<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-21175
EMERALD ISLE BANCORP, INC.
(Exact Name of Registrant as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-3300934
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
730 HANCOCK STREET 02170-2722
QUINCY, MASSACHUSETTS (Zip Code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 479-5001
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class)
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant, based on the closing sales price of the
registrant's Common Stock as quoted on the NASDAQ National Market System on
February 28, 1997 was approximately $42,460,300.
As of February 28, 1997 there were issued and outstanding 2,234,756 shares
of the registrant's Common Stock.
- --------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 28, 1997 ARE INCORPORATED BY
REFERENCE INTO PART III OF THIS FORM 10-K.
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Emerald Isle Bancorp, Inc. (the "Corporation") is a bank holding company
incorporated under the laws of the Commonwealth of Massachusetts in January of
1996, and is registered under the Bank Holding Company Act of 1956, as amended.
The Corporation is the holding company of The Hibernia Savings Bank (the "Bank")
and its subsidiaries and was organized at the direction of the Bank for the
purpose of becoming the Bank's holding company, pursuant to a Plan of
Reorganization and Acquisition dated February 15, 1996 and approved by
shareholders at the April 28, 1996 Annual Stockholders meeting. The
reorganization was consummated on October 1, 1996 and was treated as a pooling
of interests for accounting purposes. As of such date, the Bank became a
wholly-owned subsidiary of the Corporation and the Corporation issued 1,765,568
shares of its $1.00 par value per share common stock in exchange for all of the
outstanding shares of the Bank on a one for one basis. Currently, the
Corporation has no operations beyond its investment in the Bank.
The Bank is a Massachusetts chartered stock savings bank founded in 1912.
The Bank's deposit accounts are insured by the Federal Deposit Insurance
Corporation ("FDIC") Bank Insurance Fund to a maximum of $100,000 for each
depositor and by the Deposit Insurance Fund of Massachusetts ("DIF") for
deposits in excess of $100,000 per depositor. The Bank is also subject to
supervision and regulation by the Board of Governors of the Federal Reserve
System, The Federal Deposit Insurance Corporation and the Massachusetts Division
of Banks.
The Bank was incorporated in May, 1912 in Boston and 68 years later opened
our second location at 51 Commercial Street, Braintree, Massachusetts. The
Bank's third location opened in July, 1987 at 731 Hancock Street, Quincy,
Massachusetts. The Bank's headquarters was moved from Boston to 731 Hancock
Street, Quincy, Massachusetts in August, 1989. The Bank's fourth location at
1150 Washington Street, Weymouth, Massachusetts was opened in July of 1990. In
September of 1994, the Bank opened a training branch at the Quincy High School
at 52 Coddington Street, Quincy, Massachusetts. In July of 1994, the Bank's
fifth full service branch was opened at 274 Main Street, Hingham, Massachusetts.
The sixth full service branch was opened in December of 1995 at 397 Washington
Street, Stoughton, Massachusetts. Again in 1996, the Bank opened two more
locations, our seventh full service branch at 71 Main Street, Hingham,
Massachusetts and our eighth full service branch was opened in November of 1996
at 63 Franklin Street, Quincy, Massachusetts. The Bank has also received
approval from both the FDIC and Massachusetts Commissioner of Banks to open our
ninth location at 470 West Broadway, South Boston, Massachusetts, which is
expected to commence operations during the second quarter of 1997.
The Bank's subsidiaries include, Kildare Corporation, Meath Corporation,
which are inactive at this time, and a special purpose security corporation,
Limerick Securities whose sole purpose is to buy, hold and sell securities for
its own account. The securities corporation takes advantage of a lower
Massachusetts tax rate for a securities corporation (1.32%) versus a bank tax
rate of 12.13%. No operational or banking activities take place in this
subsidiary, which was incorporated in 1990.
The Corporation's principal business, conducted through the Bank, consists
of attracting deposits from the general public and investing these deposits,
together with funds generated by operations or borrowings from the Federal Home
Loan Bank of Boston, in residential mortgage loans, commercial real estate
loans, construction loans, multi-family residential mortgage loans, commercial
and small business
2
<PAGE>
loans and other loans. During the past two to three years, the Bank has become
an active lender to the small business community within our primary market area.
This opportunity has resulted from the continued consolidation of the banking
industry in our primary market area. In addition, the Bank invests in securities
issued by the U.S. Government and agencies through mortgage-backed securities,
corporate debt securities and other investments permitted by federal and state
laws and regulations. The Bank's revenues are derived principally from interest
on its loan portfolio and interest and dividends on its various investments. The
Bank's primary sources of funds for these investments are deposits, principal
and interest payments on loans and mortgage-backed securities and borrowings
mainly from the Federal Home Loan Bank of Boston.
MARKET AREA AND COMPETITION
The Corporation, including subsidiaries, is a bank holding company offering
a number of financial services, loans and deposits primarily designed and
directed to meet the needs of the communities that we serve. The Corporation's
lending markets and deposit gatherings are primarily concentrated from Boston,
south to Marshfield. The Corporation's primary market area includes several
sections of Boston, including the Financial District, Back Bay, South End,
Beacon Hill, South Boston, Dorchester and parts of Roxbury and Mattapan and the
city of Quincy, plus the towns of Braintree, Weymouth, Hingham, Scituate,
Cohasset, Milton, Norwell, Hanover, Marshfield, Hull, Holbrook, Randolph,
Canton, Stoughton and Pembroke. The Corporation's headquarters and main office
are located at 730 and 731 Hancock Street, Quincy, Massachusetts, respectively,
an industrial, commercial and residential city located south of Boston with a
population of approximately 85,000.
The Corporation's market area in total has a number of financial
institutions, several of which are significantly larger and have greater
financial resources, and all of which are competitors of the Corporation. The
Corporation's market area includes competition from commercial banks, credit
unions, mortgage banking companies, mutual funds, insurance companies and other
financial institutions. Currently, the identity of our direct competition is
changing dramatically as a result of the continued consolidation of the banking
industry as a result of mergers and acquisitions. This industry consolidation
has made it possible for us to expand our franchise and offer more products and
services in our primary market area. The ability of the Corporation to remain
competitive in the future will depend on how successfully we can respond to the
rapidly evolving competitive, regulatory, technological and demographic changes
affecting our business.
LENDING ACTIVITIES
The Bank's lending activities have focused primarily on the origination and
purchases of residential, commercial real estate and commercial business loans
for inclusion in our loan portfolio. In addition, the Bank provides home equity
lines, second mortgages and secured and unsecured consumer loans. The Bank also
is active in the secondary market for our fixed rate loan products. The Bank,
over the past two or more years has expanded the lending department to include
commissioned loan originators and established a commercial lending department,
as previously discussed. As a result, 1,415 loans of all types were originated
in 1996 totaling $143 million as compared to 962 loans of all types totaling
$103.8 million in 1995 and 1,084 loans of all types totaling $70.1 million in
1994. As noted before, the consolidation of the banking industry has reduced the
number of community banks in our market area which has afforded us the
opportunity to substantially increase our loan origination volume. The growth in
our portfolio balances outstanding has been in adjustable rate loans since the
Bank sells most fixed rate loans originated into the
3
<PAGE>
secondary market. Loan sales into the secondary market totaled 134 loans
totaling $18.3 million in 1996, compared to 126 loans totaling $12.9 million in
1995 and 66 loans totaling $6.8 million in 1994.
As discussed, the continued consolidation of the banking industry within our
market area, favorable economic conditions over the past two years and
improvement in the local real estate market has produced more lending
opportunities for the Bank. One area that benefited greatly from the foregoing
conditions was our commercial real estate department which originated or
purchased 79 loans totaling $68.3 million in 1996 compared to 47 loans totaling
$27.2 million in 1995 and 68 loans totaling $29.3 million in 1994.
The following table sets forth the composition of the Bank's loan portfolio
in dollar amounts and in percentages for the respective portfolios at the dates
indicated:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------------------------------------------
1996 1995 1994 1993
---------------------- ---------------------- ---------------------- ----------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF
(DOLLARS IN THOUSANDS) AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
- --------------------------- --------- ----------- --------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans on real
estate:
1-4 Family............... $ 136,049 51.14% $ 112,485 53.32% $ 83,589 50.38% $ 69,798 50.93%
Multifamily.............. 34,503 12.97% 34,633 16.42% 34,956 21.07% 23,914 17.45%
Commercial............... 70,857 26.63% 44,479 21.08% 36,522 22.01% 33,466 24.42%
--------- ----------- --------- ----------- --------- ----------- --------- -----------
Total mortgage loans... 241,409 90.74% 191,597 90.82% 155,067 93.46% 127,178 92.80%
Other loans:
Consumer................. 2,076 0.78% 1,768 0.84% 1,593 0.96% 3,916 2.86%
Equity lines of credit... 951 0.36% 747 0.35% 831 0.50% 464 0.34%
Commercial............... 21,614 8.12% 16,857 7.99% 8,423 5.08% 5,490 4.01%
--------- ----------- --------- ----------- --------- ----------- --------- -----------
Total other loans...... 24,641 9.26% 19,372 9.18% 10,847 6.54% 9,870 7.20%
--------- ----------- --------- ----------- --------- ----------- --------- -----------
Total loans............ $ 266,050 100.00% $ 210,969 100.00% $ 165,914 100.00% $ 137,048 100.00%
--------- ----------- --------- ----------- --------- ----------- --------- -----------
--------- ----------- --------- ----------- --------- ----------- --------- -----------
Less: Deferred loan fees
and unearned income.... 219 100 302 139
Less: Allowance for
loan losses.......... 2,623 2,542 2,241 2,481
--------- --------- --------- ---------
Loans, net............. $ 263,208 $ 208,327 $ 163,371 $ 134,428
--------- --------- --------- ---------
--------- --------- --------- ---------
<CAPTION>
1992
----------------------
PERCENT OF
(DOLLARS IN THOUSANDS) AMOUNT TOTAL
- --------------------------- --------- -----------
<S> <C> <C>
Mortgage loans on real
estate:
1-4 Family............... $ 70,005 51.37%
Multifamily.............. 29,833 21.89%
Commercial............... 33,388 24.50%
--------- -----------
Total mortgage loans... 133,226 97.77%
Other loans:
Consumer................. 2,609 1.91%
Equity lines of credit... 435 0.32%
Commercial............... -- 0.00%
--------- -----------
Total other loans...... 3,044 2.23%
--------- -----------
Total loans............ $ 136,270 100.00%
--------- -----------
--------- -----------
Less: Deferred loan fees
and unearned income.... 132
Less: Allowance for
loan losses.......... 3,056
---------
Loans, net............. $ 133,082
---------
---------
</TABLE>
4
<PAGE>
The following table sets forth the Bank's real estate loan originations and
loan purchases, sales and principal repayments for the years indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
(DOLLARS IN THOUSANDS) 1996 1995 1994
- ----------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Real estate loans (gross):
At beginning of year......................................................... $ 191,597 $ 155,067 $ 127,178
Real estate loans originated:
1-4 Family................................................................. 57,330 40,525 33,035
Multifamily................................................................ 14,507 4,966 11,408
Commercial................................................................. 40,879 20,750 17,881
---------- ---------- ----------
Total real estate loans originated:...................................... 112,716 66,241 62,324
Real estate loans purchased
1-4 Family................................................................. 2,534 20,215 --
Multifamily................................................................ 3,624 1,500 --
Commercial................................................................. 9,324 -- --
---------- ---------- ----------
Total real estate loans originated:...................................... 15,482 21,715 --
---------- ---------- ----------
Total real estate loans originated and purchased:........................ 128,198 87,956 62,324
Reductions due to principal repayments, foreclosures and charge-offs......... (60,071) (38,510) (27,670)
Sales of loans into secondary market......................................... (18,315) (12,916) (6,765)
---------- ---------- ----------
At end of year............................................................... $ 241,409 $ 191,597 $ 155,067
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
RESIDENTIAL FIRST MORTGAGES
The Bank offers various owner-occupied residential first mortgage loan
products, including, but not limited to one, three and five year adjustable rate
conforming, non-conforming mortgages, jumbo adjustable rate mortgage loans and
seven, ten, fifteen, twenty and thirty year fixed rate mortgage loans. In
addition, the Bank offers adjustable rate residential mortgage loans and
short-term notes on non-owner occupied residential properties. Residential
mortgage loans are defined as real estate loans secured by both owner-occupied
and non-owner occupied on one to four family homes and condominiums. The Bank's
policy is generally to lend up to 95% of the appraised value of the property
securing a single family residential loan and requires the loan to have private
mortgage insurance. The Bank may charge origination fees of up to 2% on one to
four family residential mortgage loans. During 1996, the Bank originated or
purchased 443 residential first mortgage loans totaling $59.9 million.
The Bank's one to four family residential mortgage loans are generally
underwritten according to Federal National Mortgage Association ("FNMA") or
Federal Home Loan Mortgage Corporation ("FHLMC") guidelines, although the Bank
may make loans in excess of the FNMA and FHLMC loan amount guidelines. At
December 31, 1996, the Bank had $31.6 million of loans which it sold but
continues to service for others.
RESIDENTIAL SECOND MORTGAGES
In addition to residential first mortgage loans, the Bank also makes term
residential second mortgage loans in amounts up to 70% of the appraised value of
the property in excess of the first mortgage balance
5
<PAGE>
for terms not to exceed twenty years in amounts of $15,000 to $150,000. These
loans are written on an adjustable rate basis and reviewed every one to three
years and on a fixed basis up to fifteen years. In addition, the Bank originates
adjustable rate second mortgage loans in the form of Home Equity Credit Lines
for inclusion in its portfolio. Underwriting of residential second mortgage
loans is in accordance with the Bank's Loan Policy which is reviewed and
approved annually by the Board of Directors.
During the year ended December 31, 1996, the Bank originated approximately
$2.5 million of second mortgage loans. As of December 31, 1996, the Bank had
$4.4 million of residential second mortgage loans outstanding, which were
primarily home equity credit lines.
COMMERCIAL REAL ESTATE LOANS
The Bank's commercial real estate loan portfolio is comprised of two major
components, multi-family residential mortgage loans and commercial real estate
loans on office buildings, retail space, large apartment buildings and
industrial properties. The majority of the multi-family loans consist of
buildings having five to fifteen units. At December 31, 1996 the Bank had $34.5
million or 13.0% of the loan portfolio in multi-family loans and $70.9 million
or 26.6% in commercial real estate loans secured by office buildings and retail
space. Commercial real estate mortgage loans are generally written for an
initial note term of three to ten years and/or on an adjustable rate basis, and
amortized up to twenty-five years. Underwriting of commercial real estate
mortgage loans is in accordance with the Bank's Loan Policy which is reviewed
and approved annually by the Board of Directors.
During 1996, the Bank originated or purchased 79 commercial real estate
loans totaling $68.3 million with an average loan size of $864,000.
COMMERCIAL AND INDUSTRIAL BUSINESS LOANS
The Bank's commercial and industrial business loan portfolio totaled $21.6
million at December 31, 1996. During 1996, the Bank originated $10.6 million in
commercial business loans. Commercial and industrial business loans are defined
as small business loans, loans secured by business assets and secured by
owner-occupied business real estate loans.
Commercial and industrial business loans are generally written for an
initial note term of three to five years and/or on a variable rate basis.
Underwriting of commercial and industrial business loans is in accordance with
the Bank's Loan Policy which is reviewed and approved annually by the Board of
Directors.
CONSUMER LOANS
The Bank's consumer loan portfolio at December 31, 1996 totaled $3.0
million. Consumer loans consist primarily of personal consumer loans, both
secured and unsecured, education loans made under the Massachusetts Higher
Education Association Corporation Program, passbook and stock loans, home
improvement loans and personal lines of credit. Consumer loans are written over
various terms, but the average life of a personal loan is approximately two to
three years in length. The Bank within the past few months has established a new
consumer loan department and hired a consumer loan officer, allowing us to
expand our volume of consumer loan originations and improve the earnings
contributed from this area. Consumer loans are made in accordance with the
Bank's Loan Policy which is reviewed and approved annually by the Board of
Directors. For 1996, 798 consumer loans were originated totaling $4.6 million.
6
<PAGE>
RISK
The Bank's asset quality has remained high throughout both fiscal years,
1996 and 1995. The Bank, like many companies, was adversely affected during the
early 1990s by local economic conditions. However, an aggressive management plan
to sell all real estate owned and resolve problem credits was put in place and
as of December 31, 1996, the Bank had no other real estate owned. In the first
quarter of 1996, the Bank recorded a special loan loss provision of $1.0 million
as a result of a loan to the Bennett Funding Group, Inc. This company committed
a well publicised fraud against its creditors. The Bank expects to record a
recovery on this loan in 1997 and 1998 based on the recent bankruptcy court
decision. In addition, the Bank's non-performing assets totaled $1,058,195 at
December 31, 1996, compared to $930,766 at December 31, 1995 and $1,677,628 at
December 31, 1994.
DELINQUENT LOANS
As a matter of policy, the Bank does not accrue interest on loans past due
90 days or more. In addition, loans are placed on non-accrual status when, in
the judgment of management, the probability of collection of interest is deemed
unlikely. When a loan is placed in non-accrual status, i.e. non-performing
loans, previously accrued but unpaid interest is deducted from interest income.
As of December 31, 1996 the Bank had 6 loans delinquent 30 days or more totaling
$373,520.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The Bank's allowance for possible loan losses is reviewed monthly for
adequacy and is established and maintained through the provision for possible
loan losses. Provisions and charges to the allowance for possible loan losses
are based on management's assessment of a number of items including the risk
characteristics of the Company's loan portfolio, collateral and trends on
delinquencies and charge-offs. Management believes it uses the best information
available to determine the adequacy of the allowance for possible loan losses,
actual losses may differ from current estimate and future adjustment may be
required as a result of changes in economic conditions.
7
<PAGE>
The following table sets forth the Company's allowance for possible loan
losses at the dates indicated:
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995 1994 1993 1992
- ----------------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period....................... $ 2,542 $ 2,241 $ 2,481 $ 3,056 $ 2,701
Provision for loan losses............................ 1,211 300 135 2,080 2,270
---------- ---------- ---------- ---------- ----------
Balance of allowance after provision................. 3,753 2,541 2,616 5,136 4,971
Loans charged-off:
1-4 Family......................................... 266 176 219 755 445
Multifamily........................................ -- 127 484 2,235 2,195
Commercial real estate............................. 1,015 25 380 424 111
Other loans........................................ 17 11 14 15 12
---------- ---------- ---------- ---------- ----------
Total loans charged-off.......................... 1,298 339 1,097 3,429 2,763
Recoveries of loans previously charged-off........... 168 340 722 774 848
---------- ---------- ---------- ---------- ----------
Balance of allowance at end of year.................. $ 2,623 $ 2,542 $ 2,241 $ 2,481 $ 3,056
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Amount of total loans at end of year................. 263,208 208,327 163,371 135,661 134,584
Average amount of loans outstanding.................. 231,255 188,479 148,814 136,227 140,582
Loans charged-off as a percentage of average loans
outstanding........................................ 0.73% 0.18% 0.74% 2.52% 1.97%
Allowance for loan losses as a percentage of total
loans at end of year............................... 1.00% 1.22% 1.37% 1.83% 2.27%
Allowance for loan losses as a percentage of
nonperforming loans................................ 247.9% 507.6% 145.1% 114.7% 88.8%
</TABLE>
INVESTMENT ACTIVITIES
The Bank's investment portfolio is used as a source of income, an
asset/liability tool and a potential source of liquidity to fund loan growth or
deposit outflows. The portfolio consists primarily of corporate bonds,
mortgage-backed securities, U.S. Treasury obligations, federal agencies and some
common stock, consistent with the Bank's asset and liability management
activities.
At December 31, 1996, the investment portfolio including short term
investments, had a book value of $125,953,244 and a market value of
$123,963,144. Of the $125,953,244, $83,512,156 or 66.3% was designated as held
to maturity, $11,679,798 or 9.3% consisted of short term investments and the
remaining balance of $30,761,290 or 24.4% being available for sale. The
investment portfolio totaled 30.7% of the Bank's assets and provided 27.8% of
interest income. The Company's longer term strategy is to have investments total
approximately 25% of total assets.
8
<PAGE>
The following table sets forth information regarding the amortized cost and
market value of the Bank's investment at the dates indicated:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------- ---------------------------- ----------------------------
(DOLLARS IN THOUSANDS) AMORTIZED COST FAIR VALUE AMORTIZED COST FAIR VALUE AMORTIZED COST FAIR VALUE
- -------------------------------------- --------------- ----------- --------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
Government securities............... $ 24,958 $ 24,635 $ 39,947 $ 39,938 $ -- $ --
Corporate bonds..................... 6,104 6,106 -- -- 5,931 5,925
--------------- ----------- --------------- ----------- --------------- -----------
Total debt securities available
for sale........................ 31,062 30,741 39,947 39,938 5,931 5,925
Equities............................ 18 20 628 738
--------------- ----------- --------------- ----------- --------------- -----------
Total securities available for
sale............................ $ 31,080 $ 30,761 $ 40,575 $ 40,676 $ 5,931 $ 5,925
--------------- ----------- --------------- ----------- --------------- -----------
--------------- ----------- --------------- ----------- --------------- -----------
SECURITIES HELD TO MATURITY:
Government securities............... $ 22,000 $ 21,318 $ -- $ -- $ -- $ --
Mortgage backed securities.......... 61,512 60,204 77,566 76,708 100,253 92,848
--------------- ----------- --------------- ----------- --------------- -----------
Total securities held to
maturity........................ 83,512 81,522 77,566 76,708 100,253 92,848
--------------- ----------- --------------- ----------- --------------- -----------
Total investment securities....... $ 114,592 $ 112,283 $ 118,141 $ 117,384 $ 106,184 $ 98,773
--------------- ----------- --------------- ----------- --------------- -----------
--------------- ----------- --------------- ----------- --------------- -----------
</TABLE>
SOURCES OF FUNDS
In general, the Bank's primary source of funds are deposits, borrowings,
principal payments on loans and investments and maturities of loans and
investments.
DEPOSITS
The Bank's deposit products include NOW accounts, demand (checking) deposit
accounts, money market deposit accounts, savings accounts and term certificates
of deposit accounts. Deposit flows can vary significantly and are influenced by
prevailing interest rates, economic conditions and pricing by the Bank's
competitors. Deposit rates are established by management on a regular basis
after reviewing cash flows, funding requirements, competitive factors and the
general trend of interest rates.
As of December 31, 1996, and 1995, deposits totaled $337,089,927 and
$282,787,249 respectively. The following table sets forth the distribution of
the Bank's average deposits during the years indicated along with weighted
average rate by deposit category:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------- ------------------------------------- ----------------------
PERCENT OF WEIGHTED PERCENT OF WEIGHTED PERCENT OF
AVERAGE TOTAL AVERAGE AVERAGE TOTAL AVERAGE AVERAGE TOTAL
AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE AMOUNT DEPOSITS
--------- ----------- ------------- --------- ----------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Demand...................... $ 10,873 3.57% 0.00% $ 7,969 3.00% 0.00% $ 6,076 2.59%
NOW......................... 13,230 4.34% 1.50% 10,365 3.90% 1.50% 9,664 4.11%
Money market................ 35,842 11.77% 3.45% 27,459 10.32% 4.14% 5,498 2.34%
Regular savings............. 46,823 15.37% 2.93% 50,210 18.87% 2.82% 86,656 36.90%
Term certificates........... 197,853 64.95% 5.78% 170,020 63.91% 5.63% 126,968 54.06%
--------- ----------- --- --------- ----------- --- --------- -----------
Total Deposits............ $ 304,621 100.00% 4.68% $ 266,023 100.00% 4.62% $ 234,862 100.00%
--------- ----------- --- --------- ----------- --- --------- -----------
--------- ----------- --- --------- ----------- --- --------- -----------
<CAPTION>
WEIGHTED
AVERAGE
RATE
-------------
<S> <C>
Demand...................... 0.00%
NOW......................... 1.49%
Money market................ 2.66%
Regular savings............. 2.89%
Term certificates........... 4.80%
---
Total Deposits............ 3.78%
---
---
</TABLE>
9
<PAGE>
BORROWINGS
Over the past few years, the Bank has borrowed funds principally from the
Federal Home Loan Bank of Boston ("FHLB") to fund asset growth. Also, aggressive
pricing by competition for retail deposits within our market area, dictate from
a cost standpoint, that we utilize borrowings as an alternative funding source
from time to time. At December 31, 1996, the Bank had $41.7 million outstanding
in FHLB advances.
EMPLOYEES
At December 31, 1996, the Company had 112 employees, of whom, 22 were
considered part-time. Management considers its relationship with its employees
to be good. The Company's employees are not represented by any collective
bargaining group.
The Company's employee benefits for full-time employees include Employee
Stock Ownership Plan ("ESOP"), a 401K Plan, a bonus plan and master medical,
dental, life and long-term disability insurance programs. The employee benefits
are considered by management to be competitive with those offered by other
financial institutions and major employers in the Company's market area.
COMPETITION
The Company faces extensive competition, both in originating loans and in
attracting deposits, from other savings banks as well as co-operative banks,
commercial banks, savings and loan associations, credit unions, and other
financial service businesses.
Competition for loans comes primarily from other savings banks, co-operative
banks, savings and loan associations, commercial banks, and mortgage banking
companies. The Company competes for loans principally on the basis of interest
rates and loan fees, types of loans originated, processing time, and the quality
of service provided to borrowers.
In attracting deposits, the Company's primary competitors are other thrift
institutions, commercial banks, mutual funds, and credit unions. The Company's
branches attract deposits from the communities in which they are located. The
Company's attraction and retention of deposits depends principally on the
quality of its service and its ability to provide investment opportunities that
satisfy the requirements of investors with respect to rate of return, liquidity,
risk, and other factors. The Company also competes for these deposits by
offering convenient locations and convenient business hours.
Management believes that providing quality financial services and products
in a personalized manner along with maintaining a community orientation have
long been characteristics of the Company which have resulted in customer
recognition and loyalty. The Company seeks to develop multiple relationships
with its customers through an experienced service staff and offers a wide range
of financial products and services to meet the demands of the Company's existing
market area and target customer base.
FEDERAL AND STATE TAXATION
GENERAL The Company and its subsidiaries report their income on a fiscal
year basis using the accrual method of accounting and are subject to federal
income taxation in the same manner as other corporations with some exceptions.
The fiscal year end for income tax purposes is October 31st of each year while
the Company's financial statements fiscal year is presented on a calendar year
basis. The following discussion of tax matters is intended only as a summary and
does not purport to be a comprehensive description of the tax rules applicable
to the Company.
10
<PAGE>
In August of 1996, Congress passed the Small Business Job Protection Act of
1996. Included in this bill was the repeal of IRC Section 593, which allowed
thrift institutions special provisions in calculating bad debt deductions for
income tax purposes. The repeal is effective for tax years beginning after
December 31, 1995.
One effect of this legislative change is to suspend the Bank's bad debt
reserve for income tax purposes as of its base year (December 31, 1987). Any bad
debt reserve in excess of the base year amount is subject to recapture over a
six-year time period. The suspended (i.e. base year) amount is subject to
recapture upon the occurrence of certain events, such as a complete or partial
redemption of the Bank's stock or if the Bank ceases to qualify as a bank for
income tax purposes.
At December 31, 1996, the Bank's surplus includes approximately $1,410,054
of bad debt reserves, representing the base year amount, for which income taxes
have net been provided. Since the Bank does not intend to use the suspended bad
debt reserve for purposes other than to absorb the losses for which it was
established, deferred taxes in the amount of $593,304 have not been recorded
with respect to such reserve.
MASSACHUSETTS TAXATION Although the Company will file a consolidated
federal income tax return, savings institutions cannot file Massachusetts
combined returns. For 1996, savings institutions are taxed in Massachusetts at
the rate of 12.13% on their Massachusetts net income. In 1995, Massachusetts
enacted tax reform legislation applicable to banks that would reduce this rate,
over a period of time, to 10.50% in 1999. Massachusetts net income for savings
institutions is gross income from all sources, without exclusion, for the
taxable year, less the deductions, but not the credits, allowable under the
provisions of the Internal Revenue Code as in effect for the taxable years, and
taxes paid to other jurisdictions.
The Company has a Massachusetts subsidiary which is qualified to be taxed as
a security corporation for Massachusetts corporation excise tax purposes.
Accordingly, this entity is taxed in Massachusetts at a rate of up to 1.32% of
its gross income (including any intercompany dividends received from its bank
subsidiary).
SUPERVISION AND REGULATION
GENERAL As a bank holding company registered under the Bank Holding Company
Act of 1956, as amended (the "BHC Act"), the Company is subject to substantial
regulation and supervision by the Federal Reserve Board. As a state-chartered
bank, the Bank is subject to substantial regulation and supervision by the FDIC
and the Massachusetts Commissioner of Banks. Such activities are often intended
primarily for the protection of depositors or are aimed at carrying out broad
public policy goals that may not be directly related to the financial services
provided by the Company and the Bank. Federal and state banking and other laws
impose a number of requirements and restrictions on the business operations,
investments and other activities of depository institutions and their
affiliates.
GENERAL SUPERVISION AND REGULATION
The Company, as a bank holding company under the BHC Act, is registered with
the Federal Reserve Board and is regulated under the provisions of the BHC Act.
Under the BHC Act, the Company is prohibited, with certain exceptions, from
acquiring direct or indirect ownership or control of more than 5 percent of the
voting shares of any company which is not a bank and from engaging in any
business other than that of banking, managing or controlling banks or furnishing
services to, or acquiring premises for, its affiliated banks, except that the
Company may engage in and own voting shares of companies engaging in
11
<PAGE>
certain activities determined by the Federal Reserve Board, by order or by
regulation, to be so closely related to banking or to managing or controlling
banks "as to be a proper incident thereto."
The Company is required by the BHC Act to file with the Federal Reserve
Board an annual report and such additional reports as the Federal Reserve Board
may require. The Federal Reserve Board also makes periodic inspections of the
Company and its subsidiaries. The BHC Act requires every bank holding company to
obtain the prior approval of the Federal Reserve Board before it may acquire
substantially all of the assets of any bank, or ownership or control of any
voting shares of any bank, if, after such acquisition, it would own or control,
directly or indirectly, more than 5 percent of the voting shares of such bank.
Because the Company is also a bank holding company under the Massachusetts
General Laws, the Massachusetts Commissioner of Banks has authority to require
certain reports from the Company from time to time and to examine the Company
and each of its subsidiaries. The Massachusetts Commissioner of Banks also has
enforcement powers designated to prevent banks from engaging in unfair methods
of competition or unfair or deceptive acts or practices involving consumer
transactions. In 1996, Massachusetts adopted legislations which allows
well-capitalized banks to be inspected by Massachusetts regulators once every 18
months in contrast to the current yearly examination. Prior approval of the
Massachusetts Board of Bank Incorporation is also required before the Company
may acquire any additional commercial banks located in Massachusetts or in those
states which permit acquisitions of banking institutions located in their states
by Massachusetts bank holding companies.
The location of nonbank subsidiaries of the Company is not restricted
geographically under the BHC Act. In 1989, after the passage of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (the "FIRREA"), the
Federal Reserve Board amended its regulations under the BHC Act to permit bank
holding companies, as a nonbanking activity, to own and operate savings
associations without geographical restrictions. Furthermore, in 1994, the
Reigle-Neal Interstate Banking and Branch Act of 1994 (the "Interstate Banking
Act") was enacted. The Interstate Banking Act's provisions, among other things:
(i) permit bank holding companies, under certain circumstances, to acquire
control of banks in any state, subject to (a) specific maximum national and
state deposit concentration limits (b) any applicable state law provisions
requiring that the acquired bank has to have been in existence for a specified
period of up to 5 years (c) any applicable nondiscriminatory state provisions
that make an acquisition of a bank contingent upon a requirement to hold a
portion of such bank's assets available for call by state sponsored housing
entity; and (d) applicable anti-trust laws; (ii) authorize interstate mergers by
banks in different states, including branching through bank mergers, beginning
June 1, 1997, subject to the provisions noted in (i) and to any state laws that
"opt-in" as of an earlier date or "opt-out" of the provision entirely; (iii)
authorize states to enact legislation permitting interstate de novo branching;
and (iv) provide for parity of treatment for foreign bank branch activities.
In 1996, Massachusetts enacted legislation implementing the provisions of
the Interstate Banking Act. In the new legislation, Massachusetts authorized
immediate "opt-in" to interstate banking. Thus, the 1996 legislation
substantially facilitates the geographic expansion of banking in Massachusetts
and out-of-state banks. Unlike the Bank, national banks have used the power
available under a federal charter to move a bank's headquarters 30 miles or less
and by that means have accelerated the pace of interstate branching.
The 1996 legislation also allows out-of-state banks to establish and
maintain branches through a merger or consolidation with the purchase of assets
or stock of any Massachusetts bank or through de novo branch establishment or
purchase of assets or purchase of a branch without purchase of the bank which
12
<PAGE>
owns the branch, in Massachusetts, provided that such out-of-state bank is
expressly authorized to do so by the laws of the state under which it is
organized. The 1996 legislation also allows Massachusetts banks to establish and
maintain branches through a merger or consolidation with or by the purchase of
the whole or any part of the assets or stock of any out-of-state bank of through
de novo branch establishment in any other state other than Massachusetts.
Finally, the 1996 legislation prohibits the establishment of bank holding
companies and acquisition of banks and bank holding companies by Massachusetts
and out-of-state bank holding companies if the Massachusetts bank to be acquired
has been in existence less than 3 years or if, after such acquisition, the bank
holding company would control 28% of the deposits in Massachusetts (until 1998,
when the deposit limitation is increased to 30%).
The Bank, whose deposits are insured by the FDIC, and the subsidiaries of
the Bank are subject to a number of regulatory restrictions, including certain
restrictions upon: (i) extensions of credit to the Company and the Company's
nonbanking affiliates (collectively with the Company, the "Affiliates"); (ii)
the purchase of assets from Affiliates; (iii) the issuance of a guarantee or
acceptance of a letter of credit on behalf of Affiliates; and (iv) investments
in stock or other securities issued by Affiliates or acceptance thereof as
collateral for an extension of credit. In addition, all transactions among the
Company and its direct and indirect subsidiaries must be made on an arm's length
basis and valued on fair market terms. The Bank pays deposit insurance premiums
to the FDIC and the DIF of Massachusetts.
Federal Reserve Board Policy requires bank holding companies to serve as a
source of strength to their subsidiary banks by standing ready to use available
resources to provide adequate capital funds to subsidiary banks during periods
of financial stress or adversity. A bank holding company also can be liable
under certain provisions of the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") for the capital deficiencies of an
undercapitalized bank subsidiary. In the event of a bank holding company's
bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, the trustee will be
deemed to have assumed and is required to cure immediately any deficit under any
commitment by the debtor to any of the federal banking agencies to maintain the
capital of an insured depository institution, and any or all of the Subsidiary
Bank or Subsidiary Banks, and, in addition, its investment in its other
Subsidiary Bank or Subsidiary Banks would be at risk.
The Company and the Bank are also subject to certain restrictions with
respect to engaging in the issue, flotation, underwriting, public sale or
distribution of certain types of securities. In addition, under both, Section
106 of the 1970 Amendments to the BHC Act and regulations which have been issued
by the Federal Reserve Board, the Company and the Bank are prohibited from
engaging in certain tie-in arrangements in connection with any extension of
credit, lease or sale of any property or the furnishing of any service. Various
consumer loans and regulations also affect the operations of the Bank.
The Bank, which is chartered under Massachusetts law, is subject to federal
requirements to maintain cash reserves against deposits, and to state mandated
restrictions upon the nature and amount of loans which may be made by the Bank
(including restrictions upon loans to "insiders" of the Company and the Bank as
well as to restrictions relating to dividends, investments, branching and other
bank activities).
FDICIA prescribes the supervisory and regulatory actions that will be taken
against undercapitalized insured depository institutions for the purposes of
promptly resolving problems at such institutions or at the least possible
long-term loss to the FDIC. Five categories of depository institutions have been
established by FDICIA in accordance with their capital levels: "well
capitalized", "adequately capitalized", "undercapitalized", "significantly
undercapitalized", and "critically undercapitalized." The federal banking
13
<PAGE>
agencies have adopted uniform regulations to implement the prompt regulatory
action provisions of FDICIA.
Under the uniform regulations, a well capitalized institution has a minimum
Tier 1 capital-to-total risk-based assets ratio of 6 percent, a minimum total
capital-to-total risk-based ratio of 10 percent and a minimum leverage ratio of
5 percent and is not subject to any written agreement, order or capital
directive. An adequately capitalized institution meets all of its minimum
capital requirements under the existing capital adequacy guidelines. An
undercapitalized institution is one that fails to meet any one of the three
minimum capital requirements. A significantly undercapitalized institution has a
Tier 1 capital-to-total risk-based assets ratio of less than 3 percent, a Tier 1
leverage ratio of less than 3 percent or a total capital-to-total risk-based
assets ratio of less than 6 percent. A critically undercapitalized institution
has a Tier 1 leverage ratio of 2 percent of less. An institution whose capital
ratios meet the criteria for a well capitalized institution may be classified as
an adequately capitalized institution due to qualitative and/or quantitative
factors other than capital adequacy. An adequately capitalized institution or
undercapitalized institution, may under certain circumstances, be required to
comply with supervisory action as if it were in the next lower category.
An undercapitalized institution is required to submit a capital restoration
plan for acceptance by the appropriate federal banking agency and will be
subject to close monitoring of both its condition and compliance with, and
progress made pursuant to, its capital restoration plan. The capital restoration
plan will be accepted only if (i) it specifies the steps that will be taken to
become adequately capitalized and the activities in which the institution will
engage (ii) it is based upon realistic assumptions and it is likely the
activities will succeed in restoring the institution's capital (iii) it does not
appreciably increase the institution's risk exposure and (iv) each holding
company that controls the institution provides appropriate assurances of
performance and guaranties that the institution will comply with the plan until
the institution is adequately capitalized on an average basis for each of four
consecutive quarters. Liability under the guaranty is the lesser of (i) five
percent of the institution's total assets at the time it became undercapitalized
and (ii) the amount necessary to bring the institution into compliance with all
applicable capital standards as of the time the institution fails to comply with
the plan. An institution that fails to submit an acceptable plan may be placed
into conservatorship or receivership unless its capital restoration plan is
accepted. An undercapitalized institution will also be subject to restrictions
on asset growth, acquisitions, branching, new activities, capital distributions
and the payment of management fees.
FDICIA requires the appropriate regulatory agencies to take one or more
specific actions against significantly undercapitalized institutions and
undercapitalized institutions that fail to submit acceptable capital restoration
plans, which actions include but are not limited to: (i) requiring the
institution to sell shares or other obligations to raise capital; (ii) limiting
deposit interest rates; (iii) requiring the election of a new board of directors
and/or dismissing senior executive officers and directors who held such
positions for more than 180 days before the institution became undercapitalized;
(iv) prohibiting receipt of deposits from correspondent banks; (v) requiring
divestiture or liquidation of one or more subsidiaries; and (vi) requiring the
parent company to divest the institution if such divestiture will improve the
institution's financial condition and future prospects. In addition, an insured
institution that receives a less-than-satisfactory rating for asset quality,
management, earnings or liquidity may be deemed by its appropriate federal
banking regulator to be engaging in an unsafe or unsound practice for purposes
of issuing an order to cease and desist or to take certain affirmative actions.
If the unsafe or unsound practice is likely to weaken the institution, cause
insolvency or substantial dissipation or assets or earnings or otherwise
seriously prejudice the interest of depositors or the FDIC, a receiver or
conservator could be appointed.
14
<PAGE>
Finally, subject to certain exceptions, FDICIA requires critically
undercapitalized institutions to be placed into receivership or conservatorship
within 90 days after becoming critically undercapitalized.
The Federal Reserve Board has indicated that it will consult with each
federal banking agency regulating the bank subsidiaries of a holding company to
monitor required supervisory actions, and based upon an assessment of these
developments, will take appropriate action at the holding company level.
Under FDICIA, federal bank regulators are also required to see that changes
are made in the operations and/or management of a bank or bank holding company
if the financial institution is deemed to be "undercapitalized." Under FDICIA, a
depository institution that is "adequately capitalized" but not "well
capitalized" is generally prohibited from accepting brokered deposits and
offering interest rates on deposits higher than the prevailing rates in its
market. In addition, "pass through" insurance coverage may not be available for
certain employee benefit accounts.
Additional regulations adopted pursuant to FDICIA include (i) real estate
lending standards for depository institutions, which provide guidelines
concerning loan-to-value ratios for various types of real estate loans; (ii)
rules requiring depository institutions to develop and implement internal
procedures to evaluate and control credit and settlement exposure to their
correspondent banks; (iii) rules implementing the FDICIA provisions prohibiting,
with certain exceptions, insured state banks from making equity investments or
engaging in activities of the types and amounts not permissible for national
banks; and (iv) rules and guidelines for enhanced financial reporting and audit
requirements. Rules currently proposed for adoption pursuant to FDICIA include
(i) revisions to the risk-based capital guidelines regarding interest rate risk,
concentrations of credit risk and the risk posed by "nontraditional activities";
and (ii) rules addressing various "safety and soundness" standards.
ITEM 2. PROPERTIES
The Company's headquarters is located at 730 Hancock Street, Quincy,
Massachusetts. The Bank has branches located at 101 Federal Street, Boston,
Massachusetts, 51 Commercial Street, Braintree, Massachusetts, 1150 Washington
Street, Weymouth, Massachusetts, 274 Main Street, Hingham Massachusetts, 71 Main
Street, Hingham, Massachusetts, 397 Washington Street, Stoughton, Massachusetts,
63 Franklin Street, Quincy, Massachusetts and an educational facility in Quincy
High School located at 52 Coddington Street, Quincy, Massachusetts. The Bank's
main office is at 731 Hancock Street, Quincy, Massachusetts. The Bank's
headquarters in Quincy, the Boston facility, and Stoughton facility are leased
premises. The Braintree, Weymouth, Hingham and Franklin Street, Quincy
facilities, as well as the building at 730 Hancock Street are owned by the Bank.
The Bank also has three Loan Centers, located at 51 Commercial Street,
Braintree, Massachusetts, 731 Hancock Street, Quincy, Massachusetts and 730
Hancock Street, Quincy, Massachusetts.
15
<PAGE>
The following table sets forth the location of the Bank's offices, as well
as certain information relating to offices at December 31, 1996:
<TABLE>
<CAPTION>
CURRENT
YEAR SQUARE OWNED/ TERM
ACQUIRED FEET LEASED EXPIRES RENEWAL/OPTIONS
----------- --------- --------- ----------- -------------------------------
<S> <C> <C> <C> <C> <C>
BRANCH................................. 1989 2,060 Leased 1999 2/five year terms
101 Federal St.
Boston, MA
BRANCH................................. 1995 2,200 Leased 2005 3/five year terms
397 Washington St.
Stoughton, MA
BRANCH................................. 1993 360 Leased 1997 1 year renewable agreement
Quincy High School
52 Coddington St.
Quincy, MA
MAIN OFFICE............................ 1986 10,100 Leased 2002 3/five year terms
731 Hancock St.
Quincy, MA
BRANCH................................. 1979 4,970 Owned
51 Commercial St.
Braintree, MA
BRANCH................................. 1991 1,800 Owned
1150 Washington St.
Weymouth, MA
BRANCH................................. 1995 2,100 Owned
274 Main Street
Hingham, MA
BRANCH................................. 1996 2,200 Owned
71 Main Street
Hingham, MA
BRANCH................................. 1996 3,050 Owned
63 Franklin St.
Quincy, MA
EXECUTIVE OFFICES...................... 1994 6,000 Owned
730 Hancock Street
Quincy, MA
</TABLE>
16
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company and the Bank are defendants in legal actions in the normal
course of business. In the opinion of the Company's management the resolution of
these matters is not expected to have a material adverse effect on the
consolidated financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded over the counter on the NASDAQ National
Market System under the symbol "EIRE." The stock is listed in The Wall Street
Journal as "EmeraldBcp" and in local papers as "EmeraldBcp".
The stock of Emerald Isle commenced trading on October 1, 1996.
<TABLE>
<CAPTION>
STOCK PRICE CASH
---------------- DIVIDENDS
QUARTER ENDED HIGH LOW PAID (1)
- -------------------------------------------------- ------ ------ -----------
<S> <C> <C> <C>
December 31, 1996................................. $ 20 $ 115/2 $ 0.06
September 30, 1996................................ 315/4 14 0.06
June 30, 1996..................................... 115/2 14 0.05
March 31, 1996.................................... 116/2 15 0.05
December 31, 1995................................. $ 118/4 $ 315/4 $ 0.05
September 30, 1995................................ 117/8 114/2 0.05
June 30, 1995..................................... 314/4 112/2 0.04
March 31, 1995.................................... 113/2 110/8 0.04
</TABLE>
- ------------------------
(1) Split adjusted
As of February 28, 1997, the Company had 436 stockholders of record and
2,234,756 shares of its common stock outstanding. The total number of shares
stockholders hold in "street" name through various brokerage firms was
1,305,337. The shares of common stock outstanding at February 28, 1997 takes
into consideration the five for four stock split declared in December of 1996
and payable February 3, 1997.
In considering the declaration of future dividends, the Company's Board of
Directors will consider a number of factors including the capital requirements
of the Company, regulatory limitations, the Company's results of operations and
financial condition, tax considerations and general economic conditions. While
it is currently the Board's intention to continue to favorably consider future
dividend declarations, no assurances can be given that dividends will continue
to be paid or will continue to be paid at the existing level.
17
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table represents selected consolidated financial data of the
Company for the five years ended December 31, 1996. The selected consolidated
financial data set forth below does not purport to be complete and should be
read in conjunction with, and is qualified in its entirety by, the more detailed
information, including the Consolidated Financial Statements and Notes thereto,
included elsewhere herein.
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995 1994 1993 1992
- ------------------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Balance Sheet Data:
Total assets............................... $ 409,639 $ 346,865 $ 286,429 $ 249,827 $ 229,792
Loans, net................................. 263,208 208,327 163,371 135,661 134,584
Securities................................. 128,624 125,300 111,582 105,735 80,449
Deposits................................... 337,090 282,787 256,340 221,950 205,921
Borrowings................................. 41,668 38,968 9,000 8,530 8,531
Stockholders' equity....................... 27,936 22,825 19,786 17,312 13,954
Book value per share....................... $ 12.64 $ 11.92 $ 10.94 $ 10.34 $ 8.71
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31 1996 1995 1994 1993 1992
- ------------------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Operating Data:
Interest and dividend income............... $ 28,783 $ 23,949 $ 18,728 $ 18,157 $ 18,805
Interest expense........................... 16,737 13,720 9,498 8,950 10,569
------------ ------------ ------------ ------------ ------------
Net interest income........................ 12,046 10,229 9,230 9,207 8,236
Add
Noninterest income......................... 804 579 549 719 364
Gain (loss) on sale of loans............... -- (52) (1) 20 320
Less
Provision for possible loan losses......... 1,211 300 135 2,080 2,270
Noninterest expenses....................... 7,656 6,552 6,209 5,680 4,835
------------ ------------ ------------ ------------ ------------
Pretax core earnings....................... 3,983 3,904 3,434 2,186 1,815
Net gain(loss) on sale of securities....... (39) 91 193 3,952 2,188
Gain on sale of loan servicing............. -- 764 -- -- --
Loss on sale of fixed assets............... -- (50) -- -- --
Net loss on sale of other real estate
owned.................................... (38) (43) (170) (666) (511)
Real estate owned expense.................. 80 301 387 1,194 1,643
------------ ------------ ------------ ------------ ------------
Income before income taxes................. 3,826 4,365 3,070 4,278 1,849
Provision for income taxes................. 1,445 1,646 1,002 1,198 265
------------ ------------ ------------ ------------ ------------
Net income................................. $ 2,381 $ 2,719 $ 2,068 $ 3,080 $ 1,584
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Earnings per share......................... $ 1.14 $ 1.41 $ 1.13 $ 1.71 $ 0.97
Weighted average number of common shares
and common equivalents................... 2,091,669 1,931,621 1,835,948 1,796,364 1,633,262
Dividends declared per share............... $ 0.22 $ 0.18 $ -- $ -- $ --
</TABLE>
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company commenced operations as the holding company of The Hibernia
Savings Bank on October 1, 1996. Accordingly, under pooling of interests
accounting, the information presented herein for 1996 and 1995 represents the
financial condition and results of operations of the Company and its wholly
owned Bank and subsidiaries on a consolidated basis.
The Company's results of operations are dependent primarily on net interest
income, which is the difference between (i) the interest income earned on loans
and investment securities and (ii) the cost of funds, which consists of the
interest paid on deposits and borrowings. Net interest income can be adversely
affected by changes in interest rates, interest rate caps in effect on
adjustable rate loans in the portfolio, and loan and mortgage-backed security
prepayments.
The Company's net income is also affected by non-interest income, such as
service charges and fees and gains or losses on asset sales, and operating
expenses, which consist primarily of compensation and benefits, occupancy
expenses, real estate owned operations, other general and administrative
expenses. The earnings of the Company are also significantly affected by general
economic and competitive conditions, particularly changes in market interest
rates, government policies and actions of regulatory authorities.
The Bank has retail banking facilities in Boston, Braintree, Quincy,
Weymouth, Hingham and Stoughton and considers its primary market area to be
these six communities and the surrounding cities and towns south of Boston. In
addition, the Bank maintains Loan Centers in Braintree and Quincy. The Bank is
primarily engaged in the lending business with an emphasis on attracting retail
deposits through its branch network. The Bank's ultimate success is very
dependent on the conditions of both the local economy and the local real estate
market.
ASSET/LIABILITY MANAGEMENT
The Company's Asset/Liability Committee ("ALCO"), under the authority of the
Board of Directors, has established guidelines within which management operates
to meet liquidity needs. These liquidity needs are defined by the needs of the
depositors and borrowers of the Company. The Company's primary source of funds
is its deposit base. Management uses the investment portfolio and borrowing
capabilities to manage the liquidity position and interest rate risk position,
in its efforts to maximize interest income within the ALCO's guidelines.
The ALCO consists of members of the senior management. Meetings are held on
a monthly basis and topics of discussion include, but are not limited to, levels
and direction of interest rates, deposit flows, loan demand, investment
portfolio and borrowed funds positions, interest rate sensitivity or "gap"
position and other variables which impact the Company's interest rate
sensitivity position.
INTEREST RATE SENSITIVITY ANALYSIS
The matching of assets and liabilities are analyzed by examining the extent
to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is considered to be interest rate sensitive within a specific time
period if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount of
interest-earning assets anticipated, based upon certain assumptions, to mature
or reprice within a specific time period. A gap is considered positive when the
amount of interest rate sensitive assets
19
<PAGE>
maturing or repricing within a period exceeds the amount of interest rate
sensitive liabilities maturing or repricing within that period; a gap is
considered negative when the converse occurs. During a decreasing interest rate
environment, a negative gap would tend to result in an increase in net interest
income while a positive gap would tend to adversely affect net interest income.
In a rising interest rate environment, an institution with a positive gap would
generally expect an increase in net interest income, whereas an institution with
a negative gap would generally be expected to experience the opposite result.
The following "gap table" sets forth maturity and repricing information
concerning the Company's interest sensitive assets and liabilities as of
December 31, 1996. The assumptions utilized to place the assets and liabilities
in the appropriate time frames are standard methods used within the banking
industry. Fixed rate, fixed term investment securities are assigned to the time
frames in which they are scheduled to mature. Adjustable rate investment
securities have been placed in the time frames in which they are scheduled to
reprice. Similarly, adjustable rate mortgage-backed securities and loans have
been allocated among the various periods in which they reprice. Deposit
maturities for NOW accounts, money market accounts and passbook savings are
assigned to time frames based on the actual experience of the Bank. Variable
rate certificates of deposits and borrowings were allocated according to the
applicable adjustment dates. Fixed rate certificates and borrowings were
allocated to the time frames in which they mature. The assumptions utilized for
this exercise are believed to be accurate and meaningful, but may not ultimately
reflect the actual prepayments, withdrawals or repricing experienced by the
Company.
The Company's interest sensitive assets were $393.9 million and the interest
sensitive liabilities were $365.8 million as of December 31, 1996. At that date,
the one year cumulative net interest rate sensitivity gap was ($29.4) million or
(6.06%) of assets.
<TABLE>
<CAPTION>
1-180 181-364 1-2 2-3 3-5 5-10 OVER 10
INTEREST RATE SENSITIVITY PERIOD DAYS DAYS YEARS YEARS YEARS YEARS YEARS
- -------------------------------------------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
DOLLARS IN THOUSANDS
Earning assets:
Fixed rate mortgages........................ $ 201 $ 347 $ 87 $ 488 $ 786 $ 3,517 $ 15,999
Variable rate mortgages..................... 84,255 34,472 17,306 19,805 34,499 7,368 21,636
Commercial loans............................ 15,645 336 375 535 2,755 556 998
Consumer loans.............................. 1,679 154 133 280 517 13 250
Investments................................. 28,428 8,669 17,338 11,073 15,764 5,000 42,670
--------- --------- --------- --------- --------- --------- -----------
Total earning assets........................ 130,208 43,978 35,239 32,181 54,321 16,454 81,553
Interest-bearing liabilities:
NOW deposits and Money Market Accounts...... 10,790 10,791 21,591 -- -- 11,461 --
Passbook and escrow deposits................ 7,121 7,121 14,242 105 247 20,307 --
Time deposits............................... 96,712 55,471 44,576 11,729 9,451 2,378 --
Borrowed funds.............................. 11,000 -- 20,000 3,000 7,668 -- --
--------- --------- --------- --------- --------- --------- -----------
Total interest-bearing liabilities.......... 125,623 73,383 100,409 14,834 17,366 34,146 --
--------- --------- --------- --------- --------- --------- -----------
Interest rate sensitivity gap............... $ 4,585 $ (29,405) $ (65,170) $ 17,347 $ 36,955 $ (17,692) $ 81,553
--------- --------- --------- --------- --------- --------- -----------
Cumulative Gap.............................. $ -- $ (24,820) $ (89,990) $ (72,643) $ (35,688) $ (53,380) $ 28,173
--------- --------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- --------- -----------
<CAPTION>
INTEREST RATE SENSITIVITY PERIOD TOTAL
- -------------------------------------------- ---------
<S> <C>
Earning assets:
Fixed rate mortgages........................ $ 21,425
Variable rate mortgages..................... 219,341
Commercial loans............................ 21,200
Consumer loans.............................. 3,026
Investments................................. 128,942
---------
Total earning assets........................ 393,934
Interest-bearing liabilities:
NOW deposits and Money Market Accounts...... 54,633
Passbook and escrow deposits................ 49,143
Time deposits............................... 220,317
Borrowed funds.............................. 41,668
---------
Total interest-bearing liabilities.......... 365,761
---------
Interest rate sensitivity gap............... $ 28,173
---------
Cumulative Gap.............................. $ --
---------
---------
</TABLE>
ANALYSIS OF FINANCIAL CONDITION
Total assets of the Bank increased by $62,773,552 or 18.1% to $409,638,765
at December 31, 1996 from $346,865,213 as of December 31, 1996. The growth in
assets was primarily due to the increase achieved in the Bank's loans
outstanding.
20
<PAGE>
The securities portfolio, which includes securities held to maturity,
securities available for sale and short-term investments, increased by
$3,323,674 or 12.3% and totaled $128,623,944 or 31.4% of total assets at
December 31, 1996 compared to $125,300,270 or 36.1% of total assets at December
31, 1995. The Bank utilizes its securities portfolio as a source of liquidity to
fund loans and meet short-term cash needs. At December 31, 1996 the Bank's
investment portfolio included Federal Home Loan Mortgage Corporation (FHLMC)
Participation Certificates classified as held to maturity. The FHLMC
Participation Certificates owned are predominantly short-term with maturities in
the four to six year range. The cash flow received from these obligations is
used primarily to fund the growth in commercial business loans and the growth in
residential and commercial mortgage loans. By maturity, the investment portfolio
can, at December 31, 1996, be broken down into three major components. The first
component, securities held to maturity, consists primarily of Federal Home
Mortgage Corporation Participation Certificates and totaled $83,512,156 or 64.9%
of total securities, all of which mature within six years. These obligations,
although being held to maturity, can be used as collateral for short-term
borrowings up to approximately 80% of their market value if required. The second
component consists of callable FHLB and FHLMC Bonds and Notes and Common Stock,
which totaled $30,761,290 or 23.9% of total securities and which are designated
as available for sale. The third component is short-term investments and FHLB
stock, totaling $14,350,498 or 11.2% of total securities. With the exception of
securities designated as available for sale, the Bank's intention is to hold all
investment securities to maturity, and accordingly, investments are carried at
cost, adjusted for amortization of premiums and accretion of discounts.
Loans continue to be the primary earning asset of the Bank and represent
64.3% of total assets. As of December 31, 1996, 91.9% of total loans outstanding
or $241,191,011 were secured by residential and commercial real estate, and of
this amount, $136,049,414 or 56.4% were secured by residential properties.
During 1996, our efforts to originate residential and commercial real estate
loans and commercial business loans produced substantial growth in our asset
size. In 1996, the Bank originated $128,198,000 in residential and commercial
real estate mortgage loans, of which only $18,315,000 were sold into the
secondary market. In addition, the Bank originated $10,600,000 in business loans
and $4,600,000 in consumer loans. As a result, net loans for 1996 increased by
$54,881,466 or 26.3% to $263,208,189 at December 31, 1996 from $208,326,723 at
December 31, 1995.
The provision for possible loan losses totaled was $1,211,333 in 1996 as
compared to $300,000 in 1995 and $135,000 in 1994. The increase in the loan loss
provision for 1996 was due to a one time special loan loss provision of $1.0
million associated with Bennett Funding Group, Inc. For 1996, the Bank had net
charge offs of $1,129,924 compared to net recoveries of $711 in 1995 and net
charge offs of $374,595 in 1994. As of December 31, 1996, the Bank's allowance
for possible loan losses totaled $2,623,406 as compared to $2,541,997 at
December 31, 1995.
Continued uncertainty exists as to the ultimate realization in full of
certain of the Bank's loans due to the current conditions of the Massachusetts
economy. Based upon management's assessment of the quality of loan production,
and the current condition of the Massachusetts economy, management believes that
the allowance for loan losses as of December 31, 1996 is adequate to absorb the
current estimation of future losses in the loan portfolio. However, any
deterioration in future periods could result in the Bank experiencing increased
levels of nonperforming loans and charge-offs, and additional provisions for
loan losses may be required.
Other real estate owned decreased by $430,000 to $0 at December 31, 1996
from $430,000 at December 31, 1995. Other real estate owned consists of assets
that were acquired by foreclosure, or assets that were acquired by the
acceptance of a deed in lieu of foreclosure during the year. Other real estate
21
<PAGE>
owned is carried on the Bank's books at the lower of the preforeclosure loan
balance or the fair value less cost to sell.
During 1996, deposits increased by $54,302,678 or 19.2% to $337,089,927 at
December 31, 1996 from $282,787,249 at December 31, 1995. The growth in deposits
during 1996 was primarily in term certificates of deposits which increased by
$39,398,992. The remainder of our deposit growth was in retail deposits which
increased by $14,903,686 during 1996. Money market deposits increased by
$3,991,624 or 11.8% to $37,811,552 in 1996 from $33,819,928 in 1995. In
addition, NOW and demand deposits increased by $9,178,665 or 41.7% to
$31,190,026 in 1996 from $22,011,361 in 1995. Other savings for the year
increased by $1,733,397 to $47,771,658.
The Bank uses borrowed funds, primarily advances from the Federal Home Loan
Bank as an alternative funding source for immediate lending or investment
opportunities or as a means of controlling its cost of funds. The Bank pays down
borrowings in accordance with the respective contracted borrowing agreements and
as cash flow warrants.
RESULTS OF OPERATIONS--COMPARISON OF FISCAL YEAR ENDED DECEMBER 31, 1996 AND
1995
Net interest margins were negatively impacted by the overall increase in our
cost of funds in 1996 which increased by 7 basis points to 4.62% in 1996
compared to 4.55% in 1995. However, net income was positively impacted by the
increase in the Bank's loan portfolio which increased by $54,881,466 or 26.3% to
$263,208,189 at year end 1996 compared to $208,326,723 in 1995. Total earning
assets increased by $58,172,155 or 17.4% to $393,934,033 at December 31, 1996.
As a result, net interest income increased by $1,816,606 or 17.8% to $12,045,839
for 1996 compared to $10,229,233 for 1995.
Noninterest income was comprised of fees on checking and savings related
services, gains and losses on sales of securities, loans, other real estate
owned, and miscellaneous other items. Noninterest income totaled $727,532 in
1996 compared to $1,288,714 in 1995. The net decrease in noninterest income came
primarily from gains from the sale of loan servicing which totaled $763,806 in
1995 as compared to no gains in 1996. Customer service fees also increased to
$752,609 in 1996 from $463,518 in 1995.
Noninterest expenses in 1996 increased by $883,802 or 12.9% to $7,736,300
compared to total noninterest expenses of $6,852,498 in 1995. Much of this
increase can be attributed to the costs associated with the opening of two
additional branches in 1996, along with the two branch locations opened in 1995.
In May 1996, we opened our eighth branch at 71 Main Street in Hingham. We opened
our ninth branch on November 23, 1996 at 63 Franklin Street, Quincy.
Consequently, salaries and employee benefits increased by $796,011 or 23.3% to
$4,212,519 in 1996 from $3,416,508 in 1995. Occupancy and equipment expenses
increased by $337,577 or 33.5% to $1,346,111 in 1996 from $1,008,534 in 1995.
This increase was partially offset by a reduction in OREO expenses which
declined by $220,902 or 73.4% from $300,796 in 1995. In total, noninterest
expenses as a percentage of average assets declined to 2.07% in 1996 from 2.21%
in 1995.
The Bank's effective tax rate was 37.8% in 1996, which is less than the
combined federal and state statutory rate, due to rehabilitation and low income
housing credits and various other differences in recognition of income as
allowed under the Internal Revenue Code.
For the year ended December 31, 1996, the Bank's net income was $2,380,869
or $1.14 per share, based on 2,091,669 weighted average shares and common stock
equivalents outstanding compared to net income of $2,719,235 or $1.41 per share,
based on 1,931,621 weighted average shares and common stock
22
<PAGE>
equivalents outstanding for the year ended December 31, 1995. Finally, as a
result of 1996 earnings of $2,380,869 and the issuance of additional capital
stock through the various purchase plans and the two private placements, the
Bank experienced an increase of $5,111,711 in stockholders' equity to
$27,936,387 at December 31, 1996 from $22,824,616 at December 31, 1995. Over
this period, the Bank's leverage capital ratio increased to 6.8% at December 31,
1996 from 6.6% at December 31, 1995.
AVERAGE BALANCE SHEET AND YIELD ANALYSIS
The following table sets forth the components of the Bank's average
balances, net interest and fee income, interest rate spread and net interest
margin for the years indicated.
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------------- ----------------------------------- ---------
AVERAGE INCOME/ AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE YIELD/ RATE BALANCE EXPENSE YIELD/ RATE BALANCE
--------- ----------- ----- --------- ----------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment securities:
Bonds and obligations.............. $ 46,315 $ 3,481 7.52% $ 10,158 $ 796 7.84% $ 271
Mortgage-backed securities........... 74,298 4,010 5.40% 93,438 5,088 5.45% 102,492
Other securities................... 6,904 346 5.01% 3,206 228 7.11% 1,812
--------- ----------- ----- --------- ----------- ----- ---------
Total investment securities........ 127,517 7,837 6.15% 106,802 6,112 5.72% 104,575
Loans................................ 231,255 20,771 8.98% 188,479 17,472 9.27% 148,814
Other interest-bearing deposits...... 3,336 175 5.22% 6,126 354 5.78% 2,117
Federal funds sold................... 0 0 0.00% 207 11 5.31% 621
--------- ----------- ----- --------- ----------- ----- ---------
Total earning assets............... 362,108 28,783 7.95% 301,614 23,949 7.94% 256,127
Allowance for possible loan losses... (2,413) (2,341) (2,357)
Cash and due from banks.............. 3,479 2,586 2,263
Other assets......................... 10,610 8,898 8,490
--------- --------- ---------
Total assets......................... $ 373,784 $ 310,757 $ 264,523
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
NOW accounts....................... $ 13,230 $ 199 1.50% $ 10,365 $ 155 1.50% $ 9,664
Savings Accounts..................... 46,823 1,372 2.93% 50,210 1,415 2.82% 86,656
Money market accounts.............. 35,842 1,235 3.45% 27,459 1136 4.14% 5,498
Term certificates.................. 197,853 11,437 5.78% 170,020 9,578 5.63% 126,968
--------- ----------- ----- --------- ----------- ----- ---------
Total deposits....................... 293,748 14,243 4.85% 258,054 12,284 4.76% 228,786
Borrowed funds....................... 43,253 2,494 5.77% 22,395 1436 6.41% 10,168
--------- ----------- ----- --------- ----------- ----- ---------
Total interest-bearing
liabilities...................... 337,001 16,737 4.97% 280,449 13,720 4.89% 238,954
Demand deposit accounts.............. 10,873 7,969 6,076
Other liabilities.................... 602 439 660
Stockholders' equity................. 25,308 21,900 18,833
--------- --------- ---------
Total liabilities and stockholders'
equity........................... $ 373,784 $ 310,757 $ 264,523
--------- --------- ---------
--------- --------- ---------
Net interest income.................. 12,046 10,229
----------- -----------
----------- -----------
Interest rate spread................. 2.98% 3.05%
----- -----
----- -----
Net interest margin.................. 3.33% 3.39%
----- -----
----- -----
Cost of funds to average earning
assets............................. 4.62% 4.55%
Average earning assets to Average
total assets....................... 96.88% 97.06%
<CAPTION>
INCOME/
EXPENSE YIELD/ RATE
----------- -----
<S> <C> <C>
ASSETS
Investment securities:
Bonds and obligations.............. $ 21 7.75%
Mortgage-backed securities........... 5,169 5.04%
Other securities................... 150 8.28%
----------- -----
Total investment securities........ 5,340 5.11%
Loans................................ 13,296 8.93%
Other interest-bearing deposits...... 73 3.45%
Federal funds sold................... 19 3.06%
----------- -----
Total earning assets............... 18,728 7.31%
Allowance for possible loan losses...
Cash and due from banks..............
Other assets.........................
Total assets.........................
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
NOW accounts....................... $ 144 1.49%
Savings Accounts..................... 2,507 2.89%
Money market accounts.............. 146 2.66%
Term certificates.................. 6,090 4.80%
----------- -----
Total deposits....................... 8,887 3.88%
Borrowed funds....................... 611 6.01%
----------- -----
Total interest-bearing
liabilities...................... 9,498 3.97%
Demand deposit accounts..............
Other liabilities....................
Stockholders' equity.................
Total liabilities and stockholders'
equity...........................
