SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO ___________.
COMMISSION FILE NUMBER 000-27081
AMERICAN HOME MORTGAGE HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-4066303
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
12 EAST 49TH STREET, NEW YORK, NY 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 755-8600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
Common Stock, $0.01 par value NASDAQ National Market
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
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] or No [ ].
Indicate by a 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. [ _ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant based upon the closing sale price of its Common Stock on March
27, 2000, on the NASDAQ National Market was $7.125.
As of March 27, 2000, there were 8,286,747 shares of Common Stock
outstanding.
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TABLE OF CONTENTS
Page
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PART I
ITEM 1. BUSINESS......................................................... 3
ITEM 2. PROPERTIES.......................................................11
ITEM 3. LEGAL PROCEEDINGS................................................11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS..........................................................12
ITEM 6. SELECTED FINANCIAL DATA (in thousands, except per share and
operating data)..................................................12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................14
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......22
ITEM 8. FINANCIAL STATEMENTS.............................................22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES............................................22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...............22
ITEM 11. EXECUTIVE COMPENSATION...........................................22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...22
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K..22
SIGNATURES.................................................................24
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS................................F-1
2
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PART I
This report contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. Readers are cautioned that
actual results could differ materially from those indicated in such statements
as a result of certain factors, including those set forth under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Factors That May Affect Future Results" and elsewhere in, or
incorporated by reference into, this report.
ITEM 1. BUSINESS
GENERAL
American Home Mortgage Holdings, Inc. ("American Home" and, together with
its subsidiaries, American Home Mortgage Corp. ("AHM") and Marina Mortgage
Company, Inc. ("Marina"), the "Company") is an independent retail mortgage
banking company primarily engaged in the business of originating and selling
residential mortgage loans. The Company offers a broad array of residential
mortgage products targeted primarily to high-credit-quality borrowers over the
Internet, as well as through its 220 primarily commission-compensated loan
originators. The Company operates from 14 loan offices in the New York
metropolitan area and five other eastern states, 13 loan offices in California
and one in Arizona. The Company operates primarily as a mortgage banker,
underwriting, funding and selling its loan products to more than 45 different
buyers. In January of 1999, the Company began marketing its mortgage products
over the Internet through its Internet site, MORTGAGESELECT.COM. Mortgage
products are originated online through arrangements with a number of popular Web
sites and through the Company's own Web site established in 1999.
On March 30, 2000, the Company filed a definitive proxy statement with the
Securities Exchange Commission for a special meeting to change its name to
MORTGAGESELECT.COM.
Since its founding in 1988, AHM has increased its origination volume by
building a retail origination network through the expansion of its branch office
network and the addition of sales personnel. The Company's loan originations
totalled $1.3 billion in 1999. The Company has maintained its focus on purchase
rather than refinance transactions by concentrating its marketing, advertising
and personnel resources on lending to home buyers rather than to home owners
seeking to refinance their mortgage loans.
On June 15, 1999, American Home was formed to serve as a holding company
for AHM. In conjunction with the closing of the initial public offering of the
common stock of American Home (the "Offering"), all of the issued and
outstanding shares of common stock of AHM were exchanged for 4,999,900 shares of
American Home's common stock. On October 6, 1999, American Home completed its
Offering of 2.5 million shares of common stock at a price of $6.00 per share.
On December 30, 1999, American Home acquired Marina Mortgage Company, Inc.,
a California corporation. Marina, now a wholly-owned subsidiary of American
Home, is a full service retail lender. Marina originates and purchases mortgage
loans for sale in the secondary mortgage market. It operates 13 branch offices
in California and one in Arizona and employs approximately 226 full time
employees, including 104 sales personnel. Marina is licensed, exempt or
otherwise qualified to originate loans in 32 states. Its business included its
Internet division, which has provided the Company with its third Internet call
center. At December 31, 1999, Marina had assets of $16.4 million and its loan
originations for 1999 were $669 million.
The Company is currently licensed to conduct its business in 46 states and
the District of Columbia.
RECENT DEVELOPMENTS
On January 17, 2000, American Home entered into an agreement to acquire
First Home Mortgage Corp. ("First Home"), an Illinois corporation. Upon
completion of the acquisition, the shareholders of First Home will receive an
aggregate of 489,760 shares of American Home's common stock and $3.6 million
over a period of two years. In addition, the shareholders of First Home may
receive additional consideration consisting of cash and shares of American
Home's common stock based on the future results of the financial performance of
the First Home division of the Company (please see the Company's current report
on Form 8-K filed with the Securities and Exchange Commission on February 1,
2000 for further information). First Home is an independent mortgage lender
based in metropolitan Chicago. Formed in 1987, First Home originates primary
residential mortgage loans. It operates 21 branch offices in four states and
employs approximately 255 full time employees, including sales personnel. First
Home is qualified to originate loans in 23 states. The mergers with Marina, in
1999, and First
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Home, expected to be completed late in the second quarter of 2000, represent an
expansion of the Company's traditional lending activities into the western and
midwest geographic regions of the country.
OPERATIONS
Lending to Home Buyers. The Company focuses on making loans to home buyers
rather than to home owners seeking to refinance their mortgages. In 1999, 72.6%
of the mortgage loans the Company originated were made to home buyers, compared
to 27.4% which were made to home owners seeking refinancing.
Web Site. The Company's Web site, MORTGAGESELECT.COM, provides customers
with 24-hour access to its interest rates and product terms and the ability to
lock in an interest rate, to file a pre-approval request or application, to
check the status of their pending application and to obtain their credit report.
The Company's Web site also provides mortgage customers with an array of "tools"
that assist them in determining how much financing they can afford, what kind of
mortgage best suits their needs and otherwise provides answers to frequently
asked questions.
Underwriting Loans to the Standards of Investors who Buy the Company's
Loans. The Company's underwriting process is designed to ensure that each loan
it originates can be sold to a third-party investor by conforming the loan to
the underwriting and credit standards of that investor. Whenever possible, the
Company uses "artificial intelligence" underwriting systems, including Fannie
Mae's Desktop Underwriter(R), to ensure consistency with its investors'
predetermined standards. These systems interface with its "enterprise" computer
system. In addition, the Company has a series of internal and external quality
control procedures in place to ensure compliance with its underwriting
standards.
Sales. The Company's loan originators are primarily compensated through
sales commissions to encourage responsiveness to its customers. The Company's
loan originators actively guide customers through the loan application process,
keeping customers informed about rate changes and market conditions.
BUSINESS DIVISIONS AND MARKETS
The Company's business is organized into the following three divisions,
each of which focuses on a distinct production channel of the residential loan
market: the Internet division, the retail division and the wholesale division.
The Internet Division
The Company created its Internet division, MORTGAGESELECT.COM, in January
of 1999. Consumers can apply online, have access to their file, update
information instantly, and check the status of their loans 24 hours a day, seven
days a week. The Company markets and sells loans on the Internet through many of
the leading Web sites in its industry, as well as directly through its own
MORTGAGESELECT.COM Web site. The Company employs a dedicated e-commerce staff
that seeks to establish new relationships with both national and regional Web
sites.
Mortgage shoppers who visit a Web site are prompted by the site's software
to provide information about their loan needs and preferences and about their
income and financial condition. The site's software then compares the
information given by the potential customer with a database of the terms of the
loans of lenders participating on the site. The software selects those loans for
which the customer qualifies that satisfy the potential customer's loan needs.
The site's software then introduces the potential customer to one of the lenders
that participates on the site. The way in which the customer is introduced
varies from site to site, but when customers are connected to the Company they
are introduced on an exclusive or semi-exclusive basis.
Once a customer is introduced to the Company, Company representatives
communicate with that customer online or through one of the Company's Internet
call centers. The call centers employ representatives who are trained to work
with customers in a consultative manner, to provide helpful information and
establish a relationship with the potential customer.
The Company has increased its call center capacity by transferring
experienced managers and personnel from its traditional origination channels to
its Internet division. The Company's experience is that having a number of
smaller call centers allows it to best manage and motivate its sales
representatives and create an atmosphere that is most conducive to its
consultative sales approach. To enable several smaller call centers to work
together efficiently, the Company has installed "virtual" software so that a
representative in any one call center can service a mortgage shopper regardless
of the source that referred that shopper.
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The Retail Division
The Company's retail division is the core of its traditional business.
Prior to the acquisition of Marina, this division consisted of 14 offices in the
eastern United States, including its New York City headquarters. With the
addition of Marina, the Company expanded its retail base by an additional 14
offices located in the western United States. The Company's retail division has
six origination channels: community loan offices; direct-to-consumer
advertising; realtor builder joint ventures; the Corporate Affinity Program;
telemarketing; and the Real Estate Direct Program.
Community Loan Offices. The Company's community loan offices serve the
regions in which they operate, and obtain business by developing and nurturing a
referral network of realtors, real estate attorneys, builders and accountants.
They also facilitate the efficient processing and closing of a borrower's loan.
Available services include pre-approval commitments based on Fannie Mae's
Desktop Underwriter(R), flexible rate lock-in and extension policies, and
holding of escrows and other accommodations that help a borrower and facilitate
a real estate transaction. The Company's community loan offices provide special
services to builders, including issuing commitments to lend to buyers in their
projects as their onsite resource for mortgage financing.
In order to attract and retain experienced loan originators, the Company
offers a high level of support that includes a broad product range, technical
help desk support, flexible extension policies, expenditures on trade shows,
educational seminars and other marketing initiatives and promotional materials.
Direct to Consumer Advertising. The Company advertises its products in
selected local and regional print media. Customer calls generated by advertising
are handled by its more experienced loan originators who use the Company's
consultative sales approach.
Realtor and Builder Joint Ventures. The Company has established three joint
ventures with mid-size real estate brokerage firms and builders, who provide the
venture with access to potential customers. The Company and its partners each
have a 50% interest in the venture. Each venture makes loans, retaining the
application and processing fees, points and discounts earned in connection with
the mortgages it originates. The venture then sells the mortgage loans to the
Company, which in turn resells the loans to institutional buyers. The Company
believes that this distribution channel provides an opportunity to cross sell
with local realtors and builders.
Corporate Affinity Program. Under this program, the Company makes loans to
employees of large companies and firms who are members of its Corporate Affinity
Program. The employees receive special group discounts, service guarantees and
other accommodations.
Telemarketing. The Company maintains a staff of loan originators and
telemarketers who place calls to persons identified as having high-interest rate
loans due to poor past credit history, but who have improved their credit
history and would now qualify for lower interest rate mortgages.
Real Estate Direct. The Company established its Real Estate Direct Program
to reach customers at the beginning of the home-buying process. Under this
program, the Company places advertisements for a particular home that not only
describe the home, but also a package of available mortgage financing terms. The
Company believes that it benefits by having early access to potential borrowers,
many of whom, although they may not buy the particular property advertised, may
become customers of the Company.
The Wholesale Division
The Company has established relationships with more than 75 mortgage
brokers. The Company's wholesale division actively solicits referrals of
borrowers from this network of independent mortgage brokers.
A mortgage broker deals directly with the borrower and submits the fully
processed loan application to the Company for an underwriting determination. The
Company applies its usual underwriting standards to each wholesale-originated
mortgage, issues a written commitment and, upon satisfaction of all lending
conditions, closes the mortgage. The Company offers mortgage brokers direct
access to Fannie Mae's Desktop Underwriter(R), which enables them to give their
clients immediate approvals. The Company also offers its entire product line,
the ability to provide approval within 24 to 48 hours of receipt of a file,
flexible lock-in and extension policies, personalized service, knowledgeable and
experienced wholesale loan originators and support of mortgage broker industry
events, such as trade shows and educational seminars.
The Company conducts due diligence on mortgage brokers with whom the it
considers doing business. Its diligence includes verifying their financial
statements and running credit checks of principals, checking business references
provided by
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the brokers and verifying with the applicable regulators that a broker is in
good standing. Once approved, the Company requires that a mortgage broker sign
an agreement that governs the mechanics of doing business with the Company and
that sets forth the representations and warranties the broker makes regarding
each loan submitted to the Company.
THE COMPANY'S MORTGAGE PRODUCTS
The Company offers a broad and competitive range of mortgage products that
aim to meet the mortgage needs of all borrowers. Its product line includes
Fannie Mae-eligible loans, jumbo loans, adjustable rate mortgages, FHA-insured
and VA-guaranteed loans, alternate "A" loans, non-prime loans, home equity and
second mortgage loans, construction loans and bridge loans. The Company provides
its full product line through each of the three divisions.
The Company's network of loan buyers allows it to identify specific loan
features, to identify a loan buyer who will purchase loans with those specific
features and to select a buyer who will accept the lowest yield for loans with
those features. As a result, the Company is able to offer a wide range of
products that it believes are well priced and that have many different features
to suit a customer's needs.
The following table summarizes information with respect to the most
important categories of mortgage loans the Company originated for the year ended
December 31, 1999:
<TABLE>
MORTGAGE LOAN ORIGINATION SUMMARY
<CAPTION>
% OF TOTAL
----------
MORTGAGE TYPE NUMBER OF LOANS DOLLAR VOLUME DOLLAR VOLUME
--------------- ------------- -------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------- ----------------------- -----------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ----- ----
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Fannie Mae Eligible Fixed.............. 4,054 3,560 622.1 $ 539.6 46.1% 46.6%
Jumbo Fixed............................ 410 506 153.8 171.5 11.4 14.8
Adjustable Rate (ARMs)................. 730 519 252.3 177.5 18.7 15.3
FHA/VA................................. 1,463 1,084 200.5 143.0 14.9 12.4
Alternate "A" Loans.................... 220 539 43.6 82.1 3.2 7.1
Non-Prime Loans........................ 488 240 51.2 25.8 3.8 2.2
Home Equity/Second..................... 344 177 16.8 9.0 1.3 0.8
Construction Loans..................... 16 20 6.3 8.4 0.5 0.7
Bridge Loans........................... 7 9 1.8 0.6 0.1 0.1
----- ----- ------- -------- ------ -----
TOTAL........................... 7,732 6,654 1,348.4 $1,157.5 100.0% 100.0%
===== ===== ======= ======== ====== ======
</TABLE>
Conforming and Government-Insured Fixed Rate Loans. These mortgage loans
conform to the underwriting standards established by Fannie Mae or the Federal
Home Loan Mortgage Corporation (commonly referred to as Freddie Mac). This
product is limited to high quality borrowers with good credit records and
involves adequate down payments or mortgage insurance. These loans may qualify
for insurance from the Federal Housing Authority (FHA) or guarantees from the
Veterans Administration (VA). The Company has been designated by the U.S.
Department of Housing and Urban Development (HUD) as a direct endorser of loans
insured by the FHA and as an automatic endorser of loans partially guaranteed by
the VA, allowing it to offer so-called FHA or VA mortgages to qualified
borrowers. FHA and VA mortgages must be underwritten within specific
governmental guidelines, which include borrower income verification, asset
verification, borrower credit worthiness, property value and property condition.
Jumbo Loans. Jumbo loans are considered non-conforming mortgage loans
because they have a principal loan amount in excess of the loan limits set by
Fannie Mae and Freddie Mac (currently, $252,700 for single-family, one-unit
mortgage loans in the continental United States). The Company offers jumbo loans
with creative financing features, such as the pledging of security portfolios.
Its jumbo loan program is geared to the more financially sophisticated borrower.
Adjustable Rate Mortgages (ARM). The ARM's defining feature is a variable
interest rate that fluctuates over the life of the loan, usually 30 years.
Interest rate fluctuations are based on an index that is related to Treasury
bill rates, regional or national average cost of funds of savings and loan
associations, or another widely published rate, such as LIBOR. The period
between the rate changes is called an adjustment period and may change every six
months, one year, three years, five years or ten years. Some of the Company's
ARMs may include payment caps, which limit the interest rate increase for each
adjustment period.
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Alternate "A" Loans. From a credit risk standpoint, alternate "A" loan
borrowers present a risk profile comparable to that of conforming loan
borrowers, but entail special underwriting considerations, such as a higher loan
to value ratio or limited income verification.
Non-Prime Mortgage Loans. The non-prime mortgage loan focuses on customers
whose borrowing needs are not served by traditional financial institutions.
Borrowers of non-prime mortgage loans may have impaired or limited credit
profiles, high levels of debt service to income, or other factors that
disqualify them for conforming loans. By originating mortgage loans to borrowers
with higher credit risk, the Company is able to charge higher interest rates
than would be charged for its conventional loans. Offering this category of
mortgage loans on a limited basis allows the Company to provide loan products to
borrowers with a variety of differing credit profiles.
Home Equity and Second Mortgage Loans. These loans are generally secured by
second liens on the related property. Home equity mortgage loans can take the
form of a home equity line of credit, which generally bears an adjustable
interest rate, while second mortgage loans are closed-end loans with fixed
interest rates. Both types of loans are designed for borrowers with high credit
profiles. Home equity lines generally provide for a 5- or 15-year draw period
where the borrower withdraws needed cash and pays interest only, followed by a
10- to 20-year repayment period. Second mortgage loans are fixed in amount at
the time of origination and typically amortize over 15 to 30 years with a
balloon payment due after 15 years.
Construction Loans. The Company offers a variety of construction loans for
owner-occupied single-family residences. These loans are available on a rollover
basis, meaning that the borrower can secure funding for the land purchase and
construction of the home, then roll the financing over into a permanent mortgage
loan. During the construction period, interest-only payments are made.
Withdrawals during the construction period, to cover the costs associated with
each stage of completion, are usually made in five to ten disbursements.
Bridge Loans. The bridge loans that the Company makes are short-term loans
and may be used in conjunction with the other loan products. Bridge loans
provide a means for a borrower to obtain cash based on the equity of a current
home that is on the market but not yet sold and to use that cash to purchase a
new home.
SALE OF LOANS AND SERVICING RIGHTS
The Company's business strategy is to sell the loans it makes, typically
within 30 days of origination, rather than hold them for investment. The Company
sells its loans to Fannie Mae, large national banks, thrifts and smaller banks,
securities dealers, real estate investment trusts and other institutional loan
buyers. The Company also swaps loans with Fannie Mae for mortgage-backed
securities, which it then sells.
Typically, the Company sells or swaps the loans with limited recourse to
it. This means that, with some exceptions, the Company reduces its exposure to
default risk at the time it sells the loan, except that it may be required to
repurchase the loan if it breaches the representations or warranties that it
makes in connection with the sale of the loan, in the event of an early payment
default, or if the loan does not comply with the underwriting standards or other
requirements of the ultimate investor.
The Company sells or swaps the loans under agreements to the buyers and
institutions described above, many of whom compete directly with the Company for
mortgage originations. The agreements generally do not have a limit as to the
principal amount of loans that the Company may sell, and establish an ongoing
sale program under which these investors and institutions stand ready to buy so
long as the loans the Company offers for sale meet their underwriting standards.
Generally, the Company sells the servicing rights to its loans at the time
it sells those loans. When it swaps loans for mortgage-backed securities, at the
time of completing the swap it sells the servicing rights to the loans to an
independent loan servicer. The prices at which the Company is able to sell its
mortgage servicing rights vary over time and may be materially adversely
affected by a number of factors, including the general supply of, and demand
for, mortgage servicing rights and changes in interest rates.
In 1999, the three institutional investors that bought the most loans from
the Company were Chase Manhattan Mortgage Corporation, Norwest Funding, Inc. and
Fleet Mortgage Corp., which accounted for 31.2%, 22.6%, and 15.2% of the
Company's total loan sales, respectively. The loss of any of these institutions
as a buyer of the Company's loans, or a significant reduction in the amount of
loans they are willing to buy or a significant reduction in the prices those
buyers are willing to pay, could have a material adverse effect on the Company's
business and results of operations.
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LOAN UNDERWRITING
The Company's primary goal in making a decision whether to extend a loan is
whether that loan conforms to the expectations and underwriting standards of the
institution that buys that type of loan. Typically, these buyers focus on a
potential borrower's credit history, often as summarized by credit scores,
income and stability of income, liquid assets and net worth and the value and
the condition of the property to be pledged. Whenever possible, the Company uses
artificial intelligence underwriting systems to determine whether a particular
loan meets those standards and expectations. In those cases where artificial
intelligence is not available, the Company relies on its credit officer staff to
make the determination.
QUALITY CONTROL
The Company has hired an outside firm to perform quality control testing
for it. The firm typically samples, on a random basis, 10% of the loans the
Company originates. It checks the accuracy of the borrower's income and assets
and the credit report used to make the loan, reviews whether the loan buyer's
underwriting standards were properly applied, examines whether the loan complies
with government regulations and, for 1% of the loans the Company originates, it
reappraises the underlying property. The firm issues monthly reports to the
Company, which it uses to identify areas that need corrective action or could
use improvement. To date, those reports have not identified material quality
control concerns, although there can be no assurances that the Company will not
experience material quality control concerns in the future.
GOVERNMENT REGULATION
The Company's business is subject to extensive and complex rules and
regulations of, and examinations by, various federal, state and local government
authorities and government sponsored enterprises, including without limitation
HUD, FHA, VA, Fannie Mae, Freddie Mac, Ginnie Mae and state regulatory
authorities. These rules and regulations impose obligations and restrictions on
the Company's loan origination and credit activities, including without
limitation the processing, underwriting, making, selling, securitizing and
servicing of mortgage loans.
The Company's lending activities also are subject to various federal laws,
including the Federal Truth-in-Lending Act and Regulation Z thereunder, the
Homeownership and Equity Protection Act of 1994, the Federal Equal Credit
Opportunity Act and Regulation B thereunder, the Fair Credit Reporting Act of
1970, the Real Estate Settlement Procedures Act of 1974 and Regulation X
thereunder, the Fair Housing Act, the Home Mortgage Disclosure Act and
Regulation C thereunder and the Federal Debt Collection Practices Act, as well
as other federal statutes and regulations affecting its activities. The
Company's loan origination activities also are subject to the laws and
regulations of each of the states in which it conducts its activities.
These laws, rules, regulations and guidelines limit mortgage loan amounts
and the interest rates, finance charges and other fees the Company may assess,
mandate extensive disclosure and notice to its customers, prohibit
discrimination, impose qualification and licensing obligations on it, establish
eligibility criteria for mortgage loans, provide for inspections and appraisals
of properties, require credit reports on prospective borrowers, regulate payment
features, and prohibit kickbacks and referral fees, among other things. These
rules and requirements also impose on the Company certain reporting and net
worth requirements. Failure to comply with these requirements can lead to, among
other things, loss of approved status, termination of contractual rights without
compensation, demands for indemnification or mortgage loan repurchases, certain
rights of rescission for mortgage loans, class action lawsuits and
administrative enforcement actions.
The Company is subject to periodic audits by the regulators in many of the
states where it operates. To date, the audits have not found any material
violations. In addition, the Company's "enterprise" computer application assists
it in complying with government regulations by automatically selecting the
requisite loan disclosure documents, calculating permissible fees and charges
and assuring that products offered to a particular borrower meet the
requirements of that borrower's state. The Company's legal compliance is
reviewed as part of its quality control process, which is performed by an
independent contractor with expertise in these matters.
Although the Company believes that it has systems and procedures in place
to ensure compliance with these requirements and believe that it currently is in
compliance in all material respects with applicable federal, state and local
laws, rules and regulations, there can be no assurance of full compliance with
current laws, rules and regulations, that more restrictive laws, rules and
regulations will not be adopted in the future, or that existing laws, rules and
regulations or the mortgage loan documents with borrowers will not be
interpreted in a different or more restrictive manner. The occurrence of any
such event could make compliance substantially more difficult or expensive,
restrict the Company's ability to originate, purchase, sell or service mortgage
loans, further limit or restrict the amount of interest and other fees and
charges earned from mortgage loans that the Company originates, purchases or
services, expose it to claims by borrowers and administrative enforcement
actions, or otherwise materially and adversely affect its business, financial
condition and results of operations.
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Members of Congress, government officials and political candidates have
from time to time suggested the elimination of the mortgage interest deduction
for federal income tax purposes, either entirely or in part, based on borrower
income, type of loan or principal amount. Because many of the Company's loans
are made to borrowers for the purpose of purchasing a home, the competitive
advantage of tax deductible interest, when compared with alternative sources of
financing, could be eliminated or seriously impaired by this type of
governmental action. Accordingly, the reduction or elimination of these tax
benefits could have a material adverse effect on the demand for the kind of
mortgage loans the Company offers.
The Company also is performing various mortgage-related operations on the
Internet. The Internet, and the laws, rules and regulations related to it, are
new and still evolving. As such, there exist many opportunities for the
Company's business operations on the Internet to be challenged or to become
subject to legislation, any of which may materially and adversely affect its
business, financial condition and results of operations.
INFORMATION SYSTEMS
The Company's enterprise system controls most aspects of the Company's
operations, from the processing of a loan application through the closing of the
loan and the sale of the loan to institutional investors. The system also
performs checks and balances on many aspects of the Company's operations, and it
supports the Company's marketing efforts. The Company's enterprise system
functions on a wide area network that connects all of its branches in "real
time." With its wide area network, a transaction at any one of its locations is
committed centrally and is therefore immediately available to all personnel at
all other locations. An important benefit of the enterprise system is that it
aids the Company in controlling its business process. The system assures that
the Company's underwriting policies are adhered to, that only loans that are
fully approved are disbursed, and that the correct disclosures and loan
documents are used based on a borrower's state and loan program. The Company's
enterprise system also provides its management with reports and other key data.
MORTGAGESELECT.COM has developed a proprietary call center and Web site
software programs that integrate the call center, its contact management system,
Fannie Mae's automated underwriting system and the Internet Web site. The
Company's Internet software programs were developed using in-house personnel and
outside software consulting companies specializing in Internet mortgage services
software.
COMPETITION
Mortgage banking on the Internet is highly competitive. A large number of
mortgage companies currently transact business over the Internet in one form or
another. The sophistication of these companies in the Internet channel varies
from simple one-page information Web sites to Web sites with extensive on-line
content and features. Many of these mortgage companies share a business strategy
and capability similar to that of the Company. The competition includes banks
such as Chase and Bank of America, as well as mortgage originators such as Prism
Financial Corporation, E-Loan and Mortgage.com, all of which are larger and
better capitalized than the Company. In addition, the Company competes on the
Internet with large, national mortgage companies, such as Countrywide Credit
Industries, Inc. and HomeSide Lending, which have greater origination volumes
and capitalization than the Company.
A large number of mortgage companies also transact business through retail
offices and other traditional channels. The Company's competitors include other
mortgage bankers (including those noted above), state and national commercial
banks, savings and loan associations (including, for example, Dime Savings Bank
of New York, FSB and Home Federal Savings Bank), credit unions, insurance
companies and other finance companies. Many of these competitors are
substantially larger and have considerably greater financial, technical and
marketing resources than the Company.
SPECIAL NOTES OF CAUTION
REGARDING FORWARD-LOOKING STATEMENTS
Some of the information in this report may constitute "forward-looking
statements" within the meaning of the federal securities laws. Forward-looking
statements generally discuss the Company's plans and objectives for future
operations. They also include statements containing a projection of revenues,
earnings (loss), capital expenditures, dividends, capital structure or other
financial terms. The following statements particularly are forward-looking in
nature:
o the Company's strategy;
9
<PAGE>
o development of the Company's Internet capabilities;
o projected joint ventures or acquisitions; and
o projected capital expenditures.
The forward-looking statements in this report are based on the Company's
management's beliefs, assumptions and expectations of its future economic
performance, taking into account the information currently available to them.
These statements are not statements of historical fact. Forward-looking
statements involve risks and uncertainties, some of which are not currently
known to the Company, that may cause its actual results, performance or
financial condition to be materially different from the expectations of future
results, performance or financial condition it expresses or implies in any
forward-looking statements. Some of the important factors that could cause the
Company's actual results, performance or financial condition to differ
materially from its expectations are:
o general volatility of the capital markets and the market price of
the Company's shares;
o changes in the real estate market, interest rates or the general
economy of the markets in which the Company operates;
o economic, technological or regulatory changes affecting the use of
the Internet;
o the Company's ability to employ and retain qualified employees;
o changes in government regulations that are applicable to the
Company's regulated brokerage and property management businesses;
o the Company's ability to identify and complete acquisitions and
successfully integrate businesses it acquires; o changes in the
demand for the Company's services;
o the degree and nature of the Company's competition; and
o the other factors referenced in this report, including, without
limitation, those under the captions "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business."
When used in this report, the words "plan," "believe," "anticipate,"
"estimate," "expect," "objective," "projection," "forecast," "goal" or similar
words are intended to identify forward-looking statements. The Company qualifies
any and all of its forward-looking statements entirely by these cautionary
factors.
10
<PAGE>
ITEM 2. PROPERTIES
The Company's Executive and Administrative Offices are located in New York,
New York and Melville, New York, respectively, and consist of approximately
50,200 square feet. The two leases covering the Executive and Administrative
offices expire in December of 2007 and January of 2003, respectively, and the
combined monthly rent is $97,458.
The Company leases an aggregate of 28 spaces for its regional operation
center and lending offices in Arizona, California, Connecticut and New York. As
of December 31, 1999 these facilities had an annual aggregate base rental of
approximately $1,598,000, and ranged in size from 400 to 11,523 square feet with
remaining lease terms ranging from one to eight years.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of its business, the Company is at times subject to
various legal proceedings. The Company does not believe that any of its current
legal proceedings, individually or in the aggregate, will have a material
adverse effect on its operations or financial condition.
A multitude of class action lawsuits have been filed against companies in
the mortgage banking industry, which allege, among other things, violations of
the terms of the mortgage loan documents and certain laws, rules and regulations
(including without limitation consumer protection laws). These lawsuits may
result in similar suits being filed against the Company. In addition, the
publicity generated by such lawsuits may result in legislation that affects the
manner in which the Company conducts its business and its relationships with
mortgage brokers, correspondents and others. Any of these developments may
materially and adversely affect the Company's business, financial condition and
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
11
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the NASDAQ National Market under
the symbol AHMH and began trading on October 4, 1999. The following table sets
forth the high, low and closing sales prices for AHM's Common Stock as reported
by the NASDAQ National Market for the periods indicated.
1999
-----------------
HIGH LOW
---- ---
Fourth Quarter (Commencing October 4, 1999) 7.375 5.375
As of March 27, 2000, the closing sales price of the Company's Common
Stock, as reported on the NASDAQ National Market, was $7.125.
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently intends to retain any earnings for growth and
expansion of its business and does not anticipate paying any cash dividends on
its Common Stock in the foreseeable future. In addition, the Company has certain
limitations on its ability to pay dividends under certain of its credit
facilities without prior approval of the lenders.
As of March 27, 2000 the Company had 16 stockholders of record. The Company
believes, based on the number of proxy statements and related materials
requested in connection with its April 12, 2000 special meeting of stockholders,
that there are approximately 800 beneficial owners of its Common Stock.
ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING
DATA)
The following selected financial data as of December 31, 1999, 1998 and
1997 and for the years ended December 31, 1999, 1998, 1997 and 1996 have been
derived from the Company's consolidated financial statements, included elsewhere
in this report, which have been audited by Deloitte & Touche LLP, the Company's
independent auditors. The selected financial data as of December 31, 1995 and
1996 and for the year ended December 31, 1995 have been derived from the
Company's unaudited consolidated financial statements, which are not included in
this report. These financial statements include all adjustments, consisting of
normal recurring adjustments, which the Company considers necessary for a fair
presentation of its financial position and results of operations for these
periods. You should not assume that the results below indicate results that the
Company will achieve in the future. The operating data are derived from
unaudited financial information that the Company compiled.
12
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You should read the information below along with all the other financial
information and analysis presented in this report, including the Company's
financial statements and related notes, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues
Gain on sale of mortgage loans ........................... $ 21,957 $ 18,981 $ 10,597 $ 6,360 $ 6,361
Interest income (expense), net ........................... 1,704 734 369 204 (610)
Other .................................................... 1,201 502 356 21 --
-------- -------- -------- -------- --------
Total revenues ....................................... 24,862 20,217 11,321 6,585 5,751
-------- -------- -------- -------- --------
Expenses
Salaries, commissions and benefits, net .................. 11,611 9,430 5,317 3,459 3,930
Marketing and promotion .................................. 1,774 1,236 962 814 445
Occupancy and equipment .................................. 2,429 1,654 909 501 91
Data processing and communications ....................... 1,133 952 612 337 203
Provision for loss ....................................... 28 153 117 -- --
Other .................................................... 2,550 1,543 946 830 715
-------- -------- -------- -------- --------
Total expenses ....................................... 19,525 14,968 8,862 5,941 5,384
-------- -------- -------- -------- --------
Income before income taxes and minority interest ........... 5,337 5,249 2,459 644 367
Income taxes(1) ...................................... 1,441 328 140 38 29
Minority interest .................................... 35 51 -- -- --
-------- -------- -------- -------- --------
Net income (loss) ........................... $ 3,861 $ 4,870 $ 2,319 $ 606 $ 338
======== ======== ======== ======== ========
Net income per share:
Basic .................................................... $ 0.69 $ 0.97 $ 0.46 $ 0.12 $ 0.07
Diluted .................................................. $ 0.69 $ 0.97 $ 0.46 $ 0.12 $ 0.07
Weighted average number of shares outstanding:
Basic .................................................... 5,595 5,000 5,000 5,000 5,000
Diluted .................................................. 5,603 5,000 5,000 5,000 5,000
BALANCE SHEET DATA:
Cash and cash equivalents ................................ $ 3,414 $ 2,892 $ 2,058 $ 1,226 $ 982
Mortgage loans held for sale, net ........................ 65,115 34,667 24,676 9,167 9,070
Total assets ............................................. 85,884 42,392 28,914 11,487 10,381
Warehouse lines of credit ................................ 56,805 34,070 24,454 9,076 9,026
Other liabilities ........................................ 11,056 2,298 1,886 881 509
Total stockholder's equity ............................... $ 18,000 $ 5,924 $ 2,574 $ 1,530 $ 886
OPERATING DATA:
Total mortgage originations (in millions) ................ $ 1,348 $ 1,158 $ 724 $ 544 $ 341
Home purchases ....................................... $ 978 $ 749 $ 562 $ 383 $ 264
Refinancings ......................................... $ 370 $ 409 $ 162 $ 161 $ 77
Number of loans originated ............................... 7,732 6,543 4,361 2,915 1,674
Loan originators at period end ........................... 220 76 71 40 28
Number of branches at period end ......................... 28 12 8 7 5
</TABLE>
- - ---------------------------------------
(1) Prior to September 29, 1999, American Home Mortgage Corp. (AHM) elected to
be treated as an S corporation for federal and state income tax purposes.
Prior to AHM's election to be treated as an S corporation, all federal
taxes were taxable to and paid by AHM's sole shareholder. Income taxes for
the years ended December 31, 1998, 1997, 1996 and 1995 reflect state income
taxes only.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company has made forward-looking statements in this annual report on
Form 10-K that are subject to risks and uncertainties. Forward-looking
statements include information concerning the Company's possible or assumed
future results of operations. Also, when the Company has used such words as
"believe," "expect," "anticipate," "plan," "could," "intend" or similar
expressions, it is making forward-looking statements. You should note that an
investment in the Company's securities involves certain risks and uncertainties
that could affect its future financial results. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth in "factors
that may affect future performance" and elsewhere in this annual report on Form
10-K.
The Company is a leading independent retail mortgage banking company
primarily engaged in the business of originating and selling residential
mortgage loans. The Company offers a broad array of residential mortgage
products targeted primarily to high-credit-quality borrowers over the Internet,
as well as through its 220 primarily commission-compensated loan originators.
The Company operates from 14 loan offices in the New York metropolitan area and
five other eastern states, 13 loan offices in California and one in Arizona. The
Company operates primarily as a mortgage banker, underwriting, funding and
selling its loan products to more than 45 different buyers. In January of 1999,
the Company began marketing its mortgage products over the Internet through its
Internet site, MORTGAGESELECT.COM. Mortgage products are originated online
through arrangements with a number of popular Web sites and through the
Company's own Web site, established in 1999.
As a mortgage bank, the Company generates revenues through the origination
and subsequent sale of funded loans. These revenues are made up of net gain on
sale and interest income. Net gain on sale consists of the net gain on the sale
of mortgage loans and mortgage servicing rights, which are sold generally within
30 days of origination. This net gain is recognized based on the difference
between the combined selling price of the loan and its related servicing rights,
and the carrying value of the mortgage loans and servicing rights sold. Net gain
on sale also includes loan-related fees consisting of application,
documentation, commitment and processing fees paid by borrowers. Net interest
income consists of the difference between interest received by the Company on
its mortgage loans held for sale and interest paid by it under its credit
facilities.
The Company's expenses largely consist of:
o salaries and benefits paid to employees;
o occupancy and equipment costs;
o Internet-related expenses, including licensing and participation
fees and advertising costs;
o marketing, promotion and advertising costs; and
o data processing and communication costs.
A substantial portion of these expenses is variable in nature. Commissions paid
to loan originators are 100% variable, while other salaries and benefits
fluctuate from quarter to quarter based on the Company's assessment of the
appropriate levels of non-loan originator staffing, which correlates to the
current level of loan origination volume and the Company's perception of future
loan origination volume.
Seasonality affects the mortgage industry as loan originations are
typically at their lowest levels during the first and fourth quarters due to a
reduced level of home buying activity during the winter months. Loan
originations generally increase during the warmer months, beginning in March and
continuing through October. As a result, the Company expects higher earnings in
its second and third quarters and lower earnings in the first and fourth
quarters.
Interest rate and economic cycles also affect the mortgage industry, as
loan originations typically fall in rising interest rate environments. During
these periods, refinancing originations decrease, as higher interest rates
provide reduced economic incentives for borrowers to refinance their existing
mortgages. Due to stable and decreasing interest rate environments over recent
years, the Company's to date performance may not be indicative of results in
rising interest rate environments. In addition, the Company's recent and rapid
growth may distort some of its ratios and financial statistics and may make
period-to-period comparisons difficult. In light of this growth, the Company's
to date earnings performance may be of little relevance in predicting future
performance. Furthermore, the Company's financial statistics may not be
indicative of its results in future periods.
14
<PAGE>
On December 30, 1999, American Home acquired Marina Mortgage Company, Inc.,
a California corporation. Marina, now a wholly-owned subsidiary of American
Home, is a full service retail lender. Marina originates and purchases mortgage
loans for sale in the secondary mortgage market. It operates 13 branch offices
in California and one in Arizona and employs approximately 226 full time
employees, including 104 sales personnel. Marina is licensed, exempt or
otherwise qualified to originate loans in 32 states. Its business included its
Internet division, which has provided the Company with its third Internet call
center. Goodwill generated as a result of this transaction was approximately
$4.5 million and will be amortized over 20 years.
On January 17, 2000, American Home entered into an agreement to acquire
First Home Mortgage Corp., an Illinois corporation. Upon completion of the
acquisition, the shareholders of First Home will receive an aggregate of 489,760
shares of American Home's common stock and $3.6 million over a period of two
years. In addition, the shareholders of First Home may receive additional
consideration consisting of cash and shares of American Home common stock based
on the future results of the financial performance of the First Home division of
the Company (please see the Company's current report on Form 8-K filed with the
Securities and Exchange Commission on February 1, 2000 for further information).
First Home is an independent mortgage lender based in metropolitan Chicago.
Formed in 1987, First Home originates primary residential mortgage loans. It
operates 21 branch offices in four states and employs approximately 255 full
time employees, including sales personnel. First Home is qualified to originate
loans in 23 states. The mergers with Marina in 1999 and First Home, expected to
be completed late in the second quarter of 2000, represent an expansion of the
Company's traditional lending activities into the western and midwest geographic
regions of the country. It is anticipated that upon the completion of this
transaction the goodwill of approximately $5.0 million will be generated and
amortized over 20 years.
In addition to the First Home merger, the Company may, from time to time,
engage in other acquisitions. Any acquisition made by the Company may result in
potentially dilutive issuances of equity securities, the incurrence of
additional debt and the amortization of expenses related to goodwill and other
intangible assets. The Company also may experience difficulties in integrating
the operations, services, products and personnel of acquired companies or the
diversion of management's attention from ongoing business operations. The
Company currently has no formal agreements with regard to any potential
acquisition other than First Home, and there can be no assurance that First Home
or future acquisitions, if any, will be consummated.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information
derived from the Company's statement of operations expressed as a percentage of
total revenues. Any trends illustrated in the following table are not
necessarily indicative of future results.
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997
---- ---- ----
RESULTS OF OPERATIONS:
Gain on sale of mortgage loans................... 88.3% 93.9% 93.6%
Net interest income.............................. 6.9 3.6 3.3
Other............................................ 4.8 2.5 3.1
----- ----- -----
Total revenues............................... 100.0 100.0 100.0
----- ----- -----
Salaries, commissions and benefits, net.......... 46.7 46.6 47.0
Marketing and promotion.......................... 7.1 6.1 8.5
Occupancy and equipment.......................... 9.8 8.2 8.0
Data processing and communications............... 4.6 4.7 5.4
Provision for loss............................... 0.1 0.8 1.0
Other............................................ 10.3 7.6 8.4
----- ----- -----
Total expenses............................... 78.6 74.0 78.3
----- ----- -----
Net income before taxes and minority interest......... 21.4 26.0 21.7
Income taxes........................ 5.8 1.6 1.2
Minority interest................... 0.1 0.3 -
----- ----- -----
Net income as reported.............. 15.5% 24.1% 20.5%
===== ===== =====
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Total Revenues. The Company's total revenues for the year ended December
31, 1999, compared to year ended December 31, 1998, increased to $24.9 million
from $20.2 million in 1998, an increase of $4.7 million, or 23.0%, primarily as
a result of strong origination growth and the subsequent sale of loans and a
generally favorable interest rate environment. Loan sales increased to $1.3
billion in 1999 from $1.2 billion in 1998 (which amounts include $64.6 million
and $47.5 million of
15
<PAGE>
originations in which the Company acted as broker, respectively), resulting from
new community loan office expansion and its Internet activity.
Net gain on the sale of mortgage loans increased to $22.0 million in 1999
from $19.0 million in 1998, an increase of $3.0 million, or 15.7%. The increase
was attributable to the increase in the Company's origination volume and
improved margins.
Net interest income increased to $1.7 million in 1999 from $734,000 in
1998, an increase of $966,000, or 132.0%. This increase was due to more
efficient cash management, including the implementation of sweep accounts, which
increased interest income.
Other income increased to $1.2 million in 1999 from $502,000 in 1998, an
increase of $698,000, or 139.2%. The increase was due primarily to volume
incentive bonuses from various investors. These bonuses represent payments
received by the Company when it meets certain volume targets specified in its
various agreements with loan purchasers. The Company accrues volume incentive
income when targets are reached.
Salaries, Commissions and Benefits. Salaries, commissions and benefits
increased to $11.6 million in 1999 from $9.4 million in 1998, an increase of
$2.2 million, or 23.1%. The increase related primarily to the Company's Internet
expansion efforts, increased staffing levels, both at new and existing community
loan offices, and, to a lesser extent, the non-deferred portion of commissions
paid to loan originators. As of December 31, 1999, the Company employed 543
people compared to 287 people at December 31, 1998.
Marketing and Promotion Expenses. Marketing and promotion expenses
increased to $1.8 million in 1999 from $1.2 million in 1998, an increase of
$600,000, or 43.5%. The increase was primarily attributable to new community
loan office openings.
Occupancy and Equipment Expenses. Occupancy and equipment expenses
increased to $2.4 million in 1999 from $1.7 million in 1998, an increase of
$700,000, or 46.9%. The increase was due primarily to an increase in occupancy
costs as a result of opening new community loan offices and depreciation charges
for increased computer networking.
Data Processing and Communications. Data processing and communication costs
increased to $1.1 million in 1999 from $952,000 in 1998, an increase of
$148,000, or 19.1%. The increase was primarily a result of increased staffing
levels, the opening of new community loan offices and increased expansion of the
Company's Internet division.
Other Expenses. Other expenses increased to $2.5 million in 1999 from $1.5
million in 1998, an increase of $1.0 million or 65.2%. These expenses, which
consist primarily of office supplies, travel, insurance and professional fees,
have increased with the Company's general activity and employment levels.
Income Taxes. Income taxes increased to $1.4 million in 1999 from $328,000
in 1998, and increase of $1,072,000 or 339%. The increase was primarily due to a
change in the tax status of AHM. Prior to September 29, 1999, AHM elected to be
treated as an S corporation. This increase in tax also includes a non-cash,
non-recurring tax expense of $625,000 resulting from this change.
Net Income. Net income decreased to $3.9 million in 1999 from $4.9 million
in 1998, a decrease of $1.0 million, or 20.7%. The decrease in net income was
primarily the result of the Company's change in tax status.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Total Revenues. The Company's total revenues increased to $20.2 million in
1998 from $11.3 million in 1997, an increase of $8.9 million, or 78.6%,
primarily as a result of strong origination growth and the subsequent sale of
loans. Loan sales increased to $1.2 billion in 1998 from $729.6 million in 1997
(which amounts include $47.5 million and $30.7 million of originations in which
the Company acted as broker, respectively), resulting from new community loan
office expansion. During 1998, the Company opened four new community loan
offices. In addition, refinancings accounted for approximately 35.3% of its
origination volume in 1998 compared to approximately 22.4% in 1997.
Net gain on sale of mortgage loans increased to $19.0 million in 1998 from
$10.6 million in 1997, an increase of $8.4 million, or 79.4%. The increase was
attributable to the increase in the Company's origination volume.
Net interest income increased to $734,000 in 1998 from $369,000 in 1997, an
increase of $365,000, or 98.9%. This increase was due to increased loan
origination volume, as well as increased use of financing agreements or purchase
and sale facilities to increase the interest spread against borrowed funds.
16
<PAGE>
Other income increased to $502,000 in 1998 from $356,000 in 1997, an
increase of $146,000, or 41.0%. The increase was due primarily to volume
incentive bonuses earned from various purchasers during that period, as well as
to the gain on sale of marketable securities.
Salaries, Commissions and Benefits. Salaries, commissions and benefits
increased to $9.4 million in 1998 from $5.3 million in 1997, an increase of $4.1
million, or 77.4%. The increase related primarily to increased staffing levels,
both at new and existing community loan offices, and, to a lesser extent, the
non-deferred portion of commissions paid to loan originators. As of December 31,
1998, the Company employed 287 people, compared to 185 people at December 31,
1997. These expenses are expected to continue to increase in 1999 as a result of
increased loan origination volume and additional employees expected to be hired
in connection with the expansion of existing operations and new community loan
office openings.
Marketing and Promotion Expenses. Marketing and promotion expenses
increased to $1.2 million in 1998 from $962,000 in 1997, an increase of
$274,000, or 28.5%. The increase was primarily attributable to new community
loan office openings.
Occupancy and Equipment Expenses. Occupancy and equipment expenses
increased to $1.7 million in 1998 from $909,000 in 1997, an increase of
$745,000, or 82.0%. The increase was due primarily to an increase in occupancy
costs as a result of opening new community loan offices and depreciation charges
for increased computer networking.
Data Processing and Communications. Data processing and communication costs
increased to $952,000 in 1998 from $612,000 in 1997, an increase of $340,000, or
55.6%. The increase was primarily a result of increased staffing levels and the
opening of new community loan offices.
Other Expenses. Other expenses increased to $1.5 million in 1998 from
$946,000 in 1997, an increase of $597,000, or 63.1%. These expenses, which
consist primarily of office supplies, travel, insurance and professional fees,
have increased with general activity and employment levels.
Net Income. Net income increased to $4.9 million in 1998 from $2.3 million
in 1997, an increase of $2.6 million, or 110.0%.
LIQUIDITY AND CAPITAL RESOURCES
To originate a mortgage loan, the Company draws against a syndicated
warehouse facility its subsidiary, American Home Mortgage Corp., has entered
into with First Union National Bank. The First Union warehouse facility was
originally for $60 million. First Union has agreed to increase this facility to
$75 million through April 30, 2000, and the Company is in negotiations to
replace this facility with a new $100 million warehouse facility that will be
agented by First Union. The Company expects to finalize an agreement with
respect to the new facility prior to April 30, 2000. The Company's existing
warehouse facility is secured by the mortgages it originates and certain of its
other assets. Loans under its warehouse facility bear interest at rates that
vary depending on the type of underlying loan, and these loans are subject to
sublimits, advance rates and terms that vary depending on the type of underlying
loan and the ratio of the Company's liabilities to its tangible net worth. At
March 28, 2000, the outstanding balance under the warehouse facility was $56.0
million, the outstanding balance in drafts payable was $2.9 million and the
maximum amount available for additional borrowings was $19.0 million.
Comerica Bank extended a $30 million line of credit to Marina prior to
American Home's acquisition of Marina. The interest rate on outstanding balances
fluctuated daily based on a spread to the Federal funds rate and interest was
paid monthly. This line was extinguished subsequent to the acquisition by
American Home and consequently, the balance at March 28, 2000 was $0.
The documents governing the Company's warehouse facility contain a number
of compensating balance requirements and restrictive financial and other
covenants that, among other things, require the Company to maintain a minimum
ratio of total liabilities to tangible net worth and maintain a minimum level of
tangible net worth, liquidity, stockholder's equity and leverage ratios, as well
as to comply with applicable regulatory and investor requirements. The facility
also contains covenants limiting the Company's subsidiary's ability to:
o transfer or sell assets;
o create liens on the collateral;
o pay cash or stock dividends; or
o incur additional indebtedness,
without obtaining the prior consent of First Union, which consent may not be
unreasonably withheld. These limits on the subsidiary may in turn restrict
American Home's ability, as the holding company, to pay cash or stock dividends
on its stock.
In addition, under the Company's warehouse facility, First Union will not
continue to finance a mortgage loan that it holds if:
17
<PAGE>
o the loan is rejected as "unsatisfactory for purchase" by the
ultimate investor and has exceeded its permissible 60-day
warehouse period;
o the Company fails to deliver the applicable mortgage note or other
documents evidencing the loan within the requisite time period;
o the underlying property that secures the loan has sustained a
casualty loss in excess of 5% of its appraised value; or
o the loan ceases to be an eligible loan (as determined pursuant to
the warehousing agreement).
In addition to the First Union warehouse facility, the Company has purchase
and sale agreements with Fannie Mae, Greenwich Capital Financial Products, Inc.,
Prudential Securities Funding Corp. and Paine Webber Real Estate Securities,
Inc., under which it sells the loans it has originated to these institutions on
an interim basis. Pursuant to these arrangements, the Company obtains
commitments from the ultimate buyer, which may be a bank, a pension fund or an
investment bank, to purchase its loans. It then sells the loans, together with
the commitment from the ultimate buyer, to one of the four institutions with
which it has purchase and sale agreements. These institutions in turn sell the
loans to the party who gave the Company the commitment. These agreements allow
the Company to accelerate the sale of its inventory of mortgage loans, thereby
enabling it to use its warehouse facility more effectively, because it does not
have to wait until the closing of a sale to the ultimate buyer before it
receives the purchase price. Amounts sold and being held under these agreements
at December 31, 1999 and December 31, 1998 were $116.9 million and $61.4
million, respectively. Amounts so held under these agreements at March 28, 2000
were $103.1 million. The combined capacity available under the Company's
purchase and sale agreements is $168 million. These agreements are not committed
facilities and may be terminated at the discretion of the counterparties.
The Company makes certain representations and warranties under the purchase
and sale agreements regarding, among other things, the loans' compliance with
laws and regulations, their conformity with the ultimate investor's underwriting
standards and the accuracy of information. In the event of a breach of these
representations or warranties or in the event of an early payment default, the
Company may be required to repurchase the loans and indemnify the investor for
damages caused by that breach. The Company has implemented strict procedures to
ensure quality control and conformity to underwriting standards, and minimize
the risk of being required to repurchase loans. In addition, an outside firm
performs quality control tests for it. Please see "Business--Quality Control."
To date, the Company has been required to repurchase fewer than 20 of the loans
it has sold.
As of December 31, 1999, the Company's warehouse facility borrowings were
$56.8 million and its outstanding drafts payable were $3.3 million compared to
$34.1 million in borrowings and no outstanding drafts payable as of December 31,
1998. At December 31, 1999, its loans held for sale were $56.8 million compared
to $34.7 million at December 31, 1998.
Cash and cash equivalents increased to $3.4 million at December 31, 1999
from $2.9 million at December 31, 1998.
The Company's primary uses of cash and cash equivalents during the year
ended December 31, 1999 were as follows:
o $7.8 million to fund the S corporation distribution note
associated with the initial public offering;
o $5.4 million net increase in mortgage loans held for sale;
o $4.0 million increase in accounts receivable;
o $1.4 million to purchase furniture and office and computer
equipment for new branch offices;
o $1.2 million increase in prepaid expenses and security deposits;
and
o $1.0 million to fund a distribution to AHM's sole stockholder
prior to the initial public offering to enable him to pay income
taxes attributable to him as a result of AHM's S corporation
status.
Cash and cash equivalents increased to $2.9 million at December 31, 1998
from $2.1 million at December 31, 1997. This increase in cash and cash
equivalents was primarily attributable to the increase in the Company's net
income to $5.2 million in 1998, before depreciation and amortization.
The Company's primary uses of cash and cash equivalents during 1998 were as
follows:
o $10.0 million net increase in mortgage loans held for sale;
o $1.9 million increases in accounts receivable;
18
<PAGE>
o $1.5 million to fund a distribution to AHM's sole stockholder
prior to the initial public offering to enable him to pay income
taxes attributable to him as a result of AHM's S corporation
status; and
o $1.2 million to purchase furniture and office and computer
equipment for existing and new branch offices and to upgrade the
Company's telecommunications system.
The Company's ability to originate loans depends in large part on its
ability to sell these mortgage loans at par or for a premium in the secondary
market so that it may generate cash proceeds to repay borrowings under its
warehouse facility. The value of the Company's loans depends on a number of
factors, including:
o interest rates on the Company's loans compared to market interest
rates;
o the borrower credit risk classification;
o loan-to-value ratios; and
o general economic conditions.
The Company's existing cash balances and funds available under its working
capital credit facilities, together with cash flows from operations, are
expected to be sufficient to meet its liquidity requirements for at least the
next 12 months. The Company does, however, expect to continue its expansion and
expects that eventually it will have to arrange for additional sources of
capital through the issuance of debt or equity or additional bank borrowings.
The Company has no commitments for any additional financings, and it cannot
ensure that it will be able to obtain any additional financing at the times
required and on terms and conditions acceptable to it. If the Company fails to
obtain needed additional financing, its growth could slow and operations could
be affected.
INFLATION
For the period 1995 to 1999, inflation has been relatively low and the
Company believes that inflation has not had a material effect on its results of
operations. To the extent inflation increases in the future, interest rates will
also likely rise, which would impact the number of loans the Company originates.
This impact would adversely affect the Company's future results of operations.
RISK MANAGEMENT
Movements in interest rates can pose a major risk to us in either a rising
or declining interest rate environment. When interest rates rise, loans held for
sale and any applications in process with agreed upon rates decrease in value.
To preserve the value of such loans or applications in process with agreed upon
rates, the Company executes mandatory loan sale agreements (forward sales of
mortgage-backed securities) to be settled at future dates with fixed prices.
However, when interest rates decline, customers may choose to abandon their
applications. In that case, the Company may be required to purchase loans at
current market prices to fulfill existing mandatory loan sale agreements,
thereby incurring losses upon sale. The Company uses an interest rate hedging
program to attempt to manage these risks. Through this program, the Company
purchases and forward sells mortgage-backed securities and acquires options on
mortgage and treasury securities.
Although the Company generally sells its loans within 30 days after
funding, there may be unexpected delays that could increase its interest rate
exposure. Even though the Company uses hedging and other strategies to minimize
its exposure to interest rate risks, no hedging or other strategy can completely
protect it. Moreover, hedging strategies involve transaction and other costs.
