141,071
<SECURITIES> 0
<RECEIVABLES> 8,327,175
<ALLOWANCES> 173,105
<INVENTORY> 91,899
<CURRENT-ASSETS> 12,195,201
<PP&E> 8,928,621
<DEPRECIATION> 3,979,261
<TOTAL-ASSETS> 22,187,936
<CURRENT-LIABILITIES> 8,640,500
<BONDS> 3,945,751
0
0
<COMMON> 43,768
<OTHER-SE> 8,657,932
<TOTAL-LIABILITY-AND-EQUITY> 22,187,936
<SALES> 24,630,139
<TOTAL-REVENUES> 24,630,139
<CGS> 4,677,440
<TOTAL-COSTS> 16,410,874
<OTHER-EXPENSES> 7,189,286
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 422,522
<INCOME-PRETAX> 607,457
<INCOME-TAX> 365,000
<INCOME-CONTINUING> 242,457
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 242,457
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