Net interest income.................. 9,230
-----------
-----------
Interest rate spread................. 3.34%
-----
-----
Net interest margin.................. 3.60%
-----
-----
Cost of funds to average earning
assets............................. 3.71%
Average earning assets to Average
total assets....................... 96.83%
</TABLE>
23
<PAGE>
RATE/VOLUME ANALYSIS
The following table shows changes in the Bank's net interest income
attributable to the change in interest rates and the change in the volume of
interest-bearing assets and liabilities. Amounts attributed to the change in
rates are based upon the change in rate multiplied by the prior year's volume.
Amounts attributed to the change in volume are based upon the change in volume
multiplied by the prior year's rate. The combined effect of changes in both
volume and rate, which cannot be separately identified, has been allocated
proportionately.
<TABLE>
<CAPTION>
1996 VS 1995 1995 VS 1994
------------------------------- -------------------------------
INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
------------------------------- -------------------------------
YEAR ENDED DECEMBER 31, VOLUME RATE TOTAL VOLUME RATE TOTAL
- -------------------------------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest income
Loans................................................... $ 3,904 $ (605) $ 3,299 $ 3,610 $ 566 $ 4,176
Investments............................................. 1,050 484 1,534 314 731 1,045
--------- --------- --------- --------- --------- ---------
Total interest income................................... 4,953 (120) 4,833 3,924 1,297 5,221
--------- --------- --------- --------- --------- ---------
Interest Expense
Deposits................................................ 1,715 244 1,959 1,265 2,132 3,397
Borrowed funds.......................................... 1,270 (212) 1,058 759 66 825
--------- --------- --------- --------- --------- ---------
Total interest expense.................................. 2,985 32 3,017 2,024 2,198 4,222
--------- --------- --------- --------- --------- ---------
Net interest income..................................... $ 1,968 $ (152) $ 1,816 $ 1,900 $ (901) $ 999
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
The earnings of the Bank depend primarily upon the difference between
interest and dividend income earned on its loan and investment portfolios and
the interest expense paid on its deposits and borrowings. Total interest income
increased by $4,833,862 or 20.2% from $23,949,001 for the year ended December
31, 1995 to $28,782,863 for the year ended December 31, 1996. Total interest
expense increased by $3,017,256 or 22.0% from $13,719,768 for the year ended
December 31, 1995 to $16,737,024 for the year ended December 31, 1996. For the
year ended December 31, 1996, the Bank's net interest income totaled $12,045,839
representing an increase of $1,816,606 or 17.8% compared to $10,229,233 for the
year ended December 31, 1995.
The gross yield on average earning assets was 8.0% for 1996 compared to 7.9%
in 1995. Interest expense as a percentage of average interest-bearing
liabilities in 1996 was 5.0% compared to 4.9% in 1995. This resulted in a net
interest spread of 3.0% in 1996 and 3.0% in 1995. Interest expense as a
percentage of average earning assets in 1996 was 4.6% compared to 4.6% in 1995.
This resulted in a net interest margin of 3.3% in 1996 and 3.4% in 1995.
RESULTS OF OPERATIONS--COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 1995 AND
1994
Net interest margins were negatively impacted by the overall increase in
interest rates in 1995. However, net income was positively impacted by the
increase in the Bank's loan portfolio resulting in increased net interest
income. In addition, pretax core earnings were positively impacted by the
substantial decline in net charge-offs and the resultant reduction in loan loss
provisions.
For 1995, noninterest income was comprised of fees on checking and savings
related services, gains and losses on sales of securities, loans and other real
estate owned, and miscellaneous other items.
24
<PAGE>
Noninterest income totaled $1,288,714 in 1995 compared to $570,926 in 1994. The
net increase in noninterest income was primarily from gains from the sale of
loan servicing which totaled $763,806 in 1995 as compared to no gains in 1994.
We also experienced an increase in customer service fees to $463,518 in 1995
from $413,058 in 1994.
Noninterest expenses in 1995 increased by $256,427 or 3.9% to $6,852,498
compared to total noninterest expenses of $6,596,071 in 1994. Much of this
increase can be attributed to the costs associated with the opening of two
additional branches in 1995 and the expansion of our lending staff which was
necessary in order to accommodate the growth in loans outstanding achieved. On
July 17, 1995, we opened a branch at 274 Main Street in Hingham. We opened our
seventh branch on December 21, 1995 at 397 Washington Street, Stoughton.
Consequently, salaries and employee benefits increased by $359,379 or 11.8% to
$3,416,508 in 1995 from $3,057,129 in 1994. Occupancy and equipment expenses
increased by $124,895 or 14.1% to $1,008,534 in 1995 from $883,639 in 1994. This
increase was partially offset by a reduction in OREO expenses which declined by
$86,262 or 22.3% from $387,058 in 1994 and a reduction in FDIC insurance expense
which declined by $290,279 or 46.6% from $623,431 in 1994 to $333,152 in 1995.
In total, noninterest expenses as a percentage of average assets declined to
2.2% in 1995 from 2.5% in 1994.
The Bank's effective tax rate was 37.7% in 1995, which is less than the
combined federal and state statutory rate, due to rehabilitation and low income
housing credits and various other differences in recognition of income as
allowed under the Internal Revenue Code.
The Bank, in 1995, recorded pretax core earnings of $3,904,144 as compared
to core earnings of $3,433,615 in 1994 and $2,186,435 in 1993. For the year
ended December 31, 1995, the Bank's net income was $2,719,235 or $1.41 per
share, based on 1,931,621 weighted average shares and common stock equivalents
outstanding compared to net income of $2,067,626 or $1.13 per share, based on
1,835,948 weighted average shares and common stock equivalents outstanding for
the year ended December 31, 1994. Finally, as a result of 1995 earnings of
$2,719,235 and the issuance of additional capital stock, the Bank experienced an
increase of $3,038,519 in stockholders' equity to $22,824,616 at December 31,
1995 from $19,786,097 at December 31, 1994. Over this period, the Bank's
leverage capital ratio declined to 6.6% from 6.9% as a result of asset growth
LIQUIDITY AND CAPITAL RESOURCES
The Bank attempts to maximize interest-earning assets while maintaining
sufficient funds on hand to meet loan commitments, cash disbursements and
possible deposit outflows. The Bank obtains funds for investment and other
banking purposes principally from deposits, borrowings, loan repayments and
through sales of loans, loan participations and securities available for sale,
and maturities of investment securities. While loan payments and maturing
investment securities are a relatively stable source of funds, deposit flows are
greatly influenced by general interest rates, economic conditions and
competitive factors. Borrowings may also be used to offset reductions in other
sources of funds such as deposits. The Bank may borrow up to 30% of its total
assets but not more than 20 times its capital stock holdings in the FHLB for any
sound business purpose for which the Bank has legal authority. Borrowings
authorized totaled $53,414,000 at December 31, 1996.
25
<PAGE>
IMPACT OF INFLATION AND CHANGING PRICES
Virtually all of the assets and liabilities of a financial institution,
unlike those of other companies, are monetary in nature. Consequently, changes
in the levels of interest rates have a greater impact on a financial
institution's performance than the effects of general levels of inflation.
Interest rates do not necessarily fluctuate in the same direction or in the same
magnitude as prices of goods and services.
The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles requiring
the measurement of financial position and operating results in terms of
historical dollars, without considering changes in the relative purchasing power
of money over time due to inflation.
CAPITAL AND REGULATORY MATTERS
The Bank's regulators have classified and defined bank capital into the
following components: (1) Tier I capital, which includes tangible stockholders'
equity for common stock and certain perpetual preferred stock, and (2) Tier II
capital, which includes a portion of the allowance for possible loan losses,
certain qualifying long-term debt and preferred stock which does not qualify for
Tier I capital. In addition, they have implemented risk-based capital guidelines
that require a bank to maintain certain minimum capital as a percent of such
bank's assets and certain off-balance sheet items adjusted for predefined credit
risk factors (risk-adjusted assets). As of December 31, 1996, the Bank's Tier I
and combined Tier I and Tier II capital ratios were 11.0% and 12.0%,
respectively.
In addition to the risk-based guidelines discussed above, the Bank's
regulators require that the Bank maintain a minimum leverage ratio (Tier I
capital as a percent of tangible assets) of 4.0%. As of December 31, 1996, the
Bank had a leverage capital ratio of 6.9%.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required to be furnished pursuant to this item is contained
in the Consolidated Financial Statements and the Notes to Consolidated Financial
Statements that follow this page.
26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
EMERALD ISLE BANCORP, INC.
To the Board of Directors and Stockholders of Emerald Isle Bancorp, Inc.:
We have audited the accompanying consolidated balance sheets of Emerald Isle
Bancorp, Inc. (the "Company") as of December 31, 1996 and 1995, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Emerald Isle Bancorp, Inc. as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
January 16, 1997
27
<PAGE>
EMERALD ISLE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Assets:
Cash and cash equivalents......................................................... $ 5,521,299 $ 3,213,259
Short-term investments............................................................ 11,679,798 4,860,000
Securities (Notes 1 and 3):
Available for sale............................................................ 30,761,290 40,676,183
Held to maturity--market value $81,522,056 and $76,708,209.................... 83,512,156 77,565,687
Federal Home Loan Bank stock.................................................. 2,670,700 2,198,400
Loans, net of allowance for possible loan losses of $2,623,406
and $2,541,997 (Note 4)....................................................... 263,208,189 208,326,723
Banking premises and equipment, net (Note 5)...................................... 7,711,423 5,574,956
Accrued interest receivable....................................................... 2,501,071 2,128,536
Other real estate owned........................................................... 0 430,000
Other assets (Note 8)............................................................. 2,072,839 1,891,469
-------------- --------------
Total assets...................................................................... $ 409,638,765 $ 346,865,213
-------------- --------------
-------------- --------------
Liabilities and Stockholders' Equity:
Deposits (Note 6)................................................................. $ 337,089,927 $ 282,787,249
Federal Home Loan Bank advances (Note 7).......................................... 41,668,000 38,968,000
Mortgagors' escrow payments....................................................... 1,371,878 1,094,397
Income taxes payable (Note 8)..................................................... 643,901 364,444
Other liabilities................................................................. 928,672 826,507
-------------- --------------
Total liabilities................................................................. $ 381,702,378 $ 324,040,597
-------------- --------------
Commitments and Contingencies (Notes 9 and 10)
Stockholders' equity (Notes 2, 11, 12 and 13):
Serial preferred stock, $1.00 par value--
Authorized--1,000,000 shares
Issued--None -- --
Common stock, $1.00 par value--...................................................
Authorized--5,000,000 shares
Issued and outstanding--2,210,888 shares and 1,915,539 shares, respectively... 2,210,888 1,915,539
Additional paid-in capital........................................................ 11,586,709 8,441,862
Retained earnings................................................................. 14,329,844 12,406,361
Less: Net unrealized gains (losses) on securities available for sale, net of
tax............................................................................. (191,054) 60,854
-------------- --------------
Total stockholders' equity........................................................ 27,936,387 22,824,616
-------------- --------------
Total liabilities and stockholders' equity........................................ $ 409,638,765 $ 346,865,213
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
28
<PAGE>
EMERALD ISLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Interest and Dividend Income:
Interest on loans..................................................... $ 20,770,693 $ 17,471,506 $ 13,295,968
Interest and dividends on securities.................................. 7,622,640 6,112,429 5,339,665
Interest on short-term investments.................................... 389,530 365,066 92,464
------------ ------------ ------------
Total interest and dividend income.................................... 28,782,863 23,949,001 18,728,097
------------ ------------ ------------
Interest Expense:
Interest on deposits.................................................. 14,243,150 12,284,438 8,892,241
Interest on borrowed funds (Note 7)................................... 2,493,874 1,435,330 605,754
------------ ------------ ------------
Total interest expense................................................ 16,737,024 13,719,768 9,497,995
------------ ------------ ------------
Net interest income................................................... 12,045,839 10,229,233 9,230,102
Provision for possible loan losses (Note 4)........................... 1,211,333 300,000 135,000
------------ ------------ ------------
Net interest income, after provision for possible loan losses......... 10,834,506 9,929,233 9,095,102
------------ ------------ ------------
Noninterest Income:
Customer service fees................................................. 752,609 463,518 413,058
Gain (loss) on sale of securities, net................................ (39,005) 90,993 193,577
Gain on sale of loan servicing (Note 4)............................... -- 763,806 --
Loss on sale of fixed assets.......................................... -- (49,826) --
Gain (loss) on sales of loans, net.................................... 193 (52,611) (1,395)
Loss on sale of other real estate owned............................... (38,195) (42,872) (170,177)
Other income.......................................................... 51,930 115,706 135,863
------------ ------------ ------------
Total noninterest income.............................................. 727,532 1,288,714 570,926
------------ ------------ ------------
Noninterest Expense:
Salaries and employee benefits (Note 12).............................. 4,212,519 3,416,508 3,057,129
Occupancy and equipment expenses (Notes 5 and 9)...................... 1,346,111 1,008,534 883,639
Data processing expenses.............................................. 233,439 230,624 217,367
Other real estate owned expenses...................................... 79,894 300,796 387,058
Other general and administrative expenses............................. 1,864,337 1,896,036 2,050,878
------------ ------------ ------------
Total noninterest expense............................................. 7,736,300 6,852,498 6,596,071
------------ ------------ ------------
Income before provision for income taxes.............................. 3,825,738 4,365,449 3,069,957
Provision for income taxes (Note 8)................................... 1,444,869 1,646,214 1,002,331
------------ ------------ ------------
Net income............................................................ 2,380,869 2,719,235 2,067,626
------------ ------------ ------------
------------ ------------ ------------
Earnings per share (Note 1)........................................... $ 1.14 $ 1.41 $ 1.13
------------ ------------ ------------
------------ ------------ ------------
Weighted average number of common shares (Note 1)..................... 2,091,669 1,931,621 1,835,948
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE>
EMERALD ISLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN (LOSS)
ON
ADDITIONAL SECURITIES
COMMON PAID-IN RETAINED AVAILABLE
STOCK CAPITAL EARNINGS FOR SALE TOTAL
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993................... $ 1,674,816 $ 7,682,560 $ 7,954,760 $ -- $ 17,312,136
Cumulative effect of adopting SFAS No. 115, net
of tax (Note 1).............................. -- -- -- 35,387 35,387
Net income..................................... -- -- 2,067,626 -- 2,067,626
Proceeds from issuance of stock through stock
purchase plan (Note 11)...................... 38,355 246,279 -- -- 284,634
Proceeds from exercise of stock options (Note
13).......................................... 95,250 31,750 -- -- 127,000
Change in net unrealized loss on securities
available for sale, net of tax............... -- -- -- (40,686) (40,686)
----------- ------------ ------------ ------------ ------------
Balance at December 31, 1994................... 1,808,421 7,960,589 10,022,386 (5,299) 19,786,097
Net income..................................... -- -- 2,719,235 -- 2,719,235
Proceeds from issuance of stock through stock
purchase plan (Note 11)...................... 54,050 435,291 -- -- 489,341
Proceeds from issuance of stock through the
dividend reinvestment and optional cash
payment plan (Note 11)....................... 1,568 20,064 -- -- 21,632
Proceeds from exercise of stock options (Note
13).......................................... 51,500 25,918 -- -- 77,418
Dividends paid................................. -- -- (335,260) -- (335,260)
Change in net unrealized gain on securities
available for sale, net of tax............... -- -- -- 66,153 66,153
----------- ------------ ------------ ------------ ------------
Balance at December 31, 1995................... 1,915,539 8,441,862 12,406,361 60,854 22,824,616
Net income..................................... -- -- 2,380,869 -- 2,380,869
Proceeds from sale of stock in private
placements (Note 11)......................... 200,000 2,739,716 -- -- 2,939,716
Proceeds from issuance of stock through stock
purchase plan (Note 11)...................... 23,641 311,026 -- -- 334,667
Proceeds from issuance of stock through the
dividend reinvestment and optional cash
payment plan (Note 11)....................... 11,138 152,175 -- -- 163,313
Proceeds from exercise of stock options (Note
13).......................................... 1,500 1,000 -- -- 2,500
Dividends paid................................. -- -- (457,386) -- (457,386)
Change in net unrealized gain (loss) on
securities available for sale, net of tax.... -- -- -- (251,908) (251,908)
Common stock dividend declared (Note 1)........ 59,070 (59,070) -- -- --
----------- ------------ ------------ ------------ ------------
Balance at December 31, 1996................... $ 2,210,888 $ 11,586,709 $ 14,329,844 $ (191,054) $ 27,936,387
----------- ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------
</TABLE>
30
<PAGE>
EMERALD ISLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income............................................................... $ 2,380,869 $ 2,719,235 $ 2,067,626
Adjustments to reconcile net income to net cash provided by operating
activities--
Depreciation and amortization............................................ 679,297 507,489 430,161
Amortization of premiums................................................. 320,226 503,928 1,024,484
Provision for possible loan losses....................................... 1,211,333 300,000 135,000
Gain (Loss) on sale of assets, net....................................... 77,200 (709,490) (22,005)
Increase (decrease) in deferred loan fees................................ 124,611 (196,407) 152,718
Provision (benefit) for deferred taxes................................... (17,364) (138,293) (52,154)
Proceeds from sale of mortgage loans..................................... 19,124,091 15,848,472 6,845,787
Loans originated for resale.............................................. (19,123,898) (15,901,083) (6,847,182)
(Increase) decrease in accrued interest receivable....................... (372,535) (643,459) (1,762)
(Increase) decrease in other assets...................................... (845,078) (814,359) 8,380
Increase (decrease) in accrued expenses and other liabilities............ 398,987 982,578 (731,838)
----------- ----------- -----------
Total adjustments........................................................ 1,576,870 (260,624) 941,589
----------- ----------- -----------
Net cash provided by operating activities................................ 3,957,739 2,458,611 3,009,215
----------- ----------- -----------
Cash Flows from Investing Activities:
Loans purchased.......................................................... (15,732,541) (22,604,223) --
Net (increase) decrease in loans......................................... (40,631,980) (22,451,874) (29,728,001)
Proceeds from sales of other real estate owned........................... 538,916 779,791 1,522,320
Sales (purchases) of short-term investments, net......................... (6,819,798) (1,270,000) (1,645,000)
Proceeds from the sale of fixed assets................................... -- 49,193 --
Purchases of securities held to maturity................................. (21,507,856) -- (35,734,168)
Proceeds from maturities of securities held to maturity.................. 15,561,387 12,894,834 18,463,098
Purchases of securities available for sale............................... (18,166,256) (76,818,369) (15,932,605)
Proceeds from sale of securities available for sale...................... 27,661,223 51,168,978 28,165,654
Purchases of premises and equipment...................................... (2,815,763) (1,443,227) (1,189,520)
----------- ----------- -----------
Net cash used in investing activities.................................... (61,912,668) (59,694,897) (36,078,222)
----------- ----------- -----------
Cash Flows from Financing Activities:
Increase in deposits, net................................................ 54,580,159 26,447,457 34,389,711
FHLB advances, net....................................................... 2,700,000 29,968,000 470,000
Proceeds from issuance of stock.......................................... 3,440,196 588,391 411,634
Dividends paid........................................................... (457,386) (335,260)
----------- ----------- -----------
Net cash provided by financing activities................................ 60,262,969 56,668,588 35,271,345
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents..................... 2,308,040 (567,698) 2,202,338
Cash and cash equivalents, beginning of year............................. 3,213,259 3,780,957 1,578,619
----------- ----------- -----------
Cash and cash equivalents, end of year................................... $ 5,521,299 $ 3,213,259 $ 3,780,957
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid............................................................ $16,724,138 $13,721,425 $ 9,500,101
Income taxes paid........................................................ 1,192,500 1,581,579 2,475,996
----------- ----------- -----------
----------- ----------- -----------
Supplemental Schedule of Noncash Investing and Financing Activities:
Transfers of loans to other real estate owned............................ $ 70,000 $ 1,323,945 $ 1,731,400
----------- ----------- -----------
----------- ----------- -----------
Transfer of held to maturity securities to available for sale............ -- $ 9,250,187 --
----------- ----------- -----------
----------- ----------- -----------
Common stock dividend declared (Note 1).................................. $ 59,070 $ 21,424 $ 26,721
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Emerald Isle Bancorp, Inc. (the "Company") and its wholly owned subsidiary, The
Hibernia Savings Bank (the "Bank"). All significant intercompany balances and
transactions have been eliminated in consolidation.
Emerald Isle Bancorp, Inc. was organized at the direction of the Bank and
pursuant to a Plan of Reorganization and Acquisition between the Company and the
Bank dated February 15, 1996 and approved by stockholders at the annual meeting
held on April 29, 1996 and consummated on October 1, 1996. The transaction has
been recorded using the pooling of interest method of accounting.
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, cash items in the process of collection and amounts due from banks.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of income and expenses during the reporting
periods. Operating results in the future could vary from the amounts derived
from management's estimates and assumptions.
SECURITIES
Securities purchased are classified as held to maturity when it is
management's intent and ability to hold them to maturity. Such securities,
including mortgage and asset-backed securities, are carried at cost, adjusted
for amortization of premium and accretion of discount, as computed by the
effective yield method. Securities not classified as held to maturity are
classified as available for sale and are reported at fair value, with unrealized
gains or losses, net of the estimated tax effects, classified as a separate
component of stockholders' equity. The Company does not have any securities
classified as trading.
When securities are sold, the adjusted cost of the specific security sold is
used to compute gains or losses on the sale.
LOANS, DISCOUNTS AND RESERVES
Loans, as reported, have been reduced by unadvanced loan proceeds, unearned
discounts, deferred fees and the allowance for possible loan losses.
Interest on loans is not accrued when principal or interest is 90 days or
more past due or, in the opinion of management, the collectibility of the
principal or interest becomes doubtful.
The Company adopted SFAS No. 114, Accounting by Creditors for Impairment of
a Loan and SFAS No. 118, Accounting by Creditors for Impairment of a Loan,
Income Recognition and Disclosures, as of
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
January 1, 1995. SFAS No. 114 requires that certain impaired loans be measured
based on the present value of expected future cash flows discounted at the loans
original effective interest rate. The Company defines impaired loans as all
classified loans in nonaccrual status and reviews on a continuous basis all
loans in order to identify possible impaired loans. As a practical expedient,
impairment may be measured based on the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent. When the
measure of the impaired loan is less than the recorded investment in the loan,
the impairment is recorded through a valuation allowance. The Company had
previously measured the allowance for credit losses using methods similar to
those prescribed in SFAS No. 114. As a result of adopting these statements, no
additional allowance for loan losses was required as of January 1, 1995.
The adequacy of the allowance for possible loan losses is evaluated on a
regular basis by management. Factors considered in evaluating the adequacy of
the allowance include previous loss experience, current economic conditions and
their effect on borrowers, and the performance of individual loans in relation
to contract terms. The provision for possible loan losses charged to operations
is based upon management's judgment of the amount necessary to maintain the
allowance at a level adequate to absorb possible future losses. The allowance is
an estimate, and ultimate losses may vary from current estimates. Loan losses
are charged against the allowance when management believes the collectibility of
principal is unlikely.
BANKING PREMISES AND EQUIPMENT
Land is carried at original cost. Buildings, leasehold improvements and
equipment are stated at cost, less accumulated depreciation and amortization,
computed primarily on the straight-line basis over the estimated useful lives of
the assets or terms of leases, if shorter. The cost of maintenance and repairs
is charged to operations as incurred. The Company periodically evaluates long
lived assets for impairment on the basis of whether these assets are recoverable
from projected undiscounted net cash flows of the related assets.
OTHER REAL ESTATE OWNED
Real estate acquired by foreclosure is initially recorded at the lower of
cost (principal balance of the former mortgage loan plus costs of obtaining
title and possession), or estimated fair value less estimated costs to sell.
During the holding period, foreclosed real estate is periodically appraised, and
the carrying value is adjusted, if necessary, if the estimated fair value is
less than the carrying value.
Expenses and revenues related to holding foreclosed assets are reported in
the results of operations as incurred.
INCOME TAXES
The Company records income taxes in accordance with SFAS No. 109, Accounting
for Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are
computed based on the difference between the financial statement and income tax
bases of assets and liabilities using the enacted marginal tax rate. Deferred
income tax expense or credits are based on the changes in the asset or liability
from period to
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
period. As changes in tax laws or rates are enacted deferred tax assets and
liabilities are adjusted through the provision for income taxes.
EARNINGS PER SHARE
Earnings per share are computed based on the weighted average number of
common shares and common stock equivalents outstanding during the year using the
treasury stock method.
On December 18, 1996 the Board of Directors declared a stock dividend of
twenty five percent (25%) effective February 3, 1997. On January 18, 1995, the
Board of Directors declared a 3 for 2 stock split with an effective date of
February 1, 1995. Prior years' consolidated financial statements have been
adjusted to reflect the stock dividend and the stock split.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATION OF CREDIT
RISK
In the normal course of business, to meet the financing needs of its
customers, the Company is a party to financial instruments with off-balance
sheet risk. As discussed in Note 9, these financial instruments include firm
commitments to grant loans that involve, to varying degrees, elements of credit
and interest rate risk in excess of the amounts recognized in the consolidated
balance sheets. The Company's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments to
grant loans is represented by the contractual amount of these instruments. The
Company uses the same credit policies in making such commitments as it does for
on-balance sheet instruments.
Commitments to grant loans are binding agreements to lend to a customer as
long as there is no violation of any condition in the contract. The Company has
established internal lending limits applicable to a single borrower or a related
group of borrowers to minimize risk and control exposure by obligor, industry,
loan type and other credit concentrations. The Company has not experienced any
significant losses on open commitments.
RECLASSIFICATIONS
Certain amounts in the prior years' consolidated financial statements have
been reclassified to be consistent with the current year's presentation.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
fair values of financial instruments as disclosed herein:
CASH AND CASH EQUIVALENTS--The carrying amounts of cash and short-term
investments approximate their fair value.
HELD TO MATURITY AND AVAILABLE FOR SALE SECURITIES--Fair values for
securities are based on quoted market prices.
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FEDERAL HOME LOAN BANK STOCK--Fair value is equal to carrying value since
the stock is redeemable at cost.
LOANS--For variable rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying values.
Fair values for certain mortgage loans (for example, one-to-four family
residential), credit card loans, and other consumer loans are based on quoted
market prices of similar loans sold in conjunction with securitization
transactions, adjusted for differences in loan characteristics. Fair values for
commercial real estate and commercial loans are estimated using discounted cash
flow analyses, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality.
DEPOSIT LIABILITIES--The fair values disclosed for demand deposits and
variable rate savings accounts are, by definition, equal to the amount payable
on demand at the reporting date (that is, their carrying amounts). Fair values
for fixed rate deposits are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on similar deposits over
their remaining terms.
SHORT-TERM BORROWINGS--The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings maturing
within 90 days approximate their fair values. Fair values of other short-term
borrowings are estimated using discounted cash flow analyses based on the Bank's
current incremental borrowing rates for similar types of borrowing arrangements.
LONG-TERM BORROWINGS--The fair values of the Bank's long-term debt are
estimated using discounted cash flow analyses based on the Bank's current
incremental borrowing rates for similar types of borrowing arrangements.
ACCRUED INTEREST--The carrying amounts of accrued interest approximate their
fair values.
OFF-BALANCE SHEET INSTRUMENTS--Fair values for off-balance sheet lending
commitments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
counterparties' credit standing.
MORTGAGE SERVICING
In May 1995, the FASB issued SFAS No. 122, Accounting for Mortgage Servicing
Rights, which is to become effective for fiscal years beginning after December
15, 1995 with earlier adoption permitted. SFAS No. 122 requires that a mortgage
banking enterprise recognize as separate assets, rights to service mortgage
loans for others regardless of the manner in which the servicing rights are
acquired. In addition, capitalized mortgage servicing rights are required to be
assessed for impairment based on the fair value of those rights. Management
elected to adopt the provisions as of October 1, 1995 and retroactively applied
the provisions of this statement to January 1, 1995. Such adoption did not have
a significant impact on the Company's reported results of operations or
financial condition.
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT PRONOUNCEMENTS
In 1996, the FASB issued SFAS No. 123, "Accounting for Stock Based
Compensation", which encourages, but does not require, Company to record
compensation cost for stock based employee compensation plans at fair value. The
Company has chosen to account for such plans using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25. Accordingly,
compensation costs for stock options is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of grant over the
exercise price of the stock.
In 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities", which
superseded SFAS No. 122 without changing its major provisions, and SFAS No. 127
"Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125", which become effective for transactions occurring after December 31, 1996.
Under these new statements, transfers of financial assets in which the
Company surrenders control over those financial assets shall be accounted for as
a sale to the extent that consideration other than beneficial interests in the
transferred assets is received in exchange. Each time the Company undertakes an
obligation to service financial assets it shall recognize either a servicing
asset or a servicing liability for the contract, unless it securitizes the
assets, retains all of the resulting securities, and classifies them as debt
securities held-to maturity. The implementation of these statements is not
expected to have a material effect on the Company's results of operations or
financial condition.
(2) CAPITAL
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory-and possibly additional discretionary-actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1996, that the
Company meets all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the Federal
Deposit Insurance Corporation (FDIC) categorized the Bank as adequately
capitalized under the regulatory framework for prompt corrective action. To be
categorized as adequately capitalized the Bank must maintain minimum total risk-
based, Tier I risk-based, and Tier I leverage ratios as set forth in the table.
There are no conditions or events since that notification that management
believes have changed the institution's category.
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) CAPITAL (CONTINUED)
The Bank's actual capital amounts and ratios are also presented in the
table.
<TABLE>
<CAPTION>
FOR CAPITAL ADEQUACY TO BE WELL CAPITALIZED
ACTUAL PURPOSES UNDER PCA PROVISIONS
-------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996:
Total Capital (to Risk Weighted Assets)... $ 30,751 11.99% > $ 20,522 >8.0% > $ 25,653 >10.0%
Tier 1 Capital (to Risk Weighted
Assets)................................. $ 28,127 10.97% > $ 10,261 >4.0% > $ 15,392 >6.0%
Tier 1 Capital (to Average Assets)........ $ 28,127 7.52% > $ 14,951 >4.0% > $ 18,689 >5.0%
AS OF DECEMBER 31, 1995:
Total Capital (to Risk Weighted Assets)... $ 25,319 12.69% > $ 15,959 >8.0% > $ 19,486 >10.0%
Tier 1 Capital (to Risk Weighted
Assets)................................. $ 22,825 11.44% > $ 7,980 >4.0% > $ 11,969 >6.0%
Tier 1 Capital (to Average Assets)........ $ 22,825 7.34% > $ 12,430 >4.0% > $ 15,538 >5.0%
</TABLE>
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) SECURITIES
The amortized cost and estimated market values of securities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
<S> <C> <C> <C> <C>
GROSS GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- ----------- --------- ----------
Securities held to maturity--Mortgage-backed
securities.................................. $83,512,156 $ 4,152 1,994,252 81,522,056
---------- ----------- --------- ----------
---------- ----------- --------- ----------
Securities available for sale--US Treasury and
Agency bonds and notes...................... $31,079,712 $ 3,903 $ 322,325 $30,761,290
---------- ----------- --------- ----------
---------- ----------- --------- ----------
<CAPTION>
DECEMBER 31, 1995
GROSS GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Securities held to maturity--Mortgage-backed
securities.................................. $77,565,687 $ -- $ 857,478 $76,708,209
---------- ----------- --------- ----------
---------- ----------- --------- ----------
Securities available for sale--US Treasury and
agency bonds and notes...................... $40,574,759 $ 101,424 -- $40,676,183
---------- ----------- --------- ----------
---------- ----------- --------- ----------
</TABLE>
The amortized cost and market value of debt securities at December 31, 1996,
by contractual maturity, is shown below. Actual maturities may differ from
contractual maturities because issuers have the right to prepay obligations with
or without call or prepayment penalties. Certain securities classified as
available for sale have call provisions. The call dates on all these securities
are within one year, as such they are classified in the one year or less
category in 1996 rather than the contractual maturity date.
<TABLE>
<CAPTION>
SECURITIES HELD TO MATURITY:
<S> <C> <C> <C>
ESTIMATED
AMORTIZED MARKET PERCENT
COST VALUE OF TOTAL
---------- ---------- ---------
December 31, 1996--
Due in one year or less.................................... $4,114,046 $4,098,548 4.93%
Due after one year through five years...................... 57,398,576 56,105,709 68.73%
Due after five years through ten years..................... -- -- --
Due after ten years........................................ 21,999,534 $21,317,799 26.34%
---------- ---------- ---------
$83,512,156 $81,522,056 100.00%
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE:
<S> <C> <C> <C>
ESTIMATED
AMORTIZED MARKET PERCENT
COST VALUE OF TOTAL
---------- ---------- ---------
December 31, 1996--
Due in one year or less.................................... $8,061,409 $8,063,039 25.94%
Due after one year through five years...................... -- -- 0.00%
Due after five years through ten years..................... 5,000,000 4,961,515 16.09%
Due after ten years........................................ 18,018,303 17,736,736 57.97%
---------- ---------- ---------
$31,079,712 $30,761,290 100.00%
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
Proceeds from the maturity and sales of investments during 1996, 1995 and
1994 were $43,222,610, $64,063,812 and $46,628,752, respectively. Gross gains of
$126,520, $363,017 and $215,126 and gross losses of $163,653, $272,024 and
$21,549, respectively, were realized on the sales.
At December 31, 1996, the Company had no investments in obligations of
states, counties or municipalities which exceeded 10% of stockholders' equity.
In December of 1995, the Company transferred and sold approximately
$9,250,000 of formerly held to maturity securities which resulted in a
corresponding net loss of approximately $171,000. The transfer was made pursuant
to the issuance of "A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities" which allowed a one-time
reassessment of the appropriateness of the classification of all securities
without calling into question the Company's classification of its other
securities.
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) LOANS
A summary of the balances of loans follows:
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Mortgage loans on real estate--
Residential, owner-occupied, one to four family and condos....................... $ 125,528,517 $ 101,817,810
Residential, nonowner-occupied, one to four family and condos.................... 10,520,897 10,667,757
Multi family units five or more.................................................. 34,502,602 34,632,581
Retail/mixed-use properties...................................................... 33,473,707 30,311,277
Office/industrial space.......................................................... 33,328,090 10,638,889
Other loans...................................................................... 4,055,467 3,528,515
-------------- --------------
241,409,276 191,596,829
Less -- Deferred fees and income................................................. 218,265 93,654
-------------- --------------
Total mortgage loans on real estate.............................................. 241,191,011 191,503,175
Commercial loans................................................................. 21,614,758 16,857,492
-------------- --------------
Other loans, personal installment................................................ 2,076,088 1,767,627
Personal lines of credit......................................................... 950,741 746,746
-------------- --------------
3,026,829 2,514,373
Less -- Unearned discount........................................................ 1,003 6,320
-------------- --------------
Total other loans................................................................ 3,025,826 2,508,053
-------------- --------------
Total loans...................................................................... 265,831,595 210,868,720
Less -- Allowance for possible loan losses....................................... 2,623,406 2,541,997
-------------- --------------
Loans, net....................................................................... $ 263,208,189 $ 208,326,723
-------------- --------------
-------------- --------------
</TABLE>
An analysis of the allowance for possible loan losses follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------ -------------
<S> <C> <C> <C>
Balance at beginning of year.......................................... $ 2,541,997 $ 2,241,286 2,480,881
Provision for possible loan losses.................................... 1,211,333 300,000 135,000
Recoveries............................................................ 167,582 340,390 722,440
------------- ------------ -------------
3,920,912 2,881,676 3,338,321
Loans charged off..................................................... (1,297,506) (339,679) (1,097,035)
------------- ------------ -------------
Balance at end of year................................................ $ 2,623,406 $ 2,541,997 $ 2,241,286
------------- ------------ -------------
------------- ------------ -------------
</TABLE>
In addition to the loan portfolio noted above, the Company services
approximately $31,563,119 of loans sold without recourse to investors in the
secondary mortgage market and other financial institutions. During the second
quarter of 1995 the Company sold its servicing rights on certain residential
mortgage loans with a gross outstanding balance of $69,113,347. From this sale
the Company received gross proceeds of $898,473 and recorded a related pretax
gain of $763,806.
40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) LOANS (CONTINUED)
The Company operates primarily in the Greater Boston area, and the
performance of its loan portfolio is dependent, to a large degree, on the
condition of the local real estate market. Uncertainty exists as to the ultimate
realization in full of certain loans, and other real estate owned as a result of
current economic conditions in the New England region. Based on management's
assessment of the condition of the Massachusetts real estate market at year end
and prevailing economic conditions, management believes that the allowance for
loan losses as of December 31, 1996 is adequate to absorb the current estimate
of future losses in the loan portfolio. However, economic deterioration in
future periods could result in the Company experiencing increased levels of
nonperforming assets and charge-offs, additional provisions for loan losses and
reduction in net interest income.
At December 31, 1996, real estate mortgage loans were pledged to secure
Federal Home Loan Bank advances, as further discussed in Note 7.
As of December 31, 1996 and 1995, the Company's impaired loans and related
valuation allowance (which is included in the allowance for loan losses)
calculated under SFAS No. 114 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------- -----------------------
<S> <C> <C> <C> <C>
IMPAIRED VALUATION IMPAIRED VALUATION
LOANS ALLOWANCE LOANS ALLOWANCE
------------ ----------- ---------- -----------
Valuation allowance required..................................... $ -- $ -- $ -- $ --
No valuation allowance required.................................. $ 1,058,195 $ -- 500,766 --
------------ ----- ---------- -----
Total impaired loans............................................. $ 1,058,195 $ -- $ 500,766 $ --
------------ ----- ---------- -----
------------ ----- ---------- -----
</TABLE>
The recorded investment in impaired loans for which no allowance is needed
is net of previous direct charge-offs and applications of cash interest payments
against the loan balances as of December 31, 1996 and 1995 of $1,129,660 and
$110,608, respectively. The average recorded investment in impaired loans for
the years ended December 31, 1996 and 1995 was $745,000 and $760,750,
respectively. Interest payments received on impaired loans are recorded as
interest income unless collection of the remaining recorded investment is
doubtful at which time payments received are recorded as a reduction in
principal.
41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) BANKING PREMISES AND EQUIPMENT
A summary of the cost and accumulated depreciation and amortization of
banking premises and equipment and their estimated useful lives follows:
<TABLE>
<CAPTION>
ESTIMATED
1996 1995 USEFUL LIVES
------------ ------------ -------------
<S> <C> <C> <C>
Land and building...................................................... $ 3,175,911 $ 1,727,200 25 years
Leasehold improvements................................................. 4,638,130 4,170,918 10-25 years
Furniture and equipment................................................ 4,436,382 3,433,923 2-10 years
------------ ------------
12,147,805 9,332,041
Less--Accumulated depreciation and amortization........................ 4,436,382 3,757,085
------------ ------------
$ 7,711,423 $ 5,574,956
------------ ------------
------------ ------------
</TABLE>
Total depreciation and amortization for the years ended December 31, 1996,
1995 and 1994 amounted to $679,297, $507,489, and $430,161, respectively.
(6) DEPOSITS
A summary of deposit balances, by type, is as follows:
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
NOW and demand deposits...................................... $ 31,190,026 $ 22,011,361
Money market deposits........................................ 37,811,552 33,819,928
Other savings................................................ 47,771,658 46,038,261
-------------- --------------
Total non-certificate accounts......................... 116,773,236 101,869,550
Term certificate accounts.................................... 220,316,691 180,917,699
-------------- --------------
Total deposits......................................... $ 337,089,927 $ 282,787,249
-------------- --------------
-------------- --------------
</TABLE>
The aggregate amounts of term certificates of deposits of $100,000 or more
at December 31, 1996 and 1995 are $52,254,548 and $63,802,166, respectively.
A summary of term certificate accounts by maturity as of December 31, 1996
and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
WEIGHTED WEIGHTED
AMOUNT AVERAGE RATE AMOUNT AVERAGE RATE
-------------- --------------- -------------- ---------------
Within one year..................................... $ 152,182,788 5.54% $ 111,842,814 5.68%
One to three years.................................. 56,304,921 5.94% 51,986,914 5.85%
Over three years.................................... 11,828,982 6.62% 17,087,971 6.67%
-------------- --- -------------- ---
$ 220,316,691 5.83% $ 180,917,699 5.17%
-------------- --- -------------- ---
-------------- --- -------------- ---
</TABLE>
42
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) FEDERAL HOME LOAN BANK ADVANCES (FHLB)
Federal Home Loan Bank advances consist of the following at December 31,
1996 and 1995:
<TABLE>
<CAPTION>
MATURITY DATE INTEREST RATE 1996 1995
- --------------------------------------------------------------------- --------------- ------------- -------------
<S> <C> <C> <C>
January 2, 1996...................................................... 5.85 3,000,000
January 16, 1996..................................................... 6.60 4,300,000
February 16, 1996.................................................... 5.80 5,000,000
July 12, 1996........................................................ 5.73 4,000,000
February 20, 1997.................................................... 4.99 8,000,000
April 21, 1997....................................................... 5.39 3,000,000
January 28, 1998..................................................... 5.48 3,000,000
September 30, 1998................................................... 6.09 2,000,000
October 13, 1998..................................................... 5.90 5,000,000 5,000,000
November 23, 1998.................................................... 5.76 10,000,000 10,000,000
September 13, 1999................................................... 6.54 3,000,000
October 10, 2000..................................................... 6.09 7,668,000
------------- -------------
Total advances....................................................... $ 41,668,000 $ 38,968,000
------------- -------------
------------- -------------
</TABLE>
Information on the amounts outstanding and interest rates of borrowings for
each of the three years in the period ended December 31, 1996, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
Balance outstanding at end of year............................................ $ 41,668 $ 38,968 $ 9,000
Average daily balance outstanding............................................. 43,253 22,395 10,021
Maximum balance outstanding at any month end.................................. 53,216 38,971 17,828
Weighted average interest rate for the year................................... 5.75% 6.43% 5.60%
Weighted average interest rate at end of year................................. 5.79% 6.06% 6.64%
</TABLE>
The interest rates charged on advances maturing in 1996 and 1995 are
primarily fixed but also include floating rate advances indexed to prime. The
FHLB advances are collateralized by a pledge of the Company's portfolio of
unencumbered securities and mortgages and by a lien on the Company's holdings of
FHLB stock. The Company may borrow up to 30% of its total assets but not more
than 20 times its capital stock holdings in the FHLB for any sound business
purpose for which the Company has legal authority. Borrowings authorized totaled
$53,414,000 at December 31, 1996.
43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) FEDERAL HOME LOAN BANK ADVANCES (FHLB) (CONTINUED)
The outstanding balance and weighted average interest rate at December 31,
1996 and 1995 of maturities are listed below:
<TABLE>
<CAPTION>
1996 1995
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
WEIGHTED WEIGHTED
AMOUNT AVERAGE RATE AMOUNT AVERAGE RATE
------------- --------------- ------------- ---------------
<CAPTION>
(IN (IN
THOUSANDS) THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less............................... $ 11,000 5.10% $ 16,300 6.00%
Due from on year to two years......................... 20,000 5.79% -- --
Due from two years to five............................ 10,668 6.22% 22,668 5.90%
------------- --- ------------- ---
$ 41,668 5.70% $ 38,968 5.95%
------------- --- ------------- ---
------------- --- ------------- ---
</TABLE>
(8) INCOME TAXES
Allocation of federal and state income taxes between current and deferred
portions is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Current tax provision --
Federal............................................................... $ 1,241,612 $ 1,371,186 $ 822,048
State................................................................. 220,621 413,321 232,437
------------ ------------ ------------
1,462,233 1,784,507 1,054,485
------------ ------------ ------------
Deferred tax provision (benefit) --
Federal............................................................... 1,121 (108,533) (38,446)
State................................................................. (18,485) (29,760) (13,708)
------------ ------------ ------------
(17,364) (138,293) (52,154)
------------ ------------ ------------
$ 1,444,869 $ 1,646,214 $ 1,002,331
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The reasons for the differences between the effective tax rate and the
corporate statutory federal income tax rate are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Statutory rate.......................................................................... 34.0% 34.0% 34.0%
Increase (decrease) resulting from--
State taxes, net of federal tax benefit............................................... 3.5 6.0 5.9
Reduction in valuation allowance...................................................... -- -- (7.0)
Rehabilitation and low income housing tax credit...................................... (1.0) (0.9) (1.2)
Dividend received deduction........................................................... (0.3) (0.4) (0.1)
Other................................................................................. 1.6 (1.0) 1.1
--- --- ---
Effective tax rate...................................................................... 37.8% 37.7% 32.7%
--- --- ---
--- --- ---
</TABLE>
44
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) INCOME TAXES (CONTINUED)
As of December 31, 1996 and 1995, the consolidated balance sheets include
net deferred tax assets of $401,017 and $383,653, respectively. The tax-affected
components of the prepaid income taxes at December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Loan allowances....................................................... $ 260,502 $ 182,711
Loan fees............................................................. (22,565) 8,314
State taxes, net of federal benefit................................... 66,753 83,109
Other, net............................................................ 96,327 109,519
---------- ----------
Total deferred tax assets....................................... 401,017 383,653
---------- ----------
---------- ----------
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company presently occupies the premises at 731 Hancock Street, Quincy,
Massachusetts, under a lease expiring in 2002, with three, five-year renewal
options, and the premises at 101 Federal Street, Boston, Massachusetts, under a
lease expiring in 1999, with two, five-year renewal options. In 1995 the Company
executed a lease on the location of its newest branch office at 397 Washington
Street, Stoughton, Massachusetts which expires in 2005 with three, five-year
renewal options. In 1996 the Company executed a lease on the location for its
newest branch office expected to open in April 1997 at 470 West Broadway, South
Boston, Massachusetts, which expires in 2016, with two ten year renewals. Future
minimum rental commitments under these leases are as follows:
<TABLE>
<S> <C>
1997.............................................................. $ 361,446
1998.............................................................. 427,423
1999.............................................................. 428,660
2000.............................................................. 428,660
2001.............................................................. 430,667
Thereafter........................................................ 10,831,447
----------
$12,908,314
----------
----------
</TABLE>
Net rental expenses for the years ended December 31, 1996, 1995 and 1994
were $258,325, $211,665, and $176,549, respectively.
LOAN AND SECURITY COMMITMENTS
In the normal course of business, there are outstanding commitments that are
not reflected in the accompanying consolidated financial statements. Firm
commitments to grant loans amounted to $20,083,073 and $15,367,512 at December
31, 1996 and 1995, respectively. Also, amounts committed under existing lines of
credit totaled $6,616,602 at December 31, 1996.
45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) COMMITMENTS AND CONTINGENCIES (CONTINUED)
EMPLOYMENT AND TERMINATION AGREEMENTS
The Company has entered into a five year Employment Agreement with its Chief
Executive Officer providing for specified minimum annual compensation and the
continuation of benefits currently received. The contract is automatically
extended for an additional year on the anniversary date of the contract. In
addition, the Company has entered into a Special Termination Agreement with its
Chief Executive Officer which provides for a lump-sum severance payment within a
three year period following a change in control, as defined in the agreement.
(10) LITIGATION
The Company and the Bank are defendants in various legal actions. In the
opinion of management and the Company's legal counsel, the resolution of these
matters is not expected to have a material effect on the consolidated financial
position or results of operations of the Company.
(11) STOCKHOLDERS' EQUITY
The Company may not declare or pay cash dividends on its shares of common
stock if the effect thereof would cause its stockholders' equity to be reduced
below applicable capital maintenance requirements or if such declaration and
payments would otherwise violate regulatory requirements (see Note 2).
The Company maintains a Stock Purchase Plan, the purpose of which is to
provide an additional source of capital. Under the terms of the plan, 375,000
shares of authorized common stock are available for purchase of which 145,036
shares remain unissued. The purchase price will be the closing bid price of the
common stock on the business day prior to the purchase. In 1996, 23,641 shares
of common stock were purchased by eligible plan participants under the plan for
total proceeds to the Company of $334,667.
In 1996, the Company began an Automatic Dividend Reinvestment and Common
Stock Purchase Plan for the benefit of all eligible stockholders of record on
November 1, 1995. The plan permits eligible stockholders to have their dividends
reinvested automatically into additional newly issued shares of common stock of
the Company as the dividends are paid. In addition, the plan allows optional
cash payments to be made which permits stockholders to purchase additional
shares on a monthly basis. In 1996, 11,138 shares of common stock were purchased
by eligible stockholders under the plan for total proceeds to the Company of
$163,313.
In 1996, the Company completed two private placements of newly issued common
stock at then market prices. The first one was completed on May 17, 1996 and the
second was completed September 24, 1996 raising $2,939,716, net of expenses, of
new capital.
46
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) EMPLOYEE BENEFIT PLANS
During 1989, the Board of Directors voted to establish an Employee Stock
Ownership Plan (ESOP), which is a qualified stock bonus plan under Internal
Revenue Code Section 401(a). Employees reaching the age of 21 and having
completed 1,000 hours of service in one consecutive twelve-month period
automatically become participants in the ESOP. Participants become fully vested
upon completion of three years of service. During 1996, 1995 and 1994, the ESOP
purchased 14,428, 20,948 and 20,961 shares, respectively, of the Company's
common stock at an aggregate purchase price of $227,241, $241,480 and $195,636
respectively, in the open market.
In 1996, 1995 and 1994, the Company made contributions to the ESOP totaling
$227,241, $183,800 and $200,914, respectively, which are included in salaries
and employee benefits expense. Dividends on unallocated shares of the Company's
stock held by the ESOP are accumulated within the plan.
The Company also maintains a Non-Qualified Executive Retirement Plan which
is an unfunded non-qualified plan which provides deferred compensation to a
select group of management whose retirement benefits in the employer's tax
qualified retirement plans are restricted by statute. During 1996, 1995 and 1994
the Company expensed $29,915, $30,944, and $41,748 respectively, related to this
plan.
In 1992, the Company adopted a Profit Sharing Plan as defined in the
Internal Revenue Code Section 401(k). Employees reaching the age of 21 and
having completed 1,000 hours of service in one consecutive twelve-month period
are eligible to participate in the plan. In 1996, 1995 and 1994, the Company
matched employees' voluntary contributions on a dollar-for-dollar basis up to an
additional 3% of total compensation. The plan is administered by the Savings
Bank Employees Retirement Association. For the plan years ended December 31,
1996, 1995 and 1994 the Company made contributions of $68,549, $49,444 and
$43,394, respectively, to the plan.
The Company maintains a Short-term Incentive Bonus Plan (the Plan) whereby
certain employees are eligible to receive a bonus if the Company meets or
exceeds certain base standards of profitability, and certain strategic goals are
achieved. The structure of the Plan is reviewed on an annual basis by the Board
of Directors of the Company. The Company expensed $265,000 in 1996, $185,504 in
1995, and $124,125 in 1994 related to this plan.
(13) STOCK-BASED COMPENSATION PLANS
The Company has three stock option plans, the 1986 Stock Option Plan ("The
1986 Plan"), the 1989 Stock Option Plan ("The 1989 Plan") and the 1995 Premium
Incentive Stock Option Plan ("The 1995 Plan"). In addition, the Company has a
1989 Employee Stock Purchase Plan ("The 1989 Stock Purchase Plan") under which
employees are able purchase Company stock at 100% of the fair market value of
the stock at that date of purchase. The Company accounts for these plans under
APB Opinion No. 25, under which no compensation cost has been recognized.
47
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(13) STOCK-BASED COMPENSATION PLANS (CONTINUED)
Had compensation cost for these plans been determined consistent with FASB
Statement No. 123, the Company's net income and earnings per share would have
been reduced to the following pro forma amounts (000's):
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C> <C>
Net Income As Reported........................................................... $ 2,380,869 $ 2,719,235
Pro Forma............................................................. $ 2,333,794 $ 2,683,999
Primary EPS As Reported........................................................... $ 1.14 $ 1.41
Pro Forma............................................................. $ 1.12 $ 1.39
</TABLE>
Because the Statement 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years. Also,
since there is no discount provided to employees under the 1989 Stock Purchase
Plan, there is no pro forma impact of this plan under Statement 123.
The Company may sell up to 375,000 shares of stock to its full- time
employees under the 1989 Stock Purchase Plan. The Company has sold 202,625
shares through December 31, 1996. The weighted average fair value of shares sold
in 1996 and 1995 was $14.15 and $11.31, respectively.
The Company may grant options for up to 150,000 shares under the 1986 Plan,
65,625 shares under the 1989 Plan and 87,500 shares under the 1995 Plan. The
Company has granted options on 120,000 shares, 52,500 and 36,750 shares,
respectively, through December 31, 1996. Under these Plans the option exercise
price equals the stock's market price on date of grant. Under each of these
plans, the options vest after two years and all expire after ten years.
A summary of the status of the Company's three stock option plans at
December 31, 1996 and 1995 and changes during the years then ended is presented
in the table and narrative below:
<TABLE>
<CAPTION>
1996 1995
----------------------- ------------------------
<S> <C> <C> <C> <C>
WEIGHTED AVG WEIGHTED AVG
SHARES EX. PRICE SHARES EX. PRICE
--------- ------------ --------- -------------
Balance, beginning of year..................................... 105,438 $ 9.50 109,125 $ 4.61
Granted........................................................ 16,388 $ 15.25 52,500 $ 11.74
Exercised...................................................... (1,875) ($ 1.34) (51,500) ($ 1.50)
Canceled....................................................... (16,388) ($ 11.80) (4,687) ($ 9.40)
--------- ------------ --------- ------
Balance, end of year........................................... 103,563 $ 9.72 105,438 $ 9.50
--------- ------------ --------- ------
--------- ------------ --------- ------
Exercisable, end of year....................................... 39,050 $ 7.33 32,600 $ 6.58
--------- ------------ --------- ------
--------- ------------ --------- ------
Weighted average fair value of options granted................. $ 3.01 $ 2.80
------------ ------
------------ ------
</TABLE>
26,125 of the 103,563 options outstanding at December 31, 1996 have exercise
prices between $1.34 and $7.06, with a weighted average exercise price of $6.27
and a weighted average remaining contractual life of approximately 6.1 years.
All of these options are exercisable. The remaining 77,438 options have exercise
48
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(13) STOCK-BASED COMPENSATION PLANS (CONTINUED)
prices between $8.80 and $13.20, with a weighted average exercise price of
$10.88 and a weighted average remaining contractual life of approximately 8.1
years. 24,940 of these options are exercisable; their weighted average exercise
price is $8.80.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995:
<TABLE>
<CAPTION>
1986 PLAN 1989 PLAN 1995 PLAN
---------------------- ---------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1996 1995 1996 1995
----- --------- ----- --------- --------- ---------
Risk Free Interest Rate............................ n/a 7.39% n/a 6.78% 6.68% 5.87%
Expected Dividend Yield............................ n/a 2.04% n/a 1.85% 1.57% 1.45%
Expected Lives..................................... n/a 3 years n/a 3 years 3 years 3 years
Expected Volatility................................ n/a 19.32% n/a 19.32% 19.32% 19.32%
</TABLE>
(14) RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company has granted loans to
officers and directors and their affiliates amounting to $1,080,219 at December
31, 1996. All such transactions are on substantially the same terms as those
prevailing at the same time for individuals not affiliated with the Company and
such loans do not involve more than the normal risk of collectibility. During
the year ended December 31, 1996, total principal additions were $0, and total
principal payments were $8,055. At December 31, 1995, outstanding loans to
officers and directors and their affiliates amounted to $1,088,274. For 1995,
total principal additions were $192,900, and total principal payments were
$1,195,276.
49
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(15) FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------------- -------------- -------------- --------------
Financial assets:
Cash and due from banks, interest-bearing
deposits with banks, and federal funds
sold......................................... $ 5,521,299 $ 5,521,299 $ 3,213,259 $ 3,213,259
Short-term investments......................... 11,679,798 11,679,798 4,860,000 4,860,000
Securities held to maturity.................... 83,512,156 81,522,056 77,565,687 76,708,209
Securities available for sale.................. 30,761,290 30,761,290 40,676,183 40,676,183
Federal Home Loan Bank stock................... 2,670,700 2,670,700 2,198,400 2,198,400
Loans receivable............................... 263,208,189 263,010,900 208,326,723 207,283,591
Accrued interest receivable.................... 2,501,071 2,501,071 2,128,536 2,128,536
Financial liabilities:
Deposit liabilities............................ $ 337,089,927 $ 337,665,927 $ 282,787,249 $ 283,363,249
Federal Home Loan Bank advances................ 41,668,000 43,494,916 38,968,000 40,794,916
</TABLE>
OFF-BALANCE-SHEET COMMITMENTS:
A summary of the notional amounts of the Company's financial instruments
with off-balance sheet risk at December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------- --------------------------
<S> <C> <C> <C> <C>
NOTIONAL FAIR NOTIONAL FAIR
AMOUNT VALUE AMOUNT VALUE
------------- ----- ------------- -----
Commitments to grant loans.......................................... $ 20,083,000 $ 0 $ 15,368,000 $ 0
Existing lines of credit............................................ 6,161,602 0 4,582,000 0
</TABLE>
50
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(16) PARENT COMPANY FINANCIAL STATEMENTS
Condensed financial information relative to the Company's balance sheets at
December 31, 1996 and the related statement of income and cash flows for the
year ended December 31, 1996 are presented below
<TABLE>
<CAPTION>
BALANCE SHEET
DECEMBER 31, 1996
- -------------------------------------------------------------------------------------------------- --------------
<S> <C>
(IN THOUSANDS)
Assets
Cash............................................................................................ $ 26
Investments in subsidiary....................................................................... 27,916
Other assets.................................................................................... 113
-------
Total assets.................................................................................... $ 28,055
-------
-------
Liabilities and Stockholders' Equity
Other liabilities............................................................................... $ 119
Total liabilities............................................................................... 119
Stockholders' equity.............................................................................. 27,936
-------
Total liabilities and stockholders' equity...................................................... $ 28,055
-------
-------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
- -------------------------------------------------------------------------------------------------- ---------------
<S> <C>
(IN THOUSANDS)
Income:
Dividend received from subsidiary bank.......................................................... $ 150
Other income.................................................................................... --
------
Total income.................................................................................... 150
------
Expenses
Other expenses.................................................................................. 6
------
Total expenses.................................................................................. 6
------
Income before income taxes and equity in undistributed income of subsidiary....................... 144
Equity in undistributed income of subsidiary...................................................... 676
------
Net income........................................................................................ $ 820
------
------
</TABLE>
51
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(16) PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOW
YEAR ENDED 1996
- -------------------------------------------------------------------------------------------------- ---------------
<S> <C>
(IN THOUSANDS)
Cash flows from operating activities:
Net income........................................................................................ $ 820
ADJUSTMENTS TO RECONCILE NET INCOME TO CASH PROVIDED FROM OPERATING ACTIVITIES:
Amortization...................................................................................... 6
equity in income of subsidiary.................................................................... (676)
------
TOTAL ADJUSTMENTS................................................................................. (670)
------
NET CASH PROVIDED FROM OPERATING ACTIVITIES....................................................... 150
------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid.................................................................................... (124)
------
NET CASH PROVIDED FROM (USED IN) FINANCING STATEMENTS............................................. 26
------
NEW INCREASE IN CASH AND CASH EQUIVALENTS......................................................... 26
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR............................................ 0
------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR.................................................. $ 26
------
------
</TABLE>
52
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(17) QUARTERLY DATA (UNAUDITED)
Summaries of consolidated operating results on a quarterly basis for the
years ended December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
FOURTH THIRD SECOND FIRST
1996 QUARTER QUARTER QUARTER QUARTER
- --------------------------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest and dividend income............................. $ 7,686,306 $ 7,436,787 $ 6,874,120 $ 6,785,650
Interest expense......................................... 4,410,702 4,386,072 3,990,378 3,949,872
------------ ------------ ------------ ------------
Net interest income...................................... 3,275,604 3,050,715 2,883,742 2,835,778
Provision for possible loan losses....................... 75,000 50,000 66,333 1,020,000
------------ ------------ ------------ ------------
Net interest income after provision for possible loan
losses................................................. 3,200,604 3,000,715 2,817,409 1,815,778
Gain (loss) on sale of loans............................. (12,908) 2,900 159 10,042
Noninterest income....................................... 298,807 165,903 154,540 185,289
Noninterest expense...................................... 2,085,741 1,926,677 1,817,473 1,826,515
------------ ------------ ------------ ------------
Core earnings............................................ 1,400,762 1,242,841 1,154,635 184,594
Net gain (loss) on sale of securities.................... (72,129) (20,156) (921) 54,201
Gain on sale of loan servicing........................... -- -- -- --
Net gain (loss) on sale of OREO.......................... (25,247) -- -- (12,948)
Gain (loss) on sale of fixed assets...................... -- -- -- --
OREO write-downs and expense............................. 1,036 30,538 21,609 26,711
Provision for income taxes............................... 470,747 464,937 431,522 77,663
------------ ------------ ------------ ------------
Net income............................................... $ 831,603 $ 727,210 $ 700,583 $ 121,473
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per common share................................ $ 0.40 $ 0.35 $ 0.33 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
FOURTH THIRD SECOND FIRST
1995 QUARTER QUARTER QUARTER QUARTER
- --------------------------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest and dividend income............................. $ 6,683,659 $ 6,073,597 $ 5,780,344 $ 5,411,401
Interest expense......................................... 3,892,744 3,569,358 3,368,318 2,889,348
------------ ------------ ------------ ------------
Net interest income...................................... 2,790,915 2,504,239 2,412,026 2,522,053
Provision for possible loan losses....................... -- 48,334 100,000 151,666
------------ ------------ ------------ ------------
Net interest income after
provision for possible loan losses....................... 2,790,915 2,455,905 2,312,026 2,370,387
Gain (loss) on sale of loans............................. 2,760 (179) (55,192) 0
Noninterest income....................................... 144,153 122,497 159,270 153,304
Noninterest expense...................................... 1,694,394 1,585,292 1,680,390 1,591,626
------------ ------------ ------------ ------------
Core earnings............................................ 1,243,434 992,931 735,714 932,065
Net gain (loss) on sale of securities.................... (219,664) 191,395 (13,750) 133,012
Gain on sale of loan servicing........................... 0 0 763,806 0
Net gain (loss) on sale of OREO.......................... 87,198 0 (119,965) (10,105)
Gain (loss) on sale of fixed assets...................... (54,574) 0 0 4,748
OREO write-downs and expense............................. 105,325 48,367 66,920 80,184
Provision for income taxes............................... 390,998 427,181 486,221 341,814
------------ ------------ ------------ ------------
Net income............................................... $ 560,071 $ 708,778 $ 812,664 $ 637,722
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per common share................................ 0.28 0.37 0.42 0.34
</TABLE>
53
<PAGE>
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item with respect to the directors and
executive officers of the Company will appear under the headings "Election of
Directors," "Beneficial Ownership of Common Stock" and "Executive Officers" in
the Company's definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders to be filed with the Securities and Exchange Commission not later
than 120 days after the close of the Company's fiscal year (the "Proxy
Statement"), and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will appear in the Proxy Statement
under the heading "Executive Compensation" and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will appear in the Proxy Statement
under the heading "Beneficial Ownership of Common Stock" and is incorporated
herein by reference.
ITEM 13. TRANSACTIONS WITH CERTAIN RELATED PERSONS
The information required by this item will appear in the Proxy Statement
under the heading "Executive Compensation-Transactions with Certain Related
Persons" and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) INDEX OF FINANCIAL STATEMENTS. The following financial statements
appear in response to Item 8 of this Report:
Independent Auditors' Reports
Consolidated Statements of Financial Condition as of December 31, 1996 and
1995
Consolidated Statements of Income for the years ended December 31, 1996,
1995 and 1994
Consolidated Statements of Stockholders' Equity for the years ended December
31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994 Notes to Consolidated Financial Statements
(a)(2) INDEX OF FINANCIAL STATEMENT SCHEDULES. All financial statement
schedules have been omitted because they are not required, nor applicable or are
included in Notes to Consolidated to Financial Statements.
54
<PAGE>
(a)(3) Exhibits required by Item 601 of Regulation S-K are attached hereto.
For a list of such exhibits, refer to the Exhibit Index immediately preceding
the exhibits.
(b) REPORTS ON FORM 8-K. The Company filed a report on Form 8-K with the
Securities and Exchange Commission on October 7, 1996 reporting the consummation
of the formation of the holding company.
55
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
EMERALD ISLE BANCORP, INC.
By: /s/ MARK A. OSBORNE
-----------------------------------------
Mark A. Osborne
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Date: March 19, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ MARK A. OSBORNE Chairman of the Board,
- ------------------------------ President and Chief March 19, 1997
Mark A. Osborne Executive Officer
/s/ GERARD F. LINSKEY Treasurer
- ------------------------------ March 19, 1997
Gerard F. Linskey
/s/ PETER L. MAGUIRE Director
- ------------------------------ March 19, 1997
Peter L. Maguire
/s/ JOHN V. MURPHY Director
- ------------------------------ March 19, 1997
John V. Murphy
/s/ THOMAS P. MOORE Director
- ------------------------------ March 19, 1997
Thomas P. Moore
/s/ RICHARD P. QUINCY Director
- ------------------------------ March 19, 1997
Richard P. Quincy
/s/ MICHAEL T. PUTZIGER Director
- ------------------------------ March 19, 1997
Michael T. Putziger
/s/ DOUGLAS C. PURDY Director
- ------------------------------ March 19, 1997
Douglas C. Purdy
56
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- ------------------------------------------------------------------------------------------
<S> <C> <C>
(2) Plan of Reorganization and Acquisition by and between the Registrant and The Hibernia
Savings Bank, dated February 15,1 996 (incorporated by reference to Exhibit No. 99.4 to
the Registrant's registration statement on Form 8-A, filed August 9, 1996).
(3)(a)(1) Articles of Organization of Registrant, filed January 10, 1996 (incorporated by reference
to Exhibit No. 99.1 to the Registrant's registration statement on Form 8-A, filed August
9, 1996).
(3)(b)(1) By-laws of the Registrant (incorporated by reference to Exhibit 99.2 to the Registrant's
registration statement on Form 8-A, filed August 9, 1996).
(3)(b)(2) First Amendment to By-Laws of the Registrant, effective September 18,1996.
(3)(b)(3) Second Amendment to By-Laws of the Registrant, effective September 18,1996.
(4) Common Stock Certificate of the Registrant (incorporated by reference to Exhibit No. 99.1
to the Registrant's registration statement on Form S-8, filed November 4, 1996 (File No.
33-15441)).
(10)(a)(1) 1986 Stock Option Plan (incorporated by reference to Exhibit No. 99.1 to the Registrant's
registration statement on Form S-8, filed November 4, 1996 (File No. 33-15441)).
(10)(a)(2) Form of Incentive Stock Option Agreement, used in connection with the 1986 Stock Option
Plan (incorporated by reference to Exhibit No. 4.2 to the Registrant's registration
statement on From S-8, filed November 4, 1996 (File No. 33-15441))
(10)(a)(3) 1989 Stock Option Plan (incorporated by reference to Exhibit No. 99.2 to the Registrant's
registration statement on Form S-8, filed November 4, 1996 (File No. 33-15441)).
(10)(a)(4) Form of Incentive Stock Option Agreement, used in connection with the 1989 Stock Option
Plan (incorporated by reference to Exhibit No. 4.3 to the Registrant's registration
statement on Form S-8, filed November 4, 1996 (File No. 33-15441))
(10)(a)(5) 1995 Premium Incentive Stock Option Plan (incorporated by reference to Exhibit No. 99.3 to
the Registrant's registration statement on Form S-8, filed November 4, 1996 (File No.