The Company cannot ensure that its hedging strategy and the hedges that it makes
will adequately offset the risk of interest rate volatility or that its hedges
will not result in losses.
The Company's board of directors establishes thresholds, which limit its
exposure to such risk. The Company performs daily analysis to determine its risk
exposures under various interest rate scenarios and manages these risks through
a combination of forward sales of mortgage-backed securities and options on
treasury futures. All derivatives are obtained for hedging (or other than
trading) purposes, and management evaluates the effectiveness of the hedges on
an on-going basis.
19
<PAGE>
The following tables summarize the Company's interest rate sensitive
instruments:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------
NOTIONAL Carrying
AMOUNT Amount FAIR VALUE
--------------- ---------- -------------
<S> <C> <C> <C>
Instruments:
Mortgage loans held for sale................................... $ -- $65,115,356 $ 65,703,301
Mortgage servicing rights...................................... -- 34,470 34,470
Mortgage loans held for sale related positions:
Commitments to fund mortgages at agreed-upon rates........ $147,482,380 -- $ 1,391,777
Forward delivery commitments.............................. 33,634,595 -- (379,248)
Option contracts to buy securities........................ 35,000,000 371,000 439,856
Warehouse lines of Credit...................................... 56,804,901 56,804,901
</TABLE>
In the event that the Company does not deliver into the forward delivery
commitments or exercise its option contracts, the instruments can be settled on
a net basis. Net settlement entails paying or receiving cash based upon the
change in market value of the existing instrument. All forward delivery
commitments and option contracts to buy securities are to be contractually
settled within six months of the balance sheet date.
The following describes the methods and assumptions the Company uses in
estimating fair values of the above financial instruments:
o Fair value estimates are made as of a specific point in time based
on estimates using present value or other valuation techniques.
These techniques involve uncertainties and are significantly
affected by the assumptions used and the judgments made regarding
risk characteristics of various financial instruments, discount
rates, estimates of future cash flows, future expected loss
experience, and other factors.
o Changes in assumptions could significantly affect these estimates
and the resulting fair values. Derived fair value estimates cannot
be substantiated by comparison to independent markets and, in many
cases, could not be realized in an immediate sale of the
instrument. Also, because of differences in methodologies and
assumptions used to estimate fair values, the fair values used by
the Company should not be compared to those of other companies.
o The fair value of commitments to fund with agreed upon rates are
estimated using the fees and rates currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties.
For fixed rate loan commitments, fair value also considers the
difference between current market interest rates and the existing
committed rates.
o The fair value of these instruments is estimated using current
market prices for dealer or investor commitments relative to the
Company's existing positions.
The Company's hedging program contains an element of risk because the
counterparties to its mortgage and treasury securities transactions may be
unable to meet their obligations. While the Company does not anticipate
nonperformance by any counterparty, it is exposed to potential credit losses in
the event the counterparty fails to perform. The Company's exposure to credit
risk in the event of default by a counterparty is the difference between the
contract and the current market price. The Company minimizes its credit risk
exposure by limiting the counterparties to well-capitalized banks and securities
dealers who meet established credit and capital guidelines.
YEAR 2000
The Company was successful in its approach to the year 2000 computer
compliance project. The year-end transition from 1999 to year 2000 has not
presented any issues to date. Although considered unlikely, the Company could be
affected by third party systems that were not as well prepared. Management will
continue to monitor the situation and take action as necessary to remediate any
problems that might occur and ensure that all business processes continue to
function properly.
The Company estimates that the year 2000 project costs equaled
approximately $15,000. This cost is in addition to existing personnel who have
been working on the year 2000 compliance project. All of the costs related to
the year 2000 project were incurred in 1999.
NEW ACCOUNTING PRONOUNCEMENTS
In June of 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires that all
derivatives be carried on the balance sheet at fair value and that changes in
the fair value of derivatives be recognized in income when they occur, unless
the derivatives qualify as hedges in accordance with the standard. If a
derivative qualifies as a hedge, a company can elect to use hedge accounting.
The type of accounting to be applied varies depending upon whether the nature of
the exposure that is being hedged is classified as one of three hedged risks
defined in the statement: change in fair value, change in cash flows and change
in foreign-currency. This statement's implementation has been delayed to be
effective for all fiscal quarters of fiscal years beginning after June 15, 2000
and cannot be applied retroactively. The Company has not yet determined the
impact SFAS No. 133 will have on its financial position or results of operations
after it adopts this statement.
20
<PAGE>
In March of 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed for Internal Use" ("SOP 98-1"), which became effective for
financial statements for calendar year 1999, with early adoption encouraged. SOP
98-1 requires the capitalization of eligible costs of specified activities
related to computer software developed or obtained for internal use. The
adoption of this statement has had no material impact on the Company's financial
condition or results of operations.
21
<PAGE>
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The information required by this Item 8 is incorporated by reference to
American Home Mortgage Holdings, Inc.'s Consolidated Financial Statements and
Independent Auditors' Report beginning at page F-1 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company intends to file with the Securities and Exchange Commission a
definitive proxy statement (the "Proxy Statement") pursuant to Regulation 14A,
which will involve the election of directors, within 120 days of the end of the
year covered by this Form 10-K. Information regarding directors of the Company
will appear under the caption "Election of Directors" in the Proxy Statement for
the Annual Meeting of Stockholders to be held on May 27, 2000, and is
incorporated herein by reference. Information regarding executive officers of
the Company will appear under the caption "Executive Officers" in the Proxy
Statement and is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation will appear under the caption
"Executive Compensation" in the Proxy Statement and is incorporated herein by
this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information to be included under the captions "Securities Ownership of
Certain Beneficial Owners and Management" in the Proxy Statement is incorporated
herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information to be included under the caption "Certain Relationships and
Related Transactions" in the Proxy Statement is incorporated herein by this
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed with this Report.
The following documents are filed as part of this Report on Form 10-K.
1. Financial Statements
The financial statements listed in the accompanying List of Financial
Statements covered by the Report of Independent Auditors.
22
<PAGE>
2. Financial Statement Schedules
None.
3. Exhibits
The information called for by this paragraph is contained in the Index
to Exhibits of this Report, which is incorporated herein by reference.
(b) Reports on Form 8-K.
During the quarter ended December 31, 1999, the Company did not file
any Reports on Form 8-K with the Securities Exchange Commission.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, American Home Mortgage Holdings, Inc., a
corporation organized and existing under the laws of the State of Delaware, has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on the 30th day of March, 2000.
AMERICAN HOME MORTGAGE HOLDINGS, INC.
By: /s/ Michael Strauss
------------------------------------------
Name: Michael Strauss
Title: President & Chief Executive Officer
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
Chairman of the Board, President &
/s/ Michael Strauss Chief Executive Officer March 30, 2000
- - --------------------------
Michael Strauss
/s/ Robert E. Burke Chief Financial Officer March 30, 2000
- - --------------------------
Robert E. Burke
/s/ Richard Silver Controller March 30, 2000
- - --------------------------
Richard Silver
/s/ Joseph P. Bryant Director March 30, 2000
- - --------------------------
Joseph P. Bryant
/s/ John A. Johnston Director March 30, 2000
- - --------------------------
John A. Johnston
/s/ C. Cathleen Raffaeli Director March 30, 2000
- - --------------------------
C. Cathleen Raffaeli
/s/ Leonard Schoen, Jr. Director March 30, 2000
- - --------------------------
Leonard Schoen, Jr.
/s/ Kenneth Slosser Director March 29, 2000
- - --------------------------
Kenneth Slosser
24
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
AMERICAN HOME MORTGAGE HOLDINGS, INC.
Independent Auditors' Report................................ 2
Consolidated Balance Sheets
as of December 31, 1999 and 1998......................... 3
Consolidated Statements of Income for
the years ended December 31, 1999, 1998 and 1997 ........ 4
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1999, 1998 and 1997..... 5
Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997................... 6
Notes to Consolidated Financial Statements.................. 7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
American Home Mortgage Holdings, Inc.
We have audited the accompanying consolidated balance sheets of American
Home Mortgage Holdings, Inc. and its subsidiary (the "Company") as of December
31, 1999 and 1998 and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of American Home Mortgage
Holdings, Inc. and its subsidiaries at December 31, 1999 and 1998 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 in conformity with generally accepted
accounting principles.
Parsippany, NJ
March 30, 2000
2
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1999 1998
----------------- ------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 3,414,017 $ 2,891,513
Accounts receivable 7,102,546 2,892,807
Mortgage loans held for sale, net 65,115,356 34,666,863
Mortgage loans held for investment, net 153,534 88,900
Real estate owned 112,865 -
Mortgage servicing rights, net 34,470 39,887
Premises and equipment, net 3,419,693 1,575,154
Prepaid expenses and security deposits 2,034,234 236,810
Goodwill 4,497,537 -
----------------- ----------------
TOTAL ASSETS $ 85,884,252 $ 42,391,934
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Warehouse lines of credit $ 56,804,901 $ 34,069,526
Drafts payable 3,313,686 -
Accrued expenses and other 5,262,997 2,297,542
Notes payable 1,947,578 -
Deferred income tax liability 532,025 -
----------------- ----------------
Total liabilities 67,861,187 36,367,068
----------------- ----------------
COMMITMENTS AND CONTINGENCIES - -
MINORITY INTEREST 23,372 100,760
STOCKHOLDERS' EQUITY:
Preferred stock $1.00 per share, 1,000,000 shares
authorized, none issued and outstanding - -
Common stock, $.01 per share par value, 19,000,000
shares authorized, 8,286,747 issued and outstanding 82,534 50,000
Additional paid-in capital 17,249,390 267,600
Retained earnings 667,769 5,606,506
----------------- ----------------
Total stockholders' equity 17,999,693 5,924,106
----------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $ 85,884,252 $ 42,391,934
================= ================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1999 1998 1997
------------- -------------- ------------
<S> <C> <C> <C>
REVENUES:
Gain on sale of mortgage loans $21,957,076 $ 18,980,534 $10,596,604
Interest income, net 1,703,498 734,179 368,808
Other 1,201,436 502,223 356,018
------------- -------------- ------------
Total revenues 24,862,010 20,216,936 11,321,430
------------- -------------- ------------
EXPENSES:
Salaries, commissions and benefits, net 11,611,275 9,430,382 5,315,732
Marketing and promotion 1,774,169 1,236,461 962,475
Occupancy and equipment 2,428,870 1,653,709 909,216
Data processing and communications 1,132,970 951,508 611,699
Provision for loss 27,967 152,955 116,837
Other 2,549,636 1,542,997 946,270
------------- -------------- ------------
Total expenses 19,524,887 14,968,012 8,862,229
------------- -------------- ------------
INCOME BEFORE INCOME TAXES AND MINORITY 5,337,123 5,248,924 2,459,201
INTEREST INCOME TAXES 1,441,125 328,209 139,887
------------- -------------- ------------
INCOME BEFORE MINORITY INTEREST 3,895,998 4,920,715 2,319,314
MINORITY INTEREST IN INCOME OF
CONSOLIDATED JOINT VENTURE 35,112 50,760
------------- -------------- ------------
NET INCOME $ 3,860,886 $ 4,869,955 $ 2,319,314
============= =============== ============
Earnings per share - basic $ 0.69 $ 0.97 $ 0.46
Earnings per share - diluted $ 0.69 $ 0.97 $ 0.46
Weighted average number of shares - basic 5,595,251 4,999,900 4,999,900
Weighted average number of shares - diluted 5,602,587 4,999,900 4,999,900
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TOTAL
STOCK CAPITAL EARNINGS EQUITY
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997..................................... $50,000 $267,600 $ 1,008,850 $ 1,326,450
Net income............................................. -- -- 2,319,314 2,319,314
Distributions.......................................... -- -- (1,072,218) (1,072,218)
------- ----------- ------------ -----------
BALANCE, DECEMBER 31, 1997................................... 50,000 267,600 2,255,946 2,573,546
Net income............................................. -- -- 4,869,955 4,869,955
Distributions.......................................... -- -- (1,519,395) (1,519,395)
------- ----------- ------------ -----------
BALANCE, DECEMBER 31, 1998................................... 50,000 267,600 5,606,506 5,924,106
Net income............................................. -- -- 3,860,886 3,860,886
Distributions.......................................... -- -- (994,013) (994,013)
S corporation distribution note........................ -- -- (7,805,611) (7,805,611)
Issuance of common stock, initial public offering,net.. 25,000 12,139,180 -- 12,164,180
Issuance of common stock, purchase of Marina........... 7,534 4,842,610 -- 4,850,144
------- ------------ ------------ -----------
BALANCE, DECEMBER 31, 1999................................... $82,534 $17,249,390 $ 667,769 $17,999,693
======= =========== ========= ===========
</TABLE>
5
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1999 1998 1997
----------- -------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES :
<S> <C> <C> <C>
Net income $ 3,860,886 $ 4,869,955 $ 2,319,314
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Gain on equity securities -- (76,088) --
Depreciation and amortization 378,282 284,304 126,965
Provision for loss 27,967 152,955 116,837
Origination of mortgage loans (1,283,174,874) (1,141,240,923) (714,612,136)
Proceeds on sale of mortgage loans 1,265,275,964 1,131,144,305 698,872,291
Proceeds on sale of equity securities, trading -- 176,088 --
Purchases of equity securities, trading -- (100,000) --
Increase in:
Accounts receivable (4,007,135) (1,909,944) (393,329)
Mortgage servicing rights (1,000) (13,581) (16,970)
Prepaid expenses and security deposits (1,194,400) (20,385) (117,451)
Accrued expenses and other liabilities 1,288,688 413,293 1,016,562
-------------- ------------- ------------
Net cash used in operating activities (17,545,622) (6,320,021) (12,687,917)
-------------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale/(purchase) of real estate owned, net -- 186,000 (186,000)
Net purchases of loans held for investment (64,634) (10,083) (78,817)
Investment in joint venture -- (50,000) --
Purchases of premises and equipment, net (1,352,171) (1,169,222) (520,829)
(Decrease)/increase in minority interest (77,388) 100,760 --
-------------- ------------- ------------
Net cash used in investing activities (1,494,193) (942,545) (785,646)
-------------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in warehouse lines of credit 11,266,343 9,615,855 15,377,843
Increase in drafts payable 3,313,686 -- --
Acquisition of Marina Mortgage Co., Inc. 1,617,734 -- --
Distributions (8,799,624) (1,519,395) (1,072,218)
Proceeds from issuance of capital stock 12,164,180 -- --
-------------- ------------- ------------
Net cash provided by financing activities 19,562,319 8,096,460 14,305,625
-------------- ------------- ------------
NET INCREASE IN CASH 522,504 833,894 832,062
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,891,513 2,057,619 1,225,557
-------------- ------------- ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,414,017 $ 2,891,513 $ 2,057,619
============== ============= ==============
SUPPLEMENTAL DISCLOSURE--CASH PAID FOR:
Interest $ 2,121,589 $ 1,674,266 $ 905,333
Taxes 536,607 180,299 66,556
</TABLE>
NON CASH ACTIVITIES
On December 30, 1999, the Company issued 753,413 shares of common stock in
exchange for 100% of the outstanding shares of Marina Mortgage Company, Inc.
On September 28, 1999, the Company transferred its retained earnings in the
form of an S corporation.
See notes to consolidated financial statements.
6
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OWNERSHIP
American Home Mortgage Holdings, Inc. is a holding company whose principal
asset is its investment in its wholly-owned subsidiaries, American Home Mortgage
Corp. ("American Home Mortgage") and Marina Mortgage Company, Inc. ("Marina")
(collectively referred to herein as "the Company"). On June 15, 1999, American
Home Mortgage Holdings, Inc. was formed. On September 29, 1999, Michael Strauss
exchanged his shares of American Home Mortgage Corp. for 4,999,900 shares of
American Home Mortgage Holdings, Inc. common stock. American Home Mortgage is a
residential mortgage lender headquartered in New York City with offices in New
York, Connecticut, New Jersey, Florida, Pennsylvania and Maryland. The Company
operates solely in the residential lending operating segment.
On October 6, 1999, the Company completed its initial public offering (the
"Offering") of 2.5 million shares of common stock, $.01 par value (the "Common
Stock"), at a price of $6.00 per share. The net proceeds from the Offering,
after deducting the distribution under the S Corporation Note dated September
28, 1999 (the "S Corporation Note") and underwriting discounts and expenses in
connection with the issuance of the Common Stock, approximated $4.7 million.
On December 30, 1999, the Company merged with Marina Mortgage Company,
Inc., a residential mortgage lender headquartered in Irvine, California, with
offices in California and Arizona. The Company issued 753,413 share of Common
stock in exchange for 34,600 shares of Marina Common Stock and will pay $2.5
million in cash over five years (See footnote 20). The Company's December 31,
1999 balance sheet reflects the following in connection with the merger: the
establishment of goodwill of approximately $4.5 million, the establishment of a
note payable to the former shareholders of Marina Mortgage Co., Inc. of
approximately $1.9 million.
Certain shares of common stock isued in connection with the initial public
offering and the acquisiiton of Marina Mortgage Company, Inc. are subject to
restrictions as to disposition into the market, ranging from 2 to 5 years.
On April 23, 1998, the Company entered into a joint venture with a realtor
in which the Company and the realtor each own a 50% interest. The Company
entered into a second joint venture on March 31, 1999 with a realtor in which
the Company and the realtor each own a 50% interest. The Company entered into a
third joint venture on May 14, 1999 with a home builder/developer in which the
Company and home builder/developer each own a 50% interest. The latest joint
venture had no activity as of the period ended December 31, 1999. The Company
purchases many of the loans originated by the joint ventures.
CONSOLIDATION
Because the Company exercises significant influence on the operations of
the joint ventures, their balances and operations have been fully consolidated
in the accompanying consolidated financial statements and all material
intercompany accounts and transactions have been eliminated.
BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. The
Company's estimates and assumptions primarily arise from risks and uncertainties
associated with interest rate volatility, credit exposure and regulatory
changes. Although management is not currently aware of any factors that would
significantly change its estimates and assumptions in the near term, future
changes in market trends and conditions may occur which could cause actual
results to differ materially.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, amounts due from banks,
and overnight deposits.
7
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale represent mortgage loans originated and held
pending sale to interim and permanent investors. The mortgages are carried at
the lower of cost or market as determined by outstanding commitments from
investors or current investor yield requirements calculated on the aggregate
loan basis. The Company separately evaluates for impairment the estimated fair
value of its commitments to lend. If impairment exists, the Company records a
charge to earnings in the current period. The Company generally sells whole
loans without servicing retained. Gains or losses on such sales are recognized
at the time legal title transfers to the investor based upon the difference
between the sales proceeds from the final investor and the basis of the loan
sold, adjusted for net deferred loan fees and certain direct costs, selling
costs and any other adjustments. The Company defers net loan origination costs
as a component of the loan balance on the balance sheet. Such costs are not
amortized and are recognized into income as a component of the gain or loss upon
sale.
MORTGAGE LOANS HELD FOR INVESTMENT
Periodically, the Company originates or repurchases loans which are unable
to be sold through normal investor channels. When loans are transferred or
repurchased into this category, they are recorded at the lower of cost or market
and are subsequently carried at amortized cost, less allowance for loan losses.
The Company has the intent and ability to hold these loans for the foreseeable
future. The Company defers net loan origination costs as a component of the loan
balance and amortizes the deferred costs into interest income over the life of
the loan using the effective interest method. The loans are evaluated for
impairment based on the collateral value of the property securing the loan.
PROVISION FOR FORECLOSURE AND LOAN LOSSES
A provision for loss is provided based on management's periodic evaluation
of its loss exposures for loans held for sale and the applicable loan sale
agreements. The provision for loans held for sale is based on certain default
and foreclosure provisions in the applicable loan sale agreements. Management
reviews such loan sale agreement exposure on an aggregate basis to evaluate the
adequacy of the related allowance for loss. Due to the relatively small number
of loans held for investment, analysis is performed on a specific loan basis.
The pertinent factors in determining the exposures include the underlying
quality of the loans, actual loss experience, current economic conditions,
detailed analysis of individual loans for which full collectibility may not be
assured, and determination of the existence and realizable value of the
collateral and any guarantees securing such loans.
MORTGAGE SERVICING RIGHTS
The Company generally sells whole loans without servicing retained. Mortgage
servicing rights represent servicing retained on loans sold to one of the
Company's permanent investors who requires the Company to continue to service
the loans as a condition of sale. The Company does not have in-house servicing
capability and has a sub-servicing contract with a third party. The Company
capitalizes the cost of these mortgage servicing rights by allocating the
original cost basis in the loans based upon the relative fair value of the
underlying mortgage loans and mortgage servicing rights at the time the
servicing rights are contractually separated from the underlying loans. The
Company records amortization expense over the period of the projected net
servicing income. Impairment is recorded as a direct reduction of the asset
balance and a charge to amortization expense in the period it is determined.
8
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL
Goodwill represents the excess purchase price over the fair value of net
assets stemming from business acquisitions and is being amortized over 20 years.
The Company evaluates the recoverability of goodwill for each applicable
business acquisition quarterly. The recoverability of goodwill is determined by
comparing the carrying value of the goodwill the the estimated operating income
of the related entity on an undiscounted cash flow basis. Should the carrying
value of the goodwill exceed the estimated operating income for the expected
period of benefit, impairment for the excess would be recorded at that time.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company obtains and holds derivative financial instruments to manage
price and interest rate risk related to its mortgage loans held for sale and
commitments to fund mortgages. No derivatives are held for trading purposes.
Fair value amounts were determined based upon available market information.
Realized and unrealized gains and losses associated with these instruments are
included in the Company's lower of cost or market evaluation and the
determination of gain or loss on sale of mortgage loans. The Company is not
required to satisfy margin or collateral requirements for any of these financial
instruments.
PREMISES AND EQUIPMENT
Premises and equipment is stated at cost less accumulated depreciation and
amortization. Depreciation is provided in amounts sufficient to relate the cost
of depreciable assets to operations over their estimated service lives using the
straight-line method. Leasehold improvements are amortized over the lesser of
the life of the lease or service lives of the improvements using the
straight-line method. Depreciation and amortization are recorded within
occupancy and equipment expense within the financial statements.
INCOME TAXES
Through September 28, 1999, the Company elected for both Federal and State
income tax purposes to be treated as an S corporation (effective April 1, 1988).
As an S corporation, the net earnings of the Company were taxed directly to the
stockholders rather than the Company.
On September 29, 1999, the Company became a C corporation. All income earned
from that date is subject to corporate tax at statutory rates for both Federal
and State income tax purposes. The Company accounts for income taxes from that
date in conformity with Statement of Financial Accounting Standard No. 109,
'Accounting for Income Taxes', which requires an asset and liability approach
for accounting and reporting of income taxes.
LOAN ORIGINATION FEES
Loan fees, discount points and certain direct origination costs are recorded
as an adjustment of the cost of the loan and are included in gain on sales of
loans when the loan is sold. Accordingly, salaries, compensation and benefits
have been reduced by approximately $8,736,000, $6,788,000 and $4,242,000 due to
direct loan origination costs including commission costs incurred for the years
ended December 31, 1999, 1998 and 1997, respectively.
INTEREST RECOGNITION
Interest income is accrued as earned. Loans are placed on a non-accrual
status when any portion of the principal or interest is ninety days past due or
earlier when concern exists as to the ultimate collectibility of principal or
interest. Loans return to accrual status when principal and interest become
current and are anticipated to be fully collectible. Interest expense is
recorded on outstanding lines of credit at a rate based on a spread to the Fed
Funds rate, which was 5.01% at December 31, 1999. Interest expense has been
netted with interest income within the consolidated statements of income in the
amounts of $2,214,876, $1,910,289 and $905,333 for the years ended December 31,
1999, 1998 and 1997, respectively.
9
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK OPTION PLAN
The Company has elected to account for their stock option plan using
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and to provide pro forma net income and pro forma earnings per
share disclosures for employee stock option grants as if the fair-value based
method, as required in Statement of Financial Accounting Standard No. 123
"Accounting for Stock-Based Compensation" had been applied.
EARNINGS PER SHARE
Basic EPS excludes dilution and is computed by dividing income available
to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company.
MARKETING AND PROMOTION
The Company charges the costs of marketing and promotion to expense in the
period incurred.
NET WORTH REQUIREMENTS
The Company's subsidiaries are required to maintain certain specified
levels of minimum net worth to maintain their approved status with Fannie Mae,
FHLMC, HUD and other investors. At December 31, 1999, the highest minimum net
worth requirement applicable to the subsidiaries was $1,000,000.
2. MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Mortgage loans held for sale $64,081,266 $34,307,323
Deferred origination costs, net 1,034,090 359,540
Mortgage loans held for sale, net $65,115,356 $34,666,863
=========== ===========
3. MORTGAGE LOANS HELD FOR INVESTMENT, NET
Mortgage loans held for investment consist of the following:
DECEMBER 31,
----------------------------
1999 1998
------------ ------------
Mortgage loans held for investment $275,445 $210,811
Less: Allowance for loss 121,911 121,911
------------ ------------
Mortgage loans held for investment, net $153,534 $ 88,900
============ ============
</TABLE>
10
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
3. MORTGAGE LOANS HELD FOR INVESTMENT, NET (CONTINUED)
The activity in the allowance for loss was as follows:
Balance at January 1, 1997................................. $ --
Provision.............................................. 116,837
Chargeoffs............................................. (77,770)
---------
Balance at December 31, 1997............................... 39,067
Provision.............................................. 152,955
Chargeoffs............................................. (70,111)
---------
Balance at December 31, 1998............................... 121,911
Provision.............................................. 27,967
Chargeoffs............................................. (27,967)
---------
Balance at December 31, 1999............................... $121,911
=========
4. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
DECEMBER 31,
-------------------------
1999 1998
---------- ----------
Investor receivables........................ $6,120,002 $1,977,950
Due from settlement agent................... 250,000 750,000
Mortgage payments receivable................ 330,615 83,338
Due from related party...................... 30,000 52,429
Accrued interest receivable................. 108,742 26,588
Sundry receivables.......................... 263,187 2,502
--------- ---------
Accounts receivable......................... $7,102,546 $2,892,807
========= =========
5. PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1999 1998
--------- ---------
<S> <C> <C>
Furniture and fixtures........................... $1,073,549 $ 659,612
Office equipment................................. 3,119,730 1,420,390
Leasehold improvements........................... 150,298 122,241
Rental property.................................. 75,070 --
---------- ---------
Subtotal..................................... 4,418,647 2,202,243
Less: Accumulated depreciation and amortization.. (998,954) (627,089)
---------- ---------
Property, equipment and leaseholdimprovements, net $3,419,693 $1,575,154
========== =========
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1999,
1998 and 1997 was $371,865 , $281,974, and $124,865 respectively.
11
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
6. WAREHOUSE FACILITIES
Warehouse lines of credit consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
WEIGHTED WEIGHTED
OUTSTANDING AVERAGE OUTSTANDING AVERAGE
BALANCE RATE BALANCE RATE
------- ---- ------- ----
<S> <C> <C> <C> <C>
First Union......................... $45,335,869 6.51% $26,380,841 7.03%
PNC................................. -- --% 7,688,685 6.18%
Comerica............................ 11,469,032 6.63% -- --%
----------- ----------
Total warehouse facilities.......... $56,804,901 6.53% $34,069,526 6.84
=========== ===========
</TABLE>
On December 6, 1999 First Union National Bank (as agent), Comerica Bank and
National City Bank of Kentuckey extended a $60,000,000 line of credit to
American Home Mortgage. Upon extension of the First Union line of credit, the
PNC line of credit was terminated and borrowings outstanding were repaid upon
sale of loans to investors. First Union has agreed to increase this facility to
$75 million through April 30, 2000, and the Company is in negotiation to replace
this facility with a new $100 million warehouse facitity that will be agented by
First Union. Loans held for sale are collateral to this line of credit. The
interest rate on outstanding balances fluctuates daily based on a spread to the
Fed Funds rate and interest is paid monthly. This line continues until
terminated or modified by either party. The Fed Funds rate at December 31, 1999
was 5.01%.
Comerica Bank extended a $30,000,000 line of credit to Marina. Under this
line of credit arrangement, the Company issued loan disbursements in the form of
wire transfers. The interest rate on outstanding balances fluctuated daily based
on a spread to the Fed Funds rate and interest was paid monthly. This line was
extinguished subsequent to the merger with American Home Mortgage.
The lines of credit are secured by mortgage loans and all other assets of
American Home Mortgage, and are guaranteed by its President, Michael Strauss.
The lines contain various covenants pertaining to maintenance of net worth and
working capital and include certain restrictions on dividends to shareholders.
At December 31, 1999 and 1998, American Home Mortgage was in compliance with its
loan covenants.
Drafts payable represent outstanding mortgage loan disbursements that the
Company has provided to its customers for the purchase of a home. The amounts
outstanding do not bear interest and are transferred into the Warehouse line
when they are presented to a bank.
7. NOTES PAYABLE
Notes payable represent the discounted value of note obligations incurred
for acquiring Marina. The Company is obligated to pay Marina's prior
shareholders $2.5 million over a five year period. The payments have been
discounted at an imputed interest rate of 10%.
12
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
8. OTHER INCOME AND EXPENSE
The significant components of other income and expense are as follows:
DECEMBER 31,
------------
1999 1998 1997
---------- ---------- ----------
Other income:
Volume incentives .......... $1,076,594 $ 422,760 $ 284,807
Other...................... 124,842 79,463 71,211
---------- ---------- ----------
Other income ............... $1,201,436 $ 502,223 $ 356,018
========== ========== ==========
Other expense
Office supplies ............ $ 543,868 $ 375,718 $ 218,031
Travel ..................... 314,907 162,973 111,037
Legal and accounting ....... 335,762 142,200 224,424
Other....................... 1,355,099 862,106 392,778
---------- ---------- ----------
Other expenses ............. $2,549,636 $1,542,997 $ 946,270
========== ========== ==========
9. INCOME TAXES
As discussed in Note 1, the Company was an S corporation through September
28, 1999 pursuant to the Internal Revenue Code of 1986, as amended, and as such
did not incur any federal income tax expense. The Company was liable for New
York State and New York City income taxes and that provision is included below
under current state provision.
On September 29, 1999, the Company became a C corporation for federal and
state income tax purposes and as such is subject to federal and state income tax
on its taxable income for the period September 29, 1999 through December 31,
1999. In connection with the change in tax status from an S corporation to a C
corporation, the Company incurred deferred income tax expense of $625,000 as of
September 29, 1999.
A reconciliation of the statutory income tax provision to the effective
income tax provision, as applied to income for the period September 29, 1999 to
December 31, 1999, is as follows:
Tax at statutory rate ................................. $ 1,814,622
Income taxed directly to shareholder .................. (1,323,850)
Minority income adjustment ............................ (11,938)
Change in tax status .................................. 625,000
State and local taxes ................................. 107,116
S corporaton state and local tax ...................... 218,275
Meals and entertainment ............................... 11,900
-----------
Total provision ....................................... $ 1,441,125
===========
13
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
9. INCOME TAXES (CONTINUED)
The income tax provision for the year ended December 31, 1999 is comprised
of the following components:
CURRENT DEFERRED TOTAL
------- -------- -----
Regular tax provision
Federal............................. $466,243 ($39,440) $ 426,803
State............................... 380,220 9,102 389,322
-------- -------- ----------
Total................................. 846,463 (30,338) 816,125
Change in tax status
Federal............................. -- 520,833 520,833
State............................... -- 104,167 104,167
-------- -------- ----------
Total tax provision................... $846,463 $594,662 $1,441,125
======== ======== ==========
The liability for income taxes at December 31, 1999 reflected on the
consolidated balance sheet, includes a deferred tax liability of $532,025. This
represents the tax effect of differences between the tax basis and financial
statement carrying amounts of assets and liabilities. This amount includes
$62,637 of a deferred income tax asset reported by Marina Mortgage Company, Inc.
and Subsidiary. The major sources of temporary differences and their deferred
tax effect at December 31, 1999 are as follows:
Deferred tax liabilities:
Capitalized cost of mortgage servicing rights......... $15,913
Loan origination costs................................ 496,133
Depreciation.......................................... 25,632
---------
Total deferred tax liabilities.................... 537,678
Deferred tax assets:
Mark to market adjustment............................. 5,653
---------
Net deferred tax liability.............................. $532,025
========
10. EARNINGS PER SHARE
The following is a reconciliation of the denominators used in the
computations of basic and diluted EPS. The numerator for calculating both basic
and diluted EPS is net income for December 31, 1999.
Numerator:
Numerator for basic earnings per share - Net income $3,860,886
==========
Denominator:
Denominator for basic earnings per share
Weighted average number of common shares
outstanding during the period 5,595,251
Net effect of dilutive stock options 7,336
----------
Denominator for diluted earnings per share 5,602,587
==========
Net income per share - basic $ 0.69
==========
Net income per share - diluted $ 0.69
==========
14
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
11. STOCK OPTIONS
On August 16, 1999, the sole Director ratified the 1999 Stock Option Plan
(the "Plan") and authorized the reserve of 750,000 shares of authorized but
unissued common stock for issuance pursuant to the Plan. Substantially all of
the options issued vest over a five-year period at 20% per year and expire seven
years from the grant date.
The following table summarizes certain information regarding the Plan at
December 31, 1999:
NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
------ --------------
Options granted 650,000 6.00
Options exercised -- --
Options cancelled 10,000 6.00
-------
Balance at December 31, 1999 640,000 $6.00
=======
Options exercisable -- --
The Company applies APB Opinion No. 25, and related Interpretations in
accounting for the Plan. There was no intrinsic value of the options granted, as
the exercise price was equal to the quoted market price at the grant date.
Accordingly, no compensation cost has been recognized for the year ended
December 31, 1999.
Had compensation cost for the Plan been determined based on the fair value
at the grant dates for awards under the Plan consistent with the method of SFAS
No. 123, the Company's net income would have been $3.6 million for 1999.
Earnings per share for 1999 would have been $0.64.
The weighted-average fair value of options granted during 1999 was $6.63.
For purposes of the pro forma calculation under SFAS No. 123, the fair value of
the options granted is estimated using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for the 1999 grants:
1999
----
Dividend yield --%
Expected volatility 24%
Risk-free interest rate 5.00%
Expected life 10 years
12. COMMITMENTS AND CONTINGENCIES
Loans Sold to Investors
Generally, the Company is not exposed to significant credit risk on its
loans sold to investors. In the normal course of business the Company is
obligated to repurchase loans which are subsequently unable to be sold through
normal investor channels. Management believes this is a rare occurrence and that
the Company can usually sell the loans directly to a permanent investor.
Loan Funding and Delivery Commitments
At December 31, 1999 and 1998, the Company had commitments to fund loans
approximating $478 million and $333 million, respectively. At December 31, 1999
and 1998, the Company had commitments to fund loans with agreed upon rates
approximating $147 million and $122 million, respectively. The Company hedges
the interest rate risk of such commitments primarily with mandatory delivery
commitments, which totaled $34 million at December 31, 1999. The remaining
commitments to fund loans with agreed-upon rates are anticipated to be sold
through "best-efforts" and investor programs. The Company does not anticipate
any material losses from such sales.
15
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Outstanding Litigation
The Company is involved in litigation arising in the normal course of
business. Although the amount of any ultimate liability arising from these
matters cannot presently be determined, the Company does not anticipate that any
such liability will have a material effect on the Company's consolidated
financial position or results of operations.
13. OPERATING LEASES
Certain facilities and equipment are leased under short-term lease
agreements expiring at various dates through December 31, 2007. All such leases
are accounted for as operating leases. Total rental expense for premises and
equipment, which is included in occupancy and equipment expense within the
financial statements, amounted to $1,866,723, $1,253,362 and $728,645 for the
years ended December 31, 1999, 1998 and 1997, respectively.
Obligations under non-cancelable operating leases which have an initial term
of more than a year are as follows:
AS OF
DECEMBER 31,
1999
----
2000.................................................... $ 3,114,298
2001.................................................... 2,563,471
2002.................................................... 2,011,948
2003.................................................... 973,923
2004.................................................... 623,616
Thereafter.............................................. 1,422,220
-----------
$10,709,476
===========
14. MINORITY INTEREST
The activity in the Minority interest account is as follows:
Capital contribution by minority partner........................ $ 50,000
Minority interest in income..................................... 50,760
Balance at December 31, 1998.................................... 100,760
Capital contribution by minority partner........................ 37,500
Minority interest in income..................................... 35,112
Distribution to minority partner................................ (150,000)
---------
Balance at December 31, 1999.................................... $ 23,372
========
15. RELATED PARTY TRANSACTIONS
The majority stockholder of the Company is a minority stockholder in another
company that provides credit reports in the normal course of business. Payments
to this company for the years ended December 31, 1999, 1998 and 1997 amounted to
approximately $232,000, $504,000 and $280,000, respectively. Additionally, total
amounts due to this related party as of December 31, 1999 and 1998 were $0 and
$25,379, respectively.
16
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
15. RELATED PARTY TRANSACTIONS (CONTINUED)
The majority stockholder of the Company is a majority stockholder in another
company that provides title services in the normal course of business. It is the
borrower's option to use this company for title services. The total amount due
from this related party was $30,000, $52,429 and $0 as of December 31, 1999,
1998 and 1997, respectively. The amounts due to the Company represent expenses
paid on behalf of the title company. Payments received from this company
amounted to approximately $52,000 in 1999.
16. CONCENTRATIONS OF CREDIT RISK
The Company has originated loans predominately in northeastern United
States, California and Arizona. Loan concentrations are considered to exist when
there are amounts loaned to a multiple number of borrowers with similar
characteristics, which would cause their ability to meet contractual obligations
to be similarly impacted by economic or other conditions. In management's
opinion, at December 31, 1999 and December 31, 1998 there were no significant
concentrations of credit risk within loans held for sale.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates are made as of a specific point in time based on
estimates using present value or other valuation techniques. These techniques
involve uncertainties and are significantly affected by the assumptions used and
the judgments made regarding risk characteristics of various financial
instruments, discount rates, estimates of future cash flows, future expected
loss experience, and other factors.
Changes in assumptions could significantly affect these estimates and the
resulting fair values. Derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized in
an immediate sale of the instrument. Also, because of differences in
methodologies and assumptions used to estimate fair values, the Company's fair
values should not be compared to those of other companies. All forward delivery
commitments and option contracts to buy securities are to be contractually
settled within six months of the balance sheet date.
Fair value estimates are based on existing financial instruments without
attempting to estimate the value of anticipated future business and the value of
assets and liabilities that are not considered financial instruments.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Company.
The fair value of certain assets and liabilities approximates cost due to
their short-term nature, terms of repayment or interest rate associated with the
asset or liability. Such assets or liabilities include cash, accounts
receivable, loans held for investment, accrued expenses and other liabilities,
and warehouse lines of credit.
The following describes the methods and assumptions used by the Company in
estimating fair values of other financial instruments:
MORTGAGE LOANS HELD FOR SALE--Fair value is estimated using the quoted
market prices for securities backed by similar types of loans and current
investor or dealer commitments to purchase loans.
MORTGAGE SERVICING RIGHTS--Fair value is estimated by discounting the
anticipated net future cash flows associated with servicing the underlying
loans using discount rates that approximate market rates, expected
subservicing costs and externally published prepayment rates.
COMMITMENTS TO FUND WITH AGREED UPON RATES--The fair value of commitments
to fund with agreed upon rates are estimated using the fees and rates
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. For fixed rate loan commitments, fair value also considers
the difference between current levels of interest rates and the committed
rates. These commitment obligations are considered in conjunction with the
Company's lower of cost or market valuation of its mortgage loans held for
sale.
17
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
17. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
COMMITMENTS TO DELIVER MORTGAGES AND OPTION CONTRACTS TO BUY
Securities--The fair value of these instruments are estimated using current
market prices for dealer or investor commitments relative to the Company's
existing positions. These instruments contain an element of risk in the
event that the counterparties may be unable to meet the terms of such
agreements. In the event a counterparty to a delivery commitment was unable
to fulfill its obligation, the Company would not incur any material loss by
replacing the position at market rates in effect at December 31, 1999 and
December 31, 1998. The Company minimizes its risk exposure by limiting the
counterparties to those major banks, investment bankers and private
investors who meet established credit and capital guidelines. Management
does not expect any counterparty to default on their obligations and,
therefore, does not expect to incur any loss due to counterparty default.
These commitments and option contracts are considered in conjunction with
the Company's lower of cost or market valuation of its mortgage loans held
for sale.
The following tables set forth information about financial instruments and
other selected assets, except for those noted above for which the carrying value
approximates fair value.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------
ESTIMATED
NOTIONAL CARRYING FAIR
AMOUNT AMOUNT VALUE
------ ------ -----
<S> <C> <C> <C>
Assets:
Mortgage loans held for sale................................................. $ -- $65,115,356 $65,703,301
Mortgage servicing rights.................................................... -- 34,470 34,470
Commitments and Contingencies:
Mortgage loans held for sale related positions:
Commitments to fund mortgages at agreed-upon rates...................... 147,482,380 -- 1,391,777
Forward delivery commitments............................................ 33,634,595 -- (379,248)
Option contracts to buy securities (1).................................. 35,000,000 371,000 439,856
<CAPTION>
DECEMBER 31, 1998
-----------------
ESTIMATED
NOTIONAL CARRYING FAIR
AMOUNT AMOUNT VALUE
------ ------ -----
<S> <C> <C> <C>
Assets:
Mortgage loans held for sale................................................. $ -- $34,666,863 $35,557,116
Mortgage servicing rights.................................................... -- 39,887 39,887
Commitments and Contingencies:
Mortgage loans held for sale related positions:
Commitments to fund mortgages at agreed-upon rates...................... 122,430,687 -- 2,075,471
Forward delivery commitments............................................ 79,841,139 -- (215,571)
Option contracts to buy securities (1).................................. 4,000,000 20,000 --
</TABLE>
(1) The carrying value and estimated fair value of option contracts are
included as a component of loans held for sale above.
18. IMPLEMENTATION OF NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133").
SFAS 133 requires that all derivative instruments be recognized as either assets
or liabilities at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedge of fair value of a recognized asset,
liability or firm commitment, a hedge of cash flows of a forecasted transaction
or a hedge of foreign currency exposure. The statement, as amended, is to be
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
The Company will adopt this statement effective January 1, 2001. The Company has
not yet determined the impact SFAS No. 133 will have on its financial position
or results of operations when such statement is adopted.
18
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
18. IMPLEMENTATION OF NEW ACCOUNTING STANDARDS (CONTINUED)
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed for Internal Use" ("SOP 98-1"), which will become effective for
financial statements for calendar year 1999, with early adoption encouraged. SOP
98-1 requires the capitalization of eligible costs of specified activities
related to computer software developed or obtained for internal use. The
adoption of this statement did not have a material impact on our financial
condition or results of operations.
19. CONDENSED FINANCIAL INFORMATION OF AMERICAN HOME MORTGAGE HOLDINGS, INC.
The following provides condensed financial information for the financial
position, results of operations and cash flows of American Home Mortgage
Holdings, Inc. (parent company only):
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999
----
<S> <C>
ASSETS:
Cash $ 1,000
Investment in subsidiaries .................................................................. 17,998,693
-----------
Total Assets....................................................................... $17,999,693
===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES $ --
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 1,000,000 shares authorized, no shares
Issued and outstanding............................................................... --
Common stock, $0.01 par value, 19,000,000 shares authorized,
8,253,400 shares issued and outstanding 82,534
Additional paid-in-capital.............................................................. 17,249,390
Retained earnings....................................................................... 667,769
-----------
Total stockholders' equity......................................................... 17,999,693
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................................... $17,999,693
===========
CONDENSED INCOME STATEMENT
FOR THE PERIOD JUNE 15, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
REVENUES:
Equity in earnings of subsidiaries $667,769
===========
NET INCOME $667,769
===========
</TABLE>
19
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
19. CONDENSED FINANCIAL INFORMATION OF AMERICAN HOME MORTGAGE HOLDINGS, INC.
(CONTINUED)
CONDENSED STATEMENT OF CASH FLOWS FOR THE
PERIOD JUNE 15, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................... $ 667,769
Increase in:
Investment in earnings of subsidiaries................... (667,769)
-----------
Cash provided by operating activities........................ --
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiaries................................... (17,331,924)
-----------
Cash used in investing activities............................ (17,331,924)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of capital stock...................... 17,332,924
Cash provided by financing activities........................ 17,332,924
NET INCREASE IN CASH............................................. 1,000
CASH, BEGINNING OF PERIOD........................................ --
-----------
CASH, END OF PERIOD.............................................. $ 1,000
===========
20. ACQUISITION
On December 30, 1999, the Company merged with Marina Mortgage Company,
Inc., a residential mortgage lender headquartered in Irvine, California, with
offices in California and Arizona. The Company issued 753,420 share of Common
stock in exchange for 34,600 shares of Marina Common Stock and will pay $2.5
million in cash over five years. The prior Marina shareholders may receive
additional consideration over the next 5 years based on 3 earnout provisions
which are primarily based on derived earnings formulas. This transaction was
accounted for as a purchase and generated goodwill of approximately $4.5
million, which will be amortized over 20 years. The results of operations for
Marina were not included in the consolidated financial statements as of December
31, 1999.
The following table sumarizes the required disclosures of the proforma
combined entity, as if the merger occurred at the beginning of each respective
period, for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Revenue................................................. $45,243,217 $38,972,742
Income before income taxes.............................. 4,490,153 6,503,613
Net income.............................................. 3,353,469 5,591,603
Earnings per share - basic.............................. $0.53 $0.97
Earnings per share - diluted............................ 0.53 0.97
</TABLE>
21. SUBSEQUENT EVENT
On January 17, 2000, the Company entered into an agreement to acquire
First Home Mortgage Corp. ("First Home"), an Illinois corporation. Upon
completion of the acquisition, the shareholders of First Home will receive an
aggregate of 489,760 shares of American Home's common stock and $3.6 million
over a period of two years. In addition, the shareholders of First Home may
receive additional consideration consisting of cash and shares of American
Home's common stock based on the future results of the financial performance of
the First Home division of the Company (please see the Company's current report
on Form 8-K filed with the Securities and Exchange Commission on February 1,
2000 for further information). First Home is an independent mortgage lender
based in metropolitan Chicago. Formed in 1987, First Home originates primary
residential mortgage loans. It operates 21 branch offices in 4 states and
employs approximately 255 full time employees, including sales personnel. First
Home is qualified to originate loans in 23 states and has an application pending
for qualification in one state. At December
20
<PAGE>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
21. SUBSEQUENT EVENT (CONTINUED)
31, 1999, Frist Home had assets of $22.4 million. It is anticipated that this
transaction will generate goodwill of approximately $5.0 million to be amortized
over 20 years.
The following table sumarizes the required disclosures of the proforma
combined entity, as if the merger occurred at the beginning of the period for
the year ended December 31, 1999:
Revenue................................................. $45,511,419
Income before income taxes.............................. 5,281,951
Net income.............................................. 3,573,280
Earnings per share - basic.............................. $0.59
Earnings per share - diluted............................ 0.59
22. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data are presented below by quarter for the
years ended December 31, 1999 and 1998 (dollars in thousands, except per share
amounts):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1999 1999 1999 1999
------------ ------------- -------- ----------
<S> <C> <C> <C> <C>
Gain on sale of mortgage loans................ $6,119 $5,016 $8,632 $5,190
Total revenue................................. 6,866 5,829 6,509 5,658
Income before income taxes and minority interest 1,360 1,273 1,947 757
Net income.................................... 747 585 1,822 707
Earnings per share - basic.................... $0.13 $0.10 $0.33 $0.13
Earnings per share - diluted.................. 0.13 0.10 0.33 0.13
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1998 1998 1998 1998
------------ ------------ -------- ---------
Gain on sale of mortgage loans................ $6,444 $4,847 $4,100 $3,589
Total revenue................................. 6,864 4,946 4,702 3,705
Income before income taxes and minority interest 1,428 1,467 1,850 503
Net income.................................... 1,265 1,364 1,765 476
Earnings per share - basic.................... $0.25 $0.27 $0.35 $0.10
Earnings per share - diluted.................. 0.25 0.27 0.35 0.10
</TABLE>
21
<PAGE>
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- - -------------- -----------
2.1 Agreement and Plan of Merger, dated December 29, 1999.*
2.2 Agreement and Plan of Merger, dated January 17, 2000.**
3.1 Form of Amended and Restated Certificate of Incorporation of
the Registrant.***
3.2 Form of Amended and Restated Bylaws of the Registrant.***
4.1 Reference is hereby made to Exhibits 3.1 and 3.2.
4.2 Specimen Certificate for the Registrant's Common Stock.****
10.1 Employment Agreement, dated as of August 26, 1999, between
American Home Mortgage Corp. and Michael Strauss.****
10.2 Employment Agreement, dated as of January 6, 1989, between
American Home Mortgage Corp. and Leonard Schoen, Jr., as
amended on August 26, 1999.****
10.3 Employment Agreement, dated as of April 14, 1999, between
American Home Mortgage Corp. and Nicholas P. Rizzetta, as
amended on August 26, 1999.***
10.4 Employment Agreement, dated as of April 3, 1997, between
American Home Mortgage Corp. and Robert Burke, as amended on
August 26, 1999.****
10.5 Employment Agreement, dated as of March 9, 1998, between
American Home Mortgage Corp. and James P. O'Reilly.
10.6 Employment Agreement, dated as of July 14, 1999, between
American Home Mortgage Holdings, Inc. and Ronald D.
Taylor.***
10.7 1999 Omnibus Incentive Stock Plan.+
10.8 Sublease, dated as of December 17, 1997, between Suntory
International Corp. and Michael Strauss, Inc., d/b/a
American Home Mortgage.
10.9 Mortgage Warehousing Loan and Security Agreement, dated as
of December 8, 1998, between First Union National Bank and
Michael Strauss, Inc., d/b/a American Home Mortgage.
10.10 Software Licensing Agreement, dated as of July 7, 1999,
between American Home Mortgage Corp. and James P. O'Reilly.
10.11 Form of Warrant Agreement, dated as of September 1999,
between American Home Mortgage Holdings, Inc. and Friedman,
Billings, Ramsey & Co., Inc.***
10.12 Form of Lock-up Agreement between Michael Strauss and
Friedman, Billings, Ramsey & Co., Inc.++
10.13 Form of Lock-up Agreement between American Home Mortgage
Holdings, Inc. and Friedman, Billings, Ramsey & Co., Inc.+++
10.14 Loan Purchase Agreement, dated as of July 8, 1996, between
Michael Strauss, Inc., d/b/a American Home Mortgage, and
Norwest Funding, Inc.
25
<PAGE>
10.15 Origination and Sales Agreement, dated as of July 8, 1994,
between American Home Mortgage Corp. and Chase Manhattan
Mortgage Corporation.
10.16 Loan Sales Agreement dated as of March 31, 1995, between
American Home Mortgage Corp. and Columbia Federal Savings
Bank.+
10.17 Master Agreement for the Sale and Purchase of Mortgages,
dated as of April 19, 1994, between Astoria Federal Savings
and Loan Association and Michael Strauss, Inc., d/b/a
American Home Mortgage.
10.18 Employment Agreement, dated as of January 18, 1996, between
American Home Mortgage Corp. and Leslie E. Tao, as amended
on August 26, 1999.****
10.19 Tax Indemnification Agreement, by and among American Home
Mortgage Holdings, Inc., American Home Mortgage Corp. and
Michael Strauss.****
10.20 Employment Agreement, dated December 29, 1999, between John
A. Johnston and American Home Mortgage Holdings, Inc.*
10.21 Employment Agreement, dated December 29, 1999, between
Ronald Bergum and American Home Mortgage Holdings, Inc.*
10.22 Non-Competition Agreement, dated December 29, 1999, between
John A. Johnston and American Home Mortgage Holdings, Inc.*
10.23 Non-Competition Agreement, dated December 29, 1999, between
Ronald Bergum and American Home Mortgage Holdings, Inc.*
10.24 Stock Purchase Agreement, dated December 29, 1999, between
American Home Mortgage Holdings, Inc. and the Stockholders
of Marina Mortgage Company, Inc. listed on the signature
pages thereto.*
10.25 Employment Agreement, dated January 17, 2000, between John
A. Manglardi and American Home Mortgage Holdings, Inc.**
10.26 Employment Agreement, dated January 17, 2000, between
Vincent Manglardi and American Home Mortgage Holdings,
Inc.**
10.27 Employment Agreement, dated January 17, 2000, between
Jeffrey L. Lake and American Home Mortgage Holdings, Inc.**
10.28 Employment Agreement, dated January 17, 2000, between Thomas
J. Fiddler and American Home Mortgage Holdings, Inc.**
10.29 Non-Competition Agreement, dated January 17, 2000, between
John A. Manglardi and American Home Mortgage Holdings,
Inc.**
10.30 Non-Competition Agreement, dated January 17, 2000, between
Vincent Manglardi and American Home Mortgage Holdings,
Inc.**
10.31 Non-Competition Agreement, dated January 17, 2000, between
Jeffrey L. Lake and American Home Mortgage Holdings, Inc.**
10.32 Non-Competition Agreement, dated January 17, 2000, between
Thomas J. Fiddler and American Home Mortgage Holdings,
Inc.**
26
<PAGE>
10.33 Mortgage Warehousing Loan and Security Agreement, dated as
of December 6, 1999, among American Home Mortgage Corp.,
First Union National Bank, and Certain Banking Institutions
named therein, as amended.++++
10.34 Lease Agreement, dated December 8, 1999, between American
Home Mortgage Holdings, Inc., as Tenant, and 47th and 6th
Associates L.L.C., as Landlord.++++
10.35 Agreement of Lease, dated October 20, 1995, between
Reckson Operating Partnership, L.P., as Landlord, Choicecare
Long Island, Inc., as Assignor, and American Home Mortgage
Corp., as Assignee, as amended on September 30, 1999.++++
21.1 Subsidiaries of American Home Mortgage Holdings, Inc.++++
23.1 Consent of Deloitte & Touche LLP.++++
27.1 Financial Data Schedule.++++
- - --------------------------------------------------------
All nonmarked Exhibits listed above are incorporated by reference to
the Exhibits to the Registration Statement on Form S-1 (file no.
333-82409) filed with the Securities and Exchange Commission on July 9,
1999.
* Incorporated by reference to the Form 8-K (file no. 000-27081) filed
with the Securities and Exchange Commission on January 12, 2000.
** Incorporated by reference to the Form 8-K (file no. 000-27081) filed
with the Securities and Exchange Commission on February 1, 2000.
*** Incorporated by reference to the Exhibits to Amendment No. 4 to the
Registration Statement on Form S-1 (file no. 333-82409) filed with the
Securities and Exchange Commission on September 30, 1999.
**** Incorporated by reference to the Exhibits to Amendment No. 3 to the
Registration Statement on Form S-1 (file no. 333-82409) filed with the
Securities and Exchange Commission on August 31, 1999.
+ Incorporated by reference to the Exhibits to Amendment No. 2 to the
Registration Statement on Form S-1 (file no. 333-82409) filed with the
Securities and Exchange Commission on August 18, 1999.
++ Incorporated by reference to Exhibit B of the Schedule 13D (file no.
005-57001) filed with the Securities and Exchange Commission on October
14, 1999.
+++ Incorporated by reference to Exhibit A attached to Exhibit 1.1 to
Amendment No. 4 to the Registration Statement on Form S-1 (file no.
333-82409) filed with the Securities and Exchange Commission on
September 30, 1999.
++++ Filed herewith.