33-15441)).
(10)(a)(6) Form of Incentive Stock Option Agreement, used in connection with the 1995 Stock Option
Plan (incorporated by reference to Exhibit No. 4.4 to the Registrant's registration
statement on Form S-8, filed November 4, 1996 (File No. 33-15441))
(10)(a)(7) 1989 Stock Purchase Plan for Directors, Officers, Employees and Certain Plans
(incorporated by reference to Exhibit No. 99.4 to the Registrant's registration statement
on Form S-8, filed November 4, 1996 (File No. 33-15441)).
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- ------------------------------------------------------------------------------------------
(10)(a)(8) Emerald Isle Bancorp, Inc. Automatic Dividend Reinvestment and Common Stock Purchase Plan
(incorporated by reference to the Registrant's registration statement on Form S-3, filed
December 30, 1996 (File No. 33-18949)).
<S> <C> <C>
(10)(a)(9) Non-Qualified Executive Retirement Plan.
(10)(a)(10) Trust Agreement.
(10)(b)(1) Employment Agreement.
(10)(b)(2) Special Termination Agreement.
(10)(b)(3) Amendment to Special Termination Agreement dated January 2, 1991
(10)(c)(1) Lease, dated as of November 10,1986 between The Hibernia Savings Bank and Ethel V. Slawsby
with respect to the premises located at 731 Hancock Street, Quincy, Massachusetts.
(10)(c)(2) Lease, dated as of December 22,1988 between The Hibernia Savings Bank and Franklin Federal
Partners with respect to the premises located at 75-101 Federal Street, Boston,
Massachusetts.
(10)(c)(3) Lease, dated as of July 31,1995 between The Hibernia Savings Bank and Stoughton Plaza
Realty Trust with respect to the premises located at 397 Washington Street, Stoughton,
Massachusetts.
(10)(c)(4) Lease, dated as of August 2,1996 between The Hibernia Savings Bank and Superior Realty Co.
with respect to the premises located at 470 West Broadway, South Boston, Massachusetts.
(13) 1997 Annual Report to Stockholders (furnished for the information of the Commission and
not deemed filed with the Commission).
(21) Subsidiaries of the Registrant.
(23) Consent of Arthur Andersen LLP
(27) Financial Data Schedule.
</TABLE>
58
<PAGE>
EXHIBIT (3)(b)(2)
<PAGE>
EMERALD ISLE BANCORP, INC.
First Amendment to By-Laws
By written consent dated September 18, 1996, the Board of Directors of the
Corporation
VOTED: To repeal Article VIII, Section 2 of the By-laws of the
Corporation and replace the repealed provision with the
following:
Section 2. Fiscal Year
Except as from time to time otherwise determined by the
Directors, the tax year of the Corporation shall in each year
end on the last day of October, or on such other date as may
be required by law and the fiscal year end for reporting
purposes shall in each year end on the last day of December,
or on such other date as may be required by law.
<PAGE>
EXHIBIT (3)(b)(3)
<PAGE>
EMERALD ISLE BANCORP, INC.
Second Amendment to By-Laws
At the meeting of January 22, 1997, the Board of Directors of the
Corporation
VOTED: To amend the first sentence of Article III, Section 1 of the
By-Laws of the Corporation to change the date of the annual
meeting of stockholders from the third Monday in April to the
last Monday in April as follows:
"The annual meeting of stockholders shall be held on the last
Monday in April in each year (or if that be a legal holiday in
the place where the meeting is to be held, on the next
succeeding full business day ) at 10:00 a.m. at the main
office of the Corporation in Massachusetts, unless a different
hour, date or place within Massachusetts (or, if permitted by
law, elsewhere in the United States) is fixed by the Chairman
of the Board, if one is elected, the Vice Chairman, if one is
elected, or the Board of Directors acting by vote or by
written instrument or instruments signed by them."
<PAGE>
EXHIBIT (10)(a)(9)
<PAGE>
THE HIBERNIA SAVINGS BANK
NON-QUALIFIED EXECUTIVE RETIREMENT PLAN
Effective January 1, 1994
<PAGE>
ARTICLE I
PURPOSE AND EFFECTIVE DATE
================================================================================
1.1 Purpose. The plan set forth herein shall be known as "The Hibernia
Savings Bank Non-Qualified Executive Retirement Plan" (the "Plan"). The Plan is
established by The Hibernia Savings Bank (the "Employer") for a select group of
management or highly compensated employees and shall be maintained for the
purpose of providing retirement benefits for eligible employees ("Executives")
whose retirement benefits in the Employer's tax qualified retirement plans are
restricted by statute.
1.2 No Guarantee of Benefits. Benefits under the Plan shall be paid only
from the general assets of the Employer. The Employer may set aside funds to
meet its obligations under the Plan to such an extent and in such a manner as it
deems advisable. An Executive's rights to benefits under the Plan shall be only
those of a general, unsecured creditor of the Employer. The Employer does not
guarantee that assets will be available to pay benefits under the Plan.
1.3 Effective Date. The Effective Date of the Plan shall be January 1,
1994. The Plan shall apply only to individuals who die, retire or otherwise
terminate employment with the Employer after the Effective Date. Death,
retirement or termination for Plan purposes shall be determined by the Plan
Administrator.
2
<PAGE>
ARTICLE II
DEFINITIONS
================================================================================
Unless the context clearly indicates otherwise, the following terms shall
have the following meanings wherever used in the Plan:
2.1 "Account" means a bookkeeping account for an Executive established by
the Employer to be credited with the Employer Credits provided for in Article IV
and deemed investment returns as provided for in Article V.
2.2 "Beneficiary" means the person or persons (including a trust)
designated by the Executive to receive any death benefit payable under the Plan.
In the absence of any designation, the Beneficiary shall be the Executive's
estate.
2.3 "Board" means the Board of Directors of The Hibernia Savings Bank.
2.4 "Change of Control" means
(a) the consummation of any transaction in which the Employer
ceases to be an independent corporation (including, without
limitation, a transaction in which the Employer becomes the
subsidiary of another corporation) or the sale or other
disposition of all or substantially all of the assets of the
Employer;
(b) a change in the composition of the Board as a result of a
tender offer, exchange offer, business combination or merger
in which more than 50% of the Board members were not members
of said Board prior to the date of such change; or
(c) the consummation of any transaction in which a person or group
of persons acquires 25% or more of the common stock of the
Employer without the approval of two-thirds of the Board.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
2.6 "Compensation" means total annual compensation paid by the Employer to
the Executive, including base salary, salary reduction amounts and annual
incentives, but excluding
(a) any amount paid to the Executive pursuant to any severance
agreement or salary continuation payments following
termination of employment,
(b) payments under any long-term incentive plan, and
(c) non-taxable benefits to any retirement plan, group insurance
plan, or other employee benefit plan sponsored by the
Employer.
3
<PAGE>
The Plan Administrator shall have discretion to determine whether any specific
item of compensation, other than those described above, shall be treated as
Compensation under the Plan.
2.7 "Disability" shall have the same meaning under the Plan with respect
to an Executive as the meaning given such term in the group long-term disability
plan sponsored by the Employer at the time of the Executive's disability.
2.8 "Effective Date" means January 1, 1994.
2.9 "Employer" means The Hibernia Savings Bank.
2.10 "Employer Credits" mean amounts credited for an Executive under the
terms of this Plan.
2.11 "ESOP" means The Hibernia Savings Bank Employee Stock Ownership Plan,
as amended from time to time.
2.12 "Executive" means an employee of the Employer designated as eligible
for participation in the Plan pursuant to Section 3.1. As of the Effective Date,
the sole Executive is Mark A. Osborne.
2.13 "Normal Retirement Age" means the Executive's 65th birthday.
2.14 "Participation Date" means the date as of which an individual is
designated as eligible to participate in the Plan in accordance with Section
3.1.
2.15 "Plan" means The Hibernia Savings Bank Non-Qualified Executive
Retirement Plan as described herein.
2.16 "Plan Administrator" means the Executive Committee of the Board. The
Plan Administrator shall be responsible for the general operation and
administration of the Plan and for carrying out the provisions thereof.
2.17 "Plan Year" means January 1 to December 31, the Employer's fiscal
year.
2.18 "Profit Sharing Plan" means The Hibernia Savings Bank Profit Sharing
Plan, as amended from time to time.
2.19 "Valuation Date" means the date as of which an Executive's Account is
adjusted for deemed investment returns under Article V. Valuation Dates shall be
in the discretion of the Plan Administrator, but no less frequent than the last
day of every calendar quarter.
2.20 Gender and Number. Wherever used in the Plan, the masculine shall
include the feminine, and the singular shall include the plural, unless the
context clearly indicates otherwise.
4
<PAGE>
ARTICLE III
ELIGIBILITY TO PARTICIPATE
================================================================================
3.1 Eligibility to Participate. The Plan Administrator shall, in its
discretion and from time to time, designate the employees eligible for
participation in the Plan.
3.2 Termination of Participation. An Executive's participation in the Plan
shall cease upon his death, Disability, Normal Retirement Age, or other
termination of employment as determined by the Plan Administrator.
5
<PAGE>
ARTICLE IV
BENEFIT ENTITLEMENTS
================================================================================
4.1 Amount of Employer Credits. With respect to each Plan Year beginning
on or after the Executive's Participation Date through the Plan Year beginning
before the earlier of his death, Disability, termination of employment, or
Normal Retirement Age, the Employer shall credit to the Executive's Account an
amount determined in accordance with this Section 4.1. Such amount shall be
equal to the difference between what the Employer would have (in the absence of
any statutory limitations in the Code) contributed for such Plan Year to the
ESOP and the Profit Sharing Plan minus the actual contribution made on behalf of
the Executive to the ESOP and the Profit Sharing Plan for said Plan Year. The
result will be the Executive's Employer Credits for the Plan Year.
4.2 Vesting in Employer Credits. Subject to Section 7.1,
(a) An Executive shall have a 100% vested interest in the amount
credited to his Account upon the earliest of death,
Disability, Normal Retirement Age, or a Change of Control,
provided that he is still actively employed by the Employer on
the date of any such event.
(b) If the termination of employment of an Executive occurs for
any reason other than those listed in (a), he shall have a
vested interest in each Plan Year's Employer Credits in his
Account (and earnings thereon) determined pursuant to the
vesting schedule then in effect in the ESOP.
The percentage of the Employer Credits (and earnings thereon) credited to
an Executive's Account which is not vested shall be forfeited to the Employer
upon his termination of employment.
4.3 No Effect on Other Benefits. The Employer Credits described in this
Article IV shall have no effect whatever on any other employee benefits provided
to an Executive by the Bank.
4.4 No Executive Contributions. No contributions by Executives will be
required or permitted under this Plan.
6
<PAGE>
ARTICLE V
CREDITING OF INVESTMENT RETURNS TO ACCOUNTS
================================================================================
5.1 Investment Options. The Plan Administrator shall identify one or more
investment options in which the Executive's Account shall be deemed to be
invested. As of the Effective Date, the sole investment option is common stock
of the Employer.
5.2 Adjustment of Accounts. As of each Valuation Date, the Account of each
Executive shall be adjusted to reflect deemed investment returns under the
investment option or options in Section 5.1, determined as if the investments
had actually been made.
5.3 No Obligation to Invest. The Employer shall not be obligated to make
any investments directed pursuant to Section 5.1. The purpose of such deemed
investment options is solely to establish a method of adjusting each Executive's
Account in order to determine the amounts to which he may ultimately be
entitled.
7
<PAGE>
ARTICLE VI
RETIREMENT AND TERMINATION BENEFITS
================================================================================
6.1 Amount and Form of Payment. The amount payable with respect to an
Executive under the Plan shall be limited to the amounts credited to his Account
under Section 4.1, as adjusted for deemed investment returns under Article V.
For this purpose, deemed investment returns shall be determined under Article V
as of the Valuation Date coincident with or immediately preceding the date of
payment. Payment shall be made in a single lump sum, provided that an Executive
may elect an alternative form of payment under Section 6.2.
6.2 Alternative Form of Payment. An Executive may, with the consent of the
Plan Administrator, elect to receive the amount credited to his Account (in cash
or securities) in any alternative form of payment allowed by the Plan
Administrator, including annual installments for a period of up to 15 years (or
the Executive's life expectancy, if shorter). The election to receive an
alternative form of payment must be made by the Executive prior to the beginning
of the Plan Year in which his benefit would otherwise become payable in a lump
sum. Installment payments in the event of death may be commuted to a lump sum in
accordance with uniform guidelines pursuant to Section 8.4 below.
6.3 Time of Payment. Payment of benefits to the Executive (or in the event
of death, his Beneficiary) shall normally commence within 60 days following the
event which gave rise to the payment. A later distribution date may only be
allowed with the approval of the Plan Administrator.
6.4 No Loans or Withdrawals. No payments of any kind will be made to any
Executive or his Beneficiary while such Executive is still in the active employ
of the Employer.
8
<PAGE>
ARTICLE VII
STATUS OF PLAN BENEFITS
================================================================================
7.1 No Funding of Plan. The Employer is not required by the Plan to
segregate any funds representing any Executive's Account hereunder, and nothing
in this Plan shall be construed as providing for such segregation. However, the
Employer may create a grantor trust (within the meaning of Section 671 of the
Code) in connection with the adoption of this Plan to which it may from time to
time make contributions. Notwithstanding the creation of any such trust, the
benefits hereunder shall be a general obligation of the Employer. Payment of
benefits from each trust shall, to that extent, discharge the Employer's
obligations under this Plan. All payments provided for under this Plan not so
discharged shall be paid from the general assets of the Employer. The Plan at
all times shall be entirely unfunded, and no provision shall at any time be made
with respect to segregating any assets of the Employer for payment of any
benefits hereunder. No Executive, Beneficiary or any other person shall have any
interest in any particular assets of the Employer by reason of the right to
receive a benefit under the Plan and any such Executive, Beneficiary, or other
person shall have only the rights of a general, unsecured creditor of the
Employer with respect to any rights under the Plan.
7.2 No Fiduciary Relationship. Nothing in this Plan shall create or be
construed to create a trust or escrow account of any kind or a fiduciary
relationship between the Employer and any Executive, his Beneficiary or any
other person. Executives and their Beneficiaries and any other persons entitled
to payment hereunder shall rely solely on the unsecured promise of the Employer
to make the payments required hereunder and shall have the right to enforce such
a claim in the same manner as any other general, unsecured creditor of the
Employer. Neither the Employer nor any individual acting as an employee or agent
of the Employer shall be liable to any Executive, former Executive, Beneficiary
or any other person for any claim, loss, liability or expense incurred in
connection with the Plan.
9
<PAGE>
ARTICLE VIII
MISCELLANEOUS
================================================================================
8.1 No Guarantee of Employment. Nothing contained in the Plan shall be
construed as a contract of employment between the Employer and any Executive, as
providing any Executive the right to have his employment continued, or as a
limitation on the right of the Employer to deal with any Executive as to his
hiring, discharge, layoff, compensation or any other condition of employment.
8.2 Amendment and Termination. The Employer reserves the right from time
to time to amend and/or terminate the Plan for any reason by vote of the Board.
If the Plan is terminated, the benefits payable to any Executive or Beneficiary
under it as of the termination date shall equal the Executive's vested interest
in his Account. Such benefits shall be payable in the manner described in
Article VI. Notwithstanding the foregoing, no amendment or termination of the
Plan shall reduce the vested benefit payable as of the date such amendment is
adopted with respect to any Executive under the Plan, other than with consent of
the Executive or (if the Executive is deceased) his Beneficiary.
8.3 Nonassignability. No benefit payable under this Plan shall be subject
to alienation, assignment, garnishment, pledge, execution, attachment or levy of
any kind, and any attempt to do so shall not be recognized, except to the extent
required by applicable law.
8.4 Plan Administration. Unless otherwise specifically provided in the
Plan, the Plan Administrator shall be responsible for administering,
interpreting and applying the Plan, and the Plan Administrator's decision on all
such matters shall be final and binding. The administration, interpretation and
application of the Plan by the Plan Administrator shall be made pursuant to
documented policies which shall be subject to the approval of, and may be
changed by, the Board. In the absence of documented policies, all provisions set
forth in the ESOP with respect to the administrative powers and duties of the
Employer, expenses of administration, and procedures for filing claims shall
also be applicable with respect to this plan. The Employer shall be entitled to
rely conclusively upon all tables, valuations, certificates, opinions and
reports furnished by any actuary, accountant, controller, counsel or other
person or entity employed or engaged by the Employer with respect to the Plan.
8.5 Successor Employer. In the event of the dissolution, merger,
consolidation or reorganization of the Employer, provision shall be made for a
successor to the Employer's property or business to participate in the Plan as a
successor Employer. Such successor shall have all the powers, duties and
responsibilities of the Plan.
8.6 Governing Law. This Plan shall be construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts, except as any such laws may
be superseded by federal law.
10
<PAGE>
IN WITNESS WHEREOF, The Hibernia Savings Bank has caused this document to
be executed by its duly authorized officer and its corporate seal to be hereunto
affixed this ____________________ day of ________________, 1994.
By: _____________________________________
Title ___________________________________
Attest:_________________________________________________________________________
(Corporate Seal)
11
<PAGE>
EXHIBIT (10)(a)(10)
<PAGE>
TRUST AGREEMENT
This Agreement made as of this 1st day of January, 1994, by and between
The Hibernia Savings Bank ("Company") and the Trustees hereinafter set forth
("Trustee").
WHEREAS, Company has adopted the Nonqualified Executive Retirement Plan
dated January 1, 1994, a copy of which has been given to the Trustee;
WHEREAS, Company has incurred or expects to incur liability under the
terms of such Plan with respect to the individuals participating in such Plan;
WHEREAS, Company wishes to establish a trust (hereinafter called "Trust")
and to contribute to the Trust assets that shall be held therein, subject to the
claims of Company's creditors in the event of Company's Insolvency, as herein
defined, until paid to Plan participants and their beneficiaries in such manner
and at such time as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management for purposes of Title I of the
Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of Company to make contributions to the Trust
to provide itself with a source of funds to assist it in the meeting of its
liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
SECTION 1. Establishment of Trust
(a) Company shall deposit with Trustee in trust such sums as are
appropriate under the Non-Qualified Executive Retirement Plan, which shall
become the principal of the Trust to be held, administered and disposed of by
Trustee as provided in this Trust Agreement.
<PAGE>
(b) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of Company and shall be used exclusively for
the uses and purposes of Plan participants and general creditors as herein set
forth. Plan participants and their beneficiaries shall have no preferred claim
on, or any beneficial ownership interest in, any assets of the Trust. Any rights
created under the Plan(s) and this Trust Agreement shall be mere unsecured
contractual rights of Plan participants and their beneficiaries against Company.
Any assets held by the Trust will be subject to the claims of Company's general
creditors under federal and state law in the event of insolvency, as defined in
Section 3(a) herein.
(c) No later than five (5) days following the end of the Plan's year,
Company shall be required to irrevocably deposit additional cash or other
property to the Trust in an amount sufficient to pay each Plan participant or
beneficiary the benefits payable pursuant to the terms of the Plan as of the
close of the Plan year.
Section 2. Payments to Plan Participants and Their Beneficiaries
(a) Company shall deliver to Trustee a schedule (the "Payment Schedule")
that indicates the amounts payable in respect of each Plan participant and his
or her beneficiaries, that provides a formula or other instructions acceptable
to Trustee for determining the amounts so payable, the form in which such amount
is to be paid as provided for or available under the Plan, and the time of
commencement for payment of such amounts. Except as otherwise provided herein,
Trustee shall make payments to the Plan participants and their beneficiaries in
accordance with such Payment Schedule. The Trustee shall make provision for the
reporting and withholding of any federal, state or local taxes that may be
required to be withheld with respect to the payment of benefits pursuant to the
terms of the Plan and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported, withheld and paid
by Company.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan shall be determined by Company or such party as it shall
designate under the Plan, and any claim for such benefits shall be considered
and reviewed under the procedures set out in the Plan.
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<PAGE>
(c) Company may make payment of benefits directly to Plan participants or
their beneficiaries as they become due under the terms of the Plan. Company
shall notify Trustee of its decision to make payment of benefits directly prior
to the time amounts are payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plan, Company shall make the balance of each such payment as it falls due.
Trustee shall notify Company where principal and earnings are not sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary When
Company is Insolvent
(a) Trustee shall cease payment of benefits to Plan participants and their
beneficiaries if the Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay
its debts as they become due, or (ii) Company is subject to a pending proceeding
as a debtor under the United States Bankruptcy Code, or (iii) Company is
determined to be insolvent by the Federal Deposit Insurance Corporation or the
Massachusetts Commissioner of Banks.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Company under federal and state law as set forth
below.
(1) The Board of Directors and the Chief Executive Officer of
Company shall have the duty to inform Trustee in writing of Company's
Insolvency. If a person claiming to be a creditor of Company alleges in writing
to Trustee that Company has become Insolvent, Trustee shall determine whether
Company is Insolvent and, pending such determination, Trustee shall discontinue
payment of benefits to Plan participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's Insolvency, or
has received notice from Company or a person claiming to be a creditor alleging
that Company is Insolvent, Trustee shall have no duty to inquire whether Company
is Insolvent. Trustee may in all events rely on such evidence concerning
Company's solvency as may be furnished to Trustee and that provides Trustee with
a reasonable basis for making a determination concerning Company's solvency.
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<PAGE>
(3) If at any time Trustee has determined that Company is Insolvent,
Trustee shall discontinue payments to Plan participants or their beneficiaries
and shall hold the assets of the Trust for the benefit of Company's general
creditors. Nothing in this Trust Agreement shall in any way diminish any rights
of Plan participants or their beneficiaries to pursue their rights as general
creditors of Company with respect to benefits due under the Plan or otherwise.
(4) Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of this Trust
Agreement only after Trustee has determined that Company is not Insolvent (or is
no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues the
payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants of their beneficiaries by Company in lieu of the payments provided
for hereunder during any such period of discontinuance.
Section 4. Payments To Company
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, Company shall have no right or power to direct Trustee to return to
Company or to divert to others any of the Trust assets before all payments of
benefits have been made to Plan participants and their beneficiaries pursuant to
the terms of the Plan.
Section 5. Investment Authority
Trustee shall invest in the common stock of the Company unless otherwise
directed by the Board of Directors of Company. All rights associated with assets
of the Trust shall be exercised by Trustee or the person designated by Trustee,
and shall in no event be exercisable by or rest with Plan participants.
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<PAGE>
Section 6. Disposition Of Income
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
Section 7. Responsibility Of Trustee
Trustee shall have, without exclusion, all powers conferred on Trustees by
applicable law, unless expressly provided otherwise herein.
Section 8. Resignation and Removal of Trustee; Appointment of Successor
(a) Trustee may resign at any time by written notice to Company, which
shall be effective five (5) days after receipt of such notice unless Company and
Trustee agree otherwise.
(b) Trustee may be removed by Company on five (5) days notice or upon
shorter notice accepted by Trustee.
(c) Upon a Change in Control, as defined herein, Trustee may not be
removed by Company for ten (10) years.
(d) Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets shall subsequently be transferred to the successor Trustee.
The transfer shall be completed within five (5) days after receipt of notice or
resignation, removal or transfer, unless Company extends the time limit.
(e) If Trustee resigns or is removed, a successor shall be appointed, in
accordance with Subsection (f) hereof, by the effective date of resignation or
removal. If no such appointment has been made, Trustee may apply to a court of
competent jurisdiction for appointment of a successor or for instructions. All
expenses of Trustee in connection with the proceeding shall be allowed as
administrative expenses of the Trust.
(f) Company may appoint a successor to replace Trustee upon resignation or
removal. The appointment shall be effective when accepted in writing by the new
Trustee, who shall have all of the rights and powers of the former Trustee
including ownership rights in the Trust assets. The former Trustee shall execute
any instrument necessary or reasonably requested by Company or the successor
Trustee to evidence the transfer.
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<PAGE>
Section 9. Amendment or Termination
(a) This Trust Agreement may be amended by a written instrument executed
by Trustee and Company. Notwithstanding the foregoing, no such amendment shall
conflict with the terms of the Plan.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms of the Plan. Upon termination of the Trust any assets remaining in
the Trust shall be returned to the Company.
Section 10. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under
this Trust Agreement may not be anticipated, assigned either at law or in
equity, alienated, pledged, encumbered, or subjected to attachment, garnishment,
levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
Section 14. Effective Date
The effective date of this Trust Agreement shall be January 1, 1994.
TRUSTEES: THE HIBERNIA SAVINGS BANK
____________________________ By: ____________________________
Its duly authorized:
____________________________ ____________________________
____________________________
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<PAGE>
EXHIBIT (10)(b)(1)
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 2nd day of January, 1991 by and between THE
HIBERNIA SAVINGS BANK, a Massachusetts savings bank with its main office in
Quincy, Massachusetts (the "Bank") and MARK A. OSBORNE of Norwell, Massachusetts
(the "Executive").
WITNESSETH
WHEREAS, the Executive and the Bank are parties to an Employment Agreement
dated September 4, 1986; and
WHEREAS, certain further action has been taken by the Bank with respect to
the Executive's employment with the Bank and the parties wish hereby to enter
into a new Employment Agreement to memorialize the current understandings
between the parties;
NOW THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Bank and the Executive agree as follows:
1. Employment. The Bank agrees to employ the Executive and the Executive
agrees to continue in the employ of the Bank on the terms and conditions
hereinafter set forth.
2. Capacity. The Executive shall serve the Bank as its President, Chairman
of the Board of Directors and Chief Executive Officer subject to his election by
the Board of Directors. In this capacity, the Executive shall, subject to the
By-Laws of the Bank and to the direction of the Board of Directors, have
responsibility for the general supervision and management of the Bank's
business.
<PAGE>
3. Effective Date and Term. The commencement date (the "Commencement
Date") of this Agreement shall be January 2, 1991. Subject to the provisions of
Section 6, the term of the Executive's employment hereunder shall be for five
(5) years from the Commencement Date; provided, however, that the term shall be
extended automatically for periods of one year commencing on the day prior to
the first anniversary of the Commencement Date and on the day prior to each
subsequent anniversary thereafter, unless, on the date of any such anniversary,
either party gives written notice to the other of such party's election not to
extend the term of this Agreement. The last day of such term, as so extended
from time to time, is herein sometimes referred to as the "Expiration Date".
4. Compensation and Benefits. The regular compensation and benefits
payable to the Executive under this Agreement shall be as follows:
(a) Salary. For all services rendered by the Executive under this
Agreement, the Bank shall pay the Executive a base salary at the rate of
$185,000.00 per year, subject to increase from time to time in accordance
with the usual practice of the Bank with respect to review of compensation
of its senior executives. At such time as the initial base salary is
increased, if ever, such increased salary shall become the base salary
under this
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<PAGE>
Agreement. The Executive's salary shall be payable in periodic
installments in accordance with the Bank's usual practice for its senior
executives.
(b) Regular Benefits. The Executive shall also be entitled to
participate in any and all employee benefit plans, medical insurance
plans, life insurance plans, disability income plans, retirement plans,
bonus incentive plans and other benefit plans from time to time in effect
for senior executives of the Bank. Such participation shall be subject to
(i) the terms of the applicable plan documents, (ii) generally applicable
Bank policies and (iii) the discretion of the Board of Directors or any
administrative or other committee provided for in or contemplated by such
plan. In addition, the Executive shall be entitled to receive benefits
which are the same or substantially similar to those which are currently
being provided to the chief executive officers of savings banks within the
Commonwealth of Massachusetts.
(c) Business Expenses. The Bank shall reimburse the Executive for
all reasonable travel, entertainment and other business expenses incurred
by him in the performance of his duties and responsibilities, subject to
such reasonable requirements with respect to substantiation and
documentation as may be specified by the Bank including without limitation
expenses incurred in travelling to and
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<PAGE>
from and attending conventions and seminars in connection with the Bank's
business. On those occasions when Executive is accompanied by his spouse,
Bank shall pay all reasonable expenses incurred by Executive on his
spouse's behalf.
(d) Automobile. The Bank will provide the Executive with the full
use of an automobile of a type and style consistent with his status as
President, Chief Executive Officer and Chairman of the Board, such
automobile to be selected by the Executive. All costs of operating,
insuring, maintaining or repairing said automobile (including without
limitation the costs of gasoline and oil) shall be paid by the Bank. The
Executive recognizes that such costs paid by the Bank represent taxable
income to him. The Bank agrees to pay to the Executive, on an annual
basis, an amount approximating the additional tax cost to the Executive
incurred as a result of the inclusion of such costs in the Executive's
taxable income to him. Such amount, to be determined solely by the Bank,
in its reasonable judgment, shall be based upon average marginal rates in
effect for persons receiving like compensation, and the actual tax paid by
the Executive shall not determine the amount so paid.
(e) Vacation. The Executive shall be entitled to not less than four
weeks of vacation per year, to be taken at
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<PAGE>
such times and intervals as shall be determined by the Executive with the
approval of the Bank, which approval shall not be unreasonably withheld.
During such vacation time, Executive's compensation shall be paid in full.
(f) Life Insurance Plan. The Executive and the Bank acknowledge
that, in addition to the Executive being a named insured under the Bank's
group life insurance plan, the Executive is covered by a term life
insurance contract in the face amount of $750,000. The Executive shall be
the owner of the policy and, in the event of the death of the Executive
while in the employ of the Bank, the proceeds shall be paid to the
beneficiary specified by the Executive, or if no beneficiary shall have
been so specified, to the estate of the Executive. The Bank shall be
solely responsible for the payment of premiums on such term life insurance
policy for so long as this Agreement is in effect. If, for any reason, the
policy is cancelled, Bank shall procure and pay for a substitute insurance
policy providing similar coverage.
The Executive recognizes that insurance premiums paid by the Bank on
all policies providing insurance in excess of limitations imposed by the
Internal Revenue Code are considered "excess insurance" and represent
taxable income to him. The Bank agrees to pay to the Executive, on an
annual basis, an amount approximating the additional tax
- 5 -
<PAGE>
cost to the Executive incurred as a result of the inclusion of all such
premiums for such excess insurance in the Executive's taxable income. Such
amount, to be determined solely by the Bank, in its reasonable judgment,
shall be based upon average marginal rates in effect for persons receiving
like compensation, and the actual tax paid by the Executive shall not
determine the amount so paid.
At the expiration of the Bank's obligations to Executive under this
Agreement including the payment of all termination benefits, Bank's
obligations to pay the premiums on such term policy shall cease; provided
however, that Bank will insure that such policy or policies provide the
Executive with the option for Executive to assume the premium cost of
continuing such insurance coverage.
(g) Physical Examination. The Executive agrees that he will submit
to an annual physical examination by a physician licensed to practice
medicine in the Commonwealth of Massachusetts chosen by the Executive. The
Bank will pay all expenses of such examination but shall not be entitled
to a report of the examination.
(h) Tax Return Preparation and Tax Planning Services. The Bank will
contract with the Bank's accountants in order to have such accountants
provide all services to Executive as are necessary to prepare the
Executive's state and federal tax returns and to provide such financial
and tax
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<PAGE>
planning services as may be reasonably required by the Executive. All
costs of such services shall be paid by the Bank.
The Executive recognizes that such payments paid by the Bank on all
such financial planning and tax services represent taxable income to him.
The Bank agrees to pay to the Executive, on an annual basis, an amount
approximating the additional tax cost to the Executive incurred as a
result of the inclusion of all such financial planning and tax services in
the Executive's taxable income. Such amount, to be determined solely by
the Bank, in its reasonable judgment, shall be based upon average marginal
rates in effect for persons receiving like compensation, and the actual
tax paid by the Executive shall not determine the amount so paid.
(i) Salary Continuation Plan. The Bank agrees that, in the event of
the death of the Executive prior to the termination of this Agreement, in
addition to any other life insurance benefits which are provided for under
this Agreement, the Bank will pay the Executive's named beneficiary the
sum of One Hundred Thousand Dollars ($100,000.00) per year for each of the
four years following the Executive's death. Such amount shall be deemed a
"salary continuation benefit" and shall be paid in equal monthly
installments over the four year period. The Bank may purchase and maintain
a life insurance policy on the
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<PAGE>
Executive in an amount sufficient to fund such benefit and, in such event
the Bank shall be the owner and beneficiary of such policy and solely
responsible for the payment of premiums on such policy, but such benefit
shall be due and payable whether or not such insurance is purchased and
whether or not the Bank receives payment on any such policy.
(j) Other Benefits. In addition to paying for all membership and
subscription fees for professional organizations and periodicals, Bank
shall pay for the cost of initiation fee and annual membership dues or
fees on behalf of the Executive at a private golf course of the
Executive's choosing in the Greater Boston Area.
5. Extent of Service. During his employment hereunder, the Executive
shall, subject to the direction and supervision of the Board of Directors,
devote his full business time, best efforts and business judgment, skill and
knowledge to the advancement of the Bank's interests and to the discharge of his
duties and responsibilities hereunder. He shall not engage in any other business
activity, except as may be approved by the Board of Directors; provided,
however, that nothing herein shall be construed as preventing the Executive from
the following:
(a) investing his assets in a manner not prohibited by Section 9(a)
hereof, and in such form or manner as shall not require any material
services on his part in the operations or affairs of the companies or
other entities in which such investments are made;
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<PAGE>
(b) serving on the board of directors of any company, subject to the
prohibitions set forth in Section 9(a) and provided that he shall not be
required to render any material services with respect to the operations or
affairs of any such company; or
(c) engaging in religious, charitable or other community or
non-profit activities which do not impair his ability to fulfill his
duties and responsibilities under this Agreement.
6. Termination and Termination Benefits. The Executive's employment may be
terminated under the following circumstances:
(a) Termination by the Bank for Cause. The Executive's employment
hereunder may be terminated without further liability on the part of the
Bank effective immediately by a two-thirds vote of all of the members of
the Board of Directors for cause by written notice to the Executive
setting forth in reasonable detail the nature of such cause. Only the
following shall constitute "cause" for such termination:
(i) Deliberate dishonesty of the Executive with respect to the
Bank or any subsidiary or affiliate thereof;
(ii) Conviction of the Executive of a crime involving moral
turpitude;
(iii) Gross and willful failure to perform a substantial
portion of his duties and responsibilities hereunder, which failure
continues for more than thirty days
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<PAGE>
after written notice given to the Executive pursuant to a two-thirds vote
of all of the members of the Board of Directors, such vote to set forth in
reasonable detail the nature of such failure.
(b) Termination by the Executive. The Executive's employment
hereunder may be terminated effective immediately by the Executive by
written notice to the Board of Directors in the event of the following:
(i) Failure of the Board of Directors to elect the Executive
to any of the offices of President, Chairman of the Board, and Chief
Executive Officer of the Bank, or to continue the Executive in such
offices; or
(ii) Failure by the Bank to comply with any of the provisions
of Section 4(a) through (j) inclusive or any material breach by the Bank
of any other provision of this Agreement; or
(iii) If, in the reasonable judgment of the Executive (such
judgment being exercised in good faith), a significant change in the
nature or scope of Executive's responsibilities, power, functions or
duties has occurred which, when compared to the Executive's
responsibilities, powers, functions or duties exercised by the Executive
as of the date of execution of this Agreement, constitutes a demotion
and/or dismissal or if a reasonable determination is made by the Executive
that he is unable to exercise the
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<PAGE>
responsibilities, powers, functions or duties exercised by him as of the
date of execution of this Agreement.
(c) Termination by the Bank Without Cause. The Executive's
employment with the Bank may be terminated without cause by a
three-fourths vote of all of the members of the Board of Directors on
written notice to the Executive.
(d) Termination at Age Sixty-Five. The Executive reaches age
sixty-five, except that retirement or termination benefits provided by
this Agreement shall not be prejudiced by this Section.
(e) Certain Termination Benefits. In the event of termination of
this Agreement for any reason other than a termination under Section 6(a)
above, the Executive shall be entitled to the following benefits:
(i) For the period subsequent to the date of termination until
the Expiration Date, the Bank shall continue to pay the Executive the base
salary at the rate in effect on the date of termination, including such
increases as are provided in Section 4(a).
(ii) For the period subsequent to the date of termination
until the Expiration Date, the Executive shall continue to receive all
benefits described in Section 4(b), (d) and (f) above existing on the date
of termination (except for any cash bonus plans which shall be pro-rated
through the date of termination). For purposes of
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<PAGE>
application of such benefits, the Executive shall be treated as if he had
remained in the employ of the Bank, with an annual salary at the rate in
effect on the date of termination, with increases as provided in Section
4(a), and service credits will continue to accrue during such period as if
the Executive had remained in the employ of the Bank.
(iii) If, in spite of the provisions of Section 6(e)(ii)
above, benefits or service credits under any benefit plan shall not be
payable or provided under any such plan to the Executive, or to the
Executive's dependents, beneficiaries or estate, because the Executive is
no longer deemed to be an employee of the Bank, the Bank itself shall pay
or provide for payment of such benefits and service credits for such
benefits to the Executive, or to the Executive's dependents, beneficiaries
or estate.
(iv) If, as of the date of termination, the Executive is
eligible to retire under any retirement plan of the Bank in effect at such
time, the Executive will be entitled to receive any and all benefits that
would accrue to retiring employees under such plan for such period of time
after termination as the Executive is receiving termination benefits under
this Agreement.
(f) Notwithstanding any other provision of this Agreement, the
Executive shall be under no obligation whatsoever to seek or accept any
employment after termination
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<PAGE>
of employment with the Bank and the Executive's entitlement to all
benefits provided herein shall not be prejudiced in any way by his failure
to seek employment after termination of employment with the Bank.
7. Termination Benefits Buy-Out.
a) In the event of Executive's termination hereunder under
circumstances entitling the Executive to termination benefits under
Section 6(e), at the Executive's sole option, the Executive, at any time
before all termination benefits have been paid, may demand and, upon such
demand, the Bank shall pay the Executive the then current value of the
termination benefits owed to the Executive, such payment to be made within
thirty (30) days of demand.
b) In the event of the Executive's death after the lawful
termination of this Agreement, but prior to the payment of all termination
benefits owed to Executive hereunder, in addition to any other life
insurance benefits provided in this Agreement, the Bank will pay the
Executive's named beneficiary the sum of One Hundred Thousand Dollars
($100,000.00) per year for each of the four years following the
Executive's death. Such amount shall be deemed a "salary continuation
benefit" and shall be paid in equal monthly installments over the four-
year period. The Bank may purchase and maintain a life insurance policy on
the Executive in an amount sufficient to fund such benefit and,
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<PAGE>
in such event the Bank shall be the owner and beneficiary of such policy
and solely responsible for the payment of premiums on such policy, but
such benefit shall be due and payable whether or not such insurance is
purchased and whether or not the Bank receives payment on any such policy.
8. Disability. If, due to illness or physical or mental disability, the
Executive shall be unable to perform substantially all of his duties and
responsibilities hereunder, the Board of Directors may designate another
executive to act in his place during the period of such disability.
Notwithstanding any such designation, the Executive shall continue to receive
his full salary and benefits under Section 4 of this Agreement until he becomes
eligible for disability income under the Bank's disability income plan. While
receiving disability income payments under such plan, the Executive shall not
receive any salary under Section 4(a), but shall continue to participate in the
Bank's benefit plans and to receive other benefits as specified in Section 4
until the Expiration Date; provided, however, that in the event that the
disability income payments under the Bank's disability income plan are less than
the Executive's salary at the time of such disability, the Bank shall pay the
Executive an amount equal to the difference between such salary and disability
payments. In the absence of a disability income plan at the time of such
disability, the Bank shall pay the Executive benefits equal to the Executive's
full salary. If
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<PAGE>
any question shall arise as to whether during any period the Executive was
disabled so as to be unable to perform substantially all of his duties and
responsibilities hereunder due to physical or mental illness, the Executive may,
and at the request of the Bank will, submit to the Bank a certification, in
reasonable detail, by a physician selected by the Executive or his guardian to
whom the Bank has no reasonable objection as to whether the Executive was so
disabled, and such certification shall for the purposes of this Agreement be
conclusive of the issue. If such question shall arise and the Executive shall
fail to submit such certification, the Bank's determination of such issue shall
be binding on the Executive.
9. Noncompetition and Confidential Information
(a) Noncompetition. During
(i) a period of one year following the date of termination of
the Executive's employment with the Bank by the Executive as a result of
his election not to extend pursuant to Section 3 or by the Bank for cause
pursuant to Section 6(a) hereof, and
(ii) the period during which the Bank continues to provide
benefits to the Executive pursuant to Section 6(e)(i)-(iii) hereof,
the Executive will not, directly or indirectly, whether as owner, partner,
shareholder, consultant, agent, employee, co-venturer or otherwise, or through
any person (as defined in Section 11),
- 15 -
<PAGE>
compete in the Bank's market area (defined as the towns in which the Bank's main
office and branch offices are located and all towns contiguous thereto) with the
banking or any other business conducted by the Bank during the period of his
employment hereunder, nor will he attempt to hire any employee of the Bank,
assist in such hiring by any other person, encourage any such employee to
terminate his or her relationship with the Bank or solicit or encourage any
customer of the Bank to terminate its relationship with the Bank or to conduct
with any other person any business or activity which such customer conducts or
could conduct with the Bank.
(b) Confidential Information. The Executive will not disclose to any
other person (except as required by applicable law or in connection with
the performance of his duties and responsibilities hereunder), or use for
his own benefit or gain, any confidential information of the Bank obtained
by him incident to his employment with the Bank. The term "confidential
information" includes, without limitation, financial information, business
plans, prospects and opportunities (such as lending relationships,
financial product developments, or possible acquisitions or dispositions
of businesses or facilities) which have been discussed or considered by
the Bank's management but does not include any information which has
become part of the public domain by means other than the Executive's
non-observance of his obligations hereunder.
- 16 -
<PAGE>
(c) Relief Interpretation. The Executive agrees that the Bank shall
be entitled to injunctive relief for any breach by him of the covenants
contained in Sections 9(a) or 9(b). In the event that any provision of
this Section 9 shall be determined by any court of competent jurisdiction
to be unenforceable by reason of its being extended over too great a
period of time, too large a geographic area or too great a range of
activities, it shall be interpreted to extend only over the maximum period
of time, geographic area or range of activities as to which it may be
enforceable. For purposes of this Section 9, the term "Bank" shall mean
the Bank and any of its subsidiaries and affiliates.
10. Confliction Agreements. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which he
is a party or is bound, and that he is not now subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder.
11. Definition of "Person", "Director" and "Board of Directors". For
purposes of this Agreement: the term "Person" shall mean an individual, a
corporation, an association, a partnership, an estate, a trust and any other
entity or organization; and the terms "Director" and "Board of Directors" shall
mean a Director and the Board of Directors, respectively, of the Bank.
- 17 -
<PAGE>
12. Withholding. All payments made by the Bank under this Agreement shall
be net of any tax or other amounts required to be withheld by the Bank under
applicable law.
13. Enforcement Expenses. In the event that the Executive retains legal
counsel and/or incurs other costs and expenses in connection with the
enforcement of any or all of the Executive's rights under this Agreement, the
Bank shall pay (or the Executive shall be entitled to recover from the Bank, as
the case may be) the Executive's reasonable attorneys' fees and other reasonable
costs and expenses in connection with the enforcement of said rights regardless
of whether the Executive prevails on the merits of his claims, so long as such
claims are made in good faith.
14. Assignment; Successors and Assigns, etc. Neither the Bank nor the
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party. This Agreement shall inure to the benefit of and be binding upon the Bank
and the Executive, their respective successors, executors, administrators, heirs
and permitted assigns.
15. Special Termination Agreement. Executive and Bank are parties to a
written Special Termination Agreement dated September 4, 1986 as amended by
Amendment dated as of January 2, 1991. Nothing contained in this Agreement shall
limit the provisions thereof and such Special Termination Agreement is to remain
in full force and effect in accordance with its provisions as from time to time
amended.
- 18 -
<PAGE>
16. Indemnity. Bank shall indemnify, defend, and hold the Executive
harmless for all acts or decisions made by him in good faith while performing
services for the Bank. In addition to and not in lieu of such indemnity, Bank
shall include Executive as an insured under any insurance policy now in force or
hereafter obtained during the term of this Agreement covering the officers and
directors of the Bank. Bank shall pay all expenses including without limitation
reasonable attorneys' fees actually and necessarily incurred by the Executive in
connection with the defense of such acts and decisions, suits or proceedings,
including costs of settlement and/or appeal.
17. Enforceability. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
18. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
- 19 -
<PAGE>
19. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the Bank
or, in the case of the Bank, at its main office attention of the Clerk.
20. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Bank.
21. Governing Law. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Bank, by its duly authorized officer and by the Executive, as
of the date first above written:
ATTEST: THE HIBERNIA SAVINGS BANK
/s/ [ILLEGIBLE] By: ___________________________
- ------------------------------
, Clerk Title: Director
[Seal]
WITNESS:
/s/ [ILLEGIBLE] /s/ Mark A. Osborne
- ------------------------------ -------------------------------
MARK A. OSBORNE
- 20 -
<PAGE>
EXHIBIT (10)(b)(2)
<PAGE>
SPECIAL TERMINATION AGREEMENT
AGREEMENT made as of the 4th day of September, 1986 by and between
HIBERNIA SAVINGS BANK, a Massachusetts savings bank with its main office in
Boston, Massachusetts (the "Bank") and MARK A. OSBORNE, an individual presently
employed by the Bank in the capacity of President and Chief Executive Officer
(the "Executive").
1. Purpose. In order to allow the Executive to consider the prospect of a
Change in Control (as defined in Section 2) in an objective manner and in
consideration of the services rendered and to be rendered by the Executive to
the Bank and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged by the Bank, the Bank is willing to provide,
subject to the terms of this Agreement, certain severance benefits to protect
the Executive from the consequences of a Terminating Event (as defined in
Section 3) occurring subsequent to a Change in Control.
2. Change in Control. A "Change in Control" shall be deemed to have
occurred in either of the following events: (i) if there has occurred a change
in control which the Bank would be required to report in response to Item 5(f)
of the Form for Proxy Statement (Form F-5) prescribed by 12 CFR Section 335.212
promulgated under the Securities Exchange Act of 1934, as amended (the "1934
Act"), or, if such regulation is no longer in effect, any regulations
promulgated by the Federal Deposit
<PAGE>
Insurance Corporation or by the Securities and Exchange Commission pursuant to
the 1934 Act which are intended to serve similar purposes or (ii) when any
"person" (as such term is used in Sections 13(d) and 14(d)(2) of the 1934 Act)
becomes a "beneficial owner" (as such term is defined in Rule 13d-3 promulgated
under the 1934 Act), directly or indirectly, of securities of the Bank
representing twenty-five percent or more of the total number of votes that may
be cast for the election of directors of the Bank and, in the case of either (i)
or (ii) above, the Bank's Board of Directors has not consented to such event by
a two-thirds vote of all of the members of the Board of Directors adopted either
prior to such event or within ninety days thereafter, except that, if at the
time such a consent vote is adopted after such event the persons who were
directors of the Bank immediately prior to such event do not constitute a
majority of the Board of Directors of the Bank or of any successor institution,
such vote shall not be deemed to constitute consent for the purposes of this
Agreement. In addition, a Change in Control shall be deemed to have occurred if,
as the result of, or in connection with, any tender or exchange offer, merger or
other business combination, sale of assets or contested election or any
combination of the foregoing transactions, the persons who were directors of the
Bank before such transaction shall cease to constitute a majority of the Board
of Directors of the Bank or of any successor institution. Notwithstanding the
other provisions of
-2-
<PAGE>
this Section, the sale of the Bank's stock in connection with its conversion
from mutual to stock form shall not constitute a Change in Control.
3. Terminating Event. A "Terminating Event" shall mean (a) termination by
the Bank of the employment of the Executive with the Bank for any reason other
than (i), death, (ii) deliberate dishonesty of the Executive with respect to the
Bank or any subsidiary or affiliate thereof or (iii) conviction of the Executive
of a crime involving moral turpitude or (b) resignation of the Executive from
the employ of the Bank, while the Executive is not receiving payments or
benefits from the Bank by reason of the Executive's disability, subsequent to
the occurrence of any of the following events:
(i) A significant change in the nature or scope of the Executive's
responsiblities, authorities, powers, functions or duties from the
responsiblities, authorities, powers, functions or duties exercised by the
Executive immediately prior to the Change in Control; or
(ii) A reasonable determination by the Executive that, as a result
of a Change in Control, he is unable to exercise the responsiblities,
authorities, powers, functions or duties exercised by the Executive
immediately prior to such Change in Control; or
(iii) A decrease in the total annual compensation payable by the
Bank to the Executive other than as a result of a decrease in compensation
payable to the Executive and
-3-
<PAGE>
to all other executive officers of the Bank on the basis of the Bank's
financial performance.
4. Severance Payment. In the event a Terminating Event occurs within three
years after a Change in Control, the Bank shall pay to the Executive an amount
equal to (3) three times the "base amount" (as defined in Section 280G(b)(3) of
the Internal Revenue Code of 1954, as amended (the "Code)) applicable to the
Executive, less (y) One Dollar ($1.00), payable in one lump sum payment on the
date of termination.
5. Employment Status. This Agreement is not an agreement for the
employment of the Executive and shall confer no rights on the Executive except
as herein expressly provided.
6. Term. Subject to the satisfaction of the conditions set forth in
Sections 15 and 16 hereof, this Agreement shall take effect one day prior to the
effective date of the conversion of the Bank from mutual to stock form of
Massachusetts savings bank, and shall terminate upon the earlier of (a) the
termination by the Bank of the employment of the Executive because of death,
deliberate dishonesty of the Executive with respect to the Bank or any
subsidiary or affiliate thereof or conviction of the Executive of a crime
involving moral turpitude, (b) the resignation or termination of the Executive
for any reason prior to a Change in Control or (c) the resignation of the
Executive after a Change in Control for any reason other than the occurrence of
any of the events enumerated in Section 3(b)(i)-(iii) of this Agreement.
-4-
<PAGE>
7. Withholding. All payments made by the Bank under this Agreement shall
be net of any tax or other amounts required to be withheld by the Bank under
applicable law.
8. Arbitration of Disputes. Any controversy or claim arising out of or
relating to this agreement or the breach thereof shall be settled by arbitration
in accordance with the laws of the Commonwealth of Massachusetts by three
arbitrators, one of whom shall be appointed by the Bank, one by the Executive
and the third by the first two arbitrators. If the first two arbitrators cannot
agree on the appointment of a third arbitrator, then the third arbitrator shall
be appointed by the American Arbitration Association in the City of Boston. Such
arbitration shall be conducted in the City of Boston in accordance with the
rules of the American Arbitration Association, except with respect to the
selection of arbitrators which shall be as provided in this Section 8. Judgment
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. In the event that it shall be necessary or desirable for
the Executive to retain legal counsel and/or incur other costs and expenses in
connection with the enforcement of any or all of the Executive's rights under
this Agreement, the Bank shall pay (or the Executive shall be entitled to
recover from the Bank, as the case may be) the Executive's reasonable attorneys'
fees and other reasonable costs and expenses in connection with the enforcement
of said rights (including the enforcement of any
-5-
<PAGE>
arbitration award in court) regardless of the final outcome, unless and to
the extent the arbitrators shall determine that under the circumstances
recovery by the Executive of all or a part of any such fees and costs and
expense would be unjust.
9. Assignment. Neither the Bank nor the Executive may make any assignment
of this Agreement or any interest herein, by operation of law or otherwise,
without the prior written consent of the other party. This Agreement shall inure
to the benefit of and be binding upon the Bank and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
In the event of the Executive's death prior to the completion by the Bank of all
payments due him under this Agreement, the Bank shall continue such payments to
the Executive's beneficiary designated in writing to the Bank prior to his death
(or to his estate, if he fails to make such designation).
10. Enforceability. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceabable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
11. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving
-6-
<PAGE>
party. The failure of either party to require the performance of any term or
obligation of this Agreement or the waiver by either party of any breach of
this Agreement shall not prevent any subsequent enforcement of such term or
obligation or be deemed a waiver of any subsequent breach.
12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by resigtered or certified mail, postage prepaid, to the
executive at the last address the Executive has filed in writing with the Bank
or, in the case of the Bank, at its main office, attention of the Clerk.
13. Election of Remedies. An election by the Executive to resign after a
Change in Control under the provisions of this Agreement shall not constitute a
breach by the Executive of any employment agreement between the Bank and the
Executive and shall not be deemed a voluntary termination of employment by the
Executive for the purpose of interpreting the provisions of any of the Bank's
benefit plans, programs or policies. Nothing in this Agreement shall be
construed to limit the rights of the Executive under any employment agreement
that he may then have with the Bank.
14. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Bank.
-7-
<PAGE>
15. Ratification of Agreement. This Agreement shall be submitted to the
full Board of Directors of the Bank for ratification at the first meeting of the
Board of Directors subsequent to the Bank's conversion.
16. Governing Law. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Bank, by its duly authorized officer and by the Executive, as
of the date first above written:
ATTEST: [Bank]
/s/ [ILLEGIBLE] By: /s/ Thomasine Kennedy
- -------------------------------- --------------------------------
Clerk Title: Treasurer
-------------------------
[Seal]
WITNESS:
/s/ Judith K. Wyman /s/ Mark A. Osborne
- -------------------------------- --------------------------------
MARK A. OSBORNE
-8-
<PAGE>
EXHIBIT (10)(b)(3)
<PAGE>
AMENDMENT
Reference is made to a Special Termination Agreement dated September 4,
1986 by and between The Hibernia Savings Bank ("Bank") and Mark A. Osborne
("Executive").
WHEREAS, the Executive and the Bank are parties to an Employment
Agreement dated January 2, 1991;
WHEREAS, the parties wish to amend the Special Termination Agreement,
dated September 4, 1986,
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Bank and the Executive
agree as follows:
1. Paragraph 3(a) is amended by adding the words "after a
Change in Control" after the word "Bank" in line 3 of
paragraph 3.
2. Paragraph 8 of the Special Termination Agreement dated
September 4, 1986 is hereby deleted in its entirety
and in its place is inserting the following:
"In the event that the Executive retains legal counsel
and/or incurs any other costs or expenses in connection
with the enforcement of any or all of the Executive's
rights under this Agreement, the Bank shall pay (or the
Executive shall be entitled to recover from the Bank, as
the case may be) the Executive's reasonable attorneys' fees
and other reasonable costs and expenses in connection with
the enforcement of the Executive's rights, regardless of
whether the Executive prevails on the merits of such
claims, so long as such claims are made in good faith";
<PAGE>
3. In all other respects, the terms and provisions of the Special
Termination Agreement dated September 4, 1986 shall remain. in
full force and effect.
Executed as of the 2nd day of January, 1991.
THE HIBERNIA SAVINGS BANK
BY: /s/ [ILLEGIBLE]
-----------------------------
/s/ [ILLEGIBLE] /s/ MARK A. OSBORNE
- --------------------------------- ---------------------------------
MARK A. OSBORNE
<PAGE>
EXHIBIT (10)(c)(1)
<PAGE>
INDEX TO LEASE
FROM
ETHEL V. SLAWSBY
to
THE HIBERNIA SAVINGS BANK
ARTICLE NUMBER CAPTION Page
ARTICLE I Basic Lease Provisions - Exhibits ..................... 1
ARTICLE II Demise - Premises - Term ............................... 5
ARTICLE III Yearly Rent ........................................... 6
ARTICLE IV Taxes ................................................. 6
ARTICLE V Maintenance of Common Areas and Tenant's Contributions . 7
ARTICLE VI Utilities; Parking .................................... 8
ARTICLE VII Condition of Premises ................................. 9
ARTICLE VIII Use of Premises ....................................... 10
ARTICLE IX Subletting and Assignment ............................. 11
ARTICLE X Maintenance of Building ............................. 13
ARTICLE XI Indemnity and Public Liability Insurance .............. 15
ARTICLE XII Landlord's Access to Premises ......................... 16
ARTICLE XIII Insurance ............................................. 17
ARTICLE XIV Damage Clause ......................................... 18
ARTICLE XV Eminent Domain ........................................ 19
ARTICLE XVI Other Stores .......................................... 21
ARTICLE XVII Landlord's Remedies ................................... 21
ARTICLE XVIII Miscellaneous Provisions .............................. 22
Section 1 Waiver ............................................ 22
Section 2 Covenant of Quiet Enjoyment, Etc. ................. 23
Section 3 Status Report. ................................... 23
Section 4 Notice to Mortgagee .............................. 24
Section 5 Assignment of Rents .............................. 24
Section 6 Mechanic's Liens. ................................. 24
Section 7 No Brokerage. ..................................... 25
Section 8 Invalidity of Particular Provisions. .............. 25
Section 9 Provisions Binding .......................... 25
Section 10 Governing Law. ................................... 25
Section 11 Recording. ....................................... 25
Section 12 Notices. ......................................... 26
Section 13 When Lease Becomes Binding. ...................... 26
Section 14 Paragraph Headings. .............................. 26
Section 15 Lease Superior or Subordinate to Mortgagee ....... 26
<PAGE>
LEASE
This Lease is made this tenth day of November, 1986 by and between
ETHEL V. SLAWSBY of Duxbury, Massachusetts, having a mailing address at c/o
Ben's Liquors, 551 Washington Street, Weymouth, Massachusetts 02188
("Landlord") and The Hibernia Savings Bank, a Massachusetts banking
corporation, having a mailing address at 263 Washington Street, Boston,
Massachusetts ("Tenant").
This instrument is an Indenture of Lease in which the Landlord and the
Tenant are the parties hereinabove named and which relates to retail
street-level store-front property in the Building, as shown on Exhibit A,
commonly known as Capitol Market Center, located at 731 Hancock Street,
Quincy, Massachusetts. The parties to this instrument hereby agree with each
other as follows:
ARTICLE I
Basic Lease Provisions - Exhibits
Section 1.1. Introduction.
The following sets forth basic data and identifying Exhibits, elsewhere
hereinafter referred to in this Lease, and where appropriate, constitute
definitions of the terms hereinafter listed.
Section 1.2. Basic Data.
Date: November 10, 1986
Landlord: Ethel V. Slawsby
551 Washington Street
Weymouth, Massachusetts 02188
For Notices to Landlord, add:
M. Bordwin, Esquire
Rubin & Rudman
Three Center Plaza
Boston, MA 02108
Tenant: The Hibernia Savings Bank,
a Massachusetts banking corporation
263 Washington Street
Boston, Massachusetts
-1-
<PAGE>
For Notices to Tenant, add:
Thomas J. Carens, Esq.
Roche, Carens & DeGiacomo
One Post Office Square
Boston, MA 02109
Lease Term: Commencing on the Commencement Date and expiring on
the fifteenth (15th) anniversary of the last day of
the calendar month in which the Rent Commencement
Date shall have occurred ("Term Expiration Date").
Commencement Date: The execution date hereof.
Rent Commencement Date: The earlier of (x) May 1, 1987 or (y)
the date Tenant opens the premises for
business with the public.
Premises Area: Street-level - 5,006 sq. ft. (plus auxiliary
mechanical equipment basement area of 2,396
sq. ft.) Basement-level - 2,629 sq. ft.
finished
Yearly Rent in respect
of Street-Level Premises:
Lease Year*
-----------
1: $30,036.00 (i.e., a monthly payment of
$2,503.00)
2: $35,042.00 (i.e., a monthly payment of
$2,920.17)
3-8: $40,048.00 (i.e., a monthly payment of
$3,337.33)
9: $45,054.00 (i.e., a monthly payment of
$3,754.50)
10: $50,060.00 (i.e., a monthly payment of
$4,171.67)
11 through the
Term Expiration
Date: Fair Market Rental Value, as defined
in the Rider as Exhibit B, of the
- ----------
* For the purposes hereof, "Lease Year" shall be defined as any
twelve-(12)-month period commencing as of the Rent Commencement Date or as of
any anniversary of the Rent Commencement Date.
-2-
<PAGE>
premises, but in no event, however, shall
the Yearly Rent payable in respect of the
street-level portion of the premises be
less than the Yearly Rent for and in
respect of the Tenth (10th) Lease Year, nor
shall it exceed Twenty ($20.00) Dollars per
square foot of floor area.
Yearly Rent in respect
of Basement-Level Premises:
Lease Year*
-----------
1 through the
Term Expiration
Date $6,000.00 (i.e., a monthly payment
of $500.00)
Tenant's Tax and CAM Portion: 37.09%
Initial Monthly Payment on Account
of Tenant's Pro Rata Share of Shopping
Center Common Area Charges (Computed
at the rate of $.50 per sq. ft.
of premises area per annum): $210.00 per calendar month
Use: Retail bank branch facility and such other uses
as are permitted by the state banking regulatory
authorities to be carried on by a bank in the
nature of the herein Tenant and for no other
purpose.
Landlord shall not lease the adjoining premises (presently a CVS retail
store) to any occupant providing financial services that are offered in whole or
in part by the tenant.
Section 1.3. Option Periods.
Tenant's Option to Extend the Term of Lease
A. On the condition, which condition Landlord may waive, at its election,
by written notice to Tenant at any time, that Tenant is not in default of its
covenants and obligations under the Lease, Tenant shall have the option to
extend the term of this Lease for three (3) additional and consecutive
five-(5)-year terms, the first such additional term commencing as of the day
after the expiration of the initial term of the Lease, the second
- ----------
* For the purposes hereof, "Lease Year" shall be defined as any
twelve-(12)-month period commencing as of the Rent Commencement Date or as of
any anniversary of the Rent Commencement Date.
-3-
<PAGE>
such additional term commencing as of the day after the expiration of the first
such additional term, and the third such additional term commencing as of the
day after the expiration of the second such additional term. Tenant may exercise
such options to extend by giving Landlord written notice on or before the date
nine (9) months prior to the expiration date of the then current term of the
Lease. Upon the timely giving of such notice, the term of this Lease shall be
deemed extended upon all of the terms and conditions of this Lease, except that
the Yearly Rent shall be as hereinafter set forth. If Tenant fails to give
timely notice, as aforesaid, Tenant shall have no further right to extend the
term of this Lease, time being of the essence of this Section 1.3.
B. Yearly Rent
The Yearly Rent during each such additional term shall be the Fair Market
Rental Value, as defined in Exhibit B (which together with the other exhibits
and schedules hereto, are attached hereto and incorporated by reference as a
part hereof as though stated verbatim herein), as of the commencement of such
additional terms, of the premises then demised to Tenant; provided, however,
that in no event shall the Yearly Rent payable during each such additional term
be less than the Yearly Rent payable for the twelve-month period immediately
preceding the commencement of each such additional term. The Fair Market Rental
Value for each such additional term shall be designated by Landlord as of the
first day of each such additional term.
If the Fair Market Rental Value of the demised premises shall be
unacceptable to Tenant, then Tenant may elect, by notice given to Landlord
within thirty (30) days after Tenant is notified of such Fair Market Rental
Value by Landlord, to terminate this Lease, such termination to be and become
effective on the 270th day next following the giving of such notice of election
of termination. And upon the giving of such timely notice of termination, this
Lease and the term hereof shall terminate on such effective date, as aforesaid,
with the same force and effect as if such effective date were stated herein as
the date set for the expiration of the term hereof.
C. Tenant shall have no further option to extend the term of the Lease
other than the three (3) additional five (5) year terms herein provided.
Section 1.4. Tenant's Termination Right.
Notwithstanding anything to the contrary herein contained, Tenant, at its
sole cost and expense, shall procure all governmental regulatory approvals
necessary to locate its premises in the Building. Tenant shall apply for such
approvals promptly after the Commencement Date, and Tenant shall use its best
efforts to obtain such approvals. If Tenant, despite such efforts, shall be
denied such approvals or shall fail to obtain such approvals on or before
February 15, 1987, ("Banking Approval Date") then Tenant
-4-
<PAGE>
shall have the right to terminate this Lease exercisable by a written
thirty-(30)-day termination notice given on or after the Banking Approval Date.
If Tenant shall have obtained such approvals on or before the thirtieth (30th)
day after Landlord receives such termination notice, Tenant shall have no
termination right under this Section 1.4 and Tenant's termination notice shall
be deemed void and of no further force or effect. If Tenant shall have failed to
obtain such approvals on or before March 15, 1987, then Landlord may elect to
terminate this Lease by giving Tenant written notice at any time after such
date, stating an effective termination date; and if such approval shall not have
been obtained by such effective date, then this Lease shall terminate in
accordance with such notice and shall thereupon cease to be of any further force
and effect.
ARTICLE II
Demise -Premises - Term
Section 2.1. The Landlord hereby leases to the Tenant, and the Tenant
hereby leases from the Landlord, upon and subject to the terms and provisions of
this Lease, the portion of the building (which portion is sometimes hereinafter
referred to as the "demised premises") shown as outlined or hatched on Exhibit
"A" hereto annexed and made a part hereof and containing approximately the floor
area as shown in Article I - Basic Lease Provisions.
Section 2.2. Excepting and reserving to the Landlord the roof, structural
members and exterior walls of the building of which the demised premises are a
part; and further reserving to the Landlord the right to place in the demised
premises (in such manner as to reduce to a minimum the interference with
Tenant's use of the demised premises) utility lines, pipes, ducts, vents and the
like, to serve the demised premises and/or premises other than the demised
premises, and to replace, maintain and repair such utility lines, pipes, ducts,
vents and the like, in, over and upon the demised premises as may have been
installed in the building from time to time provided however that any such
lines, pipes or the like shall be concealed above Tenant's ceiling or in boxed
bus ducts when installed.
Section 2.3. To have and to hold the demised premises unto the Tenant for
the term as stated in Article I, Basic Lease Provisions.
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ARTICLE III
Yearly Rent
Section 3.1. Tenant covenants and agrees to pay to Landlord during the
initial term hereof Yearly Rent for said premises at the rates stated in Article
I - Basic Lease Provisions.
Section 3.2. Such Yearly Rent shall be payable in equal monthly
installments on the first day of each and every month in advance and
proportionately for any partial month.
ARTICLE IV
Taxes
Section 4.1. Landlord shall pay, or cause to be paid, before the same
become delinquent, all general and special taxes, including assessments for
local improvements and other governmental charges which may be lawfully charged,
assessed or imposed upon the entire development of which the demised premises
are a part including the entire building and land area, provided however, that
if authorities having jurisdiction assess such real estate taxes, assessments,
or other charges which Landlord deems excessive, Landlord may defer compliance
therewith to the extent permitted by the laws of Massachusetts, so long as the
validity or amount thereof is contested by Landlord in good faith, and so long
as Tenant's occupancy of the demised premises is not disturbed.
Section 4.2. Tenant shall pay all such taxes which may be lawfully
charged, assessed, or imposed upon all Tenant's fixtures and equipment of every
type, and also upon all personal property in said demised premises, and Tenant
shall pay all license fees which may be lawfully imposed upon the business of
Tenant conducted upon the demised premises.
Section 4.3. (a) With respect to the taxes payable by the Landlord
pursuant to Section 4.1 hereof, it is agreed that Tenant shall pay to Landlord
that portion thereof determined by multiplying said taxes by a fraction, the
numerator of which is the total leasable square footage of the street-level
floor area of the demised premises, and the denominator of which is the total
square footage of the street-level floor area of the entire said Building
("Tenant's Tax and CAM Portion"), as stated in Article I - Basic Lease
Provisions. There shall be excluded from the denominator of such fraction the
floor area of non-selling mezzanines and basement (if any), malls, passageways,
public stairs, service corridors, elevators, and the like.