27
EXECUTION
12/6/99
AMENDED AND RESTATED
MORTGAGE WAREHOUSING LOAN AND SECURITY AGREEMENT
dated as of December 6, 1999
among
AMERICAN HOME MORTGAGE CORP.,
as Borrower
and
THE BANKING INSTITUTIONS NAMED HEREIN,
as Banks
FIRST UNION NATIONAL BANK,
as Agent
$60,000,000
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01 Definitions....................................................2
Section 1.02 Accounting Terms..............................................12
Section 1.03 Computation of Time Periods...................................12
Section 1.04 Rules of Construction.........................................12
ARTICLE II
LOANS
Section 2.01 The Commitment................................................12
Section 2.02 The Loans.....................................................12
Section 2.03 Advance Rates.................................................13
Section 2.04 Notice and Manner of Borrowing................................14
Section 2.05 Payment of Principal..........................................15
Section 2.06 Interest......................................................15
Section 2.07 Notes.........................................................15
Section 2.08 Mandatory Prepayment..........................................16
Section 2.09 Fees..........................................................16
Section 2.10 Method of Payment of Interest and Fees........................17
Section 2.11 Use of Proceeds...............................................17
Section 2.12 Reliance Upon Instructions....................................17
Section 2.13 Reduction and Termination of Commitment.......................17
ARTICLE III
COLLATERAL
Section 3.01 Security Interest.............................................18
Section 3.02 Security Interest in Mortgage-backed Securities...............19
Section 3.03 Responsibility for Collateral.................................19
Section 3.04 Representations and Warranties Concerning Collateral..........19
Section 3.05 Release of Security Interest..................................21
Section 3.06 Covenants and Agreements Concerning Collateral................21
Section 3.07 List of Qualified Investors...................................22
Section 3.08 Uniform Commercial Code Financing Statements..................23
Section 3.09 Collection Rights.............................................23
Section 3.10 Attorney-in-Fact..............................................23
-i-
<PAGE>
Section 3.11 Borrower Remains Liable.......................................24
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01 Conditions Precedent to Initial Loan..........................24
Section 4.02 Conditions Precedent to All Loans.............................26
Section 4.03 Loan Requests for Loans to Fund Mortgage Loans................26
Section 4.04 Disbursing Loans..............................................27
Section 4.05 Wet Mortgage Loan Closings....................................27
Section 4.06 Qualified Investor Requirements; Other Approvals..............29
Section 4.07 Temporary Release of Collateral Documents; Delivery of
Collateral Documents.........................................29
Section 4.08 Deemed Representation.........................................30
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01 Formation, Good Standing and Due Qualification................30
Section 5.02 Power and Authority; No Conflicts.............................30
Section 5.03 Legally Enforceable Agreements................................31
Section 5.04 Litigation....................................................31
Section 5.05 Financial Statements..........................................31
Section 5.06 Ownership and Liens...........................................31
Section 5.07 Taxes.........................................................31
Section 5.08 ERISA.........................................................31
Section 5.09 Subsidiaries..................................................32
Section 5.10 Operation of Business; Prior or Existing Restrictions, Etc....32
Section 5.11 No Default on Outstanding Judgments or Orders.................32
Section 5.12 No Defaults on Other Agreements...............................32
Section 5.13 Labor Disputes and Acts of God................................32
Section 5.14 Partnerships..................................................33
Section 5.15 Environmental Protection......................................33
Section 5.16 Management of Borrower........................................33
Section 5.17 Compliance with Laws..........................................33
Section 5.18 Solvency......................................................33
ARTICLE VI
AFFIRMATIVE COVENANTS
Section 6.01 Maintenance of Existence......................................34
Section 6.02 Conduct of Business...........................................34
Section 6.03 Maintenance of Properties.....................................34
-ii-
<PAGE>
Section 6.04 Maintenance of Records........................................34
Section 6.05 Maintenance of Qualification with Agencies....................34
Section 6.06 Maintenance of Insurance......................................34
Section 6.07 Compliance with Laws..........................................34
Section 6.08 Right of Inspection...........................................34
Section 6.09 Reporting Requirements........................................35
Section 6.10 Compliance With Environmental Laws............................37
Section 6.11 Agency and Take-Out Commitments...............................37
Section 6.12 Taxes.........................................................38
Section 6.13 ERISA.........................................................38
Section 6.14 Year 2000 Compliance..........................................38
ARTICLE VII
NEGATIVE COVENANTS
Section 7.01 Liens.........................................................39
Section 7.02 Debt..........................................................40
Section 7.03 Mergers, Etc..................................................40
Section 7.04 Leases........................................................40
Section 7.05 Sale and Leaseback............................................41
Section 7.06 No Dividends..................................................41
Section 7.07 Management of the Borrower....................................41
Section 7.08 Sale of Assets................................................41
Section 7.09 Investments...................................................41
Section 7.10 Financial Hedge Instruments...................................41
Section 7.11 Guaranties, Etc...............................................41
Section 7.12 Transactions With Affiliates..................................42
ARTICLE VIII
FINANCIAL COVENANTS
Section 8.01 Financial Covenants...........................................42
ARTICLE IX
EVENTS OF DEFAULT
Section 9.01 Events of Default.............................................42
Section 9.02 Remedies......................................................44
Section 9.03 Application of Proceeds.......................................45
Section 9.04 The Agent May Perform.........................................45
Section 9.05 The Agent's Duties With Respect to Collateral.................45
Section 9.06 Continuing Security Interest; Transfer of Note................46
-iii-
<PAGE>
ARTICLE X
THE AGENT
Section 10.01 Appointment and Authorization.................................46
Section 10.02 General Immunity..............................................46
Section 10.03 Consultation with Professionals...............................46
Section 10.04 Documents.....................................................46
Section 10.05 Delivery of Collateral Reports................................47
Section 10.06 Rights as a Bank..............................................47
Section 10.07 Responsibility of the Agent...................................47
Section 10.08 Action by the Agent...........................................47
Section 10.09 Notices of Event of Default, Etc..............................47
Section 10.10 Indemnification of the Agent..................................47
Section 10.11 Resignation or Replacement of the Agent.......................48
ARTICLE XI
MISCELLANEOUS
Section 11.01 No Waiver; Cumulative Remedies................................48
Section 11.02 Set-Off; Disproportionate Payments............................48
Section 11.03 Amendments....................................................49
Section 11.04 Arbitration...................................................49
Section 11.05 Exchange of Information among Banks...........................50
Section 11.06 Costs and Expenses; Indemnification...........................50
Section 11.07 Binding Effect; Assignment; Participation.....................51
Section 11.08 Chance in Laws; Increased Costs...............................51
Section 11.09 Notices.......................................................52
Section 11.10 Usury.........................................................52
Section 11.11 Nature of the Banks' Obligations..............................53
Section 11.12 Nature of the Borrower's Obligations..........................53
Section 11.13 Table of Contents; Headings...................................53
Section 11.14 Severability..................................................53
Section 11.15 Counterparts..................................................53
Section 11.16 Integration...................................................53
Section 11.17 GOVERNING LAW.................................................53
Section 11.18 JURISDICTION; IMMUNITIES......................................53
Section 11.19 WAIVER OF JURY TRIAL..........................................54
-iv-
<PAGE>
EXHIBITS
Exhibit 1.01-a Borrowing Base Certificate (Warehouse Loans) Exhibit 1.01-c Wet
Closing Agreement Exhibit 1.01-e Note Assignment Agreement Exhibit 2.07 Form of
Note Exhibit 4.01(9) Form of Opinion of Counsel to Borrower Exhibit 4.01(10)
Guaranty Exhibit 4.03 Description of Collateral Documents Exhibit 4.07 Form of
Trust Receipt
SCHEDULES
Schedule A Non-Conforming Credit Underwriting Criteria
Schedule B List of Qualified Investors as of the Closing Date
Schedule D Monthly Report of Computation of Borrowing Base and
Availability of Warehouse Loans
Schedule 5.05 Material Liabilities of Borrower
Schedule 5.09 Shareholders of Borrower
Schedule 5.14 Partnerships of Borrower
Schedule 5.16 Management of Borrower
Schedule 7.02 Debt of Borrower
-v-
<PAGE>
AMENDED AND RESTATED MORTGAGE WAREHOUSING LOAN AND SECURITY
AGREEMENT dated as of December 6, 1999 among AMERICAN HOME MORTGAGE CORP.
("Borrower") with its principal place of business at 12 East 49th Street, New
York, New York 10017, and FIRST UNION NATIONAL BANK, a national banking
association with offices at 1 First Union Center, 301 South College Street,
TW-9, Charlotte, North Carolina 28288-0610 ("First Union"), and the banks set
forth on the signature pages hereof or joining herein (First Union and the other
banks party hereto are each sometimes referred to herein individually as a
"Bank" and collectively as the "Banks"), and First Union, as Agent (the
"Agent"), for the benefit of the Banks.
The Borrower desires that the Banks extend credit as provided
herein, and the Banks are prepared to extend such credit pursuant to the terms
hereof. Accordingly, the Borrower and the Banks agree as follows:
WHEREAS, the Borrower engages in the business of origination,
purchase and sale of Mortgage Loans; and
WHEREAS, the Borrower and First Union are parties to that certain
Mortgage Warehousing Loan and Security Agreement dated as of December 8, 1998
(the "Existing Credit Agreement") pursuant to which First Union agreed to lend
to the Borrower an aggregate amount not to exceed Fifty Million Dollars
($50,000,000) outstanding at any time and as amended from time to time; and
WHEREAS, the Existing Credit Agreement is being amended and replaced
in its entirety by this Agreement, pursuant to which the Banks agree on a
several basis, subject to the terms and conditions hereof, to lend to the
Borrower a credit facility of up to Sixty Million Dollars ($60,000,000)
outstanding at any time, in order to finance its origination or purchase of
Mortgage Loans pending sale to investors;
WHEREAS, the Banks are willing, subject to the terms and conditions
of this Agreement, to make advances to the Borrower, up to the maximum amount of
the Commitment, with the Borrower's obligations for repayment to be secured, as
hereinafter described, by Mortgage Loans; and
WHEREAS, this Agreement amends and restates in its entirety the
Existing Credit Agreement, provided, that this Agreement shall not constitute a
novation and shall not be deemed to have extinguished or discharged the
indebtedness and obligations of the Borrower under the Existing Credit
Agreement, or any collateral security therefor, all of which shall continue
under and be governed by this Agreement and the other documents and agreements
executed in connection herewith.
NOW, THEREFORE, in consideration of the promises and the agreements
hereinafter set forth and of each advance made by the Banks to the Borrower, and
intending to be legally bound hereby, the parties agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01 Definitions. As used in this Agreement, the following
terms have the following meanings (terms defined in the singular are to have a
correlative meaning when used in the plural and vice versa):
"Advance Account" shall have the meaning specified in the Custodial
Agreement.
"Affiliate" means, with respect to the Borrower, any Person:
(a) which directly or indirectly Controls, or is Controlled by,
or is under common Control with the Borrower;
(b) which directly or indirectly beneficially owns or holds ten
percent or more of any ownership interest in the Borrower; or
(c) ten percent or more of the ownership interest of which is
directly or indirectly beneficially owned or held by the Borrower.
"Aged Mortgage Loan Inventory" means Mortgage Loans which have been
pledged as Collateral hereunder for a period greater than ninety (90) days but
not more than one hundred twenty (120) days.
"Aged Mortgage Loan Inventory Sublimit" means Six Million Dollars
($6,000,000).
"Agencies" means FNMA or FHLMC.
"Agent" is the entity specified in the first paragraph of this
Agreement as well as any successors to or assigns of such entity.
"Agreement" means this Amended and Restated Mortgage Warehousing
Loan and Security Agreement, as amended, supplemented or modified from time to
time.
"Approved Custodian" means a Person acceptable to the Agent from
time to time in its sole discretion, who possesses Mortgage Loans that secure
Mortgaged-backed Securities.
"Assignee" has the meaning specified in Section 11.07(b).
"Base Rate" means the Corporate Base Rate plus 1.50% per annum.
"Borrowing Base" means, as of the date of determination, the
Collateral Value of Eligible Mortgages for all Eligible Mortgage Loans;
provided, however, in no event will the Collateral Value of Eligible Mortgages
include (a) Wet Mortgage Loans to the extent that they aggregate in excess of
the Wet Mortgage Loan Sublimit, (b) Non-Conforming Mortgage Loans to the extent
that they aggregate in excess of the Non-Conforming Mortgage Loans Sublimit,
-2-
<PAGE>
(c) Aged Mortgage Loan Inventory to the extent that it aggregates in excess of
the Aged Mortgage Loan Inventory Sublimit, and (d) Eligible Repurchase Mortgage
Loans to the extent that they aggregate in excess of the Eligible Repurchase
Mortgage Loan Sublimit.
"Borrowing Base Certificate" means a Certificate in the form of
Exhibit 1.01-a or 1.01-b hereto, properly completed, executed and delivered to
the Agent and the Banks.
"Business Day" means any day on which commercial banks are not
authorized or required to close in the Commonwealth of Pennsylvania or the State
of North Carolina or any day on which a Federal Reserve Bank is closed.
"Capital Lease" means any lease which has been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Certificate of No Default" shall have the meaning specified in
Section 6.08(4).
"Clearing Account" shall have the meaning specified in the Custodial
Agreement.
"Closing Agent" means a title company, a closing attorney or other
entity which conducts the settlement of a Mortgage Loan.
"Closing Date" means December 6, 1999 or such earlier date as the
parties shall agree.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, together with all rules and regulations promulgated in connection
therewith.
"Collateral" means Mortgage Loans, Mortgage Notes, Mortgages and all
other property rights, proceeds and payments relating to (i) Mortgage Loans
which have been pledged to the Banks (whether by delivery to the Banks, the
Agent, or to a third party on the Banks' behalf or otherwise) and (ii) all other
personal property of the Borrower hereinafter described in Section 3.01, and/or
from time to time deposited with, delivered or to be delivered or held by or for
the Banks pursuant to this Agreement, and the proceeds thereof in each case,
whether now or hereafter arising.
"Collateral Sale Proceeds" shall mean all proceeds of the sale of
Pledged Mortgages.
"Collateral Value of Eligible Mortgages" has the meaning given to
such term in Section 2.03 hereof.
"Collateral Custodian" means Deutsche Bank or such other entity as
is acceptable to the Agent and is approved by the Majority Banks.
"Combined" means, when used in reference to financial statements,
financial and accounting terms, and financial covenants, a presentation in which
the balance sheet accounts and the income statement accounts of the Borrower and
its Subsidiaries have been added
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together as if the Borrower and its Subsidiaries were a single company, and
wherein all intercompany transactions and relationships among and between them
have been eliminated.
"Committed Purchase Price" means the committed amount to be paid by
a Qualified Investor pursuant to a Take-Out Commitment.
"Commitment" has the meaning specified in Section 2.01.
"Conforming Mortgage Loans" means Mortgage Loans which meet FNMA,
FHLMC, or other generally accepted underwriting criteria for conforming loans,
and which further meet such additional requirements as a Bank may impose from
time to time.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
"Corporate Base Rate" shall mean for any day a fluctuating interest
rate per annum equal to the weighted average of the rates on overnight Federal
funds transactions with numbers of the Federal Reserve System averaged by
Federal funds brokers for such day as reported by the Federal Reserve Bank of
New York, or if no longer so reported then as published in Statistical Release
H.15 of the Federal Reserve System, or if such rate is not so published for any
day, the average of the quotations for such day of such transactions received by
Agent from three (3) Federal funds brokers of recognized standing selected by
Agent.
"Custodial Agreement" shall mean the Amended and Restated Custodial
Agreement dated as of December 6, 1999 among the Borrower, the Agent and the
Collateral Custodian.
"Debt" means all liabilities of the Borrower, including, without
limitation, (1) indebtedness or liability for borrowed money; (2) obligations
evidenced by bonds, debentures, notes, or other similar instruments;
(3) obligations for the deferred purchase price of property or services
(including trade obligations); (4) obligations as lessee under Capital Leases;
(5) current liabilities in respect of unfunded vested benefits under Plans
covered by ERISA; (6) obligations under letters of credit; (7) obligations under
acceptance facilities; (8) all guaranties, endorsements (other than for
collection or deposit in the ordinary course of business), and other contingent
obligations to purchase, to provide funds for payment, to supply funds to invest
in any Person or entity, or otherwise to assure a creditor against loss; and
(9) obligations secured by any Liens, whether or not the obligations have been
assumed. The term "Debt" shall not include deferred loan origination fees of
the Borrower.
"Default" means any event which with the giving of notice or lapse
of time, or both, would become an Event of Default.
"Default Rate" means, with respect to an amount of any Loan not paid
when due, a rate per annum equal to the rate which would otherwise be in effect
hereunder plus three percent (3%).
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"Distribution" means any distribution, advance, draw, management
fees, or other transfers of cash or other assets out of the Borrower to any
Shareholder or Affiliate of the Borrower.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Eligible Mortgage Loans" means single family (1-4 family)
(a) Conforming, Jumbo, and Non-Conforming Mortgage Loans which have been pledged
as Collateral hereunder for not more than 90 days, (b) Eligible Repurchase
Mortgage Loans that have been pledged as Collateral hereunder for not more than
270 days, and (c) Aged Mortgage Loan Inventory pledged as Collateral hereunder
for not more than 120 days. Wherever applicable such Mortgage Loans shall be
subject to a policy of title insurance acceptable to the Agent in its sole
discretion.
"Eligible Mortgage Pool" means a pool of Mortgage Loans that will
secure a "mortgage related security", as defined in Section 3(a)(41) of the
Exchange Act administered or to be administered by a trustee acceptable to the
Agent in its sole discretion where the Mortgage, Mortgage Note and other
documents relating to such Mortgage Loans are held or to be held by an Approved
Custodian.
"Eligible Repurchase Mortgage Loans" means Mortgage Loans
repurchased by the Borrower from a Qualified Investor but which would otherwise
meet all requirements of Eligible Mortgage Loans except as expressly disclosed
in writing to the Agent and approved by the Agent in its sole and absolute
discretion.
"Eligible Repurchase Mortgage Loans Sublimit" means Two Million
Dollars ($2,000,000).
"Environmental Discharge" means any discharge or release of any
Hazardous Materials in violation of any applicable Environmental Law.
"Environmental Law" means any Law relating to pollution or the
environment, including, without limitation, Laws relating to noise or to
emissions, discharges, releases or threatened releases of Hazardous Materials
into the workplace, the community or the environment, or otherwise relating to
the generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
"Environmental Notice" means any complaint, order, citation, letter,
inquiry, notice or other written communication from any Person (1) affecting or
relating to the Borrower's compliance with any Environmental Law in connection
with any activity or operations at any time conducted by the Borrower;
(2) relating to the occurrence or presence of or exposure to or possible or
threatened or alleged occurrence or presence of or exposure to Environmental
Discharges or Hazardous Materials at any of the locations or facilities of the
Borrower, including, without limitation (a) the existence of any contamination
or possible or threatened contamination at any such location or facility and
(b) remediation of any Environmental Discharge or Hazardous Materials at any
such location or facility or any part thereof; and (3) any violation or alleged
violation of any relevant Environmental Law.
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"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, including any rules and regulations, promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control (within
the meaning of Section 4 14(c) of the Code) with the Borrower.
"Escrow Deposits" means all monies held by the Borrower representing
principal, interest, tax, insurance and other deposits or payments made by
mortgagors under Mortgage Loans.
"Event of Default" has the meaning specified in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time and any successor statute.
"Expiration Date" means December 5, 2000.
"Fees" has the meaning given to such term in Section 2.09 hereof.
"Fair Market Value" shall mean, at any date, with respect to any
Mortgage-backed Security, the bid price rate reflected on the Telerate screen
for a Mortgage-backed Security with the closest coupon rate that does not exceed
that of the Mortgage-backed Security in question multiplied by the original face
amount of such Mortgage-backed Security, and multiplied by the current pool
factor for such Mortgage-backed Security. In the event Telerate ceases to
publish either the market or bid price referenced above, the average bid price
quoted in writing to the Agent as of the date of determination by any two
nationally recognized dealers selected by the Agent that are making a market in
similar Mortgage Loans or Mortgaged-backed Securities shall be utilized in lieu
of the market or bid price, as the case may be.
"FHA" means the Federal Housing Administration and its successors.
"FHLMC" means the Federal Home Loan Mortgage Corporation and its
successors.
"FNMA" means the Federal National Mortgage Association and its
successors.
"GAAP" means generally accepted accounting principles in the United
States of America used by the Borrower in the preparation of its financial
statements referred to in Section 5.05, and consistently applied.
"Good Faith Contest" means the contest of an item if, in the Agent's
sole determination: (1) the item is diligently contested in good faith by
appropriate proceedings timely instituted; (2) adequate reserves are established
on the books of the Borrower with respect to the contested item; (3) during the
period of such contest, the enforcement of any contested item is effectively
stayed; and (4) the failure to pay or comply with the contested item could not
result in a Material Adverse Change.
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"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Materials" means any pollutant, effluents, emissions,
contaminants, toxic or hazardous wastes or substances, as any of those terms are
defined from time to time in or for the purposes of any relevant Environmental
Law, including, without limitation, asbestos fibers and friable asbestos,
polychlorinated biphenyls, and any petroleum or hydrocarbon-based products or
derivatives.
"Interest Rate" means the Base Rate or the Default Rate, as
applicable.
"Jumbo Mortgage Loan" means an Eligible Mortgage Loan in a principal
amount greater than the limits established from time to time by FNMA or FHLMC
for sale to FNMA or FHLMC but which Eligible Mortgage Loan in all other respects
satisfies the requirements for sale to FNMA and FHLMC.
"Law" means any federal, state or local statute, law, rule,
regulation, ordinance, order, code, policy or rule of common law, now or
hereafter in effect, and in each case as amended, and any judicial or
administrative interpretation thereof by a Governmental Authority, including any
judicial or administrative order, consent decree or judgment.
"Leverage Ratio" means a fraction, determined as of the pertinent
financial statement date, the numerator of which is the sum total of the
Borrower's outstanding liabilities and the denominator of which is Tangible
Stockholder's Equity.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing).
"List of Qualified Investors" means the List of Qualified Investors
attached hereto as Schedule B as such list may be revised from time to time in
accordance with Section 3.06.
"Loan" has the meaning specified in Section 2.01.
"Loan Documents" means this Agreement, the Notes, each written loan
request, each Compliance Certificate, each Borrowing Base Certificate and the
UCC-l financing statements delivered in connection with this Agreement, together
with any and all documents, instruments and materials issued, executed and/or
delivered by the Borrower in connection with any of the foregoing together with
all amendments, restatements, and modifications thereof.
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"Majority Banks" means those Banks which are then in compliance with
their obligations hereunder holding not less than 66 2/3% of the aggregate
Commitments of those Banks who are then in compliance with their obligations
hereunder, but in no event shall fewer than two banks constitute Majority Banks.
"Material Adverse Change" means (1) a material adverse change in the
status of the business, results of operations, condition (financial or
otherwise), property or prospects of the Borrower, (2) any event or occurrence
of whatever nature which could have a material adverse effect on the Borrower's
ability to perform their obligations under the Loan Documents or (3) any
material adverse change in the Collateral or any event or occurrence of whatever
nature which could have a material adverse effect or result in an adverse change
in the value, enforceability, collectibility or the nature of the Collateral.
"Monthly Date" means the first (1st) day of each month.
"Mortgage" means a mortgage, deed of trust, security agreement (for
cooperative share loans) on real estate, and securing a Mortgage Loan and also
creating a valid first or second lien on the fee simple title (or leasehold in
the case of cooperative share loans) to real estate referred therein subject
only to (i) liens for taxes, not yet due and payable or similar governmental
charges not yet due and payable or still subject to payment without interest or
penalty, (ii) zoning restrictions, utility easements, covenants, or conditions
and restrictions of record, which shall neither defeat nor render invalid such
lien or the priority thereof, nor materially impair the marketability or value
of such real estate, nor be violated by the existing improvements or the
intended use thereof; (iii) such other liens as may have been approved in
writing by the Majority Banks.
"Mortgage-backed Securities" means FHLMC or FNMA securities that are
backed by Mortgage Loans.
"Mortgage Loan" means a loan, with interest payable at a fixed or
variable rate, evidenced by a Mortgage Note and secured by a Mortgage covering a
fee simple interest (or leasehold in the case of cooperative share loans) in
completed residential (1-4 family) real property and all improvements located
thereon located in the United States.
"Mortgage Loan Closing Date" means the date that a Mortgage Loan is
scheduled to close.
"Mortgage Note" means a valid and binding note, bond or other
evidence of indebtedness evidencing a Mortgage Loan and secured by a Mortgage,
which (i) was executed by a bona fide third person who has capacity to contract;
(ii) is payable in accordance with terms acceptable to FNMA or FHLMC or other
generally acceptable investors at the time the Loan is closed and otherwise
acceptable to the Agent; (iii) matures in 30 years or less unless otherwise
agreed to by the Agent; and (iv) complies with any other terms as may be
required in writing in advance of the closing date by the Agent from time to
time.
"Mortgage Pool" means a pool of Mortgage Loans that were warehoused
in accordance with this Agreement, on the basis of which there is to be issued a
Mortgage-backed Security.
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"Multiemployer Plan" means a Plan defined as such in Section 3(37)
of ERISA to which contributions have been made by the Borrower or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Non-Conforming Mortgage Loans" means Mortgage Loans which do not
comply with all of the requirements for Conforming Mortgage Loans as defined by
FNMA, FHLMC or other generally accepted criteria for conforming loans, but are
written in accordance with guidelines stipulated in Schedule A, which have a
loan to value ratio not exceeding 90% (other than where permitted elsewhere in
this Agreement), and which constitute a valid first or second lien on the real
estate referred to in the Mortgage, provided, however, that Non-Conforming
Mortgage Loans shall not include Jumbo Mortgage Loans.
"Non-Conforming Mortgage Loans Sublimit" means Ten Million
Dollars ($10,000,000).
"Note" has the meaning specified in Section 2.07.
"Obligations" means (1) each and every obligation, covenant and
agreement of the Borrower now or hereafter existing contained in this Agreement,
and any of the other Loan Documents, whether for principal, interest, fees,
expenses, indemnities or otherwise, and any amendments or supplements thereto,
extensions or renewals thereof or replacements therefor, including but not
limited to all indebtedness, obligations and liabilities of the Borrower to the
Banks now existing or hereafter incurred under or arising out of or in
connection with the Notes, this Agreement, the other Loan Documents, and any
documents or instruments executed in connection therewith, (2) all sums advanced
in accordance with this Agreement by or on behalf of the Banks to protect any of
the Collateral purported to be covered hereby, and (3) any amounts paid by the
Agent in preservation of any of the Bank's rights or interest in the Collateral,
together with interest on such amounts from the date such amounts are paid until
reimbursement in full at a rate per annum equal at all times to the Default
Rate; in each case whether direct or indirect, joint or several, absolute or
contingent, liquidated or unliquidated, now or hereafter existing, renewed or
restructured, whether or not from time to time decreased or extinguished and
later increased, created or incurred, and including all indebtedness of the
Borrower under any instrument now or hereafter evidencing or securing any of the
foregoing.
"Operating Account" means a demand deposit account established by
the Borrower with the Agent for use by the Borrower for its general business
operations and for the payment to the Agent, by automatic debit, of interest,
fees and any other amounts payable from time to time hereunder.
"Outstanding Credit" means, as of the date of determination, the
aggregate principal amount of all outstanding Loans.
"Participant" has the meaning specified in Section 11.07 hereof.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" has the meaning specified in Section 7.01.
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"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by the Borrower or any
ERISA Affiliate and which is covered by Title IV of ERISA or to which Section
412 of the Code applies.
"Pledged Mortgages" means all Mortgages and Mortgage Notes (1)
(1) covered by or referred to or included in a loan request, or (2) relied on by
any Bank in making a Loan, or (3) for which any of the documentation related
thereto is received by the Agent under or pursuant to any of the Loan Documents,
or (4) which are the subject of the Wet Closing provisions of this Agreement.
"Pledged Securities" means all Mortgage-backed Securities which are
from time to time delivered or caused to be delivered to, or are otherwise in
the possession of the Agent, or its designee, its agent, bailee or custodian as
assignee or pledged to the Agent, or for such purpose are registered by
book-entry in the name of the Agent.
"Presence", when used in connection with any Environmental Discharge
or Hazardous Materials, means and includes presence, generation, manufacture,
installation, treatment, use, storage, handling, repair, encapsulation,
disposal, transportation, spill, discharge and release.
"Prohibited Transaction" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
"Qualified Investors" shall mean the investors set forth on the List
of Qualified Investors attached hereto as Schedule B, and each investor approved
by the Agent in accordance with Section 3.06 hereof which may include banks,
insurance companies, mortgage bankers, pension funds, investment bankers,
securities dealers, state, county or municipal housing agencies and other
financially responsible private investors.
"Restricted Account" means a demand deposit account established by
the Borrower with the Agent to which there may be deposited from time to time
monies paid by Qualified Investors in connection with a purchase of Mortgage
Loans held as Collateral hereunder by such Qualified Investor, which account
shall be restricted in that the Borrower shall not be entitled to withdraw money
therefrom and the Agent shall be authorized to charge or otherwise make
withdrawals from such account for amounts due in connection with the release of
such Collateral.
"Single Family Residences" means completed one (1) to four (4)
family residential dwellings and property related thereto.
"Stockholder's Equity" means the sum of the following accounts set
forth in the Borrower's balance sheet prepared in accordance with generally
accepted accounting principles consistently applied: (a) the par or stated value
of all outstanding capital stock; (b) capital surplus; and (c) retained
earnings.
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"Subsidiary" means a corporation of which 50% or more of the
outstanding voting stock (except for directors' qualifying shares, if and to the
extent required by law) is owned, at the time of determination, directly or
indirectly, by the Borrower.
"Take-Out Commitment" means an existing written commitment to the
Borrower in form and substance acceptable to Agent from a Qualified Investor
pursuant to which the Qualified Investor agrees to purchase one or more Mortgage
Loans.
"Tangible Stockholder's Equity" means, at any time, Stockholders'
Equity, less the sum of:
(a) Any surplus resulting from any write-up of assets;
(b) Goodwill including any amounts, however designated on a
balance sheet of the Borrower, representing the excess of the purchase price
paid for assets or stock acquired over the value assigned thereto on the books
of the Borrower;
(c) Patents, trademarks, trade names and copyrights;
(d) Any amount at which shares of capital stock of the Borrower
appear as an asset on the Borrower's balance sheet;
(e) Loans and advances to stockholders, directors, officers,
employees or affiliated companies;
(f) Deferred expenses;
(g) Capitalized purchased servicing;
(h) Capitalized excess servicing; and
(i) Assets, the marketability, and/or liquidity value of which are
not readily ascertainable, in the Agent's sole discretion.
"VA" means the Veterans Administration and its successors.
"Wet Closing" means a Wet Mortgage Loan closing where the Agent is
requested to make a Loan one day prior to, on the date of, or after, the closing
of the Wet Mortgage Loan, but prior to the delivery of the documentation related
thereto required to be delivered to the Agent, in all such cases in accordance
with the procedures outlined therefor under this Agreement.
"Wet Loans" means Loans made to originate Wet Mortgage Loans.
"Wet Mortgage Loan" means any Eligible Mortgage Loan that is pledged
to the Agent pursuant to the Wet Closing provisions contained in this Agreement.
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"Wet Mortgage Loan Sublimit" means Thirty Million Dollars
($30,000,000); however, the Wet Mortgage Loan Sublimit shall increase to
Thirty-Nine Million Dollars ($39,000,000) during the first five Business Days
and last five Business Days of each month but may not exceed Thirty Million
Dollars ($30,000,000) for more than ten days in the aggregate.
Section 1.02 Accounting Terms. All accounting terms not specifically
defined herein shall be determined in accordance with GAAP, and all financial
data required to be delivered hereunder shall be prepared in accordance with
GAAP, consistently applied.
Section 1.03 Computation of Time Periods. Except as otherwise
provided in this Agreement, in the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including" and words "to" and "until" each means "to but excluding".
Section 1.04 Rules of Construction. When used in this Agreement:
(1) a reference to time shall be United States Eastern Standard Time; (2) a
reference to an agreement, instrument or document shall include such agreement,
instrument or document as the same may be amended, modified or supplemented from
time to time in accordance with its terms and as permitted by the Loan
Documents; (3) a reference to a day shall be a calendar day unless a Business
Day is specified.
ARTICLE II
LOANS
Section 2.01 The Commitment. Subject to and upon the terms and
conditions set forth in this Agreement and in reliance upon the representations
and warranties set forth herein, each Bank, for itself only, agrees to lend to
the Borrower, from time to time during the period from the Closing Date up to
but not including the Expiration Date (or earlier termination of the Commitment
as provided herein), such sums (collectively, the "Loan" or "Loans") as the
Borrower may request, up to a maximum aggregate principal amount, of the Banks
collectively, of Sixty Million Dollars ($60,000,000) (the "Commitment").
Section 2.02 The Loans. The Loans shall be in the form of Warehouse
Loans and with respect to each of the Banks shall be in amounts not to exceed at
any one time outstanding the amount shown as each Bank's proportionate share of
the Commitment in the table below.
Percentage of
Commitment Total Commitment
----------- ----------------
First Union $35,000,000 58.33%
Comerica Bank $15,000,000 25.00%
National City $10,000,000 16.67%
----------- ----------------
TOTAL $60,000,000 100.00%
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Notwithstanding the foregoing, in no event (a) shall the Borrower be
entitled to any Loan if after giving effect to such Loan (1) the Outstanding
Credit would exceed the lesser of (A) the Commitment or (B) the Borrowing Base,
(2) the Wet Mortgage Loans would exceed the Wet Mortgage Loan Sublimit, (3) the
Non-Conforming Mortgage Loans would exceed the Non-Conforming Mortgage Loans
Sublimit, (4) the Aged Mortgage Loan Inventory would exceed the Aged Mortgage
Loan Inventory Sublimit, or (5) the Eligible Repurchase Mortgage Loans would
exceed the Eligible Repurchase Mortgage Loans Sublimit. Within the foregoing
limits, the Borrower may borrow, repay, and reborrow under this Section 2.02
until the Expiration Date (or earlier termination of the Commitment as provided
herein).
Each Loan made by a Bank shall be made contemporaneously with a
corresponding Loan made by the other Banks, provided that a default by one or
more of the Banks in making their Loans shall not relieve any other Bank of its
obligation to make its Loan. Each Loan shall be apportioned as among the Banks
pro rata in accordance with their respective proportionate share of the
Commitment.
Section 2.03 Advance Rates. The Borrower may request advances and
readvances of the Loan, subject to the following requirements, limitations and
sub-limitations (the "Collateral Value of Eligible Mortgages"):
(a) all Loans made hereunder shall be secured by Eligible
Mortgage Loans;
(b) each Loan secured by Conforming or Jumbo Mortgage Loans shall
not exceed 98% of the least of (i) the Committed Purchase Price (if applicable);
(ii) the aggregate original principal balance of the Mortgage Loans securing
such advance; or (iii) the market value as determined by the Agent from time to
time or at the direction of the Majority Banks; and
(c) with respect to Mortgage-backed Securities, an amount equal to
the least of (i) the sum of the principal balances of the Mortgage Loans from
which such Mortgage-backed Securities were created; (ii) the amount which the
Qualified Investor has committed to pay for such Mortgage-backed Securities
pursuant to a Take-out Commitment; or (iii) the Fair Market Value of such
Mortgage-backed Securities;
(d) each Loan secured by Non-Conforming Mortgage Loans shall not
exceed 95% of the least of (i) the Committed Purchase Price; (ii) the aggregate
original principal balance of the Mortgage Loans securing such advance; or
(iii) the market value as determined by the Agent from time to time or at the
direction of the Majority Banks;
(e) each Loan secured by Aged Mortgage Loan Inventory shall not
exceed 90% of the least of (i) the Committed Purchase Price; (ii) the aggregate
original principal balance of the Mortgage Loans securing such advance; or
(iii) the market value as determined by the Agent from time to time or at the
direction of the Majority Banks; and
(f) each advance of the Loan secured by Eligible Repurchase
Mortgage Loans shall not exceed 70% of the lesser of (i) the original principal
amount; (ii) the current outstanding principal balance; or (iii) the most recent
appraised value of the real estate set forth in the appraisal delivered to the
Collateral Custodian at the time of advance.
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Section 2.04 Notice and Manner of Borrowing. (a) The Borrower may
request a Loan hereunder (in accordance with the procedures more particularly
set forth in Article IV hereof) by delivering to the Agent a completed Borrowing
Base Certificate executed by its chief financial officer (or other officer whose
authorization to so act shall have been provided to the Agent in writing) not
later than 2:30 p.m. on the Business Day of the requested Loan. Each such
Borrowing Base Certificate shall be irrevocable. Unless the Agent elects the
procedure set forth in Section 2.04(b) below, the Agent shall by 3:00 p.m. on
the Business Day of the receipt of such request notify each other Bank of the
proposed Loan. After receipt of a request for a Loan hereunder, each Bank shall
make available to the Agent by 4:00 p.m. on the Business Day of the receipt of
such request, into Account Number 2000000998262, at the Agent's address in funds
immediately available to the Agent, such Bank's ratable share of such Loan. Upon
receipt of such funds by the Agent and upon satisfaction of all of the terms of
this Agreement, including satisfaction of all conditions precedent, and upon
fulfillment of all of the applicable conditions set forth in Article IV hereof,
the Agent will immediately make such funds available to the Collateral Custodian
for the benefit of the Borrower. The Agent shall have no obligation to make
funds available to the Borrower in excess of amounts received by the Agent from
the Banks. If one or more Banks fail to make available to the Agent such Bank(s)
ratable share of any Loan as to which the Agent has advanced the full amount of
the Loan requested by the Borrower, the Borrower shall be obligated to repay to
the Agent for the Agent's account the amount, with interest at the rate
applicable to the Loan, so advanced by the Agent and not advanced by the Bank(s)
in amounts and at the times the Borrower otherwise would be obligated to repay
such Loan. Unless the Agent shall have been notified by a Bank prior to 10:00
a.m. on the date such Bank's ratable share of any Loan is to be made by such
Bank that such Bank does not intend to make such ratable share available to the
Agent, the Agent may (but shall not be obligated to) assume that such Bank has
made such proceeds available to the Agent on such date, and the Agent, in
reliance upon such assumption may (but shall not be obligated to) make available
to the Collateral Custodian on behalf of the Borrower a corresponding amount. If
such corresponding amount is not in fact made available to the Agent by such
Bank on the date the Loan is made, the Agent shall be entitled to recover such
amount on demand from such Bank (or, if such Bank fails to pay such amount
forthwith upon demand, from the Borrower) together with interest thereon at a
rate per annum equal to the Federal Funds rate for each day during the period
between the date that the Agent advances the Loan and the date on which the Bank
makes its ratable share of the Loan available to the Agent.
(b) The Agent, in its sole discretion, may elect not to notify the
Banks immediately of Loan requests made by the Borrower, but may instead advance
its own funds on a timely basis in response to such requests provided that the
Agent has no actual knowledge that a Default or Event of Default exists
hereunder and the Borrower is otherwise in conformance with the terms of this
Agreement, and then provide notification and a request for funds to the Banks
once each week on the same day, such day to be specified from time to time by
the Agent to the other Banks in writing, in which case the Agent shall on the
designated day (or if such day is not a Business Day, the next succeeding
Business Day) not later than 11:00 a.m., notify each other Bank of the aggregate
dollar amount of all Loans advanced by the Agent pursuant to Subsection (a)
above during the immediately preceding week net of proceeds of sale of Mortgage
Loans received during such week. By 2:00 p.m. on the same day, each Bank shall
make available to the Agent, into Account Number 2000000998262, at the Agent's
address, in funds immediately available to the Agent, such Bank's ratable share
of all such net Loans made during
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the previous week. If Loans have been advanced by the Agent without actual
knowledge that a Default or Event of Default exists hereunder and any Bank fails
to make available to the Agent any amounts so required to be paid, the Agent
shall be entitled to recover such amount on demand from such Bank (or, if such
Bank fails to pay such amount forthwith upon demand, from the Borrower) together
with interest thereon at a rate per annum equal to the Federal Funds rate for
each day during the period between the date that the Agent made demand on the
Bank and the date on which the Bank makes its ratable share of the Loan or Loans
available to the Agent. The Agent shall not use the weekly settlement procedure
set forth in this Section 2.04(b) if Agent is not a Bank or, if any advance to
be made pursuant thereto would, if made, cause the Agent (in its capacity as a
Bank) to exceed its proportionate share of the Commitment.
Section 2.05 Payment of Principal. (a) The Borrower shall take all
actions required so that all Collateral Sale Proceeds will be paid directly to
the Collateral Custodian for the benefit of the Agent and the Banks and shall be
deposited into the Clearing Account. Without limiting the generality of the
foregoing, the Borrower shall cause all Qualified Investors, when making payment
for Mortgage Loans, to remit directly to the Collateral Custodian, by way of
wire transfer into the Clearing Account, from such Mortgage Loan proceeds, as
payments of principal hereunder, an amount equal to all amounts advanced by the
Collateral Custodian on behalf of the Agent and the Banks with respect to such
Mortgage Loans. In the event that notwithstanding the foregoing any such
Collateral Sale Proceeds shall be paid to the Borrower, the Borrower shall,
immediately upon such receipt, pay same over directly to the Collateral
Custodian; and while in the Borrower's possession, such amounts shall be held in
trust for the Agent on behalf of the Banks. The Borrower shall also make
payments of principal as required in accordance with Section 2.08 hereof.
Provided that no Default or Event of Default has occurred and is continuing, the
Collateral Custodian shall remit to the Borrower Collateral Sale Proceeds in
excess of the amounts due hereunder.
(b) All Obligations shall be repaid in full upon the Expiration
Date.
Section 2.06 Interest. (a) Generally. The Borrower will pay
interest monthly on the Outstanding Credit, until the Outstanding Credit is
paid in full with interest, at the Base Rate.
(b) Distribution of Interest; Calculation; Etc. Upon actual
receipt by the Agent, interest shall be distributed pro rata to all of the
Banks; provided, that in the case of weekly settlement pursuant to Section
2.04(b), the Agent shall be entitled to and shall retain for its own account, as
to any Bank, all interest accrued prior to receipt by the Agent of such Bank's
ratable share of Loans advanced by the Agent. Any principal amount not paid when
due (at maturity, by acceleration or otherwise) shall bear interest thereafter
(including after judgment is entered against the Borrower), payable on demand,
at the Default Rate. Any change in the interest rate resulting from a change in
the Base Rate shall become effective as of 12:01 a.m. on the date that the Base
Rate changes. Interest shall be calculated on the basis of a year of three
hundred sixty days for the actual number of days elapsed.
Section 2.07 Notes. All Loans made under this Agreement shall be
evidenced by, and repaid with interest in accordance with, promissory notes of
the Borrower, one each payable to the order of each Bank in substantially the
form of Exhibit 2.07 attached hereto, duly
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completed, each such note to be in an original principal amount equal to such
Bank's proportionate share of the Commitment (the "Notes"). The amount of each
Loan and payment of principal amount received by the Agent shall be recorded in
the books and records of the Agent and the appropriate Bank, which books and
records shall, in the absence of manifest error, be conclusive as to the
outstanding balance of and other information related to the Loans. Each Bank
shall be entitled at any time to endorse on a schedule attached to its
respective Note the amount and type of each Loan and information relating
thereto.
Section 2.08 Mandatory Prepayment. (a) To the extent that the
Outstanding Credit exceeds the lesser of the (i) Commitment or (ii) the
Borrowing Base, the Borrower shall immediately either (A) make a prepayment on
the Outstanding Credit in an amount equal to such excess or (B) if no Default or
Event of Default exists hereunder, provide additional Collateral so that the
Outstanding Credit does not exceed the Borrowing Base.
(b) All Collateral Sale Proceeds shall be paid directly to the
Collateral Custodian by the Qualified Investor or other Person making such
payment; and interest shall continue to accrue on the Loan to be repaid with
such proceeds until the Agent actually receives the funds to be applied by the
Agent to reduce the Outstanding Credit.
(c) If for any reason a Wet Mortgage Loan is not closed and funded
on the scheduled date, the Borrower will prepay the Wet Loan made in respect of
such Wet Mortgage Loan on the immediately following Business Day.
Section 2.09 Fees.
(a) The Borrower shall pay a fee to the Agent pursuant to the
terms of the fee letter between the Borrower and the Agent.
(b) The Borrower shall pay to the Agent, for the pro rata benefit
of the Banks, the following fees:
(1) A Non-Conforming Mortgage Loan fee in an amount equal to 0.25%
per annum multiplied by the average monthly amount of the Non-Conforming Loans
pledged as Collateral during the prior calendar month divided by the total
Mortgage Loans pledged during such month multiplied by the average Loans
outstanding during such month, which fee shall be paid according to Section 2.10
hereof;
(2) An Aged Mortgage Loan Inventory fee in an amount equal to
0.75% per annum multiplied by the average monthly amount of the Aged Mortgage
Loan Inventory pledged as Collateral during the prior calendar month divided by
the total Mortgage Loans pledged during such month multiplied by the average
Loans outstanding during such month, which fee shall be paid according to
Section 2.10 hereof; and
(3) An Eligible Repurchase Mortgage Loan fee in an amount equal to
0.75% per annum multiplied by the average monthly amount of Eligible Repurchase
Mortgage Loans pledged as Collateral during the prior calendar month divided by
the total Mortgage Loans pledged during such month multiplied by the average
Loans outstanding during such month, which fee shall be paid according to
Section 2.10 hereof.
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Section 2.10 Method of Payment of Interest and Fees. The Agent shall
submit a bill to the Borrower for interest and fees on or before the fifth
Business Day of each month. The Borrower shall make payment of interest, fees,
and other amounts under this Agreement and under the Notes by means of the
Agent's direct charge to the Operating Account on the seventh Business Day of
each month. The Borrower hereby authorizes the Agent to make such charges from
the Operating Account and in the event there are insufficient funds in the
Operating Account at the time the Agent attempts to make the charge, the Agent
may charge from time to time against any account the Borrower maintains with the
Agent (excluding any account containing Escrow Deposits) the amount so due. The
Borrower, however, shall at all times remain obligated to make such payments
when due. Upon actual receipt of fees due under Section 2.09(b) of this
Agreement, the Agent shall pay an applicable pro rata share of such fees due to
the Banks. Except to the extent provided in this Agreement, whenever any payment
to be made under this Agreement or under the Notes shall be stated to be due on
any day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of the payment of interest.
Section 2.11 Use of Proceeds. The Borrower will use the proceeds of
the Loans only to originate, purchase or repurchase Mortgage Loans which will be
Eligible Mortgage Loans. The Borrower will not, directly or indirectly, use any
part of such proceeds: (a) for the purpose of purchasing or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System, (b) to extend credit to any Person for the purpose of
purchasing or carrying any such margin stock, or (c) to make any Distributions
or investments of any kind.
Section 2.12 Reliance Upon Instructions. Without limiting the
coverage of any other indemnities provided in this Agreement, the Borrower
hereby indemnifies and agrees to hold harmless the Agent and each of the Banks,
and their respective officers, employees and agents from and against any and all
liabilities, damages, losses, costs and expenses, including counsel fees,
howsoever arising out of any actions taken by the Agent or any Bank in reliance
upon telephonic, telecopier or other instructions believed in good faith to have
been given under this Agreement on any of the Borrower's behalf by a Person
designated by the Borrower.
Section 2.13 Reduction and Termination of Commitment. (a) The
Borrower shall have the right at any time and from time to time, upon three (3)
Business Days' prior written notice to Agent, to reduce the Commitment in whole
or in part without penalty or premium, provided that: (i) any such reduction
shall be in an aggregate amount not less than Five Million Dollars ($5,000,000);
and (ii) on the effective date of such reduction the Borrower shall make a
prepayment of the Outstanding Credit in an amount, if any, by which the
Outstanding Credit exceeds the amount of the Commitment as then so reduced,
together with accrued interest on the amount so prepaid. All reductions in the
Commitment shall reduce each Bank's share of the Commitment proportionally.
(b) Any termination or reduction of the Commitment pursuant to
subsection 2.13(a) shall be permanent, and the Commitment cannot thereafter be
restored or increased without the written consent of all Banks.
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ARTICLE III
COLLATERAL
Section 3.01 Security Interest. The Borrower hereby grants to the
Agent for the benefit of the Banks, as one general, continuing collateral
security for the Loan and for any other sums owing from the Borrower to the
Agent and the Banks under the Obligations and the Notes, a security interest in
all Mortgage Loans now or hereafter made and all Mortgage-backed Securities
which have been pledged to the Agent (whether by delivery to the Agent, to the
Collateral Custodian, or to any other third party on the Agent's behalf or
otherwise) or upon which any advance is made by the Banks, and in the Mortgage
Note and Mortgage evidencing said Mortgage Loan, and in all accounts,
instruments, general intangibles, property, rights proceeds and payments
relating thereto, including without limitation the following:
(a) All payments and prepayments of principal, interest, and other
income due or to become due thereon and all proceeds therefrom, and all the
right, title and interest of every nature whatsoever of the Borrower in and to
the same and every part of such property including, without limitation, the
following:
(1) All rights, liens and security interest existing with
respect thereto or as security therefor;
(2) All hazard insurance policies, title insurance policies or
condemnation proceeds with respect thereto and all FHA insurance, VA guarantees,
PMI or any other guarantee of payment and the proceeds thereof;
(3) All prepayment premiums and late payment charges with
respect thereto;
(b) All real estate acquired by the Borrower by deed in lieu of
foreclosure or by foreclosure attributable to any such Mortgage Loan;
(c) All accounts and receivables of any kind that relate to
Eligible Repurchase Mortgage Loans;
(d) All Take-Out Commitments, Mortgage-backed Securities, and/or
pool participation certificates and the proceeds resulting from sales of same by
the Borrower;
(e) All right, title and interest of the Borrower in and to all
files, surveys, certificates, correspondence, appraisals, computer programs,
tapes, discs, cards, accounting records, and other records, information, and
related data of the Borrower;
(f) The proceeds from the sale of any Collateral;
(g) Any other property and proceeds thereof that may, from time to
time hereafter, be subject to the security interests created hereby; and
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(h) All business records, computer tapes, software, microfiche,
etc., necessary to identify and locate the Collateral.
Section 3.02 Security Interest in Mortgage-backed Securities. The
Borrower's ability to convert Mortgage Loans that are within the Collateral to
Mortgage-backed Securities are subject to the following conditions:
(a) Pledged Mortgages that are to be transferred to a pool
custodian in connection with the issuance of Mortgage-backed Securities, shall
be released from the Agent's security interest only against payment to the Agent
of the amount due the Banks in connection with such Pledged Mortgages in
accordance with this Agreement or against the issuance of such Mortgage-backed
Securities and the continuation of the Agent's first priority, perfected
security interest in such Mortgage-backed Securities and the proceeds thereof
until payment due the Banks in respect of said Pledged Mortgages is made to the
Agent.
(b) In the case of Mortgage-backed Securities created from Pledged
Mortgages, the Agent shall have the exclusive right to the possession of the
Mortgage-backed Securities or, if the Mortgage-backed Securities are not to be
issued in certificated form, shall have the right to have the book entries for
the Mortgage-backed Securities issued in the Agent's name or the name or names
of its designees. The Agent shall cause delivery of the Mortgage-backed
Securities to be made to the Qualified Investor or the book entries registered
in the name of the Qualified Investor or the Qualified Investor's designee only
against payment therefor. The Borrower acknowledges that the Agent may enter
into one or more standing arrangements with other financial institutions for the
issuance of Mortgage-backed Securities in book entry form in the name of such
other financial institutions, as agent for the Agent, and the Borrower agrees
upon request of the Agent, to execute and deliver to such other financial
institutions the Borrower's written concurrence in any such standing
arrangements.
Section 3.03 Responsibility for Collateral. All Collateral at any
time delivered to the Collateral Custodian hereunder shall, to the extent
reasonably practical under the circumstances, be held by the Collateral
Custodian pursuant to the terms of the Custodial Agreement.
Section 3.04 Representations and Warranties Concerning Collateral.
The Borrower hereby represents and warrants to the Agent and the Banks and by
submitting each loan request shall be deemed to have represented and warranted
to the Agent and the Banks that as of the date of such loan request and as to
each Pledged Mortgage to which the loan request relates:
(a) Ownership; No Liens; Pledge to the Agent. The Borrower is the
legal and equitable owner of such Pledged Mortgage and all other items of
Collateral related thereto, free and clear of all Liens, except for the Lien
granted under this Agreement. Pledged Mortgages and other items of Collateral
related thereto have been duly authorized by the Borrower thereunder and all
items of Collateral (1) comply, as applicable, with all of the requirements of
this Agreement, including those required for inclusion in the Borrowing Base,
and (2) have been validly pledged or assigned to the Agent, subject to no other
Liens, and the Agent has a first perfected Lien therein within the meaning of
the applicable Uniform Commercial Code. The
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Borrower has the full right and authority to pledge the Collateral pledged by it
hereunder and has not pledged the Collateral, or any part thereof, to any other
Person.
(b) Compliance with Laws; Enforceability; Modification; Required
Documents, Etc. Each such Pledged Mortgage and documents related thereto (1) has
been made in compliance, in all respects, with all requirements of the Real
Estate Settlement Procedures Act, the Equal Credit Opportunity Act, the Federal
Truth-In-Lending Act and all other applicable Laws, (2) is genuine, valid, duly
authorized, properly executed, properly recorded (or duly delivered to the
appropriate recording office for recordation) and enforceable in accordance with
its terms, without defense or offset, (3) has not been modified or amended and
has not had any requirements thereof waived except (i) for minor modifications
in the ordinary course of the Borrower's business which do not in any event
materially adversely affect the value or marketability of the relevant item of
Collateral or (ii) with respect to Mortgage Loans creating a valid first lien,
modifications or waivers which are required by FNMA or FHLMC, in connection with
changes to FNMA's or FHLMC's rules, regulations or guidelines, (4) complies with
the terms of this Agreement, (5) has been fully advanced in the respective face
amounts thereof and (6) is secured by a Mortgage which is a first or second Lien
on the residential real property described therein. With respect to each such
Pledged Mortgages, the Borrower has in its possession all documents and
instruments required to be possessed by the Borrower (x) under this Agreement,
(y) under FNMA's or FHLMC's rules, regulations or guidelines, if applicable, and
(z) under a Take-Out Commitment, if any, other than those documents and
instruments which are in the possession of the Agent.
(c) Defaults. No default, nor any event which would become a
default with notice or lapse of time or both, has occurred and is continuing
under any Pledged Mortgage for a period in excess of thirty days.
(d) Compliance with Agency Requirements or Underwriting Standards.
(1) All Pledged Mortgages that are Conforming Mortgage Loans comply in all
material respects with all applicable requirements for purchase under the FNMA
or FHLMC standard form of selling contract for similar Mortgage Loans and any
supplement thereto then in effect, including, but not limited to, the
representations and warranties made therein, or such Conforming Mortgage Loans
comply in all respects with the requirements of the Qualified Investors to whom
such Mortgage Loans are to be sold. (2) All Pledged Mortgages that are Jumbo
Mortgage Loans comply in all material respects with all applicable requirements
for purchase under the FNMA or FHLMC standard form of selling contract for
similar Mortgage Loans and any supplement thereto then in effect, including, but
not limited to, the representations and warranties made therein (excluding
compliance due to the principal amount thereof), or such Jumbo Mortgage Loans
comply in all respects with the requirements of the Qualified Investors to whom
such Mortgage Loans are to be sold. (3) All Pledged Mortgages that are
Non-Conforming Mortgage Loans are written in accordance with guidelines
stipulated in Schedule A.
(e) Insurance Relating to Pledged Mortgages. All fire and casualty
policies covering the premises encumbered by each Mortgage included in the
Pledged Mortgages (1) name the Borrower as the insured under a standard
mortgagee clause not less favorable to the Borrower than the applicable standard
mortgagee endorsement, (2) are in full force and effect, and (3) afford
insurance against fire and such other hazards as are usually insured against in
the
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broad form of extended coverage insurance from time to time available. All
flood, title and other insurance policies (including required private mortgage
insurance) (i) name the Borrower as an additional insured under a standard
mortgagee clause not less favorable to the Borrower than the applicable standard
mortgagee endorsement, or in the case of title insurance, the insured mortgagee,
(ii) are in full force and effect, and (iii) afford insurance against the
hazards and risks required to be insured against by any Agency or prudent
underwriting practices. The Borrower has complied with all requirements of the
Agencies or any Qualified Investor for obtaining insurance with respect to such
Pledged Mortgage.
(f) Escrow Deposits. All Escrow Deposits are held by the Borrower
in accordance with applicable Laws and any agreements relating to same and have
been and will be applied to the obligations for which they were deposited in
accordance with any agreements relating to same.
Section 3.05 Release of Security Interest. (a) The Collateral
Custodian may, with the consent of the Agent, within a reasonable time of the
receipt of a request therefor from the Borrower, release any Collateral
specified in such request from the Lien granted hereby and thereupon deliver the
same to the Borrower, provided, however, that (a) no Default or Event of Default
shall have occurred and be continuing or would result from such release, and
(b) after giving effect to such release and delivery, the Borrowing Base of the
remaining Collateral shall be at least equal to the Outstanding Credit.
(b) Upon receipt by the Collateral Custodian of payment in an
amount equal to all amounts advanced by the Banks with respect to a Mortgage
Loan or Mortgage Pool, the Lien in such Mortgage Loan or the Mortgage-backed
Security issued with respect to such Mortgage Pool and in any proceeds thereof,
shall, except in the event of the existence of a Default or Event of Default or
if a Default or Event of Default would result from such release, be released
automatically.
Section 3.06 Covenants and Agreements Concerning Collateral.
The Borrower covenants and agrees as follows:
(a) Defense of Interests. It will defend, at its sole expense, the
right, title and interest of the Agent and the Banks in and to the Pledged
Mortgages, the Pledged Securities and all other items of Collateral against the
claims and demands of all Persons.
(b) Modification; Etc. Except as provided in Section 3.03(b), it
shall not amend, modify, or waive any of the terms and conditions of, or settle
or compromise any claim in respect of, any Pledged Mortgages, Pledged Securities
or other Collateral, or any rights related to any of the foregoing.
(c) Sale or Encumbrance. It shall not sell, option, assign,
transfer or otherwise alienate any Collateral, other than in the ordinary course
of its business and in accordance with the terms and provisions of this
Agreement, or permit any Collateral or any interest therein to be subject to a
Lien, except the Lien granted under this Agreement.
(d) Performance under Servicing Contracts; Escrow Deposits. It
shall service or cause to be serviced all Pledged Mortgages and all Mortgage
Loans backing Pledged
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Securities in accordance with the standard requirements of the issuers of
Take-Out Commitments covering the same. It shall hold all Escrow Deposits in
accordance with all applicable Laws and all agreements relating to such Escrow
Deposits, without commingling the same with non-escrow funds, and shall hold and
apply the same for the purposes for which such Escrow Deposits were collected in
accordance with all applicable Laws and agreements.
(e) Failure to Qualify for Inclusion in Borrowing Base and Related
Matters. It shall notify the Agent of (1) any default under any Pledged Mortgage
which continues beyond sixty days in each monthly Collateral report, (2) the
failure of any item of Collateral which is required by the terms hereof to be
covered by a Take-Out Commitment to be so covered, (3) the failure of any item
of Collateral to satisfy any requirements of this Agreement for inclusion in the
Borrowing Base, and (4) any other event or occurrence which could cause a
Material Adverse Change in the Collateral.
(f) Further Assurances. From time to time, at the expense of the
Borrower (including the payment of all filing fees whether the items are filed
by the Borrower or by the Agent), the Borrower will promptly execute and deliver
all further instruments and documents, and take all further actions, that may be
necessary or desirable, or that the Agent or Collateral Custodian may request,
in order to preserve, perfect and protect any Lien granted or purported to be
granted hereby or to enable the Agent and the Banks to exercise and enforce
their rights and remedies hereunder with respect to any Collateral. Without
limiting the generality of the foregoing, the Borrower will execute and file
such financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as the Agent or any
Bank may request, in order to perfect and preserve the Lien granted or purported
to be granted to the Agent for the benefit of the Banks hereby.
(g) Inspection. The Agent and/or any Bank, or a representative
thereof, shall have the right at any reasonable time from time to time to enter
the Borrower's premises to inspect the Collateral, documents and agreements
related thereto and the records relating to the Collateral (including field or
collateral audits). The Agent and each of the Banks shall have the right to make
abstracts or photocopies from the Borrower's books and records pertaining to the
Collateral and the cost and expense of such abstracts and photocopy for the
Agent or the Banks shall be borne by the Borrower.
Section 3.07 List of Qualified Investors. When requested by the
Agent, the Borrower shall submit to the Agent for its approval, a List of
Qualified Investors to which the Borrower may direct the delivery of Mortgage
Loans in accordance with the terms of this Agreement, from time to time. The
Agent shall have the right, in its sole discretion, to approve or disapprove of
any Qualified Investors so listed by the Borrower at any time upon notice to the
Borrower (which notice may be telephonic) and the initial acceptance of a
Qualified Investor by the Agent shall not prevent the subsequent rejection of
any such Qualified Investor by the Agent. The Borrower may add or delete
Qualified Investors to or from, as the case may be, the List of Qualified
Investors by submitting an updated List of Qualified Investors to the Agent,
which updated List of Qualified Investors shall be subject in all respects to
the approval of the Agent. The Agent shall, from time to time, distribute the
List of Qualified Investors to the Banks.
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Section 3.08 Uniform Commercial Code Financing Statements. The Agent
is hereby authorized to file in the name of the Borrower, without the need for
the Borrower's signature thereto, such Uniform Commercial Code financing
statements, amendments thereto and continuations thereof which the Agent at any
time determines is necessary to perfect or better assure the Lien and other
benefits intended to be afforded hereby. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
Section 3.09 Collection Rights. Unless a Default or Event of Default
shall have occurred and be continuing, and except with respect to Collateral
Sale Proceeds which shall be paid to the Collateral Custodian for the benefit of
the Banks directly by a Qualified Investor or other Person purchasing a Mortgage
Loan or Mortgage Pool, the Borrower shall be entitled to receive and collect
directly all principal and interest payable to the Borrower in respect of the
Collateral and to exercise all voting or consensual powers in respect of the
Collateral in a manner not inconsistent with the terms of this Agreement. Upon
the occurrence and during the continuance of a Default or an Event of Default,
the Agent shall be entitled to receive and collect all sums payable to the
Borrower in respect of the Collateral, and in such case (a) Agent may, in its
name or in the name of the Borrower or otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable on account of or
in exchange for any of the Collateral, but shall be under no obligation to do
so, (b) the Borrower shall forthwith pay to the Agent at its principal office
all amounts thereafter received by the Borrower upon or in respect of any of the
Collateral, advising the Agent as to the source of such funds, and (c) all
amounts so received and collected by the Agent shall be held by the Agent as
part of the Collateral.
Section 3.10 Attorney-in-Fact. The Agent or a duly appointed agent
or representative of the Agent is hereby appointed the agent and
attorney-in-fact of the Borrower for the purpose of carrying out the provisions
of this Agreement, taking any action and executing any instruments which the
Agent may deem necessary or advisable to accomplish the purposes hereof and to
obtain, on behalf of the Banks, the benefits of this Agreement, the other Loan
Documents, the Collateral and the security intended to be provided to the Banks
hereby and thereby, which agency and appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, the Agent shall have the right and power in the place and stead of
the Borrower, and in the name of the Borrower or otherwise (from time to time
and without prior notice to or consent from the Borrower, and without releasing
or in any manner affecting the Borrower's Obligations hereunder): (a) to
receive, endorse and collect all checks, drafts or chattel paper made payable to
the order of the Borrower (provided that all such endorsements recite that they
are made without recourse) representing any payment on account of the principal,
interest or other amount on any of the Pledged Mortgages, Pledged Securities or
other items of Collateral, to give full discharge for the same and to complete
any endorsements or assignments made in blank or which are updated or otherwise
incomplete or to execute new endorsements (provided that all such endorsements
recite that they are made without recourse) or assignments to any Persons,
(b) to ask, demand, collect, sue for, recover, receive and give, acquittances
and receipts for moneys due and to become due under or in respect of any of the
Collateral, (c) to file any claims or take any action or institute any
proceedings which the Agent may deem necessary or desirable for the collection
or completion of, or perfection of the Agent's interest in any of the Collateral
or otherwise to enforce the rights of the Borrower or the Agent with respect to
any of the Collateral, this Agreement or the other
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Loan Documents, including, without limitation, the endorsement of any Mortgage
Note, and the creation, execution and recording of any Assignment of Mortgage
for any Pledged Mortgage and (d) if the Borrower fails to perform any obligation
under this Agreement or the other Loan Documents, or cause performance of such
obligation.
Section 3.11 Borrower Remains Liable. Notwithstanding anything
herein to the contrary: (a) the Borrower shall remain liable under the contracts
and agreements included in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed; (b) the exercise by the Agent and/or any
Bank of any of the rights hereunder shall not release the Borrower from any of
its duties or obligations under the contracts and agreements included in the
Collateral; and (c) the Agent shall not have any obligation or liability under
the contracts and agreements included in the Collateral by reason of this
Agreement, nor shall the Agent be obligated to perform any of the obligations or
duties of the Borrower thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01 Conditions Precedent to Initial Loan. The obligation of
each Bank to continue to allow its current Loans to remain outstanding or to
make the initial disbursement of its portion of a new Loan, as applicable, is
subject to the condition precedent that the Agent shall have received on or
before the Closing Date each of the following documents, in form and substance
satisfactory to the Agent and its counsel, as applicable, and each of the
following requirements shall have been fulfilled:
(a) Amended and Restated Mortgage Warehousing Loan and Security
Agreement. This Agreement duly executed by the Borrower.
(b) Evidence of Due Organization of and all Corporate Actions by
the Borrower. A certificate of the Secretary or Assistant Secretary of each of
the Borrower, dated the Closing Date, attesting to the certificate of
incorporation, by-laws or operating agreement of the Borrower and all amendments
thereto, and to all corporate actions taken by the Borrower, including, without
limitation, resolutions of its board of directors, authorizing the execution,
delivery and performance of the Loan Documents, and each other document to be
delivered by the Borrower pursuant to the Loan Documents;
(c) Incumbency and Signature Certificate of Borrower. A
certificate of the Secretary, Assistant Secretary or Managing Member of the
Borrower, dated the Closing Date, certifying the names and true signatures of
the officers of the Borrower authorized to sign the Loan Documents, and the
other documents to be delivered by the Borrower under the Loan Documents
including, without limitation, each loan request;
(d) Good Standing Certificates for the Borrower. A certificate,
dated reasonably near the Closing Date, from the Secretary of State (or other
appropriate official) of the Borrower's state of incorporation or formation
certifying as to the due incorporation and
good standing of the Borrower and
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certificates, dated within one month of the Closing Date, from the Secretary of
State (or other appropriate official) of each other jurisdiction where the
Borrower is required to be qualified to conduct business or where such
qualification is necessary to enforce any Mortgage Loan, certifying that the
Borrower is duly qualified to do such business and is in good standing in such
state;
(e) Notes. The Notes duly executed by the Borrower;
(f) Financing Statements, Etc. (1) To the extent requested by the
Agent, duly executed financing statements (UCC-1) to be filed under the Uniform
Commercial Code of all jurisdictions necessary or, in the opinion of the Agent,
desirable to perfect the Liens created by this Agreement; duly executed copies
of the termination statements (UCC-3) to be filed under the Uniform Commercial
Code of all jurisdictions necessary, or in the opinion of the Agent, desirable
to terminate any Liens in favor of any party other than the Agent; and
(2) Uniform Commercial Code searches identifying all of the financing statements
on file with respect to the Borrower;
(g) FNMA Tri-Party Agreement. An executed Tri-party agreement
with FNMA;
(h) Material Adverse Change. As of the Closing Date no Material
Adverse Change has occurred since the date of the financial statements referred
to in Section 5.05 hereof.
(i) Fees. All fees, costs and expenses payable to the Agent and
its legal counsel required to be paid at or prior to the closing of the
transactions contemplated hereby, shall have been paid in full on the Closing
Date.
(j) Opinion of Counsel for the Borrower. A favorable opinion of
counsel for the Borrower, acceptable to the Agent dated the Closing Date, in
substantially the form of Exhibit 4.01(9) and as to such other matters as the
Agent or the Banks may reasonably request;
(k) Guaranty. The Guaranty, in the form attached hereto as
Exhibit 4.01(k), duly executed by Michael Strauss;
(l) Certificate. The following statements shall be true and the
Agent shall have received a certificate signed by the President of the Borrower
dated the Closing Date stating that:
(1) The representations and warranties contained in this
Agreement and in each of the other Loan Documents are correct on and as of the
Closing Date as though made on and as of such date; and
(2) No Default or Event of Default has occurred and is
continuing;
(m) Financial Information. The Borrower shall have delivered to
the Agent and the Banks financial statements for the period ending 9/30/99 along
with a compliance certificate setting forth the Tangible Stockholder's Equity
and Leverage Ratio (and the related calculations thereof calculating as of such
date executed by the CFO of the Borrower; and
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(n) Additional Documentation. Such other approvals, opinions or
documents as the Agent may reasonably request.
Section 4.02 Conditions Precedent to All Loans. The obligations of
the Banks to make each Loan (including the initial Loan), shall be subject to
the further conditions precedent that on the date of providing each such Loan
the following statements shall be true:
(a) All the representations and warranties contained in this
Agreement and in each of the other Loan Documents are correct on and as of the
date of providing such Loan as though made on and as of such date;
(b) No Default or Event of Default has occurred and is continuing,
or could result from providing such Loan; and
(c) There has been no Material Adverse Change of any kind.
Section 4.03 Loan Requests for Loans to Fund Mortgage Loans. In
connection with each request for a Loan to fund a Mortgage Loan, the Borrower
shall deliver to the Collateral Custodian a signed loan request in form and
content satisfactory to the Collateral Custodian. For each Loan requested, the
Collateral Custodian shall receive the written loan request not later than 10:00
a.m. on the Business Day of the requested Loan. Unless the Borrower has
previously funded or purchased the Mortgage Loan to be pledged with the
Borrower's own funds, not later than 10:00 a.m. on the Business Day of such
requested Loan, the Borrower shall deliver to the Collateral Custodian all of
the Collateral Documents as listed on Exhibit 4.03 attached hereto (the
"Description of Collateral Documents"), including, without limitation, each of
the following:
(a) written wire instructions advising the Collateral Custodian to
wire Loan proceeds from the Borrower's account to the Closing Agent reflecting
the intended amount and date of disbursement of the proceeds of the Mortgage
Loan and giving other wiring instructions as needed by the Collateral Custodian;
(b) the original of the Mortgage Note duly executed at settlement,
and duly endorsed by the Borrower in blank, without recourse, and containing any
necessary intervening endorsements on a Mortgage purchased by the Borrower;
(c) a copy of the Mortgage duly executed at settlement and in
recordable form, certified in writing by the settlement agent as being a true
and accurate copy of the original Mortgage;
(d) Original assignment of the Mortgage, in recordable form and
executed by the Borrower in blank, and with respect to a Mortgage purchased by
the Borrower, the original recorded intervening assignment or a copy thereof
certified in writing by the Borrower as being a true and accurate copy of the
original intervening assignment delivered for recording, and/or a Mortgage
Electronic Reporting Systems ("MERS") assignment of the Mortgage securing the
Mortgage Note by the Borrower in the format as may be prescribed by MERS from
time to time, executed in recordable form in blank. If appropriate filing and
recording information regarding such Mortgage, including the MERS Identification
Number ("MIN"), has not been inserted into
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the assignment and the Agent has determined that such information is necessary
to perfect its Security Interest in such Mortgage, the Borrower shall promptly
provide such information to the Bank when available and hereby authorizes the
Collateral Custodian to insert such information as appropriate (whether or not
such information is supplied to the Collateral Custodian by the Borrower);
however, the Collateral Custodian shall not have any obligation to insert such
information, and may require the missing information to be completed by the
Borrower.
(e) With respect to a Mortgage Loan to be pledged by the Borrower
which was funded by the Borrower with the Borrower's own funds or purchased by
the Borrower, the Borrower will deliver the documents required by this
Section 4.03 at or prior to the time of making its loan request.
Upon receipt thereof, the Collateral Custodian shall review all documents and
instruments to determine that they are satisfactory.
Section 4.04 Disbursing Loans. Upon satisfaction of all conditions
for the making of a Loan under this Agreement and subject to the limitations
contained herein, on the date of the requested Loan, the Collateral Custodian
shall, subject to the next sentence, wire transfer from the Advance Account to
the Closing Agent account designated in the applicable Borrower's loan request
(or with respect to a requested Loan where the Pledged Mortgage was previously
funded by the applicable Borrower with the Borrower's own funds, to the
Operating Account) the requested Loan amount or portion thereof representing the
Collateral Value of Eligible Mortgages for the applicable Mortgage Loan. To the
extent that the amount of funds to be provided by the Banks are insufficient to
close and fund the applicable Mortgage Loan, the Collateral Custodian shall
transfer from the Operating Account to the Advance Account sufficient additional
funds, and the Collateral Custodian will not initiate a wire transfer of funds
to the applicable Closing Agent until sufficient additional funds are on
deposit. To the extent that the amount of funds to be provided by the Banks
exceeds the amount needed to close and fund the applicable Mortgage Loan, and to
the extent that the amount of funds to be provided by the Banks is due to excess
Collateral, the Collateral Custodian shall transfer the excess amount to the
Operating Account for use by the Borrower in accordance with this Agreement.
Upon the Agent's deposit of the Loan proceeds into the Restricted Account, the
applicable Loan shall be deemed made.
Section 4.05 Wet Mortgage Loan Closings. (a) The Borrower may
deliver Wet Mortgage Loans in pledge under this Agreement for inclusion in the
Borrowing Base and as Collateral for a requested Loan up to the Wet Mortgage
Loan Sublimit without the prior delivery of all original Collateral Documents
otherwise required by this Agreement. In connection with the pledge of any such
Wet Mortgage Loans, the Borrower shall deliver to the Collateral Custodian a
written loan request which specifies that the requested Loan shall fund a Wet
Mortgage Loan. In order for any Wet Mortgage Loan to be included in the
Borrowing Base, and for the Collateral Custodian to consider disbursing the Loan
proceeds related thereto, the Collateral Custodian must receive and approve the
applicable loan request not later than 12:00 noon on the Business Day of the
applicable Mortgage Loan Closing Date. Upon such timely receipt of the required
loan request, the Collateral Custodian shall, provided that the Collateral
Custodian determines that the Collateral Documents for such Wet Mortgage Loan
are satisfactory, include any such Wet Mortgage Loan in the Borrowing Base on
the applicable
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Mortgage Loan Closing Date notwithstanding that such Wet Mortgage
Loan may not yet have been closed and funded for purposes of permitting the
requested Wet Loan to be made in respect thereof. If a Wet Mortgage Loan shall
not be closed and funded by the Mortgage Loan Closing Date specified, or shall
be closed but subsequently rescinded pursuant to the Truth in Lending Act, the
Borrower shall immediately notify the Collateral Custodian and the Closing Agent
to such effect and such Wet Mortgage Loan shall cease to be included in the
Borrowing Base.
(b) In connection with each Wet Closing, the Borrower agrees that
it shall deliver all Collateral Documents relating to a Wet Mortgage Loan to the
Collateral Custodian not later than ten days after the date of the Wet Closing,
and in the event that the Collateral Custodian shall not have received all such
Collateral Documents complying in all respects with the requirements of this
Agreement within such ten day period, such Wet Mortgage Loan shall cease to be
included in the Borrowing Base and the Borrower shall immediately repay to the
Collateral Custodian all amounts previously advanced in connection with such Wet
Mortgage Loan, unless the Collateral Custodian with the consent of the Agent
extend the date for delivery of such Collateral Documents.
(c) Upon satisfaction of all conditions for the making of a Wet
Loan under this Agreement and subject to the limitations contained herein, Wet
Loans shall be funded in the following manner as directed by the Borrower in
each loan request:
(1) Wire Transfers: On the date of the requested Wet Loan, the
Collateral Custodian shall, subject to the next sentence, wire transfer from the
Advance Account to the Closing Agent account designated in the applicable loan
request the requested Loan amount or portion thereof representing the Collateral
Value of Eligible Mortgages for the applicable Wet Mortgage Loan. To the extent
that the amount of funds to be provided by the Banks are insufficient to close
and find the applicable Wet Mortgage Loan, the Collateral Custodian shall
transfer from the Operating Account to the Advance Account sufficient additional
funds, and the Collateral Custodian will not initiate a wire transfer of funds
to the applicable Closing Agent until sufficient additional funds are on
deposit. Upon the Collateral Custodian's deposit of the Loan proceeds into the
Advance Account, the applicable Wet Loan shall be deemed made, provided,
however, that until the applicable Wet Mortgage Loan is closed and funded, the
Banks shall have a Lien on the Wet Loan proceeds as security for all Obligations
owed to the Banks and the Closing Agent shall hold such Wet Loan proceeds as
agent for and on behalf of the Banks.
(2) Upon closing each Wet Mortgage Loan, the Closing Agent
shall, unless advised by the Collateral Custodian to the contrary (which advice
may be by telephone), deliver the applicable Collateral Documents to the
Borrower for endorsement of the Note and transmittal to the Collateral Custodian
within the ten day time period provided herein unless extended by the Agent or
the Collateral Custodian with the Agent's consent, provided that at no time
shall the aggregate outstanding principal balance of the Mortgage Loans for
which the ten day time period provided herein has been extended exceed One
Million Dollars ($1,000,000) in the aggregate. While the Collateral Documents
are in the Borrower's possession, they shall be held in trust for the benefit of
the Banks and the Borrower shall have no authority to transfer same to any other
Person other than the Collateral Custodian, or, if required by the Collateral
Custodian, at Collateral Custodian's direction.
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(3) The Borrower will not request the delivery of any wire
transfer of Wet Loan proceeds to a Closing Agent who is not approved or has not
delivered an original Closing Agent agreement in accordance with this Agreement.
The Agent shall require the Borrower to obtain at the Borrower's expense "stand
behind," indemnity or similar agreements, or "insured closing letters," for all
Closing Agents in form and substance acceptable to the Agent from title
insurance companies acceptable to the Agent providing assurance to the
Collateral Custodian that funds delivered to a Closing Agent will be applied
only for the purposes intended in accordance with this Agreement and providing
such other assurances as the Agent shall require. The delivery by the Borrower
of any such agreement or letter from an approved title insurance company shall
not affect the rights that the Agent or any other Person would otherwise have by
reason of the breach of any Closing Agent Agreement or otherwise with respect to
any Closing Agent.
Section 4.06 Qualified Investor Requirements; Other Approvals. For
all Loans, the Borrower shall have possession of all other documents required by
the relevant Qualified Investor to be held by the Borrower, and the Agent shall
have received such other approvals, opinions and documents as the Agent may
request.
Section 4.07 Temporary Release of Collateral Documents; Delivery
of Collateral Documents.
(a) Return to the Borrower. The Borrower may from time to time
request in writing that the Collateral Custodian return Mortgage Notes to the
Borrower on a temporary basis for the purpose of correction or completion and
the Collateral Custodian may, provided that there is no Default or Event of
Default hereunder, unless directed not to do so by the Agent, deliver the
requested Mortgage Notes to the Borrower. The written request to release shall
be in the form of a trust receipt in form and content satisfactory to the Agent
and attached hereto as Exhibit 4.07. Promptly upon completion of such correction
or completion, the Borrower shall return such Mortgage Notes to the Collateral
Custodian, but in no case later than ten days from the date same were shipped to
the Borrower. The Collateral Custodian shall not release to the Borrower at any
given time Mortgage Notes related to Pledged Mortgages with an outstanding
principal balance in excess of One Million Dollars ($1,000,000) in the
aggregate. If the Borrower fails to return any Collateral Documents within ten
days of the delivery thereof to the Borrower or if such Collateral Documents are
not corrected or completed so as to comply with the terms of this Agreement, the
Pledged Mortgage to which such Collateral Documents relate shall not be included
in the Borrowing Base.
(b) Delivery to a Qualified Investor. Provided that there is no
Default hereunder, the Borrower may from time to time make requests by written
notice to the Collateral Custodian to deliver Collateral Documents relating to a
Mortgage Loan or Pledged Securities to a Qualified Investor who has issued a
Take-Out Commitment to the Borrower, for review prior to purchase. Provided that
there is no Default or Event of Default hereunder (or the Agent has instructed
the Collateral Custodian not to), the Collateral Custodian shall deliver the
requested Collateral Documents relating to such Mortgage Loan or Pledged
Securities to the Qualified Investor designated by the Borrower, along with a
bailee letter in form and content satisfactory to the Agent. If any Qualified
Investor fails to return any Collateral Documents or Pledged Securities to the
Collateral Custodian within twenty-one days of the delivery thereof or on such
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earlier date requested by the Collateral Custodian or the Agent, the Mortgage
Loan to which such Collateral Documents related or Collateral Value of
Mortgage-backed Securities shall not be included in the Borrowing Base.
(c) Delivery to an Approved Custodian. Provided that there is no
Default hereunder, the Borrower may from time to time make requests by written
notice to the Collateral Custodian to deliver Collateral Documents relating to a
Mortgage Loan or Pledged Securities to an Approved Custodian for purposes of
examination or delivery in connection with the issuance of Mortgage-backed
Securities. Provided that there is no Default or Event of Default hereunder (or
the Agent has instructed the Collateral Custodian not to), the Collateral
Custodian shall deliver the requested Collateral Documents relating to such
Mortgage Loan or Pledged Securities to the Approved Custodian designated by the
Borrower, along with a bailee letter in form and content satisfactory to the
Agent. If any Approved Custodian fails to return any Collateral Documents or
Pledged Securities to the Collateral Custodian within twenty-one days of the
delivery thereof or on such earlier date requested by the Collateral Custodian
or the Agent, the Mortgage Loan to which such Collateral Documents related or
Collateral Value of Mortgage-backed Securities shall not be included in the
Borrowing Base.
Section 4.08 Deemed Representation. Each request for a Loan and
acceptance by the Borrower of any Loan shall constitute a representation and
warranty that the statements contained in Section 4.02 are true and correct both
on the date of such notice and as of the date of the providing of such Loan.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants that:
Section 5.01 Formation, Good Standing and Due Qualification. It is
duly formed, validly existing and in good standing under the laws of the state
of its formation, has the power and authority to own its assets and to transact
the business in which it is now engaged or proposed to be engaged, and is duly
qualified and in good standing under the laws of each other jurisdiction in
which such qualification is required or where such qualification is necessary to
permit it to enforce any Mortgage Loan.
Section 5.02 Power and Authority; No Conflicts. The execution,
delivery and performance by the Borrower of the Loan Documents to which it is a
party has been duly authorized and does not and will not: (1) contravene its
articles of incorporation, by-laws, operating agreement or other formation
documents; (2) violate any provision of, or require any filing (other than the
filing of the financing statements contemplated by this Agreement),
registration, consent or approval under any Law, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Borrower; (3) result in a breach of or constitute a default
under or require any consent under any indenture or loan or credit agreement or
any other agreement, lease or instrument to which the Borrower is a party or by
which it or its properties may be bound or affected; (4) result in, or require,
the creation or imposition of any Lien (other than as created under this
Agreement) upon or with respect to any
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of the properties now owned or hereafter acquired by the Borrower; or (5) cause
the Borrower to be in default under any such Law, order, writ, judgment,
injunction, decree, determination or award or any such indenture, agreement,
lease or instrument.
Section 5.03 Legally Enforceable Agreements. Each Loan Document to
which the Borrower is a party is a legal, valid and binding obligation of the
Borrower, enforceable against it in accordance with its terms, except to the
extent that such enforcement may be limited by applicable bankruptcy, insolvency
and other similar laws affecting creditors' rights generally.
Section 5.04 Litigation. There are no actions, suits or proceedings
pending or threatened, against or affecting the Borrower before any court,
governmental agency or arbitrator, which could, in any one case or in the
aggregate, result in (1) a Material Adverse Change or (2) liability to the
Borrower in excess of Two Hundred Fifty Thousand Dollars ($250,000).
Section 5.05 Financial Statements. All financial information
furnished to the Banks concerning the operations of the Borrower on a
consolidated basis, the balance sheets and related statements of income and
retained earnings of the Borrower, as at any date, and for any period ending on
or prior to 10/31/99, fairly present the financial condition of the Borrower at
such date and the results of the Borrower's operations for the periods covered
by such statements. There are no liabilities of the Borrower, fixed or
contingent, which are material but are not reflected on Schedule 5.05 hereto. No
information, exhibit, or report furnished by the Borrower to the Banks in
connection with this Agreement contain any material misstatement of fact or omit
to state a material fact or any fact necessary to make the statements contained
therein not materially misleading.
Section 5.06 Ownership and Liens. The Borrower has title to, or
valid leasehold interests in, all of its properties and assets, real and
personal, including the properties and assets and leasehold interests reflected
in the financial statements referred to in Section 5.05 (other than any
properties or assets disposed of in the ordinary course of business), and none
of the properties and assets owned by it and none of its leasehold interests is
subject to any Lien, except as may be permitted under this Agreement.
Section 5.07 Taxes. The Borrower has filed all tax returns (federal,
state and local) required to be filed and has paid all taxes, assessments and
governmental charges and levies reported thereon to be due, including interest
and penalties, except to the extent they are the subject of a Good Faith
Contest.
Section 5.08 ERISA. The Borrower is in compliance in all material
respects with all applicable provisions of ERISA. Neither a Reportable Event nor
a Prohibited Transaction has occurred with respect to any Plan; no notice of
intent to terminate a Plan has been filed nor has any Plan been terminated; no
circumstance exists which constitutes grounds under Section 4042 of ERISA
entitling the PBGC to institute proceedings to terminate, or appoint a trustee
to administer, a Plan, nor has the PBGC instituted any such proceedings; the
Borrower nor any ERISA Affiliate of the Borrower has not completely or partially
withdrawn under Sections 4201 or 4204 of ERISA from a Multiemployer Plan; the
Borrower has met its
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minimum funding requirements under ERISA with respect to all of its Plans and
there are no unfunded vested liabilities; and the Borrower nor any ERISA
Affiliate has incurred any liability to the PBGC under ERISA.
Section 5.09 Subsidiaries. Except as set forth on Schedule 5.09
hereof, the Borrower does not have any Subsidiaries. The ownership of all of the
issued and outstanding shares of stock in the Borrower is held by the Persons
listed on Schedule 5.09 attached hereto, and in the amounts and percentages
listed therein.
Section 5.10 Operation of Business; Prior or Existing Restrictions,
Etc. The Borrower possesses all licenses, qualifications (including licenses and
qualifications required in each state where each Single Family Residence
securing each Mortgage Loan acquired or originated by the Borrower is located),
Agency approvals, permits, franchises, patents, copyrights, trademarks and trade
names, or rights thereto, to conduct the Borrower's business substantially as
now conducted and as presently proposed to be conducted and the Borrower is not
in violation of any valid rights of others with respect to any of the foregoing.
The Borrower has disclosed all written reports, actions and/or sanctions of any
nature threatened, and all reviews, investigations, examinations, audits,
actions and/or sanctions that have been undertaken and/or imposed as of the date
of this Agreement and of which the Borrower has knowledge, by any federal or
state agency or instrumentality (including any Agency) with respect to either
the lending or related financial operations of the Borrower. The Borrower is
operating under any type of agreement or order (including, without limitation, a
supervisory agreement, memorandum of understanding, cease and desist order,
capital directive, supervisory directive, or consent decree) with any state or
federal banking department or government banking or other agency or
instrumentality (including any Agency), and the Borrower is in compliance with
any and all capital, leverage or other financial standards and requirements
imposed by any applicable regulatory authority, agency or instrumentality,
including any Agency.
Section 5.11 No Default on Outstanding Judgments or Orders. The
Borrower has satisfied all judgments and the Borrower is not in default with
respect to any judgment, writ, injunction, decree, rule or regulation of any
court, arbitrator or federal, state, municipal or other Governmental Authority,
commission, board, bureau, agency or instrumentality, domestic or foreign.
Section 5.12 No Defaults on Other Agreements. The Borrower is not a
party to any indenture, loan or credit agreement or any lease or other agreement
or instrument or subject to any certificate of incorporation or corporate
restriction which could result in a Material Adverse Change. The Borrower is not
in default in any respect in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any agreement or
instrument which could result in a Material Adverse Change.
Section 5.13 Labor Disputes and Acts of God. Neither the business
nor the properties of the Borrower has been and continues to be affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hurricane, hail, earthquake, embargo, act of God or of the public enemy
or other casualty (whether or not covered by insurance), which could result in a
Material Adverse Change.
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Section 5.14 Partnerships. The Borrower is not a partner in any
partnership or any joint venture except as set forth in Schedule 5.14 hereto.
Section 5.15 Environmental Protection. The Borrower has obtained all
permits, licenses and other authorizations which are required under all
Environmental Laws, except to the extent failure to have any such permit,
license or authorization could not result in a Material Adverse Change. The
Borrower is in compliance with all Environmental Laws and the terms and
conditions of any required permits, licenses and authorizations, and is also in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
those Laws or contained in any plan, order, decree, judgment, injunction, notice
or demand letter issued, entered, promulgated or approved thereunder, except to
the extent failure to comply could not result in a Material Adverse Change.
The Collateral contains no Hazardous Materials that, under any
Environmental Law currently in effect, (1) would impose liability on the
Borrower that could result in a Material Adverse Change, or (2) could result in
the imposition of a Lien on the Collateral or any portion thereof or any other
assets of the Borrower, in each case if not properly handled in accordance with
applicable Law.
Section 5.16 Management of Borrower. As of the Closing Date,
Schedule 5.16 sets forth the key members of the management of the Borrower.
Section 5.17 Compliance with Laws. The Borrower and the
operation of its business are in compliance with all applicable Laws.
Section 5.18 Solvency. To the best of the Borrower's knowledge, the
Borrower is, and after receipt and application of advances hereunder will be,
solvent such that: (i) the fair value of its assets (including without
limitation the fair salable value of the goodwill and other intangible property
of the Borrower) is greater than the total amount of its liabilities, including
without limitation, contingent liabilities, (ii) the present fair salable value
of its assets (including without limitation the fair salable value of the
goodwill and other intangible property of the Borrower) is not less than the
amount that will be required to pay the probable liability on its debts as they
become absolute and matured, and (iii) it is able to realize upon its assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business. The Borrower does
not (i) intend to, nor does it believe that it will, incur debts or liabilities
beyond its ability to pay as such debts and liabilities mature, and (ii) is
engaged in a business or transaction, or about to engage in a business or
transaction, for which its property would constitute unreasonably small capital
after giving due consideration to the prevailing practice and industry in which
it is engaged. For purposes of this Section 5.18, in computing the amount of
contingent liabilities at any time, it is intended that such liabilities will be
computed at the amount which, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual mature liability.
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ARTICLE VI
AFFIRMATIVE COVENANTS
So long as the Notes or any Obligation shall remain unpaid or the
Commitment shall exist hereunder, or any other amount is owing by the Borrower
hereunder or under any other Loan Document, the Borrower shall:
Section 6.01 Maintenance of Existence. Preserve and maintain its
existence and good standing in the state of its formation and qualified to do
business and remain qualified in each jurisdiction in which such qualification
is required.
Section 6.02 Conduct of Business. Continue to engage in an efficient
and economical manner in a business of the same general type as conducted by it
on the Closing Date, and use its best efforts to adhere to customary practices
and standards in effect from time to time in the mortgage banking industry.
Section 6.03 Maintenance of Properties. Maintain, keep and preserve
all of its properties (tangible and intangible) necessary or useful in the
proper conduct of its business in good working order and condition, ordinary
wear and tear excepted.
Section 6.04 Maintenance of Records. Keep adequate records and books
of account, in which complete entries will be made in accordance with GAAP,
reflecting all of its financial transactions.
Section 6.05 Maintenance of Qualification with Agencies.
Preserve and maintain its qualifications with the Agencies.
Section 6.06 Maintenance of Insurance. Maintain insurance with
financially sound and reputable insurance companies or associations in such
amounts and covering such risks as are usually carried by companies engaged in
the same or a similar business and similarly situated or required by any
agreement to which the Borrower is a party, including, without limitation, a
standard policy of mortgage bankers' blanket bond insurance. To the extent
permitted under the terms of the policy, the Borrower shall cause the Agent to
be named, and remain named as long as any amounts are outstanding on the Notes,
an additional insured on such mortgage bankers' blanket bond insurance policies.
Such insurance may provide for reasonable deductibility from coverage thereof
Section 6.07 Compliance with Laws. Comply in all respects with all
applicable Laws and orders, such compliance to include, without limitation,
paying before the same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property, except to the extent they are the
subject of a Good Faith Contest.
Section 6.08 Right of Inspection. At any reasonable time and from
time to time the Borrower shall permit the Agent or any Bank or representative
thereof, to examine and make copies and abstracts from the records and books of
account of, and visit the properties of, the Borrower and to discuss the
affairs, finances and accounts of the Borrower with the Borrower's officers and
directors and independent certified public accountants.
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Section 6.09 Reporting Requirements. Furnish directly to the
Agent and to each Bank:
(a) Annual Financial Statements of the Borrower. As soon as
available and in any event within ninety days after the end of the respective
fiscal years of the Borrower and each of its Subsidiaries (a) the balance sheet
of the Borrower and each of its Subsidiaries as of the end of such fiscal year,
the statements of income and retained earnings of the Borrower, and the
statements of cash flows of the Borrower for such fiscal year, on a
Consolidating and Combining basis, all prepared in accordance with GAAP
consistently applied and accompanied by an opinion thereon acceptable to the
Agent by independent certified public accountants of national standing selected
by the Borrower, and acceptable to the Agent and (b) with respect to the
foregoing, reports of the independent certified public accountants stating in
comparative form the respective figures for the corresponding date and period in
the prior fiscal years.
(b) Quarterly Financial Statements. Each fiscal quarter, as soon
as available and in any event not later than forty-five days after the end of
the fiscal quarter, a balance sheet of the Borrower as of the end of such
quarter, statements of income and retained earnings of the Borrower for the
period commencing at the end of the previous fiscal year and ending with the end
of such quarter, and statements of changes in financial position of the Borrower
for the portion of the fiscal year ended with the last day of such quarter, all
on a Consolidating and Combining basis and all in reasonable detail and stating
in comparative form the respective figures of the corresponding date and period
in the previous fiscal year and all prepared in accordance with GAAP
consistently applied and certified by the chief financial officer of the
Borrower;
(c) Monthly Report. As soon as available, and in any event within
30 days of the end of each month, the balance sheet and income statement of the
Borrower as of the end of such month prepared in accordance with GAAP
consistently applied and certified by the chief financial officer of the
Borrower.
(d) Management Letters. As soon as available and in any event
within one hundred twenty days after the end of each fiscal year, copies of any
reports submitted to the Borrower by independent certified public accountants in
connection with the examination of the financial statements of the Borrower made
by such accountants.
(e) Certificate of No Default. Not later than 30 days after the
last day of each month, the Borrower will provide the Agent with a certificate
(the "Certificate of No Default") of the chief financial officer, controller or
chief executive officer of the Borrower (a) certifying that to the best of his
or her knowledge no Default or Event of Default has occurred and is continuing
or, if a Default or Event of Default has occurred and is continuing, a statement
as to the nature thereof and the action which is proposed to be taken with
respect thereto, and (b) with computations demonstrating compliance with the
covenants contained in Article VIII.
(f) Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any court or Governmental
Authority, affecting the Borrower which, if determined adversely to the
Borrower, could result in a Material Adverse Change.
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(g) Notices of Defaults and Events of Default. As soon as possible
and in any event within five days after the occurrence of each Default or Event
of Default a written notice setting forth the details of such Default or Event
of Default and the action which is proposed to be taken by the Borrower with
respect thereto.
(h) ERISA Reports. As soon as possible and in any event within
five days after the Borrower knows or has reason to know that any Reportable
Event or Prohibited Transaction has occurred with respect to any Plan or that
the PBGC or the Borrower has instituted or will institute proceedings under
Title IV of ERISA to terminate any Plan, the Borrower will deliver to the Agent
a certificate of the chief financial officer of the Borrower setting forth
details as to such Reportable Event or Prohibited Transaction or Plan
termination and the action the Borrower proposes to take with respect thereto.
(i) Reports to Other Creditors. Promptly after the furnishing
thereof, unless prohibited by law, copies of any statement or report furnished
to any other creditor pursuant to the terms of any indenture, loan or credit or
similar agreement and not otherwise required to be furnished to the Agent
pursuant to any other clause of this Agreement.
(j) Reports, Etc. Promptly after the sending or filing thereof,
copies of all financial statements and reports which the Borrower sends to, or
receives from, any Governmental Authority or Agency.
(k) Insurance. Upon the occurrence of any casualty, damage or
loss, whether or not giving rise to a claim under any insurance policy, in an
amount greater than Two Hundred Fifty Thousand Dollars ($250,000), notice
thereof, together with copies of any document relating thereto (including copies
of any such claim) in possession or control of the Borrower or any agent of the
Borrower.
(l) Material Adverse Change. As soon as possible and in any event
within three Business Days after the Borrower has knowledge of the occurrence of
any event or circumstance which could result in or has resulted in a Material
Adverse Change, written notice thereof.
(m) Offices. Thirty days prior written notice of any change in the
chief executive office or principal place of business of the Borrower.
(n) Management. Thirty days prior written notice of any change in
the management of the Borrower as set forth in Schedule 5.16.
(o) Liens. As soon as possible and in any event within three
Business Days after the Borrower has knowledge of the assertion of any Lien
against the Collateral or the occurrence of any event that could have a Material
Adverse Change in respect of the value or marketability of the Collateral or the
validity, enforceability or priority of the Liens created under this Agreement,
written notice thereof
(p) Environmental Notices. As soon as possible and in any event
within five Business Days after receipt, copies of all Environmental Notices
received by the Borrower which are not received in the ordinary course of the
Borrower's business.
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(q) Reports Relating to Collateral. (1) With respect to Conforming
Mortgage Loans only, as soon as available and in any event within ten days after
the end of each month:
(i) A separate schedule from the Borrower in a form
satisfactory in form and content to the Agent of all commitments to make
Mortgage Loans, commitments to purchase Mortgage Loans and other information
related to all Mortgages/Loans intended to be or which are pledged under this
Agreement as to the Borrower.
(ii) A separate schedule for the Borrower in a form
satisfactory in form and content to the Agent of all Take-Out Commitments held
by the Borrower grouped by type of Mortgage Loan (whether or not delivered as
Collateral hereunder) which qualifies for delivery pursuant to such Take-Out
Commitments, listing the name of the investor, the commitment amount which
remains available for future deliveries, the yield requirement or the price and
interest rate for which said price is quoted, and the expiration, delivery or
settlement date for each such Take-Out Commitment, and the weighted average
yield requirement or the weighted average price at each applicable interest rate
for each such group of Take-Out Commitments and (b) a schedule in a form
satisfactory in form and content to the Agent listing the mandatory Take-Out
Commitments held by the Borrower which shall be satisfied by delivering Mortgage
Loans which the Borrower has committed to purchase; and
(iii) From time to time, with reasonable promptness, such
further information regarding the Collateral as the Agent or any Bank may
request.
(2) As soon as available, but in any event not later than the
date that such reports, if any, are delivered to the Agencies, copies of all
annual and regularly delivered reports to the Agencies relating to the
Borrower's Mortgage Loan origination and acquisition activities and other
matters requested or required by the Agencies.
(3) As soon as available, but in any event not later than
three Business Days after the receipt thereof by the Borrower, of any notice
received from an Agency or a Qualified Investor relating to a material default
or other deficiency under a Take-Out Commitment which could result in
termination thereof.
(4) As soon as available, but in any event not later than ten
days after the end of each month, a report of aging and delinquencies for all
Pledged Mortgage Loans.
(r) General Information. Such other information respecting the
condition or operations, financial or otherwise, of the Borrower as either the
Agent or any Bank may from time to time request.
Section 6.10 Compliance With Environmental Laws. Comply in all
material respects with all applicable Environmental Laws and immediately pay or
cause to be paid all costs and expenses incurred in connection with such
compliance.
Section 6.11 Agency and Take-Out Commitments. Maintain valid and
enforceable Take-Out Commitments sufficient at all times to (i) satisfy the
requirements of this Agreement and (ii) in accordance with prudent business
practices to protect the Borrower against
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interest rate risk with respect to Mortgage Loans originated or acquired by it
and to permit the timely sale of Mortgage Loans in accordance with prudent
mortgage banking industry practices.
Section 6.12 Taxes. Pay and discharge all taxes, assessments or
other governmental charges or levies imposed on the Borrower or any of its
property or assets prior to the date on which any penalty for non-payment or
late payment is incurred, unless the same are the subject of a Good Faith
Contest.
Section 6.13 ERISA. (a) Comply in all material respects with the
provisions of ERISA to the extent applicable to any employee benefit plan
maintained for the Borrower's or a Subsidiary's employees or any multiemployer
pension plan to which the Borrower, any Subsidiary or any ERISA Affiliate is
required to contribute; not incur any material accumulated funding deficiency or
withdrawal liability (within the meaning of ERISA), or any material liability to
the PBGC; and not permit any Prohibited Transaction or Reportable Event or other
event to occur which could result in a Material Adverse Change with respect to
the Borrower or any employee benefit plan or which may be the basis for the PBGC
to assert a material liability against it or which may result in the imposition
of a lien on the Borrower's properties or assets.
(b) Notify the Agent in writing promptly after it has come to the
attention of senior management of the Borrower of the assertion or threat of any
Prohibited Transaction or Reportable Event, the existence of any fact or set of
facts or event (including without limitation any change in the actuarial
assumptions or funding methods of any employee benefit plan or the incurrence of
any withdrawal liability under any multiemployer plan) which could have a
Material Adverse Change or may be the basis for the PBGC to assert a material
liability against it or impose a Lien on the Borrower's properties or assets.
The Borrower shall also provide to the Agent promptly after receipt thereof,
copies of (i) all notices received by the Borrower or any ERISA Affiliate of the
reorganization of any multiemployer pension plan or the PBGC's intent to
terminate any employee benefit plan or multiemployer pension plan administered
or maintained by the Borrower or any ERISA Affiliate, or to have a trustee
appointed to administer any such employee benefit plan; and (ii) at the request
of a Bank each annual report and all accompanying schedules, the most recent
actuarial reports, the most recent financial information concerning the
financial status of each employee benefit plan or multiemployer plan
administered or maintained by the Borrower or any ERISA Affiliate or to which
the Borrower makes contributions, and schedules showing the amounts contributed
to each such plan by or on behalf of the Borrower or any ERISA Affiliate in
which any of the Borrower's personnel participate or from which such personnel
may derive a benefit, and each Schedule B (Actuarial Information) to the annual
report filed by the Borrower or any ERISA Affiliate with the Internal Revenue
Service with respect to each such plan.
Section 6.14 Year 2000 Compliance. Perform all acts reasonably
necessary to ensure that: (i) the Borrower and any business in which it holds a
substantial interest, and (ii) all customers, suppliers and vendors that are
material to the Borrower's business, become Year 2000 Compliant in a timely
manner. Such acts shall include, without limitation, performing a comprehensive
review and assessment of all of the Borrower's systems and adopting a detailed
plan, with itemized budget, for the remediation, monitoring and testing of such
systems. As used in this Section, "Year 2000 Compliant" shall mean, in regard to
any entity, that all software, hardware, firmware, equipment, goods or systems
utilized by or material to the business
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operations or financial condition of such entity, will properly perform date
sensitive functions before, during and after the year 2000. The Borrower shall,
immediately upon request, provide to the Agent for the benefit of the Banks such
certifications or other evidence of the Borrower's compliance with terms of this
paragraph as the Agent or any Bank may from time to time require.
ARTICLE VII
NEGATIVE COVENANTS
So long as the Notes or any Obligation shall remain unpaid or the
Commitment shall exist hereunder or any other amount is owing by the Borrower
hereunder or under any other Loan Document, the Borrower shall not:
Section 7.01 Liens. (a) Create, incur, assume, or suffer to exist,
any Lien upon or with respect to any of its properties, now owned or hereafter
acquired, except the following kinds of Liens on properties other than Mortgage
Loans ("Permitted Liens"):
(1) Liens in favor of the Agent, for the benefit of the
Banks;
(2) Liens for taxes or assessments or other government charges
or levies if not yet due and payable or, if due and payable, if they are the
subject of a Good Faith Contest;
(3) Liens imposed by Law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than thirty days or which are the subject of a Good Faith
Contest;
(4) Liens under workers' compensation, unemployment
insurance, Social Security, or similar legislation;
(5) Liens, deposits, or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory obligations,
surety, indemnity, performance, or other similar bonds, or other similar
obligations arising in the ordinary course of business, and the pledge of assets
for the purpose of securing an appeal, stay or discharge in the course of any
legal proceeding, provided that the aggregate amount of liabilities of the
Borrower secured by a pledge of assets permitted under this clause, including
interest and penalties thereon, if any, shall not be in excess of $250,000 at
any one time outstanding;
(6) Judgment and other similar Liens arising in connection
with court proceedings, provided the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are the subject of a
Good Faith Contest;
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(7) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use, and enjoyment by the Borrower of the property or assets
encumbered thereby in the normal course of the Borrower's business or materially
impair the value of the property subject thereto;
(8) Purchase-money Liens on any property hereafter acquired or
the assumption of any Lien on property existing at the time of such acquisition
(and not created in contemplation of such acquisition), or a Lien incurred in
connection with any conditional sale or other title retention agreement or a
Capital Lease; and
No Liens shall be permitted on Mortgage Loans other than the Liens of the Agent
for the benefit of the Banks hereunder.
(b) Agree with any other Person to prohibit or otherwise restrict
its ability to grant Liens upon, or security interests in, any of its property
to the Agent or to the Banks.
Section 7.02 Debt. Create, incur, assume, or suffer to exist,
any Debt, except:
(a) Debt of the Borrower under this Agreement or the Notes;
(b) Debt described in Schedule 7.02;
(c) Accounts payable to trade creditors for goods or services and
current operating liabilities (other than for borrowed money), in each case
incurred in the ordinary course of business as presently conducted; and
(d) Debt of the Borrower secured by purchase-money Liens permitted
by Section 7.01 (a)(8).
Section 7.03 Mergers, Etc. Wind up, liquidate or dissolve itself,
reorganize, merge or consolidate with or into, convey, sell, assign, transfer,
lease, or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person, or acquire all or substantially all of the
assets or the business of any Person; provided that the Borrower may acquire the
assets of, or merge with, another Person in a similar line of business if,
immediately after giving effect to such merger or acquisition (i) no default or
Event of Default exists and is continuing, (ii) the Borrower is the surviving
Person, and (iii) the assets acquired are pledged to the Agent as Collateral
hereunder.
Section 7.04 Leases. Create, incur, assume, or suffer to exist any
obligation as lessee for the rental or hire of any real or personal property,
except: (1) Capital Leases permitted under Section 7.01(a)(8); (2) leases
existing on the date of this Agreement and any extensions, renewals or
replacements thereof, including but not limited thereto, the lease of Borrower's
primary or other business locations and (3) new leases for equipment and similar
items used in the ordinary course of the Borrower's business.
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Section 7.05 Sale and Leaseback. Sell, transfer, or otherwise
dispose of any real or personal property to any Person and thereafter directly
or indirectly lease back the same or similar property.
Section 7.06 No Dividends. Advances or Distributions. Declare
or pay any cash or stock dividends or make any cash advances or distributions
of any kind to any of the Borrower's stockholders, directors, officers,
employees, or affiliated companies.
Section 7.07 Management of the Borrower. Cause or permit Michael
Strauss to not be the President of the Borrower, unless the Majority Banks shall
have approved any replacement President.
Section 7.08 Sale of Assets. (a) Sell, lease, assign, transfer, or
otherwise dispose of any of the Borrower's now-owned or hereafter acquired
assets (including, without limitation, receivables, and leasehold interests),
except, subject to Subsection (b) of this Section 7.08, the sale or other
disposition of assets (i) in the ordinary course of the Borrower's business or
(ii) no longer used or useful in the conduct of its business, or
(b) Sell any Mortgage Loans on a recourse basis.
Section 7.09 Investments. Make any loan or advance to any Person
(other than Mortgage Loans in the ordinary course of business), or purchase or
otherwise acquire any capital stock, assets, obligations, or other securities
of, make any capital contribution to, or otherwise invest in or acquire any
interest in any Person, or participate as a partner or joint venturer with any
other Person, except the Borrower may acquire or invest in: (1) direct
obligations of the United States or any agency thereof with maturities of one
year or less from the date of acquisition; (2) commercial paper of a domestic
issuer rated at least "A-l" by Standard & Poor's Rating Agency or "P-l" by
Moody's Investors Service, Inc.; (3) certificates of deposit with maturities of
one year or less from the date of acquisition issued by any commercial bank
having capital and surplus in excess of One Billion Dollars ($1,000,000,000);
(4) stock, obligations, or securities received in settlement of debts (created
in the ordinary course of business) owing to the Borrower; and (5) investments
required to be made or purchased by any Agency or any applicable provisions of
law; provided that the Borrower may engage in joint ventures in a similar line
of business as the Borrower or create subsidiaries to the extent that the
Borrower obtains and retains a controlling interest and to the extent that the
total value of the investment by the Borrower in any such joint venture or
subsidiary does not exceed Five Million Dollars ($5,000,000).
Section 7.10 Financial Hedge Instruments. Engage in financial hedge
transactions of any kind (i) other than financial hedge transactions such as
mandatory commitments with FNMA, FHLMC or other Qualified Investors or (ii) for
interest rate protection purposes (but not for speculation purposes) with
respect to the Borrower's loan pipeline.
Section 7.11 Guaranties, Etc. Assume, guaranty, endorse, or
otherwise be or become directly or contingently responsible or liable
(including, but not limited to, an agreement to purchase any obligation, stock,
assets, goods, or services, or to supply or advance any funds,
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assets, goods, or services, or an agreement to maintain or cause such Person to
maintain a minimum working capital or net worth, or otherwise to assure the
creditors of any Person against loss) for obligations of any Person, except
guaranties by endorsement of negotiable instruments for deposits or collection
or similar transactions in the ordinary course of business.
Section 7.12 Transactions With Affiliates. Enter into any
transaction, including, without limitation, the purchase, sale, or exchange of
property or the rendering of any service, with any Affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of the Borrower's
business and upon fair and reasonable terms no less favorable to the Borrower
than would obtain in a comparable arm's-length transaction with a Person not an
Affiliate.
ARTICLE VIII
FINANCIAL COVENANTS
So long as the Notes and any Obligation shall remain unpaid or the
Commitment shall exist hereunder or any other amount is owing by the Borrower
hereunder or under any other Loan Document:
Section 8.01 Financial Covenants. The Borrower will maintain at
all times and tested as of the last day of each fiscal year:
(a) Tangible Stockholder's Equity in the minimum amount of
$5,500,000;
(b) a Leverage Ratio not exceeding 11:1.