(b) Tenant's fractional share of such taxes shall be equitably adjusted
for and with respect to the first and last partial tax years (if any) of the
term of this Lease. Where applicable tax bills and computations are not
available prior to
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the end of the term hereof, then a tentative computation shall be made on the
basis of the previous year's taxes payable by Tenant, with a final adjustment to
be made between Landlord and Tenant promptly after all bills and computations
are available for such period.
(c) Tenant's pro rata share of said taxes shall be due and payable within
ten (10) days after receipt by Tenant of Landlord's invoice plus a copy of the
tax bills involved. However, if the holder of the first mortgage which shall
encumber the demised premises shall require monthly tax deposits, Tenant agrees
to make monthly deposits with Landlord of its pro rata share of such taxes, with
a final adjustment to be made as soon as the amount of said pro rata share has
been determined.
(d) In every case, said taxes shall be adjusted to take into account any
abatement or refund thereof allocable to Landlord, and paid during the term
hereof less all of Landlord's costs of securing such abatement or refund.
Section 4.4. The foregoing provisions of this ARTICLE IV are predicated
upon the present system of taxation in the Commonwealth of Massachusetts. If
taxes upon rentals or other taxes based upon Landlord's ownership of the
building or shopping center of which the demised premises are a part other than
income taxes levied upon Landlord or Landlord's partners shall be substituted,
in whole or in part, for the present ad valorem real estate taxes, then
Tenant's pro rata share of taxes (as set forth in Section 4.3 immediately above)
shall be based upon such taxes on rentals to the extent to which the same shall
be a substitute for or in addition to present ad valorem real estate taxes but
only to the extent such taxes would apply were the building or shopping center
the only property of Landlord.
ARTICLE V
Maintenance of Common Areas and Tenant's Contribution
Section 5.1. The shopping center parking lot shall be maintained
(including lighting) by Landlord in a reasonably good and serviceable condition
throughout the term of this Lease.
Section 5.2. (a) All costs and expenses of every kind and nature paid or
incurred by Landlord in operating, managing, equipping, policing (if and to the
extent provided by Landlord), lighting, repairing, replacing, repairing and
maintaining (including cleaning, snow removal, landscaping and gardening),
building (but not Tenant) signs, utility conduits and pipes, elevators
(including service contracts therefor) and all other interior and exterior
common areas ("Common Area Maintenance" Charges or "CAM") shall be prorated,
and Tenant shall share therein in the manner hereinafter provided. Such costs
and expenses shall likewise include (but shall not be limited to)
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water and sewer charges; premiums for liability, property damage, fire,
workman's compensation, and other insurance (including all insurance, hazard and
otherwise, carried by Landlord on the entire building of which the demised
premises are a part); wages, unemployment taxes, social security taxes, costs of
waste removal; amounts paid to outside contractors for matters to be performed
hereunder; personal property taxes and assessments; fees for required licenses
and permits, supplies, repairing and restriping when required of the parking
areas, the maintenance and repair of all curbing and directional markers,
security, and adequate lighting during all hours of darkness that Tenant shall
be open for business. With the sole exception of a ten (10%) percent
administrative fee, Common Area Maintenance Charges will not include any
additional management, administrative or audit fees.
(b) Tenant shall pay all CAM charges in respect of the "Wentworth Lot"
(see Sec. 6.3, below) and its pro rata share of CAM charges in respect of the
Building and other parking areas, such share to be computed by multiplying the
whole of said costs and expenses by the Tenant's Tax and CAM Portion as stated
in Article I - Basic Lease Provisions.
(c) Tenant's pro rata share shall be paid in monthly installments,
(initially estimated as stated in Article I - Basic Lease Provisions) in the
amount established by Landlord, based on the previous year's actual amounts, on
the first day of each and every calendar month, in advance. Within ninety (90)
days after the end of each calendar year during the term hereof, Landlord shall
furnish to Tenant a statement in reasonable detail setting forth the computation
of such total costs and expenses; thereupon there shall be a prompt adjustment
between Landlord and Tenant, with payment to, or repayment by Landlord, as the
case may require, to the end that Landlord shall receive the entire amount of
Tenant's pro rata share of said costs and expenses and no more.
ARTICLE VI
Utilities; Parking
Section 6.1. Tenant shall pay for all of its requirements for utilities to
the extent the same are separately metered, including, but not limited to, gas,
steam, water, electricity, and the like. In the event that Landlord shall elect
to supply any of such utilities, Tenant agrees to purchase the same from
Landlord, provided the rate does not exceed the rate which Tenant would be
required to pay to the utility company furnishing the same to the said
development.
Section 6.2. Tenant shall itself provide and install a system to supply
heating, ventilating, and air-conditioning to the demised premises at Tenant's
own sole cost and expense.
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Section 6.3. Tenant shall have the non-exclusive right, together with the
adjoining Tenant of the Building of which the demised premises are a part and
any others lawfully entitled thereto, to use the parking areas adjacent to and
serving the Building. Tenant acknowledges that Landlord's rights to the parking
area adjacent to the said Building derive from a short- term, at-will
arrangement with the Church which owns the parking area. In addition, Tenant
shall have the exclusive right to utilize Landlord's vacant parcel located
across Wentworth Road (called "Wentworth Lot"), opposite the curb-cut entrance
to the parking areas lying behind and adjacent to the said Building, provided,
however, said Wentworth Road parking lot area shall be used only for the parking
of motor vehicles by Tenant's employees and customers for their convenience
while at the Tenant's banking offices, and for no other purpose whatsoever,
except as in Section 6.4 described.
Section 6.4. Landlord acknowledges that Tenant may wish to install, to
whatever extent, if any, permitted by applicable law and regulations, a facility
to house an automatic teller machine or drive-through window, so-called on the
Wentworth Lot. Landlord agrees to cooperate with such effort, at no cost or
expense, however (all of which shall be borne by Tenant), provided that Landlord
shall have the right of prior approval of Tenant's plans and specifications for
any such Wentworth Lot facillity. Landlord shall not unreasonably withhold or
delay such approval.
ARTICLE VII
Condition of Premises
Section 7.1. Landlord shall provide and install a gas, roof-mounted HVAC
unit on the roof of the Building and stub in the piping to the premises.
Landlord shall assign to Tenant the vendor's/installer's warranty on such
equipment, it being understood that from and after such installation, Tenant
shall be responsible for the repair, maintenance, replacement, etc. thereof
pursuant to Article X, below. In addition, Landlord shall remove the fixtures,
equipment, etc., as set forth in Exhibit C - Premises Clean-Up Details, in order
to prepare the premises for Tenant's construction. Tenant shall, at the earliest
practicable date, deliver to Landlord a schematic plan setting forth the
alterations, renovations, additions, etc. which Tenant desires to perform in the
demised premises, including, without limitation, the removal of the projection
structure located on Wentworth Street which serves as an entrance to the
basement ("Tenant's Work") which plan shall be subject to Landlord's approval,
such approval not to be unreasonably withheld or delayed. Tenant shall then
perform Tenant's Work in accordance with plans and specifications to be
developed by Tenant based upon such schematic plan. Tenant shall deliver to
Landlord a complete set of final working drawings and construction plans prior
to the commencement of any of Tenant's Work. Tenant shall also provide to
Landlord a copy of any "as-built" plans as soon as the same are available.
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Section 7.2. Tenant's Work shall meet the following requirements: (i) same
shall be done in a good and first-class workmanlike manner; (ii) same shall not
adversely affect the structural strength or common services or utilities of the
demised premises or the Building of which they are a part; (iii) Tenant shall
abide by all applicable laws, ordinances, and insurance requirements; and
Tenant's Work shall be done in full conformity with plans and specifications
which shall first have been approved by Landlord.
ARTICLE VIII
Use of Premises
Section 8.1. It is understood, and the Tenant so agrees, that the demised
premises during the term of this Lease shall be used and occupied by the Tenant
solely for the use stated in Article I - Basic Lease Provisions, and no other
use.
Section 8.2. Tenant shall strictly comply with the restrictive provisions
in the lease(s) of other premises in the Building as described in Exhibit D.
Section 8.2. Tenant further agrees to conform to the following provisions
during the entire term of this Lease:
(a) Tenant shall always conduct its operations in the demised premises
under its present trade name, unless Landlord shall otherwise consent in
writing, which consent shall not be unreasonably withheld;
(b) No auction, fire or bankruptcy sales may be conducted within the
demised premises without the previous written consent of the Landlord;
(c) Intentionally deleted;
(d) Tenant shall keep any display windows of the demised premises clean
and shall keep the same electrically lighted during such reasonable after-hours
periods of time; ;
(e) All trash, refuse, and the like, shall be kept within the demised
premises at all times, and in no event stored outside of the same;
(f) Tenant shall not place on the exterior of the demised premises
(including, but without limitation, windows, doors and entrance lobbies) any
signs other than those which shall first have been approved by Landlord,
including replacements thereof. The signs desired by Tenant shall be indicated
in Tenant's plans and specifications to be submitted to Landlord for approval;
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(g) Tenant shall not perform any act or carry on any practice which may
injure the demised premises or any other part of the Building, or cause any
offensive odors or loud noise (including, but without limitation, the use of
loudspeakers), or constitute a nuisance or menace to any other occupant or other
persons in the Building or shopping center, and in no event shall any noises or
odors be emitted from the demised premises;
(h) Subject to applicable laws and regulation, the demised premises will
be kept open for business at least during the usual business days and hours for
a business of the type of Tenant's in the city or town where the Building is
located. Tenant agrees that it is an affirmative covenant and obligation of
Tenant under this Lease to maintain the demised premises open for business and
that it is of material importance and a material inducement to Landlord in
making this Lease that the demised premises will be so open for transacting
business and further that Landlord and other tenants of the Building acting in
reliance upon Tenant's covenants to maintain the demised premises open for
business; and
Section 8.3. Landlord shall use reasonable efforts to enforce similar
provisions of the leases of other tenants, but Landlord shall have no liability
to Tenant for failure to do so.
ARTICLE IX
Subletting and Assignment
Section 9.1. In the event that Tenant desires to sublet or assign all or
substantially all of the street-level premises demised to Tenant:
A. Provided that Tenant shall first have notified Landlord in writing of a
proposed assignment of Tenant's interest in this Lease or of the term of a
proposed sublease and offered to terminate the Lease and Landlord shall not,
within sixty (60) days of receipt of such offer have accepted the same, Landlord
agrees to not unreasonably withhold its consent to a subletting of the demised
premises or to an assignment of Tenant's interest in this Lease, as the case may
be, by Tenant to a person, firm or corporation which, in Landlord's reasonable
opinion, is (i) financially responsible and of good reputation, and (ii) is
engaged in a business, the functional aspects of which, with respect to the
premises, are substantially similar to the use of other premises made by other
retail tenant(s) in the Building. Notwithstanding anything to the contrary in
the foregoing contained:
1. If Tenant is in default of its obligations under the Lease
at the time that it makes the aforesaid offer to Landlord,
such default shall be deemed to be a "reasonable" reason
for Landlord withholding
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its consent to any proposed subletting or assignment; and
2. If Tenant does not enter into a sublease with a subtenant (or
an assignment to an assignee, as the case may be) approved by
Landlord, as aforesaid, on or before the date which is one
hundred (100) days after the earlier of: (x) the expiration of
said thirty-(30)-day period, or (y) the date that Landlord
notifies Tenant that Landlord will not accept Tenant's offer
to terminate or suspend the Lease, then Landlord shall have
the right arbitrarily to withhold its consent to any
subletting or assignment proposed to be entered into by Tenant
after the expiration of said one hundred (100) day period
unless Tenant again offers, in accordance with this Paragraph
A, to terminate the Lease. If Tenant shall make any subsequent
offers to terminate the Lease pursuant to this Paragraph A any
such subsequent offer shall be treated in all respects as if
it is Tenant's first offer to suspend or terminate the Lease
pursuant to this Paragraph A, provided that the period of time
Landlord shall have in which to accept or reject such
subsequent offer shall be thirty (30) days.
B. Notwithstanding anything to the contrary herein contained, Tenant shall
have no rights, under Paragraph A of this ARTICLE IX prior to the date
thirty-six (36) months after the Commencement Date. Without limiting the
foregoing, Tenant shall have no right to give Landlord a written notice offering
to terminate or suspend the term of the Lease pursuant to this ARTICLE IX prior
to the date thirty-six (36) months after the Commencement Date.
C. No subletting or assignment shall ever relieve Tenant of its primary
obligation as party-Tenant hereunder.
D. If the rent and other sums and all considerations received by Tenant on
account of a sublease or assignment of the demised premises or of Tenant's
interest therein, as the case may be, exceed the Yearly Rent and other charges
allocable to the space subject to the sublease, Tenant shall pay to Landlord, as
an additional charge, fifty (50%) percent of such excess, monthly as received by
Tenant, less Tenant's reasonable expense incurred in respect of such sublease or
assignment including brokerage commissions to a licensed real estate broker,
advertising and reasonable attorneys fees.
Section 9.2. In the event that Tenant desires to sublet or assign less
than all or substantially all of the premises demised to Tenant, Tenant shall
have the right, with Landlord's prior consent, which consent shall not be
unreasonably withheld or
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delayed, but without offering to terminate or suspend the Lease, in accordance
with Section 9.2 of this ARTICLE IX, to sublet such portion of the premises to a
person, firm or corporation which, in Landlord's reasonable opinion, satisfies
the requirements of clauses (i) and (ii) of Paragraph A of Section 9.2 of this
ARTICLE IX.
Section 9.3. Tenant shall have the right, without obtaining Landlord's
consent, to allow an Affiliated Entity, as hereinafter defined, to utilize the
premises in accordance with ARTICLE VIII, so long as such entity remains in such
relationship to Tenant. For the purposes hereof, an "Affiliated Entity" shall be
defined as any entity which is controlled by, is under common control with, or
which controls Tenant. For the purposes hereof, control shall mean the direct or
indirect ownership of more than fifty (50%) percent of the beneficial interest
of the entity in question.
Section 9.4. Tenant shall have the right, without obtaining Landlord's
consent, to allow a stockbroker, mutual fund sales agent, insurance or real
estate broker, or the like to utilize desk space for activities which have been
approved by the state and/or federal regulatory agencies for a regulated banking
corporation.
ARTICLE X
Maintenance of Building, Etc.
Section 10.1.
(a) Other than as provided below in this Section, Landlord agrees to keep
in good order, condition, and repair, the exterior (except glass and glass
windows and the so-called store front, irrespective of which party installed the
same), roof, foundations, and structural portions of the Building, except for
any damage thereto caused by any act or negligence of Tenant, its employees,
agents, licensees, or contractors. Landlord shall not be responsible to make any
other improvements or repairs of any kind upon the demised premises, but this
paragraph is not intended to refer to damage by fire or other insured risk to
the demised premises, provision for which is hereafter made.
(b) If Landlord shall fail to comply with any of its repair and
maintenance obligations under this Article X for ten (10) business days after
notice from Tenant of the need therefor, then Tenant shall have the right, at
its option, to cure such breach at Landlord's expense, provided, however, that
prior to taking such action Tenant shall have given Landlord notice of its
intention so to proceed, which notice shall be received by Landlord at least 72
hours before Tenant begins such cure. Landlord agrees to reimburse Tenant for
all reasonable costs and expenses incurred as a result thereof together with
interest at the highest rate
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legally permitted in Massachusetts, upon demand. Landlord shall have similar
rights in the event that Tenant shall fail to comply with its repair and
maintenance obligations under this Lease, but Tenant shall grant Landlord
similar time periods to cure any such defaults.
Section 10.2. Except as specifically herein otherwise provided, Tenant
agrees that from and after the date that possession of the demised premises is
delivered to Tenant and until the end of the term hereof, it will keep neat and
clean and maintain in good order, condition and repair, the demised premises and
every part thereof, including, without limitation, the store front and the
exterior and interior portions of all doors, windows, plate glass and showcases
surrounding the demised premises, all plumbing and sewage facilities within the
demised premises, fixtures and interior walls, floors, ceilings, signs
(including exterior signs where permitted), and all wiring, electrical systems,
mechanical systems, interior building appliances, and similar equipment serving
the premises. Tenant shall, at Tenant's expense, repaint, refurbish, and remodel
the demised premises and any part and portion thereof from time to time to
assure that the same are kept in a first-class, tenantable, and attractive
condition throughout the term of this Lease. There is excepted from this
paragraph, however, damage to such portions of the demised premises originally
constructed by Landlord as is caused by those hazards which are covered by the
policies of fire insurance with extended coverage endorsements carried by
Landlord and described in ARTICLE XIII hereof. Tenant further agrees that the
demised premises shall be kept in a clean, sanitary and safe condition in
accordance with the laws of the Commonwealth of Massachusetts and ordinances of
the County and Municipality wherein the demised premises are located, and in
accordance with all directions, rules and regulations of the Health Officer,
Fire Marshall, Building Inspector, and other proper officers of the governmental
agencies having jurisdiction thereover. Tenant shall not permit or commit any
waste.
Section 10.3. Tenant shall not make any alterations, improvements and/or
additions to the demised premises without first obtaining, in each instance, the
written consent of the Landlord, which consent Landlord agrees will not be
unreasonably withheld, except that Tenant may make non-structural alterations to
the interior costing not more than Ten Thousand ($10,000.00) Dollars, upon
condition that such alterations shall be made in accordance with all applicable
laws and in a good and first-class, workmanlike manner and provided that such
alterations, improvements and/or additions shall not, upon completion thereof,
materially, adversely affect any of the Building's systems. Any and all
alterations, additions, improvements, and fixtures which may be made or
installed by either Landlord or Tenant upon the demised premises and which in
any manner are attached to the floors, walls or ceilings (including, without
limitation, any linoleum or other floor covering of similar character which may
be cemented or otherwise adhesively affixed to the floor) shall
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remain upon the demised premises, and at the termination of this Lease shall be
surrendered with the premises as a part thereof without disturbance, molestation
or injury. However, the usual trade fixtures and furniture which may be
installed in the demised premises prior to or during the term hereof at the cost
of Tenant may be removed by Tenant from the demised premises upon the
termination of this Lease if, but only if, Tenant is not then in default
hereunder. Further, Tenant covenants and agrees, at its own cost and expense, to
repair any and all damage to the demised premises resulting from or caused by
such removal. In no event shall Tenant be entitled to remove any heating,
ventilating, or air-conditioning equipment.
ARTICLE XI
Indemnity and Public Liability Insurance
Section 11.1. Tenant agrees to indemnify and save harmless the Landlord
from and against all claims of whatever nature arising from any act, omission or
negligence of the Tenant, or Tenant's contractors, invitees, licensees, agents,
servants, or employees, or arising from any accident, injury, or damage
whatsoever caused to any person, or to the property of any person occurring
during the term hereof in or about the Tenant's demised premises, or arising
from any accident, injury or damage occurring outside of the demised premises
but within the Building or shopping center, where such accident, damage or
injury results or is claimed to have resulted from an act or omission on the
part of Tenant or Tenant's licensees, invitees, agents or employees. This
indemnity and hold-harmless agreement shall include indemnity against all costs,
expenses and liabilities incurred in or in connection with any such claim or
proceeding brought thereon, and the defense thereof.
Section 11.2. Tenant agrees to maintain in full force during the term
hereof and during any fixturing period prior to the term hereof a policy of
public liability and property damage insurance under which the Landlord and
Tenant are named as insureds, and under which the insurer agrees to indemnify
and hold Landlord harmless from and against all costs, expense and/or liability
arising out of or based upon any and all claims, accidents, injuries, and
damages mentioned in Section 11.1 of this ARTICLE XI. Each such policy shall be
noncancellable with respect to the Landlord without ten (10) days' prior written
notice to Landlord, and a duplicate original or certificate thereof shall be
delivered to Landlord. The minimum limits of liability of such insurance shall
be One Million ($1,000,000.00) Dollars single limit for injury or death and
damage to property.
Section 11.3. Tenant agrees to use and occupy the demised premises and to
use such other portions of the development as it is herein given the right to
use at its own risk; and that Landlord shall have no responsibility or liability
for any loss of
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or damage to fixtures or other personal property of Tenant. The provisions of
this Section shall apply during the whole of the term hereof and, if permission
is given to Tenant to install fixtures prior to the commencement of the term
hereof, then prior to such commencement as well.
Section 11.4. Tenant agrees that Landlord shall not be responsible or
liable to the Tenant, or to those claiming by, through or under the Tenant, for
any loss or damage that may be occasioned by or through the acts or omissions of
persons occupying adjoining premises or any part of the premises adjacent to or
connecting with the premises demised hereunder or any other part of the
Building, shopping center, or otherwise, or for any loss or damage resulting to
the Tenant or those claiming by, through or under Tenant, or its or their
property, from the bursting, stopping or leaking of water, gas, sewer or steam
pipes.
Section 11.5. The foregoing provisions of this ARTICLE XI (as well as any
other provisions dealing with indemnity and the like by the Tenant of the
Landlord) shall be deemed to be modified in each case by the insertion in the
appropriate place of the ", to the extent permitted by applicable law;"
language: "except as otherwise provided in Mass. G.L. Ter. Ed., but in no event
shall Landlord at any time ever be liable for consequential damages.
ARTICLE XII
Landlord's Access to Premises
Section 12.1. Landlord and his designees shall have the right to enter
upon the demised premises at all reasonable hours for the purpose of inspecting
or making repairs to the same. If repairs are required to be made by Tenant
pursuant to the terms hereof, Landlord may demand that Tenant make the same
forthwith, and if Tenant refuses or neglects to commence such repairs and
complete the same with reasonable dispatch, after such demand, Landlord may (but
shall not be required so to do) make or cause such repairs to be made and shall
not be responsible to Tenant for any loss or damage that may accrue to its stock
or business by reason thereof. If Landlord makes or causes such repairs to be
made, Tenant agrees that it will forthwith, on demand, pay to Landlord as rent
the cost thereof, and if it shall default in such payment, Landlord shall have
the remedies provided in ARTICLE XVII hereof for the non-payment of rent.
Section 12.2. For a period commencing nine (9) months prior to the
termination of this Lease, Landlord may have reasonable access to the premises
herein demised for the purpose of exhibiting the same to prospective tenants.
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ARTICLE XIII
Insurance
Section 13.1. Landlord shall keep the structural portions of the Building
(i.e., excluding Tenant's leasehold improvements and betterments, installations,
work, equipment, contents, etc.) insured against loss or damage by fire, with
the usual so-called "replacement value" extended coverage endorsements and such
other insurance as the then holder of the first mortgage which includes the
structural portions of the Building shall require, in amounts not less than
eighty (80%) percent of the full insurable value thereof above foundation walls.
Section 13.2. Tenant agrees that it shall keep the demised premises
including, without limitation, its installations, work, contents, fixtures,
merchandise, equipment, leasehold betterments and improvements, insured to total
replacement cost against loss or damage by fire with the usual extended coverage
endorsements. It is understood and agreed that Tenant assumes all risk of damage
to its own property arising from any cause whatsoever, including, without
limitation, loss by theft or otherwise.
Section 13.3. Insofar as and to the extent that the following provision
may be effective without invalidating or making it impossible to secure
insurance coverage obtainable from responsible insurance companies doing
business in the Commonwealth of Massachusetts (even though extra premium may
result therefrom) Landlord and Tenant mutually agree that with respect to any
loss which is covered by insurance then being carried by them, respectively, the
one carrying such insurance and suffering said loss releases the other of and
from any and all claims with respect to such loss; and they further mutually
agree that their respective insurance companies shall have no right of
subrogation against the other on account thereof. In the event that extra
premium is payable by either party as a result of this provision, the other
party shall reimburse the party paying such premium the amount of such extra
premium. If, at the written request of one party, this release and
non-subrogation provision is waived, then the obligation of reimbursement shall
cease for such period of time as such waiver shall be effective, but nothing
contained in this Section shall be deemed to modify or otherwise effect releases
elsewhere herein contained of either party for claims.
Section 13.4. Tenant covenants and agrees that it will not do or permit
anything to be done in or upon the demised premises or bring in anything or keep
anything therein, which shall increase the rate of insurance on the demised
premises or on any other portion of the shopping center or Building above the
standard rate on said premises and Building with a store of the type described
in Section 8.1 of ARTICLE VIII located in the demised premises; and Tenant
further agrees that in the event it shall do any of the foregoing, it will
promptly pay to Landlord on
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demand any such increase resulting therefrom, which shall be due and payable as
additional rent hereunder.
ARTICLE XIV
Damage Clause
Section 14.1. In case during the term hereof the demised premises shall be
partially damaged (as distinguished from "substantially damaged", as that term
is hereinafter defined) by fire or other casualty, Landlord shall forthwith
proceed to repair such damage and restore the Building structure and exterior
walls, to substantially their condition at the time of such damage, but Landlord
shall not be responsible for any delay which may result from any cause beyond
Landlord's reasonable control, and Tenant shall forthwith proceed to restore all
interior portions of the premises and all systems serving the same (i.e.,
Tenant's leasehold improvements and betterments) and replace its own equipment,
etc.
Section 14.2. In case during the term hereof the demised premises shall be
substantially damaged or destroyed by fire or other casualty, the risk of which
is covered by Landlord's insurance and the cost of which is wholly paid by
Landlord's insurance, this Lease shall, except as hereinafter provided, remain
in full force and effect, and Landlord shall, proceeding with all reasonable
dispatch, repair or rebuild the Building structure and exterior walls, to
substantially their condition at the time of such damage or destruction
(subject, however, to zoning laws and building codes then in existence), but
Landlord shall not be responsible for any delay which may result from any cause
beyond Landlord's reasonable control. In case of substantial damage or
destruction, as a result of a risk which is not covered by Landlord's insurance
or which is otherwise not wholly paid for less a usual deductible by Landlord's
insurance, Landlord shall likewise be obligated to rebuild the demised premises,
all as aforesaid, unless Landlord within sixty (60) days after the occurrence of
such event gives written notice to Tenant of Landlord's election to terminate
this Lease; and upon the giving of such notice this Lease shall terminate in
accordance with the terms thereof. Tenant shall insure and repair and replace
all interior portions of the premises and all systems serving the same (i.e.,
Tenant's Leasehold improvements and betterments) and replace its own equipment,
etc.
Section 14.3. However, if the demised premises shall be substantially
damaged or destroyed by fire, windstorm, or otherwise within the last thirty-six
(36) months of the term of this Lease and Tenant shall not exercise its option
to extend the term hereof within thirty (30) days after such damage or
destruction, then either party shall have the right to terminate this Lease,
provided that notice thereof is given to the other party not sooner than thirty
(30) nor later than sixty (60) days
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after such damange or destruction. If said right of termination is exercised,
this Lease and the term hereof shall cease and come to an end as of the date of
said damage or destruction.
Section 14.4. In the event that the provisions of Section 14.1 or Section
14.2 of this ARTICLE XIV shall become applicable, the Yearly Rent, and the pro
rata charges specified in Section 5.2 of ARTICLE V of this Lease, shall be
abated or reduced proportionately during any period in which, by reason of such
damage or destruction, there is substantial interference with the operation of
the business of Tenant in the demised premises, having regard to the extent to
which Tenant may be required to discontinue its business in the demised
premises, and such abatement or reduction shall continue for the period
commencing with such destruction or damage and ending with the completion by
Landlord of such work of repair and/or reconstruction as Landlord is obligated
to do. In the event of termination of this lease pursuant to this ARTICLE XIV,
this Lease and the term hereof shall cease and come to an end as of the date of
notice of such termination.
Section 14.5. The terms "substantially damaged" and "substantial damage",
as used in this Article, shall have reference to damage of such a character as
cannot reasonably be expected to be repaired or the premises restored within
ninety (90) days from the time that such repair or restoration work would be
commenced.
ARTICLE XV
Eminent Domain
Section 15.1.
A. In the event that during the term of this Lease the premises or any
part thereof, or the use or possession thereof, is taken in condemnation
proceedings or by any right of eminent domain or for any public or quasi-public
use, this Lease and the term hereby granted shall terminate and expire on the
date when possession shall be taken by the condemnor, and rent and all other
charges payable hereunder shall be apportioned and paid in full up to that date
and all prepaid unearned rent and all other charges payable hereunder shall
forthwith be repaid by Landlord to the Tenant and neither the Landlord, nor the
Tenant shall be liable to the other for rent and all other charges payable
hereunder, damage or otherwise, for, or by reason of any matter or thing
occurring thereafter; provided, however, that if a part only of the premises
shall be so taken or condemned, and, in Tenant's reasonable opinion, the
remaining portion of the premises shall be adequate and suitable for use by it
or its subtenant for the purposes of its business, then this Lease shall
continue in full force and effect except that the fixed rent and all other
charges payable hereunder shall be reduced in the proportion that the gross
floor
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area of the part so taken or condemned shall bear to the total gross floor area
of the premises immediately prior to such taking. In such case, the Landlord
shall, at the Landlord's own expense, as speedily as circumstances permit,
repair all damage to the structural portions of the Building, as shall have been
caused by such partial condemnation and taking. The fixed rent and other charges
payable hereunder shall abate until the Building shall have been restored to a
tenantable condition including a reasonable period for Tenant to refixture and
restock the premises. The Tenant hereby waives all rights in condemnation
awards, except separate awards for Tenant's fixtures and equipment and separate
awards which may be made for Tenant's relocation expenses and the like and
hereby assigns to Landlord any other condemnation awards, compensation and
damages in respect of a taking of the shopping center or premises.
B. Notwithstanding the foregoing, in order to provide for the recapture by
Tenant of a portion of its costs of renovating its premises for use as a retail
banking facility, the parties have agreed and do hereby agree as follows:
"Award Balance" shall be the amount, if any, by which the total
compensation and damages awarded in respect of a taking exceed the sum of the
portion allocable to the land on which the Building is situated and all amounts
payable in the event of any such taking (to other than Landlord, or entities or
persons controlled by or controlling Landlord) to institutional lessors of
ground leases and holders of institutional mortgages which may now or hereafter
be placed on, encumber or affect the real property of which the premises are a
part, or any part of such real property.
"Area Ratio" shall be a fraction having as numerator the number of square
feet of Total Rentable Area of the premises as of the date of such taking and as
denominator the Total Rentable Area of the Building as of such date, namely
37.09%.
"Premises Award Balance" shall be that amount of the Award Balance
allocable to the premises determined by multiplying the Award Balance by the
Area Ratio.
"Tenant's Improvements" shall be the unamortized (i.e., undepreciated)
portion of the cost of Tenant's alterations, additions, installations and
improvements which Tenant has no right to remove under this Lease as shown on
Tenant's Federal income tax returns.
"Building Value" shall be the fair market value of the Building at the
time of such taking.
"Premises Value" shall be the product of Area Ratio multiplied by Building
Value.
Tenant shall be entitled to receive out of the Award Balance the amount of
Tenant's Improvements, provided, however, that if
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the sum of Tenant's Improvements and Premises Value exceeds the Premises Award
Balance, then Tenant's Improvements and Premises Value shall each be
proportionately reduced to an amount which, when added together, shall equal the
Premises Award Balance; and, in such event, Tenant shall be entitled to receive
out of the Award Balance the amount of Tenant's Improvements as so reduced.
ARTICLE XVI
Other Stores
[Intentionally Omitted]
ARTICLE XVII
Landlord's Remedies
Section 17.1. It is covenanted and agreed that if the Tenant shall neglect
or fail to perform or observe any of the covenants, terms, provisions or
conditions contained in this Lease and on its part to be performed or observed
within thirty (30) days after notice of default, or such additional time as is
reasonably required to correct any such default (except for payment of Yearly
Rent or other charges in which case said period of notice shall be ten (10)
days), or if the estate hereby created shall be taken on execution or by other
process of law, or if any assignment shall be made of the property of the Tenant
for the benefit of creditors, then, and in any of said cases (notwithstanding
any license of any former breach of covenant or waiver of the benefit hereof or
consent in a former instance), Landlord lawfully may, immediately or at any time
thereafter, terminate this Lease by notice to Tenant or, and without demand or
notice, enter into and upon the demised premises or any part thereof in the name
of the whole and repossess the same as of his former estate, and expel the
Tenant and those claiming through or under it and remove its or their effects
without being deemed guilty of any manner of trespass, and without prejudice to
any remedies which might otherwise be used for arrears of rent or preceding
breach of covenant, and upon entry as aforesaid, this Lease shall terminate; and
Tenant covenants and agrees, notwithstanding any entry or reentry by Landlord,
whether by summary proceedings, termination, or otherwise, to pay and be liable
for on the days originally fixed herein for the payment thereof, amounts equal
to the several installments of rent and other charges reserved as they would,
under the terms of this Lease, become due if this Lease had not been terminated
or if the Landlord had not entered or re-entered, as aforesaid, and whether the
demised premises be relet or remain vacant, in whole or in part, or for a period
less than the remainder of the term, and for the whole thereof, but in the event
the demised premises be relet by Landlord, Tenant shall be entitled to a credit
in the net amount of rent received by Landlord in reletting, after deduction of
all expenses incurred in
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reletting the demised premises (including, without limitation, remodelling
costs, brokerage and legal fees, and the like), and in collecting the rent in
connection therewith. As an alternative, at the election of Landlord, Tenant
will, upon such termination, pay to Landlord, as damages, such a sum as at the
time of such termination represents the amount of excess, if any, of the then
value of the total rent and other benefits which would have accrued to Landlord
under this Lease for the remainder of the lease term if the lease terms had been
fully complied with by Tenant over and above the then cash rental value (in
advance) of the premises for the balance of the term.
If this Lease shall be guaranteed on behalf of the Tenant, all of the
foregoing provisions with respect to the Tenant, etc. shall be deemed to read:
"the Tenant or the guarantor hereof".
Section 17.2. The Landlord shall in no event be in default in the
performance of any of his obligations hereunder unless and until the Landlord
shall have failed to perform such obligations within thirty (30) days or such
additional time as is reasonably required to correct or to commence and
diligently pursue connection of any such default after notice by Tenant to
Landlord properly specifying wherein the Landlord has failed to perform any such
obligation.
Further, if the holder of a mortgage which includes the demised premises,
notifies the Tenant that such holder has taken over the Landlord's rights under
this Lease, Tenant shall not assert any prior rights or any monetary claim
against such mortgagee but shall look solely to the Landlord for satisfaction of
such claim.
ARTICLE XVIII
Miscellaneous Provisions
Section 18.1. Waiver
(a) Failure on the part of the Landlord to complain of any action or
non-action on the part of the Tenant, no matter how long the same may continue,
shall never be deemed to be a waiver by the Landlord of any of his rights
hereunder. Further, it is covenanted and agreed that no waiver at any time of
any of the provisions hereof by Landlord shall be construed as a waiver at any
subsequent time of the same provisions. The consent or approval of Landlord to
or of any action by the Tenant requiring Landlord's consent or approval shall
not be deemed to waive or render unnecessary Landlord's consent or approval to
or of any subsequent similar act by Tenant.
(b) No payment by Tenant, or acceptance by Landlord, of a lesser amount
than shall be due from Tenant to Landlord shall be treated otherwise than as a
payment on account. The acceptance by
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Landlord of a check for a lesser amount with an endorsement or statement
thereon, or upon any letter accompanying such check, that such lesser amount is
payment in full, shall be given no effect, and Landlord may accept such check
without prejudice to any other rights or remedies which Landlord may have
against Tenant.
Section 18.2. Covenant of Quiet Enjoyment, Etc.
Tenant, subject to the terms and provisions of this Lease on payment of
the rent and observing, keeping and performing all of the terms and provisions
of this Lease on its part to be observed, kept and performed, and subject to
encumbrances of record shall lawfully, peaceably and quietly have, hold, occupy
and enjoy the demised premises during the term hereof without hindrance or
ejection by any persons lawfully claiming under Landlord; but it is understood
and agreed that this covenant and all other covenants of Landlord contained in
this Lease shall be binding upon Landlord and Landlord's successors only with
respect to breaches occurring during Landlord's and Landlord's successors'
respective ownership of the Landlord's interest hereunder. In addition, Tenant
specifically agrees to look solely to Landlord's interest in the Building for
recovery of any judgment from Landlord; it being specifically agreed that
neither the Landlord nor anyone claiming under the Landlord shall ever be
personally liable for any such judgment. The provision contained in the
foregoing sentence is not intended to, and shall not, limit any right that the
Tenant might otherwise have to obtain injunctive relief against the Landlord or
Landlord's successors in interest, or any other action not involving the
personal liability of the Landlord or anyone claiming under Landlord, to respond
in monetary damages from their assets other than their interest in this shopping
center. It is further understood and agreed that with respect to any services to
be furnished by Landlord to Tenant, Landlord shall in no event be liable for
failure to furnish the same when prevented from so doing by strike, lockout,
breakdown, accident, order or regulation of or by any governmental authority, of
failure to supply, or inability by the exercise of reasonable diligence to
obtain supplies, parts, or employees necessary to furnish such services, or
unavailability of fuel or because of war or other emergency, or for any cause
beyond the Landlord's reasonable control, or for any cause due to any act or
neglect of the Tenant or its servants, agents, employees, invitees, licensees,
or any person claiming by, through or under the Tenant, or any termination for
any reason of Landlord's occupancy of the premises from which the service is
being supplied by Landlord, and in no event shall the Landlord ever be liable to
Tenant for any indirect or consequential damages.
Section 18.3. Status Report.
Recognizing that both parties may find it necessary to establish to third
parties, such as accountants, banks, mortgagees, ground lessors, or the like,
the then current status
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of performance hereunder, either party, on the request of the other made from
time to time, will promptly furnish to Landlord, or the holder of any mortgage
or ground lease encumbering the demised premises or the Building, or to Tenant,
as the case may be, a statement on the status of any matter pertaining to this
Lease, without limitation, acknowledgments that (or the extent to which) each
party is in compliance with its obligations under the terms of this Lease.
Section 18.4. Notice to Mortgagee.
After receiving written notice from any person, firm, or other entity,
that it holds a mortgage (which term shall include a deed of trust) which
includes as part of the mortgaged premises the demised premises, Tenant shall,
so long as such mortgage is outstanding, be required to give to such holder the
same notice as is required to be given to Landlord under the terms of this
Lease, but such notice may be given by Tenant to Landlord and such holder
concurrently. It is further agreed that such holder shall have the same
opportunity to cure any default, and the same time within which to effect such
curing, as is available to Landlord; and if necessary to cure such a default,
such holder shall have access to the demised premises.
Section 18.5. Assignment of Rents.
With reference to any assignment by Landlord of Landlord's interest in
this Lease, or the rents payable hereunder, conditional in nature or otherwise,
which assignment is made to the holder of the first mortgage or deed of trust on
the demised premises, Tenant agrees:
(a) that the execution thereof by Landlord, and the acceptance thereof by
such holder, shall never be deemed an assumption by such holder of any of the
obligations of the Landlord hereunder, unless such holder shall, by written
notice sent to Tenant specifically otherwise elect; and
(b) that, except as aforesaid, such holder shall be treated as having
assumed Landlord's obligations hereunder only upon foreclosure of such holder's
mortgage or deed of trust and the taking of possession of the demised premises
by such holder.
Section 18.6. Mechanic's Liens.
Tenant agrees immediately to discharge (either by payment or by filing of
the necessary bond, or otherwise) any mechanic's, materialmen's, or other lien
against the demised premises and/or Landlord's interest therein, which liens may
arise out of any payment due for, or purported to be due for, any labor,
services, materials, supplies, or equipment alleged to have been furnished to or
for the Tenant in, upon or about the demised premises.
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Section 18.7. No Brokerage.
Tenant warrants and represents that it has dealt with no broker in
connection with the consummation of this Lease other than Richard P. Quincy; and
in the event of any brokerage claims against Landlord predicated upon prior
dealings with the Tenant named herein, Tenant agrees to defend the same and
indemnify the Landlord against any such claim other than by said Richard P.
Quincy.
Section 18.8. Invalidity of Particular Provisions.
If any term or provision of this Lease, or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable, the
remainder of this Lease, or the application of such term or provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
Section 18.9. Provisions Binding, Etc.
Except as herein otherwise expressly provided, the terms hereof shall be
binding upon and shall inure to the benefit of the successors and assigns,
respectively, of the Landlord and the Tenant. Each term and each provision of
this Lease to be performed by Tenant shall be construed to be both a covenant
and a condition. The reference contained to successors and assigns of Tenant is
not intended to qualify, negate or diminish the prohibition against assignment
by Tenant under the provisions of ARTICLE IX hereof.
Section 18.10. Governing Law.
This Lease shall be governed exclusively by the provisions hereof and by
the laws of the Commonwealth of Massachusetts, as the same may from time to time
exist.
Section 18.11. Recording.
Tenant agrees not to record the within Lease, but each party hereto
agrees, on request of the other, to execute a Notice of Lease in recordable form
and complying with applicable Massachusetts laws, and reasonably satisfactory to
Landlord's attorney. In no event shall such document set forth the rental or
other charges payable by Tenant under this Lease, and any such document shall
expressly state that it is executed pursuant to the provisions contained in this
Lease, and is not intended to vary the terms and conditions of this Lease.
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Section 18.12. Notices.
Whenever by the terms of this Lease notice, demand, or other communication
shall or may be given either to Landlord or to Tenant, the same shall be in
writing and shall be sent by registered or certified mail, postage prepaid to
the addresses shown in Article I - Basic Lease Provisions, or to such other
address or addresses as may from time to time hereafter be designated by
Landlord or Tenant.
Section 18.13. When Lease Becomes Binding.
Employees or agents of Landlord have no authority to make or agree to make
a lease or any other agreement or undertaking in Connection herewith. The
submission of this document for examination and negotiation does not constitute
an offer to lease, or a reservation of, or option for, the demised premises, and
this document shall become effective and binding only upon the execution and
delivery hereof by both Landlord and Tenant. All negotiations, considerations,
representations, and understandings between Landlord and Tenant are incorporated
herein and may be modified or altered only by agreement in writing between
Landlord and Tenant, and no act or omission of any employee or agent of Landlord
shall alter, change, or modify any of the provisions hereof,
Section 18.14. Paragraph Headings.
The paragraph headings throughout this instrument are for convenience and
reference only, and the words contained therein shall in no way be held to
explain, modify, amplify, or aid in the interpretation, construction, or meaning
of the provisions of this Lease.
Section 18.15. Lease Superior or Subordinate to Mortgage.
It is agreed that the rights and interest of Tenant under this Lease shall
be subject and subordinate to any mortgages or deeds of trust that may hereafter
be placed upon the development, and to any and all advances to be made
thereunder, and to the interest thereon, and all renewals, modifications,
replacements and extensions thereof, if the mortgagee or trustee named in said
mortgages or deeds of trust shall elect by written notice delivered to Tenant to
subject and subordinate the rights and interest of the Tenant under this Lease
to the lien of its mortgage or deed of trust and shall agree to recognize this
Lease of Tenant in the event of foreclosure if Tenant is not in default, that
any mortgagee or trustee may elect to give the rights and interest of the Tenant
under this Lease priority over the lien of its mortgage or deed of trust. In the
event of either such election, and upon notification by such mortgagee or
trustee to Tenant to that effect, the rights and interest of the Tenant under
this lease shall be deemed to be subordinate to, or to have priority over, as
the case may be, the lien of said mortgage or
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deed of trust, whether this Lease is dated prior to or subsequent to the date of
said mortgage or deed of trust. Tenant shall execute and deliver whatever
instruments may be required for such purposes, and in the event Tenant fails so
to do within ten (10) days after demand in writing, Tenant does hereby make,
constitute and irrevocably appoint Landlord as its attorney in fact and in its
name, place and stead so to do.
WITNESS the execution hereof under seal in any number of counterpart
copies, each of which counterpart copies shall be deemed an original for all
purposes as of the day and year first above written.
(LANDLORD)
/s/ Ethel V. Slawsby
------------------------------
Ethel V. Slawsby
Date Signed: 1/9/87
-----------------
(TENANT)
THE HIBERNIA SAVINGS BANK
BY: Mark A. Osborne President
--------------------------
(Name) (Title)
Hereunto Duly Authorized
Date Signed: 12/27/86
-----------------
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<PAGE>
EXHIBIT "A"
Lease Plan
[MAP]
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<PAGE>
A. Fair Market Rental Value
A. "Fair Market Rental Value" shall be computed as of the date in question
at the then current annual rental charge (i.e., the sum of Yearly Rent plus
escalation and other charges), including provisions for subsequent increases and
other adjustments for new leases then currently being negotiated or executed in
comparable space located in the Building is a part or if no new leases are then
currently being negotiated or executed in such Building, the Fair Market Rental
Value shall be determined by reference to new leases then currently being
negotiated or executed for comparable space located elsewhere in similar retail
street-level store-front properties in the general trading area of the demised
premises. In determining Fair Market Rental Value, the following factors, among
others, shall be taken into account and given effect: size, location of
premises, lease term, condition of Building, and services provided by the
Landlord.
B. Dispute as to Fair Market Rental Value
Landlord shall initially designate Fair Market Rental Value and Landlord
shall furnish data in support of such designation. If Tenant disagrees with
Landlord's designation of a Fair Market Rental Value, Tenant shall have the
right, by written notice given within thirty (30) days after Tenant has been
notified of Landlord's designation, to submit such Fair Market Rental Value to
arbitration. Fair Market Rental Value shall be submitted to arbitration as
follows: Fair Market Rental Value shall be determined by impartial arbitrators,
one to be chosen by the Landlord, one to be chosen by Tenant, and a third to be
selected, if necessary, as below provided. The unanimous written decision of the
two first chosen, without selection and participation of a third arbitrator, or
otherwise, the written decision of a majority of three arbitrators chosen and
selected as aforesaid, shall be conclusive and binding upon Landlord and Tenant.
Landlord and Tenant shall each notify the other of its chosen arbitrator within
ten (10) days following the call for arbitration and, unless such two
arbitrators shall have reached a unanimous decision within thirty (30)days after
their designation, they shall so notify the President of the Boston Bar
Association (or such organization as may succeed to said Boston Bar Association)
and request him to select an impartial third arbitrator, who shall be an office
building owner, a real estate counsellor or a broker dealing with like types of
properties, to determine Fair Market Rental Value as herein defined. Such third
arbitrator and the first two chosen shall, subject to commercial real estate
arbitration rules of the American Arbitration Association, hear the parties and
their evidence and render their decision within thirty (30) days following the
conclusion of such hearing and notify Landlord and Tenant thereof. Landlord and
Tenant shall bear the expense of the third arbitrator (if any) equally. The
costs and expenses of such arbitration hereunder and
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its apportionment between the parties shall be determined by the arbitrator in
his award or decision. If the dispute between the parties as to a Fair Market
Rental Value has not been resolved before the commencement of Tenant's
obligation to pay rent based upon such Fair Market Rental Value, then Tenant
shall pay Yearly Rent and other charges under the Lease in respect of the
premises in question based upon the Fair Market Rental Value designated by
Landlord until either the agreement of the parties as to the Fair Market Rental
Value, or the decision of the arbitrators, as the case may be, at which time
Tenant shall pay any underpayment of rent and other charges to Landlord, or
Landlord shall refund any overpayment of rent and other charges to Tenant.
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EXHIBIT "C"
Premises Clean-up Details
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<PAGE>
The Landlord covenants and agrees that, throughout the term of this Lease
and any renewal thereof, it will not lease any space in the Building or in the
shopping center, as now constructed or as enlarged or altered at any time in the
future, or permit the use or occupancy of any such space, for a health and
beauty aid store, a drug store, and/or a pharmacy prescription department,
except the premises hereby demised.
It is understood and agreed that the provisions of this Exhibit D shall
not affect any other tenants in the Building or in the shopping center who may
sell health and beauty aids as an incidental part of their business, provided,
however in no event shall any other tenant in the Building or in the shopping
center be permitted to operate a health and beauty aids store (being defined as
a store which devotes a third or more of its retail selling space to the display
and sale of health and beauty aids, cosmetics, vitamins and over-the-counter
pharmaceuticals) or to operate a drug store and/or a pharmacy prescription
department.
Landlord further warrants and agrees that in no event shall it lease or
permit the use or occupancy of any space in the Building or in the shopping
center for the primary purpose of (i) a greeting card store, or (ii) a candy
store, however, nothing in this paragraph shall be deemed to affect other
tenants in the Building or in the shopping center who may sell candy or greeting
cards as an incidental part of their business.
Should the Landlord or any of its officers, directors/trustees, individual
members or partners, as the case may be, acquire any interest in any land
immediately adjacent to the shopping center, during the term of this Lease and
any renewals thereof, the Landlord warrants and agrees that it shall not allow
any of the premises on such land to be leased or to be used for the purpose of a
health and beauty aids store, a drug store, and/or a pharmacy prescription
department.
USE RESTRICTIONS -
Landlord warrants that throughout the term of this Lease and any renewals
thereof, it will not lease any space in the Building or in the shopping center
or allow any such space to be used for the purpose of (i) a pinball, video game
or any form of entertainment arcade (ii) a gambling or betting office (iii) a
massage parlor (iv) a cinema or bookstore selling or exhibiting material of a
pornographic or adult nature. Tenant warrants and agrees that in no event and
notwithstanding anything in this Lease to the contrary, shall its premises be
used for the purposes enumerated above.
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EXHIBIT (10)(c)(2)
<PAGE>
75-101 FEDERAL STREET
Boston, Massachusetts 02110
RETAIL LEASE
Tenant: The Hibernia Savings Bank
12.17.
14384-113
HEWI/GZ2
11/3/88
11/15/88
12/8/88
12/15/88
12/22/88
<PAGE>
75-101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
RETAIL LEASE
TABLE OF CONTENTS
PAGE
----
1. BASIC DATA 1
2. LEASE OF PREMISES; TERM 2
3. POSSESSION 3
4. BASE RENT 3
5. ADDITIONAL RENT 3
A. Definitions 4
Base Operating Expenses 4
Calendar Year 4
Tenant's Proportionate Share 4
Taxes 4
Operating Expenses 5
B. Expense Adjustment 6
6. USE OF PREMISES 9
7. CONDITION OF PREMISES 10
8. SERVICES 10
A. List of Services 10
B. Utilities 11
C. Interruption for Services 11
D. Charges for Services 11
E. Energy Conservation 12
9. REPAIRS AND MAINTENANCE 12
10. ADDITIONS AND ALTERATIONS 12
11. COVENANT AGAINST LIENS 13
12. INSURANCE 14
A. Waiver of Subrogation 14
B. Coverage 14
C. Loss of Coverage; Rate Increases 15
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<PAGE>
13. FIRE OR CASUALTY 15
14. WAIVER OF CLAIMS - INDEMNIFICATION 17
15. NONWAIVER 17
16. CONDEMNATION 17
17. ASSIGNMENT AND SUBLETTING 18
18. SURRENDER OF POSSESSION 19
19. HOLDING OVER 20
20. ESTOPPEL CERTIFICATE 20
21. SUBORDINATION 21
22. CERTAIN RIGHTS RESERVED BY LANDLORD 21
23. RULES AND REGULATIONS 23
24. REMEDIES UPON DEFAULT 23
25. REIMBURSEMENT OF LANDLORD'S EXPENSES 25
26. COVENANT OF QUIET ENJOYMENT 25
27. ENERGY CONSERVATION 25
28. REAL ESTATE BROKER 25
29. NONDISCRIMINATION 26
30. NOTICE TO MORTGAGEE AND GROUND LESSOR 26
31. ASSIGNMENT OF RENTS 26
32. PERSONAL PROPERTY TAXES 27
33. MISCELLANEOUS 27
A. Rights Cumulative 27
B. Interest 27
C. Terms 27
D. Binding Effect 27
E. Lease Contains All Terms 27
F. Delivery for Examination 27
C. No Air Rights 27
H. Modification of Lease 28
I. Substitution of Other Premises 28
J. Transfer of Landlord's Interest 28
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K. Landlord's Title 28
L. Prohibition Against Recording 28
M. Captions 28
N. Covenants and Conditions 28
0. Only Landlord/Tenant Relationship 28
P. Decoration and Signs 29
Q. Definition of Landlord 29
R. Time of Essence 29
S. Governing Law 29
T. Partial Invalidity 29
U. Size of Premises 29
34. NOTICES 30
35. LIMITATION ON LANDLORD'S LIABILITY 30
36. LANDLORD'S DESIGNATED AGENT 31
37. COMMENCEMENT AND TERMINATION DATES 31
38. CONSTRUCTION ON ADJACENT PREMISES 31
39. TENANT AS BUSINESS ENTITY 32
Exhibit A. Plan of Premises
Exhibit B. Work Letter B-1
Exhibit C. Rules and Regulations C-1
Exhibit D. Base Building Core and Shell - Retail D-l
Exhibit E. Measurement Standards E-l
Exhibit F. F-l
Exhibit G. Sign Criteria G-1
Exhibit H. Security Program H-1
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RETAIL LEASE
THIS INSTRUMENT is an Agreement of Lease in which the Landlord and the
Tenant are the parties hereinafter named, and which relates to space
(hereinafter referred to as the "Premises") located in the buildings at 75-101
Federal Street, Boston, Massachusetts 02110 subject to the covenants, terms,
provisions and conditions of this Lease.
For value received, Landlord and Tenant covenant and agree as follows:
1. BASIC DATA.
The following sets forth basic data and, where appropriate, constitutes
definitions of the terms hereinafter listed.
Date: As of December 22, 1988
Landlord: Franklin Federal Partners, a Massachusetts general
partnership
Present Mailing Address 75 Federal Street
of Landlord: Boston, MA 02110
Tenant: The Hibernia Savings Bank
Present Mailing Address 731 Hancock Street
of Tenant: Quincy, MA 02170
Tenant's Trade Name: The Hibernia Savings Bank
Tenant's Approvals: Tenant will, on or before December 15, 1988, apply
to the appropriate regulatory authorities for
consent to operate retail banking facilities at
the Premises (the Approvals"). If Tenant has not
received the Approvals on or before February 15,
1989 Tenant may, by notice given to Landlord on or
before such date, terminate this Lease and all
obligations of the parties hereunder shall
terminate except that Tenant, as a continuing
obligation hereunder, shall pay all amounts paid
by Landlord in connection with the performance of
Finish Work or otherwise authorized hereunder
accruing on or before the date of Landlord's
receipt of Tenant's notice of termination, plus
Landlord's cost of demolition of Finish Work
installed by Tenant in the Premises. While
Tenant's right to terminate under this provision
continues, Landlord shall have the right to show
the space at reasonable times to prospective
alternative tenants.
Commencement Date: Subject to Paragraph 37 hereof, December 15, 1988
or the earlier date on which Tenant takes
occupancy (for purposes other than early access as
described in the Work Letter (the "Work Letter")
attached hereto as Exhibit B) of the Premises or
any portion thereof.
Opening Date: June 15, 1989
Termination Date: Subject to Paragraph 37 hereof, April 30, 1999
unless sooner terminated as provided in this
Lease.
Extension Terms: See Paragraph 2.1
Base Rent: Commencement Date - April 30, 1990: $50.00 per
square foot of Total Rentable Area on an annual
basis
May 1, 1990 -- April 30, 1991: $51.00
May 1, 1991 -- April 30, 1992: $52.00
May 1, 1992 -- April 30, 1993: $53.00
May 1, 1993 -- April 30, 1994: $54.00
May 1, 1994 -- April 30, 1995: $66.00
May 1, 1995 -- April 30, 1996: $67.00
May 1, 1996 -- April 30, 1997: $68.00
May 1, 1997 -- April 30, 1998: $69.00
May 1, 1998 -- April 30, 1999: $70.00
No Base Rent or Additional Rent shall be due or
payable until the earlier of April 15, 1989 or the
date 90 days after Tenant shall receive the
Approvals to operate banking facilities in the
Premises.
Base Rent during any Extension Term shall be in
the amount determined under Paragraphs 4.1 and
4.2.
<PAGE>
Landlord's Contribution to
Finish Work Costs: Landlord shall contribute up to $50.00 per square
foot of Total Rentable Area of the Premises for
the cost of Finish Work actually installed in the
Premises in accordance with Working Drawings
approved pursuant to Exhibit B upon presentation
to Landlord of invoices therefor. If the costs of
Finish Work actually installed pursuant to Working
Drawings approved in accordance with Exhibit B
shall exceed $110.00 per square foot of Total
Rentable Area and provided Landlord shall, in its
reasonable judgment, have approved the budget for
all Finish Work installed and to be installed in
the Premises, Landlord shall contribute up to
$10.00 per square foot of Total Rentable Area of
the Premises of such excess cost for Finish Work
actually installed in the Premises upon
presentation to Landlord of invoices therefor.
Percentage Rent Rate: N/A
Percentage Rent Breakpoint: N/A
Percentage Rent Periods:
Use: Retail banking use, including customary uses
ancillary to such use, including automatic teller
machines installed in accordance with plans
therefore approved by Landlord pursuant to the
provisions of this Lease.
Hours of Operation: Subject to contrary requirements of applicable
laws, Tenant's Hours of Operation shall be from
9:00 a.m. to 4:00 p.m. on Mondays through Fridays,
except holidays. Tenant may, at its option and
provided that such hours are customary for retail
banking facilities similar to Tenant's facilities
at the Premises, open the Premises for business at
any time between 8:00 a.m. and 8:00 p.m. on
weekdays and 8:00 a.m. and 3:00 p.m. on Saturdays.
Premises: That portion of the Building (as defined in
Paragraph 2) designated on the plan attached
hereto as Exhibit A and containing 2060 square
feet of Total Rentable Area, as such number may be
adjusted pursuant to Paragraph 33U.
Lease Year: A year beginning on the Commencement Date or an
anniversary thereof.
Security Program: Landlord acknowledges that Tenant's Use of the
Premises requires a special Security Program for
the Premises (the "Security Program"). The initial
Security Program is attached to the Lease as
Exhibit H. Landlord and Tenant shall reasonably
agree from time to time on the terms of any
appropriate amendments to the Security Program.
The Security Program in effect from time to time
shall govern matters affecting the security of the
Premises including, without limitation, access to
the Premises for maintenance and repairs.
Guarantor of Tenant's
Obligations: N/A
Security Deposit: N/A
Broker: The Gifford Group
2. LEASE OF PREMISES; TERM.
To have and to hold the Premises for the term commencing on the
Commencement Date and ending on the Termination Date, and the right to use the
Common Areas (as hereinafter defined) during such term in common with others
entitled thereto. The Common Areas are those portions of the Property (as
hereinafter defined) not leased to any tenant, but available from time to time
for the benefit of the Property and its tenants, such as landscaped areas, the
ground floor lobby and any elevator lobbies on floors on which the Premises are
located together with space occupied by others, pedestrian walkways, common
restrooms, service areas and the like. Excepted and excluded from the Premises
are the roof or ceiling, the floor and all perimeter walls of the Premises,
except the inner surfaces thereof, but the entry doors to the Premises are not
excluded from the Premises and are a part thereof for all purposes; and Tenant
agrees that Landlord shall have the right (upon notice except in emergency) and
at the Landlord's expense to place in the Premises (but in such manner as to
reduce to a minimum interference with Tenant's use of the Premises) utility
lines, pipes and the like, to serve premises other than the Premises, and to
replace and maintain and repair such utility lines, pipes and the like, in, over
and upon the Premises. The Property includes the land (the "Land") and
improvements known as 75 and 101 Federal Street, Boston, Massachusetts 02110,
including without limitation the buildings thereon including pedestrian
walkways, including space leased and available for lease from time to time to
office tenants ("Office Space") and retail and/or service tenants ("Retail
Space"), parking garage (the "Garage"), the lobbies, services areas and all
other common areas, together with all present and future easements additions,
improvements and other rights appurtenant thereto (the "Building"). The Property
is comprised of the land and building known as and numbered 75 Federal Street,
Boston ("75 Federal") and the land and building known as and numbered 101
Federal Street ("101 Federal"). The Term of
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this Lease (hereinafter referred to as the "Term") shall commence on the
Commencement Date specified in Paragraph 1 hereof and end on the Termination
Date specified in Paragraph 1 hereof unless sooner terminated as provided herein
2.1 EXTENSION TERMS
Tenant shall have the option to extend the term for two (2) five-year
extension terms (the "Extension Terms") as set forth herein. Tenant shall have
the option so to extend the Term only if (i) Tenant is not in default hereunder
(including the expiration of any applicable grace periods) at the time Tenant
elects to extend the Term, and (ii) Tenant is not in default hereunder at the
time the Term would expire but for such extension (including the expiration of
any applicable grace periods). Any extension of the Term shall be applicable to
the entire Premises. If Tenant fails to exercise its option for an Extension
Term, Tenant shall have no further rights under this Paragraph 2.1. Tenant's
election shall be exercised, and Base Rent for each Extension Term determined,
in accordance with Paragraph 4.1. During the Extension Terms, if any, all
provisions of this Lease shall apply except that Tenant shall have no more than
two five-year Extension Terms.
3. POSSESSION.
A. If Landlord's Work (as defined in Paragraph 37) in the Premises shall
not be substantially completed on the Commencement Date or if Landlord is unable
to deliver possession on such date by reason of the holding over or retention of
possession by any tenant or occupant, or for any other reason, this Lease shall
nevertheless continue in force and effect. The obligation of Tenant to begin
paying Rent shall commence in accordance with Insert Page 1A. Landlord's Work
shall be substantially complete if only insubstantial details of construction or
mechanical adjustments remain to be done. Landlord's architect shall determine
whether Landlord's Work is substantially completed and such determination shall
be final and conclusive on Tenant.
B. If Tenant shall enter the Premises or any part thereof prior to the
Commencement Date (which Tenant may not do without Landlord's prior written
consent which shall not be unreasonably withheld or delayed), such entry shall
be at Tenant's sole risk and without interference to the work then being
performed in the Building by Landlord or other tenants or occupants, and all of
the covenants and conditions of this Lease shall be binding upon the parties
hereto with respect to such whole or part of the Premises.
C. Except as set forth in Paragraph 37 hereof, the occurrence of any of the
events described in this Paragraph 3 shall not be deemed to accelerate or defer
the Termination Date.
4. BASE RENT.
Tenant shall pay to Landlord or Landlord's agent without notice or demand
at the present mailing address of Landlord, or at such other place as Landlord
may from time to time designate in writing, in coin or currency which, at the
time of payment, is legal tender for private or public debts in the United
States of America, the Base Rent specified in Paragraph 1 (subject to Paragraph
33U) hereof in the equal monthly installments (subject to Paragraph 33U) hereof
in advance on or before the first day of each and every month during the Term,
without any abatement, counterclaim, set-off or deduction whatsoever. If the
Term commences other than on the first day of a month or ends other than on the
last day of the month, the Base Rent for such month shall be prorated. The
prorated Base Rent for the portion of the month in which the Term commences
shall be paid on the first day of the first full month during the Term.
4.1 BASE RENT - EXTENSION TERMS
During the first Extension Term under Paragraph 2.1 (if validly exercised),
Tenant shall pay Base Rent equal to 95 percent of the then applicable Fair
Market Rent for the Premises. During the second Extension Term under Paragraph
2.1 (if validly exercised), Tenant shall pay Base Rent equal to 95 percent of
the then applicable Fair Market Rent for the Premises. In computing the Fair
Market Rent for the Extension Terms, the annual fair market rent per square foot
shall be ascertained for a five-year term commencing on the date the Extension
Term in question commences ("the Extension Date") under the terms of this Lease
for comparable ground floor retail premises appropriate for retail banking use
in high-rise office complexes in the financial district of Boston,
Massachusetts, as though such space were in the condition then obtaining in the
Premises or in such better condition as the same are required to be maintained
hereunder by Tenant (it is being understood that it is not possible to maintain
the Premises in new condition). Fair Market Rent shall not include charges
that are paid by Tenant as additional rent under this Lease and shall take into
account the services required to be rendered by Landlord and Tenant's
obligations to pay Expense Adjustment Amounts.
The Fair Market Rent for any Extension Term shall be determined, and
notice of extension given, as follows:
(a) If Tenant wishes to consider exercising any extension option under
Paragraph 2.1, Tenant shall so notify Landlord no less than 19 months prior to
the date the Term is then scheduled to expire. Failure timely to send a notice
under this paragraph (a) shall constitute a waiver of Tenant's right to receive
Landlord's estimate of Fair Market Rent under paragraph (b) but shall not affect
Tenant's right to extend the Term pursuant to paragraph (c) below.
(b) Landlord in response shall furnish Tenant Landlord's estimate of
Fair Market Rent within three months after Landlord's receipt of such notice.
(c) On or before the first day of the twelfth remaining calendar month
in the Term (calculated without regard to any future extension), Tenant may
exercise Tenant's extension option hereunder by giving Landlord notice to such
effect. Such notice shall specify, in addition to Tenant's exercise of the
option, whether Tenant accepts Landlord's estimate of the Fair Market Rent (in
which case the parties shall execute an agreement specifying the agreed Base
Rent hereunder for the Extension Term and acknowledging the extension of the
Term), or whether Tenant disputes such estimate. If Landlord has not supplied
such an estimate, then the parties shall proceed as though such a dispute
existed. (Failure timely to send a notice under this paragraph (c) shall
constitute an election not to exercise Tenant's extension option under Paragraph
2.1). In case of disputes, the matter of the Fair Market Rent promptly shall be
submitted to arbitration in accordance with Paragraph 4.2.
4.2 FAIR MARKET RENT - ARBITRATION PROCEDURE
For any period during which the Fair Market Rent is in dispute hereunder,
Tenant shall make payments on account of Base Rent at the rate in effect during
the last year prior to the period in question and the parties shall adjust over-
or for under-payments within ten days after the decision of the arbitrators is
announced.
In the event of a dispute concerning Fair Market Rent, such dispute shall
be arbitrated in accordance with the following procedure. Each of Landlord and
Tenant, within twenty days after notice by Tenant disputing Landlord's estimate
of the Fair Market Rent, shall appoint as an arbitrator an MAI appraiser or a
commercial real estate broker, such arbitrator to have at least ten years'
experience as an appraiser or broker of downtown Boston office buildings,
including high-rise office buildings, and shall give notice of such appointment
to the other party. If either Landlord or Tenant shall fail timely to appoint an
arbitrator, the other may apply to the Boston Office of the American Arbitration
Association ("AAA") for appointment of such arbitrator fifteen (15) days after
notice of such failure to Landlord or Tenant, as the case may be, if such
arbitrator has not been appointed. The two arbitrators shall, within ten (10)
days after appointment of the second arbitrator, appoint a third arbitrator who
shall be similarly qualified. If the two arbitrators are unable to agree timely
on the selection of the third arbitrator, then either arbitrator on behalf of
both may request such appointment from the Boston office of the AAA. The
arbitration shall be conducted in accordance with the rules of the AAA insofar
as such rules are not inconsistent with the provisions of this Paragraph and
paragraph 4.1 (in which case the provisions of this Paragraph and Paragraph 4.1
shall govern), and the arbitrators shall be charged to reach a majority decision
in accordance with the standards provided in this Paragraph and paragraph 4.1.