ARTICLE IX
EVENTS OF DEFAULT
Section 9.01 Events of Default. Any of the following events
shall be an "Event of Default":
(a) The Borrower shall: (a) fail to pay the principal amount of
the Loans when due; or (b) fail to make any of the prepayments required by
Section 2.08 as and when required; (c) fail to fulfill or satisfy any of the
covenants regarding the Collateral in Section 3.05; or (d) fail to pay within
five days after the Agent bills it interest on the Loan or any fee or interest
or any other amount due under this Agreement or any other Loan Document;
(b) any representation or warranty made or deemed made by the
Borrower in this Agreement or in any other Loan Document or Which is contained
in any certificate, document, opinion, financial or other statement furnished at
any time under or in connection with any Loan Document shall prove to have been
incorrect in any material respect on or as of the date made or deemed made;
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(c) (1) the Borrower shall fail to perform or observe any covenant
contained in Articles VII and VIII of this Agreement, or (2) the Borrower shall
fail to perform or observe any other term, covenant or agreement contained in
this Agreement (other than as referred to above in Sections 9.01(a), (b) or
(c)(I)) and such failure of performance or observance is not cured within
fifteen days;
(d) the Borrower shall: (a) fail to pay any Debt (other than the
payment obligations described in (a) above), of the Borrower when due (whether
by scheduled maturity, required prepayment, acceleration, demand or otherwise);
or (b) fail to perform or observe any term, covenant or condition on its part to
be performed or observed under any agreement or instrument relating to any such
Debt, when required to be performed or observed, if the effect of such failure
to perform or observe is to accelerate, or to permit the acceleration of, after
the giving of notice or the lapse of time, or both, of the maturity of such
Debt, whether or not the failure to perform or observe shall be waived by the
holder of such Debt; or any such Debt shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof;
(e) the Borrower: (a) shall generally not, or be unable to, or
shall admit in writing its inability to, pay its debts as such debts become due;
or (b) shall make an assignment for the benefit of creditors, petition or apply
to any tribunal for the appointment of a custodian, receiver or trustee for it
or a substantial part of its assets; or (c) shall commence any proceeding under
any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (d) shall have had any such petition or application filed or any such
proceeding shall have been commenced, against it, in which an adjudication or
appointment is made or order for relief is entered, or which petition,
application or proceeding remains undismissed or unstayed for a period of thirty
days or more; or shall be the subject of any proceeding under which its assets
may be subject to seizure, forfeiture or divestiture; or (e) by any act or
omission shall indicate its consent to, approval of or acquiescence in any such
petition, application or proceeding or order for relief or the appointment of a
custodian, receiver or trustee for all or any substantial part of its property;
or (f) shall suffer any such custodianship, receivership or trusteeship to
continue undischarged for a period of thirty days or more;
(f) one or more judgments, decrees or orders for the payment of
money in excess of Two Hundred Fifty Thousand Dollars ($250,000) in the
aggregate shall be rendered against the Borrower, and such judgments, decrees or
orders shall continue unsatisfied and in effect for a period of thirty (30)
consecutive days without being vacated, discharged, satisfied or stayed or
bonded pending appeal;
(g) any of the following events shall occur or exist with respect
to the Borrower or any ERISA Affiliate: (a) any Prohibited Transaction involving
any Plan; (b) any Reportable Event shall occur with respect to any Plan; (c) the
filing under Section 4041 of ERISA of a notice of intent to terminate any Plan
or the termination of any Plan; (d) any event or circumstance exists which might
constitute grounds entitling the PBGC to institute proceedings under Section
4042 of ERISA for the termination of, or for the appointment of a trustee to
administer, any Plan, or the institution by the PBGC of any such proceedings;
(e) complete or partial withdrawal under Section 4201 or 4204 of ERISA from a
Multiemployer Plan or the
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reorganization, insolvency, or termination of any Multiemployer Plan; and in
each case above, such event or condition, together with all other events or
conditions, if any, could in the opinion of the Agent subject the Borrower or
any ERISA Affiliate to any tax, penalty, or other liability to a Plan,
Multiemployer Plan, the PBGC, or otherwise (or any combination thereof) which in
the aggregate exceeds or may exceed Two Hundred Fifty Thousand Dollars
($250,000);
(h) this Agreement shall at any time and for any reason cease to
create a valid and perfected first priority Lien in the Collateral or the
validity or enforceability of this Agreement shall be contested by the Borrower,
or the Borrower shall deny it has any further liability or obligation under this
Agreement; or
(i) if there is a Material Adverse Change in the Collateral, or if
there shall occur a Material Adverse Change (as determined by the Agent or the
Agent, as directed by the Majority Banks), or if the Majority Banks in good
faith believe that the prospects of payment, performance or realization upon the
Collateral is impaired, or if the Majority Banks shall deem themselves insecure.
Section 9.02 Remedies. (a) If any Event of Default shall occur and
be continuing, the Agent may, and shall, at the request of the Majority Banks,
by notice to the Borrower, (1) declare the Commitments to be terminated,
whereupon the same shall forthwith terminate; (2) declare the Notes, all
interest thereon, and all other amounts payable under this Agreement and any
other Loan Documents to be forthwith due and payable, whereupon the Notes, all
such interest, and all such amounts due under this Agreement and under any other
Loan Document shall become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind, all of which are
hereby expressly waived by the Borrower; and/or (3) exercise any remedies
provided in any of the Loan Documents, at Law or otherwise with respect to the
Collateral and the Loans; provided, however, that upon the occurrence of an
Event of Default referred to in Section 9.01(e), the Commitment shall
automatically terminate and the Notes and any other amounts payable under this
Agreement and any of the other Loan Documents, and all interest on any of the
foregoing shall be forthwith due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Borrower.
(b) Upon the occurrence of an Event of Default, the Agent may
exercise in respect of the Collateral, in addition to other rights and remedies
provided for herein, at Law or otherwise available to it, all the rights and
remedies of a secured party on default under the applicable Uniform Commercial
Code (whether or not the applicable Uniform Commercial Code applies to the
affected Collateral) and also may (i) require the Borrower to, and the Borrower
hereby agrees that it will at its expense and upon request of the Agent
forthwith, assemble all or part of the Collateral as directed by the Agent and
make it available to the Agent or Collateral Custodian at a place to be
designated by the Agent, and (ii) without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or private
sale, at any of the Agent's or Collateral Custodian's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other commercially
reasonable terms. The Borrower agrees that, to the extent notice of sale shall
be required by law, five days prior notice of the time and place of any public
sale or the time after which any private sale is to be made shall constitute
reasonable notification. The Agent shall not be obligated to make any sale of
Collateral regardless of notice
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of sale having been given. The Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. All cash proceeds received by the Agent in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
may, in the discretion of the Agent, be held by the Agent in a restricted
account (which the Agent is hereby authorized to establish) as Collateral for,
and/or then or at any time thereafter applied in accordance with the terms of
Section 9.03 in whole or in part by the Agent against, all or any part of the
Obligations. After the occurrence of an Event of Default, the Agent shall have
the right to deliver any Pledged Mortgage into any Take-Out Commitment and to
obtain the benefits of any Agency commitment, in any such event either in the
name of the Agent or the Borrower, pursuant to the power of attorney granted
under this Agreement or otherwise.
Section 9.03 Application of Proceeds. The proceeds of any sale
or enforcement of all or any part of the Collateral shall be applied by the
Agent:
First to the payment of all costs and expenses incurred by (a) the
Agent in connection with such sale or enforcement of (i) any rights and benefits
afforded hereby, by any other Loan Documents or at Law, and/or (ii) the Liens
granted hereunder of all or any part of the Collateral or of the Liens,
collateral, any guaranty or other assurances granted under the other Loan
Documents, (b) the Agent in collecting, maintaining and preserving the
Collateral, (c) the Agent and the Banks in the enforcement of this Agreement,
the Notes and the other Loan Documents, including payment to the Agent's and any
of the Banks' agents and counsel in accordance with Section 11.06, and to the
payment of all expenses, liabilities and advances made or incurred by such
parties in connection therewith;
Second, to the payment of all accrued and unpaid interest due and
owing on the Outstanding Credit on a pro rata basis for each of the Banks in
proportion to each Bank's share of the Outstanding Credit;
Third, to the payment of all unpaid Outstanding Credit on a pro rata
basis for each of the Banks in proportion to each Bank's share of the
Outstanding Credit;
Fourth, to the payment of all other amounts owed by the Borrower
in respect of the Loan Documents; and
Finally, to the payment to the Borrower, or to its successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
If the proceeds of any such sale are insufficient to cover the amounts described
in clauses First through Fourth, inclusive, above, the Borrower shall remain
liable for any deficiency.
Section 9.04 The Agent May Perform. If the Borrower fails to perform
any agreement contained in this Agreement, the Agent may itself perform (but
shall not be obligated to perform), or cause performance of, such agreement, and
the expenses of the Agent incurred in connection therewith shall be payable by
the Borrower under Section 11.06.
Section 9.05 The Agent's Duties With Respect to Collateral. The
powers conferred on the Agent under this Agreement are solely to protect its
interest and the interests of
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the Banks in the Collateral and shall not impose any duty upon the Agent to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Agent shall not have any duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
Section 9.06 Continuing Security Interest; Transfer of Note. This
Agreement creates a continuing Lien in the Collateral and shall (i) remain in
full force and effect until termination of the Commitment and payment in full of
all the Obligations to the Banks, (ii) be binding upon the Borrower, and their
successors and assigns, and (iii) inure to the benefit of the Banks and their
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (iii), each Bank may assign or otherwise transfer any document
evidencing any Obligation held by it to its successors or any Affiliate, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Bank herein or otherwise. Upon termination of the
Commitment and the payment in full of the Obligations, the Lien granted hereby
shall terminate and all rights to the Collateral shall revert to the Borrower.
Upon any such termination, the Agent will, at the Borrower's expense, execute
and deliver to the Borrower such documents as the Borrower shall reasonably
request to evidence such termination.
ARTICLE X
THE AGENT
Section 10.01 Appointment and Authorization. Each Bank hereby
appoints and authorizes the Agent to take such action on its behalf and to
exercise such powers under this Agreement as are delegated to the Agent by the
terms hereof, together with such powers as are incidental thereto.
Section 10.02 General Immunity. In performing its duties as Agent
hereunder, the Agent will take the same care as it takes in connection with
loans in which it alone is interested. However, neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them hereunder or in connection herewith except for
its or their own gross negligence or willful misconduct.
Section 10.03 Consultation with Professionals. The Agent may consult
with legal counsel and other professionals selected by it and shall not be
liable for any action taken or suffered in good faith by it in accordance with
the advice of such counsel and professionals in their respective areas of
expertise.
Section 10.04 Documents. The Agent shall not be under a duty to
examine or pass upon the effectiveness, genuineness or validity of this
Agreement or any of the Notes or any other instrument or document furnished
pursuant hereto or in connection herewith, and the Agent shall be entitled to
assume that the same are valid, effective and genuine and what they purport to
be.
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Section 10.05 Delivery of Collateral Reports. The Agent shall
promptly deliver to the Banks the monthly collateral reports delivered by the
Collateral Custodian in accordance with Section 4D of the Custodial Agreement.
Section 10.06 Rights as a Bank. With respect to its Commitment and
their respective portions of the Loan, the Agent shall have the same rights and
powers hereunder as any Bank and may exercise the same as though it was not the
Agent, and the terms "Bank" and "Banks" shall, unless the context otherwise
indicates, include the Agent in its individual capacity. The Agent may accept
deposits from, lend money to and generally engage in any kind of banking or
trust business with the Borrower as if it was not the Agent.
Section 10.07 Responsibility of the Agent. It is expressly
understood and agreed that the obligations of the Agent hereunder are only those
expressly set forth in this Agreement and that the Agent shall not be entitled
to assume that no Default or Event of Default, has occurred and is continuing,
unless the Agent has actual knowledge of such fact or has received notice from a
Bank that such Bank considers that a Default or Event of Default has occurred
and is continuing and specifying the nature thereof
Section 10.08 Action by the Agent. So long as the Agent shall be
entitled, pursuant to Section 10.06 hereof, to assume that no Default or Event
of Default has occurred and is continuing, the Agent shall be entitled to use
its discretion with respect to exercising or refraining from exercising any
rights that may be vested in it by, or with respect to taking or refraining from
taking any action or actions that they may be able to take under or in respect
of, this Agreement. The Agent shall not incur liability under or in respect of
this Agreement by acting upon any notice, consent, certificate, warranty or
other paper or instrument believed by it to be genuine or authentic or to be
signed by the proper party or parties, or with respect to anything that it may
do or refrain from doing in the reasonable exercise of its judgment, or that may
seem to it to be necessary or desirable under the circumstances.
Section 10.09 Notices of Event of Default, Etc. In the event that
the Agent shall have acquired actual knowledge of any Default or Event of
Default, the Agent shall promptly give written notice thereof to the Banks, and
the Agent may take such action and assert such rights with respect to taking or
refraining from taking any action or actions that it may be able to take under
or in respect of, this Agreement, as it deems to be advisable in its discretion
for the protection of the interests of the Banks including, without limitation,
the exercise of rights and remedies under Article IX hereof.
Section 10.10 Indemnification of the Agent. The Banks agree to
indemnify the Agent (to the extent reimbursable, but not reimbursed by the
Borrower), ratably according to the amount of each Bank's Commitment, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatever that may be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of this Agreement or any action
taken or omitted by the Agent under this Agreement, provided that no Bank shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct.
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Section 10.11 Resignation or Replacement of the Agent. The Agent may
resign at any time by giving 30 days written notice thereof to each of the Banks
and to the Borrower or may be replaced by the Majority Banks for cause. Upon any
such resignation or replacement, the Majority Banks shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed by
the Majority Banks and shall have accepted such appointment within 30 days after
any such notice of resignation, then the resigning entity may, on behalf of the
Banks, appoint a successor which shall be another Bank, if any other Bank is
willing to serve in such capacity, or, if not, a commercial bank organized under
the laws of the United States of America or any State thereof having a combined
capital and surplus of at least $1,000,000,000. After any such resignation or
replacement, the provisions of this Article 10 shall continue in effect for the
benefit of the resigning entity with respect to any actions taken by or omitted
by it while acting as agent.
ARTICLE XI
MISCELLANEOUS
Section 11.01 No Waiver; Cumulative Remedies. No failure or delay on
the part of the Agent or any Bank in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law. In the event of a dispute between the Borrower and the Agent
concerning the principal amount outstanding hereunder, the interest rates
applicable thereto, the amounts available under the Commitments, the payment of
principal, interest and other amounts hereunder, or concerning similar factual
matters, absent manifest error, the books and records of the Agent shall be
irrebuttably presumed to be correct.
Section 11.02 Set-Off; Disproportionate Payments. The Borrower
agrees that, in addition to (and without limitation of) any right of setoff,
bankers' lien or counter-claim the Agent and the Banks or any of them may have,
each Bank shall have a right of setoff against, and a Lien upon all property of
the Borrower now or at any time in the possession of the Agent or such Bank in
any capacity whatever, including, but not limited to, the Borrower's interest in
any deposit account, as security for all Obligations. In the event that any Bank
exercises such rights, that Bank will, to the fullest extent permitted by law,
apply the proceeds to the payment of its portion of the Obligations hereunder
prior to applying any such amount against amounts due from the Borrower in
connection with other transactions outside of this Agreement; and to the extent
that such proceeds exceed such Bank's portion of the Obligations and if
Obligations remain hereunder to other Banks, prior to applying any such excess
proceeds against amounts due from the Borrower in connection with other
transactions outside of this Agreement, such Bank shall remit the balance of any
such proceeds to the Agent for the account of such other Banks with respect to
such Obligations. To the fullest extent permitted by law, any proceeds obtained
pursuant to this Section 11.02 shall be applied in accordance with Section 9.03.
If at any time, as the result of exercising such rights or otherwise, any Bank
receives a payment on account of its portion of the Loans in a proportion
greater than similar payments on account of the portions of the Loans held by
the other Banks, the Bank so receiving such greater
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proportionate payment will purchase a participation in the portions of the Loans
held by the other Banks of such amount that after such purchase each Bank shall
hold a proportionate share in the aggregate outstanding principal balance of
Loans equal to their respective proportionate shares in the outstanding
principal balance of Loans before the disproportionate payment. If, however, any
payment on account of the Loans is rescinded or invalidated or must otherwise be
restored or returned by the recipient in a bankruptcy or insolvency proceeding
or otherwise, then any participations purchased as a result of such payment will
be rescinded.
Section 11.03 Amendments. Any of the provisions of this Agreement
may be waived, modified or amended in writing by any agreement or agreements
entered into by the Borrower and the Majority Banks, except that (1) all Banks
must join in (a) the deferral of the payment of any interest or principal due
hereunder, or fee due under Section 2.09(b) hereof, beyond its due date, (b) any
reduction in the Borrower's obligation to repay the principal amount of the
Loans or any decrease in the Interest Rate or fees applicable to the Loans,
(c) any change in the amount of the Commitment of any Bank or an increase in the
aggregate amount of the Commitments, (d) any change in the Expiration Date,
(e) any amendment to this Section 11.03, (f) the release of any Collateral other
than as provided in Section 3.04 or as otherwise permitted in accordance with
this Agreement, or (g) any amendment to the definition of Majority Banks, and
(2) no such waiver, modification or amendment shall extend to or affect any
obligation not expressly waived, modified or amended, or impair any right of the
Banks related to such obligation.
Section 11.04 Arbitration. (a) Upon demand of the Borrower or a Bank
whether made before or after institution of any judicial proceeding, any claim
or controversy arising out of, or relating to the Agreement between the parties
hereto (a "Dispute") shall be resolved by binding arbitration conducted under
and governed by the Commercial Financial Disputes Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association (the "AAA") and the
Federal Arbitration Act. Disputes may include, without limitation, tort claims,
counterclaims, a dispute as to whether a matter is subject to arbitration,
claims brought as class actions, or claims arising from documents executed in
the future. A judgment upon the award may be entered in any court having
jurisdiction. Notwithstanding the foregoing, this arbitration provision does not
apply to disputes under or related to swap agreements (as defined in 11 U.S.C.
ss. 101) between the parties.
(b) All arbitration hearings shall be conducted in the city in
which the office of a Bank first stated above is located. A hearing shall begin
within 90 days of demand for arbitration and all hearings shall be concluded
within 120 days of demand for arbitration. These time limitations may not be
extended unless a party shows cause for extension and then for no more than a
total of 60 days. The expedited procedures set forth in Rule 51 et seq. of the
Arbitration Rules shall be applicable to claims of less than $1,000,000.
Arbitrators shall be licensed attorneys selected from the Commercial Financial
Dispute Arbitration Panel of the AAA. The parties do not waive applicable
federal or state substantive law except as provided herein.
(c) Notwithstanding the preceding binding arbitration provisions,
the parties agree to preserve, without diminution, certain remedies that any
party may exercise before or after an arbitration proceeding is brought. The
parties shall have the right to proceed in any court
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of proper jurisdiction or by self help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose against any real or
personal property or other security by exercising a power of sale or under
applicable law by judicial foreclosure including a proceeding to confirm the
sale; (ii) all rights of self help including peaceful occupation of real
property and collection of rents, set-off and peaceful possession of personal
property, (iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Any claim or controversy with regard to any
party's entitlement to such remedies is a Dispute.
(d) The parties agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute and hereby waive
any right or claim to punitive or exemplary damages they have now or which may
arise in the future in connection with any Dispute, whether the Dispute is
resolved by arbitration or judicially.
Section 11.05 Exchange of Information among Banks. Each Bank will
promptly give each other Bank notice of any matter coming to its attention that,
in its judgment, would materially and adversely affect the interest of any Bank
in connection with this Agreement. No Bank will be liable for failure to give
any other Bank notice under this Section 11.05 unless such Bank intentionally
fails to provide such notice with the knowledge that such failure will
materially and adversely affect the interest of the other Banks hereunder.
Section 11.06 Costs and Expenses; Indemnification. The Borrower
agrees to pay on demand (a) all reasonable costs and expenses of the Agent in
connection with the preparation, printing, execution, delivery and
administration of this Agreement, the Notes and the other instruments and
documents to be delivered hereunder (including the reasonable fees and out-of
pocket expenses of the Agent's counsel with respect thereto; all reasonable fees
and expenses relating to any special audit or audits, investigations,
examinations, or the like, of the finances or operations of the Borrower,
conducted by the Agent's representatives), (b) all reasonable costs and
expenses, if any, of the Banks in connection with the enforcement against the
Borrower of this Agreement, the Notes and the other instruments and documents to
be delivered hereunder (including the reasonable fees and out-of-pocket expenses
of legal counsel with respect thereto) and (c) all reasonable costs, expenses
and fees of the Agent in connection with any amendment, renegotiation or
extension of this Agreement. The Borrower agrees to indemnify the Agent and the
Banks, and their directors, officers, employees and agents from, and hold each
of them harmless against, any and all losses, liabilities, claims, damages or
expenses incurred by any of them arising out of or by reason of any
investigation or litigation or other proceedings (including any threatened
investigation or litigation or other proceedings) relating to the Loan Documents
or transactions contemplated by any of the Loan Documents, including any actual
or proposed use by the Borrower of the proceeds of the Loans, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation or litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified). The obligations of the Borrower under this Section 11.06 shall
survive the repayment in full of the Notes and the Obligations and all amounts
due under or in connection with any of the Loan Documents and the termination of
the Commitment.
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Section 11.07 Binding Effect; Assignment; Participation. (a) This
Agreement shall become effective when it shall have been executed by the
Borrower and the Agent shall have been notified by each Bank that such Bank has
executed it, and it shall thereafter be binding upon and inure to the benefit of
the Borrower, the Agent and each of the Banks and their respective successors
and assigns, except that the Borrower shall not have the right to assign its
rights or obligations hereunder or any interest herein.
(b) Any Bank may assign to one or more banks or other institutions
(each an "Assignee") acceptable to the Agent in its reasonable discretion, up to
100% of its Commitments and Loans under this Agreement and the Note, provided
that in no event shall any such assignment under this Section be permitted if
the amount of Commitments and Loans under this Agreement and the Note to be
assigned in such assignment would be less than Five Million Dollars
($5,000,000), and further provided that in no event shall any such assignment be
permitted if after such assignment the assigning Bank's Commitment would be less
than Ten Million Dollars ($10,000,000). The assigning Bank shall timely notify
the Agent of any assignment pursuant to this Section, and with respect to each
assignment, the assigning Bank shall pay the Agent, for the Agent's account, a
fee of Three Thousand Dollars ($3,000). Such Assignee shall assume rights and
obligations, pursuant to an assignment and assumption agreement, reasonably
satisfactory in form and substance to the Agent, executed by such Assignee and
the assigning Bank. Upon execution and delivery of such instruments and payment
by such Assignee to the assigning Bank of an amount equal to the purchase price
agreed between the assigning Bank and such Assignee, such Assignee shall be a
Bank under this Agreement and shall have all the rights and obligations of the
assigning Bank with a Commitment as set forth in such assignment and assumption
agreement, and the assigning Bank shall be released from its obligations
hereunder to a corresponding extent with respect to the assigned interest, and
no further consent or action by any Person shall be required. Upon the
consummation of any assignment pursuant to this paragraph, a new Note or Notes
shall be issued by the Borrower.
(c) Any Bank may at any time sell a participation interest,
without limitation as to amount, to one or more banks or other institutions
(each a "Participant") of all or a proportionate part of all of its rights and
obligations under this Agreement, the Note and the other Loan Documents pursuant
to a participation agreement, provided, that any such participation agreement
may not grant the participant the right to direct the Bank selling the
participation interest as to how to vote on matters under this Agreement except
with respect to voting hereunder regarding (1) changes in the maturity of the
Loans, (2) the amount of the Commitments and (3) decreases in the interest
rates.
(d) The Borrower agrees to provide all assistance requested by any
Bank to enable the Bank either to sell participations in or to make assignments
of its portion of the Loans as permitted by this Section 11.07.
Section 11.08 Chance in Laws; Increased Costs. In the event that any
applicable law, order, regulation, treaty or directive issued by any central
bank or any other applicable governmental authority, or in the governmental or
judicial interpretation or application thereof, or compliance by any Bank with
any request or directive (whether or not having the force of law) issued
subsequent to the date hereof by any central bank or other
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applicable government authority: (i) does or shall subject any Bank to any tax
of any kind whatsoever with respect to this Agreement or any Loans made
hereunder, or change the basis of taxation of payments to such Bank of
principal, fee, interest or any other amount payable hereunder (except for
change in the rate of tax on the overall net income of such Bank imposed by the
jurisdiction in which such Bank maintains its principal office); (ii) does or
shall impose, modify or hold applicable any reserve, capital requirement,
special deposit, compulsory loan or similar requirements against assets held by,
or deposits or other liabilities in or for the accounts of, advances or loans
by, or other credit extended by, or any other acquisition of funds by, any
office of such Bank which are not otherwise included in the determination of the
Base Rate; or (iii) does or shall impose on such Bank any other condition; and
the result of any oft he foregoing is to increase the cost to such Bank of
making, renewing or maintaining any Loan hereunder, or to reduce any amount
receivable in respect thereof or to reduce the rate of return on the capital of
such Bank or any Person controlling such Bank, then, in any such case, the
Borrower shall promptly pay to the Agent for remittance to such Bank, upon its
written demand made through the Agent, any additional amounts necessary to
compensate such Bank for such additional cost or reduced amounts receivable or
rate of return as reasonably determined by such Bank with respect to this
Agreement or the Advances made hereunder. If a Bank becomes entitled to claim
any additional amounts pursuant to this Section 11.08, it shall promptly notify
the Borrower through the Agent of the event of which it has become so entitled.
In conjunction with such notification, such Bank shall provide the Company with
a certificate specifying any additional amounts payable pursuant to the
foregoing sentence, which certificate shall set forth a calculation of such
amounts in sufficient detail and according to reasonable and customary
computation methods. The provisions of this Section 11.08 shall survive the
termination of this Agreement and the payment of all obligations hereunder.
Section 11.09 Notices. Except as specifically provided otherwise in
this Agreement or in any of the other Loan Documents, all notices and the
communications hereunder and thereunder shall be in writing (for requests for
Loans hereunder, notice may be given by telephone, confirmed in writing within
one (1) Business Day) at the addresses and numbers specified in this Agreement
or at such other address or number of which notice thereof is given to the other
parties. Notices in writing shall be delivered personally or sent by certified
or registered mail postage prepaid or by telex or telecopy and shall be deemed
received in the case of personal delivery, when delivered against a receipt
therefor, in the case of mailing, on the fourth Business Day after mailing, in
the case of telex, upon transmittal, and in the case of telecopies, when
transmitted, provided, that the sender of a telex or telecopy must immediately
confirm such transmittal in writing or by telephone. A telephonic notice to the
Agent, as understood by the Agent, will be deemed to be the controlling and
proper notice in the event of a discrepancy with, or failure to receive, a
confirming written notice.
Section 11.10 Usury. Anything herein to the contrary
notwithstanding, the obligations of the Borrower under this Agreement and the
Note shall be subject to the limitation that payments of interest shall not be
required to the extent that receipt thereof would be contrary to provisions of
applicable law limiting rates of interest which may be charged or collected by
the Banks. Any payments of interest in excess of amounts permitted by applicable
law limiting rates of interest shall be applied to reduce the Obligations.
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Section 11.11 Nature of the Banks' Obligations. The obligations of
the Banks hereunder are several and not joint. Nothing contained in this
Agreement and no action taken by the Agent or any Bank pursuant hereto shall be
deemed to create a partnership, association, joint venture or other entity.
Section 11.12 Nature of the Borrower's Obligations. The Obligations
of the Borrower hereunder are joint and several, and the Borrower shall be fully
liable for the full amount of all of the Obligations hereunder until all of such
Obligations have been paid in full and all of the Commitments have terminated.
Section 11.13 Table of Contents; Headings. Any table of contents and
the headings and captions hereunder are for convenience only and shall not
affect the interpretation or construction of this Agreement.
Section 11.14 Severability. The provisions of this Agreement are
intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
Section 11.15 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this Agreement by signing any
such counterpart.
Section 11.16 Integration. The Loan Documents set forth the entire
agreement among the parties hereto relating to the transactions contemplated
thereby and supersede any prior oral or written statements or agreements with
respect to such transactions.
Section 11.17 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (BUT NOT THE
LAW OF CONFLICTS OF LAW) OF THE COMMONWEALTH OF PENNSYLVANIA.
Section 11.18 JURISDICTION; IMMUNITIES. THE BORROWER HEREBY
ABSOLUTELY AND IRREVOCABLY CONSENTS AND SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE COMMONWEALTH OF PENNSYLVANIA OR THE UNITED STATES OF AMERICA FOR
THE EASTERN DISTRICT OF PENNSYLVANIA IN CONNECTION WITH ANY ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES, ANY OTHER
LOAN DOCUMENT, OR THE BANKING RELATIONSHIP GIVING RISE TO THIS AGREEMENT; AND
THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH PENNSYLVANIA OR FEDERAL COURT.
IN ANY SUCH ACTION OR PROCEEDING, THE BORROWER HEREBY ABSOLUTELY AND IRREVOCABLY
WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT, DECLARATION OR OTHER PROCESS
AND HEREBY ABSOLUTELY AND IRREVOCABLY AGREES THAT
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THE SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, POSTAGE
PREPAID, TO THE BORROWER AT ITS ADDRESS SPECIFIED BELOW (OR AT SUCH OTHER
ADDRESS AS THE BORROWER SHALL LAST SPECIFY TO THE AGENT IN WRITING). THE
BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. THE BORROWER FURTHER WAIVES ANY OBJECTION
TO VENUE IN PHILADELPHIA AND ANY OBJECTION TO AN ACTION OR PROCEEDING IN
PHILADELPHIA ON THE BASIS OF FORUM NON CONVENIENS. THE BORROWER FURTHER AGREES
THAT ANY ACTION OR PROCEEDING BROUGHT AGAINST THE AGENT WITH REGARD TO THIS
CREDIT AGREEMENT SHALL BE BROUGHT ONLY IN PENNSYLVANIA OR UNITED STATES FEDERAL
COURT SITTING IN PHILADELPHIA.
NOTHING IN THIS SECTION 11.18 SHALL AFFECT THE RIGHT OF THE AGENT TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
THE AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY
IN THE COURTS OF ANY OTHER JURISDICTIONS.
TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER FROM
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION,
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT, THE NOTE, AND ANY OTHER LOAN DOCUMENT.
Section 11.19 WAIVER OF JURY TRIAL. THE BORROWER HEREBY
(I) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF
RIGHT BY A JURY, AND (II) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT
THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL
BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY THE BORROWER, AND
THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE
AS TO WHICH THE RIGHT OF JURY TRIAL WOULD OTHERWISE ACCRUE. THE AGENT IS HEREBY
AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING
JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS
CONCLUSIVE EVIDENCE OF THE FOREGOING WAIVER OF THE RIGHT TO JURY TRIAL. THE
BORROWER HEREBY CERTIFIES THAT NEITHER THE AGENT NOR ANY REPRESENTATIVE OR AGENT
OF THE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO ANY OF THE UNDERSIGNED
THAT THE AGENT WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION.
-54-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
AMERICAN HOME MORTGAGE CORP.
/s/ Michael Strauss
----------------------------------------
Name: Michael Strauss
Title: President
Address for Notices: FIRST UNION NATIONAL BANK
By: /s/ R. Steven Hall
------------------------------------
Name: R. Steven Hall
Title: Vice President
Address for Notices: COMERICA BANK
500 Woodward - 3256
Detroit, MI 48226-3256
By: /s/ Robert W. Marr
------------------------------------
Name: Robert W. Marr
Title: Account Officer
Address for Notices: NATIONAL CITY BANK OF KENTUCKY
By: /s/ Mary Jo Reiss
------------------------------------
Name: Mary Jo Reiss
Title: Assistant Vice President
<PAGE>
AMENDMENT NO. 1 TO
AMENDED AND RESTATED MORTGAGE WAREHOUSING
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT ("Amendment"), dated as of December 22, 1999, is by
and among AMERICAN HOME MORTGAGE (the "Borrower") and FIRST UNION NATIONAL BANK
(as a Bank and as Agent), NATIONAL CITY BANK OF KENTUCKY and COMERICA BANK
(collectively, the "Banks").
BACKGROUND
----------
A. The Borrower and the Banks are parties to that certain Amended
and Restated Mortgage Warehousing Loan and Security Agreement dated as of
December 6, 1999 (as amended from time to time, the "Agreement").
B. The Borrower has requested that First Union temporarily increase
the Wet Mortgage Loan Sublimit, and First Union's Commitment by $12,000,000.00.
C. The Borrower and the Banks desire to amend the Agreement as set
forth herein.
D. All capitalized terms used herein and not otherwise defined
herein shall have the meanings given to them in the Agreement.
NOW, THEREFORE, the foregoing Background Section being incorporated
by reference, the parties hereto agree as follows:
1. The definition of Wet Mortgage Loan Sublimit is hereby amended,
effective upon the execution hereof by all parties hereto and until the earliest
to occur of (a) an Event of Default, (b) the termination of the Commitments in
full or (c) December 30, 1999 by deleting the reference to $30,000,000 contained
therein and replacing it, with $42,000,000, and deleting the reference to
$39,000,000 contained therein and replacing it with $51,000,000.
2. Effective upon execution hereof by all parties hereto and
delivery to First Union of the Note attached hereto as Exhibit "A," and until
the earliest to occur of (a) an Event of Default, (b) the termination of the
Commitments in full or (c) December 30, 1999, First Union's Commitment shall be
increased from $35,000,000 to $47,000,000 and the total Commitment shall be
increased from $60,000,000 to $72,000,000
3. National City and Comerica, by signing below, each consent to the
increase in the Wet Mortgage Loan Sublimit and the increase in First Union's
Commitment as well as the overall Commitment.
4. The Borrower has taken all corporate action necessary to
authorize the execution, delivery and performance of this Amendment. This
Amendment is, or when executed by the Borrower and the Guarantor delivered to
the Agent together with the Note will be, a valid and legally binding obligation
of the Borrower in accordance with its terms. The Borrower
<PAGE>
hereby ratifies and reaffirms the representations and warranties set forth in
Article V of the Agreement as being true and correct as of the date hereof.
5. Except as amended hereby, all of the terms and conditions of the
Agreement and the obligations of the Borrower under the Notes are ratified and
confirmed, and the Agreement shall continue in full force and effect in
accordance with its terms.
6. This Amendment may be executed in counterparts, all of which
counterparts, when taken together, will constitute the entire agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date set forth above.
AMERICAN HOME MORTGAGE CORP.
By /s/ Michel Strauss
----------------------------------
Its President
----------------------------------
FIRST UNION NATIONAL BANK,
as a Bank, and as Agent
By /s/ Sinclair Gillespie
-------------------------------------
Its Vice President
-------------------------------------
COMERICA BANK
By /s/ Robert W. Marr
-------------------------------------
Its Account Officer
-------------------------------------
NATIONAL CITY BANK OF KENTUCKY
By /s/ Mary Jo Reiss
-------------------------------------
Its Asst. Vice President
-------------------------------------
Consent of Guarantor
Michel Strauss, Guarantor under that certain Guaranty Agreement
dated as of December 6, 1999, hereby consents to the foregoing increase in the
Wet Mortgage Loan Sublimit and expressly acknowledges the increase of the
Commitment and ratifies the continued existence of the Guaranty.
/s/ Michel Strauss
-----------------------------------------
Michel Strauss
<PAGE>
AMENDMENT NO. 2 TO
AMENDED AND RESTATED MORTGAGE WAREHOUSING
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT ("Amendment"), dated as of January 2, 2000, is by and
among AMERICAN HOME MORTGAGE (the "Borrower") and FIRST UNION NATIONAL BANK (as
a Bank and as Agent), NATIONAL CITY BANK OF KENTUCKY and COMERICA BANK
(collectively, the "Banks").
BACKGROUND
A. The Borrower and the Banks are parties to that certain Amended
and Restated Mortgage Warehousing Loan and Security Agreement dated as of
December 6, 1999 (as amended from time to time, the "Agreement").
B. The Borrower has requested that certain modifications be made to
the Agreement to accommodate late funding of Loans by the Agent.
C. The Borrower and the Banks desire to amend the Agreement as set
forth herein.
D. All capitalized terms used herein and not otherwise defined
herein shall have the meanings given to them in the Agreement.
NOW, THEREFORE, the foregoing Background Section being incorporated
by reference, the parties hereto agree as follows:
1. A new Section 2.04(c) is hereby added to the Agreement as
follows:
"(c) The Agent may, subject to Section 2.04(b), above, advance
its owns funds for Loans requested by the Borrower not later than
4:00 p.m. prevailing New York time."
2. This Amendment shall be effective upon execution hereof by all
parties hereto and delivery to First Union of the First Amendment to Custodial
Agreement attached hereto as Exhibit "A."
3. The Borrower has taken all corporate action necessary to
authorized the execution, delivery and performance of this Amendment. This
Amendment is, or when executed by the Borrower and the Guarantor delivered to
the Agent together with the Note will be, a valid and legally binding obligation
of the Borrower in accordance with its terms. The Borrower hereby ratifies and
reaffirms the representations and warranties set forth in Article V of the
Agreement as being true and correct as of the date hereof.
4. Except as amended hereby, all of the terms and conditions of the
Agreement and the obligations of the Borrower under the Notes are ratified and
confirmed, and the Agreement shall continue in full force and effect in
accordance with its terms.
<PAGE>
5. This Amendment may be executed in counterparts, all of which
counterparts, when taken together, will constitute the entire agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date set forth above.
AMERICAN HOME MORTGAGE CORP.
By /s/ Michael Strauss
------------------------------------
Its President
------------------------------------
FIRST UNION NATIONAL BANK,
as a Bank, and as Agent
By /s/ Mark Mendenhall
------------------------------------
Its Vice President
------------------------------------
COMERICA BANK
By /s/ Robert W. Marr
------------------------------------
Its Account Officer
------------------------------------
NATIONAL CITY BANK OF KENTUCKY
By /s/ Mary Jo Reiss
------------------------------------
Its Asst. Vice President
------------------------------------
<PAGE>
AMENDMENT NO. 3 TO
AMENDED AND RESTATED MORTGAGE WAREHOUSING
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT ("Amendment"), dated as of January 31, 2000, is by
and among AMERICAN HOME MORTGAGE (the "Borrower") and FIRST UNION NATIONAL BANK
(as a Bank and as Agent), NATIONAL CITY BANK OF KENTUCKY and COMERICA BANK
(collectively, the "Banks").
BACKGROUND
----------
A. The Borrower and the Banks are parties to that certain Amended
and Restated Mortgage Warehousing Loan and Security Agreement dated as of
December 6,1999 (as amended from time to time, the "Agreement").
B. The Borrower has requested that First Union temporarily increase
the Wet Mortgage Loan Sublimit, and First Union's Commitment by $15,000,000.00.
C. The Borrower and the Banks desire to amend the Agreement as set
forth herein.
D. All capitalized terms used herein and not otherwise defined
herein shall have the meanings given to them in the Agreement.
NOW, THEREFORE, the foregoing Background Section being incorporated
by reference, the parties hereto agree as follows:
1. Subject to Paragraph 5 hereof, the definition of Wet Mortgage
Loan Sublimit is hereby amended, effective upon the execution hereof by all
parties hereto and the delivery by Borrower of its Second Replacement Note and
until the earliest to occur of (a) an Event of Default, (b) the termination of
the Commitments in full, (c) the closing a permanent increase in the total
Commitment or (d) March 17, 2000 as follows:
"Wet Mortgage Loan Sublimit" means fifty percent (50%) of the
Commitment; however, the Wet Mortgage Loan Sublimit shall increase to
sixty-five percent (65%) of the Commitment for the first five (5) Business
Days and the last five (5) Business Days of each month but may not exceed
fifty percent (50%) of the Commitment for more than ten (10) Business Days
each month.
2. Subject to Paragraph 5 hereof, effective upon execution hereof by
all parties hereto and delivery to First Union of the Second Replacement Note
attached hereto as Exhibit "A" and until the earliest to occur of (a) an Event
of Default, (b) the termination of the Commitments in full or (c) March 17,
2000, First Union's Commitment shall be increased from $35,000,000 to
$50,000,000 and the total Commitment shall be increased from $60,000,000 to
$75,000,000.
<PAGE>
3. National City and Comerica, by signing below, each consent to the
increase in the Wet Mortgage Loan Sublimit and the increase in First Union's
Commitment as well as the overall Commitment.
4. The Borrower has taken all corporate action necessary to
authorize the execution, delivery and performance of this Amendment. This
Amendment is, or when executed by the Borrower and the Guarantor delivered to
the Agent together with the Note will be, a valid and legally binding obligation
of the Borrower in accordance with its terms. The Borrower hereby ratifies and
reaffirms the representations and warranties set forth in Article V of the
Agreement as being true and correct as of the date hereof.
5. This temporary increase in First Union's Commitment shall cease
to be effective if the Borrower does not deliver Borrower prepared financial
statements as of November 30, 1999 and December 31, 1999 to the Agent on or
before February 4, 2000.
6. Except as amended hereby, all of the terms and conditions of the
Agreement and the obligations of the Borrower under the Notes are ratified and
confirmed, and the Agreement shall continue in full force and effect in
accordance with its terms.
7. This Amendment may be executed in counterparts, all of which
counterparts, when taken together, will constitute the entire agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date set forth above.
AMERICAN HOME MORTGAGE CORP.
By /s/ Michel Strauss
-------------------------------------
Its President
-------------------------------------
FIRST UNION NATIONAL BANK,
as a Bank, and as Agent
By /s/
-------------------------------------
Its Vice President
-------------------------------------
COMERICA BANK
By /s/ Robert W. Marr
-------------------------------------
Its Account Officer
-------------------------------------
NATIONAL CITY BANK OF KENTUCKY
By /s/ Mary Jo Reiss
-------------------------------------
Its Asst. Vice President
-------------------------------------
Consent of Guarantor
Michel Strauss, Guarantor under that certain Guaranty Agreement
dated as of December 6, 1999, hereby consents to the foregoing increase in the
Wet Mortgage Loan Sublimit and expressly acknowledges the increase of the
Commitment and ratifies the continued existence of the Guaranty.
/s/ Michel Strauss
-----------------------------------------
Michel Strauss
<PAGE>
AMENDMENT NO. 4 TO
AMENDED AND RESTATED MORTGAGE WAREHOUSING
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 4 ("Amendment"), dated as of February 29, 2000,
is by and among AMERICAN HOME MORTGAGE (the "Borrower"), MARINA MORTGAGE
COMPANY, INC. ("Marina") and FIRST UNION NATIONAL BANK (as a Bank and as Agent),
NATIONAL CITY BANK OF KENTUCKY and COMERICA BANK (collectively, the "Banks").
BACKGROUND
----------
A. The Borrower and the Banks are parties to that certain Amended
and Restated Mortgage Warehousing Loan and Security Agreement dated as of
December 6, 1999 (as amended from time to time, the "Agreement").
B. The Borrower has requested that the Banks add Marina as a
"Borrower" under the terms of the Agreement.
C. The Borrower and the Banks desire to amend the Agreement as set
forth herein and add Marina as a Borrower and, Marina hereby joins in the
Agreement as a Borrower for all purposes.
D. All capitalized terms used herein and not otherwise defined
herein shall have the meanings given to them in the Agreement.
NOW, THEREFORE, the foregoing Background Section being incorporated
by reference, the parties hereto agree as follows:
1. From and after the date hereof, Marina hereby: (a) shall be,
become and is a Borrower under, in accordance with and subject to the terms and
conditions of the Agreement; (b) joins in and agrees to be bound by and to
perform in accordance with the terms of the Agreement; (c) confirms that Marina
and the Borrower are jointly and severally liable to Banks for all the
Liabilities; (d) hereby pledges, transfers, assigns and delivers and grants to
Banks a first lien on and security interest in and to the Collateral; and (e)
confirms the truth and accuracy of the representations and warranties in the
Agreement as of the date hereof.
2. Each and every reference to the term "Borrower" in the Agreement
shall be deemed to include Marina from and after the effective date of this
Amendment.
3. The effectiveness of this Amendment is conditioned upon the
Banks' receipt of the following:
a. This Amendment No. 4 duly executed by Marina and Borrower;
b. A Note payable to each of the Banks in the form attached hereto
as Exhibit "A" duly executed by Marina and Borrower;
<PAGE>
c. A certificate of the Secretary or Assistant Secretary of Marina,
dated the date hereof, attesting to the certificate of incorporation,
by-laws or operating agreement of Marina and all amendments thereto, and
to all corporate actions taken by Marina, including, without limitation,
resolutions of its board of directors, authorizing the execution, delivery
and performance of the Loan Documents, and each other document to be
delivered by Marina pursuant to the Loan Documents;
d. A certificate of the Secretary or Assistant Secretary of Marina,
dated the date hereof, certifying the names and true signatures of the
officers of Marina authorized to sign the Loan Documents, and the other
documents to be delivered by Marina under the Loan Documents including,
without limitation, each loan request;
e. A certificate, dated reasonably near the date hereof, from the
Secretary of State (or other appropriate official) of Marina's state of
incorporation or formation certifying as to the due incorporation and good
standing of Marina and certificates, dated within one month of the date
hereof, from the Secretary of State (or other appropriate official) of
each other jurisdiction where Marina is required to be qualified to
conduct business or where such qualification is necessary to enforce any
Mortgage Loan, certifying that Marina is duly qualified to do such
business and is in good standing in such state;
f. (1) To the extent requested by the Agent, duly executed financing
statements (UCC-1) to be filed under the Uniform Commercial Code of all
jurisdictions necessary or, in the opinion of the Agent, desirable to
perfect the Liens created by this Agreement, duly executed copies of the
termination statements (UCC-3) to be filed under the Uniform Commercial
Code of all jurisdictions necessary, or in the opinion of the Agent,
desirable to terminate any Liens in favor of any party other than the
Agent; and (2) Uniform Commercial Code searches identifying all of the
financing statements on file with respect to the Borrower;
g. Asset, lien, Uniform Commercial Code, and judicial searches dated
as of a date reasonably near the date hereof;
h. The Agent shall have received a certificate signed by the
Presidents of Borrower and Marina dated the date hereof stating that:
(i) The representations and warranties contained in this
Agreement and in each of the other Loan Documents are correct on and as of
the Closing Date as though made on and as of such date; and
(ii) No Default or Event of Default has occurred and is
continuing;
i. Copies of Marina's articles of incorporation and corporate
by-laws;
j. Agreement and Plan of Merger dated as of December 29, 1999; and
2
<PAGE>
k. Such other approvals, opinions or documents as the Agent may
reasonably request;
4. The Borrower and Marina have taken all corporate action necessary
to authorize the execution, delivery and performance of this Amendment. This is,
or when executed by the Borrower, Marina and the Guarantor delivered to the
Agent together with the Notes will be, a valid and legally binding obligation of
the Borrower in accordance with its terms. Borrower and Marina each hereby
ratifies and reaffirms the representations and warranties set forth in Article V
of the Agreement as being true and correct as of the date hereof.
5. Except as amended hereby, all of the terms and conditions of the
Agreement and the obligations of the Borrower under the Notes are ratified and
confirmed, and the Agreement shall continue in full force and effect in
accordance with its terms.
6. This Amendment may be executed in counterparts, all of which
counterparts, when taken together, will constitute the entire agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date set forth above.
AMERICAN HOME MORTGAGE CORP.
By /s/ Michael Strauss
-------------------
Michael Strauss
Its President
MARINA MORTGAGE COMPANY, INC.
By /s/ Michael Strauss
-------------------
Michael Strauss
Its Chairman
FIRST UNION NATIONAL BANK,
as a Bank, and as Agent
By /s/___________________
Its Vice President
COMERICA BANK
By /s/ Robert W. Marr
-------------------
Robert W. Marr
Its Account Officer
3
<PAGE>
NATIONAL CITY BANK OF KENTUCKY
By /s/ Mary Jo Reiss
-----------------
Mary Jo Reiss
Its Asst. Vice President
Consent of Guarantor
Michel Strauss, Guarantor under that certain Guaranty Agreement
dated as of December 6, 1999, hereby consents to the addition of Marina Mortgage
Company, Inc. and ratifies the continued existence of the Guaranty.
/s/ Michael Strauss
----------------------
Michael Strauss
4
<PAGE>
AMENDMENT NO. 5 TO
AMENDED AND RESTATED MORTGAGE WAREHOUSING
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT ("Amendment"), dated as of March 17, 2000, is by and
among AMERICAN HOME MORTGAGE (the "Borrower") and FIRST UNION NATIONAL BANK (as
a Bank and as Agent), NATIONAL CITY BANK OF KENTUCKY and COMERICA BANK
(collectively, the "Banks").
BACKGROUND
A. The Borrower and the Banks are parties to that certain Amended
and Restated Mortgage Warehousing Loan and Security Agreement dated as of
December 6, 1999 (as amended from time to time, the "Agreement").
B. On January 31, 2000, the Borrower requested that First Union
temporarily increase the Wet Mortgage Loan Sublimit, and First Union's
Commitment by $15,000,000.00. First Union agreed to this request. However, this
temporary increase is expiring and the Borrower requests that it be extended.
C. The Borrower and the Banks desire to amend the Agreement as
set forth herein.
D. All capitalized terms used herein and not otherwise defined
herein shall have the meanings given to them in the Agreement.
NOW, THEREFORE, the foregoing Background Section being incorporated
by reference, the panics hereto agree as follows:
1. The definition of Wet Mortgage Loan Sublimit is hereby amended,
effective upon the execution hereof by all parties hereto and until the earliest
to occur of (a) an Event of Default, (b) the termination of the Commitments in
full, (c) the closing a permanent increase in the total Commitment or (d) April
30, 2000 as follows:
"Wet Mortgage Loan Sublimit" means fifty percent (50%) of the
Commitment; however, the Wet Mortgage Loan Sublimit shall increase
to sixty-five percent (65%) of the Commitment for the first five (5)
Business Days and the last five (5) Business Days of each month but
may not exceed fifty percent (50%) of the Commitment for more than
ten (10) Business Days each month.
2. Effective upon execution hereof by all parties hereto and until
the earliest to occur of (a) an Event of Default, (b) the termination of the
Commitments in full or (c) April 30, 2000, First Union's Commitment shall remain
increased from $35,000,000 to $50,000,000 and the total Commitment shall be
increased from $60,000,000 to $75,000,000.
<PAGE>
3. National City and Comerica, by signing below, each consent to the
increase in the Wet Mortgage Loan Sublimit and the increase in First Union's
Commitment as well as the overall Commitment.
4. The Borrower has taken all corporate action necessary to
authorize the execution, delivery and performance of this Amendment. This
Amendment is, or when executed by the Borrower and the Guarantor delivered to
the Agent together with the Note will be, a valid and legally binding obligation
of the Borrower in accordance with its terms. The Borrower hereby ratifies and
reaffirms the representations and warranties set forth in Article V of the
Agreement as being true and correct as of the date hereof.
5. Except as amended hereby, all of the terms and conditions of the
Agreement and the obligations of the Borrower under the Notes are ratified and
confirmed, and the Agreement shall continue in full force and effect in
accordance with its terms.
6. This Amendment may be executed in counterparts, all of which
counterparts, when taken together, will constitute the entire agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date set forth above.
AMERICAN HOME MORTGAGE CORP.
By /s/ Michael Strauss
----------------------------------
Its President
----------------------------------
FIRST UNION NATIONAL BANK,
as a Bank, and as Agent
By /s/ Mark Medenhall
-----------------------------------
Its Vice President
COMERICA BANK
By /s/ Robert W. Marr
----------------------------------
Its Account Officer
----------------------------------
-2-
<PAGE>
NATIONAL CITY BANK OF KENTUCKY
By /s/ Mary Jo Reiss
----------------------------------
Its Assistant Vice President
----------------------------------
Consent of Guarantor
Michael Strauss, Guarantor under that certain Guaranty Agreement
dated as of December 6, 1999, hereby consents to the foregoing extension of the
increase in the Wet Mortgage Loan Sublimit and expressly acknowledges the
increase of the Commitment and ratifies the continued existence of the Guaranty.
/s/ Michael Strauss
-----------------------------------
Michael Strauss
-3-
LEASE
47TH AND 6TH ASSOCIATES L.L.C.
as Landlord,
to
AMERICAN HOME MORTGAGE HOLDINGS, INC.
as Tenant
Date: December 8, 1999
Premises:
114 West 47th Street
New York, New York 10036
Neither this draft lease, nor any other draft lease, nor any correspondence,
writings, communications or other documents delivered or exchanged between
Landlord and Tenant shall be deemed to be an offer or agreement to lease or to
enter into a lease, on the terms set forth herein or otherwise and no lease, or
agreement to lease, shall be binding on either party except and until as set
forth in Section 32.11 of this draft.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. PREMISES; TERM.....................................................1
ARTICLE 2. COMMENCEMENT OF TERM...............................................1
ARTICLE 3. RENT...............................................................3
ARTICLE 4. ADJUSTMENT OF RENT, ESCALATION.....................................5
ARTICLE 5. USE...............................................................13
ARTICLE 6. SERVICES AND EQUIPMENT............................................14
ARTICLE 7. ELECTRIC..........................................................16
ARTICLE 8. ASSIGNMENT, SUBLETTING, MORTGAGING................................19
ARTICLE 9. SUBORDINATION, NON-DISTURBANCE, ESTOPPEL CERTIFICATE..............23
ARTICLE 10. ENTRY; RIGHT TO CHANGE
PUBLIC PORTIONS OF THE BUILDING...................................25
ARTICLE 11. LAWS, ORDINANCES,
REQUIREMENTS OF PUBLIC AUTHORITIES................................26
ARTICLE 12. REPAIRS...........................................................27
ARTICLE 13. ALTERATIONS; FIXTURES.............................................28
ARTICLE 14. LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS..................32
ARTICLE 15. NO LIABILITY OF LANDLORD..........................................32
ARTICLE 16. INSURANCE.........................................................34
ARTICLE 17. DAMAGE BY FIRE OR OTHER CAUSE.....................................35
ARTICLE 18. CONDEMNATION......................................................37
ARTICLE 19. BANKRUPTCY........................................................38
ARTICLE 20. DEFAULTS AND REMEDIES; WAIVER OF REDEMPTION.......................40
ARTICLE 21. COVENANT OF QUIET ENJOYMENT.......................................42
-i-
<PAGE>
ARTICLE 22. SURRENDER OF PREMISES.............................................42
ARTICLE 23. DEFINITION OF LANDLORD............................................43
ARTICLE 24. NOTICES...........................................................43
ARTICLE 25. ARBITRATION.......................................................44
ARTICLE 26. RULES AND REGULATIONS.............................................44
ARTICLE 27. BROKER............................................................45
ARTICLE 28. ZONING RIGHTS.....................................................45
ARTICLE 29. SECURITY DEPOSIT..................................................46
ARTICLE 30. WINDOW CLEANING...................................................48
ARTICLE 31. CONSENTS..........................................................48
ARTICLE 32. MISCELLANEOUS.....................................................49
ARTICLE 33. SUCCESSORS AND ASSIGNS............................................52
ARTICLE 34. HAZARDOUS MATERIALS...............................................52
ARTICLE 35. PARTNERSHIP TENANT................................................52
ARTICLE 36. SUBMISSION TO JURISDICTION........................................54
EXHIBIT A FLOOR PLAN
EXHIBIT B INTENTIONALLY OMITTED
EXHIBIT C CLEANING SPECIFICATIONS
EXHIBIT D RULES AND REGULATIONS
EXHIBIT D-1 RULES AND REGULATIONS FOR
TENANT ALTERATIONS
EXHIBIT E LIST OF APPROVED CONTRACTORS
EXHIBIT E-1 BUILDING STANDARDS
EXHIBIT F LETTER OF CREDIT
EXHIBIT G SAMPLE INSURANCE CERTIFICATE
-ii-
<PAGE>
INDENTURE OF LEASE, dated as of this ____ day of December, 1999,
between 47TH AND 6TH ASSOCIATES L.L.C., a New York limited liability company,
with offices at 1155 Avenue of the Americas, New York, New York 10036
(hereinafter referred to as "Landlord") and AMERICAN HOME MORTGAGE HOLDINGS,
INC., a Delaware corporation having offices at 12 East 49 Street, New York, New
York 10017 (hereinafter referred to as "Tenant").
W I T N E S S E T H:
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ARTICLE 1.
PREMISES; TERM
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1.1 Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord Room 1716-25 (as shown on the floor plans annexed hereto as Exhibit A
and made a part hereof) in the building known as 114 West 47th Street,
hereinafter called the "Building," in the Borough of Manhattan, City, County and
State of New York, (herein called the "Premises" or the "Demised Premises.")
Floor references are designated rental floor numbers, there being no rental
floor designated as the 13th floor.
1.2 The Demised Premises are leased, together with the
appurtenances, including without limitation the right to use in common with
others, the lobbies, elevators and other public portions of the Building.
TO HAVE AND TO HOLD unto Tenant, its successors and permitted assigns,
for the term to commence on a date (the "Commencement Date") which is the
earlier to occur of:
(i) the date Landlord's Work is Substantially Complete as
provided in Section 2.1, or
(ii) the date Tenant or anyone claiming by, under or through
Tenant shall first occupy any part of the Demised Premises for any
purpose including the preparation of the same for Tenant's initial
occupancy;
and shall end on November 30, 2006 ("Expiration Date") unless the term shall
terminate sooner pursuant to any of the terms of this Lease or pursuant to law,
YIELDING AND PAYING the rents and additional rents hereinafter set forth, all on
the covenants, conditions and agreements hereinbefore and hereinafter stated.
ARTICLE 2.
COMMENCEMENT OF TERM
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2.1 The term of this Lease and the payment of rent hereunder
shall commence on the Commencement Date. Landlord shall give Tenant ten (10)
days' prior written notice of the anticipated date of substantial completion of
the work to be performed by Landlord in the
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deemed substantially complete when Landlord has Substantially Completed (as
defined below) Landlord's Work.
Landlord, at its sole cost and expense, shall perform the following
work in or to the Demised Premises in order to prepare the same for Tenant's
occupancy (collectively, "Landlord's Work"), using materials of
Building-standard quality, color and design:
(i) Paint the Demised Premises;
(ii) Remove the existing pantry, cabinets and appliances per the
plan attached hereto as Exhibit B and install carpeting in the pantry
area;
(iii) Steam clean the existing carpet;
(iv) Broom clean any other flooring; and
(v) Re-key locks on outer door.
Landlord shall use reasonable efforts (without being obligated to
employ overtime labor or to incur any extraordinary expenses in connection
therewith, and subject to delays caused by Tenant or by force majeure) to
complete Landlord's Work in a timely manner. Tenant acknowledges, however, that
the performance by Landlord of Landlord's Work may disturb Tenant's quiet
enjoyment of, and access to, the Demised Premises. Tenant hereby accepts such
conditions as modifications and limitations on its right to use the Demised
Premises and hereby waives any and all claims for damages to its property or its
business which may be caused by the effects of any such work.
If there is a delay in the Substantial Completion of Landlord's Work,
or any portion thereof, due to (a) any act or omission of Tenant, its
contractors, sub-contractors, architects, space designers, agents or employees,
including, without limitation, delays due to changes in Landlord's Work, or any
other work to be done by Landlord or delays in submission of information,
approving working drawings or estimates or giving authorizations or approvals,
(b) any additional time for completion of such work which may be required
because of the inclusion in such work of any work which may hereinafter be
referred to in this Lease as "Additional Work" or (c) the noncompletion by
Landlord of any work, whether in connection with the layout or finish of the
Demised Premises or otherwise, which Landlord is not required to do by the terms
hereof until after the Commencement Date; then Landlord's Work, or such portion,
shall be deemed Substantially Complete on the date when Landlord's Work or such
portion would have been Substantially Complete but for such delay even though
work to be done by Landlord has not been commenced or completed. Any additional
cost to Landlord to complete Landlord's Work occasioned by such delay shall be
paid as additional rent upon demand. For the purposes of the preceding sentence
"additional cost to Landlord" shall mean the total cost incurred in excess of
the aggregate cost which Landlord would have incurred to complete Landlord's
Work if there had been no such delay.
2.2 The taking of possession of the Demised Premises shall be
deemed an acceptance of the same by Tenant and shall be deemed Substantial
Completion by Landlord of all of Landlord's Work for the purposes of determining
the Commencement Date. For the
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purposes of this Article, the work to be done by Landlord shall be deemed
"Substantially Complete" even though minor details or adjustments which shall
not materially interfere with Tenant's use and occupancy of the Demised Premises
may not then have been completed, but which work Landlord agrees, will
thereafter be completed. In the event that there shall be any such minor details
or adjustments in connection with Landlord's Work (collectively, "Punch List
Items"), Tenant shall give written notice to Landlord of such Punch List Items
within twenty (20) days after the Commencement Date. Landlord shall use
reasonable efforts (without being obligated to employ overtime labor or to incur
any extraordinary costs in connection therewith) to complete such Punch List
Items within thirty (30) business days after Landlord's receipt of such notice.
Landlord shall have no obligation to perform any work in the Demised Premises
other than Landlord's Work.
2.3 Promptly after the Commencement Date, Landlord and Tenant
will execute an agreement in recordable form, hereafter referred to as the
"Commencement Date Agreement" stating among other things the Commencement Date
and the Expiration Date of the term of this Lease. Tenant's failure or refusal
to sign the same shall in no event affect Landlord's designation of the
Commencement Date.
2.4 Tenant expressly waives any right to rescind this Lease under
Section 223-a of the New York Real Property Law or under any present or future
statute of similar import then in force and further expressly waives the right
to recover any damages, direct or indirect, which may result from Landlord's
failure to deliver possession of the Demised Premises on the Commencement Date.
The Commencement Date shall not be postponed or delayed by reason of or arising
out of delays occasioned by Tenant as described herein. Tenant agrees that the
provisions of this Article and Article 3 are intended to constitute "an express
provision to the contrary" within the meaning of said Section 223-a.
ARTICLE 3.
RENT
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3.1 During the term of this Lease, Tenant covenants and agrees to
pay to Landlord a fixed minimum rent, inclusive of electricity (the "Fixed
Rent") in lawful money of the United States, at an annual rate of:
(i) Three Hundred Seventy Thousand Three Hundred and 00/100
Dollars ($370,300.00) per annum ($30,858.33 per month) from the
Commencement Date until and including the last day of the month in
which occurs the day preceding the third (3rd) anniversary of the
Commencement Date; and
(ii) Three Hundred Eighty Four Thousand Three Hundred and 00/100
Dollars ($384,300.00) Dollars per annum ($32,025.00 per month) from
the first day of the month following the month in which occurs the day
preceding the third (3rd) anniversary of the Commencement Date and the
Expiration Date.
Fixed Rent shall be payable in equal monthly installments in advance
on the first day of each month during the term of this Lease at the office of
Landlord or such other place as
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Landlord may designate, without any setoff or deduction whatsoever (except as
otherwise expressly set forth herein), the first installment to be paid on the
delivery of this Lease. All Fixed Rent and additional rent payable under this
Lease shall be paid by check of Tenant drawn on a bank which is a member of the
New York Clearing House Association. Failure to pay rent by such a check shall
be deemed a material default by Tenant under this Lease.
3.2. All adjustments of rent, costs, charges and expenses which
Tenant assumes, agrees or is obligated to pay to Landlord pursuant to this Lease
shall be deemed additional rent which Tenant covenants to pay when due. In the
event of nonpayment, Landlord shall have all the rights and remedies with
respect thereto as is herein provided for in case of nonpayment of Fixed Rent.
All rent shall be payable by Tenant to Landlord without offset, reduction,
counterclaim and/or deduction (except as otherwise expressly set forth herein).
3.3. If any of the rent payable under the terms of this Lease
shall be or become uncollectible, reduced or required to be refunded because of
any rent control, federal, state or local law, regulation, proclamation or other
legal requirement, Tenant shall enter into such agreement(s) and take such other
steps (without additional expense to Tenant) as Landlord may request and as may
be legally permissible to permit Landlord to collect the maximum rent which,
from time to time, during the continuance of such legal rent restriction may be
legally permissible (and not in excess of the amounts then reserved therefor
under this Lease). Upon the termination of such legal rent restriction, (a) the
Fixed Rent and additional rent shall become and shall thereafter be payable in
accordance with the amounts reserved herein for the periods following such
termination and (b) Tenant shall promptly pay in full to Landlord, unless
expressly prohibited by law, an amount equal to (i) rentals which would have
been paid pursuant to this Lease but for such legal rent restriction less (ii)
the rent actually paid by Tenant during the period such legal rent restriction
was in effect.
3.4. If any installment of Fixed Rent or additional rent is not
paid within five (5) days of the date due, Tenant shall also pay Landlord
interest thereon from the due date until paid at 2% per annum above the then
published prime interest rate upon unsecured loans charged by Chemical Bank (or
The Chase Manhattan Bank, N.A. if Chemical Bank shall not then have an announced
prime rate) on loans of 90 days (herein such announced rate plus 2% per annum
being herein called the "Prime Rate"). The term "rents" shall include all Fixed
Rent, additional rent or other charges payable under this Lease, for nonpayment
of which Landlord shall have the same remedies as for a default in the payment
of Fixed Rent. If Tenant shall be more than ten days late in making any payment
due under this Lease more than three times in any twelve month period, Landlord
shall in addition to the remedies provided for in this Section 3.4, be entitled
to demand from Tenant, and Tenant agrees promptly to deposit with Landlord,
additional cash lease security in the amount of one month's then current annual
Fixed Rent, to be held and applied in accordance with the terms of Article 29
hereof
3.5. Anything to the contrary provided for hereinabove
notwithstanding, so long as Tenant shall not be in default of any of the terms
and provisions of this Lease beyond any applicable notice or grace periods,
Tenant shall have no obligation to pay a portion of the Fixed Rent provided for
hereinabove in the amount of $29,166.67 per month for that sixty (60) day period
of time commencing on the Commencement Date. Tenant shall, however, continue to
be obligated to pay the ERIF and any and all additional rent (including, but not
limited to, additional
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rent payable under Article 4 and Article 7 hereof) and
other charges payable by Tenant hereunder in accordance with the terms of this
Lease commencing on the Commencement Date.
ARTICLE 4.
ADJUSTMENT OF RENT, ESCALATION
4.1. The annual rental rate hereinbefore set forth shall be
adjusted from time to time as in this Article provided to reflect the decrease
or increase in Landlord's expenses incurred in operating the Building and Tenant
shall pay such rental, as adjusted pursuant to the provisions hereof, as
hereinbefore provided. Landlord shall have all of the rights and remedies for
Tenant's failure to make a payment under this Article as Landlord has for
Tenant's failure to pay Fixed Rent.
A. For the purposes of the Article:
(1) "Base Tax" shall mean the Taxes, as finally determined, for
the Base Tax Year.
(2) "Base Tax Year" shall mean the fiscal year July 1, 1999 to
June 30, 2000, inclusive.
(3) "Tax Year" shall mean each successive New York City real
estate fiscal year commencing on July 1st and expiring on June 30th. If the
present use of July 1 to June 30 real estate tax year shall change, then such
changed tax year shall be used with appropriate adjustment for the transition.
(4) "Taxes" shall mean (a) the product of the total assessed
valuation (all references in this Article to "assessed valuation" shall be
deemed to refer to the lesser of the so-called transitional value assessed
valuation and the actual assessed valuation) of the Land and Building of which
the Demised Premises are a part (without taking into consideration any
abatement, exemption and/or deferral because of the Industrial Commercial
Development Incentive Program ("ICIP") applicable to such Land and Building) for
any Tax Year multiplied by the applicable real estate tax rate for such Tax Year
plus (b) any assessments, special and extraordinary assessments, and government
levies imposed upon or with respect to the Land and Building (exclusive of any
ICIP deferrals) and (c) any franchise, income, profit, value added, use, or
other tax imposed in addition to, in whole or partial substitution for, or in
lieu of an increase (in whole or part) in such real estate taxes, whether due to
a change in the method of taxation or otherwise (exclusive of any ICIP
deferrals), it being understood and agreed that the portion of the Taxes so
computed under clause (a) above may be a different amount than the real estate
taxes actually payable by Landlord in any Tax Year because of the ICIP program.
Except as set forth in clause (c) above, Taxes shall not include (i) any taxes
on Landlord's income, (ii) franchise taxes, or (iii) estate or inheritance taxes
imposed upon Landlord. Provided that Tenant shall have paid Tenant's Percentage
of the Taxes in question in a timely manner, such Taxes shall exclude late fees
or penalties imposed upon Landlord as a result of Landlord's late payment of
such Taxes.
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(5) "Expense Year" shall mean the 2000 calendar year and each
subsequent calendar year.
(6) "Tenant's Percentage" shall mean for purposes of this Lease
and all calculations in connection therewith one and 25/100 percent (1.25%)
which has been computed on the basis of a fraction, the numerator of which is
the agreed rentable square foot area of the Demised Premises and the denominator
of which is the agreed rentable square foot area of the Building, both as set
forth below. The parties agree that the agreed rentable square foot area of the
Demised Premises shall be deemed to be 7,000 square feet, and that the agreed
rentable square foot area of the Building shall be deemed to be 561,352 square
feet.
(7) "Expense Base" shall mean the Expenses (as hereinafter
defined) for the 2000 Expense Year.
(8) "Expenses" shall mean the total of all the costs and
expenses incurred or borne by Landlord with respect to the operation and
maintenance of the Land and Building and all appurtenances thereto, and the
services provided to the tenants thereof, including, but not limited to, the
costs and expenses incurred for and with respect to: electricity (other than
electricity purchased by or for individual tenants for consumption in such
tenants' space); steam and any other fuel, water rates and sewer charges; air
conditioning, ventilation and heating; metal, elevator and elevator cab, lobby,
sidewalk and plaza maintenance; equipment, services and personnel for protection
and security; messenger service; lobby decoration and interior and exterior
landscape maintenance; sprinkler maintenance and alarm service; maintenance,
repairs, replacements, and improvements (except as otherwise expressly provided
below), which are appropriate for the continued operation of the Building as a
first-class office building in Manhattan; rental (or depreciation) of vacuums,
window washing rigs and other equipment used in cleaning and maintenance;
painting and decoration of non-tenant areas; cleaning and window washing
(interior and exterior) of the Building by contract or otherwise; garbage and
trash removal; premiums for fire and extended coverage insurance, special
extended coverage insurance, owner's protective insurance, and other casualty
insurance coverage, boiler and machinery insurance, sprinkler, apparatus
insurance, public liability and umbrella liability insurance, property damage
insurance, rent, or rental value insurance, plate glass insurance, environmental
peril insurance and any other insurance which Landlord may deem necessary or
which is required by the lessor under any superior lease and/or the holder of
any superior mortgage; supplies, wages, salaries, disability benefits, pensions,
hospitalization, retirement plans, and group insurance and other direct or
indirect expenses respecting employees of the Landlord and Landlord's
contractors up to and including the grade of building manager; uniforms and
working clothes for such employees and the cleaning thereof; expenses imposed on
Landlord pursuant to laws, orders, rules, regulations, and other legal
requirements or pursuant to any collective bargaining agreement with respect to
such employees; worker's compensation insurance, payroll, social security,
unemployment, and other similar taxes with respect to such employees; a
bookkeeper and an accountant; telephone and other Building office expenses;
professional and consulting fees, including legal and auditing fees; association
fees or dues; computer time; the expenses, including payments to attorneys,
experts and appraisers, incurred by Landlord in connection with any application,
proceeding or settlement wherein Landlord obtains or seeks to obtain reduction
or refund of Taxes; an annual fee for management of the Building in the sum of
$842,000. Said management fee shall be increased for each Expense
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Year, by adding to $842,000 an amount equal to the product of $842,000 and the
percentage of increase in the Expenses for such Expense Year over the Base
Expense, both exclusive of such management fees.
Expenses shall exclude or have deducted from them, as the case may be
and as shall be appropriate:
(i) leasing commissions;
(ii) salaries of personnel above the grade of building manager
(except for personnel employed by Landlord or by any parent, affiliate,
subsidiary or successor of Landlord (collectively, "Landlord Entities")
which provides services typically performed by a third party in first
class office buildings such as cleaning, security and messenger services
to the Building and/or other buildings owned by Landlord or other
Landlord Entities (provided that the cost of such services, including
the salaries, fringe benefits, payroll taxes, and other compensation for
such personnel, does not exceed competitive market rates charged by
independent third parties for services comparable to such services being
provided at the Building) in which case such salaries, fringe benefits,
payroll taxes and compensation shall be equitably apportioned among all
such buildings);
(iii) expenditures for capital improvements except (a) those
which under generally applied real estate practice are expenses or
regarded as deferred costs, (b) capital expenditures or expenses for
equipment designed to result in savings or reduction of Expense (e.g.,
energy saving devices), and (c) capital expenditures required by any law
that either (x) is not in effect as of the Commencement Date or (y) is
in effect as of the Commencement Date, but only to the extent that such
existing law requires capital expenditures in the future (e.g., due to
new interpretations of, or future amendments of, any existing law or
recurring obligations such as those currently required under Local Law
11), in any of which cases the cost thereof shall be included in
Expenses for the Expense Year in which the costs are incurred and
subsequent Expense Years, on a straight line basis, to the extent that
such items are depreciated over an appropriate period, but not more than
ten (10) years, with an interest factor equal to the Prime Rate at the
time of Landlord's having incurred said expenditure. If Landlord shall
lease any such item of capital equipment designed to result in savings
or reductions in Expenses, then the rentals and other costs paid
pursuant to such leasing shall be included in Expenses for the Expense
Year in which they are incurred;
(iv) cost of repairs or replacements incurred by reason of fire
or other casualty or by the exercise of the right of eminent domain, to
the extent to which Landlord is compensated therefor through proceeds of
insurance or a condemnation award;
(v) advertising and promotional expenditures;
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(vi) legal fees incurred in disputes with tenants and legal and
auditing fees, other than legal and auditing fees reasonably incurred
(a) in connection with the maintenance and operation of the Land and
Building or (b) in connection with the preparation of statements
required pursuant to additional rent or rental escalation provisions;
(vii) costs incurred in performing work or furnishing services
to or for individual tenants (including Tenant) other than work or
services of a kind and scope which Landlord would be obligated to
furnish Tenant without charge if such work were required in the Demised
Premises;
(viii) the cost incurred by Landlord in performing work or
furnishing any service to or for a tenant of space in the Building
(including Tenant) for which a separate charge is made, including
without limitation, the supply of overtime air-conditioning, ventilation
and heating at Landlord's cost and expense, regardless of the amount
billed or received by Landlord for performing such work or furnishing
such service;
(ix)Depreciation and amortization of the Building, except as
otherwise provided herein;
(x) Advertising and promotional expenses incurred for the
purpose of marketing space in the Building;
(xi)Any rental under any ground or underlying lease;
(xii) Interest, including interest on debt, debt service or
amortization payments on any mortgage encumbering the Building and any
financing and refinancing costs with respect thereto;
(xiii) Amounts received by Landlord through proceeds of
insurance to the extent they are compensation for sums previously
included in Expenses;
(xiv) Taxes;
(xv)Landlord's income taxes and franchise, gains or estate taxes
imposed upon the income of Landlord;
(xvi) Costs with respect to the creation of a mortgage or a
superior lease or in connection with a sale of the Building including,
without limitation, survey, legal fees and disbursements, transfer taxes
or stamps and appraisals, engineering and inspection reports associated
with the contemplated sale;
(xvii) The costs of installing, operating and maintaining any
specialty business at the Building, e.g., parking facilities,
restaurants, and/or clubs, provided same are not available to
tenants generally;
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(xviii) Lease takeover or termination costs incurred by Landlord
in connection with any lease in the Building, including any payments
required to be made in connection with the termination of a lease
pursuant to Article 31-B of the Tax Law of the State of New York or
other similar statute, and legal fees incurred by Landlord in connection
with the preparation and negotiation of specific leases in the Building;
and
(xix) Fines and penalties incurred because of violations of
laws, orders, rules, regulations or other legal requirements that arise
by reason of Landlord's failure to construct, maintain or operate the
Building or any part thereof in compliance with such requirements
(excluding the costs of permits and approvals required to comply with
such laws, orders, rules, regulations or other legal requirements in the
ordinary course of the operation and maintenance of the Building and
excluding fines and penalties that are reasonably unavoidable in the
operation of a first class office building in Manhattan or which are
assessed in the ordinary course of business, including by way of example
and not by limitation, sidewalk violations and trash fines).
If, during all or part of any Expense Year, Landlord shall not furnish any
cleaning service to portions of the Building, due to the fact that construction
of the Building is not completed or such portions are not occupied or leased, or
because such cleaning service is not required or desired by the tenant of such
portion, or such tenant is itself obtaining and providing such cleaning service,
or for other reasons, then, for the purposes of computing the additional rent
payable hereunder, the amount of such cleaning service included in Expenses for
such period shall be increased by an amount equal to the additional expenses
which would reasonably have been incurred during such period by Landlord if it
had at its own expense furnished such cleaning service to such portion of the
Building.
B (1) If the Expenses for any Expense Year shall be
greater than the Expense Base, Tenant shall pay to Landlord, as additional rent
for such Expense Year, in the manner hereinafter provided, an amount equal to
Tenant's Percentage of the excess of the Expenses for such Expense Year over the
Expense Base (such amount being hereinafter called the "Expense Payment").
(2) Landlord shall, prior to or following the
commencement of each Expense Year, deliver to Tenant a statement of the
projected Expenses for such Expense Year and Tenant shall pay on the first day
of each month as additional rent, together with payment of Fixed Rent, an
"Estimated Expense Payment" which shall be equal to one-twelfth (1/12th) of
Tenant's Percentage of the amount by which such projected Expenses exceed the
Expense Base. At any time during any Expense Year, Landlord may deliver a
revised statement of projected Expenses to reflect, if Landlord can reasonably
so estimate, known increases in rates for the current Expense Year applicable to
the categories involved in computing Expenses and thereafter Tenant's monthly
Estimated Expense Payment shall be adjusted accordingly.
(3) To the extent that at the time of furnishing of any
statement of projected Expenses the aggregate monthly payments made during the
preceding months of the Expense Year in question are less than the amount which
would have been paid if the installment required
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pursuant to such statement had been made for such preceding months, the
deficiency shall be due and payable in full as additional rent together with the
regular monthly installment of rent next coming due.
(4) Within one (1) year after the expiration of each
Expense Year, Landlord shall submit to Tenant an "Expense Statement" prepared by
Landlord, setting forth the Expenses for the preceding Expense Year and the
Expense Payment, if any, due to Landlord from Tenant for such Expense Year. In
the event Tenant's Expense Payment shall be greater than or less than
respectively the aggregate of Tenant's Estimated Expense Payments for such
Expense Year, then within thirty (30) days after receipt of such Expense
Statement Tenant shall make payment of any unpaid portion of its Expense Payment
as additional rent, or any excess paid by Tenant shall be, at Landlord's option,
either refunded to Tenant or credited against the payment(s) of Estimated
Expense Payment next coming due.
(5) Until a new statement of projected Expenses is
rendered, Tenant's Estimated Expense Payment for any Expense Year shall be
deemed to be one-twelfth (1/12th) of the total Estimated Expense Payment for the
preceding Expense Year.
(6) The Expense Statements furnished to Tenant shall
constitute a final determination as between Landlord and Tenant of the Expenses
for the periods represented thereby, unless Tenant, within forty-five (45) days
after they are furnished, shall give a notice to Landlord that it disputes the
accuracy or appropriateness of any of same, which notice shall specify the
particular respects in which the disputed Statement is inaccurate or
inappropriate, but only to the extent such information is within Tenant's actual
knowledge. Pending the resolution of such dispute, Tenant shall pay the
Estimated Expense Payments, as well as the Expense Payment in dispute, to
Landlord in accordance with the statements of projected Expenses furnished by
Landlord. Tenant shall have the right, during reasonable business hours and upon
not less than ten (10) business days' prior written notice to Landlord, to
examine Landlord's books and records with respect to any Statement, provided (a)
such examination is commenced within ninety (90) days and concluded within one
hundred twenty (120) days following the rendition of the Statement in question
(b) such examination may only be conducted by full-time, regular employees of an
independent and reputable, certified public accounting firm, and such firm is
not being compensated by Tenant for such services on a contingency or success
fee basis and (c) Tenant delivers a confidentiality agreement to Landlord with
respect to such dispute and such examination in form and substance reasonably
satisfactory to Landlord and Tenant.
(7) In no event shall the Fixed Rent under this Lease be
reduced by virtue of this Section.
(8) If the Commencement Date is not the first day of an
Expense Year or if the date of expiration or termination of this Lease (except
for termination for Tenant's default), whether or not same is the Expiration
Date or another date prior or subsequent thereto, is not the last day of an
Expense Year then the Expense Payment shall be prorated based upon the number of
days of the applicable Expense Year within the Term. With respect to the year in
which the term of this Lease expires or terminates, such pro rata portion shall
become immediately due and payable by Tenant to Landlord, if it has not
theretofore already been paid, and Landlord, as soon as reasonably practicable,
shall cause the annual statements of the Expenses for that Expense
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Year to be prepared and furnished to Tenant. Landlord and Tenant thereupon shall
make appropriate adjustments of all amounts then owing.
(9) If the first Expense Year is not a full calendar
year, then the Expenses for such first Expense Year shall be annualized by
Landlord, giving effect to seasonal variations, to obtain the amounts thereof
which would have been incurred had said first Expense Year been a full calendar
year, and the Expense Payment shall be computed by Landlord based upon such
annualized amounts.
C (1) The annual rental rate shall be increased for
each Tax Year during the term of this Lease by Tenant's Percentage of the amount
by which the Taxes in each such Tax Year exceed the Base Tax. Landlord shall
advise Tenant, by a written statement by Landlord's accountant or by Landlord or
its agent, of any change in Taxes and the effective date thereof (the "Tax
Statement"). The Tax Statement shall show the Tenant's new annual rental rate
caused by each change and the monthly installments shall be one-twelfth (1/12th)
thereof, and the manner in which the adjustment is computed, including any
adjustments in real estate tax assessments affecting the Taxes for any Tax Year.
Said one-twelfth (1/12th) of such increase shall be due and payable with monthly
installments of Fixed Rent. Notwithstanding the foregoing, if Taxes are required
to be paid prior to the expiration of the appropriate calendar half or any other
applicable fiscal period or the expiration of any Tax Year to avoid a penalty or
late charge, then Landlord may immediately elect to bill Tenant for its above
specified percentage of any increase in Taxes in excess of the Base Tax with
respect to such calendar half or any other applicable fiscal period or Tax Year,
as the case may be, and Tenant shall pay same within thirty (30) days
thereafter. Any decrease in annual rental rate under this Paragraph C can be
applied only to reduce prior increases under this Paragraph. To the extent that
the change is relevant to a period for which Tenant has paid its monthly
installments of Fixed Rent, a retroactive lump sum payment shall be made by
Tenant as and when billed for the same by Landlord.
(2) The Tax Statements furnished to Tenant shall
constitute a final determination as between Landlord and Tenant of the Taxes for
the periods represented thereby, unless (a) the Taxes for any such period are
subsequently reduced by tax certiorari proceedings or otherwise (in which event
the Tax Statement for such adjusted Taxes shall be conclusive and binding,
subject to subsection (b) of this paragraph), or (b) Tenant, within forty-five
(45) days after they are furnished, shall give a notice to Landlord that it
disputes the accuracy or appropriateness of any of same, which notice shall
specify the particular respects in which the disputed Tax Statement is
inaccurate or inappropriate to the extent Tenant has such information. Pending
the resolution of such dispute, Tenant shall pay Tenant's Percentage of the
Taxes to Landlord in accordance with the Tax Statements furnished by Landlord.
Tenant shall have the right to receive a copy of any tax bill or statement from
the applicable taxing authority upon which the disputed Tax Statement is based
within twenty (20) days after demand therefor.
(3) It is understood and agreed that, although the real
estate taxes for the Building are subject to certain abatements, exemptions
and/or deferrals under the ICIP, Tenant shall pay Tenants' percentage of any
increase in Taxes over the Base Tax, in accordance with Section 4.1C(l), without
taking any such ICIP abatement, exemption or deferral into consideration.
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(4) It is further understood and agreed that (in order to
enable Landlord to comply with certain requirements of the ICIP):
(i) Landlord is seeking, or has obtained, benefits under the ICIP
program.
(ii)Tenant agrees to report to Landlord the number of workers
permanently engaged in employment in the space leased, the nature of
each worker's employment and the New York City residency of each
worker.
(iii) Tenant agrees to provide access to the Demised Premises by
employees and agents of the Department of Finance of the City of New
York, the Office of Labor Services, or any such other agency at the
request of Landlord at all reasonable times and, to the extent
practicable, upon reasonable prior notice (which may be oral).
(iv)Tenant shall not be required to pay taxes or charges which
become due because of the willful neglect or fraud by Landlord in
connection with the ICIP program or otherwise relieve or indemnify
Landlord from any personal liability arising under Administrative Code
ss.11-265, except where imposition of such taxes, charges or liability
is occasioned by actions of Tenant in violation of this Lease.
(5) With respect to Tenant's work set forth below, and in
connection with Landlord's ICIP application, Tenant, at its sole cost and
expense, shall be obligated to timely and fully comply with the requirements of
(i) Executive Order No. 50 of 1980; (ii) Executive Order No. 108 of 1986; (iii)
Section 11-260 of the Administrative Code of the City of New York; (iv) Article
22 of the ICIP Regulations; (v) the New York City Charter; and (vi) any other
additional or successor executive orders, statutes, rules or regulations bearing
on Landlord's ICIP application. Such compliance shall include, but shall not be
limited to, the filing with the Department of Labor Services ("DLS") of
Construction Employment Reports, Supply and Service Construction Employment
Reports, Less Than $750,000 Subcontract Certificates, and certified payroll
records. Tenant shall also be solely responsible for the compliance of any
contractor, subcontractor, consultant, agent or party employed by Tenant in
connection with Tenant's work. Tenant further agrees that copies of all such
filings shall currently be sent by certified mail to the Owner's ICIP counsel:
Rosenberg & Estis, P.C., 733 Third Avenue, New York, New York 10017, Attention:
Jeffrey Turkel, Esq. Tenant, as well as any contractor, subcontractor,
construction manager, general contractor, consultant, agent or any party
employed by Tenant in connection with Tenant's work, shall cooperate with
Landlord and will supply such information and comply with such reporting
requirements as Landlord advises Tenant are reasonably necessary to comply with
the ICIP, and Tenant will assist Landlord in connection with maintaining its
eligibility under the ICIP.
Tenant also agrees that at the commencement of its work, and as the
work progresses, Tenant (or its agent) shall provide Landlord's ICIP counsel
with the names of all contractors or subcontractors retained by Tenant with
respect to the work, as well as the dollar value of each contract or
subcontract. Tenant further agrees that with respect to any contractors or
subcontractors performing work pursuant to a contract or subcontract with a
value of
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$750,000 or more, a retainage in the amount of 10% of the value of said contract
or subcontract shall be withheld until DLS gives written approval that final
payment may be released to said contractor or subcontractor.
ARTICLE 5.
USE
---
5.1 Tenant shall use and occupy the Demised Premises for
executive and general offices (which may include such offices in connection with
Tenant's mortgage banking business, provided that such use shall not involve
patronage of the general public) and for a pantry (provided that no cooking
shall be allowed) and for no other purpose. Tenant will not at any time use or
occupy the Demised Premises, or permit same to be used or occupied in violation
of the certificate of occupancy for the Building.
5.2 The use of the Demised Premises for the purposes specified in
Section 5.1 shall not include:
(1) the sale to the public of any products kept in the Demised
Premises, or any demonstrations to the public, or the sale (whether by persons
or by vending machines) of alcoholic beverages, candy, cigarettes, cigars,
tobacco, narcotics or other controlled or prohibited substances, newspapers,
magazines, beverages, or similar items,
(2) the rendition of medical, psychological, or therapeutic
services;
(3) the conduct of an auction;
(4) the conduct of any gambling activities, or any political
activities, or of an employment agency;
(5) offices of a governmental agency, or government (including,
without limitation, an autonomous governmental corporation or any entity having
governmental immunity), or a diplomatic or trade mission;
(6) the operation of any school or college; or
(7) any use prohibited by the Rules and Regulations attached
hereto and made a part hereof as Exhibit D.
5.3 Tenant shall not use, occupy, suffer or permit the Demised
Premises (or any part thereof) to be used in any manner, or suffer or permit
anything to be brought into or kept therein, which would, in Landlord's
reasonable judgment, (a) make unobtainable at standard rates from any reputable
insurance company authorized to do business in New York State any fire insurance
with extended coverage or liability, elevator, boiler, umbrella or other
insurance, (b) cause, or be likely to cause, injury or damage to the Building or
to any Building equipment or to the Demised Premises, (c) constitute a public or
private nuisance, (d) violate any certificate of occupancy in the Building, (e)
emit objectionable noise, fumes, vibrations, heat, chilled air,
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vapors or odors into or from the Building or the Building equipment, or (f)
impair or interfere with any of the Building services, including the furnishing
of electrical energy, or the proper and economical cleaning, heating,
ventilating, air conditioning or other servicing of the Building, Building
equipment, or the Demised Premises.
5.4 If any governmental license or permit shall be required for
the proper and lawful conduct of Tenant's business in (or any subtenant's
business) or occupancy of the Demised Premises, then Tenant, at its sole
expense, shall procure and thereafter maintain (or cause to be maintained) such
license or permit and submit the same to Landlord for inspection upon Landlord's
request. Tenant shall comply with the terms and conditions of each such license
and/or permit.
5.5 No licensing of desk space shall be permitted.
ARTICLE 6.
SERVICES AND EQUIPMENT
6.1 Landlord shall, at its cost and expense:
A. Provide elevator service during business hours on
business days. As used in this Lease, the term "business days" means Monday
through Friday exclusive of holidays, and the term "business hours" means 8:00
A.M. to 6:00 P.M. At all times other than during business hours on business
days, only one elevator shall be on call to the Demised Premises and to other
tenants of the Building.
B. Maintain and keep in good order and repair the
central heating, ventilating and air-conditioning system installed by Landlord.
The aforesaid system will be operated by Landlord during business hours on
business days.
C. Provide Building standard cleaning services to the
Demised Premises and public portions of the Building on business days. The
Cleaning Specifications are annexed hereto and made a part hereof as Exhibit C.
If any space may, under the terms of this Lease, be used for the consumption of
food, such space will receive only Exhibit C office space cleaning
specifications, and Tenant shall have such space periodically exterminated.
D. Furnish water for ordinary lavatory, drinking and
office cleaning purposes. If Tenant requires, uses or consumes water for any
other purposes, Tenant agrees that Landlord may install a meter or meters or
other means to measure Tenant's water consumption, and Tenant further agrees to
reimburse Landlord for the cost of the meter or meters and the installation
thereof, and to pay for the maintenance of said meter equipment and/or to pay
Landlord's costs of other means of measuring such water consumption by Tenant.
Tenant shall reimburse Landlord for the cost of all water consumed as measured
by said meter or meters or as otherwise measured, including sewer rents.
6.2 Holidays shall be deemed to mean all Federal holidays, State
holidays and Building Service Employees Union Contract holidays.
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6.3 Landlord reserves the right to interrupt, curtail or suspend
the services required to be furnished by Landlord under this Article 6 when the
necessity therefor arises by reason of required maintenance, accident, labor
dispute, riot, insurrection, emergency, mechanical breakdown, Acts of God, or
when required by any law, order or regulation of any federal, state, county or
municipal authority, or for any other cause beyond the reasonable control of
Landlord. Landlord shall exercise good faith to complete all required repairs or
other necessary work so that Tenant's inconvenience resulting therefrom may be
for as short a period of time as circumstances will permit. No diminution or
abatement of rent or other compensation shall or will be claimed by Tenant as a
result thereon nor shall this Lease or any of the obligations of Tenant be
affected or reduced by reason of such interruption, curtailment or suspension.
Anything herein contained to the contrary notwithstanding, if as a result of
Landlord's negligence in connection with any repairs or other work by Landlord
in the Building or the Demised Premises, any utility or service is not provided
to all or part of the Demised Premises (except if such utility or service is not
provided due to the failure of the utility company), and therefore Tenant for
ten (10) consecutive business days cannot and does not use all or any part of
the Demised Premises for such entire ten (10) business day period, then Tenant
shall be entitled to a pro rata abatement of the rent attributable to the
portion of the Demised Premises that Tenant cannot and does not use for each day
after said ten (10) business day period, until such utility or service is
restored and Tenant can use the entire Demised Premises. Notwithstanding the
foregoing, Tenant shall not be entitled to any rent abatement if any utility
service for which Tenant is a direct customer of the utility providing such
service is not provided to all or part of the Demised Premises by said utility.
6.4 Tenant shall reimburse Landlord for the cost to Landlord of
removal from the Demised Premises and the Building of any refuse and rubbish of
Tenant except normal office trash, and Tenant shall pay all bills therefor
promptly after rendered.
6.5 If Tenant shall require HVAC service at any time other than
during business hours on business days, Landlord shall furnish such service
(herein called "after-hours air-conditioning service") upon advance written
notice from Tenant as specified below and Tenant shall pay Landlord's then
established charges therefor on Landlord's within fifteen (15) days after demand
as additional rent. If Tenant shall not pay the same, Tenant shall also pay
interest thereon at the then Prime Rate. Requests for after-hours
air-conditioning service shall be submitted in writing to the Building manager,
by a person designated by Tenant as authorized to make such requests, before
1:00 P.M. on a non-holiday weekday for such weekday and at least thirty-six (36)
hours prior to a holiday or weekend. Landlord's currently established charges
for such after-hours air-conditioning service are as follows: air conditioning
- - -- $250 per hour and heat-- $180 per hour.
6.6 Notwithstanding anything in this Lease to the contrary,
Landlord agrees that Tenant may install, at Tenant's own cost and expense in
accordance with, and subject to, the applicable provisions of this Lease
(including, without limitation, Article 13 hereof) an additional heating,
ventilating and air-conditioning system (hereinafter referred to as the
"Supplemental Air-Conditioning System"). The costs of installation (including,
without limitation, connection to any condenser water source), maintenance and
operation of the Supplemental Air-Conditioning System shall be borne by Tenant,
and Tenant shall be responsible for the design and installation of its own
condenser water pumps, capable of
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delivering the required flow to Tenant's equipment. Tenant (or at Landlord's
option, Landlord) shall install, at Tenant's sole cost and expense, valved
outlets into the condenser water riser, the cost of which valves are to be paid
for by Tenant. Whenever Tenant shall make a connection to any condenser water
source, Tenant shall also leave additional valved outlets of a size to be
determined by Landlord. All facilities, equipment, machinery and ducts installed
by Tenant in connection with the Supplemental Air-Conditioning System shall (a)
be subject to Landlord's prior written approval, (b) comply with Landlord's
reasonable requirements as to installation, maintenance and operation, and (c)
comply with all other terms, covenants and conditions of this Lease applicable
thereto. Landlord shall have no liability or responsibility whatsoever for any
interruption in service of the Supplemental Air-Conditioning System (if any) for
any cause whatsoever, nor shall any such interruption be construed as an actual
or constructive eviction of Tenant, or entitle Tenant to any abatement of Fixed
Rent or additional rent, or relieve or release Tenant from any of its
obligations under this Lease. Tenant agrees to cooperate fully with Landlord and
to abide by all reasonable regulations and requirements which Landlord may
prescribe for the proper connection, functioning and protection of the
Supplemental Air-Conditioning System.
ARTICLE 7.
ELECTRIC
7.1 Landlord shall furnish to the Tenant electricity for normal
business purposes as provided in Paragraph 7.2 hereof in the Demised Premises at
no additional charge or rental, subject however to future adjustments after the
date hereof, in the event that there is an increase or decrease in the utility
rate schedule or utility or sales taxes thereon pursuant to which electricity
shall be furnished to Owner by the utility company serving the Building in which
the Demised Premises are located and the Tenant shall have the right to use
electricity on an unmetered basis as an additional service. Each such adjustment
shall be computed by multiplying the electrical rent inclusion factor ("ERIF")
set forth in Paragraph 7.2 hereof, as adjusted, by the percentage of increase or
decrease, as the case may be, in the utility rate schedule or utility or sales
taxes thereon applicable to the Building and by adding or subtracting the
product thereof to or from said ERIF to determine the amount of the adjusted
rent and the adjusted ERIF. In no event, however, may the ERIF be reduced below
the amount set forth in Section 7.2 below.
7.2 As of the date of this Lease, the ERIF is $1,691.67 per month
which factor is based upon the Tenant's use, during regular business hours, of
lighting fixtures and electrically operated equipment which operates on a
standard 120 volt convenience receptacle on a 15 Amp general purpose branch
circuit with not less than eight (8) outlets on such circuit. The use of
electricity on other than regular business hours or for fixtures or equipment
which are not accommodated by such base receptacles may be permitted within the
limitation of Paragraph 7.3 provided that the ERIF shall be increased in an
amount to be determined from a survey made by a reputable independent electrical
engineer or consultant selected by Owner.
7.3 Tenant's use of electrical energy shall never exceed the
capacity of the then existing feeders to the Building or the then existing
risers or wiring installation serving the Demised Premises; in furtherance
thereof, Tenant's connected electrical load in the Demised
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Premises shall at no time exceed five (5) watts (average) per usable square foot
without Landlord's prior written approval. Tenant understands that if the
connected load exceeds four (4) watts (average) per usable square foot in any
area that the HVAC system will not be able to perform within the limits
specified therefor in Exhibit E-1 attached hereto and made a part hereof. Any
additional risers required by Tenant to supply Tenant's electrical requirements
and all other equipment proper and necessary in connection therewith, upon
request of Tenant, will be installed by Landlord, at Tenant's sole cost and
expense, if in Landlord's judgment, the same are necessary and will not cause or
create a hazardous condition or entail excessive or unreasonable alterations,
repairs or expense or interfere with or disturb other tenants. Rigid conduit
only will be allowed. In order that personal safety and property of Landlord and
the tenants and occupants of the Demised Premises and the Building may not be
imperiled by the over taxing of the capacity of the electrical distribution
system of the Demised Premises or the Building, and to avert possible adverse
effect upon the Building's electrical system, Tenant shall not, without prior
consent of Landlord, make or perform or permit any changes in or alterations to
wiring installations or other electrical facilities in or serving the Demised
Premises (as such installations or facilities shall be indicated by the final
electrical plans submitted by Tenant to Landlord in connection with the initial
construction of the Demised Premises) or any additions to the electric fixtures,
business machines or office equipment or appliances (other than personal
computers, fax machines and similar low energy consuming office machines) in the
Demised Premises which utilize electrical energy. Any such alterations or
changes performed by Tenant shall be in compliance with all codes and legal
requirements. Should Landlord grant such consent, all additional risers, wiring
or other equipment required therefor shall be provided by Landlord and the cost
thereof shall be paid by Tenant as additional rent within 15 days after being
billed therefor. Landlord's approval of any electrical alterations or changes
shall not be deemed a representation that the same comply with applicable codes
or other legal requirements. Landlord, its agents and engineers and consultants
may survey the electrical fixtures, appliances and equipment in the Demised
Premises and Tenant's use of electrical energy therein from time to time to
determine whether Tenant is complying with its obligations under this Article.
In the event that Landlord causes any such survey to be performed to determine
whether there should be an increase in the ERIF as a result of Tenant's
installation of additional equipment that utilizes electrical energy, and if
Tenant shall dispute the findings of such survey, Tenant, within sixty (60) days
of receipt of Landlord's findings, may cause a like survey to be made by an
electric consultant selected and paid by Tenant. If Tenant so elects, upon
completion of the second survey Tenant shall notify Landlord of the results
thereof. If such determination differs from that of Landlord by 10% or less,
Landlord's findings shall be conclusive and binding upon the parties. If such
determination differs from that made by Landlord's electric consultant by more
than 10% and Landlord and Tenant cannot agree on the amount of the increase in
the ERIF, if any, the dispute shall be resolved by arbitration in accordance
with Article 25 hereof. Pending a final determination pursuant to such
arbitration however, Tenant shall pay to Landlord for such electrical energy
based on the determination of Landlord's engineer or consultants; and if it is
determined that Tenant has overpaid, Landlord shall reimburse Tenant for any
overpayment at the conclusion of such arbitration. If Tenant shall not dispute
the findings as provided in this Section, the determination by Landlord's
engineer or consultants shall be deemed final and conclusive. Notwithstanding
the provisions of Article 25 hereof, the losing party in any such arbitration
proceeding shall bear the fees and expenses of the arbitrator and all other
expenses of arbitration (other than the fees and disbursements of attorneys or
witness for each party).
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7.4 Landlord shall have no liability to Tenant for any loss,
damage or expense which Tenant may sustain or incur by reason of any change,
failure, inadequacy or defect in the supply or character of the electrical
energy furnished to the Demised Premises or if the quantity or character of the
electrical energy is no longer available or suitable for Tenant's requirements,
except for any actual damage suffered by Tenant by reason of any such failure,
inadequacy or defect caused by Landlord's gross negligence or willful
misconduct, and then only after prior actual notice has been given to Landlord
as provided in Article 24.
7.5 In addition to the foregoing, Landlord shall have the right
on five (5) days' prior notice to Tenant (whenever possible) to "shut down"
electrical energy to the Demised Premises when necessitated by the need for
repairs, alterations, connections or reconnections, with respect to the Building
electrical system (singularly or collectively, "Electrical Work"), regardless of
whether the need for such Electrical Work arises in respect of the Demised
Premises, any other tenant space, or any Building common areas. Landlord may
not, however, shut down Tenant's electrical energy for such Electrical Work
during business hours unless such Electrical Work shall be required because of
an emergency or required by the utility company servicing the Building. Landlord
shall have no liability to Tenant for any loss, damage, or expense which Tenant
may sustain due to such "shut down" or Electrical Work.
7.6 Landlord reserves the right to terminate the furnishing of
electrical energy at any time, upon 30 days' notice to Tenant unless such notice
is not feasible under the circumstances, in which event Landlord will give
Tenant such reasonable notice as is possible. If Landlord shall so discontinue
the furnishing of electrical energy, (a) Tenant shall arrange to obtain
electrical energy directly from the utility company furnishing electrical energy
to the Building, (b) Landlord shall permit the existing feeders, risers, wiring
and other electrical facilities serving the Demised Premises to be used by
Tenant for such purpose to the extent that they are available, suitable and
safe, (c) from and after the effective date of such discontinuance Landlord
shall not be obligated to furnish electric energy to Tenant, (d) such
discontinuance shall be without liability of Landlord to Tenant, and (e) if
Landlord shall discontinue the furnishing of electrical energy as a result of
any legal requirement or insurance requirement, Landlord shall, at Tenant's
expense, install and maintain at locations in the Building reasonably selected
by Landlord any necessary electrical meter equipment, panel boards, feeders,
risers, wiring and other conductors and equipment which may be required to
obtain electrical energy directly from the utility supplying the same.
Commencing with the date when Tenant receives such direct service, and as long
as Tenant shall continue to receive such service, the Fixed Rent payable under
this Lease shall be reduced to what the Fixed Rent would then have been but for
the adjustments under this Article 7 and the original ERIF payable by Tenant
included in the Fixed Rent as set forth in Article 3 hereof. Landlord, at its
option, before commencing any work to be paid for by Tenant hereunder or at any
time thereafter, may require Tenant to furnish to Landlord such security,
whether by surety bond issued by a corporation satisfactory to Landlord, in form
and amount and licensed to do business in New York State or otherwise, as
Landlord shall deem necessary to assure the payment for such work by Tenant.
Landlord shall be promptly given by Tenant a copy of each electric utility bill
of Tenant if Tenant should become a direct customer of the local utility.
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7.7 In the event that any tax shall be imposed upon Landlord's
receipts from the sale, use or resale of electrical energy to Tenant, the pro
rata share allocable to the electrical energy service received by Tenant shall
be passed onto, included in the bill of, and paid by Tenant if and to the extent
not prohibited by law.
7.8 Landlord shall, at Tenant's option, furnish and install all
replacement lighting, tubes, lamps, starters, bulbs and ballasts required in the
Demised Premises and Tenant shall pay to Landlord (or its designated contractor)
upon demand the then established charges therefor as additional rent on demand.
ARTICLE 8.
ASSIGNMENT, SUBLETTING, MORTGAGING
8.1 A. Tenant or its legal representatives will not by operation
of law or otherwise, assign (in whole or in part), mortgage or encumber this
Lease, or sublet or permit the Demised Premises or any part thereof to be used
or occupied by others, without Landlord's prior written consent in each
instance. The consent by Landlord to any assignment or subletting, whether by
Tenant or any other tenant in the Building, shall not be a waiver of or
constitute a diminution of Landlord's right to withhold its consent to any other
assignment or subletting and shall not be construed to relieve Tenant from
obtaining Landlord's express written consent to any other or further assignment
or subletting. Such reasonable attorneys' fees as may be incurred by Landlord in
connection with Tenant's request for consent to an assignment or subletting
shall be paid by Tenant.
B. If Tenant or its legal representatives desires to assign this
Lease or sublet all or any portion of the Demised Premises, Tenant shall
promptly notify the then managing agent of the Building in writing of its desire
to assign or sublet. Upon obtaining a proposed assignee or subtenant upon
acceptable terms, Tenant shall submit to Landlord in writing:
(i) the name and address of the proposed assignee or sublessee;
and
(ii)the terms of the proposed assignment or sublease; and
(iii) the nature and character of the business which the proposed
assignee or subtenant will conduct in the Demised Premises;
(iv) if the proposed assignee or sublessee is a corporation, the
names and addresses of all directors and officers thereof and the
names and addresses of each stockholder who or which has beneficial
ownership of 10% or more of the proposed assignee or sublessee entity,
setting forth for each such stockholder his, her or its percentage of
such beneficial ownership; if a partnership, joint venture or other
business or unincorporated association, the name and address of each
general partner (and limited partner, if any), joint venturer or
member thereof, who or which has beneficial ownership of 10% or more
of the proposed assignee or sublessee entity, setting forth for each
such general partner, limited partner,
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joint venturer and member his, her or its percentage of such
beneficial ownership; and
(v) a complete financial statement (not more than 12 months old),
for the proposed assignee or sublessee, certified by certified public
accountants regularly employed by the proposed assignee or sublessee,
together with a more current interim financial statement for the
proposed assignee or sublessee, if available; and
(vi)the names and business experience of the management level
personnel of the proposed assignee or sublessee who will be active in
the actual day to day operation of the business to be continued in the
Demised Premises by the proposed assignee or sublessee and their
respective percentages of beneficial ownership in the proposed
assignee or sublessee; and
(vii) an executed copy of the proposed assignment or sublease
(which is conditioned upon Landlord's rights and consent as provided
in this Article 8); and
(viii) any other information concerning the assignment or
sublease which Landlord may reasonably request.
Landlord shall have the option to be exercised within thirty (30) days
from the submission of the aforesaid information: (i) to cancel this Lease with
respect to the space to be sublet for the duration of the proposed sublease; or
(ii) to require Tenant to execute and deliver an assignment or sublease to
Landlord (or its designee) upon the same terms as submitted by Tenant to
Landlord, except that Landlord shall have the unrestricted right to assign or
sublet and/or alter the space. In the event of a proposed assignment, or of a
proposed sublease which, in the aggregate with all other subleases, demises 50%
or more of the Demised Premises, Landlord shall have the further option to be
exercised within the said thirty (30) day period, to cancel and terminate this
Lease effective on the date of Tenant's proposed assignment or sublease, in
which event this Lease and the term hereof shall expire and terminate on that
date as if it were the date herein fixed for the termination and expiration of
the term of this Lease. Notwithstanding any provision of this Lease to the
contrary, 75% any rentals and/or consideration paid or payable by the subtenant
or assignee in excess of the rentals (pro-rated on a square foot basis if the
sublease is for less than all of the Demised Premises) reserved and/or payable
under this Lease shall be paid by Tenant as and when received by Tenant to
Landlord as additional rent, deducting from such excess, the reasonable expenses
proven to have been incurred by Tenant in effecting the sublease or assignment,
appropriately pro rated (if a sublease) over the term of the sublease. Said
reasonable expenses shall include, but not be limited to, brokerage fees,
attorneys' fees and disbursements, advertising costs, reasonable concessions to
the assignee or subtenant, including, without limitation, free rent or work
contributions to the assignee or subtenant, and the costs incurred in connection
with alterations, decorations and installations made by Tenant pursuant to its
subject assignment or sublease to prepare the space for occupancy by the
assignee or the subtenant. Tenant may not assign all or any part of this Lease,
nor sublet all or any part of the Demised Premises, if Tenant is in default
under this Lease beyond applicable notice and cure periods (if any). In
addition, Tenant may not request
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Landlord to consider and/or approve any proposed subletting or assignment if
Tenant is in default under this Lease beyond applicable notice and cure periods
(if any).
C. If Tenant has complied with the provisions of Section 8.1B
and Landlord has not exercised either of its foregoing options within the time
set forth above, its consent to the proposed assignment or subletting shall not
be unreasonably withheld; provided, however, that it may withhold consent
thereto if in the reasonable exercise of its judgment it determines that:
(1) The financial condition and general reputation for good
character of the proposed assignee or subtenant are insufficient or not
consistent with the obligation and responsibility undertaken by the proposed
assignment or sublease; or
(2) The proposed business to be conducted in the Demised Premises
is not appropriate for the Building or in the keeping with the character of the
existing tenancies or permitted by this Lease, or the use is not expressly
permitted by this Lease; or
(3) The nature of the occupancy of the proposed assignee or
subtenant will cause a greater density of employees or traffic or make greater
demands on the Building's services or facilities than that made by Tenant; or
(4) Tenant proposes to assign or sublet to one who at the time is
a tenant (or subsidiary or affiliate of a tenant) or to a person in possession
of premises in the Building, or another building located on the West side of
Manhattan owned by Landlord or an entity affiliated with Landlord or to one with
whom Landlord is negotiating for a lease or sublease for space in any building
owned by Landlord or an entity affiliated with Landlord located on the West side
of Manhattan; or
(5) The assignee or subtenant shall have or enjoy diplomatic
immunity; or
(6) Such proposed subletting would result in the Demised Premises
being divided into more than two (2) rental units in the aggregate; or
(7) Any combination of the foregoing conditions exist.
8.2 If this Lease shall be assigned or sublet in accordance with
this Article, such assignee or subtenant shall not be permitted to further
assign or sublet in whole or in part.
8.3 If this Lease shall be assigned, or if the Demised Premises
or any part thereof be sublet or occupied by any person or persons other than
Tenant, Landlord may, after default by Tenant, collect rent from the assignee,
subtenant or occupant and apply the net amount collected to the rent herein
reserved, but no such assignment, subletting, occupancy or collection of rent
shall be deemed a waiver of the covenants in this Article, nor shall it be
deemed acceptance of the assignee, subtenant or occupant as a tenant, or a
release of Tenant from the full performance by Tenant of all terms, conditions
and covenants of this Lease. Notwithstanding the foregoing, in the event of an
assignment or sublease to Landlord or its designee pursuant to Section 8.2B
above, the performance by Landlord or its designee under such assignment or
sublease shall be deemed to be the performance by the Tenant of a similar
obligation under this
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Lease, and any default by the subtenant or assignee under any such sublease or
assignment shall not give rise to a default by Tenant under a similar obligation
included in this Lease.