The Fair Market Rent shall be in accordance with the arbitrators' decision which
may be entered and enforced by either party in any court of competent
jurisdiction. The cost of the arbitration (exclusive of each party's witness and
attorney fees, which shall be paid by such party) shall be borne equally by the
parties. If the AAA shall cease to provide arbitration for commercial disputes
in Boston, the second or third arbitrator, as the case may be, shall be
appointed by any successor organization providing substantially the same
services, and in the absence of such an organization, by a court of competent
jurisdiction under the arbitration act of The Commonwealth of Massachusetts.
5. ADDITIONAL RENT
In addition to paying the Base Rent specified in Paragraph 4 hereof, Tenant
shall pay as "Additional Rent" the amounts determined pursuant to Sub-Paragraphs
B and C of this Paragraph 5. The Base Rent and the Additional Rent are sometimes
herein collectively referred to as the "Rent". All amounts due under this
Paragraph as Additional Rent shall be payable for the same periods and in the
same manner, time and place as the Base Rent, without any abatement,
counterclaim, set-off or deduction whatsoever. Without limitation on other
obligations of Tenant which shall survive the expiration of the Term, the
obligations of Tenant to pay the Additional
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Rent provided for in this Paragraph 5 shall survive the expiration of the Term-
For any partial Calendar Year, Tenant shall be obligated to pay only a pro rata
share of the Additional Rent, based on the number of days of the Term falling
within such Calendar Year.
A. Definitions. As used in this Paragraph 5, the terms:
(ii) "Calendar Year" shall mean each calendar year in which any part
of the Term falls, through and including the year in which the Term
expires.
(iii) "Tenant's Proportionate Share" with respect to "Taxes" (as
hereinafter defined) for each Calendar Year shall mean the percentage
calculated by dividing the Total Rentable Area contained in the Premises by
the Total Rentable Area of 101 Federal leased (but not less than 85% of the
Total Rentable Area of 101 Federal) as of the first day of the Calendar
Year in question. Tenant's Proportionate Share with respect to "Operating
Expenses" (as hereinafter defined) for each Calendar Year shall mean the
percentage calculated by dividing the Total Rentable Area contained in the
Premises by the Total Rentable Area contained in the Building leased (but
not less than 85% of the Total Rentable Area of the Building) as of the
first day of the Calendar Year in question.
(iv) "Taxes' shall mean all taxes, assessments, betterments, excises,
user fees and similar charges assessed or imposed on 101 Federal for the
then current calendar year by any governmental authority (including
personal property associated therewith) or impositions or agreed payments
in lieu of any of the foregoing, or voluntary payments made in connection
with the provision of governmental services or improvements of benefit to
101 Federal. The amount of any special taxes, special assessments and
agreed or governmentally imposed "in lieu of tax" or similar charges
(including so-called "linkage payments" and other agreed or voluntary
payments paid by Landlord) shall be included in Taxes for any year but
shall be limited to the amount of the installment (plus any interest, other
than penalty interest, payable thereon) of such special tax, special
assessment or such charge required to be paid during or with respect to the
year in question. Taxes include expenses, including fees of attorneys,
appraisers and other consultants, incurred in connection with any efforts
to obtain abatements or reduction or to assure maintenance of Taxes for any
year wholly or partially included in the Term, whether or not successful
and whether or not such efforts involved filing of actual abatement
applications or initiation of formal proceedings. Taxes exclude income
taxes of general application and all estate, succession, inheritance and
transfer taxes. If at any time during the Term there shall be assessed on
Landlord, in addition to or lieu of the whole or any part of the ad valorem
tax on real or personal property, a capital levy or other tax on the gross
rents or other measures of building operations, or a governmental income,
franchise, excise or similar tax assessment, levy, charge or fee measured
by or based, in whole or in part, upon building valuation, gross rents or
other measures of building operations, or benefits of governmental services
furnished to the building, then any and all of such taxes, assessments,
levies, charges and fees, to the extent so measured or based, shall be
included within the term Taxes, but only to the extent that the same would
be payable if 101 Federal were the only property of Landlord.
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(v) "Operating Expenses" shall mean all costs of Landlord in owning,
servicing, operating, managing, maintaining, and repairing the Property,
and providing services to tenants including, without limitation, the costs
of the following: (i) supplies, materials and equipment purchased or
rented, total wage and salary costs paid to, and all contract payments
made on account of, all persons engaged in the operation, maintenance,
security, cleaning and repair of the Property, including Social Security,
old age and unemployment taxes and so-called "fringe benefits"): (ii)
building services furnished to tenants of the Property at Landlord's cost
(including the types of services provided to Tenant pursuant to Paragraph
8.A hereof) and maintenance and repair of and services provided to or on
behalf of the Property performed by Landlord's employees or by other
persons under contract with Landlord (other than maintenance and repair in
other tenant spaces caused by the actions of another tenant): (iii)
utilities consumed and expenses incurred in the operation, maintenance and
repair of the Building including, without limitation, oil, gas,
electricity (other than electricity to tenants in their Premises if Tenant
is directly responsible for payment under this Lease on account of
electricity consumed by Tenant), water, sewer and snow removal; (iv)
casualty, liability and other insurance (all insurance to be in such
amounts and insuring against such risks as Landlord may, in its sole
discretion from time to time, decide, together with such amounts and
coverages as may be required by any mortgagee) and unreimbursed costs
incurred by Landlord which are subject to an insurance deductible: (v)
costs in the nature of common area and facilities costs of the Property
including without limitation, operation, maintenance and servicing of the
lobby and pedestrian walkways, snow plowing and removal, grounds
maintenance and the like; and (vi) management fees plus the actual or an
imputed cost of any space in the Building occupied by Landlord's
management offices for the Building. If Landlord, in its sole discretion,
installs a new or replacement capital item for the purpose of reducing or
conserving the use of energy in the Building, complying with any building
code or other law, regulation, or legal requirement, complying with
requirements of any insurer of Landlord or of the Property, or otherwise
relating to the operation of the Property, the cost of such item amortized
over a reasonable period with interest at two points above the so-called
base rate or prime rate from time to time announced by The First National
Bank of Boston, N.A. (or any comparable financial institution) at its head
office in Boston, Massachusetts shall be included in Operating Expenses.
Operating Expenses shall not include any costs or expenses incurred by
Landlord in the construction and development of the Building; costs of
special services to particular tenants which are reimbursable to landlord,
payments of principal, interest or other charges on mortgages; ground
rents; salaries of executives or principals of Landlord (except as the
same may be reflected in the management fee for the Building or
attributable to actual Building operations): leasing commissions; costs of
alteration of any tenant's premises for a particular tenant and not for
the benefit of the Building or any group of tenants therein; and all
expenses, costs, disbursements paid or incurred by Landlord: to clean the
Office Space; to furnish heat, ventilation, and air-conditioning to the
Office Space; to operate, manage and maintain the Garage; to maintain and
repair the elevators servicing the Office Space; and to maintain all
interior common areas of the Building above the first floor.
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B. Expense Adjustment. Tenant shall pay to Landlord or Landlord's agent as
Additional Rent, a sum ("Expense Adjustment Amount") equal to the sum of
Tenant's Proportionate Share of Taxes and Tenant's Proportionate Share of
Operating Expenses incurred with respect to each Calendar Year. The Expense
Adjustment Amount with respect to each Calendar Year shall be paid in monthly
installments, in an amount estimated from time to time by Landlord and
communicated by written notice to Tenant, which estimate may be revised to
reflect, without limitation, increases and anticipated increase in Operating
Expense during any period. Landlord shall cause to be kept books and records
showing Operating Expenses in accordance with an appropriate system of accounts
and accounting practices consistently maintained. Following the close of each
Calendar Year, Landlord shall cause the amount of the Expense Adjustment Amount
for such Calendar Year to be computed based on Operating Expenses for such
Calendar Year and Landlord shall deliver to Tenant a statement of such amount
and Tenant shall pay any deficiency to Landlord as shown by such statement
within fifteen (15) days after receipt of such statement. If the total of the
estimated monthly installments paid by Tenant during any Calendar Year exceeds
the actual Expense Adjustment Amount due from Tenant for such Calendar Year,
such excess shall be refunded by Landlord, provided Tenant is not then in
default hereunder. Delay in computation of the Expense Adjustment Amount or
failure to deliver a statement of such amount shall not be deemed a default
hereunder or a waiver of Landlord's right to collect the Expense Adjustment
Amount. In computing the Expense Adjustment Amount, the following provisions
relating to Taxes shall be applicable: The amount of any refund of Taxes
received by Landlord shall be credited against Taxes for the calendar year in
which such refund is received, provided, however, in the event Landlord receives
a refund of taxes after the termination date (as the same may be accelerated or
extended as provided elsewhere in this Lease) which refund relates to a year
during the Term hereof, the amount of such refund fairly allocable to Tenant
shall be refunded to Tenant by Landlord (net of Tenant's allocated share of the
cost of obtaining such refund and the cost, if any, of making such refund) ; and
further provided that if Tenant expands into space formerly occupied by other
tenants, which expansion space becomes subject to this Lease, Tenant shall not
be entitled to any refund or credit in connection with a refund or abatement of
Taxes for periods prior to Tenant's occupancy of such expansion space. All
references to Taxes "for" a particular Calendar Year shall be deemed to refer to
Taxes due and payable during such Calendar Year without regard to when such
Taxes are assessed or levied.
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6. USE OF PREMISES.
Beginning on the Opening Date set forth in Paragraph 1 and continuing
throughout the term, as it may be extended, Tenant shall continuously occupy the
Premises in their entirety during all of the Hours of Operation set forth in
Paragraph 1, as such hours may hereafter be reasonably adjusted by Landlord, and
at other times with Landlord's prior approval, and use the Premises for the Use
specified in Paragraph 1 only (including the use of an insubstantial portion of
the Premises for storage and administrative uses ancillary to the Use) and shall
not use the Premises for any other purpose. Tenant shall operate its business in
the Premises under Tenant's Trade Name only. Tenant shall not injure, overload,
deface or commit waste in the Premises or any part of the Property, nor use or
permit any use of the Premises which is improper, offensive, contrary to law or
ordinance or which is liable to invalidate or increase the premium for any
insurance on the Property or its contents or which is liable to render necessary
any alterations or additions in the Property, nor obstruct in any manner any
portion of the Property. Tenant shall keep all mechanical apparatus free of
vibration and noise which may be transmitted beyond the Premises and conduct its
business in all respects in a dignified manner in accordance with high standards
of retail operation consistent with the quality of operation of the Property as
determined by Landlord. If Tenant's use of the Premises results in an increase
in the premium for any insurance on the Property or the contents thereof,
Landlord shall notify Tenant of such increase and Tenant shall pay the same upon
billing as additional rent. Tenant may not without Landlord's consent (which may
be indicated on Tenant's Plans for Finish Work) install in the Premises any pay
telephones or vending machines, water fountains, refrigerators, sinks or cooking
equipment provided that Landlord's consent will not be unreasonably withheld
with respect to items designed for the convenience of Tenant's employees which
are customary for retail employees if Landlord determines that special venting
or other matters are not required in connection therewith. Subject to the
requirements of the Security Program, Landlord may require that Tenant obtain
maintenance, other services, and supplies for such items at competitive rates
from Landlord or from an independent vendor approved by Landlord, the cost
thereof for any such item obtained from Landlord to be paid as Additional Rent.
Tenant shall not permit the use of any objectionable advertising medium
such as, without limitation, loudspeakers, phonographs, public address systems,
sound amplifiers, reception of radio or television broadcasts within the
Property, which
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is in any manner audible or visible outside of the Premises. Tenant shall
operate the Premises in compliance with all applicable governmental regulations,
and in accordance with all licenses and permits applicable to the Use, including
without limitation, compliance with the regulations of the Board of Health and
with the terms of any victualer's license and liquor license. Tenant shall not
solicit business outside of the Premises, distribute handbills or other
advertising matter outside the Premises in any common area; permit the parking
of vehicles so as to interfere with the use of any driveway, corridor, footwalk,
parking area, or other common area; receive or ship articles of any kind outside
the designated loading areas for the Premises; use the Building common area
adjacent to the Premises for the sale or display of any merchandise or for any
other business, occupation or undertaking; conduct or permit to be conducted any
auction, fire sale, going out of business sale, bankruptcy sale (unless directed
by a court order), or other similar type sale in or connected with the Premises
(but this provision shall not restrict the absolute freedom of Tenant in
determining its own selling prices, nor shall it preclude the conduct of
periodic seasonal, promotional or clearance sales); use or permit the use of any
portion of the Premises for any unlawful purpose or for any activity of a type
which is not generally considered appropriate for a first-class urban retail
center conducted in accordance with the highest standards of operation. Tenant
shall not operate its heating or air-conditioning in such a manner as to drain
heat or air-conditioning from other portions of the Building. The foregoing
prohibition of solicitation shall not be interpreted to prohibit customary
commercial contacts between Tenant and other tenants of the Building.
Tenant acknowledges that it is Landlord's intent that the Retail Area be
operated in a manner which is consistent with the highest standards of decency
prevailing in the community which it serves. Toward that end, Tenant agrees that
it will not sell, distribute, display or offer for sale any item which, in
Landlord's good faith judgment, is inconsistent with the quality of operation of
the Retail Area or may tend to injure or detract from the character or image of
the Property within such community. Without limiting the generality of the
foregoing, Tenant will not sell, distribute, display or offer for sale any
paraphernalia commonly used in the use or ingestion of illicit drugs, or any
pornographic or lewd newspaper, book, magazine, film, picture, representation or
merchandise of any kind. Provided that Tenant shall not have defaulted in its
performance of its obligations under this Lease, Landlord agrees that it shall
not, during the first year following the date of execution of this Lease, enter
into a lease for premises located in the portion of Building gallery running
between Federal Street and Winthrop Square with any financial institution for a
use which competes directly with Tenant's Use.
7. CONDITION OF PREMISES.
Tenant's taking possession of any portion of the Premises shall be
conclusive evidence that such portion of the Premises was delivered in
compliance with Landlord's obligations under the terms of this Lease. No promise
of Landlord to alter, remodel or improve the Premises, the Building or the
Property and no representation by Landlord or its agents respecting the
condition of the Premises, the Building or the Property have been made to Tenant
or relied upon by Tenant other than as may be contained in this Lease or in any
written amendment hereto signed by Landlord and Tenant. It is understood that
visits by the tenant prior to the Commencement Date shall not constitute "taking
possession" of the Premises.
8. SERVICES.
A. List of Services
Landlord shall provide the following services, the costs of which are
included within Operating Expenses, on all days during the Term, except Sundays
and holidays established by Federal, State and/or local law, unless otherwise
stated, and subject to all governmental rules, regulations and guidelines
applicable thereto:
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(i) Heating and air conditioning in the Building common areas during
the normal heating and air conditioning seasons, from Monday through Friday
during the period from 8 a.m. to 6 p.m. ("business days").
(ii) Electrical lighting in the Building common areas.
(iii) City water from the regular Building outlets for drinking,
lavatory and toilet purposes for Tenant and its employees.
(iv) Window washing of the outside of windows in the Building's
perimeter walls as may be situated in the Premises.
(v) Non-exclusive automatic passenger elevator service at all times.
(vi) Non-exclusive freight elevator services subject to scheduling by
Landlord.
(vii) Snow and ice removal from Building walkways.
(viii) Except as otherwise provided in this Lease and except for
repairs necessitated by Tenant's act or neglect (which shall be deemed a
repair obligation of Tenant), Landlord shall make such repairs to the roof,
exterior walls, floor slabs, and common areas and facilities as may be
necessary to keep them in good condition consistent with a first class
office building.
B. Utilities.
Tenant shall pay Landlord, as Additional Rent, for the use of all
electrical services and other utilities to the Premises. Such payments shall be
made in monthly installments at the time prescribed for monthly installments,
and shall be in the amount of Tenant's allocable share of the cost of such
utilities metered to the Premises or to premises which include the Premises, as
the case may be, as estimated by Landlord from time to time in Landlord's sole
discretion. Tenant shall, as part of its approved improvements and at its
expense install electric wiring from the vault in the basement of the Building
to the Premises, together with an electric meter to measure Tenant's consumption
of electricity in the Premises. Such wiring and meter shall be maintained
throughout the term by Tenant at its expense. If Tenant, at its option and
expense, contracts directly with the utility company for electric service to the
Premises, Tenant's payments shall be made directly to the utility company and
shall not be included as additional rent.
C. Interruption of Services.
Tenant agrees that Landlord shall not be liable in damages, by abatement of
Rent or otherwise, for failure to furnish or delay in furnishing any service, or
for any diminution in the quality or quantity thereof, when such failure or
delay or diminution is occasioned, in whole or in part, by repairs, renewals, or
improvements, by any strike, lockout or other labor trouble, by inability to
secure electricity, gas, water, or other fuel at the Building after reasonable
effort so to do, by any accident or casualty whatsoever, by act or default of
Tenant or other parties, or by any other cause beyond Landlord's reasonable
control; and such failures or delays or diminution shall never be deemed to
constitute an eviction or disturbance of Tenant's use and possession of the
Premises or relieve Tenant from paying Rent or performing any of its obligations
under this Lease. Notwithstanding the foregoing, if the Premises shall be
untenantable for more than five (5) business days as a result of Landlord's
negligent act or omission, Base Rent shall thereafter abate until the Premises
are again tenantable. If the Premises shall continue to be untenantable for any
reason beyond Tenant's control for nine (9) months, Tenant shall have the right
to terminate this Lease upon notice to Landlord given within thirty (30) days
following the expiration of such nine (9) month period.
D. Charges for Services.
Charges for any service for which Tenant is required to pay from time to
time hereunder including, but not limited to, utilities and hoisting services
shall be due and payable at the same time as the installment of Rent with which
they are billed, or if billed separately, shall be due and payable as further
Additional Rent within ten (10) days after such billing.
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9. REPAIRS AND MAINTENANCE.
Tenant will, at Tenant's own expense, keep the Premises, including all
improvements, fixtures and furnishings therein, in good order, repair and
condition at all times during the Term, and Tenant shall promptly and adequately
repair all damage to the Premises and replace or repair all damaged or broken
glass (excepting exterior glass, which shall be repaired by Landlord at Tenant's
cost), fixture and appurtenances. If Tenant does not do so, Landlord may, but
shall not be obligated to, make such repairs and replacements, and Tenant shall
pay Landlord the cost thereof, including a percentage of the cost thereof
sufficient to reimburse Landlord for all overhead, general conditions, fees and
other costs or expenses arising from Landlord's involvement with such repairs
and replacements, forthwith upon being billed for same. Landlord may, but shall
not be required to, enter the Premises at all reasonable times (and at any time
in emergency situations) to make such repairs, alterations, improvements and
additions to the Premises and the Property or to any equipment located therein
or thereon as Landlord shall desire or deem necessary or as Landlord may be
required to do by governmental authority or court order or decree.
Tenant shall maintain the Premises in a clean, orderly and sanitary
condition, free of insects, rodents, vermin and other pests; and keep any
garbage, trash, rubbish and other refuse in vermin-proof containers within the
Premises and out of sight of the public and other tenants until removed. Tenant
shall not place or maintain any merchandise, trash, refuse, or other articles in
any vestibule or entry of the Premises, on the footwalks or corridors adjacent
thereto or elsewhere on or around the exterior of the Premises. Tenant shall not
permit undue accumulations of nor burn garbage, trash, rubbish or other refuse
within or without the Premises. Tenant shall not cause or permit odors, lights
or noises which are, in Landlord's sole opinion, objectionable to emanate or to
be dispelled from the Premises. Tenant shall keep all trash in the Premises in
appropriate containers and shall be responsible for its removal daily (or more
frequently if necessary) by its own employees or by a company approved by
Landlord. Tenant shall cause all cleaning in the Premises to be done at Tenant's
expense by its own employees or a company approved by Landlord, shall cause all
extermination of vermin in the Premises to be performed at Tenant's expense only
by a company approved by Landlord and shall cause all laundry from the Premises
to be collected and serviced at Tenant's expense only by a company approved by
Landlord.
10. ADDITIONS AND ALTERATIONS.
A. The installation of initial Tenant Finish Work in the Premises shall be
as provided in Exhibit B. Tenant shall not, without the prior written consent of
Landlord, make any alterations, improvements or additions to the Premises after
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initial construction except as approved by Landlord. Landlord agrees that its
consent shall not be required with respect to improvements to the Premises which
(i) cost in the aggregate no more than $10,000; (ii) are consistent with the
design and materials contained in the initial Finish Work approved and installed
pursuant to Exhibit B; and (iii) do not affect the structure, systems or common
facilities of the Building. Landlord's refusal to give said consent shall be
conclusive. If Landlord consents to said alterations, improvements or additions,
it may impose such conditions with respect thereto as Landlord deems
appropriate, including, without limitation, requiring Tenant to furnish Landlord
with security for the payment of all costs to be incurred in connection with
such work, insurance against liabilities which may arise out of such work, and
plans and specifications plus permits necessary for such work, requiring Tenant
to perform such work at times designated by Landlord. The work necessary to make
any alterations, improvements or additions to the Premises, whether prior to or
subsequent to the Commencement Date, shall be done at Tenant's expense by
employees of or contractors hired by Landlord except to the extent Landlord
gives its prior written consent to Tenant's hiring its own contractors, which
consent shall not be unreasonably withheld or delayed. It is understood that
Landlord's consent to the hiring by Tenant of Tenant's own contractors may be
withheld if Landlord's permitting such hiring might reasonably be expected
adversely to affect other construction in the Building or might reasonably be
expected to result in an interruption of services provided to tenants of the
Building. Tenant shall promptly pay to Landlord or Tenant's contractors, as the
case may be, when due, the cost of all such work and of all decorating required
by reason thereof. Tenant shall also pay to Landlord a percentage of the cost of
such work sufficient to reimburse Landlord for all overhead, general conditions,
fees and other costs and expenses arising from Landlord's involvement with such
work, which costs shall be appropriate to Landlord's degree of involvement in
the work in question. In connection with seeking Landlord's approval, Tenant
shall provide to Landlord Plans and Specifications regarding proposed
alterations, additions or improvements, as Landlord shall reasonably require,
and Tenant shall, in addition to all other expenses which Tenant is obligated to
pay to Landlord hereunder, pay to Landlord the expense incurred by Landlord in
connection with the review of such information. Upon completion of such work
Tenant shall deliver to Landlord, if payment is made directly to contractors,
evidence of payment, contractors' affidavits and full and final waivers of all
liens for labor, services or materials, all in form satisfactory to Landlord.
Tenant shall defend and hold Landlord, Landlord's ground lessor, if any, any
mortgagees of any of the Property, the Property and the Building harmless from
all costs, damages, liens and expenses related to such work. All work done by
Tenant or its contractors pursuant to Paragraphs 9 or 10 shall be done in a
first-class workmanlike manner using only good grades of materials and shall
comply with all insurance requirements and all applicable laws and ordinances
and rules and regulations of governmental departments or agencies.
B. All alterations, improvements and additions to the Premises, whether
temporary or permanent in character, made or paid for by Landlord or Tenant,
shall without compensation to Tenant become Landlord's property at the
termination of this lease by lapse of time or otherwise and shall, unless
Landlord requests their removal (in which case Tenant shall remove the same as
provided in Paragraph 18) be relinquished to Landlord in good condition,
ordinary wear excepted. Landlord and Tenant shall, in connection with the
approval of Working Drawings pursuant to Exhibit B, agree on those Tenant
improvements which are to be removed by Tenant at the Termination Date.
11. COVENANT AGAINST LIENS.
Tenant has no authority or power to cause or permit any lien or encumbrance
of any kind whatsoever, whether created by act of Tenant, operation of law or
otherwise, to attach to or be placed upon the Property, the Building or the
Premises, or to affect any estate or interest of Landlord, Landlord's ground
lessor, if any, or any mortgagees. Tenant covenants and agrees not to suffer or
permit any lien of mechanics, materialmen or others to be placed against the
Property, the Building or the Premises, or to affect any estate or interest of
Landlord,
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Landlord's ground lessor, if any, or any mortgagees with respect to work or
services claimed to have been performed for or materials claimed to have been
furnished to Tenant or the Premises, and, in case of any such lien attaching, or
claim therefor being asserted, Tenant covenants and agrees to cause same to be
immediately released and removed of record In the event that such lien is not
released and removed as soon as possible under applicable law. Landlord, at its
sole option, may take all action necessary to release and remove such lien
(without any duty to investigate the validity thereof) and Tenant shall promptly
upon notice reimburse, Landlord for all sums, costs and expenses (including
reasonable attorneys' fees) incurred by Landlord in connection therewith
12. INSURANCE.
A. Waiver of Subrogation.
Landlord and Tenant each hereby waive any and every claim for recovery from
the other for any and all loss of or damage to the Building or the Premises or
to the contents thereof, which loss or damage is covered by valid and
collectible physical damage insurance policies, to the extent that such loss or
damage is recoverable under said insurance policies. Inasmuch as this mutual
waiver will preclude the assignment of any such claim by subrogation (or
otherwise) to an insurance company (or any other person), Landlord and Tenant
each agree to give to each insurance company which has issued, or in the future
may issue, to it policies of physical damage insurance, written notice of the
terms of this mutual waiver, and to have said insurance policies properly
endorsed, if necessary, to prevent the invalidation of said insurance coverage
by reason of said waiver. Tenant's waiver of subrogation as hereinabove set
forth shall also run to the benefit of and extend to Landlord's ground lessor,
if any, and any mortgagees.
B. Coverage.
Tenant shall purchase and maintain insurance during the entire Term (and
during such further time as Tenant or any person claiming through Tenant
occupies any part of the premises or has any liability for matters arising
during the Term and such further time) for the benefit of Tenant, Landlord,
Landlord's ground lessor, if any, and any mortgagees (as their respective
interests may appear) with terms, coverages and in companies satisfactory to
Landlord, and with such increases in limits as Landlord may from time to time
request, but initially Tenant shall maintain the following coverages in the
following amounts:
(i) Comprehensive General Liability Insurance covering Tenant,
Landlord, Landlord's ground lessor, if any, any mortgagees, and Landlord's
management agent for claims of bodily injury, personal injury and property
damage arising out of Tenant's operations, assumed liabilities or use of
the Premises, for limits of liability not less than:
Bodily Injury Liability $6,000,000 each occurrence
$6,000,000 annual aggregate
Personal Injury Liability $6,000,000 annual aggregate
O% Insured's participation
Property Damage Liability $6,000,000 each occurrence
$6,000,000 annual aggregate
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(ii) Comprehensive Automobile Insurance covering all owned, non-owned
and hired automobiles of Tenant including the loading and unloading of any
automobile with limits of liability not less than:
Bodily Injury Liability $3,000,000 each person
$3,000,000 each accident
Property Damage Liability $1,000,000 each accident
(iii) Physical Damage Insurance covering all additions, improvements
and alterations to the Premises including the building standard Tenant
improvements provided by Landlord and all furniture, trade fixtures,
equipment, merchandise and all other items of Tenant's property on the
Premises. Such insurance shall be written on "all risks" of physical loss
or damage basis, for the full replacement cost value of the covered items
and in amounts that meet any coinsurance clauses of the policies of
insurance.
Tenant shall, prior to the commencement of the Term, furnish to Landlord
certificates evidencing such coverage, which certificates shall state that such
insurance coverage may not be changed or cancelled without at least thirty days
written notice to Landlord and Tenant shall name Landlord and Landlord's
management agent as additional insureds.
C. Loss of Coverage; Rate Increases
Tenant shall comply with all applicable laws and ordinances, all orders and
decrees of court and all requirements of other governmental authorities having
jurisdiction over the Building and of the applicable rating bureau, and shall
not, directly or indirectly, make any use of the Premises which may thereby be
prohibited or be dangerous to person or property or which may cause the
termination of or may result in a loss of any insurance coverage. If by reason
of the failure of Tenant to comply with the provisions of this paragraph 12C,
(i) any insurance coverage is jeopardized Landlord may, in addition to all other
remedies which may be available to Landlord, terminate this Lease or (ii)
insurance premiums are increased, Landlord shall have the option either to
terminate this Lease or to require Tenant to make immediate payment of the
increased insurance premiums.
13. FIRE OR CASUALTY.
A. Paragraph 9 hereof notwithstanding, if the Premises or the access
thereto shall be damaged by fire or other casualty and if such damages does not
render all or a material portion of the Premises untenable and if the Premises
or the Building are not substantially damaged (as hereinafter defined), then
Landlord shall, subject to building and zoning laws then applicable, and subject
to Landlord's mortgagees making available insurance proceeds therefor, repair
and restore the same (or so much thereof as was originally constructed by
Landlord as Landlord's Work pursuant to Paragraph 37) with reasonable
promptness, subject to reasonable delays for insurance adjustments and delays
caused by matters beyond Landlord's reasonable control, but shall not be
obligated to expend therefor an amount in excess of the proceeds of insurance
recovered with respect thereto. If all or a material portion of the Premises are
rendered untenable by fire or other casualty, or if the Premises or the Building
are substantially damaged by fire or other casualty (the term "substantially
damaged" meaning damage of such a character that the same cannot, in ordinary
course,
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reasonably be expected to be repaired within ninety (90) days from the time that
repair work would commence), then, in either such case, Landlord shall have the
right to terminate this Lease by giving notice of Landlord's election so to do
not later than thirty (30) days after Landlord has ascertained all information
required by Landlord to determine whether or not to terminate this Lease,
including without limitation the amount of insurance proceeds which are
available to Landlord for restoration. In the event Landlord gives such
termination notice, this Lease shall terminate (with appropriate proration(s) of
Rent being made for Tenant's possession of the tenantable portion of the
Premises after the date of such damage) as of the date specified in such notice
(but in no event sooner than thirty (30) days after the date of such notice)
with the same force and effect as if the date specified were the date originally
established as the expiration date hereof. Landlord shall have no liability to
Tenant, and Tenant shall not be entitled to terminate this Lease by virtue of
any delays in completion of such repairs and restoration. If Landlord elects to
restore Landlord's Work following a casualty but fails to complete Landlord's
Work within nine (9) months from the date of the casualty, Tenant shall have the
right to terminate this Lease upon notice to Landlord given within thirty (30)
days following the expiration of such nine (9) month period. Further, in the
event this Lease is not terminated, Landlord shall not be obligated to restore
any portion of the Building outside of the Premises which is not necessary for
reasonable access to and egress from the Premises. Except as otherwise provided
below, Rent shall abate on those portions of the Premises as are, from time to
time, untenable as a result of such damage.
B. In the event the Premises or the Building is damaged by fire or other
casualty resulting from the act or neglect of Tenant, its agents, contractors,
employees or invitees and if this Lease shall not be terminated by Landlord as a
result of such damage, Tenant shall not be released from any of its obligations
hereunder including, without limitation, its duty to pay Rent, and Rent shall
not be abated.
C. Notwithstanding anything to the contrary herein set forth, Landlord
shall have no duty pursuant to this Paragraph 13 to repair or restore any
portion of the alterations, additions or improvements in the Premises or the
decorations thereto, except (i) to the extent that damage to such alterations,
additions, improvements and decorations was to Landlord's Work or if (ii) at
Landlord's sole option, Landlord elects to make repairs to such other damage to
alterations, additions, improvements and additions as was insured against by
Tenant as required under Paragraph 12B(iii) of this Lease and the proceeds from
such insurance are made available to Landlord. If Tenant desires any other or
additional repairs or restoration and if Landlord consents thereto, the same
shall be done at Tenant's sole cost and expense subject to all of the provisions
of Paragraph 9 hereon. Tenant acknowledges that Landlord shall be entitled to
the full proceeds of any insurance coverage carried by Tenant, for damage to
alterations, additions, improvements or decorations whether such alterations,
additions, improvements or decorations were paid for by Landlord or Tenant;
provided, however, in the event Landlord does not repair or restore such damage,
Landlord shall repay to Tenant the amount of the insurance proceeds received by
Landlord from policies of insurance carried by Tenant pursuant to Paragraph
12B(iii) of this Lease. If Tenant is entitled to abatement of Rent under
Paragraph 13A and if Landlord has not elected to repair any damage to the
Premises other than Landlord's Work, Tenant shall be entitled to an additional
period of abatement of Rent commencing on the date that Landlord's Work is
substantially complete and ending on the earlier of (i) the date ninety (90)
days thereafter and (ii) the date on which Tenant occupies the Premises for the
Use permitted under Paragraph 1. Furthermore, with respect to damage by fire or
casualty solely to alterations, additions or improvements or decorations within
the Premises, Tenant may elect, by notice to Landlord, to be responsible for
repair and restoration of such alterations, additions, improvements or
decoration's and Tenant shall, in such event, be obligated to repair and restore
the Premises to the condition the same were in immediately prior to the fire or
casualty, such repair or restoration to be accomplished by Tenant consistent
with the provisions of Paragraph 10 of this Lease; and if Tenant so elects, the
proceeds of insurance under Paragraph 12B(iii) of this Lease shall be paid to
Tenant on requisition as repair and restoration of the Premises progresses.
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14. WAIVER OF CLAIMS - INDEMNIFICATION.
To the extent not prohibited by law, Landlord, Landlord's ground lessor, if
any, any mortgagees, and their respective officers, agents, servants and
employees shall not be liable for any damage either to person or property or
resulting from the loss of use thereof sustained by Tenant or by other persons
due to the Property or any part thereof or any appurtenances thereof becoming
Out of repair, or due to the happening of any accident or event in or about the
Premises, the Building or the Property, or due to any act or neglect of any
tenant or occupant of the Building or of any other person or entity. This
provision shall apply particularly, but not exclusively, to damage caused by
gas, electricity, snow, frost, steam, sewage, sewer gas or odors, fire, water,
noise, vibration, fumes or by the bursting or leaking of pipes, faucets,
sprinklers, plumbing fixtures and windows, and shall apply without distinction
as to the person whose act or neglect was responsible for the damage and whether
the damage was due to any of the causes specifically enumerated above or to some
other cause of an entirely different kind. Tenant further agrees that all
personal property upon the Premises, or upon loading docks, receiving and
holding areas, or freight elevators of the Building shall be at the risk of
Tenant only, and that Landlord shall not be liable for any loss or damage
thereto or theft thereof. Without limitation of any other provisions hereof,
Tenant agrees to defend, protect, indemnify and save harmless Landlord,
Landlord's ground lessor, if any, and any mortgagees from and against all
liability to third parties which arise (or which were claimed to have arisen)
within or without the Premises or out of acts or omissions of Tenant and its
servants, agents, employees, contractors, suppliers, workers and invitees.
15. NONWAIVER.
No waiver of any provision of this Lease shall be implied by any failure of
Landlord to enforce any remedy on account of the violation of such provision,
even if such violation be continued or repeated subsequently, and no express
waiver shall affect any provision other than the one specified in such waiver
and that one only for the time and in the manner specifically stated. No receipt
of monies by Landlord from Tenant after the termination of this Lease shall in
any way alter the length of the Term or of Tenant's right of possession
hereunder or after the giving of any notice shall reinstate, continue or extend
the Term or affect any notice given Tenant prior to the receipt of such monies,
it being agreed that after the service of notice or the commencement of a suit
or after final judgment for possession of the Premises, Landlord may receive and
collect any Rent due, and the payment of said Rent shall not waive or affect
said notice, suit or judgment.
16. CONDEMNATION.
If the Property, the Building or any portion thereof shall be taken or
condemned by any competent authority for any public or quasi-public use or
purpose (a "taking"), or if the configuration of any roadway, street, alley, or
railroad line adjacent to or beneath the Building is changed by any competent
authority and such taking or change in configuration makes it necessary or
desirable to remodel or reconstruct the Building or any part thereof, Landlord
shall have the right, exercisable at its sole discretion, to cancel this Lease
upon not less than ninety (90) days notice prior to the date of cancellation
designated in the notice. No
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money or other consideration shall be payable by Landlord to Tenant for the
right of cancellation and Tenant shall have no right to share in the
condemnation award or in any judgment for damages caused by such taking or
change in configuration. If Landlord elects to restore Landlord's Work following
a taking but fails to complete Landlord's Work within nine (9) months from the
date of the taking Tenant shall have the right to terminate this Lease upon
notice to Landlord given within thirty (30) days following the expiration of
such nine (9) month period. If the Premises are rendered untenantable by the
taking and the Lease is not terminated, Tenant shall be entitled to an abatement
of rent until the earliest of (i) the date the Premises are again rendered
tenantable; (ii) the date 90 days after Landlord's Work is substantially
complete; or (iii) the date on which Tenant occupies the Premises for the Use
permitted under Paragraph 1.
17. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not, without the prior written consent of Landlord (which
consent, except as provided in the next sentence, shall not be unreasonably
withheld) (i) assign, convey or mortgage this Lease or any interest hereunder;
(ii) permit to occur or exist any assignment of this Lease, or any lien upon
Tenant's interest, voluntarily or by operation of law; (iii) sublet the Premises
or any part thereof; or (iv) permit the use of the Premises by any parties other
than Tenant and its employees (all or any of the foregoing actions are sometimes
collectively referred to as a "sublease"). An sublease shall include, without
limitation, any transfer of Tenant's interest in this Lease by operation of law,
merger or consolidation of Tenant into any other firm or corporation, and the
transfer or sale of a controlling interest in Tenant, whether by sale of its
capital stock or otherwise. Tenant shall not offer to make, or enter into
negotiations with respect to, and in no case shall it be unreasonable for
Landlord to refuse consent to, a sublease to (i) a tenant in the Building or 75
Federal or entity owned by, whether directly or indirectly, a tenant in the
Building or 75 Federal; or (ii) any party with whom Landlord is then negotiating
with respect to other space in the or in 75 Federal; or (iii) any party which
would be of such type, character or condition as to be inappropriate, in
Landlord's judgment, as a tenant for a first class office and retail building;
or (iv) any party for a rental which is less than the rent for which Landlord is
then marketing comparable premises in the Building; or (v) any party which is
not at least equal in creditworthiness and business reputation to Tenant as of
the date hereof. Any such action on the part of Tenant shall be void and of no
effect. Landlord's consent to any sublease or Landlord's election to accept any
assignee, subtenant or transferee (collectively, "subtenant") as the tenant
hereunder and to collect rent from such subtenant shall not release Tenant or
any subsequent tenant from any covenant or obligation under this Lease.
Landlord's consent to any sublease shall not constitute a waiver of Landlord's
right to withhold its consent to any future sublease. If Tenant is a corporation
and if at any time during the Term the person or persons who own a majority of
its voting shares at the time of the execution of this Lease cease to own a
majority of such shares, Tenant shall so notify Landlord, and Landlord may
terminate this Lease by notice to Tenant given not later than ninety (90) days
thereafter. This provision shall not apply whenever Tenant is a corporation the
outstanding voting stock of which is listed on a recognized security exchange
(including NASDAQ). For the purposes of this provision, stock ownership shall be
determined in accordance with the principles set forth in Section 544 of the
Internal Revenue Code of 1954, as the same existed on August 16, 1954, and the
term "voting stock" shall refer to shares of stock regularly entitled to vote
for the election of directors of the corporation. Notwithstanding anything else
contained in this paragraph, Tenant shall, subject to the provisions of this
Page 18A, be entitled to sell its business at the Premises in a transaction
which has been approved by appropriate regulatory authorities to an entity which
will continue the use of Premises for the Use permitted in Paragraph 1. The
Trade Name of the Tenant pursuant to a Permitted Assignment shall be the name
approved by the appropriate regulatory authorities. If Tenant wishes at any time
to make a permitted Assignment, Tenant shall provide Landlord with a list of the
entities which Tenant is considering as potential assignees of a permitted
Assignment and Landlord shall, within 15 days, notify Tenant if any such entity
is unacceptable to Landlord. If Landlord does not respond to such list within
such time, all the entities so listed will be deemed to be acceptable to
Landlord. Tenant may, within 12 months following its notice to Landlord, make a
permitted Assignment to any entity so listed other than an entity which is
unacceptable to Landlord. Following a permitted Assignment, Tenant shall be
jointly and severally liable with the assignee pursuant to any permitted
Assignment for the performance of Tenant's obligations under this Lease.
B. If Tenant requests Landlord's consent to sublease all or any portion of
the Premises (other than a Permitted Assignment as described on Insert page
18A), in addition to withholding its consent, Landlord shall have the option,
exercisable by written notice to Tenant given within thirty (30) days after
receipt of such request, either to relieve Tenant of its rights and
responsibilities under
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this Lease with respect to the space Tenant proposes to sublease for the
proposed period of such sublease, or to terminate this Lease with respect to
such space. If Landlord exercises such right to relieve Tenant of its rights and
responsibilities or to terminate, Landlord shall be entitled to recover
possession of and Tenant shall surrender the whole or such portion of the
Premises on the later of (i) the proposed date for possession by such subtenant,
or (ii) ninety (90) days after the date of Landlord's notice of termination to
Tenant. In the event of such occurrence with respect to a portion of the
Premises, the portion surrendered shall be delivered to Landlord in good order
and condition and thereafter, to the extent necessary in Landlord's judgment,
Landlord, at its own cost and expense, may have access to and may make
modification to the Premises so as to make such portion a self-contained rental
unit with access to common areas, elevators and like. Base Rent and Tenant's
Proportionate Share shall be adjusted according to the extent of the Premises
for which the Lease is terminated or Tenant is relieved of its rights and
responsibilities. Without limitation of the rights of Landlord hereunder in
respect thereto, if there is any sublease of all or a portion of the Premises by
Tenant at a rent in excess of the subleased portion's pro rata share of the rent
payable hereunder by Tenant, then Tenant shall pay to Landlord, as additional
rent, forthwith upon Tenant's receipt of each installment of any such excess
rent, the full amount of any such excess rent. The provisions of this paragraph
shall apply to each and every sublease of all or a portion of the Premises,
whether to a subsidiary or controlling corporation or any other person, firm or
entity, in each case on the terms and conditions set forth herein. Each request
by Tenant for permission to sublease the whole or any part of the Premises shall
be accompanied by a warranty by Tenant as to the amount of rent to be paid to
Tenant by the proposed subtenant. For the purposes of this Paragraph 17B, the
term "rent" shall mean all Base Rent, Additional Rent or other payments and/or
consideration payable by one party to another related to the use and occupancy
of all or a portion of the Premises.
18. SURRENDER OF POSSESSION.
Upon the expiration of the Term or upon the termination of Tenant's right
of possession to all or a portion of the Premises, whether by lapse of time or
at the option of Landlord as herein provided, Tenant shall forthwith quietly and
peaceably surrender the Premises or portion thereof to Landlord in good order,
repair and condition, ordinary wear excepted, and shall, if Landlord so
requires, restore the Premises or portion thereof to the condition existing at
the beginning of the Term. Subject to the agreement between Landlord and Tenant
with respect to removal of Tenant's improvements described in Paragraph 10B, any
interest of Tenant in the alterations, improvement and additions to the Premises
made or paid for by Landlord or Tenant shall, without compensation to Tenant,
become, at Landlord's option, Landlord's property at the termination of this
Lease by lapse of time or otherwise and if such option is exercised such
alterations, improvements and additions shall be relinquished to Landlord in
good condition, ordinary wear excepted. If Landlord does not exercise such
option with respect to any such alteration, improvement or addition, Tenant's
restoration obligation referred to above shall be applicable. Within seven (7)
days prior to the termination of the Term or of Tenant's right of possession
Tenant shall remove furniture, trade fixtures, equipment and all other items of
Tenant's property on the premises. Tenant shall pay to Landlord upon demand the
cost of repairing any damage to the Premises and to the Building caused by any
removal required hereunder. If Tenant shall fail or refuse to remove any such
property from the Premises, Tenant shall be conclusively presumed to have
abandoned the same, and title thereto shall thereupon pass to Landlord without
any cost either by set-off, credit, allowance or
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otherwise, and Landlord may at its option accept the title to such property or,
at Tenant's expense, may (i) remove the same or any part in any manner that
Landlord shall choose, repairing any damage to the Premises caused by such
removal, and (ii) store, destroy or otherwise dispose of the same without
incurring liability to Tenant or any other person.
19. HOLDING OVER.
Tenant shall pay to Landlord an amount as Rent equal to 200% of one-twelfth
of the Base Rent and 150% of one-twelfth of the Additional Rent paid by Tenant
during the previous Calendar Year herein provided during each month or portion
thereof for which Tenant shall retain possession of the Premises or any part
thereof after the expiration of the Term or termination of Tenant's right of
possession, whether by lapse or time or otherwise, and also shall pay all
damages sustained by Landlord, whether direct or consequential, on account
thereof. At the option of Landlord, expressed in a written notice to Tenant and
not otherwise, such holding over shall constitute a renewal of this Lease for a
period of one year at Base Rent equal to twice the Base Rent paid by Tenant
during the previous Calendar Year and at the Additional Rent as would be
applicable for such year determined with the original Base year as the Base
Year. The provisions of this Paragraph 19 shall not be deemed to limit or
constitute a waiver of any other rights or remedies or Landlord provided herein
or at law.
20. ESTOPPEL CERTIFICATE.
Tenant agrees that, from time to time upon not less than ten days prior
request by Landlord, Landlord's ground lessor, if any, or any mortgagee, Tenant
or Tenant's duly authorized representative having knowledge of the following
facts will deliver to Landlord a statement in writing certifying (i) that this
Lease is unmodified and in full force and effect (or if there have been
modifications, a description of such modifications and that the Lease as
modified is in full force and effect); (ii) the dates to which Rent and other
charges have been paid; (iii) that Landlord is not, to the best of Tenant's
knowledge, in default under any provisions of this Lease, or, if in default, the
nature thereof in detail; (iv) that the Premises have been delivered to Tenant
by Landlord and accepted by Tenant; (v) that there are no proceedings pending
against Tenant which have been adversely decided and which affect Tenant's
performance of its obligations under this Lease or which, if adversely decided,
would affect Tenant's performance of its obligations under this Lease; (vi) that
Tenant has not made a claim against Landlord which has not been resolved or
satisfied; and (vii) such further matters, to the best of Tenant's knowledge, as
may be requested by Landlord or such ground lessor or mortgagee, it being
intended that any such statement may be relied upon by any prospective assignee
of Landlord, any mortgagee or prospective mortgagee of the Building, any
prospective assignee of any such mortgagee, or any prospective and/or subsequent
purchaser or transferee of all or a part of Landlord's interest in the Property
or the Building, or any other person having an interest therein. Tenant shall
execute and deliver whatever instruments may be required for such purposes, and
in the event Tenant fails so to do within ten (10) days after notice of such
request is deemed to have been given, Tenant shall be considered in default
under this Lease. Tenant acknowledges that the execution and delivery of such
certificates in connection with a financing or sale in a prompt manner
constitute requirements of Landlord's financing and/or property dispositions,
and Tenant shall indemnify Landlord against all damages
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(including consequential damages in the nature of increased costs or loss of any
such transactions, and including attorneys' fees) directly or indirectly
resulting from Tenant's failure to comply herewith.
21. SUBORDINATION.
This Lease and all rights of Tenant hereunder are subject and subordinate
to any mortgage or mortgages, blanket or otherwise, made by Landlord and which
do now or may hereafter affect the Property or the Building and to any and all
renewals, modifications, consolidations, replacements and extensions thereof,
and to any ground or other lease, or similar instrument now or hereafter placed
against the Property or the Building. It is the intention of the parties that
this provision be self-operative and that no further instrument shall be
required to affect such subordination of this Lease. Tenant shall, however, upon
demand at any time or times execute, acknowledge and deliver to Landlord without
expense to Landlord, any and all instruments that may be necessary or proper to
subordinate this Lease and all rights of Tenant hereunder to any such mortgage
or mortgages or to conform or evidence such subordination. Tenant covenants and
agrees, in the event any proceedings are brought for the foreclosure of any such
mortgage, to attorn, without any deductions or set-offs whatsoever, to the
purchaser upon any such foreclosure sale if so requested to do by such
purchaser, and to recognize such purchaser as the Landlord under this Lease.
Tenant agrees to execute and deliver at any time and from time to time, upon the
request of Landlord or of any holder of such mortgage or of such purchaser, any
instrument which, in the sole judgment of such requesting party, may be
necessary or appropriate in any such foreclosure proceeding or otherwise to
evidence such attornment. Tenant hereby irrevocably appoints Landlord and the
holder of such mortgage, or either of them, the attorney-in-fact of Tenant to
execute and deliver any such instrument for and on behalf of Tenant. Tenant
further waives the provisions of any statute or rule of law, now or hereafter in
effect, which may give or purport to give Tenant any right or election to
terminate or otherwise to adversely affect this Lease, or the obligations of
Tenant hereunder in the event any such foreclosure proceeding is brought,
prosecuted or completed. Tenant and Landlord further agree that if so requested
by any mortgagee of Landlord, this Lease shall be made superior to any such
mortgage or to such rights of any such mortgagee as such mortgagee shall in its
sole discretion elect, and that they will execute such documents as may be
required by such mortgagee to effect the superiority of this Lease to such
mortgage or to such rights. Landlord shall obtain on Tenant's behalf a non-
disturbance agreement from Landlord's current mortgagee of the Building and
shall request on Tenant's behalf non-disturbance agreements from Landlord's
current and future mortgagees of the Building
22. CERTAIN RIGHTS RESERVED BY LANDLORD.
Subject to the terms of Exhibit H, the Security Program, Landlord shall
have the following rights (but not obligations), each of which Landlord may
exercise without notice to Tenant and without liability to Tenant for damage or
injury to property, person or business on account of the exercise thereof, and
the exercise of any such rights shall not be deemed to constitute an eviction or
disturbance of Tenant's use or possession of the Premises and shall not give
rise to any claim for set-off or abatement or Rent or any other claim.
(i) To change the Building's name or street address.
(ii) To install, affix and maintain any and all signs on the exterior
and on the interior of the Building.
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(iii) To decorate or to make repairs, alterations, additions,
improvements, whether structural or otherwise, thereof, and for such
purposes to enter upon the Premises, and during the continuance of any of
said work, to temporarily close doors, entryways, public space and
corridors in the Building and to interrupt or temporarily suspend service
or use of facilities, all without affecting any of Tenant's obligations
hereunder, so long as the Premises are reasonably accessible and usable. It
is understood that any non-emergency maintenance to be performed by
Landlord shall occur in a fashion reasonably calculated to minimize
disruption to Tenant's use of the Premises during business hours, and if
any such non-emergency maintenance can reasonably be anticipated to cause
more than minimal disruption, such maintenance shall be performed during
non-business hours
(iv) To furnish door keys for the entry door(s) in the Premises at the
commencement of this Lease and to retain at all times, and to use in
appropriate instances, keys to all doors within and into the Premises.
Tenant agrees to purchase only from Landlord additional duplicate keys as
required, to change no locks, and not to affix locks on doors without the
prior written consent of Landlord. Notwithstanding the provisions for
Landlord's access to Premises, Tenant relieves and releases Landlord of all
responsibility arising out of theft, robbery, pilferage and personal
assault. Upon the expiration of the Term or of Tenant's right of
possession, Tenant shall return all keys to Landlord and shall disclose to
Landlord the combination of any safes, cabinets or vaults left in the
Premises.
(v) To designate and approve all window coverings used in the
Building.
(vi) To approve the weight, size and location of safes, vaults and
other heavy equipment and articles in and about the Premises and the
Building so as not to exceed the legal live load per square foot designated
by the structural engineers for the Building, and to require all such items
and furniture and similar items to be moved into or out of the Building and
Premises only at such times and in such manner as Landlord shall direct in
writing. Tenant shall not install or operate machinery or any mechanical
devices of a nature not directly related to Tenant's ordinary use of the
Premises without the prior written consent of Landlord. Movements of
Tenant's property into or out of the Building or the Premises and within
the Building are entirely at the risk and responsibility of Tenant, and
Landlord reserves the right to require permits before allowing any property
to be moved into or out of the Building or the Premises.
(vii) To establish security policies and other controls for the
purpose of regulating all property and packages, both Building and Premises
and all persons using the Building both during and after the Hours of
Operation.
(viii) To regulate delivery and service of supplies and the usage of
the loading (locks, receiving areas and freight elevators.
(ix) Upon reasonable notice and without unreasonable interference with
Bank operations, to show the Premises to prospective tenants at reasonable
times and, if vacated or abandoned, to show the Premises at any time, and
to prepare the Premises for re-occupancy,
(x) At Landlord's expense, to erect, use and maintain pipes, ducts,
wiring and conduits, and appurtenances thereto, in and through the Premise
at reasonable locations.
(xi) Upon reasonable notice and without unreasonable interference with
Bank operations, to enter the Premises at any reasonable time to inspect
the Premises.
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(xii) To grant to any person or to reserve unto itself the exclusive
right to conduct any business or render any service in the Building. If
Landlord elects to make available to tenants in the Building any services
or supplies, or arranges a master contract therefor, Tenant agrees to
obtain its requirements, if any, therefor from Landlord or under any such
contract provided that the charges therefor are reasonable.
23. RULES AND REGULATIONS.
Tenant agrees to observe the rules and regulations for the Building
attached hereto as Exhibit C and made a part hereof. Landlord shall have the
right from time to time to prescribe additional rules and regulations which, in
its judgment, may be desirable for the use, entry, operation and management of
the Premises, the Building and the Property, each of which rules and regulations
and any amendments thereto shall become a part of this Lease. Tenant shall
comply with all such rules and regulations; provided, however, that such rules
and regulations shall not contradict or abrogate any right or privilege herein
expressly granted to Tenant.
24. REMEDIES UPON DEFAULT.
If default shall be made in the payment of the Rent or any installment
thereof or in the payment of any other sum required to be paid by Tenant under
this Lease or under the terms of an other agreement between Landlord and Tenant
and such default shall continue for five (5) days after notice or if default
shall be made in the observance or performance of any of the other covenants or
conditions in this Lease which Tenant is required to observe and perform and
such default shall continue for twenty (20) days after written notice to Tenant,
or if more than three notices of default are given in any 12 month period, or if
a default involves a hazardous condition and is not cured by Tenant immediately
upon written notice to Tenant, or if the interest of Tenant in this Lease shall
be levied on under execution or other legal process, or if any voluntary
petition in bankruptcy or for corporate reorganization or any similar relief
shall be filed by Tenant or if any involuntary petition in bankruptcy shall be
filed against Tenant under any federal or state bankruptcy or insolvency act and
shall not have been dismissed within thirty days from the filing thereof, or if
a receiver shall be appointed for Tenant or any of the property of Tenant by any
court and such receiver shall not have been dismissed within thirty days from
the date of his appointment, or if Tenant shall make an assignment for the
benefit of creditors, or if Tenant shall admit in writing Tenant's inability to
meet Tenant's debts as they mature, or if Tenant shall abandon or vacate all or
any part of the Premises during the Term, then Landlord may treat the occurrence
of any one or more of the foregoing events as a breach of this Lease, and
thereupon at its option may, with or without notice or demand of any kind to
Tenant or any other person, have either of the following described remedies in
addition to all other rights and remedies provided at law or in equity or
elsewhere herein:
(i) Landlord may terminate this Lease and the Term created hereby by
mailing or delivering a notice of termination to Tenant in accordance with
Paragraph 34, in which event Landlord may forthwith repossess the Premises
and be entitled to recover forthwith, in addition to any other sums or
damages for which Tenant may be liable to Landlord, as damages a sum of
money equal to (a) the excess of the value of the Rent provided to be paid
by Tenant for the
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balance of the Term over the fair market rental value of the Premises, plus
(b) all amounts of reimbursement due under Paragraph 25. Should the fair
market rental value of the Premises for the balance of the Term exceed the
value of the Rent provided to be paid by Tenant for the balance of the
Term. Landlord shall have no obligation to pay to Tenant the excess or any
part thereof or to credit such excess or any part thereof against any other
sums or damages for which Tenant may be liable to Landlord.
(ii) Landlord may terminate this Lease and the Term created hereby by
mailing or delivering a notice of termination to Tenant in accordance with
Paragraph 34 in which event Tenant agrees to surrender possession and
vacate the Premises immediately and deliver possession thereof to Landlord,
and Tenant hereby grants to Landlord full and free license to enter into
and upon the Premises, in whole or in part, with or without process of law,
to repossess Landlord of the Premises or any part thereof and to expel or
remove Tenant and any other person, firm or corporation who may be
occupying or within the Premises or any part thereof and remove any and all
property therefrom without releasing Tenant in whole or in part from
Tenant's obligation to pay rent and perform the covenants, conditions and
agreements to be performed by Tenant as provided in this Lease without
being deemed in any manner guilty of trespass eviction or forceful entry or
detainer, and without relinquishing Landlord's right to rental or any other
right of Landlord under this Lease or by operation of law; Landlord may,
but shall be under no obligation to, relet the same for such rent and upon
such terms as shall be satisfactory to Landlord. For the purpose of such
reletting, Landlord is authorized to decorate, repair, remodel or alter the
Premises. If Landlord shall fail to relet the Premises, Tenant shall pay to
Landlord as damages a sum equal to the amount of the Rent reserved in this
Lease for the balance of the Term, plus all amounts of reimbursement due
under Paragraph 25. If the Premises are relet and a sufficient sum shall
not be realized from such reletting to satisfy the Rent provided for in
this Lease, plus all amounts of reimbursement due under Paragraph 25,
Tenant shall satisfy and pay the same upon demand therefor from time to
time. Tenant shall not be entitled to any rents received by Landlord in
excess of the Rent provided for in this Lease. Tenant agrees that Landlord
may file suit to recover any sums falling due under the terms of this
Paragraph 24 from time to time and that no suit or recovery of any portion
due Landlord hereunder shall be any defense to any subsequent action
brought for any amount not theretofore reduced to judgment in favor of
Landlord.
In lieu of any other damages or indemnity and in lieu of full recovery by
Landlord of all sums payable under all the foregoing provisions of this
Paragraph, Landlord may by notice to Tenant within two months after termination
under any of the provisions contained in this paragraph or otherwise for breach
of any obligation of Tenant and before such full recovery, elect to recover, and
Tenant shall thereupon pay, as liquidated damages, an amount equal to the lesser
of (i) the Rent provided for in this Lease for the balance of the term had it
not been terminated, or (ii) the Rent for the 12 months ended next prior to such
termination, plus, either case, the amount of Rent accrued and unpaid at the
time of termination and less the amount of any recovery by Landlord under the
foregoing provisions of this Paragraph up to the time of payment of such
liquidated damages (but not less any amounts of reimbursement under Paragraph
25).
Notwithstanding any other provisions contained in this Lease, in the event
the Tenant is closed or taken over by the banking authority of The Commonwealth
of Massachusetts, or other bank supervisory authority, the Landlord may
terminate the Lease only with the concurrence of such banking authority or other
bank supervisory authority, and any such authority shall in any event have the
election either to continue or to terminate the Lease: Provided, that in the
event this Lease is terminated, the maximum claim of Landlord for damages or
indemnity for injury resulting from the rejection or abandonment of the
unexpired term of the Lease shall in no event be in an amount exceeding the rent
reserved by the Lease, without acceleration, for the year next succeeding the
date of the surrender of the Premises to the Landlord, or the date of reentry of
the Landlord, whichever first occurs, whether before or after the closing of the
bank, plus an amount equal to the unpaid rent accrued, without acceleration up
to such date.
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25. REIMBURSEMENT OF LANDLORD'S EXPENSES.
Tenant shall upon demand reimburse Landlord for all Landlord's costs,
charges and expenses including the fees and out-of-pocket expenses of counsel,
agents and others retained by Landlord incurred in enforcing Tenant's
obligations hereunder or incurred by Landlord in any litigation, negotiation or
transaction in which Tenant causes Landlord without Landlord's fault to become
involved or concerned. Upon the occurrence of any event of default and the lapse
of any applicable grace or notice period, Tenant shall reimburse Landlord for
all free rent amounts, rent waivers and the like, all Landlord's costs of
improvements to the Premises, moving allowances, and allowances for other Tenant
expenses including costs such as design and engineering costs if any have been
agreed to by Landlord. If Landlord terminates this Lease for default, Tenant
shall also reimburse Landlord for all expenses arising out of such termination
including, without limitation, all costs incurred in collecting amounts due from
Tenant under this Lease; all expenses incurred by Landlord in attempting to
relet the Premises or parts thereof (including advertisements, brokerage
commissions, Tenant's allowances, costs of preparing space, and the like); and
all Landlord's other reasonable expenditures necessitated by the termination.
The reimbursements from Tenant herein shall be due and payable immediately from
time to time upon notice from Landlord that an expense has been incurred,
without regard to whether the expense was incurred before or after termination.
26. COVENANT OF QUIET ENJOYMENT.
Landlord covenants that Tenant, on paying the Rent, charges for services
and other payments herein reserved and on keeping, observing and performing all
the other terms, covenants, conditions, provisions and agreements herein
contained on the part of Tenant to be kept, observed and performed shall, during
the Term, peaceably and quietly have, hold and enjoy the Premises subject to the
terms, covenants, conditions, provisions and agreements hereof, without
hindrance or ejection by any persons lawfully claiming by, through or under
Landlord, the foregoing covenant of quiet enjoyment being in lieu of any other
covenant, expressed or implied.
27. ENERGY CONSERVATION.
Tenant agrees to cooperate with Landlord and to abide by all reasonable
Building regulations which Landlord may, from time to time, prescribe for the
proper functioning and protection of the heating and air-conditioning systems
and in order to maximize the effect thereof and to conserve heat and air-
conditioning. Notwithstanding anything to the contrary in this Lease, Landlord
may institute such policies, programs and measures as may be in Landlord's
judgment necessary to comply with applicable codes, rules, regulations or
standards.
28. REAL ESTATE BROKER.
The Tenant represents that Tenant has dealt with (and only with) the Broker
specified in Paragraph 1 hereof as broker in connection with this Lease, and
that insofar as Tenant knows, no other broker negotiated this Lease or is
entitled to any commission in connection therewith. Tenant agrees to indemnify.
defend and hold
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Landlord its employees and agents harmless from and against any claims made by
any broker or finder other than the Broker named above for a commission or fee
in connection with this Lease or any sublease hereunder, provided that Landlord
has not in fact retained such broker or finder, but nothing herein shall be
construed as permitting any such sublease. Landlord shall indemnify Tenant from
any claims made against Tenant by any broker or finder for a commission or fee
in connection with this Lease other than a broker with whom Tenant has dealt who
is not specified in Paragraph 1 hereof as Broker.
29. NONDISCRIMINATION.
In connection with hiring to fill permanent jobs at the Premises, Tenant
acknowledges its obligations under applicable law to avoid discrimination
against any employee or applicant for employment because of race, color,
religious creed, national origin, age or sex, including to the extent
applicable, with Title VII of the U.S. Civil Rights Act, M.G.L. c.151B and all
other applicable law, including, without limitation City of Boston requirements,
with respect to employment at the Premises.
30. NOTICE TO MORTGAGEE AND GROUND LESSOR.
After receiving notice from any person, firm or other entity that it holds
a mortgage which includes the Premises or the Building as part of the mortgaged
premises, or that it is the ground lessor under a ground lease with Landlord, as
ground lessee, which includes the Premises or the Building as part of the
demised premises, no notice from Tenant to Landlord shall be effective unless
and until a copy of the same is given to such holder or ground lessor, and the
curing of any of Landlord's defaults by such holder or ground lessor shall be
treated as performance by Landlord. Such holder or ground lessor shall be given
such reasonable time as may be necessary to effect such cure or to foreclose the
mortgage or terminate the ground lease, as the case may be. For the purposes of
Paragraph 2l, this Paragraph 30 or Paragraph 31, the term "mortgage" includes a
mortgage on a leasehold interest of Landlord (but not a mortgage on Tenant's
leasehold interest).
31. ASSIGNMENT OF RENTS.
With reference to any assignment by Landlord of Landlord's interest in this
Lease, or the rents payable hereunder, conditional in nature or otherwise, which
assignment is made to the holder of a mortgage or ground lease on property which
includes the Premises or the Building, Tenant agrees:
(i) that the execution thereof by Landlord, and the acceptance thereof
by the holder of such mortgage, or the ground lessor, shall never be
treated as an assumption by such holder or ground lessor of any of the
obligations of Landlord hereunder, unless such holder, or ground lessor,
shall, by notice sent to Tenant, specifically otherwise elect; and
(ii) that, except as aforesaid, such holder or ground lessor shall be
treated as having assumed Landlord's obligations hereunder only upon a
foreclosure of such holder's mortgage and the taking of possession of the
Premises, or in the case of a ground lessor, the assumption of Landlord's
position hereunder by such ground lessor. In no event shall the acquisition
of title to the Building and the land on which the same is located by a
purchaser which, simultaneously therewith, leases the entire Building or
such land back to the seller thereof be treated as an assumption, by
operation of law or otherwise, of Landlord's obligations hereunder, but
Tenant shall look solely to such seller-lessee, and its successors from
time to time in title, for
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performance of Landlord's obligations hereunder. In any such event, this
Lease shall be subject and subordinate to the lease to such seller. For all
purposes, such seller-lessee, and its successors in title, shall be the
landlord hereunder unless and until Landlord's position shall have been
assumed by such purchaser-lessor.
32. PERSONAL PROPERTY TAXES.
Tenant shall pay all taxes which may be lawfully charged, assessed, or
imposed upon all fixtures and equipment of every type and also upon all personal
property in the Premises, and Tenant shall pay all license fees which may
lawfully be imposed upon the business of Tenant conducted upon the Premises.
33. MISCELLANEOUS.
A. Rights Cumulative. All rights and remedies of Landlord and Tenant under
this Lease shall be cumulative and none shall exclude any other rights and
remedies allowed by law.
B. Interest. All payments becoming due under this Lease and remaining
unpaid when due shall bear interest until paid at the rate of the greater of
three percent (3%) per annum above the prime rate of interest charged from time
to time by The First National Bank of Boston (but in no event at a rate which is
more than the highest rate which is at the time lawful in The Commonwealth of
Massachusetts).
C. Terms. The necessary grammatical changes required to make the provisions
hereof apply either to corporations or partnerships or other entities, or
individuals, men or women, as the case may require, shall in all cases be
assumed as though in each case fully expressed.
D. Binding Effect. Each of the provisions of this Lease shall extend to and
shall, as the case may required, bind or inure to the benefit not only of
Landlord and of Tenant, but also of their respective successors or assigns,
provided this clause shall not permit any assignment by Tenant contrary to the
provisions of Paragraph 17 hereof.
E. Lease Contains All Terms. All of the representations and obligations of
Landlord are contained herein and in the Exhibits attached hereto, and no
modification, waiver or amendment of this Lease or of any of its conditions or
provisions shall be binding upon Landlord unless in writing signed by Landlord
or by a duly authorized agent of Landlord empowered by a written authority
signed by Landlord.
F. Delivery for Examination. Submission of this Lease for examination shall
not bind Landlord in any manner, and no lease or obligations of Landlord shall
arise until this instrument is signed by both Landlord and Tenant and delivery
is made to each.
G. No Air Rights. No rights to any view or to light or air over any
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease.
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H. Modification of Lease. If any lender requires, as a condition to its
lending funds the repayment of which is to be secured by a mortgage or trust
deed on the Premises and Building or either, that certain modifications be made
to this Lease, which modifications will not require Tenant to pay any additional
amounts or otherwise change materially the rights or obligations of Tenant
hereunder. Tenant shall, upon Landlord's request, execute appropriate
instruments effecting such modifications.