8.4 Each permitted assignee or transferee shall assume and be
deemed to have assumed this Lease and shall be and remain liable jointly and
severally with Tenant for the payment of the Fixed Rent and additional rent and
for the due performance of all the terms, covenants, conditions and agreements
herein contained on Tenant's part to be performed for the term of this Lease. No
assignment shall be effective unless Tenant shall promptly deliver to Landlord a
duplicate original of the instrument of assignment, in form reasonably
satisfactory to Landlord, containing a covenant of assumption by the assignee of
all of the obligations aforesaid and shall obtain from Landlord the aforesaid
written consent, prior thereto.
8.5 Anything herein contained to the contrary notwithstanding:
(1) Tenant shall not advertise (but may list with
brokers) its space for assignment or subletting at a rental rate lower than the
greater of the then Building rental rate for such space or the rental rate then
being paid by Tenant to Landlord.
(2) The transfer of a majority of the issued and
outstanding capital stock of any corporate tenant or subtenant of this Lease or
a majority of the total interest in any partnership tenant or subtenant, however
accomplished, and whether in a single transaction or in a series of related or
unrelated transactions, shall be deemed an assignment of this Lease or of such
sublease. The transfer of outstanding capital stock of any corporate tenant, for
purposes of this Article, shall not include sale of such stock by persons other
than those deemed "insiders" within the meaning of the Securities Exchange Act
of 1934 as amended, and which sale is effected through "over-the-counter market"
or through any recognized stock exchange.
(3) Anything to the contrary in the foregoing
notwithstanding, Tenant may sublet all or any portion of the Premises or assign
this Lease to any Subsidiary, Parent Company, Affiliate or successor by merger
or consolidation or a person to whom all or substantially all of Tenant's assets
are transferred (such successor or person being herein called a "Successor")
without the consent of Landlord (but only if (a) the Successor has a net worth
on the date of such assignment or sublease equal to or greater than the greater
of (i) the net worth of Tenant on the date hereof and (ii) the net worth of
Tenant at the date which is twelve (12) months prior to the proposed assignment
or sublease and (b) such merger, consolidation or transfer of assets is not
effected for the primary purpose of transferring this Lease or subleasing the
Premises). For purposes of this Section 8.5(3), a "Subsidiary", "Parent Company"
and "Affiliate" of Tenant shall mean the following: (i) "Subsidiary" shall mean
any corporation not less than 51% of whose outstanding stock shall, at the time,
be owned directly or indirectly, by Tenant; (ii) "Parent Company" shall mean any
corporation which shall own, directly or indirectly, at least 50% of the
outstanding stock of Tenant at the time; and (iii) "Affiliate" shall mean any
corporation or other entity which, directly or indirectly, controls or is
controlled by, or is under common control with Tenant. For this purpose,
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such corporation
or other entity, whether through the ownership of voting securities or by
contract or otherwise. Section 8.1B shall not apply to a proposed assignment or
sublease pursuant to this Section 8.5(3). No such assignment or sublease shall
be permitted or effective unless (x) Tenant
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cures any existing default under the Lease, (y) Tenant gives Landlord at least
ten (10) days' prior written notice of such assignment or sublease together with
a copy of the proposed assignment or sublease and reasonably acceptable proof of
the compliance of such transaction with the conditions set forth in this Section
8.5(3) and (z) Tenant gives Owner a signed copy of the final assignment or
sublease within ten (10) days after it is executed. No such assignment or
sublease by Tenant shall be deemed to release the Tenant from any of its
obligations and liabilities hereunder and such assignee or subtenant shall
execute an agreement, in form or substance reasonably satisfactory to Owner,
assuming all Tenant's obligations and liabilities hereunder.
8.6 With respect to each and every sublease or subletting
authorized by Landlord under the provisions of this Lease, it is further agreed
as follows:
(a) no subletting shall be for a term ending later than one day prior
to the Expiration Date of this Lease;
(b) no sublease shall be valid, and no subtenant shall take possession
of the Demised Premises or any part thereof, until an executed counterpart
of such sublease has been delivered to Landlord and approved by Landlord
(where such approval is required);
(c) each sublease shall provide that it is subject and subordinate to
this Lease and to the matters to which this Lease is or shall be
subordinate, and that, in the event of termination, re-entry or dispossess
by Landlord under this Lease, Landlord may, at its option, either terminate
such sublease or take over all of the right, title and interest of Tenant,
as sublessor, under such sublease, and such subtenant shall, at Landlord's
option, attorn to Landlord pursuant to the then executory provisions of
such sublease, except that Landlord shall not (i) be liable for any
previous act or omission of Tenant under such sublease, (ii) be subject to
any offset, not expressly provided in such sublease, which theretofore
accrued to such subtenant against Tenant, or (iii) be bound by any previous
modification of such sublease or by any previous prepayment of more than
one month's rent.
ARTICLE 9.
SUBORDINATION, NON-DISTURBANCE, ESTOPPEL CERTIFICATE
9.1 Landlord's right, title and interest in and to its leasehold
estate and to the Building are derived from and under a lease or leases
(sometimes referred to as the "Over Lease").
9.2 This Lease is and shall be subject and subordinate in all
respects to the Over Lease, and any other ground leases, overriding leases and
underlying leases of the Land and/or the Building now or hereafter existing and
to all mortgages which may now or hereafter affect the Land and/or the Building
and/or such leases, to each and every advance made or hereafter to be made under
such mortgages and to all renewals, modifications, consolidations, replacements
and extensions of such Over Lease or leases or mortgages. This section shall be
self-operative and no further instrument of subordination shall be required. In
confirmation of such subordination, Tenant agrees to promptly execute and
deliver any instrument that Landlord,
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the lessor of any such lease or the holder of any such mortgage or any of their
respective successors in interest may request to evidence such subordination,
and Tenant hereby irrevocably appoints Landlord the attorney-in-fact of Tenant
to execute and deliver such instrument on behalf of Tenant, should Tenant refuse
or fail to do so promptly after request. The leases to which this Lease is, at
the time referred to, subject and subordinate pursuant to this Article are
hereinafter sometimes called "superior leases", and references to the lessors of
superior leases are intended to include the successors in interest of the
lessors of superior leases and their successors in interest as may be
appropriate. The mortgages to which this Lease is, at the time referred to,
subject and subordinate are hereinafter sometimes collectively called "superior
mortgages".
9.3 In the event of any act or omission of Landlord which would
give Tenant the right, immediately or after lapse of a period of time, to cancel
or terminate this Lease, or to claim a partial or total eviction, Tenant shall
not exercise such right (i) until it has given written notice of such act or
omission to the holder of each superior mortgage and the lessor of each superior
lease whose name and address shall previously have been furnished to Tenant in
writing, and (ii) unless such act or omission shall be one which is not capable
of being remedied by Landlord or such mortgage holder or lessor within a
reasonable period of time, until a reasonable period for remedying such act or
omission shall have elapsed following the giving of such notice and following
the time when such holder or lessor shall have become entitled under such
superior mortgage or superior lease, as the case may be, to remedy the same
(which reasonable period shall in no event be less than the period to which
Landlord would be entitled under this Lease or otherwise, after similar notice,
to effect such remedy), provided such holder or lessor shall with due diligence
give Tenant written notice of intention to, and commence and continue to, remedy
such act or omission.
9.4 In the event of a termination of the Over Lease, or if the
interests of Landlord under this Lease are transferred by reason of or assigned
in lieu of foreclosure or other proceedings for enforcement of any such
mortgage, or if the holder of any such mortgage acquires a lease in substitution
therefor, then Tenant under this Lease will, at the option to be exercised in
writing by the lessor under said Over Lease or such purchaser, assignee or
lessee, as the case may be, (i) attorn to it and will perform for its benefit
all the terms, covenants and conditions of this Lease on Tenant's part to be
performed with the same force and effect as if said lessor or such purchaser,
assignee or lessee, were the landlord originally named in this Lease, or (ii)
enter into a new lease with said lessor or such purchaser, assignee or lessee,
as landlord, for the remaining term of this Lease and otherwise on the same
terms and conditions and with the same options then remaining.
9.5 In the event of the enforcement by the holder of any mortgage
of the remedies provided for by law or by any security instrument, Tenant will,
upon request of any person succeeding to the interest of Landlord as a result of
such enforcement, automatically become the Tenant of said successor in interest,
without change in the terms or other provisions of this Lease; provided,
however, that said successor in interest shall not be bound by (i) any payment
of Fixed Rent or additional rent for more than one month in advance, except
prepayments in the nature of security for the performance by Tenant of its
obligations under this Lease, (ii) any amendment or modification of this Lease
made without the consent of the holder of such mortgage or such successor in
interest, or (iii) any obligation or liability of Landlord
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thereunder arising prior to the date the holder of such mortgage shall succeed
to the interest of Landlord. Upon request by said successor in interest, Tenant
shall execute and deliver an instrument or instruments confirming such
attornment. Anything to the contrary in the foregoing notwithstanding, any
cancellation, abridgment, surrender, modification or amendment of this Lease,
without the prior written consent of the holder of any superior mortgage, except
as may be permitted by the provisions of any such superior mortgage or
assignment of leases and rents granted in connection with such superior mortgage
shall be voidable as against the holder of the superior mortgage, at its option.
9.6 If, in connection with obtaining financing (or
condominiumizing) for the Land and/or Building, or of any ground or underlying
lease, a banking, insurance or other recognized institutional lender shall
request reasonable modifications in this Lease as a condition to such financing
(or condominiumizing), Tenant will not unreasonably withhold, delay or defer its
consent thereto, provided that such modifications do not increase the
obligations or materially adversely affect the rights of Tenant hereunder or
materially adversely affect the leasehold interest hereby created or Tenant's
use and enjoyment of the Demised Premises.
9.7 Tenant agrees, at any time and from time to time, upon not
less than ten days' prior notice by Landlord, to execute, acknowledge and
deliver to Landlord, a statement in writing addressed to Landlord certifying
that this Lease is unmodified and in full force and effect (or, if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications), stating the dates to which the Fixed Rent,
additional rental and other charges have been paid, and stating whether or not
to the best knowledge of the signer of such certificate, there exists any
default in the performance of any covenant, agreement, term, provision or
condition contained in the Lease, and, if so, specifying each such default of
which the signer may have knowledge, it being intended that any such statement
delivered pursuant hereto may be relied upon by Landlord and by any mortgagee or
prospective mortgagee of any mortgage affecting the Building or the Building and
the Land, and by any landlord under a ground or underlying lease affecting the
Land or Building, or both.
9.8 Tenant agrees to submit to Landlord on or before March 31 in
each calendar year a copy of the latest annual financial statements of Tenant
(and any guarantor of Tenant's obligations under this Lease), certified by an
independent certified public accountant.
ARTICLE 10.
ENTRY; RIGHT TO CHANGE
PUBLIC PORTIONS OF THE BUILDING
10.1 Tenant shall permit Landlord to erect, use and maintain pipes
and conduits in and through the Demised Premises, provided same does not reduce
the usable area of the Demised Premises by more than a de minimis amount or
materially interfere with Tenant's conduct of business in the Demised Premises.
Landlord or its agents or designees shall have the right to enter the Demised
Premises upon reasonable notice to Tenant (except in case of an emergency in
which case no notice shall be required), for the purpose of making such repairs
or alterations as Landlord shall be required or shall have the right to make by
the provisions of this Lease and, subject to the foregoing, shall also have the
right to enter the Demised Premises upon
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reasonable notice to Tenant for the purpose of inspecting them or exhibiting
them to prospective purchasers or lessees of the Building or to prospective
mortgagees or to prospective assignees of any such mortgagees. Landlord shall be
allowed to take all material into and upon the Demised Premises that may be
required for the repairs or alterations above mentioned without the same
constituting an eviction of Tenant in whole or in part and the rent reserved
shall in no wise abate, except as otherwise provided in this Lease, while said
repairs or alterations are being made. Landlord shall use commercially
reasonable efforts to minimize any interference with the conduct of Tenant's
business operations in the Demised Premises in connection with any such repairs
or alterations, without, however, being obligated to employ overtime labor or to
incur any extraordinary expense in connection therewith.
10.2 During the twelve (12) months prior to the expiration of the
term of this Lease, Landlord may exhibit the Demised Premises to prospective
tenants.
10.3 Landlord shall have the right at any time without thereby
creating an actual or constructive eviction or incurring any liability to Tenant
therefor, to change the arrangement or location of entrances, passageways, doors
and doorways, corridors, stairs, toilets and other like public service portions
of the Building, provided that Tenant shall have reasonable access to the
Demised Premises.
10.4 Landlord shall have the right at any time to name the
Building for any person(s) or tenant(s) and to change any and all such names at
any time thereafter.
ARTICLE 11.
LAWS, ORDINANCES,
REQUIREMENTS OF PUBLIC AUTHORITIES
11.1 Tenant shall, at its expense, comply with all laws, orders,
ordinances and regulations of Federal, State, County and Municipal authorities
including, but not limited to, the Americans with Disabilities Act, Title III,
42 U.S.C.S. ss. 12181-12189 and with any direction made pursuant to law or any
public officers which shall, with respect to the occupancy, use or manner of use
of the Demised Premises or to any abatement of nuisance, impose any violation,
order or duty upon Landlord or Tenant arising from Tenant's occupancy, use or
manner of use of the Demised Premises or any installations made therein by or at
Tenant's request or required by reason of a breach of any of Tenant's covenants
or agreements hereunder. However, Tenant shall not be required to perform any
structural modifications in the Demised Premises or to the Building in order to
comply with the requirements of this Section 11.1, except where such structural
modifications have become necessary as a result of either Tenant's (i)
particular manner of use of the Demised Premises (as opposed to the mere use of
the Demised Premises for offices), (ii) negligence or (iii) alterations to the
Demised Premises.
11.2 If Tenant receives written notice of any violation of law,
ordinance, rule, order or regulation applicable to the Demised Premises, it
shall give prompt notice thereof to Landlord.
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11.3 Except as aforesaid, Landlord shall, at its expense comply
with or cause to be complied with, all laws, orders, ordinances and regulations
of Federal, State, County and Municipal authorities and any direction, made
pursuant to law, of any public officer or officers which shall, with respect to
the public portions of the Building, or which affect Tenant's use or enjoyment
of, or access to, the Demised Premises, impose any violation, order or duty upon
Landlord or Tenant and with respect to which Tenant is not obligated by Section
11.1 to comply. Landlord may at its expense contest the validity of any such
law, ordinance, rule, order or regulation.
ARTICLE 12.
REPAIRS
12.1 Tenant shall take good care of the Demised Premises and the
fixtures and appurtenances therein and at its sole cost and expense make all
repairs thereto as and when needed to preserve them in good working order and
condition (except to the extent such repair is required due to Landlord's
negligence or willful misconduct). All damage or injury to the Demised Premises,
whether structural or non-structural, and to its fixtures, glass, appurtenances
and equipment or to the Building or to its fixtures, glass, appurtenances and
equipment caused by Tenant moving property in or out of the Building or by
installation or removal of furniture, fixtures or other property, or resulting
from fire, explosion, air-conditioning unit or system, short circuits, flow or
leakage of water, steam, illuminating gas, sewer gas, sewerage or odors or by
frost or by bursting or leaking of pipes or plumbing works or gas, or from any
other cause of any other kind or nature whatsoever due to the negligence or
willful misconduct of Tenant, its servants, employees, agents, visitors or
licensees, shall be repaired, restored or replaced promptly by Tenant at its
sole cost and expense to the reasonable satisfaction of Landlord. All aforesaid
repairs, restorations and replacements shall be in quality and class equal to
the original work or installations and shall be done in a good and workmanlike
manner. If Tenant fails to make such repairs, restorations or replacements, same
may be made by Landlord at expense of Tenant and all sums so spent and expenses
incurred by Landlord shall be collectible as additional rent and shall be paid
by Tenant within ten (10) days after rendition of a bill or statement therefor.
12.2 Landlord shall, at its expense, make all repairs and
replacements, structural and otherwise, necessary or desirable in order to keep
in good order and repair the exterior of the Building and the public portions of
the Building the need for which Landlord may have knowledge (including the
public halls and stairways, plumbing, wiring and other Building equipment for
the general supply of water, heat, air-conditioning, gas and electricity) except
repairs hereinabove provided to be made by Tenant. Tenant agrees to notify
Landlord of the necessity of repairs of which Tenant may have knowledge, for
which Landlord may be responsible under the provisions of the preceding
sentence. Landlord shall use commercially reasonable efforts to minimize
interference with Tenant's use and occupancy of the Demised Premises in making
such repairs, without, however, being obligated to employ overtime labor or to
incur any extraordinary expense in connection therewith.
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ARTICLE 13.
ALTERATIONS; FIXTURES
13.1 Tenant shall make no alterations, decorations, installations,
additions or improvements in or to the Demised Premises or the electrical,
plumbing, mechanical or heating, ventilating and air-conditioning systems
serving the Demised Premises, including but not limited to, a water cooler, an
air-conditioning or cooling system, mechanical or electrical equipment, or any
unit or part thereof or other apparatus of like or other nature, without
Landlord's prior written consent, which consent, with respect to non-structural
alterations that do not adversely affect any of the Building systems, shall not
be unreasonably withheld or delayed, provided Tenant complies with the
provisions herein, and then only by contractors or mechanics approved by
Landlord, which approval shall not be unreasonably withheld or delayed as to any
proposed general contractor to be retained by Tenant or subcontractors proposed
to be retained by Tenant's contractor. All such work, alterations, decorations,
installations, additions or improvements shall be done at Tenant's sole expense
and at such times and in such manner as Landlord may from time to time designate
and in full compliance with all governmental bodies having jurisdiction
thereover. As a condition precedent to Landlord's consent to the making by
Tenant of alterations, decorations, installations, additions or improvements to
Demised Premises costing in excess of $50,000, Tenant agrees to obtain and
deliver to Landlord a performance bond and a labor and materials payment bond
issued by a surety company satisfactory to Landlord and licensed to do business
in the State of New York, each in an amount equal to 100% of the cost of all
work, labor, and such services to be performed and materials to be furnished in
connection with such work, signed by such surety and a receipt of payment in
full of the premium for such bond. Landlord and Landlord's designees shall be
obligee(s) or insured(s) under such surety bond. Notwithstanding the foregoing,
if any mechanic's lien is filed against the Demised Premises or the Building for
work claimed to have been done for or materials claimed to have been furnished
to Tenant, it shall be discharged by Tenant within twenty (20) days after Tenant
is given notice of such lien, at Tenant's expense, by filing the bond required
by law or payment or otherwise. If Tenant fails to discharge such lien, then
Landlord (upon ten (10) days prior notice to Tenant) shall have the right to
discharge same (by filing the bond required by law or by payment in full of the
mechanic's lien or otherwise) and Landlord's costs and expense in obtaining such
discharge shall be repaid in full by Tenant to Landlord as additional rent
within ten (10) days after written demand therefor. In addition, Tenant shall
defend, save and hold Landlord harmless from any such mechanic's lien or claim,
including, without limitation, Landlord's reasonable attorneys' fees, costs and
expenses. Landlord shall not be liable for any failure of any Building
facilities or services including, but not limited to, the heating, ventilating
and air-conditioning installations, and/or additions by Tenant and Tenant shall
correct any such faulty installation. Upon Tenant's failure to correct same,
Landlord may make such correction and charge Tenant for the cost thereof. Such
sum due Landlord shall be deemed additional rent and shall be paid by Tenant
promptly upon being billed therefor and unless so paid, Tenant shall also pay
Landlord the then Prime Rate on such additional rent.
13.2 Prior to commencing any work pursuant to the provisions of
Section 13.1, Tenant shall furnish to Landlord:
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A. Copies of all governmental permits and authorizations
which may be required in connection with such work.
B. A certificate evidencing that Tenant (or Tenant's
contractors) has (have) procured workmen's compensation insurance in statutory
limits covering all persons employed in connection with the work who might
assert claims for death or bodily injury against the holder of the Over-Lease,
Landlord, Tenant or the Building.
C. Such additional personal injury and property damage
insurance (over and above the insurance required to be carried by Tenant
pursuant to the provision of Section 16.3 of Article 16) and general liability
insurance (with completed operations endorsement) for any occurrence in or about
the Building, in such limits as Landlord may reasonably require because of the
nature of the work to be done by Tenant and with insurers satisfactory to
Landlord.
13.3 All alterations, decorations, installations, additions or
improvements upon the Demised Premises, made by or for the benefit of Tenant,
including all paneling, decoration, partitions, railing, and the like, affixed
to the realty so that they cannot be removed without material damage, or for
which Tenant has received a credit shall, except as otherwise provided in this
Section 13.3, become the property of Landlord and shall remain upon, and be
surrendered with, the Demised Premises, as a part thereof, at the end of the
term or renewal terms, as the case may be. All alterations, installations,
additions or improvements upon the Demised Premises which are of a specialized
nature, however, including, but not limited to, pre-action sprinkler system,
raised floors, private bathrooms, pantries, outside louvers, and any other
improvements not generally usable by office tenants shall be deemed to be
"Specialty Alterations", and unless Landlord elects otherwise, shall be removed
from the Demised Premises by Tenant at Tenant's expense, with all damage caused
by such removal repaired by Tenant at its expense, and leaving the Demised
Premise otherwise in "broom clean" condition at or prior to the expiration of
the term. Landlord shall have the right to postpone its election as to such
Specialty Alterations until the date which is six (6) months after the end of
the term or renewal terms, as the case may be, in which case such items shall
remain upon, and be surrendered with, the Demised Premises at the end of such
term or renewal terms; if Landlord elects not to retain any of such Specialty
Alterations and gives notice thereof to Tenant within such six (6) month period,
then (a) Landlord shall remove such item(s) and repair any damage caused by such
removal and restore the Demised Premises as set forth above, (b) Tenant shall
promptly reimburse Landlord upon demand for Landlord's reasonable costs of such
removal and/or restoration, (c) if Landlord is holding a Security Deposit under
Article 29 of this Lease, Landlord shall retain such portion of that Security
Deposit as Landlord deems reasonably necessary in order to secure Tenant's
payment obligations under clause (b) above (but the same shall not constitute a
limit on Tenant's obligation under such clause (b) above) and (d) the provisions
of this sentence shall survive the expiration or earlier termination of this
Lease. Where furnished by or at the expense of Tenant (except where same is a
replacement of an item theretofore furnished and paid for by Landlord or against
which Tenant has received a credit), all movable property, furniture,
furnishings and trade fixtures, not affixed to the realty so that they can be
removed without material damage shall remain the property of Tenant, shall be
removed by Tenant on or before the expiration of the term or sooner termination
thereof and, in case of damage by reason of their removal, Tenant shall repair
any damage and restore the Demised Premises to good order and condition. In case
Tenant shall decide not to remove any part of such property, it shall notify
Landlord in writing
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not less than sixty (60) days prior to the expiration of the term of this Lease
specifying the items of property which it has decided not to remove. If within
thirty (30) days after the service of such notice Landlord shall request Tenant
to remove any of the said Tenant's property, and/or if Landlord shall elect, not
less than 30 days prior to the expiration of this Lease, to require the removal
of any alterations, decorations, installations, additions or improvements
referred to above, Tenant shall at its expense, at or before the expiration of
the term of this Lease, remove said property, and in case of damage by reason of
such removal, restore the Demised Premises to good order and condition.
Notwithstanding anything to the contrary contained in this Lease, Tenant shall
not be required to obtain the consent or approval of Landlord for decorative,
nonstructural alterations (such as painting, wallcovering and carpeting) which:
(a) shall be located wholly within the Demised Premises; (b) shall not affect
the structural integrity of the Building or the operation of the HVAC, plumbing,
electrical, or water and sewer or other systems of the Building and (c) shall
not cost more than $10,000 in the aggregate, provided that Tenant gives Landlord
reasonable prior notice of such work.
13.4 A. Before proceeding with any alteration and/or addition,
Tenant shall submit to Landlord three copies of detailed plans and
specifications therefor, for Landlord's review and approval. In no event by
reason thereof shall Tenant's connected electrical load exceed the capacity of
the distribution system in and to the Demised Premises. Provided Tenant so
requests in writing when submitting its plans to Landlord, Landlord shall advise
Tenant as to whether any of the alterations set forth in such plans shall be
required by Landlord to be removed by Tenant at the end of the term or renewed
terms.
B. Tenant shall promptly reimburse Landlord for all
reasonable expenses incurred by Landlord in connection with (i) its decision and
the decision of any superior lessor and superior mortgagee as to whether to
approve the proposed alterations and/or additions and (ii) inspecting the
alterations and/or additions to determine whether the same are being or have
been performed in accordance with the approved plans and specifications therefor
and with all legal requirements and insurance requirements, including the fees
and expenses of any attorney, architect or engineer employed for such purpose.
Landlord shall exercise its good faith efforts to obtain consents from any
superior lessor and superior mortgagee. If such alterations and/or additions
require consent by or notice to the superior lessor, or the superior mortgagee,
Tenant, notwithstanding anything to the contrary contained in this Article,
shall not proceed with the same until such consent has been received, or such
notice has been given, as the case may be, and all applicable conditions and
provisions of the superior lease and/or additions for which consent has been
received shall be performed in accordance with the approved plans and
specifications therefor, and no changes thereto shall be made without the prior
consent of Landlord.
C. Tenant shall not be permitted to install and make
part of the Demised Premises any materials, fixtures or articles which are
subject to liens, chattel mortgages or security interests (as such term is
defined in the Uniform Commercial Code as then in effect in New York) but Tenant
shall be permitted to lease normal office equipment, e.g., typewriter, photocopy
machines and telex machines, which are not to be built into the Demised
Premises.
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D. No alterations and/or additions shall be undertaken
(i) except under the supervision of a licensed architect or licensed
professional engineer satisfactory to Landlord (except for minor, decorative
alterations such as painting) and (ii) except after at least 15 days' prior
notice to Landlord.
E. All alterations and/or additions shall at all times
comply with all legal requirements and insurance requirements and all rules and
regulations including any Landlord may adopt with respect to the making of any
improvements and shall be made at such times and in such manner as Landlord may
from time to time direct. Tenant, at its expense, shall (a) obtain all necessary
municipal and other governmental permits, authorizations, approvals and
certificates for the commencement and prosecution of such alterations and/or
improvements and for final approval thereof upon completions, (b) deliver three
copies to Landlord and (c) cause all alterations and/or improvements to be
performed in a good and first class workmanlike manner, using new materials and
equipment at least equal in quality to the original installations of the
Building or the then standards for the Building established by Landlord. All
alterations and/or additions shall be promptly commenced and completed and shall
be performed in such manner so as not to interfere with the occupancy of any
other tenant nor delay or impose any additional expense upon Landlord in the
maintenance, cleaning, repair, safety, management, or security of the Building
(or the Building's equipment) or in the performance of any improvements. If any
additional expense is incurred Landlord may collect the same as additional rent
from Tenant and Tenant's failure to promptly pay the same when billed shall
entitle Landlord to treat the nonpayment thereof as a non-payment of rent under
this Lease and until paid to Landlord such additional rent shall bear interest
at the then Prime Rate. Upon completion of Tenant's improvements, Tenant shall
deliver a complete set of "As Built" drawings and plans to Landlord. No
improvements shall involve the removal of any fixtures, equipment or other
property in the Demised Premises which are not Tenant's sole and exclusive
property without Landlord's prior written consent and unless they shall be
promptly replaced, at Tenant's expense, with fixtures, equipment or other
property, of like utility and at least equal value (which thereupon shall become
the property of Landlord).
F. Tenant, at its sole expense, promptly shall procure
the cancellation or discharge of all notices of violation arising from or
otherwise connected with its alterations and/or additions which shall be issued
by any public authority having or asserting jurisdiction.
G. Only Landlord or persons first reasonably approved by
Landlord shall be permitted to act as contractor for any work to be performed in
accordance with this Article. Landlord reserves the right to exclude from the
Building any person attempting to act as construction contractor in violation of
this Article. In the event Tenant shall employ any contractor permitted in this
Article, such contractor or any subcontractor may have use of the Building
facilities subject to the provisions of this Lease and the Rules and Regulations
governing construction. Tenant will advise Landlord of the names of any such
contractor and subcontractor Tenant proposes to use in the Demised Premises at
least 30 days prior to the beginning of work by such contractor or
subcontractor.
H. Tenant agrees that it will not at any time prior to
or during the term of this Lease, either directly or indirectly employ or permit
the employment of any contractor, mechanic or laborer, or permit any materials
in the Demised Premises, if the use of such contractor,
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mechanic or laborer or such materials would, in Landlord's sole and exclusive
opinion, create any difficulty, work slowdown, sabotage, wild-cat strike, strike
or jurisdictional dispute with other contractors, mechanics and/or laborers
engaged by Tenant or Landlord or others, or would in any way disturb the
peaceful and harmonious construction, maintenance, cleaning, repair, management,
security or operation of the Building or any part thereof or in any other
building owned by Landlord (or an affiliate of Landlord or co-venturer of
Landlord). In the event of any interference or conflict, or perceived
interference or conflict, Tenant, upon demand of Landlord, shall cause all
contractors, mechanics or laborers, or all materials causing, in Landlord's sole
and exclusive opinion, such interference, difficulty or conflict, to leave or be
removed from the Building immediately and Tenant does hereby agree to defend,
save and hold Landlord harmless from any and all loss arising thereby,
including, without limitation, any attorney's fees and any claims made by
contractors, mechanics and/or laborers so precluded from having access to the
Building.
I. No approval of any plans or specifications by
Landlord or consent by Landlord allowing Tenant to make any improvements or any
inspection of improvements made by or for Landlord shall in any way be deemed to
be an agreement by Landlord that the contemplated improvements comply with any
legal requirements or insurance requirements or the certificate of occupancy for
the Building nor shall it be deemed to be a waiver by Landlord of the compliance
by Tenant of any provision of this Lease.
ARTICLE 14.
LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
14.1 If Tenant shall default beyond applicable notice and cure
periods in the observance or performance of any term or covenant on its part to
be observed or performed under or by virtue of any of the terms or provisions in
any Article of this Lease, Landlord, without being under any obligation to do so
and without thereby waiving such default, may remedy such default for the
account and at the expense of Tenant. If Landlord makes any expenditures or
incurs any obligations for the payment of money in connection therewith,
including, but not limited to, attorney's fees in instituting, prosecuting or
defending any action or proceeding, such sums paid or obligations incurred with
interest and costs shall be deemed to be additional rent hereunder and shall be
paid to it by Tenant promptly after demand.
ARTICLE 15.
NO LIABILITY OF LANDLORD
15.1 Landlord or Landlord's agents have made no representations or
promises with respect to the Building, the Land or the Demised Premises except
herein expressly set forth and no rights, easements or licenses are acquired by
Tenant by implication or otherwise except as expressly set forth in the
provision of this Lease. The taking possession of the Demised Premises by Tenant
shall be conclusive evidence, as against Tenant, that Tenant accepts said
premises and that same were in good and satisfactory condition, except as
otherwise provided in this Lease, at the time such possession was so taken
subject to Punch List Items, and to latent
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defects (of which Landlord must be given notice within two (2) months after the
date of delivery of possession of the Demised Premises to Tenant).
15.2 This Lease and the obligation of Tenant to pay rent hereunder
and perform all of the other covenants and agreements hereunder on the part of
Tenant to be performed shall in no way be affected, impaired or excused because
Landlord is unable to fulfill any of its obligations under this Lease or is
unable to supply or is to make or is delayed in making any repairs, additions,
alterations or decorations or is unable to supply or is delayed in supplying any
equipment or fixtures, if Landlord is prevented or delayed from so doing by
reason of strike or labor trouble or any other cause whatsoever beyond
Landlord's reasonable control including, but not limited to, governmental
pre-emption in connection with a National Emergency or by reason of any rule,
order or regulation of any department or subdivision thereof of any government
agency or by reason of the conditions of supply and demand which have been or
are affected by war or other emergency.
15.3 Landlord and its agents shall not be liable for any damage to
property of Tenant or of others entrusted to employees of the Building, nor for
the loss of or damage to any property of Tenant by theft or otherwise. Landlord
and its agents shall not be liable for any injury or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water, rain or snow leaks from any part of the Building or from the
pipes, appliances or plumbing works or from the roof, street or sub-surface or
from any other place or by dampness or by any other cause of whatsoever nature,
unless caused by or due to the negligence of Landlord, its agents, servants or
employees; nor shall Landlord and its agents be liable for any such damage
caused by other tenants or persons in the Building or caused by operations in
construction of any private, public or quasi-public work; nor shall Landlord be
liable for any patent defect in the Demised Premises or in the Building. If at
any time any windows of the Demised Premises are temporarily closed, darkened or
bricked up for any reason whatsoever including, but not limited to, Landlord's
own acts (or permanently closed or bricked up if required by law), Landlord
shall not be liable for any damage Tenant may sustain thereby and Tenant shall
not be entitled to any compensation therefor nor abatement of rent nor shall the
same release Tenant from its obligations hereunder nor constitute an eviction.
In the case of a temporary closing or darkening, Landlord shall use commercially
reasonable efforts to minimize the duration of such closing or darkening,
without, however, being obligated to employ overtime labor or to incur any
extraordinary expense in connection therewith. Tenant shall reimburse and
compensate Landlord as additional rent within ten (10) days after rendition of a
statement for all expenditures made by or damages or fines sustained or incurred
by Landlord due to non-performance or non-compliance with or breach or failure
to observe any term, covenant or condition of this Lease upon Tenant's part to
be kept, observed, performed or complied with. If Tenant shall fail to make such
payment within said ten (10) days, Tenant shall also be liable for interest on
such additional rent at the then Prime Rate until Landlord shall be fully
reimbursed. Tenant shall give immediate notice to Landlord in case of fire or
accidents in the Demised Premises or in the Building or of defects therein or in
any fixtures or equipment.
15.4 No recourse shall be had on any of Landlord's obligations
under this Lease or for any claim based thereon or otherwise in respect thereof
against any incorporator of Landlord, subscriber to Landlord's capital stock,
shareholder, employee, agent, officer or director, past, present or future, of
any corporation, or any partner or joint venturer of any
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partnership or joint venture which shall be Landlord hereunder or included in
the term "Landlord" or of any successor of any such corporation, or against any
principal, disclosed or undisclosed, or any such corporation, or against any
principal, disclosed or undisclosed, or any affiliate of any party which shall
be Landlord or included in the term "Landlord," whether directly or through
Landlord or through any receiver, assignee, agent, trustee in bankruptcy or
through any other person, firm or corporation, whether by virtue of any
constitution, statute or rule of law or by enforcement of any assessment or
penalty or otherwise, all such liability being expressly waived and released by
Tenant.
15.5 Tenant shall look only and solely to Landlord's leasehold
estate and interest in and to the Building and the rents and profits therefrom
and the proceeds of any sale thereof for the satisfaction of any right of Tenant
arising out of this Lease or for the collection of judgment or other judicial
process or arbitration award requiring the payment of money by Landlord and no
other property or assets of Landlord, Landlord's agents, incorporators,
shareholders, employees, officers, directors, partners, agents, principal
(disclosed or undisclosed), joint venturers, or affiliates shall be subject to
levy, lien, execution, attachment, or other enforcement procedure for the
satisfaction of Tenant's rights and remedies under or with respect to this
Lease, the relationship of Landlord and Tenant hereunder or under law, or
Tenant's use and occupancy of the Demised Premises or any other liability of
Landlord to Tenant.
ARTICLE 16.
INSURANCE
16.1 Tenant shall not do or permit to be done any act or thing in
or upon the Demised Premises which will invalidate or be in conflict with the
Certificate of Occupancy or the terms of the New York State standard form of
fire, boiler, sprinkler, water damage or other insurance policies covering the
Building and the fixtures and property therein; and Tenant shall, at its own
expense, comply with all rules, orders, regulations or requirements of the New
York Board of Fire Underwriters or any other similar body having jurisdiction,
and shall not knowingly do or permit anything to be done in or upon the Demised
Premises or bring or keep anything therein or use the Demised Premises in a
manner which increases the rate of fire insurance upon the Building or on any
property or equipment located therein over the rate in effect at the
commencement of the term of this Lease.
16.2 If, by reason of any failure of Tenant to comply with the
provisions of this Lease, the rate of fire, boiler, sprinkler, water damage or
other insurance (with extended coverage) on the Building or on the property and
equipment of Landlord or any other tenant or subtenant in the Building shall be
higher than it otherwise would be, Tenant shall reimburse Landlord and the other
tenants in the Building for that part of the fire, boiler, sprinkler, water
damage or other insurance premiums thereafter paid by Landlord which shall have
been charged because of such failure by Tenant and Tenant shall make the
reimbursement on the first day of the month following such payment by Landlord.
If Tenant shall fail to make such reimbursement when billed for the same,
Landlord may treat the same as a default in the payment of rental and shall also
be entitled to interest on the unpaid sum at the then Prime Rate until such sum
shall be fully paid to Landlord. In any action or proceeding wherein Landlord
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and Tenant are parties, a schedule or "make up" of rates for the Building or
Demised Premises issued by the New York Fire Insurance Exchange or other body
making fire insurance rates for said premises, shall be conclusive evidence of
the facts therein stated and of the several items and charges in the fire
insurance rate then applicable to said Building or Demised Premises.
16.3 Tenant shall obtain and keep in full force and effect during
the term, at its own cost and expense, to protect Tenant as the insured and
Landlord, Landlord's agents, any superior lessor, and any superior mortgagee as
additional insureds (a) public liability insurance to afford protection against
any and all claims for personal injury, death or property damage occurring in,
upon, adjacent to or connected with the Demised Premises, or any part thereof in
an amount of not less than $5,000,000 in the aggregate combined single limit
bodily injury and property damage arising out of any one occurrence or in any
increased amount reasonably required by Landlord; and (b) insurance against loss
or damage by fire, and such other risks and hazards as are insurable under then
available standard forms of fire insurance policies with extended coverage, to
Tenant's property for the full insurable value thereof. During such time as
Tenant shall be constructing any improvements, alterations and/or additions to
the Demised Premises, Tenant shall carry builder's risk insurance, completed
value form, covering all physical loss, in an amount reasonably satisfactory to
and to specifically protect the Landlord and any superior lessor.
All such insurance shall be written in form and substance reasonably
satisfactory to Landlord by an insurance company of recognized responsibility
licensed to do business in New York State. Upon failure of Tenant to procure,
maintain and pay all premiums therefor, Landlord may, at its option do so, and
Tenant agrees to pay the cost thereof to Landlord upon demand as additional
rent, together with interest thereon at the then Prime Rate. Tenant shall cause
to be included in all such insurance policies a provision to the effect that the
same will be noncancellable and not permitted to lapse or be modified except
upon 30 days' prior notice to Landlord. Attached hereto as Exhibit G is a sample
insurance certificate showing the lower right-hand "Cancellation" section
requirements which must be met to conform the certificate to the provisions of
this Section. On the Commencement Date the original insurance policies or
appropriate endorsements thereto shall also be deposited.
16.4 Tenant shall indemnify and hold Landlord harmless from and
against all claims or damage (including attorneys' fees) to person or property
occurring in or about the Demised Premises or arising from, related to or in
connection with the use or occupancy of the Demised Premises or the conduct of
Tenant's business therein or therefrom.
ARTICLE 17.
DAMAGE BY FIRE OR OTHER CAUSE
17.1 If the Demised Premises shall be partially damaged by fire or
other cause without the default or neglect of Tenant, Tenant's servants,
employees, agents, visitors or licensees, the damages shall be repaired by and
at the expense of Landlord and until such repairs shall be completed the Fixed
Rent shall be apportioned according to the part of the Demised Premises which is
usable by Tenant. But if partial damage is due to the fault or neglect of
Tenant, Tenant's servants, employees, agents, visitors or licensees, without
prejudice to any
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other rights and remedies of Landlord and without prejudice to the rights of
subrogation of Landlord's insurer, the damages shall be repaired by Landlord but
there shall be no apportionment or abatement of rent. No penalty shall accrue
for reasonable delay which may arise by reason of adjustment of insurance on the
part of the Landlord, or for reasonable delay on account of "labor troubles," or
for Acts of God, or any other cause beyond Landlord's control, or any
combination thereof. If the Demised Premises are totally or substantially
damaged or are rendered wholly or substantially untenantable by fire or other
cause, then the rent shall be proportionately paid up to the time of the
casualty and thenceforth shall cease until the date when the Demised Premises
shall have been repaired and restored by Landlord, subject to Landlord's right
to elect not to restore the same as hereinafter provided. If the Demised
Premises are rendered substantially unusable or (whether or not the Demised
Premises are damaged in whole or in part) if the Building shall be so damaged
that Landlord shall decide to demolish it or to rebuild it, then or in any of
such events Landlord may, within ninety (90) days after such fire or other
cause, give Tenant a notice in writing of such decision, which notice shall be
given as in Article 24 hereof provided, and thereupon the term of this Lease
shall expire by lapse of time upon the third day after such notice is given, and
Tenant shall vacate the Demised Premises and surrender the same to Landlord.
Upon the termination of this Lease under the conditions provided for in the
sentence immediately preceding, Tenant's liability for rent shall cease as of
the day following the casualty. Tenant hereby expressly waives the provision of
Section 227 of the Real Property Law and agrees that the foregoing provision of
this Article shall govern and control in lieu thereof, this Article being an
express agreement. If the damage or destruction be due to the fault or neglect
of Tenant the debris shall be removed by, and at the expense of Tenant.
17.2 No damage, compensation or claims shall be payable by
Landlord for inconvenience, loss of business or annoyance arising from any
repair or restoration of any portion of the Demised Premises or of the Building.
Landlord shall use its reasonable efforts (which reasonable efforts shall in no
event obligate Landlord to pay overtime pay or other premium rates) to effect
such repairs promptly and in such a manner as not unreasonably to interfere with
Tenant's occupancy.
17.3 The parties hereto shall each procure and maintain in force
and effect an appropriate clause in, or endorsement on, any fire or extended
coverage insurance covering the Demised Premises and the Building and the
personal property, fixtures and equipment located therein or thereon, pursuant
to which, the insurance companies waive subrogation, provided such waiver is
procurable without additional premium, and having obtained such clause or
endorsement of waiver of subrogation, each party hereby agrees that it will not
make any claims against or seek to recover from the other for any loss or damage
to its property or the property of the other, covered by such fire and extended
coverage insurance; provided, however, that the release, discharge, exoneration
and covenant not to sue herein contained shall be limited by the terms and
provisions of the waiver of subrogation clause and/or endorsements and shall be
co-extensive therewith. If such waiver of subrogation shall be procurable only
by payment of an additional premium therefor, notice of such requirements shall
be furnished to the other party, and if such other party fails to pay such
additional premium, or if such waiver of subrogation shall no longer be
obtainable, then the provisions hereof shall not be applicable to such other
party. Tenant acknowledges that Landlord will not carry insurance on Tenant's
furniture, equipment, improvements, furnishings or other Tenant appurtenances
removable by Tenant, and
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Tenant agrees that Landlord will not be obligated to repair any damage thereto
or to replace the same. Tenant agrees to carry and maintain insurance on all of
its property equal to 100% of the full insurable value thereof.
17.4 If more than 15% of the Demised Premises or a substantial
portion of the Building shall be damaged by fire or other casualty during the
last two (2) years of the terms of this Lease, Landlord may, upon 90 days
written notice to Tenant, cancel and terminate this Lease as of the date set
forth in such notice, as if such date were the stated Expiration Date of this
Lease and Landlord shall have no duty to repair and/or restore the Demised
Premises.
17.5 Notwithstanding anything herein to the contrary, if the
Demised Premises are totally or substantially damaged, then Landlord (if it has
not theretofore cancelled this Lease pursuant to the provisions of this Article)
shall within ninety (90) days after such fire or casualty obtain and deliver to
Tenant an estimate from a reliable contractor as to whether or not the Demised
Premises can be repaired and restored under a normal working schedule within
twelve (12) months from the date of such fire or casualty. If such estimate
states that the Demised Premises cannot be so restored, Tenant may, within
thirty (30) days after receipt of the estimate, upon thirty (30) days written
notice to Landlord, elect to terminate this Lease as of the date set forth in
such notice. If within twelve (12) months (such period to be extended to the
extent of delays caused by Tenant or due to force majeure) after the fire or
casualty, the Demised Premises have not been substantially restored by Landlord,
Tenant may, within thirty (30) days after the end of such period, upon thirty
(30) days written notice to Landlord, cancel and terminate this Lease as of the
date set forth in such notice. If Tenant exercises its right to terminate this
Lease pursuant to this paragraph, this Lease shall terminate as of the date set
forth in Tenant's notice as if such date were the stated expiration date of this
Lease and Landlord shall have no further duty to repair and/or restore the
Demised Premises.
ARTICLE 18.
CONDEMNATION
18.1 In the event that the whole of the Demised Premises shall be
condemned or taken in any manner for any public or quasi-public use, this Lease
and the term and estate hereby granted shall forthwith cease and terminate as of
the date of vesting of title. In the event that only a part of the Demised
Premises shall be so condemned or taken, then, effective as of the date of
vesting of title, the rent hereunder for such part shall be equitably abated and
this Lease shall continue as to such part not so taken. In the event that only a
part of the Building shall be so condemned or taken, then (a) if substantial
structural alteration or reconstruction of the Building shall, in the reasonable
opinion of Landlord, be necessary or appropriate as a result of such
condemnation or taking (whether or not the Demised Premises be affected),
Landlord may, at its option, terminate this Lease and the term and estate hereby
granted as of the date of such vesting of title by notifying Tenant in writing
of such termination within 60 days following the date on which Landlord shall
have received notice of vesting of title, or (b) if Landlord does not elect to
terminate this Lease, as aforesaid, this Lease shall be and remain unaffected by
such condemnation or taking, except that the rent shall be abated to the extent,
if any, hereinbefore provided. In the event that only a part of the Demised
Premises shall be so condemned or taken and this Lease and the terms and estate
hereby granted are not terminated as hereinbefore
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provided, Landlord will, at its expense, restore with reasonable diligence the
remaining structural portions of the Demised Premises as nearly as practicable
to the same condition as it was in prior to such condemnation or taking.
18.2 In the event of termination in any of the cases hereinabove
provided, this Lease and the term and estate hereby granted shall expire as of
the date of such termination with the same effect as if that were the date
hereinbefore set for the expiration of the term of this Lease, and the rent
hereunder shall be apportioned as of such date.
18.3 In the event of any condemnation or taking hereinabove
mentioned of all or a part of the Building, Landlord shall be entitled to
receive the entire award in the condemnation proceeding, including any award
made for the value of the estate vested by this Lease in Tenant, and Tenant
hereby expressly assigns to Landlord any and all right, title and interest of
Tenant now or hereafter arising in or to any such award or any part thereof, and
Tenant shall be entitled to receive no part of such award. Tenant shall have no
claim for the value of any unexpired term of this Lease.
18.4 If more than 15% of the Demised Premises shall be taken in
condemnation during the last two (2) years of the term of this Lease, Landlord
may give Tenant a 90 day notice terminating and canceling this Lease as if the
date set forth in the notice were the Expiration Date hereof.
ARTICLE 19.
BANKRUPTCY
19.1 If at any time prior to the date herein fixed as the
Commencement Date there shall be filed by or against Tenant in any court
pursuant to any statute either of the United States or of any State a petition
in bankruptcy, or there shall be commenced a case under the United States
Bankruptcy Code, 11 U.S.C. ss.101 et. seg., as amended (the "Bankruptcy Code")
by or against Tenant, or a petition filed for insolvency or for reorganization
or for the appointment of a receiver or trustee of all or a portion of Tenant's
property, and within sixty (60) days thereof Tenant fails to secure a discharge
thereof, or if Tenant makes an assignment for the benefit of creditors, or
petitions for or enters into an arrangement with its creditors, (any or all of
the foregoing being herein called a "Bankruptcy Event") this Lease shall be
cancelled and terminated, in which event neither Tenant nor any person claiming
through or under Tenant or by virtue of any statute or of an order of any court
shall be entitled to possession of the Demised Premises and Landlord, in
addition to the other rights and remedies given by Section 19.3 hereof and by
virtue of any other provision herein or elsewhere in this Lease contained or by
virtue of any statute or rule of law, may retain as liquidated damages any rent,
security, deposit or monies received by it from Tenant or others on behalf of
Tenant upon the execution hereof.
19.2 If at the date fixed as the Commencement Date or if at any
time during the term hereby demised there shall be filed by or against Tenant in
any court pursuant to any statute either of the United States or of any State a
petition in bankruptcy, or there shall be commenced a case by or against Tenant
under the Bankruptcy Code, or a petition filed in insolvency or for
reorganization or for the appointment of a receiver or trustee of all or a
portion of Tenant's
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property, and within sixty (60) days thereafter Tenant fails to secure a
discharge thereof, or if Tenant makes an assignment for the benefit of creditors
or petitions for or enters into an arrangement with its creditors, this Lease,
at the option of Landlord, exercised within a reasonable time after notice of
the happening of any one or more of such events, may be cancelled and
terminated, in which event neither Tenant nor any person claiming through or
under Tenant by virtue of any statute or of an order of any court shall be
entitled to possession or to remain in possession of the Demised Premises but
shall forthwith quit and surrender the Demised Premises, and Landlord, in
addition to the other rights and remedies Landlord has by virtue of any other
provision herein or elsewhere in this Lease contained or by virtue of any
statute or rule of law, may retain as liquidated damages any rent, security,
deposit or monies received by it from Tenant or others on behalf of Tenant.
19.3 It is stipulated and agreed that in the event of the
termination of this Lease pursuant to Sections 19.1 or 19.2 hereof, Landlord
shall forthwith, notwithstanding any other provisions of this Lease to the
contrary, be entitled to recover from Tenant as and for liquidated damages an
amount equal to the difference between the rent reserved hereunder for the
unexpired portion of the term demised and the then fair and reasonable rental
value of the Demised Premises for the same period. In the computation of such
damages the difference between any installment of rent becoming due hereunder
after the date of termination and the fair and reasonable rental value of the
Demised Premises for the period for which such installment was payable shall be
discounted to the date of termination at the rate of four per cent (4%) per
annum. If such premises or any part thereof be re-let by the Landlord for the
unexpired term of this Lease, or any part thereof, before presentation of proof
of such liquidated damages to any court, commission or tribunal, the amount of
rent reserved upon such reletting shall be deemed prima facie to be the fair and
reasonable rental value for the part or the whole of the premises so re-let
during the term of the re-letting. Nothing herein contained shall limit or
prejudice the right of the Landlord to prove for and obtain as liquidated
damages by reason of such termination, an amount equal to the maximum allowed by
any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether or not such amount
be greater, equal to or less than the amount of the difference referred to
above.
19.4 Without limiting any of the foregoing provisions of this
Article, if pursuant to the Bankruptcy Code, Tenant is permitted to assign or
otherwise transfer this Lease (whether in whole or in part in disregard of the
restrictions contained in this Article and/or Article 8), Tenant agrees that
adequate assurance of future performance by the assignee or transferee permitted
under such Code shall mean the deposit of cash security with Landlord in an
amount equal to the sum of one year's Fixed Rent then reserved hereunder plus an
amount equal to all additional rent payable under Articles 4, 6, 7 or other
provisions of this Lease for the calendar year preceding the year in which such
assignment is intended to become effective, which deposit shall be held by
Landlord, without interest, for the balance of the term as a security for the
full and faithful performance of all of the obligations under this Lease on the
part of Tenant yet to be performed. If Tenant receives or is to receive any
valuable consideration for such an assignment or transfer (in part or in whole)
of this Lease, such consideration, after deducting therefrom any portion of such
consideration reasonably designated by the assignee or transferee as paid for
the purchase of Tenant's personal property in the Demised Premises, shall be and
become the sole exclusive property of Landlord and shall be paid over to
Landlord directly by such assignee or transferee. Any such assignee or
transferee may only use the
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Demised Premises as executive offices for an assignee or transferee whose main
business is the same as Tenant's and such occupancy may not increase the number
of individuals occupying the Demised Premises at the time a petition for
bankruptcy (or reorganization) is filed by or against Tenant. In addition,
adequate assurance shall mean that any such assignee or transferee of this Lease
shall have a net worth (exclusive of good will) equal to at least fifteen (15)
times the aggregate of the annual Fixed Rent reserved hereunder plus all
additional rent for the preceding calendar year as aforesaid. Such assignee or
transferee shall expressly assume this Lease by an agreement in recordable form.
ARTICLE 20.
DEFAULTS AND REMEDIES; WAIVER OF REDEMPTION
20.1 A. If Tenant defaults in fulfilling any of the covenants of
this Lease, other than the covenants for the payment of Fixed Rent or additional
rent, or if the Demised Premises become abandoned, or if the Demised Premises
are damaged by reason of negligence or carelessness of Tenant, its agents,
employees or invitees, then, in any one or more of such events, upon Landlord
serving a written fifteen (15) days' notice upon Tenant specifying the nature of
said default, and upon the expiration of said fifteen (15) days, if Tenant shall
have failed to comply with or remedy such default, or if the said default or
omission complained of shall be of such a nature that the same cannot be
completely cured or remedied within said fifteen (15) day period, and if Tenant
shall not have diligently commenced curing such default within such fifteen (15)
day period, and shall not thereafter with reasonable diligence and in good faith
proceed to remedy or cure such default or, if Tenant shall default in the
performance of any term or condition of this Lease (other than the payment of
Fixed Rent or additional rent) more than three times in any period of nine
months, or, with respect to the payment of any item of Fixed Rent or additional
rent, more than two times in any period of six months, and notwithstanding that
such defaults shall have each been cured within the applicable period, as above
provided, if any further similar default shall occur, then Landlord may serve a
written three (3) day notice of cancellation of this Lease upon Tenant, and upon
the expiration of said three (3) days, this Lease and the term hereunder shall
end and expire as fully and completely as if the date of expiration of such
three (3) day period were the day herein definitely fixed for the end and
expiration of this Lease and the term thereof and Tenant shall then quit and
surrender the Demised Premises to Landlord but Tenant shall remain liable as
hereinafter provided.
B. If the notice provided for in A hereof shall have been given,
and the term shall expire as aforesaid; or (1) if Tenant shall make default in
the payment of the Fixed Rent reserved herein or any item of additional rent
herein mentioned or any part of either or in making any other payment herein
provided; or (2) if any execution or attachment shall be issued against Tenant
or any of Tenant's property whereupon the Demised Premises shall be taken or
occupied or attempted to be taken or occupied by someone other than Tenant; or
(3) if Tenant shall make default with respect to any other lease between
Landlord and Tenant; or (4) if Tenant shall fail to move into or take possession
of the Demised Premises within sixty (60) days after commencement of the term of
the Lease, of which fact Landlord shall be the sole judge; then and in any of
such events Landlord may without notice, re-enter the Demised Premises by legal
means and dispossess Tenant by summary proceedings or otherwise, and the legal
representative
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of Tenant or other occupant of the Demised Premises and remove their effects and
hold the Demised Premises as if this Lease had not been made but Tenant shall
remain liable hereunder as hereinafter provided, and Tenant hereby waives the
service of notice of intention to re-enter or to institute legal proceedings to
that end. If Tenant shall make default hereunder that remains uncured on the
date fixed as the commencement of any renewal or extension of this Lease,
Landlord may cancel and terminate such renewal or extension agreement by written
notice, but Tenant shall remain liable as hereinafter provided.