J. Transfer of Landlord's Interest. Tenant acknowledges that Landlord has
the right to transfer its interest in the Premises, the Building and the
Property and in this Lease, and Tenant agrees that in the event of any such
transfer Landlord shall automatically be released from all liability under this
Lease and Tenant agrees to look solely to such transferee for the performance of
Landlord's obligations hereunder. Tenant further acknowledges that Landlord may
assign its interest in this Lease to a mortgage lender as additional security
and agrees that such an assignment shall not release Landlord from its
obligations hereunder and that Tenant shall continue to look to Landlord for the
performance of its obligations hereunder.
K. Landlord's Title. Landlord's title is and always shall be paramount to
the title of Tenant. Nothing herein contained shall empower Tenant to commit or
engage in any act which can, shall or may encumber the title of Landlord.
L. Prohibition Against Recording. Neither this Lease, nor any memorandum,
affidavit or other writing with respect thereto, shall be recorded by Tenant or
by anyone acting through, under or on behalf of Tenant, and the recording
thereof in violation of this provision shall make this Lease null and void at
Landlord's election.
M. Captions. The captions of paragraphs and subparagraphs are for
convenience only and shall not be deemed to limit, construe, affect or alter the
meaning of such paragraphs or subparagraphs.
N. Covenants and Conditions. All of the covenants of Tenant hereunder shall
be deemed and construed to be "conditions", if Landlord so elects, as well as
"covenants" as though the words specifically expressing or importing covenants
and conditions were used in each separate instance.
0. Only Landlord/Tenant Relationship. Nothing contained in this Lease shall
be deemed or construed by the parties hereto or by any third party to create the
relationship of principal and agent, partnership, joint venturer or any
association between Landlord and Tenant, it being expressly understood and
agreed that neither the method of computation of Rent nor any act of the parties
hereto shall be deemed to create any relationship between Landlord and Tenant
other than the relationship of landlord and tenant.
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<PAGE>
P. Decoration and Signs. Tenant will not paint or decorate any part of the
exterior of the Premises. Tenant will not paint or decorate any part of the
interior of the Premises visible from the exterior thereof, without first
obtaining Landlord's approval of Tenant's plans therefor. Tenant will install
and maintain at all times, subject to the other provisions of this Lease.
displays of merchandise in the show windows (if any) of the Premises. All
articles, and arrangement, style, color and general appearance thereof in the
interior of the Premises including, without limitation, window displays,
advertising matter, signs, merchandise and store fixtures, shall be in keeping
with the character and standards of the improvements within the Retail Space as
determined by Landlord. Landlord reserves the right to require Tenant to correct
any non-conformity. Tenant will not place or suffer to be placed or maintained
on the exterior of the Premises any sign, advertising matter or any other thing
of any kind, and will not place or maintain any decoration, letter or
advertising matter on the glass of any window or door of the Premises unless the
same is placed and maintained pursuant to Landlord's prior consent. Tenant will,
at its sole cost and expense, maintain such sign, decoration, lettering,
advertising matter or other thing as may be permitted hereunder in good
condition and repair at all times. All sign, logo and window illuminations shall
he controlled by a time clock. Tenant shall comply with time settings
established from time to time by Landlord.
Q. Definition of Landlord. All indemnities, covenants and agreements of
Tenant contained herein which inure to the benefit of Landlord shall be
construed to also inure to the benefit of Landlord's agents and employees.
R. Time of Essence. Time is of the essence of this Lease and each of its
provisions.
S. Governing Law. Interpretation of, this Lease shall be governed by the
law of the Commonwealth of Massachusetts.
T. Partial Invalidity. If any term, provision or condition contained in
this Lease shall, to any extent, be invalid or unenforceable, the remainder of
this Lease (or the application of such term, provision or condition to persons
or circumstances other than those in respect of which it is invalid or
unenforceable) shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.
U. Size of Premises. The size of Premises will be determined on the basis
of the standards set forth in Exhibit E attached hereto. With regard to Base
Rent, Operating Expenses, and with regard to all other payments which are
computed based upon the "Total Rentable Area" of the Premises (as defined in
Exhibit E), it is understood that the amounts payable as set forth in this Lease
are predicated upon assumed rentable area set forth in this Lease. Not later
than ninety days after the Commencement Date, an exact measurement of the Total
Rentable Area of the Premises shall be made in accordance with Exhibit E, and if
said measurement shall indicate a Total Rentable Area different from that
recited in this Lease, Landlord and Tenant shall promptly execute a supplemental
instrument adjusting the amounts payable hereunder to conform to the exact
measurements. Such adjustments shall be made by multiplying the amount subject
to adjustment by a fraction the numerator of which is the actual Total Rentable
Area of the Premises and the denominator of which is the
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<PAGE>
rentable area of the Premises originally set forth herein. Any payment due from
either party to the other as a result of any adjustments made hereunder shall be
paid promptly upon rendition of a statement by the party entitled to additional
Rent, or Rent refund, as the case may be.
34. NOTICES.
All notices to be given under this Lease shall be in writing and delivered
by hand during business hours or deposited in the United States mail, certified
return receipt requested, postage prepaid, addressed as follows
A. If to Landlord:
Franklin Federal Partners
75 Federal Street
Boston, MA 02110
with copies to:
75 Federal Street Associates
c/o H.N. Gorin Associates, Inc.
75 Federal Street
Boston, MA 02110
Boston HS Associates
c/o Himmel/MKDG
75 Federal Street
Boston, MA 02110
or to such other person or such other address designated by notice sent by
Landlord or Tenant.
B. If to Tenant:
Addressed to Tenant at Tenant's present address, and after occupancy of the
Premises by Tenant, at the Premises, or to such other address as is designated
by Tenant in a notice to Landlord.
Notice shall be deemed to have been given when so delivered or when so
deposited in the United States mail.
35. LIMITATION ON LANDLORD'S LIABILITY.
It is expressly understood and agreed by Tenant that none of Landlord's
covenants, undertakings or agreements are made or intended as personal
covenants, undertakings or agreements by Landlord or its partners or any
partners of its partners, and any liability for damage or breach of
nonperformance by Landlord shall be collectible only out of Landlord's interest
in the Building and no personal liability is assumed by, nor at any time may be
asserted against, landlord or its partners of any of its or their partners,
officers, agents, employees, legal
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<PAGE>
representatives, successors or assigns, all such liability, if any, being
expressly waived and released by Tenant. The provisions of this Paragraph 35
shall expressly be applicable to and inure to the benefit of Landlord's
successors and assigns.
36. LANDLORD'S DESIGNATED AGENT.
It is expressly understood and agreed by Tenant that the provisions of this
Lease may be enforced on behalf of Landlord by an agent designated by Landlord
for such purpose, and such enforcement shall be equally effective whether in the
name of Landlord or such agent.
37. COMMENCEMENT AND TERMINATION DATES.
If Landlord shall not have substantially completed Landlord's Work (which
shall be the Work shown on Exhibit D) by five (5) days prior to the Commencement
Date ("Landlord's Completion Date") then, as Tenant's sole remedy and,
notwithstanding Paragraph 3 of this Lease, the Commencement Date shall be
deferred for the number of days after Landlord's Completion Date required for
Landlord to substantially complete Landlord's Work; and the Termination Date
shall be extended by the number of days by which the Commencement Date was so
deferred; provided, however, the Commencement Date shall not be deferred.
38. CONSTRUCTION ON ADJACENT PREMISES.
Landlord shall have the right, in connection with any development of
premises adjacent to the Property, to grant easements through the Building for
access and egress to and from such development and for the installation,
maintenance, repair, replacement or relocation of utilities serving such
development and/or the Premises and for the installation, removal, maintenance,
repair and replacement of windows, walkways and other facilities related to such
development. Such right shall include the right to grant such easements through
the Premises, provided that installations, replacements or relocations of
utilities in the Premises shall, as far as practicable, be placed above ceiling
surfaces, below floor surfaces or within perimeter walls. This Lease shall be
subject and subordinate to any easements so granted. (Such subordination shall
be self-operative but in confirmation thereof Tenant shall execute and deliver
whatever instruments may be required to acknowledge such subordination in
recordable form, and if Tenant fails to do so within 10 days after demand,
Tenant hereby irrevocably appoints Landlord as its attorney-in-fact and to do so
in Tenant's name.)
Landlord and its agents, employees, licensees and contractors shall also
have the right during any construction period for any such development to enter
the Premises to undertake work pursuant to any easement granted pursuant to the
above paragraph; to shore up the foundations and/or walls of the Premises and
Building; to erect scaffolding and protective barricades around the Premises or
in other locations within or adjacent to the Building; and to do any other act
necessary for the safety of the Premises or Building or the expeditious
completion of such construction. Landlord shall also have the right to enter the
Premises for the purpose of sealing and covering any and all windows adjacent or
contiguous to such development. The covering of such sealed windows shall be
finished, at Landlord's expense, in substantially the same style and quality as
the remainder of the Premises. Landlord shall not be liable to Tenant for any
compensation or reduction of rent by reason of inconvenience or annoyance or for
loss of business resulting
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from any act by Landlord pursuant to this Paragraph Landlord shall use
reasonable efforts to minimize the extent and duration of any inconvenience,
annoyance or disturbance to Tenant resulting from any work pursuant to this
Paragraph in or about the Premises or Building, consistent with accepted
construction practice. If any act by Landlord pursuant to this Paragraph results
in a reduction in the rentable floor area of the Premises, Tenant shall be
entitled to a proportional abatement of Base Rent and Additional Rent while such
reduction continues.
39. TENANT AS BUSINESS ENTITY.
If Tenant is a business entity, then the person or persons executing this
Lease on behalf of Tenant jointly and severally warrant and represent in their
individual capacities that (a) Tenant is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which such entity was
organized; (b) Tenant has the authority to own its property and to carry on its
business as contemplated under this Lease; (c) Tenant is in compliance with all
laws and orders of public authorities applicable to Tenant; (d) Tenant has duly
executed and delivered this Lease; (e) the execution, delivery and performance
by Tenant of this Lease (i) are within the powers of Tenant, (ii) have been duly
authorized by all requisite action, (iii) will not violate any provision of law
or any order of any court or agency of government, or any agreement or other
instrument to which Tenant is a party or by which it or any of its property is
bound, or (iv) will not result in the imposition of any lien or charge on any of
Tenant's property, except by the provisions of this Lease; and (f) the Lease is
a valid and binding obligation of Tenant in accordance with its terms. Tenant,
if a business entity, agrees that breach of the foregoing warranty and
representation shall at Landlord's election be a default under this Lease for
which there shall be no cure. This warranty and representation shall survive the
termination of the Term.
LANDLORD:
FRANKLIN FEDERAL PARTNERS
By: 75 FEDERAL STREET ASSOCIATES
By: /s/[ILLEGIBLE SIGNATURE]
-------------------------
General Partner
By: BOSTON HS ASSOCIATES,
Partner
By: /s/[ILLEGIBLE SIGNATURE]
-------------------------
Authorized Representative
TENANT:
The Hibernia Savings Bank
By: /s/[ILLEGIBLE SIGNATURE]
-------------------------
its _____________________
hereunto duly authorized
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<PAGE>
EXHIBIT A
PLAN OF PREMISES
[Floor Plan]
A-1
<PAGE>
EXHIBIT B
TO
RETAIL LEASE
FOR
75-101 FEDERAL STREET
BOSTON, MASSACHUSETTS
WORK LETTER
This is the Work Letter referred to and specifically made a part of the
Lease to which this Exhibit B is attached, covering Premises, as more
particularly described in said Lease, in the Building at 75-101 Federal Street,
Boston, Massachusetts.
A. Finish Work
"Finish Work" means all work required to be performed in the Premises in
order that the same be suitable for Tenant's use and occupancy throughout
and shall comprise all alterations, additions, equipment and fixtures to be
performed, constructed and installed in the Premises. Finish Work shall
include (without limitation) partitions; hung ceilings; floor coverings;
heating, ventilating and air conditioning systems; and electrical systems
and other utilities, wiring and trade fixtures. Tenant's Plans shall
require use of materials of good quality, and all construction shall be in
compliance with applicable laws, ordinances, orders and regulations of
governmental authorities.
B. Space Layout
1. On or before January 5, 1989 (the "Space Layout Delivery Date"),
Tenant agrees to deliver to Landlord one (1) set of sepia
reproducibles and two (2) sets of blue-lined prints of Tenant-approved
Space Layout (hereinafter referred to as the "Space Layout") of the
Premises sufficiently complete to permit preparation of structural.
plumbing, fire protection, mechanical and electrical engineering
drawings for the Premises. The Space Layout shall specifically
include, without limitation:
a) Partition layout and door locations,
b) Electrical outlet locations and anticipated usage thereof.
c) Tenant's telephone system indicating location of outlets,
d) Reflected ceiling plan, including lighting. switching and all
other items necessary for engineering design.
e) Tenant's anticipated occupancy loads for any area in which such
occupancy load is expected to be in excess of building standard,
special heating. ventilation and air conditioning equipment
(including duct locations) and any other equipment or systems
(with brand names wherever possible) which require structural,
mechanical, fire protection. electrical, or life safety
modifications to the Building,
B-1
<PAGE>
f) Interior section elevations, and
g) Schedule of materials and finishes.
2. Within five (5) business days of Landlord's receipt of Tenant's Space
Layout , Landlord shall review the same for compliance with the
intended space usage requirements of the Premises consistent with the
Lease, and return to Tenant one (1) sepia set of the same marked
"Approved," Approved as Noted," or "Disapproved as Noted. Revise and
Resubmit." If the Space Layout is returned to Tenant marked
"Disapproved as Noted, Revise and Resubmit," is shall be revised by
Tenant taking into account the reasons for Landlord's disapproval and
resubmitted within five (5) business days to Landlord for review. The
same procedure shall be repeated until Landlord fully approves the
Space Layout.
3. Landlord's approval of the Space Layout shall not imply (i) approval
by Landlord as to compliance of the Space Layout with the requirements
of applicable codes, rules or regulations of any governmental agencies
having jurisdiction over the Premises or (ii) the Space Layout's
compatibility with the Building's shell and core construction. Tenant
understands that the obtaining of all permits to comply with all
applicable codes, rules and regulations and the compatibility of the
Space Layout with the Building's shell and core construction is
Tenant's responsibility.
C. Working Drawings
1. On or before February 1 , 1939 (the "Working Drawing Delivery Date")
Tenant agrees to deliver to Landlord one (1) set of sepia
reproducibles and three (3) sets of blue-lined prints of Working
Drawings and Specifications (hereinafter referred to collectively as
"Working Drawings") for the Premises prepared, at Tenant's sole cost
and expense, by an architect ("Tenant's Architect") licensed in The
Commonwealth of Massachusetts and approved by Landlord. Tenant's
Architect shall retain Landlord's engineers (or engineers approved by
Landlord) to prepare all structural. plumbing, fire protection,
mechanical and electrical engineering aspects of the Working Drawings.
2. Within five (5) business days after receipt of Tenant's Working
Drawings, Landlord shall return to Tenant one (1) sepia set of same
marked "Approved," "Approved as Noted," or "Disapproved as Noted.
Revise and Resubmit." If said Working Drawings are returned to Tenant
marked "Disapproved as Noted, Revise and Resubmit" such drawings shall
be revised by Tenant and resubmitted to Landlord for approval within
five (5) business days and the same procedure shall be repeated until
Landlord fully approves the Working Drawings.
3. It is understood that the Working Drawings are to be consistent with
and a logical extension of the approved Space Layout. Any
inconsistencies between the Working Drawings and the shell and core
construction of the Building shall be Tenant's sole responsibility.
Tenant shall also be solely responsible for the completeness of the
Working Drawings.
B-2
<PAGE>
4. In the event Landlord approves the Working Drawings, such approval
shall not limit Landlord's right to require changes in portions of the
Working Drawings which are incompatible with or which adversely affect
Building structure or systems or the availability to Landlord of third
party warranties. When the Working Drawings are approved by Landlord
and Tenant, they shall be acknowledged as such by Landlord's and
Tenant's signing each sheet of the Working Drawings.
D. Construction of Premises
1. Tenant shall arrange with its own general contractor to perform the
work shown on the approved Working Drawings. The identity of Tenant's
contractor (who shall be licensed to build in the City of Boston)
shall be subject to Landlord's prior approval (approval not to be
unreasonably withheld or delayed) and if in Landlord's reasonable
judgment the scope or nature of Tenant's Finish Work requires
particular care, Landlord may designate the contractor (or Landlord's
employees) to perform such work. Tenant shall procure all necessary
governmental approvals before undertaking any work, shall perform all
work at its risk in a good and workmanlike manner in accordance with
Tenant's approved Plans employing new materials of good quality and
producing a result at least equal in quality to the other parts of the
Building. Finish Work shall be substantially completed prior to the
Opening Date, and shall be completed in all respects within a
reasonable time thereafter. Finish Work shall be performed by union
labor which is in harmony with other labor in the Building and which
does not interfere with such labor. The performance of Finish Work
shall be coordinated with all reasonable regulations of Landlord with
respect to the performance of other work in the Building and the
requirements of other occupants thereof.
2. When any Tenant's Finish Work is in progress, Tenant shall maintain
worker's compensation insurance required by law covering all persons
employed in such Finish Work and such other insurance as may be
required by Landlord covering the additional hazards due to such
Finish Work, in each case for the benefit of Landlord and such
additional parties as Landlord shall require. It shall be a condition
of Landlord's approval of any plans for Tenant's Finish Work that
certificates of such insurance shall have been deposited with
Landlord. Prior to performing any work in the Building. Tenant shall
obtain and file a statutory lien bond protecting the Building and all
ownership interests therein against the imposition of liens by
contractors. subcontractors, material suppliers and laborers.
3. Tenant shall cause its employees, agents, contractors, subcontractors,
material suppliers and laborers to observe and perform all of Tenant's
obligations under this Lease excepting only the obligations to pay
Base Rent and additional rent and other charges and excepting further
other obligations the performance of which would be clearly
incompatible with construction and the installation of furnishings,
fixtures pursuant hereto.
B-3
<PAGE>
E. Changes to the Work
Changes to approved Finish Work may be made only after Landlord's approval
of a written request therefor by Tenant. Landlord may, in its discretion,
disapprove any proposed change which may delay the completion of Finish
Work or would be inconsistent with the approved Working Drawings or with
the standards for Finish Work contained in this Exhibit B.
F. Performance of Other Work
Tenant agrees that all services and work performed on the Premises,
including installation of telephone and carpeting, and delivery of
materials and personal property to the Premises on behalf of or for the
account of Tenant shall be performed or delivered, as the case may be, only
by persons whose employment for such tasks shall not result in any work
stoppage or slow-down by union members working the Building.
G. Tenant's Representative
Tenant hereby designates Mark A. Osborne as its sole representative with
respect to the matters set forth in this Work Letter and such person shall
have full authority and responsibility to act on behalf of Tenant as
required herein. Tenant's Architect shall not be an authorized
representative of Tenant unless Tenant specifically advises Landlord in
writing of such designation.
Landlord:
FRANKLIN FEDERAL PARTNERS
By: 75 FEDERAL STREET ASSOCIATES,
Partner
By: [ILLEGIBLE]
-------------------------
General Partner
Agreed and Accepted
Tenant: By: BOSTON HS ASSOCIATES,
THE HIBERNIA SAVINGS BANK Partner
By: [ILLEGIBLE] By: [ILLEGIBLE]
---------------------- -----------------------
Its President Authorized Representative
hereunto duly authorized
B-4
<PAGE>
EXHIBIT C TO RETAIL LEASE
RULES AND REGULATIONS
RULES AND REGULATIONS. Tenant agrees to observe the rights reserved to
Landlord in the Lease and agrees, for itself, its employees, agents, clients.
customers, invitees and guests, to comply with the following rules and
regulations and with such reasonable modifications thereof and additions thereto
as Landlord may make, from time to time, for the Building.
(a) Tenant shall always conduct its operations in the Premises under its
present trade name, unless Landlord shall otherwise consent in
writing, which consent shall not be unreasonably withheld.
(b) No auction, fire or bankruptcy sales may be conducted within the
Premises without the previous written consent of Landlord.
(c) Tenant shall not use the sidewalks adjacent to the Premises or the
recessed vestibules, if any, of the Premises or the entrance lobby or
hallways of the Building for business purposes (including, without
limitation, the distribution of handbills or advertising of any type)
without the previous written consent of Landlord.
(d) Tenant shall keep the windows of the Premises clean and shall keep the
same electrically lighted during such reasonable periods of time as a
majority of the retail or service tenants of the Building shall be
open and, in addition, during such other reasonable periods of time as
shall be determined by Landlord, provided windows of a majority of the
Retail Space are kept lighted during such additional periods.
(e) Tenant shall receive and deliver goods and merchandise only in the
manner, at such times, and in such areas, as may be reasonably
designated by Landlord; and all trash, refuse, and the like, shall be
either (1) kept in covered cans, which cans shall be kept within the
Premises at all times, and in no event stored outside of the same or
(2) deposited in a trash compactor from time to time designated by
Landlord for such purposes. Any wet refuse shall be kept in cold
storage within the Premises. If provision is made by Landlord for
trash removal by a contractor, Tenant agrees to use said contractor
for its trash removal and to pay when due all charges at the rate
established therefor from time to time, provided such rate is
competitive within the area for similar services. If Tenant fails so
to pay for trash removal, Landlord shall have the same remedies (even
if such payment is due to such contractor and not to Landlord) as
Landlord has for non-payment of rent hereunder.
(f) Except to the extent otherwise expressly permitted herein, Tenant
shall not place on the exterior of the Premises (including, but
without limitation, windows, doors, and entrance lobbies) any signs
whatsoever; and shall not place in the interior of the Premises any
signs other than those signs (including the design, number and
location of such signs and any replacements thereof) which shall first
have been approved by Landlord. The signs desired by Tenant shall be
indicated in Tenant's plans and
C-l
<PAGE>
specifications to be submitted to Landlord for approval: all signs
must be professionally prepared.
(g) Tenant shall not perform any act or carry on any practice which may
injure the Premises or any other part of the Building, or cause any
offensive odors or loud noise (including, but without limitation, the
use of loudspeakers), or constitute a nuisance or menace to any other
occupant or other persons in the Building, and in no event shall any
noises or offensive odors be emitted from the Premises.
(h) The Premises (as well as all doors and entryways thereto) shall be
kept open for business during the Hours of Operation.
(i) Tenant shall at all times fully and adequately heat and/or
air-condition (as the circumstances require) the Premises. In no event
shall Tenant in any manner "bleed" (that is to say tap into or draw
from) the heating or air-conditioning provided for the Building.
(j) Tenant agrees that it and its employees and others connected with
Tenant's operations at the Premises will abide by all reasonable rules
and regulations from time to time established by Landlord by written
notice to Tenant with respect to the Building. Landlord agrees that
all such rules and regulations will be enforced in a
non-discriminatory manner, except where differing circumstances
reasonably justify differing treatment.
(k) Tenant shall at all times provide handicapped access to and through
the Premises in accordance with all applicable laws of The
Commonwealth of Massachusetts and ordinances of the City of Boston,
and in accordance with all directions, rules and regulations of the
Building Inspector and other proper officers of the governmental
agencies having jurisdiction thereover. Landlord represents that there
is handicapped access to the Building through the Devonshire, Franklin
and Federal street entrances.
(l) The Tenant shall conduct Tenant's business in the Premises in such a
manner that Tenant's customers and invitees shall not collect, line-up
or linger outside of the Premises.
(m) Tenant shall not use, handle or store hazardous materials or hazardous
wastes in the Premises.
(n) Tenant shall be solely responsible for all costs and expenses of
security systems and/or personnel used in connection with the conduct
of Tenant's business in the Premises.
C-2
<PAGE>
EXHIBIT D
BASE BUILDING CORE AND SHELL - RETAIL
75-101 FEDERAL STREET
ARCHITECTURAL
A. Demising Walls: Demising walls between adjacent retail tenants are to be
constructed of drywall and metal studs taped, sanded, ready to receive
finish by Tenant. Cost of constructing the demising wall is to be shared
equally by the Tenant and Landlord.
B. Flooring: Reinforced concrete. exposed construction.
C. Storefront: Storefront is No. 4 Stainless Steel with one pane of glass and
aluminum doors. Details of construction are as delineated on the core and
shell lobby documents produced by Kohn Pedersen Fox.
MECHANICAL
A. Sprinklers: Base building sprinkler system with provisions for
approximately one sprinkler head per 225 gross square feet.
B. HVAC: Condenser water provided to tenant demising wall.
C. Electricity: 480 Volt power is available to the Tenant in the basement
electrical vault.
D. Telephone: Tenant is to provide its own system for telephone.
All items herein shall be provided at Landlord's sole cost and expense
except to the extent provided otherwise. All items not treated herein to be
provided at Tenant's sole cost and expense in accordance with the Work Letter,
Exhibit B.
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<PAGE>
EXHIBIT E
MEASUREMENT STANDARDS
I. RETAIL
Total Rentable Area with respect to any premises included in Rental Space shall
be the number of square feet of floor area calculated from the center line of
exterior wall column lines and from the inside surface of interior walls.
II. OFFICE
Office Measurement Standards - Single Tenancy Floors. Three steps, in sequence,
are to be followed to determine the Total Rentable Area: (i) compute gross area,
(ii) deduct certain areas, (iii) add applicable share of areas to be apportioned
(see paragraph C. below):
A. Cross Area: The gross area of a floor shall be the entire area within
the exterior walls. If the exterior wall consists in whole or part of
windows, fixed clear glass or other transparent material, the
measurement along the entire such wall shall be taken to a line
established by the vertical plane of the inside of the glass or other
transparent material. If it consists solely of a nontransparent
material, the measurement shall be taken to the inside surface of the
outer building wall. If a floor has no exterior wall within the
property line, measurements shall be taken to the property line. If a
floor has no full-height enclosing wall, measurements shall be taken
to the edge of the floor slab.
B. Deductions from Gross Area: The following non-rentable building areas
with one-half of their enclosing walls are to be deducted:
1. Public elevator shafts and associated elevator machine rooms.
2. Required egress stairways.
3. Areas within the gross area which are to be apportioned pursuant
to paragraph C below.
C. Areas to be apportioned ("Attributable Area"):
1. Common facilities including without limitation, all heating,
ventilating, air conditioning, mechanical, electrical, cooling
tower, telephone and other service floors, rooms or areas,
containing equipment or supplies (exclusive or any tenant special
air conditioning or mechanical area or facilities) and all public
lobbies (including monumental stair and/or escalator), loading
and other common service areas, throughout and within the
Building including one-half of their enclosing walls, are to be
apportioned.
2. Whenever the height of any room or space used for a heating,
ventilating, air conditioning, mechanical, or electrical facility
above the ground floor shall exceed the average story height in
the
E-1
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EXHIBIT G
SIGN CRITERIA - RETAIL
101 FEDERAL STREET
All signs erected on or in the Building by Tenant (except as provided
herein) shall meet the following criteria:
A. General Regulation:
1. Codes, Ordinances and Approvals: The Tenant shall comply with the
requirements of all applicable codes and/or governmental ordinances and, prior
to erection of any sign, shall obtain all required governmental approvals. Sign
construction is to be performed in compliance with the instructions; limitations
and criteria established by the City of Boston and the Landlord's architect.
2. No neon or backup signs will be permitted.
3. Signs shall be of a quality, material, and design which is consistent
with the building and building standard signage.
4. Notwithstanding any of the above, all signage shall be professionally
designed and presented for Landlord's approval. All premises signs shall be
presented together as one package.
G-1
<PAGE>
EXHIBIT H
Security Program
At times when the Premises are open for access by the public during
Tenant's Hours of Operation from time to time, Landlord's access to the Premises
shall be governed by the general provisions of the Lease. At other times,
Landlord's access to the Premises shall be governed by the provisions of this
Exhibit H.
Repairs, Service and Maintenance: Repairs, service and maintenance by
Landlord requiring access to the Premises shall be scheduled by Landlord with at
least one business days' notice to Tenant (which may be oral or written) and
Tenant shall make the premises available for such purpose and shall be entitled,
at its expense, to have a representative present during the performance of any
such repairs, service and maintenance.
Tenant's Security Representative: Tenant's Authorized Representative shall,
by notice to Landlord, designate a "Security Representative" and provide
Landlord with the telephone number for such Security Representative. The
Tenant's Security Representative ;shall be reachable by telephone in Boston and
available to come to the premises at all times when the premises is not occupied
by Tenant.
Emergency: In case of emergency, Landlord may enter the Premises at any
time when the premises is occupied by Tenant, but shall only enter the Premises
when the Premises is not occupied by Tenant after telephoning Tenant's Security
Representative and only when accompanied by Tenant's Security Representative
unless Tenant's Security Representative shall fail to answer Landlord's call or
to respond within a reasonable time under the circumstances, in which case,
Landlord may enter the Premises without accompaniment by a representative of
Tenant's security service. Nothing in this provision shall prohibit or make
Landlord liable for any action of any government personnel including, without
limitation, personnel from the police Department or Fire Department or for
actions taken by Landlord at the direction of any such personnel.
Security and Alarm Systems: Tenant shall be entitled to install its own
electronic security and alarm systems in and for the Premises, provided that
such systems shall be installed in accordance with approved Plans for Finish
Work and shall be compatible with the Building electronic security and alarm
systems. At no time shall Landlord de-activate Tenant's alarm system on the
Premises. The parties note that entry by Landlord or any other person while
Tenant's alarm system is activated will alert the Boston Police Department.
H-1
<PAGE>
PARKING AGREEMENT
Agreement dated as of December 22, 1988 between Franklin Federal Partners
("Landlord") and The Hibernia Savings Bank ("Tenant").
Reference is made to a Lease of even date (the "Leases") between Landlord
and Tenant for Premises at 101 Federal Street, Boston. Terms used herein and
defined in the Lease shall have the same meaning given them therein.
In consideration of the mutual covenants herein contained, Landlord and
Tenant hereby agree as follows.
Throughout the Term, Tenant shall have the right, during the Hours of
Operation (subject to provisions of the Lease including, without limitation,
provisions for interruptions due to repairs and emergencies) to use one valet
parking space in the Garage. Such space may be used only by the employees and
invitees of Tenant's business on the Premises and by no other persons. Such use
of parking space shall be on a non-reserved basis. Tenant shall pay for such
space at the then current prevailing monthly rate for parking spaces in the
Garage. Such payments shall constitute additional rent for purposes of the
Lease. A posting of the monthly rate in the Garage shall be notice to the Tenant
of the current prevailing rate. If Tenant discontinues use of such space,
Tenant's rights with respect to such space shall cease. Payments hereunder shall
be made at the places and times and subject to the conditions specified for
payments of Base Rent in Paragraph 4 of the Lease, or at such other places and
times as Landlord shall specify in writing. To the extent applicable to Tenant's
use of and conduct in the Garage, the provisions of the Lease shall apply,
including rules and regulations from time to time promulgated by Landlord and
including the provisions of Paragraph 35 of the Lease.
This Agreement shall terminate upon the expiration or earlier termination
of the Lease or upon the earlier breach by Tenant of any of its covenants under
the Agreement.
<PAGE>
Executed to take effect as a sealed instrument.
FRANKLIN FEDERAL PARTNERS
Landlord
By: 75 FEDERAL STREET ASSOCIATES,
PARTNER
[ILLEGIBLE]
-----------------------------
General Partner
By: BOSTON HS ASSOCIATES, PARTNER
By: [ILLEGIBLE]
-----------------------------
Authorized Representative
THE HIBERNIA SAVINGS BANK
Tenant
By: [ILLEGIBLE]
-----------------------------
Its:____________________________
hereunto duly authorized
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By: BOSTON HS ASSOCIATES, PARTNER
By: [ILLEGIBLE]
---------------------------------
Authorized Representative
Tenant
THE HIBERNIA SAVINGS BANK
By: [ILLEGIBLE]
---------------------------------
its ______________________
hereunto duly authorized
THE COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. __________________________ , 1988
Before me personally appeared ___________________________ and acknowledged
the foregoing instrument to be his/her free act and deed.
___________________________________
Notary Public
My commission expires:
THE COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. December 23, 1988
Before me personally appeared Mark A. Osborne, President of The Hibernia
Savings Bank and acknowledged that he executed the foregoing instrument as
his/her free act and deed in such capacities and as the free act and deed of
such corporation.
___________________________________
Notary Public
My commission expires: 2/19/93
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<PAGE>
EXHIBIT (10)(c)(3)
<PAGE>
LEASE OF
STOUGHTON PLAZA REALTY TRUST
and
THE HIBERNIA SAVINGS BANK
TABLE OF CONTENTS
ARTICLE
NUMBER PAGE
------ ----
I. DEFINITIONS AND EXHIBITS ................................... 2
II. PREMISES ................................................... 4
III. BASE RENT .................................................. 4
IV. COMMENCEMENT DATE .......................................... 5
V. USE OF PREMISES ............................................ 5
VI. ASSIGNMENT AND SUBLETTING .................................. 7
VII. RESPONSIBILITY FOR REPAIRS AND CONDITIONS OF
PREMISES; SERVICES TO BE FURNISHED BY
LANDLORD ................................................... 9
VIII. OPERATING AND TAX EXPENSES ................................. 10
IX. INDEMNITY AND PUBLIC LIABILITY INSURANCE ................... 11
X. FIRE, EMINENT DOMAIN, ETC .................................. 13
XI. DEFAULT .................................................... 15
XII. MISCELLANEOUS PROVISIONS ................................... 18
XIII. OPTION TERMS AND TERMINATION OPTION ........................ 24
XIV. CONDITIONS PRECEDENT ....................................... 24
<PAGE>
LEASE
THIS INSTRUMENT IS A LEASE, dated as of July 31, 1995, in which the
Landlord and the Tenant are the parties hereinafter named, and which relates to
space in the buildings located at 397-423 Washington St., Stoughton,
Massachusetts. The parties to this instrument hereby agree with each other as
follows:
ARTICLE I
DEFINITIONS AND EXHIBITS
1.1 Definition of Basic Lease Terms. The following constitute definitions of the
basic terms used in this Lease.
Landlord: Stoughton Plaza Realty Trust, Curt R. Feuer, Trustee,
under a Declaration of Trust dated June 27, 1980 and recorded in the
Norfolk County Registry District of the Land Court as Document #403353
with Certificate #111101, Book 550, Page 101.
Landlord's Original Address: c/o Orsett Properties, Ltd., 372
Washington St., Wellesley, Massachusetts 02181.
Tenant: The Hibernia Savings Bank
Tenant's Original Address: 731 Hancock St., Quincy, MA 02170
Base Rent: Annual Rent
Years 1-3 $50,600.00 ($4,216.67/mo.)
Years 4-6 $57,200.00 ($4,766.67/mo.)
Years 7-10 $59,400.00 ($4,950.00/mo.)
Option Years 11-15 $68,310.00 ($5,692.50/mo.)
Option Years 16-20 $78,556.50 ($6,546.38/mo.)
Option Years 21-25 $90,339.98 ($7,528.34/mo.)
Buildings: The existing buildings owned by Landlord at 397-423
Washington St., Stoughton, Massachusetts together with the parking area and
lands serving the same.
Premises: 2,200 square feet, more or less, (the "Premises Area")
which is agreed to be as shown as a free-standing structure on Exhibit A annexed
hereto known and numbered as 397 Washington St., Stoughton, MA.
Permitted Uses: Retail banking office related office space, ATM, and
a single drive up teller window.
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<PAGE>
Term: The period commencing on the Commencement Date and expiring at
5:00 p.m. on the day immediately preceding the tenth anniversary of the
Commencement Date.
Commencement Date: One Hundred, Twenty (120) days after the date
upon which this Lease has been executed by the parties subject to the
satisfaction or waiver by the Tenant of the Conditions Precedent as outlined in
Article XV or the Occupancy Date, whichever is earlier.
Common Areas: The access entrances, the parking lots and that
portion of any sidewalks included in the Property.
Default of Tenant: As defined in Section 11.1.
Extended Term: Any option term exercised under Article XIII of the
Lease beyond the original ten year term.
Initial public Liability Insurance: $1,000,000 per occurrence
(combined single limit) for property damage, bodily injury or death.
Initial Term: The Term prior to any Extended Terms.
Occupancy Date: The date the Tenant is first open for business.
Operating and Tax Expenses: The operating and tax expenses relating
to the Property as further defined in Article VIII.
Property: The Building and the land parcels on which it is located
(including adjacent sidewalks).
Tenant's Proportionate Share: 11 (eleven) per cent.
Tenant's Share of Operating and Tax Expenses: Tenant's Proportionate
Share of the Operating and Tax Expenses.
1.2 Exhibits.
EXHIBIT A (Floor Plan)
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ARTICLE II
PREMISES
2.1 LEASE OF PREMISES. Landlord hereby demises and leases to Tenant for
the Term of this Lease and upon the terms and conditions hereinafter set forth,
and Tenant hereby accepts from Landlord, the Premises.
2.2 APPURTENANT RIGHTS AND RESERVATIONS. (a) Tenant shall have, as
appurtenant to the Premises, the non-exclusive right to use, and permit its
customers, patrons, employees and invitees to use, in common with others, the
Common Areas, and common walkways necessary for access to the Building; but such
rights shall always be subject to reasonable rules and regulations from time to
time established by Landlord pursuant to Section 12.7.
(b) Landlord shall have the right to enter the Premises with
twenty-four (24) hour advance notice, (except in the case of an emergency, when
no notice shall be required) for the purpose of making repairs to the same, and
Landlord shall also have the right to enter the Premises during normal business
hours and with reasonable advance notice for the purpose of inspecting the same
and to make access available to prospective or existing mortgagees, purchasers,
partners, investors, insurers or tenants. Landlord agrees to use reasonable
efforts (excluding any obligation to incur overtime labor costs) to minimize any
inconvenience, annoyance or interruption to Tenant's business operations, and to
recognize any reasonable security requirements of Tenant in exercising such
rights of entry.
(c) The Premises are hereby leased in an "as is"" condition, it
being expressly understood and agreed that Landlord is not obligated to install
services or facilities in the Premises beyond those now in place with the
exception that Landlord will install a new rubber roof on the Premises prior to
the Tenant's opening for business.
ARTICLE III
BASE RENT
3.1 BASE RENT PAYMENT. Tenant agrees to pay the Base Rent to Landlord, or
as directed by Landlord, commencing on the Commencement Date, without offset,
abatement (except as otherwise expressly provided in this Lease), deduction or
demand. Such Base Rent shall be payable in equal monthly installments, in
advance, on the first day of each and every calendar month during the Term of
this Lease, at Landlord's Original Address, or at such other place as Landlord
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shall from time to time designate by notice.
ARTICLE IV
COMMENCEMENT DATE
4.1 COMMENCEMENT DATE: The Commencement Date hereunder shall be as set
forth in Section 1.1 hereof.
ARTICLE V
USE OF PREMISES
5.1 PERMITTED USE. (a) Tenant agrees that the Premises shall be used and
occupied by Tenant only for Permitted Uses and for no other purpose.
(b) Tenant agrees to conform to the following provisions during the
Term of this Lease:
(i) Tenant shall have the right, at its own expense, to
install and maintain on the Premises as well as on the Property of which
the Premises are a part any sign (including signs erected on poles or
stanchions not higher than fifteen (15) feet in height) which is either
allowed by right under any applicable municipal ordinance, bylaw or
regulation or for which Tenant has received a valid permit from any
municipal body, board or commission having jurisdiction thereof. Landlord
shall not object to any permit request filed by Tenant seeking signage
approval and shall cooperate with the Tenant in the pursuit of such
permits, licenses or approvals.
(ii) Tenant shall not perform any act or carry on any practice
which may damage the Premises, or any other part of the Building, or cause
any offensive odors or unreasonably loud noises or constitute a nuisance
or a menace to, or otherwise interfere with the business of, any other
tenant in the Building;
(iii) Tenant shall not introduce any hazardous or toxic
materials (other than those normally used in an office environment) onto
the Property without (i) first notifying Landlord and (ii) complying with
all applicable Federal, State and local laws or ordinances pertaining to
the storage, use or disposal of such materials including, but not limited
to,
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<PAGE>
obtaining proper permits;
(iv) Without derogating from the foregoing, if Tenant's
storage, use or disposal of hazardous or toxic materials on the Property
results in (i) contamination of the soil or surface or ground water or
(ii) loss or damage to person(s) or property but excluding any
contamination that predates the Occupancy Date, then Tenant agrees to
clean up the contamination or pay for such cleanup, at Landlord's option,
and indemnify, defend and hold Landlord harmless from and against any
claims, suits, causes of action, costs and fees, including attorney's
fees, arising from or connected with any such contamination, loss or
damage. This provision shall survive the termination of this Lease; and
(v) Tenant shall, in its use of the Premises, comply with the
requirements of all applicable governmental laws, rules and regulations;
(vi) Tenant shall occupy the Premises on and after the the
Occupancy Date and shall conduct continuously in entire Premises the
business above stated.
5.2 INSTALLATIONS AND ALTERATIONS BY TENANT. (a) Tenant shall make no
alterations, additions or improvements in or to the Premises during the Term of
this Lease without the prior written consent of Landlord, which consent shall
not be unreasonably withheld or delayed provided that Tenant fully complies with
the provisions of this Section 5.2. If such consent is granted, such
alterations, additions or improvements shall (i) be made at Tenant's sole
expense and, if the same would unreasonably disturb other tenants of the
Building, at times other than during normal business hours and (ii) except for
Tenant's Removable Property, as defined below, become part of the Premises and
the property of Landlord.
(b) All articles of personal property and all business fixtures,
machinery and equipment and furniture owned or installed by Tenant solely at its
expense in the Premises ("Tenant's Removable Property") shall remain the
property of Tenant and may be removed by Tenant at any time prior to the
expiration of this Lease, provided that Tenant, at its expense, shall repair any
damage to the Building caused by such removal.
(c) Notice is hereby given that Landlord shall not be liable for any
labor or materials furnished or to be furnished by contractors, mechanics or
suppliers to Tenant upon credit, and that no mechanic's or other lien for any
such labor or materials shall attach to or affect the reversion or other estate
or interest of Landlord in and to the Premises. To the maximum extent permitted
by law, at such time as any contractor commences to perform work on
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<PAGE>
behalf of Tenant, or any supplier commences to provide materials to Tenant, such
contractor (and any subcontractors) or supplier shall furnish a written
statement acknowledging the provisions set forth in the prior clause. Whenever
and as often as any mechanic's lien shall have been filed against the Property
based upon any act or interest of Tenant or of anyone claiming through Tenant,
Tenant shall forthwith take such action by bonding, deposit or payment as will
remove or satisfy the lien.
(d) Both parties acknowledge that it will be necessary that certain
work, improvements or alterations to the Premises will be done prior to the
Tenant opening for business. Within sixty (60) days of the execution hereof,
Tenant shall, at its own expense, prepare all necessary plans and/or drawings
reasonably describing the work ("Tenant's Work"), which shall include interior
and exterior renovations as well as plans depicting the proposed drive through
service area which Tenant wishes to perform as a condition for Tenant taking
occupancy of the Premises. Such plans shall be submitted to the Landlord for its
reasonable review and approval, which approval shall be completed within ten
(10) business days of the submission. The Landlord shall review the plans as
expeditiously as possible and failure to object within ten (10) business days
shall constitute Landlord's approval of the plans. Should Landlord raise a
reasonable, good faith objection to any of the Tenant's work plans which cannot
be resolved between Tenant and Landlord, Tenant may either correct or modify its
submission or terminate the Lease without recourse to the Tenant. In the event
that Tenant seeks to terminate the Lease on the grounds of plans disapproval,
said notice of termination must be received by Landlord within ninety (90) days
of the execution of the Lease.
ARTICLE VI
ASSIGNMENT AND SUBLETTING
6.1 PROHIBITION. (a) Tenant covenants and agrees that neither this Lease
nor the term and estate hereby granted, nor any interest herein or therein, will
be assigned, mortgaged, pledged, encumbered or otherwise transferred and that no
part of the Premises will be used or occupied or permitted to be used or
occupied, by anyone other than Tenant, or for any use or purpose other than a
Permitted Use, or be sublet (which term, without limitation, shall include
granting of concessions, licenses and the like) in whole or in part, in each
case without first obtaining the written approval of Landlord, which approval
shall not be unreasonably withheld or delayed.
(b) In addition, Tenant shall have the absolute right (without the
necessity of seeking or obtaining Landlord approval)
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<PAGE>
to transfer the Tenant's interests in branch locations without being deemed in
violation of the provisions of this Article. In the event of such a transfer,
Tenant shall provide Landlord with notice the new ownership within thirty (30)
days of the transfer.
(c) If this Lease be assigned, or if the Premises or any part
thereof be sublet or occupied by anyone other than Tenant, Landlord may, if
Tenant is not paying timely the Base Rent, Tenant's share of Operating and Tax
Expenses, or any other charges due under this Lease, collect rent and other
charges from the assignee, subtenant or occupant, and apply the net amount
collected to the rent and other charges herein reserved, but no such assignment,
subletting, occupancy, collection or modification of any provisions of this
Lease shall be deemed a waiver of this covenant, or the acceptance of the
assignee, subtenant or occupant as a tenant or a release of the original named
Tenant from the further performance by the original named Tenant hereunder. No
assignment or subletting hereunder shall relieve Tenant from its obligations
hereunder and Tenant shall remain fully and primarily liable therefor. No such
assignment, subletting, or occupancy shall affect Permitted Uses. Any proposed
or actual assignment, subletting or occupancy shall in any event be subject to
any so-called "exclusives" previously granted to other Tenants in the Building
or, if Tenant has or is given notice thereof prior to obtaining the consents
required from Landlord, to any exclusive under negotiation between Landlord and
a prospective new Tenant.
(d) In the event the Tenant is acquired and the transfer of Tenant's
stock occurs, the acquiring entity has the right to assume this Lease without
the permission of Landlord provided that the acquiring entity continues to
maintain operation of a retail banking office.
6.2 SUBLEASE RIGHTS. Notwithstanding the prohibition set forth in Section
6.1, Landlord shall not withhold its consent to a subletting or sublettings
requested by Tenant, provided that: (i) in Landlord's reasonable judgment, the
business of the proposed subtenant or the proposed use of the sublet premises
will not adversely affect the reputation or image of the Building (ii) in
Landlord's reasonable judgment, the financial strength and ability of the
proposed subtenant satisfies Landlord's underwriting standards for new Tenants;
(iii) such sublease(s) shall not, in the aggregate, cover more than 50% of the
Rentable Area of the premises; (iv) the rent to be derived by such sublease is
payable monthly at a fixed rate or at a rate which is determinable from the
terms of the sublease and not based on the net or gross income or profits
derived by such subtenant from the Premises; and (v) Landlord has been furnished
with information sufficient to make a determination as to each of the foregoing
requirements. If Landlord shall withhold such consent, it shall set forth in
writing the reasons therefor.
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<PAGE>
6.3 SHARING OF SUBLEASE PROFITS. If the rent and other sums received by
Tenant on account of a permitted sublease exceed the sum of (i) the Base Rent
and Tenant's Share of Operating and Tax Expenses allocable to the Premises
subject to the sublease (in the proportion of the area of such space to the
entire Premises), and (ii) reasonable legal fees and brokerage commissions
incurred by Tenant in connection with such subleasing, Tenant shall pay to
Landlord, as additional rent, 50% of such excess, as received by Tenant.
ARTICLE VII
RESPONSIBILITY FOR REPAIRS AND CONDITION OF PREMISES;
SERVICES TO BE FURNISHED BY LANDLORD
7.1 LANDLORD REPAIRS. (a) Except as otherwise provided in this Lease,
Landlord agrees to keep in good order, condition and repair the parking areas
(except the lawn area and grounds immediately adjacent to the Premises).
Landlord shall in no event be responsible for (i) the repair of glass, doors or
door hardware in the Premises (ii) maintenance or repair of the plumbing or HVAC
system; or (iii) any condition in the Premises or the Building caused by any act
or omission of Tenant, or its employees, invitees, agents or contractors.
(b) Landlord shall not be liable for any failure to make repairs
which, under the provisions of this Section 7.1 or elsewhere in this Lease,
Landlord has undertaken to make with respect to any portion of the Building
within the Premises or under the control of Tenant unless Tenant has given
notice to Landlord of the need to make such repairs, and Landlord has failed to
commence to take appropriate actions and/or make such repairs (as the case may
be) within a reasonable time after receipt of such notice based upon the nature
of the repairs or thereafter fails to proceed with reasonable diligence to
complete such repairs.
7.2 TENANT'S AGREEMENT. (a) Tenant will keep neat and clean and maintain
in good order, condition and repair the Premises and every part thereof
including, without limitation, all interior and exterior walls, roof and all
mechanical, electrical and plumbing equipment and fixtures including without
limitation HVAC, excepting only that maintenance and those repairs for which
Landlord is responsible under the terms of this Lease and excepting also
reasonable wear and tear of the Premises, and damage by fire or other casualty
and as a consequence of the exercise of the power of eminent domain; and shall
surrender the Premises, at the end of the Term, in such condition. Without
limitation, Tenant shall continually during the Term of this Lease maintain the
Premises in
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accordance with all laws, codes and ordinances from time to time in effect and
all directions, rules and regulations of the proper officers of governmental
agencies having jurisdiction, and the standards recommended by the Boston Board
of Fire Underwriters, and shall, at Tenant's expense, obtain all permits,
licenses and the like required by applicable law. Roof warranties will be
assigned by Landlord to Tenant.
7.3 UTILITIES. Tenant shall pay directly to such utility as services the
water, gas, and electrical energy to the Premises, on a monthly basis, all
charges accrued with respect to water, gas and electricity used in the Premises
as measured by the meter serving the Premises. Tenant's use of electrical energy
in Premises shall not at any time exceed the capacity of any of the electrical
conductors or equipment in or otherwise serving Premises.
ARTICLE VIII
OPERATING AND TAX EXPENSES
8.1 DEFINITIONS. For the purposes of this Article, the following terms
shall have the following respective meanings:
Operating Year: Each calendar year (or other twelve--month period as
determined by Landlord) in which any part of the Term of the Lease shall fall.
Operating Expenses: The aggregate costs or expenses reasonably
incurred by Landlord with respect to the operation, cleaning, repair,
maintenance and management of the Property including, without limitation,
Tenant's Proportionate Share of electricity, water, snowplowing, security,
insurance, cleaning, amortized capital repairs to be limited to the common
areas, parking and sidewalks, reasonable management fees and other normal and
reasonable charges relative to the Property.
Taxes: The real estate taxes or betterment assessments assessed with
respect to the Property and/or any other tax if the same replaces the current
method of assessment of real estate taxes in whole or in part or is additionally
imposed on the Property or upon Landlord relating to the Property and is
generally applicable to owners of similar properties.
Operating and Tax Expenses: The aggregate of the Operating Expenses
and Taxes.
8.2 TENANT'S PAYMENTS. (a) Tenant shall pay to Landlord
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Tenant's Proportionate Share of Operating and Tax Expenses for any Operating
Year, which amount shall be apportioned for any Operating Year in which the
Commencement Date falls or the Term of this Lease ends.
(b) Payments by Tenant on account of Operating and Tax Expenses
shall be made monthly on the first day of each and every calendar month during
the Term of this Lease and otherwise in the manner herein provided for the
payment of Base Rent. The monthly amount so to be paid to Landlord shall be the
amount billed by Landlord for costs incurred during the next preceding month on
account of Operating and Tax Expenses.
(c) Tenant's payments of Operating and Tax Expenses will be limited
to a cumulative three per cent (3%) per year increase over the level of
Operating and Tax Expenses of the first year of the Lease.
8.3 ABATEMENT. (a) If Landlord shall receive any tax abatement refund or
reimbursement of Taxes, then after deducting Landlord's unpaid expenses
reasonably incurred in obtaining the same, Landlord shall pay to Tenant Tenant's
Proportionate Share of such abatement; provided that Landlord shall have the
right to deduct from any such amount the amount of any payments which are then
due and payable from Tenant.
ARTICLE IX
INDEMNITY AND PUBLIC LIABILITY INSURANCE
9.1 TENANT'S INDEMNITY. To the maximum extent this agreement may be made
effective according to law, Tenant agrees to indemnify and save harmless
Landlord from and against all claims of whatever nature arising (i) from any
accident, injury or damage whatsoever to any person, or to the property of any
person, occurring on the Premises as well as on the Property of which the
Premises are a part or (ii) from any accident, injury or damage occurring
outside of the Premises but on the Property, in each case where such accident,
damage or injury results or is claimed to have resulted from an act or omission
on the part of Tenant or Tenant's agents or employees or independent
contractors, invitees or visitors and, in either case, occurring after the date
of this Lease until the end of the Term of this Lease and thereafter so long as
Tenant is in occupancy of any part of the Premises unless such accident, damage
or injury is caused by the negligence or misconduct of Landlord or its
employees, agents or contractors or assigns. This indemnity and hold harmless
agreement shall include indemnity against all costs, expenses and liabilities
incurred in or in connection with any such claim or proceeding brought thereon,
and the defense thereof, including, without limitation, reasonable attorneys'
fees at both the trial and appellate levels.
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9.2 PUBLIC LIABILITY INSURANCE. Tenant agrees to maintain in full force
from the date upon which Tenant first enters the Premises for any reason,
throughout the Term of this Lease, and thereafter so long as Tenant is in
occupancy of any part of the Premises, a policy of general liability and
property damage insurance under which Tenant and Landlord are named as an
insured. Each such policy shall be non-cancelable and non-amendable with respect
to Landlord, without twenty (20) days' prior notice and shall be in at least the
amounts of the Initial Public Liability Insurance specified in Section 1.1 or
such greater amounts as Landlord shall from time to time reasonably request, and
a duplicate original or certificate thereof shall be delivered to Landlord.
9.3 TENANT'S RISK. To the maximum extent this agreement may be made
effective according to law, Tenant agrees that all of the furnishings, fixtures,
equipment, effects and property of every kind, nature and description of Tenant
and all persons claiming by, through or under Tenant which, during the Term of
this Lease or any occupancy of the Premises by Tenant or anyone claiming under
Tenant, may be on the Premises or elsewhere on the Property, shall be at the
sole risk and hazard of Tenant, and if the whole or any part thereof shall be
destroyed or damaged by fire, water or otherwise,' or by the leakage or bursting
of water pipes or sprinklers, by theft or from any other cause, no part of said
loss of damage is to be charged to or be borne by Landlord unless due to the
negligence or misconduct of Landlord, its employees, agents, or contractors.
9.4 INJURY CAUSED BY THIRD PARTIES. To the maximum extent this agreement
may be made effective according to law, Tenant agrees that Landlord shall not be
responsible or liable to Tenant, or to those claiming by, through or under
Tenant, for any loss or damage that may be occasioned by or through the acts or
omissions of persons other than Landlord and Landlord's employees, agents and
contractors.
9.5 WAIVER OF SUBROGATION. Insofar as, and to the extent that, the
following provision shall not make it impossible to secure insurance coverage
obtainable at reasonable rates from responsible insurance companies doing
business in the locality in which the Property is located (even though extra
premium may result therefrom) Landlord and Tenant mutually agree that any
property damage insurance carried by either shall provide for the waiver by the
insurance carrier of any right of subrogation against the other, and they
further mutually agree that, with respect to any damage to property, the loss
from which is covered by insurance then being carried by them, respectively, the
one carrying such insurance and suffering such loss releases the other of and
from any and all claims with respect to such loss to the extent of the
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insurance proceeds paid with respect thereto.
ARTICLE X
FIRE, EMINENT DOMAIN. ETC.
10.1 ABATEMENT OF RENT. If the Premises shall be damaged by fire or other
casualty, Base Rent and Tenant's Share of Operating and Tax Expenses payable by
Tenant shall abate proportionately for the period in which, by reason of such
damage, there is material interference with Tenant's use of the Premises, having
regard to the extent to which Tenant may be required to discontinue Tenant's use
of all or a portion of the Premises, but such abatement or reduction shall end
if and when Landlord shall have substantially restored the Premises (excluding
any alterations, additions or improvements made or to be made by Tenant) to the
condition in which they were prior to such damage. If the Premises shall be
affected by any exercise of the power of eminent domain, Base Rent and Tenant's
Share of Operating and Tax Expenses payable by Tenant shall be justly and
equitably abated and reduced according to the nature and extent of the loss of
use thereof suffered by Tenant. In no event shall Landlord have any liability
for damages to Tenant for inconvenience, annoyance or interruption of business
arising from such fire, casualty or eminent domain.
10.2 RIGHTS OF TERMINATION. Within sixty (60) days from the date of damage
by fire or other casualty, Landlord shall notify Tenant whether or not the
Premises can be materially restored within one hundred and eighty (180) days
from the date of such damage, and Landlord's reasonable determination shall be
binding on Tenant. For purposes hereof, the Building or Premises shall be deemed
"materially restored" if they are in such condition as would not prevent or
materially interfere with Tenant's use of the Premises for the purpose for which
it was then being used. If such repairs cannot, in Landlord's reasonable
estimation, be made within one hundred and eighty (180) days, Landlord and
Tenant shall each have the option of giving the other, within thirty (30) days
after the giving of such notice, notice terminating this Lease as of the date of
such damage. In the event of the giving of such notice, this Lease shall expire
and all interest of the Tenant in the Premises shall terminate as of the date of
such notice as if such date had been originally fixed in this Lease for the
expiration of the Term.
10.3 RESTORATION. In the event that neither Landlord nor Tenant exercises
the above set forth option to terminate this Lease in the event of damage by
fire or other casualty then Landlord shall repair or restore such damage to the
extent Landlord receives insurance proceeds for such repair or restoration, this
Lease continuing in full force and effect, with the Rent hereunder to be
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equitably abated as herein above provided. In the event that Landlord notifies
Tenant that the Premises can be materially restored within one hundred eighty
days (180) from the date of damage by fire or other casualty pursuant to Section
10.2 and Landlord fails to materially restore the Premises within such one
hundred eighty (180) day period, then Tenant shall be entitled to terminate this
Lease by giving Landlord thirty (30) days prior written notice of such
termination. In the event that Landlord fails to complete such material
restoration of the Premises within thirty (30) days of receipt of Tenant's
notice to terminate as set forth above, then this Lease shall expire at the end
of such thirty (30) days and all interest of the Tenant in the Premises shall
terminate as of such date as if such date had been originally fixed in this
Lease for the expiration of the Term. Landlord shall not be required to repair
any damage by fire or other cause, or to make any repairs or replacements of any
of Tenant's Work, or of any alterations, additions or improvements installed in
the Premises by Tenant. Notwithstanding anything to the contrary contained in
this Article, (a) Landlord shall not have any obligation whatsoever to repair,
reconstruct, or restore the Premises when the damages resulting from any
casualty covered by the provisions of this Article occur during the last twelve
(12) months of the Term unless the Tenant exercises its option to extend the
term within thirty (30) days of the casualty and (b) in the event the holder of
any indebtedness secured by a mortgage or deed of trust covering the Premises or
Building or any Superior Lessor, as defined in Section 12.14 hereof, requires
that any insurance proceeds be applied to such indebtedness or to amounts owing
to such Superior Lessor, then Landlord shall have the right to terminate this
Lease by delivering written notice of termination to Tenant within thirty (30)
days after such requirement is made by any such holder, whereupon this Lease
shall end on the date of such notice as if the date of such notice were the date
originally fixed in this Lease for the expiration of the Term.
10.4 EMINENT DOMAIN. If possession of all or any substantial part of the
Premises shall be taken by any public or quasi-public authority under the power
of eminent domain, or conveyance in lieu thereof, either party hereto shall have
the right, at its option, of giving the other, at any time within thirty (30)
days after such taking, notice terminating this Lease. If neither party hereto
shall so elect to terminate this Lease, Rent shall be adjusted equitably. Before
Tenant may terminate this Lease by reason of taking or appropriation as above
provided, such taking or appropriation shall be so substantial as to materially
interfere with Tenant's use and occupancy thereof or shall make unusable for
Tenant's purposes more than twenty five percent of the Premises. In addition to
the rights of Landlord above, if any substantial part of the Building shall be
taken or appropriated by any public or quasi-public authority under the power of
eminent domain, or conveyance in lieu thereof, and regardless of whether the
Premises or any part thereof are so taken or appropriated, Landlord shall
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have the right at its sole option, to terminate this Lease.
10.5 AWARD. Landlord shall have and hereby reserves and expects, and
Tenant hereby grants and assigns to Landlord, all rights to recover for damages
to the Property and the leasehold interest hereby created, and to compensation
accrued or hereafter to accrue by reason of such taking, damage or destruction,
and by way of confirming the foregoing, Tenant hereby grants and assigns, and
covenants with Landlord to grant and assign to Landlord, all rights to such
damages or compensation; provided, however, if any such damages or compensation
award expressly includes an amount for Tenant's Removable Property or Tenant's
moving expenses, Landlord shall pay such amount to Tenant promptly after its
receipt thereof. Nothing contained herein shall be construed to prevent Tenant
from prosecuting in any condemnation proceedings a claim for the value of any of
Tenant's Removable Property installed in the Premises by Tenant at Tenant's
expense and for relocation expenses, provided that such action shall not affect
the amount of compensation otherwise recoverable by Landlord from the taking
authority.
ARTICLE XI
DEFAULT
11.1 TENANT'S DEFAULT. (a) If at any time subsequent to the date of this
Lease any one or more of the following events (herein referred to as a "Default
of Tenant") shall happen:
(i) Tenant shall fail to pay the Base Rent when due and such failure
shall continue for fifteen (15) full Business Days from written notice;
(ii) Tenant shall fail to pay Tenant's Share of Operating and Tax
Expenses or other charges hereunder when due and such failure shall
continue for fifteen (15) full Business Days from written notice; or
(iii) Tenant shall neglect or fail to perform or observe any other
covenant herein contained on Tenant's part to be performed or observed and
Tenant shall fail to remedy the same as soon as practicable and in any
event within thirty (30) days after written notice to Tenant specifying
such neglect or failure, or if such failure is of such a nature that
Tenant cannot reasonably remedy the same within such thirty (30) day
period, Tenant shall fail to commence promptly (and in any event within
such thirty (30) day period) to remedy the same and to prosecute such
remedy to completion with diligence and continuity; or
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(iv) Tenant's leasehold interest in the Premises shall be taken on
execution or by other process of law directed against Tenant; or
(v) Tenant shall make an assignment for the benefit of creditors or
shall file a voluntary petition in bankruptcy or shall be adjudicated
bankrupt or insolvent, or shall file any petition or answer seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under any present or future
Federal, State or other statute, law or regulation for the relief of
debtors, or shall seek or consent to or acquiesce in the appointment of
any trustee, receiver or liquidator of Tenant or of all or any substantial
part of its properties, or shall admit in writing its inability to pay its
debts generally as they become due; or
(vi) A petition shall be filed against Tenant in bankruptcy or under
any other law seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any
present or future Federal, State or other statute, law or regulation and
shall remain undismissed or unstayed for an aggregate of sixty (60) days
(whether or not consecutive), or if any debtor in possession (whether or
not Tenant) trustee, receiver or liquidator of Tenant or of all or any
substantial part of its properties or of the Premises shall be appointed
without the consent or acquiescence of Tenant and such appointment shall
remain unvacated or unstayed for an aggregate of ninety (90) days (whether
or not consecutive); or
(vii) If Tenant shall vacate or abandon the Premises and permit same
to remain unoccupied or closed for business for more than twenty (20)
business days within any ninety (90) consecutive day period;
then, in any such case, Landlord may terminate this Lease by notice to Tenant,
specifying a date not less than fifteen (15) days after the giving of such
notice on which this Lease shall terminate and this Lease shall come to an end
on the date specified therein as fully and completely as if such date were the
date herein originally fixed for the expiration of the Term of this Lease
(Tenant hereby waiving any rights of redemption under Massachusetts General Laws
c. 186 ss.11), and Tenant will then quit and surrender the Premises to Landlord,
but Tenant shall remain liable as hereinafter provided.
(b) If this Lease shall have been terminated as provided in this
Article, or if any execution or attachment shall be issued against Tenant or any
Tenant's property whereupon the Premises shall be taken or occupied by someone
other than Tenant, then Landlord may, without notice, re-enter the Premises,
either by
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force, summary proceedings, ejectment or otherwise, and remove and dispossess
Tenant and all other persons and any and all property from the same, as if this
Lease had not been made, and Tenant hereby waives the service of notice of
intention to re-enter or to institute legal proceedings to that end.
(c) In the event of any termination as provided in this Article,
Tenant shall pay the Base Rent, Tenant's Share of Operating and Tax Expenses and
other sums payable hereunder up to the time of such termination, and thereafter
Tenant, until the end of what would have been the Term of this Lease in the
absence of such termination, and whether or not the Premises shall have been
relet, shall be liable to Landlord for, and shall pay to Landlord, as liquidated
current damages, the Base Rent, Tenant's Share of Operating and Tax Expenses and
other sums which would be payable hereunder if such termination had not
occurred, less the net proceeds, if any, of any reletting of the Premises, after
deducting all expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage commissions, legal expenses,
attorneys' fees, advertising, expenses of employees, alteration costs and
expenses of preparation for such reletting. Tenant shall pay such current
damages to Landlord monthly on the dates which the Base Rent would have been
payable hereunder if this Lease had not been terminated.
(d) At any time after such termination, whether or not Landlord
shall have collected any current damages as set forth in paragraph (c), as
liquidated final damages and in lieu of all such current damages beyond the date
of such demand, at Landlord's election Tenant shall pay to Landlord an amount
equal to the excess, if any, of the Base Rent, Tenant's Share of Operating and
Tax Expenses and other sums as hereinbefore provided which would be payable
hereunder from the date of such demand (assuming that, for the purposes of this
paragraph, annual payments by Tenant on account of Operating and Tax Expenses
would be the same as the payments required for the Operating Year immediately
preceding such demand) for what would be the then unexpired Term of this Lease
if the same remained in effect, discounted to present value at a rate of 8% per
year, over the then fair net rental value of the premises for the same period,
also discounted to present value at a rate of 8% per year.
(e) In case of any Default by Tenant, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord may (i) re-let the
Premises or any part or parts thereof, either in the name of Landlord or
otherwise, for a term or terms which may at Landlord's option be equal to or
less than or exceed the period which would otherwise have constituted the
balance of the Term of this Lease and may grant concessions or free rent to the
extent that Landlord considers advisable and necessary for the purpose of
reletting the premises; and such actions and the making of any alterations,
repairs and decorations to the Premises in
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connection therewith shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Landlord shall in no event be liable in any
way whatsoever for failure to re-let the Premises, or, in the event that the
Premises are re-let, for failure to collect the rent under such re-letting.
Tenant hereby expressly waives any and all rights of redemption granted by or
under any present or future laws in the event of Tenant being evicted or
dispossessed, or in the event of Landlord obtaining possession of the Premises,
by reason of the violation by Tenant of any of the covenants and conditions of
this Lease.
(f) The specified remedies to which Landlord may resort hereunder
are not intended to be exclusive of any remedies or means of redress to which
Landlord may at any time be entitled lawfully, and Landlord may invoke any
remedy (including the remedy of specific performance) allowed at law or in
equity as if specific remedies were not herein provided for.
(g) All costs and expenses incurred by or on behalf of Landlord
(including, without limitation, reasonable attorneys' fees and expenses at both
the trial and appellate levels) in enforcing its rights hereunder in connection
with any Default of Tenant shall be paid by Tenant.
11.2 LANDLORD'S DEFAULT. Landlord shall in no event be in default in the
performance of any of Landlord's obligations hereunder unless and until Landlord
shall have failed to perform such obligations within thirty (30) days, or such
additional time as is reasonable required to correct any such default or, in the
event of an emergency as soon as reasonably possible, after notice by Tenant to
Landlord specifying wherein Landlord has failed to perform any such obligations.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 EXTRA HAZARDOUS USE. Tenant covenants and agrees that Tenant will not
do or permit anything to be done in or upon the Premises, or bring in anything
or keep anything therein, which shall increase the rate of property or liability
insurance on the Premises or the Property above the standard rate applicable to
Premises being occupied for Permitted Uses; and Tenant further agrees that, in
the event that Tenant shall do any of the foregoing, Tenant will promptly pay to
Landlord, on demand, any such increase resulting therefrom, which shall be due
and payable as an additional charge hereunder.
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12.2 WAIVER. (a) Except as otherwise expressly provided for in this Lease,
failure on the part of Landlord or Tenant to complain of any action or
non-action on the part of Tenant or Landlord, no matter how long the same may
continue, shall never be a waiver by Landlord or by Tenant of any rights
hereunder. Further, no waiver at any time of any of the provisions hereof by
Landlord or by Tenant shall be construed as a waiver of any of the other
provisions hereof, and a waiver at any time of any of the provisions hereof
shall not be construed as a waiver at any subsequent time of the same
provisions. The consent or approval of Landlord or Tenant to or of any action
requiring such consent or approval shall not be construed to waive or render
unnecessary Landlord's or Tenant's consent or approval to or of any subsequent
similar act by the other.
(b) No payment by Tenant, or acceptance by Landlord, of a lesser
amount than shall be due from Tenant to Landlord shall be treated otherwise than
as a payment on account of the earliest installment of any payment due from
Tenant under the provisions hereof. The acceptance by Landlord of a check for a
lesser amount with an endorsement or statement thereon, or upon any letter
accompanying such check, that such lesser amount is payment in full, shall be
given no effect, and Landlord may accept such check without prejudice to any
other rights or remedies which Landlord may have against Tenant.
12.3 COVENANT OF QUIET ENJOYMENT. Tenant, subject to the terms and
provisions of this Lease, on payment of the Base Rent and Tenant's Share of
Operating and Tax Expenses and observing, keeping and performing all of the
other terms and provisions of this Lease on Tenant's part to be observed, kept
and performed, all within any applicable grace period allowed in this Lease,
shall lawfully, peaceably and quietly have, hold, occupy and enjoy the Premises
during the term hereof without hindrance or ejection by Landlord or persons
lawfully claiming by, through or under Landlord. The foregoing covenant of quiet
enjoyment is in lieu of any other covenant, express or implied.
12.4 LANDLORD'S LIABILITY. (a) Tenant specifically agrees to look solely
to Landlord's then equity interest in the Property at the time owned for
recovery of any judgment from Landlord; it being specifically agreed that (i)
Landlord shall have no liability for any claims accruing other than during the
period of Landlord's ownership of the Property and (ii) neither Landlord
(original or successor) nor any partner, trustee, agent, consultant, officer,
stockholder, director, employee, or beneficiary of Landlord, nor any constituent
person or entity of Landlord, shall ever be personally liable for any such
judgment, or for the payment of any monetary obligation to Tenant. The provision
contained in the foregoing sentence is not intended to, and shall not, limit any
right that Tenant might otherwise have to obtain injunctive relief against
Landlord or Landlord's successors in interest, or to take
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any action not involving the personal liability of Landlord (original or
successor).
(b) With respect to any services or utilities to be furnished by
Landlord to Tenant, Landlord shall in no event be liable for failure to furnish
the same when prevented from doing so by strike, lockout, breakdown, accident,
order or regulation of or by any governmental authority, or failure of supply or
failure whenever and for so long as may be necessary by reason of the making of
necessary or emergency repairs or changes which Landlord is required or is
permitted by this Lease or by law to make or in good faith deems necessary, or
inability by the exercise of reasonable diligence to obtain supplies, parts or
employees necessary to furnish such services, or because of war or other
emergency, or for any other cause beyond Landlord's reasonable control, or for
any cause due to any act or neglect of Tenant or Tenant's servants, agents,
employees, licensees or any person claiming by, through or under Tenant.
(c) In no event shall Landlord ever be liable to Tenant for any loss
of business or any other indirect or consequential damages suffered by Tenant
from whatever cause.
(d) With respect to any repairs or restoration which are required or
permitted to be made by Landlord, the same may be made during normal business
hours and Landlord shall not have any liability for damages to Tenant for
inconvenience, annoyance or interruption of business arising therefrom.
12.5 ASSIGNMENT OF RENTS AND TRANSFER OF TITLE. In the event of a transfer
of Landlord's interest in the Property by Landlord, Landlord shall from the date
of such transfer be entirely freed and relieved from the performance and
observance of all covenants and obligations hereunder accruing thereafter.
12.6 RULES AND REGULATIONS. Tenant shall abide by reasonable rules and
regulations as hereinafter from time to time established by Landlord (provided
that the same do not materially diminish Tenant's rights under this Lease), and
of which Tenant has been given notice, it being agreed that such rules and
regulations will be applied by Landlord in a non-discriminatory fashion, such
that all rules and regulations shall be generally applicable to other tenants of
the Building. Landlord agrees to use reasonable efforts to insure that any such
rules and regulations are so uniformly enforced, but Landlord shall not be
liable to Tenant for violation of the same by any other tenant or occupant of
the Building, or persons having business with them. In the event that there
shall be a conflict between such rules and regulations and this Lease, the
provisions of this Lease shall prevail.
12.7 INVALIDITY OF PARTICULAR PROVISIONS. If any term or provision of this
Lease, or the application thereof to any person
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or circumstance shall, to any extent, be invalid or unenforceable, the remainder
of this Lease, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision of this Lease shall
be valid and be enforced to the fullest extent permitted by law.
12.8 PROVISIONS BINDING, ETC. Except as herein otherwise provided, the
terms hereof shall be binding upon and shall inure to the benefit of the
successors and assigns, respectively, of Landlord and Tenant and, if Tenant
shall be an individual, upon and to his heirs, executors, administrators,
successors and assigns. Each term and each provision of this Lease to be
performed by Tenant shall be construed to be both a covenant and a condition.
12.9 RECORDING. Tenant agrees not to record this Lease, but, if the Term
of this Lease (including any extended term) is seven (7) years or longer, each
party hereto agrees, on the request of the other, to execute a so-called notice
of lease in recordable form, complying with applicable law and reasonably
satisfactory to Landlord's attorneys. If this Lease is terminated prior to the
Lease expiration date set forth in such notice of lease, each party hereto
agrees, on the request of the other, to execute and deliver a recordable
certificate documenting such earlier termination date.
12.10 NOTICES. Whenever, by the terms of this Lease, notices shall or may
be given either to Landlord or to Tenant, such notice shall be in writing. All
such notices shall be delivered in hand, sent by certified mail, postage
prepaid, return receipt requested, or sent by an overnight express courier
service which provides evidence of delivery or attempted delivery.:
If intended for Landlord, delivered or addressed to Landlord at
Landlord's Original Address (or to such other address or addresses as may from
time to time hereafter be designated by Landlord by like notice); with a copy
to: Curt R. Feuer, P.C., Kassler and Feuer, 101 Arch St., Boston, Massachusetts
02110.
If intended for Tenant, delivered or addressed to Tenant at Tenant's
Original Address until the Commencement Date and thereafter to the Premises (or
to such other address or addresses as may from time to time hereafter be
designated by Tenant by like notice)
All notices shall be effective on the day delivered provided the
same is delivered on or before 5:00 p.m. on such day or on the following
Business Day if not delivered on or before 5:00 p.m.
12.11 WHEN LEASE BECOMES BINDING. The submission of this document for
examination and negotiation does not constitute an -
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offer to lease, or a reservation of, or option for, the Premises, and this
document shall become effective and binding only upon the execution and delivery
hereof by both Landlord and Tenant. All negotiations, considerations,
representations and understandings between Landlord and Tenant are incorporated
herein and this Lease expressly supersedes any proposals or other written
documents relating hereto. This Lease may be modified or altered only by written
agreement between Landlord and Tenant, and no act or omission of any employee or
agent of Landlord shall alter, change or modify any of the provisions hereof.
12.12 RIGHTS OF MORTGAGEE OR GROUND LESSOR. Lease Superior or Subordinate
to Mortgages. This Lease is an shall continue to be subject and subordinate to
any presently existing mortgage or mortgages secured by the Premises, and to any
and all advances hereafter made thereunder, and to the interest of the holder or
holders thereof in the Premises. The holder of any such presently existing
mortgage shall have the election to subordinate the same to this Lease,
exercisable by filing with the appropriate recording office a notice of such
election, whereupon this Lease shall have priority over such mortgage. A copy of
such filing shall be given to Tenant. Such election by the holder of any
presently existing mortgage shall not affect priority with respect to this Lease
of any other presently existing mortgage.
Any mortgage or other voluntary lien or other encumbrance recorded
subsequent to the recording of the notice or short form referred to in Section
12.9 shall be subject and subordinate to this Lease unless Landlord and the
holder of any such subsequent mortgage and the holders of all mortgages prior to
such subsequent mortgage elect to subordinate this Lease to such subsequent
mortgage and to any and all advances thereafter made thereunder and to the
interest of the holder thereof in the Premises, such election to be exercisable
by Landlord and all such holders by filing with the appropriate recording office
(a) a notice of such election and (b) an agreement between the holder of such
subsequent mortgage and Tenant, consented to by holders of all mortgages having
priority over such subsequent mortgage, by the terms of which such holder will
agree to recognize the rights of Tenant under this Lease and to accept Tenant as
tenant of the Premises under the terms and conditions of this Lease in the event
of acquisition of title by such holder through foreclosure proceedings or
otherwise and Tenant will agree to recognize the holder of such subsequent
mortgage as Landlord in such event, which agreement shall be made expressly to
bind and inure to the benefit of the successors and assigns of Tenant and of
such holder and upon anyone purchasing said Premises at any foreclosure sale
brought by such holder. Tenant and Landlord agree to execute and deliver any
appropriate instruments necessary to carry out the agreements contained in this
Section 12.12.
12.13 ESTOPPEL CERTIFICATES. Within ten (10) days following any written
request which Landlord or Tenant (the "Requesting
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Party") may make from time to time to the other party hereto (the "Responding
Party"), the Responding Party shall execute and deliver to the Requesting Party,
any prospective purchaser, mortgagee or prospective mortgagee, ground lessor or
prospective ground lessor, a sworn statement in form reasonably satisfactory to
Landlord certifying to the matters reasonably requested provided only that they
are matters customarily certified to by landlords and tenants in the Boston
region. Tenant and Landlord acknowledge that any statement delivered pursuant to
this Article may be relied upon by any such party, and the Responding Party
shall be liable for all loss, cost or expense resulting from or caused by any
material misstatement contained in such estoppel certificate, or the failure to
deliver the estoppel certificate.
12.14 REMEDYING DEFAULTS. Landlord shall have the right, but shall not be
required, to pay such sums or do any act which requires the expenditure of
monies which may be necessary or appropriate by reason of the failure or neglect
of Tenant to perform any of the provisions of this Lease, and in the event of
the exercise of such right by Landlord, Tenant agrees to pay to Landlord
forthwith upon demand all such sums.
12.15 HOLDING OVER. Any holding over by Tenant after the expiration of the
term of this Lease shall be treated as a daily tenancy at sufferance at a rate
equal to 1 1/2 times the Base Rent then in effect plus Tenant's Share of
Operating and Tax Expenses and other charges herein provided (prorated on a
daily basis) and shall otherwise be on the terms and conditions set forth in
this Lease as far as applicable.
12.16 SURRENDER OF PREMISES. Upon the expiration or earlier termination of
the Term of this Lease, Tenant shall peaceably quit and surrender to Landlord
the Premises in neat and clean condition and in good order, condition and
repair, together with all alterations, additions and improvements which may have
been made or installed in, on or to the Premises prior to or during the Term of
this Lease, excepting only ordinary wear and use and damage by fire or other
casualty for which, under other provisions of this Lease, Tenant has no
responsibility of repair or restoration. Tenant shall remove all of Tenant's
Removable Property and, to the extent specified by Landlord, all alterations,
additions and improvements made by Tenant; and shall repair any damages to the
Premises or the Building caused by such removal. Any Tenant's Removable Property
which shall remain in the Building or on the Premises after the expiration or
termination of the Term of this Lease shall be deemed conclusively to have been
abandoned, and either may be retained by Landlord as its property or may be
disposed of in such manner as Landlord may see fit, at Tenant's sole cost and
expense.
12.17 BROKERAGE. Landlord and Tenant each mutually warrants and represents
to the other that they have dealt with no broker in connection with the
consummation of this Lease other than the
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broker herein listed, if any. Landlord and Tenant hereby each agree to
indemnify, defend and hold the other harmless from any claim arising from the
breach of such representation and warranty.
12.18 GOVERNING LAW. This Lease shall be governed exclusively by the
provisions hereof and by the laws of the Commonwealth of Massachusetts, as the
same may from time to time exist.
ARTICLE XIII
OPTION TERMS AND TERMINATION OPTION
13.1 The Tenant shall have the right to extend this Lease for three
additional five year terms by providing written notice of the desire to exercise
an option to Landlord six months prior to the expiration of the original term
and hence, six months prior to the expiration of the ensuing option terms. The
failure of the Tenant to notify the Landlord of the exercise of an option to
extend shall not constitute a waiver and abandonment of such option unless and
until (a) Landlord notifies Tenant in writing that there has been a failure to
notify the Landlord on time and (b) Tenant, within ten (10) days after receipt
of such notice, still fails to notify the Landlord of its exercise of the
option. Said options may not be exercised by Tenant if Tenant is in default
under this Lease as defined in Article XI.
All other terms and conditions of the Lease will remain in full
force and effect during an option term.
13.2 The Tenant shall have the option to terminate the Lease by providing
written notice to Landlord on or before thirty (30) months from the Commencement
Date said termination right to be effective thirty-six (36) months from the
Commencement Date.
ARTICLE XIV
CONDITIONS PRECEDENT
14.1 Tenant proposes to use the premises for the operation of a free
standing retail banking office including a drive-through service window.
Tenant's obligation to lease the Premises is contingent on the satisfaction or
waiver of the following conditions ("Conditions Precedent"), within one hundred,
twenty (120) days after the execution of this Lease:
(a) Tenant obtaining permission from the Banking Commissioner of the
Commonwealth of Massachusetts and the Federal
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Deposit Insurance Corporation to operate a banking facility at 397 Washington
St., Stoughton, MA.
(b) Tenant obtaining, at Tenant's sole cost and expense, all
municipal approvals and permits for Tenant's proposed use including interior and
exterior renovations and drive-through service window use. Landlord agrees to
cooperate fully with Tenant (provided the same is at no cost to Landlord) in
securing the municipal approval and permits.
In the event that the Conditions Precedent are not satisfied,
approved or waived by Tenant, then at any time within one hundred, twenty (120)
days after the execution of this Lease, Tenant may terminate the Lease in which
event the Lease shall be void of no further force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly
executed, under seal, by persons hereunto duly authorized, in multiple copies,
each to be considered an original hereof, as of the date first set forth above.
LANDLORD:
Stoughton Plaza Realty Trust
By: /s/ Curt R. Feuer
--------------------------------
Curt R. Feuer, Trustee
TENANT:
The Hibernia Savings Bank
By: /s/ Mark A. Osborne
--------------------------------
Mark A. Osborne, C.E.O.
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The Hibernia Savings Bank
731 Hancock St.
Quincy, MA 02170
Attn:Mark A. Osborne
July 31, 1995
Dear Mr. Osborne:
In consideration of the execution of a Lease dated as of July 31, 1995 by
and between the Hibernia Savings Bank as Tenant and the undersigned as Landlord,
Stoughton Plaza Realty Trust agrees that, during the term of the Lease, it will
not lease any space in Stoughton Plaza (being the property located at 397-423
Washington Street, Stoughton, Massachusetts) to any entity principally engaged
in any business currently performed by the Bank.
Sincerely,
STOUGHTON PLAZA REALTY TRUST
By: /s/ Curt R. Feuer
--------------------------------
Curt R. Feuer, Trustee
<PAGE>
EXHIBIT (1O)(c)(4)
<PAGE>
LEASE
THIS LEASE made this 2nd day of August, 1996, between SUPERIOR REALTY CO.,
INC., a Massachusetts corporation with a place of business at 540 Gallivan
Boulevard, Dorchester, Boston, Massachusetts 02124 ("Landlord") and THE HIBERNIA
SAVINGS BANK, a Massachusetts banking corporation with a principal office at 730
Hancock Street, Quincy, Massachusetts 02170 ("Tenant").
ARTICLE I
DEMISED PREMISES
Section 1.1. Landlord, in consideration for the rents to be paid and the
covenants and agreements to be performed and observed by Tenant, does hereby
lease unto Tenant and Tenant does hereby lease and take from Landlord those
certain parcels of land, containing approximately 38,857 square feet of land,
together with the building (the "Building") thereon, containing approximately
32,736 square feet of gross leasable area, all situated in the South Boston
district of Boston, Suffolk County, Massachusetts, more particularly described
in Exhibit A attached hereto and made a part hereof (the "Demised Premises").
(The term "Demised Premises" may include the land or the Building or both, as
the context may require or admit.)
ARTICLE II
Section 2.1 (a). Term of Lease. The term of this Lease shall be for a
period of twenty (20) years beginning on the earlier to occur of: (i) one
hundred twenty (120) days following the date upon which Landlord delivers
possession of the Demised Premises to Tenant; or (ii) the date upon which Tenant
opens the Demised Premises for business to the public. Landlord shall deliver
the Demised Premises to Tenant, in "as is" condition (subject to normal wear and
tear following the date of this Lease but "broom clean"), upon surrender and
yield up of the Demised Premises to Landlord by the current tenant thereof, the
term of whose lease expires on December 31, 1996.
Section 2.1(b). Lease Year. The term "lease year" shall mean each of the
successive calendar years which fall entirely in the term of this Lease, as it
may be extended. The last lease year shall be coterminous with the term, and may
therefore be less than twelve months long.
Section 2.2. Notice of Lease. Upon request of the other party, Landlord
and Tenant shall execute a recordable instrument containing a description of the
Demised Premises, a statement of the commencement and expiration dates of the
term, and a statement of Tenant's extension rights, if any.
Section 2.3. Extensions. Tenant shall have the right to extend the term of
this Lease, upon all of the terms, covenants and conditions contained in this
Lease, for a total of two (2) extension periods, each to be ten (10) years in
duration, by written notice sent to Landlord not less than one (1) year prior to
the expiration of the then current part of the term. [Once exercised, an
extension right shall be deemed to have been exhausted and shall not be
susceptible of revival as one of the "terms" contained in the Lease, to be
carried forward, unmodified, into the extended term.] Notwithstanding the
foregoing, in the event that Tenant shall not have given such notice at least
one (1) year prior to the expiration of the then current part of the term,
Tenant shall continue to have the ability to exercise such right of extension
until the earlier to occur of: (i) ten (10) months prior to the expiration of
the then current part of the term; or (ii) thirty (30) days following its
receipt of a reminder notice from Landlord of its failure to so extend, Landlord
representing that it shall endeavor (but
<PAGE>
shall not be obligated) to send such reminder notice. Notwithstanding the above,
any extension right exercised by Tenant shall be void if, either at the time of
exercise or on the first day of a putative extension period, Tenant is in
default of any of its obligations hereunder beyond any applicable cure period or
has been served with a notice of default and the default in question then
remains uncured after expiration of the applicable grace period.
ARTICLE III
Section 3.1. Minimum Rent. Throughout the term of this Lease, and any
extension thereof, Tenant shall pay Minimum Rent for the Demised Premises to
Landlord without any abatement, deduction, counterclaim, or setoff, at the
yearly and monthly rates set forth below:
ANNUAL
MINIMUM MONTHLY
PERIOD RENT INSTALLATIONS
- ------------ ----------- -------------
Years 1-5 $170,000.00 $14,166.67
6-10 $187,000.00 $15,583.33
11-15 $205,700.00 $17,141.67
16-20 $226,270.00 $18,855.83
Minimum Rent, during each five year interval of any extension period set forth
in Section 2.3, shall reflect Current Market Rent, as hereafter defined, at the
beginning of the applicable five year interval. The phrase "Current Market Rent"
shall mean the rental and all other monetary payments and escalations that
Landlord could obtain from a third party desiring to lease space in the South
Boston area as of the applicable period, taking into account the type of
Building, the size, location and floor levels and then condition of the Demised
Premises, the quality of construction of the Building and of the Demised
Premises, the services provided under the terms of this Lease, including without
limitation any special rights hereunder and the rental then being attained for
new leases of space comparable to the demised premises in the South Boston area
but in no event less than the Minimum Rent for the year preceding such
extension. Landlord shall designate "Current Market Rent" by written notice to
Tenant within ninety (90) days following Landlord's receipt of Tenant's election
to extend the term of the Lease which notice may include data which Landlord
considers to support such designation ("Designation"). If Tenant disagrees with
the Designation, Tenant shall, by written notice sent to Landlord within fifteen
(15) days after such Designation, advise Landlord of such disagreement;
otherwise Tenant shall conclusively be deemed to have agreed to the Designation
of Current Market Rent. In the event that within sixty (60) days prior to the
applicable Adjustment Date the parties hereto shall not have agreed in writing
(or to be deemed to have agreed pursuant to the immediately preceding sentence)
as to the Current Market Rent, each party shall, within thirty (30) days
thereafter appoint an appraiser. Each appraiser so appointed shall be instructed
to determine independently the Current Market Rent. If the difference between
the amounts so determined by such appraisers shall not exceed ten percent (10%)
of the lesser of such amounts, then the Current Market Rent shall be an amount
equal to fifty percent (50%) of the total of the amounts so determined. If the
difference between the amounts so determined shall exceed ten percent (10%) of
the lesser of such amounts, then such two (2) appraisers shall have ten (10)
days thereafter to appoint a third appraiser, but if such appraisers fail to do
so within such ten (10) day period, then either Landlord or Tenant may request
the American Arbitration Association or any successor organization thereto to
appoint an appraiser within ten (10) days of such request, and both Landlord and
Tenant shall be bound by any appointment so made within such ten (10) day
period. If no such appraiser shall
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have been appointed within such ten (10) days either Landlord or Tenant may
apply to any court having jurisdiction to have such appointment made by such
court. Any appraiser appointed by the original appraisers, by the American
Arbitration Association or by such court shall be instructed to determine the
Current Market Rent in accordance with the definition of such term contained
herein and within twenty (20) days after its appointment. If the third appraisal
shall exceed the higher of the first two appraisals, the Current Market Rent
shall be the higher of the first two appraisals; if the third appraisal is less
than the lower of the first two appraisals, the Current Market Rent shall be the
lower of the first two appraisals. In all other cases, the Current Market Rent
shall be equal to the third appraisal. All such determinations of the Current
Market Rent shall be final and binding upon Landlord and Tenant as the Current
Market Rent for the applicable Adjustment Date. Notwithstanding the foregoing,
if either party shall fail to appoint its appraiser within the 30 day period
specified above (such party being referred to herein as the "failing party"),
the other party may serve notice on the failing party requiring the failing
party to appoint its appraiser within ten (10) days of the giving of such
notice. If the failing party shall not respond by appointment of its appraiser
within said ten day period, then the appraiser appointed by the other party
shall be the sole appraiser whose determination of the Current Market Rent shall
be binding and conclusive upon Tenant and Landlord. This provision for
determination by appraisal shall be specifically enforceable to the extent such
remedy is available under applicable law, and any determination hereunder shall
be final and binding upon the parties except as otherwise provided by applicable
law. Each party shall pay for the fees and expenses of the appraiser appointed
by it, but the fees and expenses of the third appraiser shall be shared equally
by the parties. All appraisers appointed hereunder shall be MAI appraisers,
so-called.
The monthly rent installments shall be paid in advance on the first day of each
calendar month, and shall be prorated for any partial month on the basis of a
thirty (30) day month. The Minimum Rent shall be over and above all other
additional payments to be made by Tenant as hereinafter provided, and shall be
absolutely net to Landlord, so that this Lease shall yield, net, to Landlord
such net basic rental as aforesaid.
Section 3.2.1. Interest. If any amount payable to Landlord under this
Lease (including, without limitation, any monthly rent installment) is not
received by Landlord within ten (10) days after receipt by Tenant of written
notice of such neglect or failure, Tenant shall, promptly upon receipt of
Landlord's bill therefor, pay Landlord interest on the unpaid amount, calculated
from the original due date thereof, at the rate of (i) 12% per year or (ii) an
annual rate which is two percentage points greater than the "discount rate",
so-called, charged by the Federal Reserve Bank of Boston for loans to member
banks, which discount rate is in effect on the due date for the payment in
question, whichever of those two stated rates [that in (i) or that in (ii)]
shall be the higher, except that (iii) if the highest annual interest rate
permitted by applicable law (the "legal rate") is lower than a stated rate
appearing in (i) or (ii), the legal rate shall be substituted for each higher
stated rate before determining which interest rate is to be applied in computing
Tenant's liability hereunder. Notwithstanding the foregoing, it is expressly
agreed and understood that interest shall begin to accrue from the original due
date of any such obligation, without either notice from Landlord or a ten (10)
day grace period within which Tenant may pay without the imposition of interest,
in the event that Tenant fails to pay any obligation when due in accordance with
the terms and provisions of this Lease more than two (2) times in any twelve
(12) month period.
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Section 3.2.2. Late Charge. Tenant acknowledges that any default in the
timely payment of any sum due to Landlord, including, without limitation, the
monthly rent installments, will result in additional expense to Landlord, to
verify the default and collect the defaulted payment. Tenant acknowledges
further that the actual cost to Landlord in each particular case will vary
according to the circumstances of the case and that the determination of the
precise cost would, in itself, result in considerable expense. Accordingly, if
any amount payable to Landlord under this Lease (including, without limitation,
any monthly rent installment) is not received by Landlord within ten (10) days
after receipt by Tenant of written notice of such neglect or failure, promptly
upon receipt of Landlord's bill therefor, shall pay Landlord a late charge of
Two Hundred ($200.00) Dollars with respect to the delayed or defaulted payment,
as liquidated damages in lieu of the actual amount of expense and other damages
[other than the defaulted payment(s)] incurred and suffered by Landlord by
reason of the delay or default in payment, and not as a penalty or as additional
interest. Notwithstanding the foregoing, it is expressly agreed and understood
that a late charge shall begin to accrue from the original due date of any such
obligation, without either notice from Landlord or a ten (10) day grace period
within which Tenant may pay without the imposition of a late charge, in the
event that Tenant fails to pay any obligation when due in accordance with the
terms and provisions of this Lease more than two (2) times in any twelve (12)
month period.
Section 3.3. Other Payments. Each payment or expenditure which Tenant must
make to Landlord under any provision of this Lease shall be deemed to be
Additional Rent, and Landlord's rights in the event Tenant defaults in making
any such payment or expenditure shall be the same as in the case of a default in
paying the Minimum Rent.
Section 3.4. Address of Payments. All rents and other charges payable to
Landlord pursuant to the provisions of this Lease shall be sent to Landlord, at
540 Gallivan Boulevard, Dorchester, Massachusetts 02124 unless Landlord
otherwise directs by written notice to Tenant.
Section 3.5. Net Lease. This Lease shall be deemed and construed to be an
absolutely net lease and, except as herein otherwise expressly provided,
Landlord shall receive Minimum Rent and Additional Rent absolutely free from any
charges, assessments, impositions, setoffs, expenses or deductions of any and
every kind or nature whatsoever.
ARTICLE IV
Section 4.1. Contingency. This Lease is subject to Tenant's obtaining,
within one hundred and twenty (120) days following the date of execution of this
Lease, all authorizations and consents from the appropriate officials, boards or
other governmental bodies necessary to allow Tenant to maintain and use the
Demised Premises for a branch banking facility of the Tenant by the Office of
the Controller of the Currency and by all other banking regulatory authorities
(all of the same being hereinafter referred to collectively as
"Authorizations"). Tenant warrants to Landlord that it shall file applications
for all such Authorizations as soon as possible, but in no event later than
thirty (30) days following the complete execution of this Lease, and Tenant
shall proceed with all due diligence in order to obtain such Authorizations. No
Authorization shall be deemed obtained until all appeal periods from the
issuance thereof have elapsed without any appeal being taken or if any appeal
has been taken, the appeal has been resolved in favor of the Tenant. In the
event the Authorizations have not been obtained by such date, Landlord and
Tenant shall each have the right to terminate this
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Lease, upon written notice to the other received within ten (10) days following
such contingency date.
ARTICLE V
Section 5.1(a). Real Estate Taxes. Tenant shall pay directly to the
applicable taxing authority within fifteen (15) days after receipt of a bill
therefor, the entire amount of any real estate tax imposed with respect to or
attributable to, any improvement to the Demised Premises or the Building made by
Tenant (including without limitation, Tenant's exterior signs).
Section 5.1(b). Tenant shall be liable for and shall pay all taxes levied
against personal property and trade fixtures owned or placed by Tenant in or
upon the Demised Premises.
Section 5.2. As Additional Rent, Tenant shall pay directly to the
applicable taxing authority an amount equal to all real estate taxes and other
governmental charges or impositions which shall or may be assessed upon the said
Demised Premises after the commencement of and during the term hereof, payable
upon being billed therefor. Tenant may, in good faith and diligently, contest
the validity or amount of any tax or betterment assessment which, under the
terms hereof, it is required to pay, and Landlord agrees that Tenant may, if it
shall so elect, commence in the name of Landlord, or in its own name, but at the
sole expense; and for the sole benefit of Tenant, any legal proceedings to
contest the validity or amount of any such tax or betterment assessment, or for
a refund or a rebate, and execute any instruments that may be reasonably
required therefor by Tenant. Nothing herein contained shall be construed to
permit postponement of any payments required hereunder.
Section 5.3. The term "real estate taxes" as used in this Lease shall mean
regular taxes, betterments and other special assessments, flat-rate water and
sewer charges, and all other governmental levies made with respect to real
property and payable by owners of such property, without regard to the identity
of the authority making the impost, but no other governmental imposition shall
be deemed a part of the "real estate taxes" unless the system of taxation is
changed with the result that the whole or a determinable part of the taxes
defined above as "real estate taxes" will be replaced by a tax or taxes imposed
on owners of real property with respect to that property in a form not included
in the foregoing definition, or with the result that a tax in a form not
included above as a part of "real estate taxes" is imposed in addition to "real
estate taxes" as defined above and presently imposed on owners of real property
with respect to that property. If any such change in the tax system takes place,
each such alternative tax and each such additional tax (as well as any other
taxes which were already considered a part of "real estate taxes" for the
purposes of this Lease and which continue to be imposed) shall be considered a
part of "real estate taxes" for the purposes of this Lease, subject only to the
requirements that (a) such alternative or additional taxes have materially
different applicability to the owners of real property, or to real property, or
to the income derived from real property than they do to owners of other kinds
of property, to other kinds of property or to other kinds of income, and (b) the
amount includable in real estate taxes attributable to the demised premises for
a tax year on account of any such alternative or additional tax shall be no
greater than would be the case if the demised premises were the only property of
Landlord subject to such alternative or additional tax.
Section 5.4. Tenant's liability to Landlord under the provisions of
Section 5.2 for any tax year not falling entirely within the term shall be
prorated, on the basis of a 365-day year, to reflect the portion of the tax year
which falls within the term.
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Section 5.5. Tenant shall, with respect to all payments of real estate
taxes in accordance with the provisions of this Article V, provide evidence of
payment of such taxes to Landlord as soon as possible following payment thereof,
but in no event later than thirty (30) days thereafter.
ARTICLE VI
Section 6.1. Common Facilities Maintenance. During the entire term of this
Lease and any extensions thereof, Tenant shall keep the parking areas,
sidewalks, driveways, entrances, exits and other like areas (together the
"Common Facilities") in a reasonably neat, clean and orderly condition. Tenant
shall also keep the parking areas, driveways, entrances, exits and other like
areas in reasonable repair. These obligations on the part of Tenant shall,
without limiting the generality thereof, include the following:
(i) maintaining the surfaces of the parking areas, driveways, entrances,
exits and other like areas in a reasonably level and smooth
condition (Landlord and Tenant recognize that the sidewalks
surrounding the Demised Premises are maintained by the City of
Boston and, accordingly, neither Landlord nor Tenant has the
obligation to make repairs thereto);
(ii) clearing snow, ice and debris and sweeping the sidewalks, parking
areas, driveways, entrances, exits and other like areas to the
extent necessary to keep said areas in a reasonably clean and
orderly condition; and
(iii) placing, keeping in repair, and replacing any necessary appropriate
direction signs, markers and lines; and operating, keeping in repair
and replacing when necessary such artificial lighting facilities as
shall be reasonably required during the hours which the Demised
Premises (or any portion thereof) may be open for business.
Notwithstanding the foregoing, it is expressly agreed and understood that
Landlord shall pay to Tenant, within fifteen (15) days following Landlord's
receipt of fully executed mechanic's lien waivers and substantiating bills
marked "paid", a sum not to exceed Ten Thousand ($10,000.00) Dollars as
consideration for either: (i) repaving the parking areas, driveways, entrances,
exits and other like areas; or (ii) filling any potholes and placing the parking
areas, driveways, entrances, exits and other like areas in a reasonably level
and smooth condition.
Section 6.2. It is specifically understood and agreed that Landlord shall
have no obligation or liability whatsoever in connection with the maintenance or
management of the Common Facilities. Tenant, and not Landlord, shall have care,
custody and control of the Demised Premises, including, without limitation, the
Common Facilities, and Tenant shall manage, operate and maintain the Common
Facilities or cause the same to be done on its behalf.
Section 6.3. Liability Insurance. Throughout the term of this Lease,
Tenant, at its own expense, shall maintain with respect to the Demised Premises,
including without limitation, the Common Facilities, comprehensive general
liability insurance with a single limit of at least $2,000,000.00 with respect
to bodily injury and property damage, all in companies qualified to do business
in Massachusetts. Landlord shall have the right to require Tenant to increase
said coverage limit; provided however, such limit of liability shall not be
increased more frequently than annually and shall be in accordance with good
property
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management practice. All such liability insurance maintained by Tenant shall
name Landlord as an additional named insured.
Section 6.4. Intentionally omitted.
Section 6.5. Tenant's Certificates. Tenant shall deliver to Landlord on or
before the first day of the term [and thereafter at least thirty (30) days prior
to the expiration of each such policy] a certificate of each policy of insurance
required to be maintained by Tenant under the provisions of Section 6.3. No such
policy of insurance shall be cancelled or changed nor shall the coverage of any
such policy be reduced without at least thirty (30) days' prior written notice
to Landlord, and each policy shall so provide.
ARTICLE VII
Section 7.1. Casualty Insurance. Tenant shall, throughout the term of this
Lease:
A. Keep all buildings on the Demised Premises insured under an all-risk
policy, so called, insuring against loss or damage by at least fire, lightning,
windstorm, hail, explosion, riot, riot attending a strike, and civil commotion,
damage from aircraft and vehicles, and smoke damage, and such other risks and
perils as Landlord may reasonably determine, in amounts at least sufficient to
prevent Landlord or Tenant from becoming a coinsurer within the terms of the
applicable policies and in any event equal to the full insurable value thereof;
B. Keep all buildings on the Demised Premises insured against war risks as
and when such insurance is obtainable and a state of war or national or public
emergency exists in the maximum amount then available;
C. Keep all buildings on the Demised Premises insured against loss or
damage (i) from leakage of sprinkler systems, if and so long as installed in
said buildings, and (ii) by explosion of steam boilers, pressure vessels or
similar apparatus, each in such amount and in such form as Landlord may deem
reasonable;
The term "full insurable value" shall mean the actual replacement cost
(excluding foundation and excavation costs) without deduction for physical
depreciation and said "full insurable value" shall be determined from time to
time at the request of either Landlord or Tenant (but not more frequently than
once in every twelve (12) months' period) by an architect, contractor,
appraiser, appraisal company, or one of the insurers, in any such case selected
and paid by the requesting party and acceptable to Landlord and the holder of
any mortgage on the Demised Premises.
Section 7.2. Subrogation Waiver - Tenant. Each policy of insurance
maintained by Tenant (whether or not required under the provisions of this
Lease) with respect to Tenant's business or property therein shall include
provisions by which the insurance carrier(s) [a] waive(s) all rights of
subrogation against Landlord (and against all persons for whose actions Landlord
may be legally responsible) on account of any loss payable under the policy and
[b] agree(s) that the policy will not be invalidated because the insured (in
writing and prior to the occurrence of any loss under the policy) has waived
part or all of its right(s) of recovery against any party on account of any loss
or damage covered by the policy, or because of the act or negligence of Tenant
or anyone for whom Tenant may be legally responsible, or because of the prior
agreement of the parties regarding the application of the proceeds of the
insurance. If Tenant is unable to procure the inclusion of all of the provisions
described in subdivisions [a] and [b] of the next-preceding
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sentence, Tenant shall name Landlord as an additional insured in the policy.
Section 7.2.1. Waiver of Tenant's Claims. Tenant hereby waives any and all
rights of recovery which it might otherwise have against Landlord, its agents,
employees, contractors and all other persons for whose actions Landlord may be
legally responsible, for any loss or damage to Tenant's business or property in
the Demised Premises or the Building, which business or property are either
required to be insured under the terms of this Lease or which Tenant, in the
absence of any such requirement, elects to insure, notwithstanding that the loss
or damage may result from the negligence, willful act or default under the terms
of this Lease of Landlord, its agents, employees, contractors, or other persons
for whose actions Landlord may be legally responsible.
Section 7.2.2. Landlord's Waiver of Claims. Landlord hereby waives any and
all rights of recovery which it might otherwise have against Tenant, its agents,
employees, contractors and all other persons for whose action Tenant may be
legally responsible, for any loss or damage to the Demised Premises, the
Building or Landlord's business or property therein, which are covered by any
policy of insurance maintained by Landlord, even though that loss or damage
results from the negligence, willful act or default under the terms of this
Lease of Tenant, its agents, employees, contractors or other persons for whose
actions Tenant may be legally responsible.
Section 7.2.3. Subrogation Waiver - Landlord. Landlord agrees that the
insurance policies maintained by it with respect to the Demised Premises or the
Building and Landlord's business and property therein, if any, shall contain
provisions or endorsements substantially similar to those described in
subdivisions [a] and [b] of the first sentence of Section 7.2, so that Tenant's
liabilities shall be limited in the same manner as Landlord's liabilities are to
be limited pursuant to the provisions of Section 7.2 and its several subsections
and subdivisions.
Section 7.3. All insurance provided for in this Article shall be effected
with insurers, authorized to do business in Massachusetts under valid and
enforceable policies, and such policies shall name Landlord as an additional
insured, and contain a standard loss payable endorsement to a mortgagee, if any.
All policies of insurance provided for in this Article shall provide (a) that
such policies shall not be cancelled without at least fifteen (15) days' prior
written notice to each assured named therein and to the holder of any mortgage
to whom loss thereunder may be payable, and (b) that any loss shall be payable
to Landlord or to the holder of any mortgage, notwithstanding any act or
negligence of Tenant (or of the Landlord), in case of any loss payable to the
holder of any mortgage) which might otherwise result in forfeiture of said
insurance.
Section 7.4. Insured Parties - Tenant's Insurance. Each policy of
insurance maintained by Tenant with respect to the Demised Premises or the
Building or its business or property, whether or not required by this Lease,
shall name Landlord an additional named insured, except for insurance policies
containing the endorsements provided for in Section 7.2[a] and 7.2[b]. It is
understood and agreed that the designation of the additional insured parties is
intended to afford to those parties the same protection against claims as is
normally afforded to the insured person procuring the policy by the usual terms
of the customary casualty and liability insurance policies Tenant is required to
maintain or provide for under the terms of this Lease. It is not intended that
any person named as insured by any such policy shall, by virtue of such
designation alone, be entitled to share in any payments made under that policy,
and
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(except in the event that Tenant does not restore the property covered thereby)
Landlord agrees to endorse (without recourse) and deliver to Tenant any check or
draft for any payment under any such policy, which check or draft was made
payable to Landlord solely by virtue of a designation as an additional insured
in accordance with the requirements of this Section or of Section 7.2.
Section 7.5. Tenant's Reports. From time to time, as Landlord may
reasonably require, but not more often than annually, Tenant shall deliver to
Landlord a complete and accurate list of all insurance coverage maintained by
Tenant with respect to the Demised Premises, the Building, or the property or
business of Tenant or Landlord, whether or not the insurance coverage is
required. That list shall include for each policy (a) the policy number, (b) the
name of the carrier, (c) the amount and (in detail) the type of coverage, (d)
the expiration date and the date to which the premium has been paid, (e) the
names of those persons designated as insured, and a reasonably detailed
description of each endorsement on each policy.
Section 7.6. Payment By Tenant. Tenant warrants to Landlord that Tenant
shall pay, on or before the due date(s) thereof, the entire cost of the premiums
for all of the insurance required to be maintained by Tenant pursuant to the
provisions of this Article VII.
ARTICLE VIII
Section 8.1. Condition of Premises. The Demised Premises are demised to
Tenant "broom clean" but in "as is" condition (subject to normal wear and tear
following the date of this Lease), without warranty of fitness for use or
occupation whatsoever, express or implied, Tenant expressly (i) acknowledging
that it has inspected the Demised Premises to the extent desired by Tenant; and
(ii) waiving any rights it may have under any warranty which is created by
statute or otherwise. Tenant agrees that Landlord shall have no obligation to
perform any work of construction or repair to render the Demised Premises fit
for use or occupation, or for Tenant's particular purposes or to make them
acceptable to Tenant.
ARTICLE IX
Section 9.1. Use. Tenant shall have the right to use or occupy the Demised
Premises for any lawful purpose or purposes. Notwithstanding the foregoing,
Tenant shall not have the right to use or occupy the Demised Premises: (i)
during the first lease year, as a food market; or (ii) at any time during the
Lease term, as a pinball, video game, or any other form of entertainment arcade;
a gambling or betting office, other than for the sale of governmentally issued
lottery tickets; a massage parlor; a cinema, video store or bookstore selling,
renting or exhibiting primarily material of a pornographic or adult nature; an
adult entertainment bar or club; a facility offering live entertainment of any
kind; a billiards parlor or pool hall; a flea market; or any purpose or business
which is obnoxious or offensive because of the emission of noise, smoke, dust or
odors.
Section 9.2. Trash Removal. Throughout the term hereof, Tenant agrees to
store all trash and refuse in closed containers at locations as may be agreed to
by Landlord and Tenant (which agreement shall not be unreasonably withheld or
delayed), and to dispose of the trash and refuse as is customary in well-run
businesses of the type operated by Tenant, and to keep the Demised Premises and
all appointments therein reasonably neat and clean.
Section 9.3. Exterior Signs. Subject to applicable laws and regulations,
Tenant may erect at such locations as Tenant may
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request and as Landlord may agree, which agreement shall not be unreasonably
withheld or delayed by Landlord, exterior signs advertising only the business
conducted upon the Demised Premises.
ARTICLE X
Section 10.1. Landlord's Repairs. Landlord has, and shall have, no
repair or replacement obligations whatsoever under this Lease, except as
provided in Section 10.2(b).
Section 10.2(a). Tenant's Repairs. Subject to the provisions of Section
10.2(b) of this Lease, and except for reasonable wear and tear, Tenant shall, at
its cost and expense, make all structural and nonstructural repairs, exterior or
interior, ordinary as well as extraordinary, foreseen and well as unforeseen,
reasonably required to keep the interior and exterior of the Building, the
Common Facilities and lighting facilities, in good order, repair and condition.
Tenant shall also keep in good order and repair the mechanical systems, utility
lines, pipes and conduits which serve the Demised Premises. Tenant may be
self-insured with respect to damage to glass, but shall make all repairs
necessary to keep the glass whole.
Section 10.2(b). If the Building roof, any of the structural portions of
the Building shall be in need of repair to put them in good order, repair and
condition (or shall require replacement because repairs are no longer
effective), and the repair or replacement become necessary during the first
twenty (20) years of the Lease term except in the event of: (i) the act, default
or negligence of Tenant, or of its agents, invitees, licensees or contractors;
or (ii) casualty or accident, then, after receipt of notice from Tenant of the
necessity therefor, Landlord, and not Tenant, shall make the needed repair or
replacement.
Section 10.3. Alterations; Additions. Except for Tenant's initial work
prior to its opening for business, Tenant shall not make any alterations,
additions, or improvements without Landlord's prior written approval therefor in
or to the Demised Premises, except for "permitted changes," which are hereby
defined as improvements which do not change the perimeter of the Demised
Premises, which do not involve or affect the roof or structure or any structural
members of the Demised Premises. Tenant shall give Landlord prior written notice
of any proposed permitted change which is anticipated by Tenant to cost more
than Fifty Thousand ($50,000.00) Dollars, describing it in reasonable detail.
All permitted changes and other improvements shall become a part of the realty
unless Landlord requires their removal at the end of the term.
Section 10.4. Work by Tenant. With respect to any repairs, construction,
restoration, replacement or alterations performed upon the Demised Premises by
Tenant during the term hereof under this Lease, Tenant agrees that:
A. No work in connection therewith shall be undertaken until Tenant
shall have procured and paid for, so far as the same may be
required, from time to time, all municipal and other governmental
permits and authorizations of the various municipal departments and
governmental subdivisions having jurisdiction, and Landlord agrees
to join in and execute the application of such permits or
authorizations whenever such action is necessary;
B. (1) All work in connection therewith shall be done promptly and in
good and workmanlike manner and in compliance with the building,
zoning and all laws and regulations of the municipality or other
governmental
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subdivisions having jurisdiction, and in accordance with orders,
rules and regulations of any company or association insuring the
premises; the cost of any such work shall be paid when due so that
the Demised Premises and Tenant's leasehold shall at all times be
free of liens for labor and materials supplied or claimed to have
been supplied to the Demised Premises; the work shall be prosecuted
with reasonable dispatch, unavoidable delays excepted; (2) Worker's
compensation insurance covering all persons employed in connection
with the work and with respect to whom death or bodily injury claims
could be asserted against Landlord, Tenant or the Demised Premises,
and general liability ("builder's risk") insurance (specifically
covering this class of risk) naming Tenant as insured and Landlord
as additional named insured for the mutual benefit of Landlord and
Tenant, and also, if Landlord so requires, for the benefit of any
holder of any first mortgage, with a single limit not less than One
Million ($1,000,000.00) Dollars for bodily injury and for property
damage, shall be maintained by Tenant at Tenant's cost and expense
at all times when any substantial work is in process. The general
liability insurance provided for in this subsection may be effected
by an appropriate endorsement, if obtainable, upon the insurance
referred to in Section.6.3. All such insurance shall be effected
with insurers authorized to do business in Massachusetts, and all
policies or certificates therefor issued by the respective insurers
shall be delivered to Landlord endorsed "premium paid" by the
company or agency issuing the same or with other evidence of payment
of the premiums satisfactory to Landlord, and further provide that
such policy may not be cancelled or changed without at least ten
(10) days' prior notice in writing to Landlord.
Section 10.5. Tenant shall not suffer or permit any mechanics' liens to be
filed or exist against the fee of the Demised Premises nor against Tenant's
leasehold interest by reason of work, labor, services or materials supplied or
claimed to have been supplied to Tenant or anyone holding the Demised Premises
or any part thereof through or under Tenant. If any such mechanics lien shall at
any time be filed or arise against the Demised Premises, Tenant shall, within
thirty (30) days after notice of the filing thereof, cause the same to be
discharged of record by payment, deposit, bond, order of a court of competent
jurisdiction or otherwise. If Tenant shall fail to cause such lien to be
discharged within the period aforesaid, then, in addition to any other right or
remedy of Landlord, Landlord may, but shall not be obligated to, discharge the
same by procuring the discharge of such lien by deposit or by bonding
proceedings, and in any such event Landlord shall be entitled, if Landlord so
elects, to compel the prosecution of an action for the foreclosure of such
mechanics' lien by the lienor and to pay the amount of the judgment for and in
favor of the lienor with interest, costs and allowances. Any amount paid by
Landlord for any of the aforesaid purposes with interest thereon at the rate of
two (2) points greater than the then prime rate of the Bank of Boston from the
date of payment shall be repaid by Tenant to Landlord on demand, and if unpaid
may be treated as additional rent as provided hereunder. Nothing in this Lease
contained shall be deemed or construed in any way as constituting the consent or
request of the Landlord, express or implied, by inference or otherwise, to any
contractor, subcontractor, laborer or materialman for the performance of any
labor or the furnishing of any materials for any specific improvement,
alteration or repair of or to the Demised Premises or any part thereof, nor as
giving Tenant a right, power or authority to contract for or permit the
rendering of any services or the furnishing of any
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materials that would give rise to the filing of any mechanics liens against the
fee of the Demised Premises.
Section 10.6. All non-removable improvements and alterations and all
building service equipment made or installed by or on behalf of Tenant (but not
trade fixtures and equipment) shall immediately upon completion or installation
thereof be subject to this Lease and, upon the expiration or earlier termination
thereof, become the property of Landlord without payment therefor by Landlord.
ARTICLE XI
Section 11.1. Rent Payments. Tenant shall pay the Minimum Rent and all
other charges payable by it hereunder, without deduction or set-off of any kind
except as may be specifically set forth herein, at the times and in the manner
provided herein to Landlord at 540 Gallivan Boulevard, Dorchester, Massachusetts
02124 or to such other address as Landlord may direct.
Section 11.2. Utilities. Tenant shall pay for all utility service charges
as well as all sewer, fire-pipe, water, water stand-by and other charges which
are attributable to the Demised Premises, without regard to the standards by
which the charges are measured, except to the extent any such charge is included
as part of the "real estate taxes" on the Demised Premises. From and after the
delivery of the Demised Premises to Tenant, Tenant shall be responsible for
maintaining sufficient heat in the Demised Premises to preclude the freezing of
water in the pipes and fixtures.
Section 11.3. Condition of Premises. Tenant shall keep and maintain the
interior of the Demised Premises and the show windows in neat and clean
condition. Tenant shall keep the Demised Premises equipped with all safety
appliances which, because of Tenant's use, may be required by any governmental
authority, and Tenant shall keep the drains empty and clean. Tenant shall comply
with the orders and regulations of all governmental authorities having
jurisdiction and conform to all rules and regulations of the local Board of Fire
Underwriters and similar bodies. Tenant shall install all fire-fighting and
fire-prevention equipment required by any such authority, Board or body. Tenant
shall procure and keep in good standing any licenses and permits required for
any use made of the Demised Premises. Tenant shall, at Tenant's sole cost and
expense, comply with all of the requirements of all county, municipal, state,
federal and other applicable governmental authorities, now in force, or which
may hereafter be in force, pertaining to the Demised Premises and shall
faithfully observe in the Demised Premises all municipal and county ordinances
and state and federal statutes now in force or which may hereafter be in force.
Section 11.3.1. Yield Up. At the end of the term, Tenant shall peaceably
yield up to Landlord the Demised Premises and all alterations, additions and
changes made to or upon the same in good order, repair and condition in all
respects, except for damage resulting from fire, casualty, taking by eminent
domain, or act of or pursuant to public authority, and reasonable wear and tear.
Section 11.3.2. Tenant's Fixtures. All counters, shelving and other
equipment and all other trade fixtures installed by or at the expense of Tenant
and all erections, additions and/or improvements not affixed to the Building and
not used in the operation of the Building, made to, in or on the Demised
Premises by and at the expense of Tenant and susceptible of being removed from
the Demised Premises or the Building without damaging in any manner the
structure of such Building, shall remain the property of Tenant and Tenant shall
(unless authorized by Landlord to abandon the same) remove the same or any part
thereof at any time
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or times during the term hereof, provided that Tenant, at its sole cost and
expense, shall make all repairs occasioned by such removal. Notwithstanding the
foregoing provisions of this Section, however, Landlord shall have the right to
dispose of Tenant's goods and effects in the manner set forth in Section
13.4.
Section 11.3.3. Landlord's Fixtures. Notwithstanding' anything in Section
11.3.2 contained, the following fixtures shall be and remain the property of
Landlord as part of the Demised Premises: HVAC systems; boiler system; light
fixtures; and any other equipment affixed to the Building and parking areas
which is necessary to the physical operation of the Demised Premises. Landlord's
fixtures shall not be deemed to include Tenant's (or any subtenant's) trade
fixtures and equipment.
Section 11.4. Improper Use. Tenant shall not conduct any auction sale or
"going out of business" sale on the Demised Premises unless it is, in fact,
going out of business; nor injure, overload, or deface the Demised Premises; nor
make any use thereof which is improper, offensive or contrary to any law or
ordinance; or any act or thing which shall constitute a nuisance or which may
make void or voidable any insurance covering the Demised Premises; nor cause or
permit the emission of any noise or odor from the Demised Premises by the
operation of any instrument, apparatus or equipment thereon.
Section 11.4.1. If Tenant violates the prohibition against auction sales
or going out of business sales or any of the prohibitions against any of the
several forms of objectionable behavior referred to in Section 11.4, (including,
without limitation, the emission of noise or objectionable odors), or if Tenant
shall fail to terminate the objectionable behavior immediately upon Landlord's
notice to do so, Landlord shall be entitled, then or at any time thereafter, to
pursue the remedies provided in Article XIII for a Condition of Default.
Section 11.5. Intentionally omitted.
Section 11.6. Landlord's Entry. Tenant shall permit Landlord to examine
the Demised Premises at reasonable times and to show the same to prospective
purchasers, lenders, tenants and occupants. Landlord may also enter the Demised
Premises, without charge, to make such repairs, improvements, alterations or
additions as may be necessary in order to comply with the requirements imposed
on Landlord by this Lease, if any, or by any public authority having
jurisdiction of the premises, and to facilitate making repairs required of
Tenant which Tenant has failed to make promptly, and to exercise any of
Landlord's rights under this Lease, and for any of such purposes Landlord shall
have the right to use or occupy without charge such portion of the Demised
Premises as may be reasonably necessary therefor. Landlord shall not, in the
course of any such entry, unreasonably interfere with the conduct of business in
the Demised Premises. In exercising its rights set forth in this Section 11.6,
it is expressly agreed and understood that (except in the event of an emergency)
Landlord shall provide forty-eight (48) hours' prior notice to Tenant and, for
so long as Tenant uses the Demised Premises for the operation of a bank
facility, shall comply with Tenant's security requirements.
Section 11.7. Tenant's Property and Leasehold Improvements. Tenant
covenants and agrees that all personal property and leasehold improvements of
Tenant (and of those claiming under Tenant), which is on the Demised Premises
shall be so at Tenant's sole risk, and Landlord shall not be liable for any
damage thereto unless caused by the act, negligence, or default under this Lease
by Landlord or its agents, licensees or contractors. Without limiting the
foregoing, Tenant agrees that Landlord shall not be responsible or liable to
Tenant, or to those claiming by,
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through or under Tenant, for any loss or damage that may be occasioned by or
through the acts or omissions of other persons, or for any loss or damage
resulting to Tenant or those claiming by, through or under Tenant, or to its or
their property, from the bursting, stopping, leaking or breaking of electric
cables or wires, or water, gas, sewer or steam pipes or other utility lines,
fixtures, facilities or components.
Section 11.8. Tenant's Indemnity. Subject to any limitation imposed by law
and excepting any loss or damage caused by the act, negligence or default under
this Lease by Landlord or its agents, licenses or contractors, Tenant covenants
and agrees to defend Landlord and to save Landlord harmless and indemnified from
and against any and all claims, actions, loss, damages, liability and expense in
connection with loss of life, personal injury and damage to property, whether
arising out of or resulting from any occurrence in the Demised Premises, or out
of or from the occupancy or use by Tenant (or anyone claiming under or through
Tenant) of the Demised Premises or any part thereof, or out of or from any work
undertaken by Tenant (or on Tenant's direct or indirect authority) under this
Lease, or out of or from any occurrence elsewhere which is occasioned wholly or
partly by or which is in any way connected with (a) any failure to perform any
obligation imposed on Tenant by this Lease or any breach of any such obligation,
or (b) any act, neglect, or omission of Tenant, its agents, contractors,
employees, licensees or concessionaires, or of any other person occupying space
in the Demised Premises; and from and against all costs, expenses and
liabilities incurred in connection with any claim or action or proceeding
brought thereon; and in case any action or proceeding be brought against
Landlord or against the holder of any first mortgage covering the Demised
Premises by reason of any such claim, Tenant upon notice from Landlord or such
holder covenants to resist or defend such action or proceeding, and to employ
counsel selected by the insurance companies carrying the risk, or other counsel
reasonably satisfactory to Landlord.
Section 11.9.1. Assignment. Tenant shall have the right to assign this
Lease in accordance with the requirements of Section 11.10.
Section 11.9.2. Tenant shall have the right to sublet the whole or any
part of the Demised Premises; provided that, as a condition thereto, Tenant
shall notify Landlord, promptly upon receipt of a written request therefor, of
the identity of all such subtenants within the Demised Premises. Notwithstanding
any assignment or subletting, in any event, Tenant shall remain primarily liable
on this Lease, and not as a guarantor or surety.
Section 11.10. Tenant shall send to Landlord a notice of assignment which
shall contain (i) the identity and address of the proposed assignee and of any
proposed guarantor, and (ii) a detailed description of the use of the Demised
Premises to be made by the proposed assignee.
Section 11.11. Tenant acknowledges and agrees that, in any event, each
assignee of Tenant shall be required to execute an assignment, assumption and
attornment instrument reasonably satisfactory to Landlord.
ARTICLE XII
Section 12.1. Insurance. The casualty insurance which Tenant is required
to maintain hereunder is set forth in Article VII.
Section 12.2. Termination Rights; Fire. Tenant shall have the right to
terminate this Lease, if the Building is destroyed or damaged by fire or other
insured casualty to the extent of at least twenty five (25%) percent or fifteen
(15%) percent of the
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total cost of replacing it, during the second-last or last year, respectively,
of the original term or of an extension period. Such termination right under
this Section shall be exercised by written notice to the Landlord received
within thirty (30) days after the occurrence of the destruction or damage. Any
termination notice sent by Tenant shall take effect thirty (30) days after
mailing thereof.
Section 12.3(a). Taking. If, after the execution of this Lease, the whole
of the Demised Premises, or the whole (or an undetermined portion) of the
remainder of the original term or of the then current extension period is taken
by eminent domain by any public, quasi public or private authority, or is
otherwise appropriated (without a formal taking) pursuant to public authority,
this Lease shall terminate on the date Landlord is divested of its title to the
Demised Premises, or the date Tenant is divested of the lessee interest herein.
Section 12.3(b). If, as the direct or indirect result of any such taking
by eminent domain or any act of or pursuant to public authority, any of the
conditions described below shall come into existence after the execution of this
Lease, Tenant shall have the right to terminate this Lease by written notice to
Landlord, as provided below. Such termination shall take effect as of the date
on which the event giving rise to the termination right occurred.
(i) The aggregate of all reductions in the ground floor of the Building
resulting from all such takings and acts equals or exceeds fifteen
(15%) percent of the original ground floor area of the Building;
(ii) The aggregate of all reductions in the paved parking areas of the
Demised Premises resulting from all such takings and acts equals or
exceeds forty (40%) percent of the original capacity thereof,
measured by the number of parking stalls.
Section 12.3(c). Notices. The termination right under Section 12.3(b)
shall be exercised by written notice to Landlord received within thirty (30)
days after date of the relevant taking.
Section 12.4. Restoration. If the Building or the parking areas shall be
damaged or destroyed by fire or other casualty or damaged, destroyed or
appropriated by any such taking or act, and if this Lease is not terminated by
or because of such damage, destruction or appropriation, Tenant, within sixty
(60) days after the occurrence of such damage, destruction or appropriation
shall commence to repair and restore the Building and the parking areas (or so
much as shall remain thereof in the case of any such appropriation). Tenant
shall diligently prosecute the work of repair and restoration, in a good and
workmanlike manner, using good materials to its completion.
Section 12.5. No Rent Abatement. If the Demised Premises are taken,
damaged or destroyed by a taking by eminent domain or by act of or pursuant to
public authority and if, as the result of such taking, damage, destruction, the
Demised Premises are rendered wholly or partly untenantable, then, in any such
case, the Minimum Rent and all items of Additional Rent payable by Tenant to
Landlord shall not abate.
Section 12.6. Taking Damages. Landlord reserves, and Tenant hereby assigns
to Landlord, all rights to any award or compensation accruing on account of any
damage, destruction or other "adverse effect" (which latter term shall include
both the termination and the appropriation of intangible rights, such as
easements, as well as other forms of limitation adversely affecting the
interests of any party) suffered by the leasehold
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hereby created, the Demised Premises, the Building or any improvement or
appurtenance in, on or to any of these as a result of any act of, or pursuant
to, public authority. Tenant shall execute and deliver to Landlord such
confirmatory instruments of this assignment as Landlord may from time to time
request.
Section 12.7. The foregoing reservation and assignment do not include any
award payable to Tenant for physical damage to or appropriation of Tenant's
tangible personal property or for moving expenses, on condition, however, that
such award shall be payable to Tenant by the taking authority and not by
Landlord, and on the further condition that no award to Tenant shall result in
any reduction in the amount recoverable from the taking authority by Landlord,
or by the holder of any mortgage.
Section 12.8. In the event of any termination of this Lease as the result
of the provisions of this Article XII, Tenant shall assign to Landlord the
proceeds of all insurance coverages maintained by Tenant therefor and shall,
within fifteen (15) days following Tenant's notification to Landlord of its
election to terminate the Lease, pay to Landlord the sum of all so-called
"deductibles" which are part of any such policy maintained by Tenant. In the
event of any termination of this Lease as the result of the provisions of this
Article XII, the parties, effective as of such termination, shall be released,
each to the other, from all liability and obligations thereafter arising under
this Lease.
ARTICLE XIII
Section 13.1. Each of the following contingencies shall be a Condition of
Default:
Section 13.1.1. Condition of Default. If (i) Tenant shall neglect or fail
to pay any rent or other charge due and payable by Tenant, and such neglect or
failure shall continue for a period of ten (10) days after receipt by Tenant of
written notice of such neglect or failure, subject to the provisions of Section
3.2.1; or (ii) Tenant shall neglect or fail to perform or observe any other
terms, provisions, conditions or covenants herein contained and on Tenant's part
to be performed or observed, and if (a) such neglect or failure shall continue
for a period of thirty (30) days after receipt by Tenant of written notice of
such neglect or failure; or if (b) more than thirty (30) days are required to
cure such default (because of the nature of the default and of the necessary
cure), and Tenant fails, or, having begun to cure such default within the
thirty (30) day period, Tenant thereafter does not diligently and continuously
proceed to cure the default to completion; or
Section 13.1.2. If the estate hereby created shall be taken on
execution or by other process of law; or
Section 13.1.3. If Tenant or any person or legal entity occupying the
Demised Premises through or under Tenant (save and except Tenant's subtenants or
concessionaires) shall commit an act of bankruptcy or be declared bankrupt or
insolvent according to law, or if any assignment shall be made of the property
of any of them, for the benefit of creditors, or if any proceedings, including
without limitation, proceedings for reorganization or for an arrangement with
creditors, shall be commenced under any bankruptcy or insolvency law by or
against Tenant or any person or legal entity occupying the Demised Premises
through or under Tenant, (save and except Tenant's subtenants and
concessionaires) and the same shall not be discharged within ninety (90) days of
its filing; or
Section 13.1.4. Except in the event that Tenant is operating a banking
facility in the Demised Premises and a regulatory order is issued by a
governmental authority having
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jurisdiction therefor, if a receiver, guardian, conservator, trustee, assignee
or any other or similar officer or person shall be appointed to take charge of
all or substantially all of Tenant's property or the property of any person or
legal entity occupying the Demised Premises through or under Tenant (save and
except Tenant's subtenants or concessionaires); or
Section 13.1.5. If any court shall enter an order with respect to Tenant
or with respect to any person or legal entity occupying the Demised Premises
through or under Tenant (save and except Tenant's subtenants and
concessionaires) providing for the modification or alteration of the rights of
creditors.
Section 13.2. Landlord's Remedies. In the event any Condition of Default
shall occur (notwithstanding any waiver, license or indulgence granted by
Landlord with respect to the same or any other Condition of Default in any
former instance) Landlord, then or at any time thereafter, but prior to the
removal of such Condition of Default, if the Condition of Default is susceptible
of being cured, shall have the right at its sole election, either
Section 13.2.1. (Termination). to terminate this Lease by written notice
to Tenant, which shall take effect on the date of Tenant's receipt of said
notice or on any later date (on or prior to the expiration of the
then-current portion of the term) specified in Landlord's termination
notice; or
Section 13.2.2. (Possession). to enter upon and take possession of the
Demised Premises (or any part thereof in the name of the whole) without
demand or notice, and repossess the same as of the Landlord's former
estate, expelling Tenant and those claiming under Tenant (except to the
extent as Landlord may have otherwise agreed pursuant to the terms of
Section 11.11 above), without being deemed guilty of any manner of
trespass and without prejudice to any remedy for arrears of rent or
preceding breach of covenant.
Section 13.2.3. Landlord's repossession of the Demised Premises under
Section 13.2.2 shall not be construed to effect a termination of this
Lease, unless Landlord sends Tenant a written notice of termination under
Section 13.2.1.
Section 13.3. Reletting. Landlord shall make reasonable efforts (whether
or not this Lease shall be terminated pursuant to Section 13.2.2) to relet
the Demised Premises or any part thereof for such period or periods (which
may extend beyond the term of this Lease) and at such rent or rents and
upon such other terms and conditions as Landlord may deem advisable, and
in connection with any such reletting, Landlord may make or cause to be
made such additions, alterations and improvements to the Demised Premises
as Landlord shall deem advisable.
Section 13.4. Removal of Goods. If Landlord shall terminate this Lease or
take possession of the Demised Premises, Tenant, and those claiming under
Tenant, shall forthwith remove their goods and effects from the Demised
Premises. If Tenant or any other claimant shall fail to effect such removal
forthwith, Landlord may, without liability to Tenant or to those claiming under
Tenant, remove such goods and effects and may store the same for the account of
Tenant or of the owner thereof in any place selected by Landlord or, at
Landlord's election, Landlord may sell the same at public auction or private
sale on such terms and conditions as to price, payment and otherwise as
Landlord, in its sole judgment, may deem advisable. Tenant shall be responsible
for all costs of removal, storage and sale, and Landlord shall have the right to
reimburse itself from the proceeds of any such sale for all such costs paid or
incurred by
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Landlord. If any surplus sale proceeds shall remain after such reimbursement
Landlord may deduct from such surplus any other sum due to Landlord hereunder
and shall pay over to Tenant the remaining balance of such surplus sale proceeds
if any.
Section 13.5. No termination or repossession provided above shall relieve
Tenant of its liabilities and obligations hereunder, all of which shall survive
such termination or repossession. In the event of any such termination or
repossession, Tenant shall pay Landlord, in advance, on the first day of each
month (and pro rata for the fraction of any month) for what would have been the
entire balance of the term of this Lease (or the current extension period)
one-twelfth (1/12th) of the annual rental for the Demised Premises, as defined
in Section 13.5.1, after applying the proceeds (if any) of the reletting of the
Demised Premises which remain after deducting Landlord's expenses in connection
with such reletting, termination or repossession. Such expenses shall include,
without limitation, removal, storage and attorneys' and brokers' fees.
Section 13.5.1. The annual rental for the Demised Premises shall be the
total of (i) the Minimum Rent, and all other charges payable by Tenant (whether
or not to Landlord) for the portion of the term immediately preceding such
termination or repossession; and (ii) the cost of heating the Demised Premises
to prevent the freezing of pipes, while the Demised Premises remain vacant,
(iii) any increase in the premiums payable by Landlord for any insurance
coverage maintained with respect to the Demised Premises, while the Demised
Premises remain vacant, if the increases are attributable to the vacancy of the
Demised Premises and which would have been required of Tenant under the Lease if
the Lease had not been terminated, and (iv) the cost of any repairs to the
Demised Premises, which, notwithstanding they become necessary because of the
acts of some other person(s) would not have become necessary if the Demised
Premises had not been vacant.
Section 13.6. At any time after any such termination or repossession,
whether or not Landlord has collected any current damages, Landlord shall be
entitled to recover from Tenant and Tenant shall pay to Landlord, on demand, as
liquidated final damages in lieu of all accrued, unpaid current damages and all
current damages accruing beyond the date of the demand (or, if earlier, the date
to which Tenant shall have paid current damages) a sum equal to the amount by
which the annual rent (as defined in Section 13.5.1) payable from the date of
such demand for what would have been the balance of the term shall exceed the
fair net rental value of the Demised Premises for the same period, determined as
of the beginning of that period.
Section 13.7. Not more than seven (7) days after receipt of Landlord's
bill therefor, Tenant shall pay Landlord all actual costs and expenses
(including, without limitation, reasonable amounts for attorneys' fees) incurred
by Landlord in enforcing Tenant's obligations or Landlord's rights under this
Lease.
ARTICLE XIV
Section 14.1. Miscellaneous - Landlord Self-Help. If Tenant shall default
in the performance of any obligation imposed on it by this Lease and shall not
cure such default within the applicable time period set forth in Section 13.1.1,
Landlord, without waiving or prejudicing any other right or remedy Landlord may
have, shall have the right at any time thereafter to cure such default for the
account of Tenant, and Tenant shall forthwith reimburse Landlord for any amount
paid and any expense or contractual liability so incurred. Tenant's failure to
reimburse Landlord shall be deemed a failure to pay the minimum rent.
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Section 14.1.1. If it shall be necessary to do so to protect the real
estate or Landlord's interest therein, or to prevent injury to persons or damage
to property, Landlord may cure a default by Tenant, as provided in Section 14.1,
before the expiration of the waiting period but only after written notice to
Tenant. If Tenant's defaulted obligation under this Lease consists of a payment
of money to a person or legal entity other than Landlord (e.g., an insurance
premium), Landlord may cure the default under this Section 14.1.1.
Section 14.1.2. Tenant Self-Help. If Landlord shall neglect or fail to
perform or observe any of the terms, provisions, conditions or covenants herein
contained and on Landlord's part to be performed or observed, and if such
neglect or failure shall continue for a period of thirty (30) days after receipt
by Landlord of written notice of such neglect or failure, or if more than thirty
(30) days are required to cure such default (because of the nature of the
default and of the necessary cure), and Landlord fails, within such thirty (30)
day period to begin to cure the default or, having begun to cure such default
within the thirty (30) day period, Landlord thereafter is not diligently and
continuously proceeding to cure the default to completion, Tenant shall have the
right to exercise self-help in order to cure such default. Landlord shall
reimburse Tenant for the reasonable cost of such cure, within thirty (30) days
following Landlord's receipt of fully executed mechanics' lien waivers and bills
marked "paid". In the event that Landlord does not reimburse Tenant in
accordance with the terms and provisions of the preceding sentence, interest
shall accrue, from the date of Tenant's presentation to Landlord of such fully
executed mechanics' lien waivers and receipted bills, at the interest rate set
forth in Section 3.2.1 of this Lease. In the event that Landlord has not
reimbursed Tenant within sixty (60) days following Tenant's presentation to
Landlord of fully executed mechanics' lien waivers and receipted bills, Tenant
shall have the right to deduct such reasonable costs of cure from payment(s) of
Minimum Rent until such sum has been fully recouped.
Section 14.2. Mortgages, Overleases. This Lease shall be subordinate to
any future mortgage or other pledge of the Demised Premises to which Landlord's
interest in the Demised Premises is subordinated and to any overlease by or
under which Landlord holds its interest therein which is, as a matter of record,
superior to the lien of this Lease provided that, Landlord obtains for Tenant a
"mortgagee's nondisturbance agreement," so-called, to be executed by Tenant and
the holder of such mortgage. Such nondisturbance agreement shall be in a form as
Tenant shall approve, which approval shall not be unreasonably withheld or
delayed. Subsequent to Tenant and such holder executing such agreement, then, in
the event such mortgage shall be foreclosed, this Lease shall not terminate, but
shall continue in force in accordance with its terms and in accordance with the
terms of such non-disturbance agreement.
Section 14.2.1. The provisions of Section 14.2 shall be self-operative,
but Tenant hereby designates Landlord as Tenant's attorney-in-fact irrevocable
to execute and deliver such confirmatory instruments of subordination as any
mortgagee or overlessor of the Building require, as well as any instrument of
attornment providing for the continued efficacy of this Lease notwithstanding
the foreclosure of any such mortgage or the termination of any such overlease.
Section 14.2.2. Offset Statements. Within ten (10) days after receipt of
Landlord's written request therefor, Tenant shall execute and deliver to any
such mortgagee a statement acknowledging (if such be the case) that Landlord's
obligations hereunder have been fully performed to the date of such statement
(or, alternatively, specifying those matters as to which Tenant claims Landlord
is in default) and stating, also, the date or
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dates to which (or the periods with respect to which) the payments required of
Tenant hereunder have been made.
Section 14.3. Waiver. Neither Landlord's nor Tenant's failure to complain
of any act or omission on the part of the other, or to complain of any
deficiency in any payment or performance (however long the same may continue)
nor the payment or acceptance of all or a part of the rent (nor the performance,
either complete or partial, or acceptance of performance, either complete or
partial of any other obligation), regardless of any accompanying statement,
assertion or qualification at the time the payment or performance is tendered,
shall never be deemed to waive or to preclude the exercise of any of its rights
hereunder. No waiver shall be effective except by written instrument describing
the waiver explicitly and signed by such party. No waiver of any breach of any
provision of this Lease shall be deemed a waiver of a breach of any other
provision of this Lease or a consent to any subsequent breach of the same or any
other provision. If any action shall require consent or approval, the grant of
such consent or approval on any one occasion shall not be deemed a consent to or
approval of any other action on the same occasion or the grant of such consent
or approval of the same or any other action on any subsequent occasion. Each
right and remedy under this Lease or by operation of law shall be distinct and
separate from every other right and remedy; all such rights and remedies shall
be cumulative, and none of them shall be deemed inconsistent with or exclusive
of any other, whether or not exercised; and any two or more or all such rights
and remedies may be exercised at the same time or successively.
Section 14.4(a). Notices. Any notice hereunder shall be in writing and may
be served in any lawful manner selected by the notifying party but it is agreed
that a written notice, mailed by registered or certified mail in accordance with
the requirements of the United States Postal Service and directed to the party
to be notified at the address most recently furnished by that party to the party
sending the notice ("an incontestable notice") shall be conclusively deemed to
have been served. An incontestable notice shall be deemed conclusively to have
been delivered on the Postal Service's delivery date, shown on the certified or
registered mail return receipt for such notice, except that if any such notice
is returned to the sender by the Postal Service for any reason, the
incontestable notice shall nevertheless be deemed conclusively to have been
delivered on the earliest date on which delivery by the Postal Service was
attempted, as indicated by the Postal Service endorsement on the cover of the
returned notice. Any incontestable notice sent by registered mail shall be
deemed conclusively to have been mailed on the mailing date endorsed on the
mailing receipt furnished to the notifying party by the Postal Service. During
the period of any postal strike or other interference with the mails, commercial
delivery such as Federal Express shall be substituted for registered or
certified mail. Except for a written notice specifically declared to take effect
on its dispatch by the lease provision requiring or permitting the notice, every
written notice hereunder shall take effect when delivered.
Tenant agrees to give any mortgagee of the Demised Premises a duplicate notice
of any letter to Landlord alleging a default by Landlord under this Lease and
Tenant agrees that such mortgagee shall thereafter have thirty (30) days to
correct or cure such default, as well as Landlord, either such performance to be
accepted by Tenant or in the event that such cure cannot be completed within
such thirty (30) day period, such reasonable period of time as is required to
diligently prosecute such cure to its completion.
Section 14.4(b). Addresses. Initially, notices for the parties shall be
directed to them at their respective addresses, stated at the beginning of this
Lease. Any change in the
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address(es) to which notices for a party shall be sent shall be effected by
written notice from that party to the other. Written notice sent to Tenant at
the Demised Premises shall conclusively be deemed to have been sent to Tenant's
most current address for notices. Each party may, by written notice, require
that additional copies [but not more than two (2)] of each notice directed to it
be sent to the address(ees) at the address(es) designated in the requesting
party's notice.
Section 14.5. Quiet Enjoyment. If Tenant shall pay the Minimum Rent and
all Additional Rent and other charges reserved and imposed by the terms of this
Lease and shall fully and promptly discharge all of the other obligations
imposed on Tenant by the terms of this Lease (whether requiring Tenant to act or
to refrain from doing so), then Tenant shall peaceably and quietly have, hold,
occupy and enjoy the Demised Premises during the term without hindrance or
ejection by Landlord or by any person lawfully claiming under Landlord, subject
only to the provisions of applicable law and to the terms of this Lease.
Section 14.6. Delays. In any case where either party hereto is required to
do any act, the date (or the period) by (or in which) the act is to be performed
shall be postponed (or enlarged) by a period equal to any delay caused by or
resulting from Act of God; war, civil commotion; fire or other casualty;
weather, labor difficulties, shortages of labor, materials, fuel, electricity
(or other relevant form of energy) or equipment; or resulting from government
regulations or other causes (not including financial inability to perform)
beyond such party's reasonable control, whether such date (or time period) be
designated specifically (e.g. "July 4, 1986"; "within 120 days after such
filing") or described as (or with reference to) a "reasonable time."
Section 14.7(a). "Tenant" Defined, Successors. The term "Named Tenant" (as
well as the term "Tenant") and the pronouns referring thereto shall mean the
party (or parties) named originally in this Lease as such. When the context
permits or requires it, the term "Tenant" shall also mean any party or parties
succeeding by operation of law to the interest of the Named Tenant, any assignee
of Tenant, and any party or parties responsible for Tenant's obligations under
this Lease by operation of the provisions of Section 11.11 or otherwise. If
there is more than one party named (or responsible) as Tenant at any time, the
covenants of Tenant shall be the joint and several obligations of each of those
parties, and if Tenant is a partnership, the covenants of Tenant shall be the
joint and several obligations of each of the partners and the obligations of the
firm.
Section 14.7(b). If the Named Tenant or any of its successors is a group
or combination (such as, for example, a group of tenants in common), rather
than a single person or a single corporation, the covenants and liabilities of
Tenant may be enforced against the group or corporation, in a proceeding brought
against one or more of the members of the group or combination, with the same
effect as if each member had been made a party thereto and duly served with
process.
Section 14.7(c). Except as expressly otherwise provided by any provision
of this Lease, the terms and provisions of this Lease shall be binding upon and
inure to the benefit of the heirs, devisees, personal representatives,
successors and assigns, respectively, of the Landlord and Tenant.
Section 14.8. Limitation of Landlord's Liability. If at any time during
the term of this Lease, the Landlord's interest hereunder shall be held by
anyone acting in a fiduciary capacity, then notwithstanding any other provision
of this Lease, the Landlord's obligations hereunder shall not be binding upon
such
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fiduciary individually or upon any beneficiary or shareholder for whom such
fiduciary acts, but only upon such fiduciary in that capacity and upon the trust
estate.
Section 14.8.1. The covenants of Landlord contained in this Lease shall be
binding upon each party holding the Landlord's interest herein only with respect
to breaches occurring during the time of that party's ownership of the
Landlord's interest hereunder. In addition, Tenant specifically agrees to look
solely to Landlord's interest in the Demised Premises for the satisfaction of
any claim or judgment against Landlord, it being specifically agreed that
neither the Landlord nor anyone claiming under the Landlord shall ever be
personally liable for any such judgment. The provisions contained in the
foregoing sentence are not intended to limit any right that the Tenant might
otherwise have to obtain injunctive relief against Landlord or Landlord's
successor in interest, or to prevent Tenant from taking or prosecuting any other
action which does not result in the personal liability of any person holding the
Landlord's interest in this Lease to respond in monetary damages in excess of
the value of that person's interest in the Demised Premises. It is further
understood and agreed that with respect to any services to be furnished by
Landlord to Tenant, Landlord shall in no event be liable for failure to furnish
the same when prevented from doing by strike or lockout, by equipment breakdown,
by accident, by order or regulation of or by any governmental authority, by
failure (for any cause) of supply, supplies, parts, or labor necessary to
furnish such services, by war or other public emergency, by any cause beyond the
Landlord's reasonable control, by any cause due to any act or neglect of the
Tenant or its servants, agents, employees, or licensees or due to any act or
neglect of any person claiming by, through or under the Tenant, or by the
termination for any reason of Landlord's occupancy of the premises from which
the services is being supplied by Landlord; and in no event shall the Landlord
ever be liable to Tenant for any indirect or consequential damages.
Section 14.9. Brokers. Tenant warrants and represents to Landlord, upon
which warranty and representation Landlord has relied in the execution of this
Lease, that Tenant has had no dealings of any kind with any broker in connection
with the Demised Premises, or in connection with the transaction represented by
this Lease. Tenant shall indemnify and save Landlord harmless from and against
any and all claims, loss, cost, damage and expense (including reasonable amounts
for attorneys' fees) arising out of or in connection with the claim of any
person or legal entity, for any fee, commission or payment on account of any
interest in the Demised Premises on account of this Lease or the transaction
represented hereby.
Section 14.10. Assignment by Landlord. If Landlord assigns Landlord's
interest in this Lease or the rents payable hereunder (conditionally or
otherwise) to the holder of a mortgage or deed of trust of the Demised Premises,
Tenant agrees that neither the assignment by Landlord nor the acceptance thereof
by such holder shall be deemed an assumption by such holder of any of the
obligations of Landlord hereunder, unless such holder shall (a) specifically
elect to do so by written notice sent to Tenant, or (b) take possession of the
Demised Premises, with or without the foreclosure of such holder's mortgage or
deed of trust.
Section 14.10.1. Tenant shall execute such instruments as may be required
to assure such holder that without the written consent of such holder (i) no
rent or other charge shall be prepaid hereunder other than in accordance with
the express provisions of this Lease, (ii) no modification shall be made in the
provisions of this Lease nor shall the term be extended or renewed, except as
provided herein, (iii) this Lease shall not be terminated except as provided
herein nor shall Tenant tender or effect a surrender of the Lease except
incident to a termination
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provided for herein, and (iv) this Lease shall not be subordinated to any lien
subordinate to such first mortgage.
Section 14.11. Every provision of this Lease obligating Tenant shall be
construed to be both a covenant and a condition.
Section 14.12. The rights of the parties are governed by the terms of this
Lease which is to be interpreted in accordance with Federal law (where
applicable), and in accordance with the laws of the Commonwealth of
Massachusetts with respect to all other provisions.
Section 14.13. If Tenant continues in occupancy of the Demised Premises
after the end of the term, such occupancy shall be deemed a tenancy at
sufferance, terminable at Landlord's election without notice to Tenant or anyone
claiming under Tenant, whether or not Landlord receives any payments for use and
occupancy of the Demised Premises during such tenancy. Tenant's liability for
such use and occupancy after the term of this Lease ends shall be calculated:
(i) for the first sixty (60) days after the end of the lease term, at one
hundred twenty-five (125%) percent of the rate payable by Tenant hereunder
immediately prior to the end of the term; and (ii) after sixty (60) days
following the end of the lease term, at double the rate payable by Tenant
hereunder immediately prior to the end of the term. Tenant shall pay any amount
due under this Section within five (5) days after receipt of Landlord's bill
therefor.
Section 14.14. The term "person," except when qualified in some limiting
way (as in the phrase "natural person") shall mean and include not only all
natural persons but all other "legal entities," such as corporations and
partnerships, which are or may be recognized by law as acceptable organizational
forms for use in operating a business or conducting any other lawful activity,
whether private, governmental or mixed.
Section 14.15. The terms "business day" and "business days" shall not
include or refer to Saturday, Sunday or any "legal holiday," which latter term
shall mean and include those days for which employees who are paid on an hourly
basis are entitled to receive premium pay from their employers, by operation of
the laws of the United States or of the state in which the Demised Premises are
located.
Section 14.16. Any pronoun shall be read in the singular or plural number
and in such gender as the context may require.
Section 14.17. If any restrictive provision set forth (or incorporated by
adoption or reference) in this Lease shall be deemed, by a court of competent
jurisdiction, to be excessive in scope, duration or geographic extent, the
provision shall be effective to such extent, for such period of time and over
such geographic area as such court, after evidentiary hearing, shall deem is
reasonable. If any other provision of this Lease shall be determined to be void
or unenforceable by a court of competent jurisdiction, the remaining provisions
shall not thereby be affected.
Section 14.18. Any reference made in this Lease to an Article, Section,
subsection or other type of subdivision of this Lease shall be construed as a
reference to the entire Article (including all of its Sections, sections and
other subdivisions) to the entire Section (including all of its subsections and
other subdivisions) or to the entire subdivision (including all of its further
subdivisions), as the case may be, and shall be construed as a reference to any
appendix provision or Exhibit which complements, supplements or modifies the
provision referred to.
Section 14.19. The parties acknowledge that in the course of negotiating
this Lease their respective representatives have
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gradually reached preliminary agreement on the several terms set forth in this
instrument. The parties acknowledge and agree that at all times they have
intended that none of such preliminary agreements (either singly or in
combination) shall be binding on either party, and that they shall be bound to
each other only by a single, formal, comprehensive document containing all of
the agreements of the parties, in final form, which has been executed by a duly
authorized officer of Landlord and by Tenant or a duly authorized representative
of Tenant. The parties acknowledge that none of the prior oral and written
agreements between them (and none of the representations on which either of them
has relied) relating to the subject matter of this Lease shall have any force or
effect whatever, except as and to the extent that such agreements and
representations have been incorporated in this Lease. The submission of this
instrument for examination does not constitute a reservation of or option for
the Demised Premises but shall become effective as a lease only upon said
execution and delivery by both Landlord and Tenant.
Section 14.20. Any schedule, exhibit, table of contents, index or appendix
attached to this Lease shall be deemed a part of the Lease.
Section 14.21. Right of First Refusal to Purchase. Should Landlord at any
time during the term of this Lease or any extension, receive an offer to
purchase the Demised Premises, the entire building or any part of the building
(collectively referred to as the Subject Property) and Landlord decides to
accept such offer, or should Landlord during any such time make an offer to sell
the Subject Property, Landlord shall give Tenant thirty (30) days notice in
writing of such offer. Tenant shall then have the first option to purchase the
Subject Property by giving written notice to Landlord of its intention to
purchase within such thirty (30) day period at the same price and on the same
terms as any such offer. In the event that Tenant does not elect to purchase the
Subject Property in accordance with such offer, Landlord shall have the right to
sell the Subject Property, in accordance with terms materially similar to such
offer, at any time within which six (6) months following the date of Landlord's
receipt of Tenant's rejection of such offer. In the event that Landlord shall
not consummate such sale in accordance with the provisions of the preceding
sentence, then the provisions of this Section 14.21 shall continue in force and
effect.
Section 14.22. Hazardous Substances. Tenant shall not cause or permit the
release of any hazardous substance/material or oil into the septic, sewage or
other waste disposal system serving the Demised Premises and/or the Building,
nor cause or permit the use, generation, release, disposal or storage of any
hazardous substance/material or oil (except only the use and storage of fuel oil
used for heating the Building, provided the same is used and stored in
compliance with any and all federal, state, and local laws, ordinances and
regulations governing the same) nor commit or suffer to be committed in or on
the Demised Premises any act which would require the filing of notice pursuant
to applicable law. In addition, Tenant shall not cause or permit the
transportation of any hazardous substance/material or oil to or from the Demised
Premises without the prior written consent of Landlord, and then only in
compliance with any and all federal, state and local laws, ordinances and
regulations governing such transportation. The phrase "hazardous
substance/material or oil" as used in this Section shall have the same meaning
as defined and used in 42 USC ss. 9601, et seq., as the same may be amended from
time to time, or as defined in any other federal, state or local laws,
ordinances and regulations applicable to the Demised Premises and/or the
Building. Tenant shall forthwith give Landlord notice of the accidental or other
introduction of any such hazardous substance/material or oil, or
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the release or threat of release from the Demised Premises of any such hazardous
substance/material or oil.
Section 14.22.1. Tenant's Indemnity. Tenant shall indemnify, defend, and
hold Landlord, any parent, subsidiary and affiliate of Landlord, any overlessor,
and their respective officers, directors, beneficiaries, shareholders, partners,
agents, and employees harmless from all fines, suits, procedures, claims, and
actions of every kind, and all costs associated therewith (including attorneys'
and consultants' fees) arising out of or in any way connected with any deposit,
spill, discharge, or other release (or the threat of release) of any hazardous
substance/material or oil that occurs during the term of this Lease, or which
arises at any time from Tenant's use or occupancy of the Demised Premises, or
from Tenant's failure to provide all information, make all submissions, and take
all actions required by all governmental authorities under all applicable laws,
ordinances and regulations. In addition, in connection with Tenant's
indemnifications pursuant to this Section 14.22.1, Tenant shall be responsible
for the cost of any remediation required to be performed in, on or to the
Demised Premises and/or the Building as a result of any deposit, spill,
discharge, or other release (or the threat of release) of any hazardous
substance/material or oil that occurs during the term of this Lease.
Section 14.22.2. Tenant will not cause or permit any asbestos or asbestos
containing materials to be installed or otherwise introduced into the Demised
Premises or the Building. Tenant shall be solely responsible (at its sole cost
and expense) for any removal or remediation required in connection with any
existing asbestos or asbestos containing materials contained in the Building or
on the Demised Premises as of the date of this Lease if such removal or
remediation shall be required because of (i) any demolition, renovation,
alteration, refurbishing, refixturing or other work performed in or to the
Demised Premises by or on behalf of Tenant or anyone claiming under Tenant, or
(ii) any damage or deterioration of such existing asbestos or asbestos
containing materials arising out of or resulting from any act, omission or
negligence of Tenant or of Tenant's employees, agents, licensees, invitees or
contractors, or arising out of or resulting from any demolition, renovation,
alteration, refurbishing, refixturing or other work performed in or to the
Demised Premises by or on behalf of Tenant or anyone claiming under Tenant.
Section 14.22.3. Tenant's obligations and liabilities under Section 14.22,
Section 14.22.1 and Section 14.22.2 shall survive the expiration or earlier
termination of this Lease.
[HERE ENDS THIS PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Lease as a
sealed instrument on the date first specified above.
LANDLORD:
SUPERIOR REALTY CO., INC.
By: [Illegible]
-------------------------------
Its Treasurer hereunto
duly authorized
TENANT:
THE HIBERNIA SAVINGS BANK
By:________________________________
Its ________________ hereunto
duly authorized
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IN WITNESS WHEREOF, the parties hereto have executed this Lease as a
sealed instrument on the date first specified above.
LANDLORD:
SUPERIOR REALTY CO., INC.
By:________________________________
Its Treasurer hereunto
duly authorized
TENANT:
THE HIBERNIA SAVINGS BANK
By: [Illegible]
-------------------------------
Its Chairman hereunto
duly authorized
26A
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EXHIBIT A
Twelve (12) certain parcels of land, with the buildings thereon, situate
in that part of said Boston known as South Boston, and bounded and described as
follows:
PARCEL ONE - Registered Land
NORTHEASTERLY by West Third Street, fifty-four (54) feet;
SOUTHEASTERLY by land now or formerly of Duncan McGee et al,
ninety-five (95) feet;
SOUTHWESTERLY by lands now or formerly of Michael J. Daly, and of
Ignas Kibilda, fifty-four (54) feet; and
NORTHWESTERLY by lands now or formerly of Matthew J. Thoemmel, Jr.
and of Thomas F. O'Connor et al, ninety-five (95) feet.
All of said boundaries are determined by the Land Court to be located as shown
on a plan drawn by D.W. Hyde, Engineer & Surveyor, dated September 21, 1925, as
modified and approved by said Court, filed in the Land Registration Office as
plan No. 11061-A, a copy of a portion of which is filed with Certificate of
Title No. 19532 and said land is shown thereon as lots A and B.
Being the premises described in Certificate of Title No. 64672 Suffolk Deeds,
Registered Land Division.
PARCEL TWO
A certain parcel of land with the buildings thereon formerly numbered 464-470
WesT Broadway and 395-401 Athens Street, in that part of said Boston called
South Boston, bounded and described as follows:
SOUTHWESTERLY by West Broadway, seventy-five (75) feet;
NORTHWESTERLY by land of the Phillips Church and Society,
one hundred forty-five and 5/10 (145.5) feet;
NORTHEASTERLY by Athens Street, seventy-five (75) feet; and
SOUTHEASTERLY by land now or formerly of Rifchin, one hundred
forty-five and 5/10 (145.5) feet.
PARCEL THREE
A parcel of land with the buildings thereon situated at numbers 388 and 388 on
Athens Street, in South Boston, Massachusetts, bounded and described as follows:
SOUTHWESTERLY by Athens Street, forty-five (45) feet;
NORTHWESTERLY by land of Lindsey, now or formerly, sixty--six (66)
feet;
NORTHEASTERLY on land now or formerly of Bowdoin & Johnson,
forty-five (45) feet; and
SOUTHEASTERLY on land now or formerly of Nolan, sixty-six (66) feet.
Be said measurements more or less or however otherwise bounded and
described.
27
<PAGE>
PARCEL FOUR
A certain parcel of land with the buildings thereon situated and numbered 345 on
Third Street in that part of said Boston called South Boston and bounded and
described as follows:
NORTHEASTERLY on Third Street, twenty-seven (27) feet;
SOUTHEASTERLY on land formerly of Seth Padelford, now or late of
Bowden, eighty-five and 6/12 (85 6/12) feet;
SOUTHWESTERLY by land now or late of Grenwald, twenty-seven feet;
and
NORTHWESTERLY on land now or late of Hayes, eighty-five and 6/12
(85 6/12) feet.
Parcels Two and Three hereinabove described are conveyed herewith subject to,
and with the benefit of, a certain license agreement dated December 6, 1948,
between The South Boston Savings Bank and the Grantee herein, recorded with said
Deeds, Book 6867, Page 83.
PARCEL FIVE
About sixteen hundred twenty (1620) square feet of land on the northeasterly
side of Athens Street formerly numbered three hundred seventy-six (376) in the
numbering of said Athens Street, between an estate now or formerly of Margaret
M. Hurley (numbered 374) and an estate now or formerly of Margaret G. Murphy
(numbered 378).
Said land is situated in Block 112A, in the South Boston District shown on the
Boston Assessors' Plans of said City, filed in the office of the Board of
Assessors.
PARCEL SIX
A certain parcel of land with the buildings thereon being known and numbered as
347-349 West Third Street, in the South Boston District of said Boston, and
bounded and described as follows:
NORTHEASTERLY by Third Street, twenty-six (26) feet, nine (9)
inches;
NORTHWESTERLY on land now or late of Robinson, eighty (80) feet;
SOUTHWESTERLY on land now or late of E. Dana, twenty-six (26)
feet, nine (9) inches;
SOUTHEASTERLY on land now or late of Charles W. Reed, eighty (80)
feet.
PARCEL SEVEN
A certain parcel of land with the building and improvements thereon situated at
343 West Third Street, in the South Boston District of said Boston, and bounded
and described as follows:
NORTHEASTERLY by said West Third Street, twenty-seven feet;
NORTHWESTERLY by land now or late of Otis T. Dana, eighty-five (85)
feet, six (6) inches;
SOUTHWESTERLY by land now or late of Weston, twenty-seven (27)
feet; and
SOUTHEASTERLY by land now or late of Henry F. Spencer, eighty-five
(85) feet, six (6) inches.
28
<PAGE>
PARCEL EIGHT - Registered Land
The land with the buildings thereon in said South Boston District of Boston,
bounded and described as follows:
SOUTHWESTERLY by Athens Street, twenty-seven (27) feet;
SOUTHEASTERLY by land now or formerly of the Warren Association,
sixty (60) feet;
NORTHEASTERLY by land now or formerly of the heirs of F. Robinson,
deceased, twenty-seven (27) feet;
NORTHWESTERLY by land conveyed by John H. Gray to Charles C. Conley,
sixty (60) feet.
All of said boundaries are determined by the Land Court to be located as shown
on a plan drawn by Schofield Brothers, Civil Engineers, dated January 29, 1959,
as modified and approved by the Court, filed in the Land Registration Office, a
copy of a portion of which will be filed with the original certificate of title
issued on the decree. For title see Certificate of Title No. 65871.
PARCEL NINE
A certain parcel of land with the buildings thereon in that part Boston called
South Boston, bounded and described as follows:
NORTHEASTERLY on Third Street, twenty-seven (27) feet, three (3) inches;
SOUTHEASTERLY on land now or formerly of Blake, eighty (80) feet;
SOUTHWESTERLY in part by land now or formerly of Wolkins, in part by a
passageway, and in part by land now or formerly of Dana,
measuring on this line in the whole twenty-seven (27) feet,
three (3) inches;
NORTHWESTERLY and by land now or formerly of Anthony W. Bowden, eighty
(80) feet.
PARCEL TEN
The land in that part of said Boston called South Boston, with the buildings
thereon and bounded and described as follows:
Beginning on the northeasterly side of Athens Street at land now or
formerly of Robinson and thence running northeasterly on said land of
Robinson, sixty-six (66) feet; thence turning at a right angle and running
southeasterly on land formerly of the Warren Association, thirty-six and
one-half (36 1/2) feet; thence turning at a right angle and running
southwesterly on land now or late of Leonard Hail, sixty-six (66) feet to
said Athens Street; thence turning at a right angle and running
northwesterly on said Athens Street, thirty-six and one-half, (36 1/2)
feet to the point of beginning.
Said ten (10) parcels of land are the same parcels conveyed to Grantors by
deed of Grantee dated December 1, 1958 and duly recorded with Suffolk Deeds,
Book ____, Page ____
All of said parcels of land are conveyed herewith subject to and with the
benefit of all rights, easements, encumbrances, leases, and other matters of
record insofar as now in force and applicable.
29
<PAGE>
PARCEL ELEVEN
Land, with the buildings thereon, if any, on the northwesterly side of
Dorchester Street numbered seventy-three (73) in the numbering of said
Dorchester Street, between an estate now or formerly of Guiseppe Bognana and
another (numbered 75) and an estate now or formerly of Joseph L. Schicher and
another (number 71) and supposed to contain about fifteen hundred forty (1540)
square feet.
Said land is situated in Block 112 a, in the South Boston District shown
on the Boston Assessors' Plans of said City, filed in the office of the Board of
Assessors.
PARCEL TWELVE
A certain parcel of land with the buildings thereon now known as and
numbered 75 Dorchester Street situated in that part of said Boston called South
Boston, being Lot 8 on a plan dated October 19, 1870, recorded with Suffolk
Deeds in Book 1021, Page 190 bounded and described as follows:
Beginning at the southerly corner of the granted premises at the corner of
Dorchester Street and Athens Street, thence running North-easterly on Dorchester
Street twenty-three feet, thence Northwesterly on said Lot 7 in a line parallel
with Athens Street, seventy-seven feet to a passageway four feet in width,
thence Southwesterly on said passageway in a line parallel to said Dorchester
Street twenty-three feet to Athens Street, thence Southeasterly on Athens Street
seventy-seven feet to Dorchester Street and the point of beginning, containing
1771 square feet of land; together with the right to use said passageway in
common with other lawfully entitled thereto.
Being the same premises conveyed by deed of Barbara and Walter Krjashew,
dated January 10, 1961.
30
<PAGE>
Annual Report
1996
Emerald Isle Bancorp, Inc.
730 Hancock Street, Quincy, Massachusetts 02170
Financial Highlights
Total Assets
(dollars in thousands)
12/31/96 12/31/95
Balance Sheet Data
Total assets $409,638,765 $346,865,213
Earning assets 393,615,610 335,761,878
Securities 128,623,944 125,300,270
Allowance for possible loan losses 2,623,406 2,541,997
Loans, net 263,208,189 208,326,723
Deposits 337,089,927 282,787,249
Borrowings 41,668,000 38,968,000
Stockholders' equity 27,936,387 22,824,616
Operating Data
Interest income $28,782,863 $23,949,001
Interest expense 16,737,024 13,719,768
Net interest income 12,045,839 10,229,233
Provision for possible loan losses 1,211,333 300,000
Non-interest expense 7,736,300 6,852,498
Net income 2,380,869 2,719,235
Per Share Data*
Earnings per share $1.14 $1.41
Book value per share $12.64 $11.92
Outstanding shares 2,210,888 1,915,539
Dividends declared per share $0.22 $0.18
Other Data
Yield on average earning assets 7.95% 7.94%
Cost of funds 4.62% 4.55%
Net interest margin 3.33% 3.39%
Return on average assets 0.64% 0.88%
Return on average equity 9.41% 12.42%
Leverage capital to assets ratio at year end 6.82% 6.58%
* Per share data has been adjusted to reflect the 5 for 4 stock split effective
February 3, 1997
Total Assets Total Deposits Total Loans, Net
(Dollars in Thousands) (Dollars in Thousands) (Dollars in Thousands)
- ---------------------- ---------------------- ----------------------
1992..... $229,792 1992..... $205,921 1992..... $134,584
1993..... $249,827 1993..... $221,950 1993..... $135,661
1994..... $286,429 1994..... $256,340 1994..... $163,371
1995..... $346,865 1995..... $282,787 1995..... $208,327
1996..... $409,639 1996..... $337,090 1996..... $263,208
Emerald Isle Bancorp, Inc.
1
<PAGE>
Letter to Stockholders
Dear Stockholder,
During 1996 the management of our company continued to implement its basic
business strategy of geographically expanding our franchise in order to
facilitate the achievement of growth, both in assets under management and the
volume of core business activities. The management of our company believes
that the expansion of our franchise and the growth and diversification of our
business activities is the best business strategy available to us to create
value for our stockholders. I am pleased to report that efforts in that
regard resulted in a number of successful business initiatives during the
past year.
The most visible event that took place in 1996 was the completion of the
formation of our holding company, Emerald Isle Bancorp, Inc., on October 1,
1996. This is the first annual report published by our new company. The
formation of our holding company, Emerald Isle Bancorp, Inc., is an integral
component of our business strategy to expand operations and build franchise
value. The holding company structure provides the flexibility needed to
respond to continuously evolving competitive conditions in the financial
services marketplace and enables us to consider the acquisition of other
banking institutions outside our existing market area. The holding company
allows us to operate any acquired institution as a stand- alone community
bank in order to capitalize on its established individual local identity.
. . . the expansion of our franchise and the growth and diversification of
our business activities is the best business strategy available to us to
create value for our stockholders.
The management of our company believes that our growth focused business
strategies have proven to be both timely and effective. The continuing
consolidation of our local banking industry has resulted in an opportunity
for our company to become a significant competitor within our market area.
The absorption of banks with a community based operating philosophy, like
ours, by our regional competitors has created a void that we are filling.
During the past year our local operating environment was characterized by
strong competition for both quality lending opportunities and retail
deposits. The condition of our local residential real estate market
continued to improve as both the volume of sales and average sales prices
increased for single family homes and condominiums. Last year was also a
very strong year for our local commercial real estate market. Vacancy rates
for apartments, retail, office and industrial space all declined resulting in
increased rents. Business activity in our market area continued to expand.
There was moderate job growth and the Massachusetts unemployment rate
declined. Overall, 1996 was a year of solid economic growth in
Massachusetts.
Against this background we achieved substantial growth in each of our major
business lines. Total assets increased by 18.1% to $409.6 million, earning
assets grew by 17.2% to $393.6 million, loans outstanding increased by 26.3%
to $263.2 million and total deposits grew by 19.2% to $337.1 million. The
volume of transactions generated by our core business activities and the
number of customers serviced continued to expand throughout the
2
<PAGE>
year. Net income for 1996 totaled $2.4 million. Earnings per share for 1996
totaled $1.14. Stockholders' equity increased by 22.4% to $27.9 million at
December 31, 1996 and book value per share increased to $12.64.
The primary method we have chosen to achieve the expansion of our franchise
and the growth of our business activities is by opening additional full
service banking offices either within our existing service area or contiguous
to it. In executing this business strategy we have opened four new full
service branch offices during the past two years, doubling the number of such
facilities we operate.
Our fifth full service branch office opened at 274 Main Street in Hingham on
July 17, 1995 and on December 23, 1995 we opened our sixth full service
branch office at 397 Washington Street in Stoughton. As of December 31, 1996
at our Hingham office new customers had opened deposit accounts with balances
totaling $15.7 million, at our Stoughton office new customers had opened
deposit accounts with balances totaling $15.1 million. Most importantly,
both offices reached the break-even deposit level during 1996 and were
operating profitably at year end. We expect both to make a contribution to
earnings in 1997.
. . . we achieved substantial growth in each of our major business lines.
We opened our seventh full service branch office, and second office in
Hingham, at 71 Main Street on May 13, 1996. Deposit growth at this office
has not been as robust as we would like. Nonetheless, at December 31, 1996
deposit balances for this office totaled $3.6 million. Our eighth full
service branch office, and second such facility in Quincy, opened on November
14, 1996 at 63 Franklin Street. Initial results have been beyond our
expectations. At year end, after being open for slightly more than one
month, deposit balances at this office totaled $3.4 million. Our goal for
1997 for these two offices is to achieve their respective break-even deposit
levels by year end.
We will continue to implement our basic business strategy by opening two
additional
Stockholders' Equity Earning Assets Book Value Per Share
(Dollars in Thousands) (Dollars in Thousands) (Dollars)
- ---------------------- ---------------------- ----------------------
1992..... $13,954 1992..... $213,146 1992..... $ 8.71
1993..... $17,312 1993..... $240,480 1993..... $10.34
1994..... $19,786 1994..... $275,944 1994..... $10.94
1995..... $22,825 1995..... $335,762 1995..... $11.92
1996..... $27,936 1996..... $393,615 1996..... $12.64
3
<PAGE>
full service branch offices in 1997. We have received regulatory approval to
open an office at 470 West Broadway in South Boston. The renovation of this
building is underway and we hope to be open for business by mid-summer. In
August of 1996 we acquired a site at 1932 Ocean Street in Marshfield. The
municipal approvals required to construct a new facility at this location
have been obtained and we expect to apply by mid- summer for the necessary
regulatory approvals to commence operating at this site. If all goes as
planned, we should be open for business in Marshfield by the end of 1997.
While additional worthwhile opportunities exist to expand our franchise and
branch network, we believe that once the foregoing projects are completed it
will be appropriate to take a respite from our physical expansion efforts in
order to allow our new branch offices to mature. Our efforts will then be
directed at achieving incremental growth utilizing our existing facilities so
as to create the critical mass required for each of our new offices to
operate profitably. The maturation process will result in realizing the
financial benefits of our expansion program through the achievement of the
projected return on our investment in these new facilities.
As previously noted, total assets increased by $62.7 million or 18.1% from
$346.9 million at December 31, 1995 to $409.6 million at December 31, 1996, a
rate of growth well in excess of the industry average. This achievement
follows 21.1% asset growth generated in 1995.
Total earning assets increased by $57.8 million or 17.2% from $335.8 million
at year end 1995 to $393.6 million at year end 1996. The increase achieved
during 1996 in earning assets, which was primarily in loans outstanding, was
the most significant positive factor in the 17.8% increase in net interest
income achieved for the year. Our ratio of average earning assets to average
total assets declined marginally from 97.1% for 1995 to 96.9% for 1996.
Our continuing business focus on originating residential, commercial real estate
and business loans for inclusion in our loan portfolio as our primary investment
vehicle produced very strong results during the past year.
During 1996 the consolidation of our local banking industry continued to evolve.
This process has drastically reduced the number of community based banks within
our market area. We view this as a significant business opportunity for us, not
only for the coming year, but also for many years to come. We feel that our
institution provides a superior level
of personalized service that many customers demand and that our larger regional
competitors are unable to provide, particularly for small business owners and
investors in commercial real estate.
Throughout 1996 commercial real estate lending was the strongest performing
business line of our company. For the year, our Commercial Real Estate Loan
Department originated 79 loans totaling $68.3 million as compared to 47 loans
totaling $27.2 million originated in 1995. This represents a very significant
151.1% or $41.1 million increase in the volume of commercial real estate loans
originated for 1996 as compared to the prior year. The average size of a new
commercial real estate loan originated in 1996 was $865,000 and $579,100 in
1995. Our focus is on investing in commercial real estate loans secured by
multi-family residential properties, retail space, office buildings and certain
types of industrial properties held for investment purposes. On the strength of
the increase in the volume of loans originated last year, our commercial real
estate loan outstandings grew by $26.3 million or 33.2% to $105.4 million at
December 31, 1996 from $79.1 million a year earlier. Commercial real estate
loan outstandings also grew 10.7% during 1995.
Our Commercial Loan Department originated 95 commercial and industrial
business loans last year totaling $10.6 million as compared to 48 business
loans totaling $13.8 million in
4
<PAGE>
1995. In spite of the modest decline in the volume of loans originated for
the year, our commercial and industrial loan outstandings increased by $4.7
million or 28.2% to $21.6 million at December 31, 1996 from $16.9 million a
year earlier. The average size of a commercial business loan originated in
1996 was $111,500 and $286,700 in 1995. Our corporate commitment to allocate
significant resources to this department is directed at accomplishing, over
time, a substantial increase in both the volume of our commercial and
industrial business loan originations and in our total commercial loan
portfolio outstandings. We need to be successful in building this business
line in order to achieve our earnings potential as a company.
Residential mortgage lending continues to be a very important business line
for our company. For the year we originated, through our Retail Loan
Department, 443 residential first mortgage loans totaling $59.9 million as
compared to 483 residential loans totaling $60.7 million originated in 1995.
The average size of a residential loan originated in 1996 was $135,100 and
$125,800 in 1995. During 1996, 134 residential fixed rate mortgage loans
totaling $18.5 million were sold into the secondary mortgage market as
compared to 126 residential mortgage loans totaling $12.9 million sold during
1995. We now service 265 real estate loans, totaling $31.6 million, for
investors, after selling our entire servicing portfolio of 798 loans totaling
$69.1 million in the second quarter of 1995. Of our total residential
mortgage loan originations in 1996, approximately 60% were variable rate and
40% were fixed rate. As a result of the continuing strong flow of variable
rate loan originations, we were able to achieve significant growth of $23.5
million, or 20.9%, in our residential mortgage loan portfolio which totaled
$112.5 million at December 31, 1995 and $136.0 million at December 31, 1996.
This follows the achievement of 34.6% growth in residential mortgage loan
outstandings generated in 1995.
During the past year our Retail Loan Department also originated 798 consumer
loans totaling $4.6 million as compared to 384 loans totaling $2.0 million
originated during 1995. Consumer loans outstanding totaled $3.0 million at
December 31, 1996 as compared to $2.5 million at December 31, 1995. During
the fourth quarter of 1996 we established a separate Consumer Loan Department
and hired an experienced consumer loan officer. These steps were taken to
create a more directed corporate focus on building our consumer loan
portfolio so that, over time, it will become an important earning asset of
our company.
The substantial increase in total loans outstanding generated during 1996
represented the achievement of a very important business goal which is a
major factor in the improvement in our core earnings capacity.
During 1996, 1,415 loans of all types were originated totaling $143.4 million
as compared to 962 loans totaling $103.8 million in 1995. Total loans
outstanding, net for the year, increased by $54.9 million or 26.3% from
$208.3 on December 31, 1995 to $263.2 million on December 31, 1996. This
follows the achievement of growth in loans outstanding during 1995 of 27.5%.
The number of loans in our portfolio increased from 2,686 at December 31,
1995 to 3,266 at December 31, 1996. We continued to be one of the most
active lenders in our market area. The substantial increase in total loans
outstanding generated during 1996 represented the achievement of a very
important business goal which is a major factor in the improvement
5
<PAGE>
in our core earnings capacity. Our success in achieving this goal will have
a substantial impact on our net earnings for 1997.
Our loan portfolio is the highest earning asset of our company. For 1996,
our investment in commercial real estate loans generated a net interest
margin of 5.64%, our investment in commercial business loans generated a net
interest margin of 5.78% and our portfolio of residential mortgage loans and
consumer loans produced a net interest margin of 3.42%. Combined, our
investment in loans outstanding generated a net interest margin of 4.40% in
1996.
Our investment in securities increased modestly by $3.3 million or 2.7% from
$125.3 million at December 31, 1995 to $128.6 million at December 31, 1996.
Of our total portfolio at year end, $83.5 million is classified as held to
maturity and $30.7 million is classified as available for sale. The balance
of our investment portfolio is invested in short term investment securities
totaling $11.7 million and $2.7 million in equity securities, primarily stock
in the Federal Home Loan Bank. Our holdings of securities classified as
available for sale and our short term investments are available to provide
liquidity as needed. Our investment portfolio produced a net interest margin
of 1.51% during 1996.
Our company has been very successful in expanding its franchise and customer
base over the past few years and the volume of our business activities has
grown substantially.
For 1996 our combined commercial real estate and commercial business loan
portfolios contributed 53.8% of our net earnings of $2.4 million, despite
accounting for only 32.1% of earning assets. Our residential mortgage and
consumer loan portfolios contributed 46.1% of our net earnings, while
accounting for 35.1% of earning assets. Because of the dramatic differential
in both net interest margins and net interest income generated by the major
categories of earning assets in which our company invests, we have been
following, and intend to follow in 1997, two complementary business
strategies directed at maximizing the earnings potential of our company. A
reallocation of our asset mix out of our investment in securities and into an
incremental investment in loans outstanding will enhance both our net
interest margin and our net earnings by taking advantage of the higher
returns earned through our lending activities. We believe that an asset mix
of approximately 70.0% in loans outstanding, 25.0% in securities and 5.0% in
other assets is the appropriate asset mix that will allow for the
maximization of our earnings potential while still providing for sufficient
ongoing liquidity. As of December 31, 1996 our loan portfolio accounted for
64.3% of total assets and our investment portfolio 31.4% of total assets.
The higher net interest margins earned by our commercial real estate and
business lending activities of 5.64% and 5.78%, respectively, dictate that we
continue to focus on achieving growth in these business lines. This focus on
the commercial segments of our business will result in a shift, over time, in
the composition of our loan portfolio. It is our goal to reallocate our
investment in loans outstanding by reducing our relative investment in
residential mortgages and consumer loans while increasing our relative
investment in commercial real estate and commercial business loans.
Currently, residential mortgages and consumer loans comprise 52.3% of our
total loan portfolio while commercial real estate and commercial business
loans account for 47.7%. The eventual reallocation of our loan portfolio
6
<PAGE>
to a mix of 40.0% in residential mortgages and consumer loans and 60.0% in
commercial real estate and commercial business loans will enhance our net
interest margin and net earnings. It is recognized that residential mortgage
loans have a substantively lower risk profile than commercial real estate or
commercial business loans. Accordingly, it is paramount that our
underwriting principles not be compromised in order to achieve the foregoing
business goal.
Overall, our asset quality was very good throughout 1996. Nonperforming
assets totaled $930,766 at December 31, 1995 and $1.1 million as of December
31, 1996 and as a percent of assets, 0.27% and 0.26% as of the same dates.
As of year end, our ratio of loan loss reserves to nonperforming assets was
247.9%. The continuing improvement in our asset quality is evidenced by the
fact that, at year end, our company had no other real estate owned. Our
company experienced lower losses on the sale of other real estate owned and
reduced expenses related to the management and disposition of nonperforming
assets in 1996.
Deposit growth for the year totaled $54.3 million or 19.2% as deposits
increased from $282.8 million on December 31, 1995 to $337.1 million on
December 31, 1996. Retail deposits increased during the year by $59.3
million and, as a result, our funding from wholesale deposit sources declined
from $20.0 million to $15.0 million. Transaction account balances increased
by $9.2 million or 41.7 % to $31.2 million, savings and money market deposit
accounts grew by $5.7 million or 7.2% to $85.6 million and certificates of
deposit balances increased by $39.4 million or 21.8% to $220.3 million.
Deposits increased at each of our branch offices during 1996. Our four
newest offices, which opened in 1995 and 1996, accounted for $29.8 million or
54.9% of the total increase in deposits generated for the year. The number
of deposit accounts open increased by 5,398 or 25.6% from 21,102 accounts as
of December 31, 1995 to 26,500 accounts as of December 31, 1996.
Borrowings increased during 1996 by $2.7 million or 6.9% from $39.0 million
at December 31, 1995 to $41.7 million at December 31, 1996. At certain
points in time during 1996, borrowings, more specifically Federal Home Loan
Bank advances, were a
<TABLE>
<CAPTION>
Total Residential Mortgage Loan Total Commercial Loans Total Commercial Real Estate Loans
(Dollars in Thousands) (Dollars in Thousands) (Dollars in Thousands)
- ------------------------------- ---------------------- ----------------------------------
<S> <C> <C>
1992..... $ 70,005 1992..... $ 0 1992..... $ 63,221
1993..... $ 69,798 1993..... $ 5,490 1993..... $ 57,380
1994..... $ 83,494 1994..... $ 8,423 1994..... $ 71,478
1995..... $112,486 1995..... $16,857 1995..... $ 79,112
1996..... $136,049 1996..... $21,615 1996..... $105,359
</TABLE>
7
<PAGE>
more economical means of funding our asset growth than retail deposits. From
a cost perspective, aggressive price competition for retail deposits within
our local market area dictated that we utilize borrowings on occasion as a
funding resource.
Our yield on average earning assets increased by one basis point during 1996
to 7.95% from 7.94% in 1995. Competition for quality lending opportunities
during the past year somewhat limited our ability to more aggressively price
our loan products and services. Since January 31, 1996 when the Federal
Reserve Board of Governors reduced the federal funds rate from 5.50% to
5.25%, market interest rates have trended upward. Over that period of time
the yield on the 30 year Treasury bond has increased from 6.03% to 6.64%.
Mirroring the general increase in interest rates, our average cost of funds
increased by seven basis points during 1996 to 4.62% from 4.55% for 1995.
Consequently, our net interest margin decreased slightly by six basis points
during 1996 to 3.33% from 3.39% for 1995. One side observation concerning
our funding cost is that our average cost of funds for the fourth quarter of
1996 was 4.57%, eight basis points lower than our average cost of funds for
the first three quarters of the year of 4.65%. The lower cost of funds for
the fourth quarter is directly related to an enhanced ability to manage our
costs due to the success of our new branch offices in attracting incremental
core deposits.
The growth in earning assets achieved of 17.2% during 1996, in particular the
26.3% growth in loans outstanding, combined to more than offset the decrease
in our net interest margin.
The continuing success of our growth oriented business strategies requires
that an ongoing investment be made in this company to support our current and
future growth.
The net result of the foregoing factors was that interest and dividend income
generated from our aggregate investment in loans and securities for 1996
increased by 20.2% or $4.9 million to $28.8 million from $23.9 million for
1995 while total interest expense increased by less, 22.0% or $3.0 million
from $13.7 million in 1995 to $16.7 million for 1996. Consequently, even
though our net interest margin declined slightly by six basis points our net
interest income increased by $1.8 million or 17.8% from $10.2 million for
1995 to $12.0 million for 1996.
Our loan loss provision for 1996 increased to $1.2 million as compared to
$300,000 for 1995. The increase in the loan loss provision for 1996 was the
result of a special provision of $1.0 million taken in the first quarter of
the year resulting from the Bennett Funding Group, Inc. fraud and subsequent
bankruptcy filing. We are confident that during 1997 we will be successful
in recovering a substantial portion of our investment in the Bennett Funding
Group, Inc.
Non-interest income in 1996 declined from $1.3 million in 1995 to $727,532 in
1996. A one time gain from the sale of loan servicing rights totaling
$763,806 in 1995 accounted for the comparative year to year decline in
non-interest income. Net losses on the sale of securities totaled $39,005
during the year compared to $90,993 in net gains realized during 1995. Fee
income from services provided to customers increased to $804,539 in 1996
compared to $579,224 in 1995. For 1996, the Bank had $193 in gains on the
sale of loans in the secondary market compared to losses of $52,611 in 1995.
Non-interest operating expenses rose by $883,802 or 12.9% from $6.9 million
for 1995 to $7.7 million for 1996. The increase was
8
<PAGE>
primarily a result of increases in compensation and benefits expense of 23.3%
to $4.2 million in 1996 from $3.4 million in 1995. The increase in
compensation and benefits expense is the direct result of the expansion of
our staff from 94 employees at December 31, 1995 to 112 employees at December
31, 1996. Our lending staff size was increased in order to achieve and
manage our continuing growth in loans outstanding. New branch personnel were
required to staff our four newest full service branch offices opened during
1995 and 1996 in Hingham, Stoughton and Quincy. Additional administrative
support staff were needed to manage such functions as marketing and public
relations. Also as a result of the physical expansion of our branch network,
we experienced during 1996 a 33.5% or $337,577 increase in occupancy and
equipment expense from $1.0 million for 1995 to $1.3 million. The operating
expense increases for compensation and benefits and for occupancy and
equipment were partially offset by a reduction in expenses related to the
management and disposition of nonperforming assets which totaled $79,894 as
compared to $300,796 for the previous year, a reduction of 73.4%, along with
a substantial decline in our FDIC assessment of $326,261 from $333,152 in
1995 to $6,891 in 1996.
In spite of the 12.9% increase in operating expenses for 1996 our company
became more efficient. Asset growth for the year was 18.1%. Because our
asset growth rate exceeded the growth rate of our operating expenses, we
effectively are managing an increased asset base for a lower relative cost.
Our ratio of operating expenses to average assets declined substantively, by
14 basis points, from 2.21% for 1995 to 2.07% for 1996. While we believe the
effective control of operating expenses and increased productivity and
efficiency are integral factors in the achievement of increases in future
profitability, we also believe that it is essential that our staffing level
be sufficient to insure that the various business initiatives and strategies
we undertake can be completed efficiently and successfully.
Net earnings before taxes totaled $3.8 million for 1996. After accruing our
ordinary tax liability for 1996 of $1.4 million, our company earned $2.4
million for 1996.
Net Interest Income Operating Expenses as a Year End Stock Prices
(Dollars in Thousands) Percent of Average Assets (dollars)
- ---------------------- ------------------------- ----------------------
1992..... 8,236 1992..... 2.89% 1992.....$ 4-1/4
1993..... 9,207 1993..... 2.88% 1993.....$ 7-1/4
1994..... 9,230 1994..... 2.49% 1994.....$ 8-1/2
1995..... 10,229 1995..... 2.21% 1995.....$13
1996..... 12,046 1996..... 2.07% 1996.....$16
9
<PAGE>
Our company has been very successful in expanding its franchise and customer
base over the past few years and the volume of our business activities has
grown substantially. Our asset growth rates for 1994, 1995 and 1996 have
been 14.7%, 21.1% and 18.1%, respectively. The growth rates for our loan
portfolio for the same three year period have been 20.4%, 27.5% and 26.3%,
respectively. The continuing success of our growth oriented business
strategies requires that an ongoing investment be made in this company to
support our current and future growth. In order to maintain a prudent
leverage capital ratio, we completed two separate private placements of newly
issued common stock at then market prices during 1996. The first, on May 17,
was for 100,000 shares of common stock which raised, after expenses, $1.4
million in new capital. The second private placement, also for 100,000
shares of common stock, was completed on September 24, and raised, again
after expenses, an additional $1.5 million in incremental capital.
. . . one of the most important results achieved during 1996 was a 23.1%
increase in the price per share of the common stock. . .
Stockholders' equity increased during 1996 by $5.1 million or 22.4% from
$22.8 million as of year end 1995 to $27.9 million as of year end 1996. This
follows an increase in stockholders' equity for 1995 of 15.4%. For 1996,
$2.4 million was added to stockholders' equity by net earnings, $457,386 was
paid out to stockholders in dividends, incremental new capital of $2.9
million was raised through the two private placements previously referenced
and an additional $497,980 in capital was raised through our various stock
purchase plans. Our leverage capital ratio increased to 6.82% at December
31, 1996
10
<PAGE>
from 6.58% at December 31, 1995 and our risk-based capital ratio was
11.9% and 12.7% as of the same respective dates.
In addition to the positive financial achievements, there were several other
important business developments that occurred in 1996. On December 18, 1996
we declared a 25% stock dividend which was payable on February 3, 1997. We
believe the increase in the number of shares outstanding will further enhance
both the liquidity in the marketplace for, and value of our common stock. At
the same time, we maintained our regular quarterly cash dividend of $0.07 per
share, which after accounting for the stock dividend, results in an increase
in cash dividends to our stockholders of 25%. For the year, cash dividends
paid to our shareholders totaled $0.22 per share.
From our mutual perspective as stock-holders, one of the most important
results achieved during 1996 was a 23.1% increase in the price per share of
the common stock of our company, from $13.00 at December 31, 1995 to $16.00
at December 31, 1996. According to Keefe, Bruyette & Woods (KBW), an
investment in the common stock of our company earned a total return on
investment of 1,029% over the five year period ended December 31, 1996. By
comparison, the total return over the same period for the S&P 500 Index was
103% and for the Keefe, Bruyette & Woods New England Bank Index was 409%.
. . . we must continue to aggressively expand our business activities. There
are voids in our local marketplace for banking products and services which we
can, and will, fill.
The continuing consolidation of our industry has created unprecedented
business opportunities for this institution. To take advantage of those
business opportunities we must continue to aggressively expand our business
activities. There are voids in our local marketplace for banking products and
services which we can, and will, fill.
Over the past year, our dedicated staff has worked diligently and
successfully to achieve our business goals and improve both the financial and
competitive position of our company. I would like to personally thank each
and every member of our staff and our Board of Directors for their efforts.
I also wish to thank all of our stockholders for their continuing support and
confidence. I am looking forward to sharing our future successes with you.
Best regards,
/s/ Mark A. Osborne
Mark A. Osborne
Chairman of the Board,
President & Chief Executive Officer
1992-1996 Index of Total Return
-------------------------------
S&P 500 Index........... 103%
KBW New England Index... 409%
EIRE.................... 1,029%
11
<PAGE>
Officers and Directors
Emerald Isle Bancorp, Inc.
Officers
Mark A. Osborne
Chairman of the Board, President & Chief
Executive Officer
Richard S. Straczynski
Executive Vice President
Gerard F. Linskey
Treasurer
Directors
Peter L. Maguire
President
Management Information Services
Thomas P. Moore, Jr.
Senior Vice President
State Street Research and Management Company
John V. Murphy
Executive Vice President
Mass Mutual Life Insurance Co.
Mark A. Osborne
Chairman of the Board &
Chief Executive Officer
The Hibernia Savings Bank
Douglas C. Purdy
Attorney-at-Law
Serafini, Purdy, DiNardo & Wells
Michael T. Putziger
Attorney-at-Law
Roche, Carens & DeGiacomo
Richard P. Quincy
President
Quincy & Co.
The Hibernia Savings Bank
Officers
Mark A. Osborne
Chairman of the Board & Chief Executive Officer
Richard S. Straczynski
President &
Chief Operating Officer
Wayne F. Blaisdell
Senior Vice President & Operations Officer
Gerard F. Linskey
Senior Vice President &
Chief Financial Officer
Dennis P. Myers
Senior Vice President &
Senior Loan Officer
Robert D. McCarthy
Vice President
Roger L. Meade
Vice President
Joseph F. Richardi
Vice President
Michael P. Donohoe
Treasurer
Thomasine F. Kennedy
Comptroller
Edwin J. Beck, Jr.
Assistant Vice President
Barry E. Burden
Assistant Vice President
Elizabeth M. Casey
Assistant Vice President
James M. Duff
Assistant Vice President
Armand A. Fernandez
Assistant Vice President
Robert E. Foy
Assistant Vice President
Patricia Hanlon
Assistant Vice President
Robert S. Pyer, Jr.
Assistant Vice President
Jane M. Hanlon-Cook
Loan Officer
Anne R. Mascal
Consumer Loan Officer
Douglas C. Purdy
Clerk of the Corporation
Directors
Martha M. Campbell
Attorney-at-Law
Thomas J. Carens
of Counsel
Roche, Carens & DeGiacomo
Bernard J. Dwyer
Attorney-at-Law
William E. Lucey
Certified Public Accountant
O'Connor & Drew
Peter L. Maguire
President
Management Information Services
Thomas P. Moore, Jr.
Senior Vice President
State Street Research and Management Company
John V. Murphy
Executive Vice President
Mass Mutual Life Insurance Co.
Mark A. Osborne
Chairman of the Board & Chief Executive Officer
The Hibernia Savings Bank
Paul D. Osborne
Treasurer
Osborne Office Furniture
Douglas C. Purdy
Attorney-at-Law
Serafini, Purdy, DiNardo & Wells
Michael T. Putziger
Attorney-at-Law
Roche, Carens & DeGiacomo
Richard P. Quincy
President
Quincy & Co.
John M. Sheskey
President
John M. Sheskey &
Associates, Inc.
Stockholder Information
Administrative Offices
Emerald Isle Bancorp, Inc.
730 Hancock Street
Quincy, MA 02170
617/479-5001
The Hibernia Savings Bank
730 Hancock Street
Quincy, MA 02170
617/479-5001
The Hibernia Savings Bank Main Office
731 Hancock Street
Quincy, MA 02170
617/479-2265
800-568-BANK
Branch Offices
101 Federal Street
Boston, MA 02110
617/345-0441
51 Commercial Street
Braintree, MA 02184
617/848-5560
1150 Washington Street
Weymouth, MA 02189
617/331-0893
274 Main Street
Hingham, MA 02043
617/740-4830
71 Main Street
Hingham, MA 02043
617/741-8061
397 Washington Street
Stoughton, MA 02072
617/297-3550
63 Franklin Street
Quincy, MA 02169
617/689-0001
Loan Centers
730 Hancock Street
Quincy, MA 02170
617/479-5001
731 Hancock Street
Quincy, MA 02170
617/479-2265
51 Commercial Street
Braintree, MA 02184
617/356-8246
Educational Training Facility
Quincy High School
52 Coddington Street
Quincy, MA 02169
617/472-2404
Transfer Agent and Registrar
ChaseMellon Shareholder Services, LLC
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
1-800-288-9541
Independent Public Accountants
Arthur Andersen, LLP
225 Franklin Street
Boston, MA 02110
617/330-4000
Legal Counsel
Roche, Carens & DeGiacomo
99 High Street
Boston, MA 02109
617/451-9300
Form 10-K
A copy of the Annual Report on form 10-K filed with the Securities and Exchange
Commission for fiscal 1996 is available without charge by writing to:
Gerard F. Linskey
Treasurer
Emerald Isle Bancorp, Inc.
730 Hancock Street
Quincy, MA 02170
617/479-5001
Trading of Common Stock
Emerald Isle Bancorp, Inc. common stock is traded over the counter on the NASDAQ
National Market System under the symbol EIRE.
Stockholder Relations
To receive further information about Emerald Isle Bancorp, Inc. please contact:
Gerard F. Linskey
Treasurer
Emerald Isle Bancorp, Inc.
730 Hancock Street
Quincy, MA 02170
617/479-5001
Annual Meeting
The annual meeting of the stockholders of Emerald Isle Bancorp, Inc. will be
held at 10:00 a.m. on Monday, April 28, 1997 at the Sheraton Tara hotel, 37
Forbes Road, Braintree, Massachusetts.
Emerald Isle Bancorp, Inc.
12
<PAGE>
EXHIBIT (21)
<PAGE>
Subsidiaries of Emerald Isle Bancorp, Inc.
The following are the only subsidiaries of Emerald Isle Bancorp, Inc.:
Direct Subsidiary Jurisdiction of Incorporation
- ----------------- -----------------------------
The Hibernia Savings Bank Massachusetts
Indirect Subsidiaries Jurisdiction of Incorporation
- ------------------------ -----------------------------
Meath Corporation(1) Massachusetts
Kildare Corporation(1) Massachusetts
The Limerick Securities Corporation(1) Massachusetts
Roscommon Realty Corporation(2) Massachusetts
Mayo Corporation(2) Massachusetts
Donegal Realty Corporation(2) Massachusetts
Athlone Corporation(2) Massachusetts
(1) Subsidiaries of The Hibernia Savings Bank
(2) Subsidiaries of Kildare Corporation
<PAGE>
EXHIBIT (23)
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in
this Form 10-K of our report dated January 16, 1997. We also consent to the
incorporation by reference of our report dated January 10, 1996 included in
Registration Statements File No. 33-15441 and File No. 33-18949. It should be
noted that we have not audited any financial statements of the company
subsequent to December 31, 1996 or performed any audit procedures subsequent
to the date of our report.
March 14, 1997 /s/ ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from
the form 10-K filed as of December 31, 1996.
</LEGEND>
<CIK> 0001018380
<NAME> EMERALD ISLE BANCORP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,521
<INT-BEARING-DEPOSITS> 11,680
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 30,761
<INVESTMENTS-CARRYING> 83,512
<INVESTMENTS-MARKET> 81,522
<LOANS> 265,832
<ALLOWANCE> (2,623)
<TOTAL-ASSETS> 409,639
<DEPOSITS> 337,090
<SHORT-TERM> 11,000
<LIABILITIES-OTHER> 2,944
<LONG-TERM> 30,688
0
0
<COMMON> 2,211
<OTHER-SE> 25,725
<TOTAL-LIABILITIES-AND-EQUITY> 409,639
<INTEREST-LOAN> 20,771
<INTEREST-INVEST> 7,623
<INTEREST-OTHER> 389
<INTEREST-TOTAL> 28,783
<INTEREST-DEPOSIT> 14,243
<INTEREST-EXPENSE> 16,737
<INTEREST-INCOME-NET> 12,046
<LOAN-LOSSES> 1,211
<SECURITIES-GAINS> (39)
<EXPENSE-OTHER> 6,970
<INCOME-PRETAX> 3,826
<INCOME-PRE-EXTRAORDINARY> 2,381
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,381
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 1.14
<YIELD-ACTUAL> 3.33
<LOANS-NON> 1,058
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,542
<CHARGE-OFFS> 1,298
<RECOVERIES> 168
<ALLOWANCE-CLOSE> 2,263
<ALLOWANCE-DOMESTIC> 1,211
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 432
</TABLE>