20.2 In the case of any such default, re-entry, expiration and/or
dispossession by summary proceedings or otherwise, (a) the Fixed Rent and
additional rent shall become due thereupon and be paid to the time of such
re-entry, dispossession and/or expiration, together with such expenses as
Landlord may incur for legal expenses, attorneys' fees, brokerage, and/or
putting the Demised Premises in good order, or for preparing the same for
re-rental; (b) Landlord may re-let the Demised 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 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; and/or (c) Tenant or the legal representative of Tenant shall also
pay Landlord as liquidated damages for the failure of Tenant to observe and
perform said Tenant's covenants herein contained, any deficiency between the
rent and additional rents hereby reserved and/or covenanted to be paid and the
net amount, if any, of the rents collected or to be collected on account of the
lease or leases of the Demised Premises for each month of the period which would
otherwise have constituted the balance of the term of this Lease. The failure or
refusal of Landlord to re-let the Demised Premises or any part or parts thereof
shall not release or affect Tenant's liability for damages. In computing such
damages there shall be added to the said deficiency such expenses as Landlord
may incur in connection with re-letting, such as legal expenses, attorneys'
fees, brokerage and for keeping the Demised Premises in good order or for
preparing the same for re-letting. Any such damages shall be paid in monthly
installments by Tenant on the rent days specified in this Lease and any suit
brought to collect the amount of the deficiency for any month or months shall
not prejudice in any way the rights of Landlord to collect the deficiency for
any subsequent month or months by a similar proceeding. In lieu thereof,
Landlord may immediately accelerate such deficiency for the entire balance of
the term, discounted in the same manner as specified in Section 19.3. Landlord
at Landlord's option may make such alterations, repairs, replacements and/or
decorations in the Demised Premises as Landlord in Landlord's sole judgement
considers advisable and necessary for the purpose of re-letting the Demised
Premises; and the making of such alterations and/or decorations 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 Demised Premises, or in the event that the Demised Premises are re-let, for
failure to collect the rent thereof under such re-letting. Any such action may
be an action for the full amount of all rents and damages suffered or to be
suffered by Landlord. In the event of a breach or threatened breach by Tenant of
any of the covenants or provisions hereof, Landlord shall have the right of
injunction and the right to invoke any remedy allowed at law or in equity as if
re-entry, summary proceedings and other remedies were not herein provided for.
Mention in this Lease of any particular remedy, shall not preclude Landlord from
any other remedy, in law or in equity. The foregoing remedies and rights of
Landlord are cumulative. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event of
Tenant's being evicted or dispossessed for any cause, or in the event of
Landlord's obtaining possession of the Demised
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Premises by reason of the violation by Tenant of the covenants and conditions of
this Lease, or otherwise.
ARTICLE 21.
COVENANT OF QUIET ENJOYMENT
21.1 Landlord covenants and agrees with Tenant that upon Tenant's
paying the rent and additional rent and observing and performing all the terms,
covenants and conditions on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this Lease (including, but not
limited to, Article 23 hereof) and the Over Lease, ground leases, underlying
leases and mortgages hereinbefore and hereinafter mentioned.
ARTICLE 22.
SURRENDER OF PREMISES
22.1 Upon the expiration or other termination of the term of this
Lease, Tenant shall quit and surrender the Demised Premises in good order and
condition, ordinary wear and tear and damage by fire or other casualty, the
elements and any cause beyond Tenant's control excepted, and shall remove all
its property therefrom, except as otherwise provided in this Lease. Tenant's
obligation to observe or perform this covenant shall survive the expiration or
other termination of the term of this Lease.
22.2 Tenant acknowledges that possession of the Demised Premises
must be surrendered to Landlord at the expiration or sooner termination of the
term hereof. The parties recognize and agree that the damage to Landlord
resulting from any failure by Tenant timely to surrender possession of the
Demised Premises as aforesaid will be substantial, will exceed the amount of
annual Fixed Rent and additional rent theretofore payable hereunder, and will be
impossible accurately to measure. Tenant therefore agrees that if possession of
the Demised Premises is not surrendered to Landlord upon the expiration or
sooner termination of the term of this Lease, then notwithstanding anything to
the contrary contained in this Lease, Tenant shall pay to Landlord for each
month and for each portion of any month during which Tenant holds over in the
Demised Premises after the expiration or sooner termination of the term hereof,
for use and occupancy, the aggregate sum of (i) two times the amount of the
installment of the annual Fixed Rent that was payable under this Lease for the
last month of the term hereof, plus (ii) one-twelfth of all items of annual
additional rent which would have been payable monthly pursuant to this Lease had
its term not expired or been terminated, plus (iii) those items of additional
rent (not annual additional rent) which would have been payable monthly pursuant
to this Lease had its term not expired or been terminated, which aggregate sum
Tenant agrees to pay to Landlord upon demand, in full without setoff, and no
extension or renewal of this Lease shall be deemed to have occurred by such
holding over, nor shall Landlord be precluded by accepting such aggregate sum
for use and occupancy from exercising all rights and remedies available to it to
obtain possession of the Demised Premises. Further, Tenant shall be liable to
Landlord for all losses and damages which Landlord may reasonably incur or
sustain by reason
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of such holding over, including, but not limited to, damages incurred or
sustained by reason of Landlord's inability to timely place a new tenant in
possession of the Demised Premises.
ARTICLE 23.
DEFINITION OF LANDLORD
23.1 The term "Landlord" wherever used in this Lease shall be
limited to mean and include only the owner or owners at the time in question of
the Building or the tenant under the ground lease or under the Over Lease
affecting the Land and the Building or the Building, to whom this Lease may be
assigned, or a mortgagee in possession, so that in the event of any sale,
assignment or transfer of the Building, or Landlord's interest as a lessee under
the Over Lease, or of such ground or underlying lease, such owner, tenant under
the ground or Over Lease or mortgagee in possession shall thereupon be released
and discharged from all covenants, conditions and agreements of Landlord
hereunder; but such covenants, conditions and agreements shall be binding upon
each new owner, tenant under the ground or underlying lease, or Over Lease, or
mortgagee in possession for the time being of the Building, until sold, assigned
or transferred.
ARTICLE 24.
NOTICES
24.1 Any notice, request or demand permitted or required to be
given by the terms and provisions of this Lease, or by any law or governmental
regulation, either by Landlord to Tenant or by Tenant to Landlord, shall be in
writing. Unless otherwise required by such law or regulation such notice,
request or demand shall be given, and shall be deemed to have been served and
given by Landlord and received by Tenant, 3 days after Landlord shall have
deposited such notice, request or demand by certified or registered mail, return
receipt requested, enclosed in a securely closed postpaid wrapper, in a United
States Government general or branch post office, addressed to Tenant at 520
Broadhollow Road, Melville, New York 11747, and until Tenant has moved its
offices to the Demised Premises, shall have deposited such notice, request or
demand by certified or registered mail, enclosed in a securely closed postpaid
wrapper in such a post office addressed to Tenant at its address as stated on
the first page of this Lease. Such notice, request or demand shall be given, and
shall be deemed to have been served and given by Tenant and received by
Landlord, 3 days after Tenant shall have deposited such notice, request or
demand by certified or registered mail, return receipt requested, enclosed in a
securely closed postpaid wrapper in such a post office addressed to Landlord at
1155 Avenue of the Americas, New York, N.Y. 10036, with a copy to Richards &
O'Neil, LLP, 885 Third Avenue, New York, New York 10022-4873, Attention: Robert
M. Safron, Esq., or to such other or further address or addresses as Landlord
may designate for such purpose by like notice. Either party may, by notice as
aforesaid designate a different address or addresses for notices, requests or
demands to it.
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ARTICLE 25.
ARBITRATION
25.1 Whenever in this Lease, it is provided that a dispute shall
be determined by arbitration, the arbitration shall be conducted as provided in
this Article. The party desiring such arbitration shall give written notice to
that effect to the other, specifying the dispute to be arbitrated and the name
and address of the person designated to act as the arbitrator in its behalf.
Within ten days after said notice is given, the other party shall give written
notice to the first party, specifying the name and address of the person
designated to act as arbitrator on its behalf. If the second party fails to
notify the first party of the appointment of its arbitrator as aforesaid by the
time above specified, then the appointment of the second arbitrator shall be
made in the same manner as hereinafter provided for the appointment of a third
arbitrator. The arbitrators so chosen shall meet within ten days after the
second arbitrator is appointed and within thirty days thereafter shall decide
the dispute. If within said period they cannot agree upon their decision, they
shall appoint a third arbitrator and if they cannot agree upon said appointment,
then the third arbitrator shall be appointed upon their application or upon the
application of either party, by the American Arbitration Association in the City
of New York. The three arbitrators shall meet and decide the dispute. A decision
in which two of the three arbitrators concur shall be binding and conclusive
upon the parties. In designating arbitrators and in deciding the dispute, the
arbitrators shall act in accordance with the rules then in force of the American
Arbitration Association, subject, however, to such limitations as may be placed
upon them by the provisions of this Lease. Judgment may be had on the decision
and award of the arbitrators so rendered in any court.
25.2 The obligation of Landlord and Tenant to submit a dispute to
arbitration is limited to disputes arising under those Articles of this Lease
which specifically provide for arbitration.
ARTICLE 26.
RULES AND REGULATIONS
26.1 Tenant, its servants, employees, agents, visitors and
licensees shall observe faithfully and comply strictly with the Rules and
Regulations attached hereto and incorporated herein as Exhibits D and D-1.
Landlord shall have the right from time to time during the term of this Lease to
make reasonable changes in and additions to the said Rules and Regulations with
the same force and effect as if they were originally attached hereto and
incorporated herein.
26.2 Any failure by Landlord to enforce any Rules and Regulations
now or hereafter in effect, either against Tenant or any other tenant in the
Building, shall not constitute a waiver of the enforceability of any such Rules
and Regulations. Landlord shall not enforce the Rules and Regulations against
Tenant in a discriminatory manner. In case of a conflict or inconsistency
between the Rules and Regulations and this Lease, this Lease shall govern.
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ARTICLE 27.
BROKER
27.1 Each of Landlord and Tenant warrants and represents that the
sole broker in this transaction is Colliers ABR, Inc. (the "Broker"). Each of
Landlord and Tenant agrees to defend, save and hold the other harmless from any
claims for fees and commissions and against any liability (including reasonable
attorneys' fees and disbursements) arising out of any conversations or
negotiations had by the indemnifying party with any broker or party acting as
such other than the Broker. Landlord shall be responsible for payment of any
commission or other fee earned by the Broker pursuant to separate agreement
between them only if, as and when this Lease is fully and unconditionally
executed and delivered by Landlord and Tenant and all conditions to its
effectiveness and validity have been satisfied or waived.
ARTICLE 28.
ZONING RIGHTS
28.1 During the Term of this Lease, Landlord shall have the right,
and Tenant shall not have the right, (i) to cause all or any part of the Demised
Premises and/or the zoning lot upon which the Building is located in whole or in
part (hereinafter referred to solely for purposes of this Article as the "Land")
and/or the Building, to be combined with any other land or premises so as to
constitute the combined premises into a single zoning "lot" or "development" or
"enlargement" as those terms are now, or may hereafter be, defined in the Zoning
Resolution of The City of New York (the "Zoning Resolution"), (ii) to cause any
lot, development or enlargement at any time constituting or including all or any
part of the Demised Premises, the Land or the Building to be subdivided into two
or more lots, developments or enlargements, (iii) to cause development rights
(whether from the Land or other premises) to be transferred to any such lot,
development or enlargement, (iv) to cause other combinations, subdivisions and
transfers to be effected, whether similar or dissimilar to those now permitted
by law or (v) to exploit, sell, convey, lease or otherwise transfer any so
called "air rights", "air space", "zoning rights" or "development rights" above
or appurtenant to the Land or the Building. Tenant hereby acknowledges that it
is not a "party in interest" as defined in the Zoning Resolution, and shall not
and cannot become a "party in interest" under any circumstances by virtue of its
leasehold interest hereunder. Tenant further acknowledges that neither Tenant
nor the estate or interest of Tenant hereunder would be "adversely affected"
(within the meaning of the Zoning Resolution) by any development of the Land or
the Building or any such combined premises nor by the filing of any declaration
combining all or a part of the Land or the Building with any other premises and
that Tenant's estate and interest hereunder are not and would not be superior to
any such declaration.
28.2 Notwithstanding the provisions of Section 28.1, above, in the
event that Tenant is deemed to have any of the rights disclaimed in Section
28.1, above, or is deemed to be a party in interest, Tenant hereby transfers
such rights and any rights as a party in interest to Landlord. In furtherance
thereof, Tenant will within three (3) days after written request by Landlord
execute and deliver to Landlord a waiver of its right to join in a Declaration
of Restrictions pursuant to Section 12-10 of the Zoning Resolution (a "Waiver").
Upon each
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assignment of this Lease by Tenant (no consent thereto being implied hereby) the
assignee shall execute, acknowledge and deliver to Landlord, and at any time or
times, within three (3) days after written request of Landlord, Tenant and each
assignee shall execute, acknowledge and deliver to Landlord, (i) any further
Waiver, and (ii) if requested by Landlord, any Declaration of Restrictions
pursuant to said Section 12-10 (or any successor provision thereto), and (iii)
any other instrument in form and substance satisfactory to the parties intended
to evidence the fact that Tenant (or such assignee) has no right and asserts no
claim, and/or has transferred to Landlord any such right or claim, to
participate in any way in the matters reserved to Landlord pursuant to Section
28.1, above. If Tenant (or such assignee) fails to so execute any such
instrument within ten (10) days after Landlord's written request therefor,
Tenant (or such assignee) hereby irrevocably appoints Landlord its agent and
attorney-in-fact, coupled with an interest, to execute and deliver the same in
its name.
ARTICLE 29.
SECURITY DEPOSIT
29.1 Tenant has deposited with Landlord that sum of money equal to
three (3) months of Fixed Rent (the "Security Deposit") as security for the
full, faithful and punctual performance by Tenant of all of the terms of this
Lease. In the event the annual Fixed Rent payable under Article 3 of this Lease
shall increase at any time, and from time to time, pursuant to the provisions of
said Article 3, Tenant shall, on the same day that any such increase in the
annual Fixed Rent shall be effective, deposit with Landlord a sum sufficient to
increase the then current Security Deposit to an amount equal to three (3)
months of annual Fixed Rent then payable hereunder, as so increased pursuant to
Article 3 hereof. In the event Tenant defaults in the performance of any of the
terms of this Lease, including the payment of rent, or in the event of a
Bankruptcy Event, Landlord may use, apply or retain the whole or any part of the
Security Deposit to the extent required for the payment of any rent or for any
sum which Landlord may expend or may be required to expend by reason of Tenant's
default in respect of any of the terms of this Lease, including any damages or
deficiency in the re-letting of the Demised Premises, whether accruing before or
after summary proceedings or other re-entry by Landlord. In the case of every
such use, application or retention, Tenant shall, on demand, pay to Landlord the
sum so used, applied or retained which shall be added to the Security Deposit so
that the same shall be replenished to its former amount. If Tenant shall fully
and punctually comply with all of the terms of this Lease, the Security Deposit,
without interest, shall be returned to Tenant promptly after the termination of
this Lease and delivery of exclusive possession of the Demised Premises to
Landlord. In the event of a sale or lease of the Building, Landlord shall have
the right to transfer the Security Deposit to the vendee or lessee and Landlord
shall immediately be released by Tenant from all liability for the return of the
Security Deposit; and Tenant agrees to look solely to the new owner or landlord
for the return of the Security Deposit; and it is agreed that the provisions
hereof shall apply to every transfer or assignment made of the Security Deposit
to a new owner or landlord. Tenant shall not assign or encumber or attempt to
assign or encumber the monies deposited herein as security and neither Landlord
nor its successors or assigns shall be bound by any such assignment,
encumbrance, attempted assignment or encumbrance.
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29.2 In lieu of a cash deposit, Tenant may deliver to Landlord a
clean, irrevocable and unconditional Letter of Credit (the "Letter of Credit")
issued by and drawn upon any commercial bank which is a member of the New York
Clearing House Association (hereinafter referred to as the "Issuing Bank") with
offices for banking purposes in the City of New York and having a net worth of
not less than One Billion and 00/100 ($1,000,000,000.00) Dollars, which Letter
of Credit shall have a term of not less than one year, be in the form attached
hereto as Exhibit F, be for the account of Landlord and be in the amount of the
Security Deposit. The Letter of Credit shall provide that:
(i) The Issuing Bank shall pay to Landlord or its duly authorized
representative an amount up to the face amount of the Letter of Credit
upon presentation of the Letter of Credit and a sight draft in the
amount to be drawn;
(ii)The Letter of Credit shall be deemed to be automatically
renewed, without amendment, for consecutive periods of one year each
during the term of this Lease, unless the Issuing Bank sends written
notice (hereinafter referred to as the "Non-Renewal Notice") to
Landlord by certified or registered mail, return receipt requested,
not less than thirty (30) days next preceding the then expiration date
of the Letter of Credit, that it elects not to have such Letter of
Credit renewed;
(iii) Landlord, within twenty (20) days of its receipt of the
Non-Renewal Notice, shall have the right, exercisable by a sight
draft, to receive the monies represented by the Letter of Credit
(which monies shall be held by Landlord as a cash deposit pursuant to
the terms of this Article 29 pending the replacement of such Letter of
Credit or Tenant's default after notice and the expiration of any
applicable cure period hereunder);
(iv)Upon Landlord's sale of Landlord's interest in the land and
the Building, the Letter of Credit shall be transferable, without
charge, by Landlord, as provided in Section 29.3 hereof; and
(v) If a Bankruptcy Event occurs, Landlord shall have the right,
exercisable by a sight draft, to receive monies represented by the
Letter of Credit.
29.3 In the event of a sale of Landlord's interest in the land and
the Building, Landlord shall have the right to transfer (at no expense to
Landlord) the cash security or Letter of Credit, as the case may be, deposited
hereunder to the vendee or lessee, and Landlord shall, after notice to Tenant of
such transfer, sent by certified mail, return receipt requested, including the
name and address of the transferee, be released by Tenant from all liability for
the return of such cash security or Letter of Credit. In such event, Tenant
agrees to look solely to the new landlord for the return of said cash security
or Letter of Credit. It is agreed that the provisions hereof shall apply to
every transfer or assignment made of said cash security or Letter of Credit to a
new landlord.
29.4 Tenant covenants that it will not assign or encumber, or
attempt to assign or encumber, the monies or Letter of Credit deposited
hereunder as security, and that neither
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Landlord nor its successors or assigns shall be bound by any such assignment,
encumbrance, attempted assignment, or attempted encumbrance.
29.5 Landlord agrees that it will not draw down the proceeds of
the Letter of Credit except in the event of a default, after notice and the
expiration of any applicable cure period, by Tenant hereunder or a Bankruptcy
Event or the non-renewal of such Letter of Credit by the Issuing Bank.
29.6 In the event that at any time during the term of this lease,
Landlord, in Landlord's reasonable opinion, believes (a) that the net worth of
the Issuing Bank shall be less than the minimum amount specified in Section 29.2
hereof, or (b) that circumstances have occurred indicating that the Issuing Bank
may be incapable of, unable to, or prohibited from honoring the then existing
Letter of Credit (hereinafter referred to as the "Existing L/C") in accordance
with the terms thereof, then, upon the happening of either of the foregoing,
Landlord may send written notice to Tenant (hereinafter referred to as the
"Replacement Notice") requiring Tenant within ten (10) days to replace the
Existing L/C with a new letter of credit (hereinafter referred to as the
"Replacement L/C") from an Issuing Bank meeting the qualifications described in
Section 29.2 hereof. Upon receipt of a Replacement L/C meeting the
qualifications of Section 29.2 hereof, Landlord shall forthwith return the
Existing L/C to Tenant. In the event that (i) a Replacement L/C meeting the
qualifications of Section 29.2 hereof is not received by Landlord within the
time specified, or (ii) Landlord reasonably believes an emergency exists, then
in either event, the Existing L/C may be presented for payment by Landlord and
the proceeds thereof shall be held by Landlord in accordance with Section 29.1
hereof, subject, however, to Tenant's right, at any time thereafter prior to a
Tenant's default hereunder, to replace such cash security with a new letter of
credit meeting the qualifications of Section 29.2 hereof.
ARTICLE 30.
WINDOW CLEANING
30.1 Tenant will not clean any window in the Premises from the
outside (within the meaning of Section 202 of the New York Labor Law or any
successor statute thereto). In addition, unless the equipment and safety devices
required by all legal requirements including Section 202 of the New York Labor
Law or any successor statute thereto are provided and used, Tenant will not
require, permit, suffer or allow the cleaning of any window in the Premises from
the outside (within the meaning of said Section). Tenant hereby indemnifies
Landlord against liability as a result of any violation of the foregoing.
ARTICLE 31.
CONSENTS
31.1 Tenant hereby waives any claim against Landlord which it may
have based upon any assertion that Landlord has unreasonably withheld or
unreasonably delayed any such consent or approval, and Tenant agrees that its
sole remedy shall be an action or proceeding
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to enforce any such provision or for specific performance, injunction or
declaratory judgment (which proceeding for specific performance solely in
connection with any such dispute involving Tenant's sublease or assignment
rights pursuant to Article 8 hereof or the making of any alterations or
improvements to the Demised Premises by Tenant pursuant to Article 13 hereof, at
Tenant's option, may be an arbitration pursuant to Article 25 hereof). In the
event of a determination favorable to Tenant, the requested consent or approval
shall be deemed to have been granted; however, Landlord shall have no personal
or other liability to Tenant for its refusal to give such consent or approval.
The sole remedy for Landlord's unreasonably withholding or delaying of consent
or approval shall be as set forth in this Article 31.
31.2 Notwithstanding anything to the contrary provided in this
Lease, in any instance where the consent or approval of the over lessor and/or
the superior mortgagee is required, Landlord shall not be required to give its
consent or approval until and unless such over lessor and/or such superior
mortgagee has given its consent or approval.
ARTICLE 32.
MISCELLANEOUS
32.1 Tenant shall not move any safe, heavy equipment or bulky
matter in or out of the Building without Landlord's written consent, which
consent Landlord agrees not unreasonably to withhold or delay. If the movement
of such items requires special handling, Tenant agrees to employ only persons
holding a Master's Rigger's License to do said work and all such work shall be
done in full compliance with the Administrative Code of the City of New York and
other municipal requirements. All such movements shall be made during hours
which will least interfere with the normal operations of the Building, and all
damage caused by such movement shall be promptly repaired by Tenant at Tenant's
expense. Tenant shall not place a load upon any floor of the Demised Premises
which exceeds the load per square foot which such floor was designated to carry
and which is allowed by law.
32.2 Business machines and mechanical equipment belonging to
Tenant which may cause noise, vibration or any other nuisance that may be
transmitted to the structure or other portions of the Building or to the Demised
Premises to such a degree as to be objectionable to Landlord or which may
interfere with the use or enjoyment by other tenants of their premises or the
public portions of the Building, shall be placed and maintained by Tenant at
Tenant's cost and expense, in settings of cork, rubber or spring type vibration
eliminators sufficient to eliminate noise or vibration.
32.3 In the event that an excavation or any construction should be
made for building or other purposes upon land adjacent to the Building, or
should be authorized to be made, Tenant shall, if necessary, afford to the
person or persons causing or authorized to cause such excavation or construction
or other purpose, license to enter upon the Demised Premises for the purpose of
doing such work as shall reasonably be necessary to protect or preserve the wall
or walls of the Building, or the Building, from injury or damage and to support
them by proper foundations, pinning and/or underpinning, or otherwise.
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<PAGE>
32.4 Tenant waives the right to trial by jury in any summary
proceeding that may hereafter be instituted against it or in any action that may
be brought hereunder, provided such waiver is not prohibited by law. Tenant
shall not interpose any counterclaim in any summary proceeding.
32.5 The failure of Landlord to seek redress for violation of, or
to insist upon the strict performance of, any covenant or condition of this
Lease, or any of the Rules and Regulations attached hereto or hereafter adopted
by Landlord, shall not prevent a subsequent act, which would have originally
constituted a violation, from having all the force and effect of an original
violation. No employee of Landlord or of Landlord's agents shall have any power
to accept the keys of the Demised Premises prior to the termination of this
Lease. The delivery of keys to any employee of Landlord or of Landlord's agent
shall not operate as a termination of this Lease or a surrender of the Demised
Premises. In the event of Tenant at any time desiring to have Landlord sublet
the Demised Premises, Landlord or Landlord's agents are authorized to receive
said keys for such purpose without releasing Tenant from any of the obligations
under this Lease. The receipt or acceptance by Landlord of rent with knowledge
of the breach of any covenant of this Lease shall not be deemed a waiver of such
breach. No provision of this Lease shall be deemed to have been waived by
Landlord, unless such waiver be in writing signed by Landlord. No payment by
Tenant or receipt by Landlord of a lesser amount than the monthly rent required
to be paid shall be deemed to be other than on account of the earliest such
rent, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such rent or pursue any other remedy in this
Lease provided.
32.6 This Lease with its schedules and annexes contain the entire
agreement between Landlord and Tenant and any executory agreement hereafter made
between Landlord and Tenant shall be ineffective to change, modify, waive,
release, discharge, terminate or effect an abandonment of this Lease, in whole
or in part, unless such executory agreement is signed by the party to be
charged. This Lease may not be orally waived, terminated, changed or modified.
32.7 The captions of Articles in this Lease and its Table of
Contents and Index are inserted only as a convenience and for reference and they
in no way define, limit or describe the scope of this Lease or the intent of any
provision thereof. References to Articles and Sections are to those in this
Lease unless otherwise noted.
32.8 If any term, covenant, condition or provision of this Lease
or the application thereof to any circumstance or to any person, firm or
corporation shall be invalid or unenforceable to any extent, the remaining
terms, covenants, conditions and provisions of this Lease or the application
thereof to any circumstances or to any person, firm or corporation other than
those as to which any term, covenant, condition or provision is held invalid or
unenforceable, shall not be affected thereby and each remaining term, covenant,
condition and provision of this Lease shall be valid and shall be enforceable to
the fullest extent permitted by law.
32.9 If any term, covenant, condition or provision of this Lease
is found invalid or unenforceable to any extent, by a final judgement or award
which shall not be subject to
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change by any appeal, then, either party to this Lease may initiate an
arbitration in accordance with the provisions of Article 25, which arbitration
shall be by three (3) arbitrators each of which shall have at least ten (10)
years' experience in the supervision of the operation and management of major
office buildings in Manhattan. Said arbitrators shall devise a valid and
enforceable substitute term, covenant, condition or provision for this Lease
which shall as nearly as possible carry out the intention of the parties with
respect to the terms, covenant, condition or provisions theretofore found
invalid or unenforceable. Such substitute term, covenant, condition or
provision, as determined by the arbitrators, shall thereupon be deemed a part of
this Lease.
32.10 Landlord shall have the right from time to time, to
substitute for the basement space, if any, then occupied by Tenant, comparable
space in the basement, provided Landlord shall give at least thirty (30) days'
prior written notice to Tenant of its intention so to do. No vault or basement
space not within the property line of the Building is leased hereunder, anything
to the contrary indicated elsewhere in this Lease notwithstanding. Any vault or
basement space not within the property line of the Building, which Tenant may be
permitted to use or occupy, shall be used or occupied under revocable license
and if the amount of such space be diminished or required by any governmental
authority having jurisdiction, Landlord shall not be subject to any liability
nor shall Tenant be entitled to abatement of rent, nor shall such diminution or
abatement be deemed a constructive or actual eviction. Any fee or license charge
or tax of municipal authorities for such vault or basement space shall be paid
by Tenant to Landlord as additional rent within five (5) days after written
demand therefor. In such fee, tax or charge shall be for vault or basement space
greater in area than that occupied by Tenant, the charge to Tenant shall be
pro-rated.
32.11 This Lease is submitted to Tenant on the understanding that
it shall not be considered an offer and shall not bind Landlord in any way until
(i) Tenant has duly executed and delivered duplicate originals to Landlord, (ii)
Landlord has executed and unconditionally delivered one of said originals to
Tenant and the mortgagee (if required) and lessor of the Over Lease (if
required) shall consent thereto in writing.
32.12 Landlord shall provide Tenant with (i) up to ten (10)
Building-standard listings in the directory located in the lobby of the
Building; and (ii) one (1) Building-standard listing on the directory plaque
located in each passenger elevator serving the Demised Premises (provided
Landlord has installed and is then maintaining such directory plaques in such
elevators). Tenant acknowledges that Building-standard signage is not available
for the entrance door to the Demised Premises, as such door is made of glass.
Instead, Landlord shall reimburse Tenant for the cost to purchase and install
one sign for the entrance door of the Demised Premises, upon presentation of
invoices evidencing such costs, provided that such reimbursement shall not
exceed the cost to purchase and install one Building-standard sign, and provided
that the materials used for such sign, as well as the content and appearance
thereof, shall be subject to Landlord's prior written approval.
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ARTICLE 33.
SUCCESSORS AND ASSIGNS
33.1 The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and, except as otherwise
provided herein, their assigns.
ARTICLE 34.
HAZARDOUS MATERIALS
34.1 Tenant shall not cause or permit "Hazardous Materials" (as
defined below) to be used, transported, stored, released, handled, produced or
installed in, on or from, the Demised Premises or the Building, except for small
quantities normally used for routine office cleaning purposes. The term
"Hazardous Materials" shall, for the purposes hereof, mean any flammable,
explosive or radioactive materials; hazardous wastes; hazardous and toxic
substances or related materials; asbestos or any material containing asbestos;
or any other such substance or material; as defined by any federal, state or
local law, ordinance, rule or regulation, including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, and in the regulations adopted and
publications promulgated pursuant to each of the foregoing. In the event of a
breach of the provisions of this Article 34, Landlord shall, in addition to all
of its rights and remedies under this Lease and pursuant to law, require Tenant
to remove any such Hazardous Materials from the Demised Premises or the Building
in the manner prescribed for such removal by all requirements of law. The
provisions of this Article 34 shall survive the expiration or sooner termination
of this Lease.
34.2 Landlord represents to Tenant that, to the best of Landlord's
knowledge as of the date hereof, the Demised Premises is free of Hazardous
Materials.
ARTICLE 35.
PARTNERSHIP TENANT
35.1 A. If Tenant is a partnership or a professional corporation
(or is comprised of two (2) or more persons, individually or as co-partners of a
partnership or shareholders of a professional corporation) or if Tenant's
interest in this Lease shall be assigned to a partnership or a professional
corporation (or to two (2) or more persons, individually or as co-partners of a
partnership or shareholders of a professional corporation) pursuant to Article 8
hereof (any such partnership, professional corporation and such persons are
referred to in this Article 35 as "Partnership Tenant"), the following
provisions shall apply to such Partnership Tenant: (a) the liability of each of
the parties comprising Partnership Tenant for the observance and performance of
all the terms, covenants and conditions of this Lease shall be joint and
several; (b) each of the parties comprising Partnership Tenant hereby consents
in advance to, and agrees to be bound by (x) any written instrument which may
hereafter be executed by
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<PAGE>
Partnership Tenant or any successor entity, changing, modifying, extending or
discharging this Lease, in whole or in part, or surrendering all or any part of
the Premises to Landlord, and (y) any notices, demands, requests or other
communications which may hereafter be given by Partnership Tenant or by any of
the parties comprising Partnership Tenant; (c) any bills, statements, notices,
demands, requests or other communications given or rendered to Partnership
Tenant or to any of such parties shall be binding upon Partnership Tenant and
all such parties; (d) if Partnership Tenant shall admit new partners or
shareholders, as the case may be, all of such new partners or shareholders, as
the case may be, shall, by their admission to Partnership Tenant, be deemed to
have assumed joint and several liability for the performance of all of the
terms, covenants and conditions of this Lease on Tenant's part to be observed
and performed; and (e) Partnership Tenant shall give prompt notice to Landlord
of the admission of any such new partners or shareholders, as the case by be,
and upon demand of Landlord, shall cause each such new partner or shareholder,
as the case may be, to execute and deliver to Landlord an agreement in form
satisfactory to Landlord, wherein each such new partner or shareholder, as the
case may be, shall assume joint and several liability for the observance and
performance of all the terms, covenants and conditions of this Lease on Tenant's
part to be observed and performed (but neither Landlord's failure to request any
such agreement nor the failure of any such new partner or shareholder, as the
case may be, to execute or deliver any such agreement to Landlord shall vitiate
the provisions of clause (d) of this Article 35).
B. Anything herein to the contrary notwithstanding, if Tenant is
a limited or general partnership (or is comprised of two (2) or more persons,
individually or as co-partners), the change or conversion of Tenant to (i) a
limited liability company, (ii) a limited liability partnership, or (iii) any
other entity which possesses the characteristics of limited liability (any such
limited liability company, limited liability partnership, or entity is
collectively referred to as a "Successor Entity") shall be prohibited unless the
prior written consent of Landlord is obtained, which consent may be withheld in
Landlord's sole discretion.
C. Notwithstanding the foregoing in Section 35.1 B,
Landlord agrees not to unreasonably withhold or delay its consent provided that:
(1) The Successor Entity succeeds to all or substantially all of
Tenant's business and assets;
(2) The Successor Entity shall have a net worth ("Net Worth"),
determined in accordance with generally accepted accounting principles,
consistently applied, of not less than the greater of the Net Worth of Tenant on
(i) the date of execution of the Lease, or (ii) the day immediately preceding
the proposed effective date of such conversion;
(3) Tenant is not in default of any of the terms, covenants or
conditions of this Lease on the proposed effective date of such conversion;
(4) Tenant shall cause each partner of Tenant to execute and
deliver to Landlord an agreement, in form and substance satisfactory to
Landlord, wherein each such partner agrees to remain personally liable for all
of the terms, covenants and conditions of the Lease that are to be observed and
performed by the Successor Entity; and
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(5) Tenant shall reimburse Landlord within ten (10) days
following demand by Landlord for any and all reasonable costs and expenses that
may be incurred by Landlord in connection with said conversion of Tenant to a
Successor Entity, including, without limitation, any attorney's fees and
disbursements.
ARTICLE 36.
SUBMISSION TO JURISDICTION
36.1 Tenant hereby (a) irrevocably consents and submits to the
jurisdiction of any Federal, state, county or municipal court sitting in the
State and County of New York in respect to any action or proceeding brought
therein by Landlord against Tenant concerning any matters arising out of or in
any way relating to this Lease; (b) irrevocably waives all objections as to
venue and any and all rights it may have to seek a change of venue with respect
to any such action or proceedings; (c) agrees that the laws of the State of New
York shall govern in any such action or proceeding and waives any defense to any
action or proceeding granted by the laws of any other country or jurisdiction
unless such defense is also allowed by the laws of the State of New York; and
(d) agrees that any final judgment rendered against it in any such action or
proceeding shall be conclusive and may be enforced in any other jurisdiction by
suit on the judgment or in any other manner provided by law. Tenant further
agrees that any action or proceeding by Tenant against Landlord in respect to
any matters arising out of or in any way relating to this Lease shall be brought
only in the State of New York, county of New York. In furtherance of the
foregoing, Tenant hereby agrees that its address for notices by Landlord and
service of process under this Lease shall be the Premises.
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IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and
sealed this Lease as of the date first above written.
47TH AND 6TH ASSOCIATES L.L.C.
Landlord
By: /s/ Douglas Durst
---------------------------------
Name: Douglas Durst
Title: President
AMERICAN HOME MORTGAGE HOLDINGS, INC.
Tenant
By: /s/ Michael Strauss
---------------------------------
Name: Michael Strauss
Title: President
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ACKNOWLEDGMENT
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the 3rd day of December, 1999, before me personally came Michael
Strauss, to me known, who, being by me duly sworn, did depose and say that he
resides as 53 E 75th Street, New York, NY 10021; that he is the President of
American Home Mortgage, the corporation described in and which executed the
foregoing instrument as Tenant; and that he signed his name thereto by order of
the board of directors of said corporation.
----------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 8th day of December, 1999, before me personally came Douglas
Durst, to me known, who, being by me duly sworn, did depose and say that he is a
member of 47th AND 6th ASSOCIATES, L.L.C., a New York limited liability company
as Landlord; that the execution of the foregoing instrument was duly authorized
by said limited liability company; and acknowledged that he executed the same as
the act and deed of said limited liability company pursuant to such
authorization.
----------------------------
Notary Public
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EXHIBIT A
520 Broadhollow Road
AGREEMENT OF LEASE
BETWEEN
RECKSON OPERATING PARTNERSHIP, L.P.
AND
CHOICECARE LONG ISLAND, INC.
<PAGE>
TABLE OF CONTENTS
Page
SPACE........................................................................1
TERM.........................................................................1
RENT.........................................................................2
USE..........................................................................2
tenant's initial construction................................................3
SERVICES.....................................................................5
LANDLORD'S REPAIRS...........................................................6
WATER SUPPLY.................................................................6
parking field................................................................6
DIRECTORY....................................................................7
TAXES AND OTHER CHARGES......................................................7
TENANT'S REPAIRS.............................................................8
FIXTURES & INSTALLATIONS.....................................................9
ALTERATIONS..................................................................9
REQUIREMENTS OF LAW.........................................................12
END OF TERM.................................................................14
QUIET ENJOYMENT.............................................................15
SIGNS.......................................................................15
RULES AND REGULATIONS.......................................................16
RIGHT TO SUBLET OR ASSIGN...................................................16
LANDLORD'S ACCESS TO PREMISES...............................................18
SUBORDINATION...............................................................19
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PROPERTY LOSS, DAMAGE REIMBURSEMENT.........................................21
TENANT'S INDEMNITY..........................................................22
DESTRUCTION - FIRE OR OTHER CASUALTY........................................22
INSURANCE...................................................................24
EMINENT DOMAIN..............................................................26
NONLIABILITY OF LANDLORD....................................................27
DEFAULT.....................................................................27
TERMINATION ON DEFAULT......................................................29
DAMAGES.....................................................................30
SUMS DUE LANDLORD...........................................................31
NO WAIVER...................................................................31
WAIVER OF TRIAL BY JURY.....................................................32
NOTICES.....................................................................32
INABILITY TO PERFORM........................................................33
INTERRUPTION OF SERVICE.....................................................33
CONDITIONS OF LANDLORD'S LIABILITY..........................................34
TENANT'S TAKING POSSESSION..................................................34
ENTIRE AGREEMENT............................................................34
DEFINITIONS.................................................................35
PARTNERSHIP TENANT..........................................................35
SUCCESSORS, ASSIGNS, ETC....................................................36
BROKER......................................................................36
CAPTIONS....................................................................36
NOTICE OF ACCIDENTS.........................................................36
TENANT'S AUTHORITY TO ENTER LEASE...........................................37
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RENEWAL OPTION..............................................................37
RIGHT OF FIRST OFFER........................................................39
BUILDING IMPROVEMENTS.......................................................41
REASONABLE CONSENT..........................................................41
TENANT'S REMEDY.............................................................41
ROOF ANTENNA................................................................41
SCHEDULE "A"................................................................44
SCHEDULE "B"................................................................46
SCHEDULE "C"................................................................47
SCHEDULE "E"................................................................50
EXHIBIT 1 RENTAL PLAN......................................................54
EXHIBIT 2 PRELIMINARY PLANS................................................55
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AGREEMENT OF LEASE, made as of this 20th day of October, 1995,
between RECKSON OPERATING PARTNERSHIP, L.P., a limited partnership, having its
principal office at 225 Broadhollow Road, Suite 212 W, CS 5341, Melville, New
York 11747-0983 (hereinafter referred to as "Landlord"), and CHOICECARE LONG
ISLAND, INC. a corporation, having its principal place of business at 395 North
Service Road, Melville, New York 11747 (hereinafter referred to as "Tenant").
WITNESSETH: Landlord and Tenant hereby covenant and agree as
follows:
SPACE
1. Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the space substantially as shown on the Rental Plan initialed by the
parties and made part hereof as Exhibit "l" ("Demised Premises" or "Premises")
in the building located at 520 Broadhollow Road, Melville, New York (hereinafter
referred to as the "Building") which space the parties agree contains
approximately 43,200 square feet in a Building containing approximately 83,176
square feet which constitutes 51.94 percent of the area of the Building
("Tenant's Proportionate Share").
TERM
2. The term ("Term" or "Demised Term" or "term") of this lease shall
commence and, subject to Article 5(F) below, Tenant's obligation to pay Rent
shall commence on the date (the "Term Commencement Date") that the Contractor
(defined below) shall substantially complete Tenant's Initial Construction
(defined below) in the Demised Premises. The Term of this lease shall expire on
the date (the "Expiration Date") which is seven (7) years after the last day of
the month in which the Term Commencement Date shall have occurred, unless the
Term shall sooner terminate pursuant to any of the terms, covenants or
conditions of this lease or pursuant to law.
A "Lease Year" shall comprise a period of twelve (12) consecutive
months. Notwithstanding the foregoing, the first Lease Year shall commence upon
the Term Commencement Date and if the Term Commencement Date is not the first
day of a month shall include the additional period from the Term Commencement
Date to the end of the then current month. Each succeeding Lease Year shall end
on the anniversary date of the last day of the preceding Lease Year. For
example, if the Term Commencement Date is January 1, 1996, the first Lease Year
would end on December 31, 1996 and each succeeding Lease Year would end on
December 31st. If, however, the Term Commencement Date is January 2, 1996 the
first Lease Year would end on January 31, 1997, the second Lease Year would
commence on February 1, 1997 and each succeeding Lease Year would end on January
31st.
<PAGE>
RENT
3. The annual minimum rental ("Rent" or "rent") is as follows:
During the first Lease Year, the Rent shall be $734,400.00, payable in monthly
installments of $61,200.00.
During the second Lease Year, the Rent shall be $756,432.00, payable in monthly
installments of $63,036.00.
During the third Lease Year, the Rent shall be $779,124.96, payable in monthly
installments of $64,927.08.
During the fourth Lease Year, the Rent shall be $802,498.68, payable in monthly
installments of $66,874.89.
During the fifth Lease Year, the Rent shall be $826,573.68, payable in monthly
installments of $68,881.14.
During the sixth Lease Year, the Rent shall be $851,370.84, payable in monthly
installments of $70,947.57.
During the seventh Lease Year, the Rent shall be $876,912.00, payable in monthly
installments of $73,076.00.
Tenant agrees to pay the Rent to Landlord, without notice or demand, in lawful
money of the United States which shall be legal tender in payment of the debts
and dues, public and private, at the time of payment in advance on the first day
of each calendar month during the Demised Term at the office of the Landlord, or
at such other place as Landlord shall designate, except that Tenant shall pay
the first monthly installment on the Term Commencement Date. Tenant shall pay
the Rent as above and as hereinafter provided, without any set off or deduction
whatsoever except as otherwise specifically permitted under this lease. Should
the Term Commencement Date be a date other than the first day of a calendar
month, the Tenant shall pay a pro rata portion of the Rent on a per diem basis,
based upon the fourth full calendar month of the first Lease Year, from such
date to and including the last day of that current calendar month, and the first
Lease Year shall include said partial month. The Rent payable for such partial
month shall be in addition to the Rent payable pursuant to the Rent schedule set
forth above.
Notwithstanding the foregoing, provided Tenant is not then in default under any
provision of this lease, Tenant shall be relieved of its obligations to pay Rent
for the first, second and third full calendar months of the Term of this lease.
USE
4. (A) Tenant shall use and occupy the Demised Premises only for
executive, administrative and general office purposes and for no other purpose.
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(B) Tenant shall not use or occupy, suffer or permit the Premises,
or any part thereof, to be used in any manner which would in any way, in the
reasonable judgment of Landlord, (i) violate any laws or regulations of public
authorities; (ii) make void or voidable any insurance policy then in force with
respect to the Building; (iii) impair the appearance, character or reputation of
the Building; (iv) discharge objectionable fumes, vapors or odors into the
Building, air-conditioning systems or Building flues or vents in such a manner
as to offend other occupants. The provisions of this Section shall not be deemed
to be limited in any way to or by the provisions of any other Section or any
Rule or Regulation.
(C) The emplacement of any equipment which will impose an evenly
distributed floor load in excess of 100 pounds per square foot shall be done
only after written permission is received from the Landlord. Such permission
will be granted only after adequate proof is furnished by a professional
engineer that such floor loading will not endanger the structure. Business
machines and mechanical equipment in the Premises shall be placed and maintained
by Tenant, at Tenant's expense, in such manner as shall be sufficient in
Landlord's judgment to absorb vibration and noise and prevent annoyance or
inconvenience to Landlord or any other tenants or occupants of the Building.
(D) Tenant will not at any time use or occupy the Demised Premises
in violation of the certificate of occupancy (temporary or permanent) issued for
the Building or portion thereof of which the Demised Premises form a part.
(E) Tenant shall not conduct medical examinations or any other
activities which shall generate "red-bag" medical waste or install any MRI or
X-ray equipment in the Demised Premises.
(F) Tenant shall be permitted access to the Demised Premises
twenty-four (24) hours a day, seven (7) days a week.
tenant's initial construction
5. (A) At Tenant's expense, Landlord shall cause Reckson
Construction Group, Inc. (the "Contractor") to perform, on a turn-key basis,
pursuant to a separate contract, the work (including architectural services) and
make the installations required to provide the Demised Premises with
substantially the same finishes as currently exist in the premises presently
leased by Tenant in the building located at 395 North Service Road, Melville,
New York (except for extraordinary finishes, including, without limitation,
interior stairwells) ("Tenant's Initial Construction"). The tenant's finish work
which constitutes Tenant's Initial Construction shall substantially conform to
the specifications for Tenant's Initial Construction set forth on Schedule "E"
annexed hereto and made a part hereof.
Landlord hereby agrees to pay to Tenant a work allowance
(hereinafter referred to as "Landlord's Contribution") of $1,080,000.00 to be
used by Tenant toward the cost of Tenant's Initial Construction. Tenant shall
draw down Landlord's Contribution by use of A1A Application for Payment forms
(hereinafter referred to as "Requisition" in the singular and "Requisitions" in
the plural). In the format set forth in the Requisitions, Tenant shall be
entitled to draw down, from time to time, that percentage of Landlord's
Contribution which equals the
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percentage of Tenant's Initial Construction that has been completed by or on
behalf of Tenant or by the Contractor. Tenant shall submit a Requisition to
Landlord's architect no more frequently than monthly and Landlord's architect
shall verify the percentage of completion claimed by Tenant on the Requisition
in question. Landlord shall pay Tenant that portion of Landlord's Contribution
requested by a Requisition within ten (10) days after Landlord's receipt of such
Requisition, provided Landlord's architect confirms that the percentage of
completion set forth on such Requisition is correct.
(B) Landlord and Tenant acknowledge that Tenant has delivered to
Landlord its Program of Space Requirements for the Premises and they have agreed
upon and signed the preliminary plans (the "preliminary plans") prepared by
Landlord based upon Tenant's Program of Space Requirements. A copy of the
preliminary plans is annexed hereto as Exhibit "2". Landlord and Tenant also
acknowledge Tenant has given to Landlord its furniture plan and a description of
Tenant's power, data and telephone requirements (hereinafter referred to as the
"Supplemental Information").
(C) Landlord shall cause the Contractor to deliver the Tenant's
Initial Construction in a substantially completed condition (the date of such
delivery being referred to herein as the "Delivery Date") on or before January
30, 1996 provided Tenant shall comply with the following schedule:
(i) Landlord shall prepare working plans on the basis of the
preliminary plans within thirty (30) days after Tenant shall have delivered the
Supplemental Information to Landlord.
(ii) Tenant shall comment on Landlord's working plans and approve
such working plans, subject to such comments, within seven (7) days after
Tenant's receipt of such working plans from Landlord.
(iii) Contractor shall substantially complete Tenant's Initial
Construction within sixty-four (64) days after Tenant shall have so approved
Landlord's working plans and delivered such approval to Landlord.
(D) The Delivery Date referred to in Paragraph (C) above shall be
extended by the period of any delay in the foregoing schedule resulting from
Tenant's non-compliance with such schedule. Such delay shall not, however, delay
the commencement of the Term or the Tenant's obligation to pay Rent as otherwise
provided hereunder.
(E) (i) If Landlord shall fail to cause the Contractor to deliver
the Premises in a substantially completed condition on or before March 30, 1996,
Tenant shall receive a rent credit equal to $2,0l2.05 per day for each day
beyond March 30, 1996, until Landlord causes the Contractor to deliver the
Premises in a substantially completed condition. Such rent credit shall be
applied against the Rent payable pursuant to this lease beginning with the
fourth (4th) full calendar month of the term of this lease. Notwithstanding the
foregoing, the effective date of Tenant's receipt of the foregoing rent credit
shall be delayed beyond March 30, 1996 by one (1) day (a) for each day that
Tenant shall delay in complying with its obligations under the plan schedule set
forth in Paragraph (C) above, or (b) for each day that Tenant shall
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<PAGE>
delay the substantial completion of Tenant's Initial Construction by reason of
any of the causes set forth in Paragraph (F) below.
(ii) In the event Landlord shall fail to cause the Contractor to
deliver the Premises in a substantially completed condition on or before March
30, 1996 and neither Landlord nor the Contractor shall cure such default within
thirty (30) days after Landlord shall have received from Tenant written notice
of such default (or, if such default cannot reasonably be cured within such
thirty (30) day period, Landlord or the Contractor shall not have commenced the
cure of such default within such thirty (30) day period and thereafter
diligently pursued such cure to completion), then Tenant shall have the right to
complete Tenant's Initial Construction and deduct the reasonable cost thereof
from the next payments of Rent due under this Lease.
(iii) Receipt by Tenant of the rent credit set forth in Subparagraph
(i) above and Tenant's right of setoff set forth in Subparagraph (ii) above
shall be Tenant's sole remedies in the event Landlord or the Contractor shall
fail to deliver the Premises as required under this lease and Tenant waives any
right to rescind this lease under Section 223-a of the New York Real Property
Law or any successor statute of similar import then in force and further waives
the right to recover any damages which may result from Landlord's or the
Contractor's failure to deliver possession of the Premises on the Term
Commencement Date. Notwithstanding the foregoing, the remedies waived by Tenant
in the foregoing sentence shall be deemed reinstated in the event neither
Landlord nor the Contractor shall deliver the Demised Premises to Tenant in a
substantially completed condition on or before December 31, 1996.
(F) For purposes of this Article, the ten "substantially completed"
shall mean when the only items to be completed are those which do not materially
interfere with the Tenant's use and occupancy of the Demised Premises
(including, without limitation, minor construction details, mechanical
adjustments and decorations). Subject to any applicable rent concession set
forth in this lease, the commencement of the Term and Tenant's obligation to pay
Rent shall commence upon the substantial completion of Tenant's Initial
Construction; but if Landlord or the Contractor shall be delayed in such
"substantial completion" as a result of (i) Tenant's failure to approve
Landlord's working plans within the time schedule set forth in Paragraph (C)
above; (ii) Tenant's request for materials, finishes or installations other than
Landlord or Contractor's standard; (iii) Tenant's changes in its Program of
Space Requirements, Supplemental Information, the preliminary plans or
Landlord's working plans; or (iv) the performance or completion of any work,
labor or services by a party employed by Tenant (other than the Contractor);
then the commencement of the Term of this lease and the payment of Rent
hereunder with respect to the space in question shall be accelerated by the
number of days of such delay.
SERVICES
6. (A) As long as Tenant is not in default under any covenants of
this lease, Landlord, during the hours of 8:00 A.M. to 7:00 P.M. on weekdays and
8:00 A.M. to 5:00 P.M. on Saturdays ("Working Hours"), excluding legal holidays,
shall provide normal services to the "Common Area" of the Building, which normal
services shall include lighting and heating, ventilation and air conditioning as
required by the respective season. During all other hours,
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Landlord shall provide only limited lighting to the parking area servicing the
Demised Premises as may be necessary for Tenant's employees and agents to gain
access to the Demised Premises.
(B) Landlord shall provide, at its expense, an electric meter which
shall measure Tenant's consumption of electricity in the Demised Premises for
all purposes, including, without limitation, lighting, office equipment,
heating, ventilation and air conditioning. Tenant shall make arrangements to
secure electricity for such purposes directly from the utility servicing the
Building and Tenant shall pay the charges for such electricity directly to such
utility in a timely manner. Upon completion by Landlord of the conversion of the
Demised Premises to gas heat pursuant to Article 46 below and the installation
by Landlord of a separate gas meter to measure the consumption of gas in the
Demised Premises, Tenant shall make arrangements to secure gas directly from the
utility servicing the Building and Tenant shall pay the charges for such gas
directly to such utility in a timely manner. Landlord shall cause the Contractor
to install the above-referenced electric and gas meters and the conversion to
gas heat as part of Tenant's Initial Construction and the time periods and
remedies referred to in Article 5 above shall pertain thereto.
LANDLORD'S REPAIRS
7. Landlord, at its expense, will make all necessary structural and
nonstructural repairs to and provide maintenance for the Building and all
mechanical systems servicing the Building, and generally keep the Building in
good order and repair, and make all the structural and nonstructural repairs to
and provide the maintenance for the Demised Premises (excluding painting and
decorating) and for all public areas and facilities as set forth in Schedules A
and B, except such repairs and maintenance as may be necessitated by the
negligence, improper care or use of such premises and facilities by Tenant, its
agents, employees, licensees or invitees, which will be made by Landlord at
Tenant's expense.
WATER SUPPLY
8. Landlord, at its expense, shall furnish hot and cold or tempered
water for lavatory purposes and for the kitchenette and other sinks permitted in
the Demised Premises and for no other purpose.
parking field
9. Tenant shall have the right to use one hundred seventy-two (172)
parking spaces for the parking of automobiles of the Tenant, its employees and
invitees, in the parking areas servicing the Building (hereinafter sometimes
referred to as "Building Parking Area"), twenty-five (25) of which shall be
marked "reserved" for use by Tenant, subject to the reasonable Rules and
Regulations now or hereafter adopted by Landlord. Such reserved parking spaces
shall include all those spaces located adjacent to the Route 110 side of the
Building with the balance located as shown on the Rental Plan annexed as Exhibit
1. Tenant shall not use nor permit any of its officers, agents or employees to
use any parking spaces in excess of Tenant's allotted number of spaces therein.
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DIRECTORY
10. Landlord will furnish on the building directory listings
requested by Tenant, not to exceed five (5) listings. The initial listings will
be made at Landlord's expense and any subsequent changes by Tenant shall be made
at Tenant's expense. Landlord's acceptance of any name for listing on the
directory will not be deemed, nor will it substitute for, Landlord's consent, as
required by this lease, to any sublease, assignment or other occupancy of the
Premises.
TAXES AND OTHER CHARGES
11. (A) As used in and for the purposes of this Article 11,
the following definitions shall apply:
(i) "Taxes" shall be the real estate taxes, assessments, special or
otherwise, sewer rents, rates and charges, and any other governmental charges,
general, specific, ordinary or extraordinary, foreseen or unforeseen, levied on
a calendar year or fiscal year basis against the Real Property. If at any time
during the Term the method of taxation prevailing at the date hereof shall be
altered so that there shall be levied, assessed or imposed in lieu of, or as in
addition to, or as a substitute for, the whole or any part of the taxes, levies,
impositions or charges now levied, assessed or imposed on all or any part of the
Real Property (a) a tax, assessment, levy, imposition or charge based upon the
rents received by Landlord, whether or not wholly or partially as a capital levy
or otherwise, or (b) a tax, assessment, levy, imposition or charge measured by
or based in whole or in part upon all or any part of the Real Property and
imposed on Landlord, or (c) a license fee measured by the rent payable by Tenant
to Landlord, or (d) any other tax, levy, imposition, charge or license fee
however described or imposed (excluding income, capital levy, estate,
inheritance and transfer taxes imposed on any corporate owner and any tax on
rental income), then all such taxes, levies, impositions, charges or license
fees or any part thereof, so measured or based, shall be deemed to be Taxes.
(ii) "Base Year Taxes" shall be the taxes actually due and payable
in the 1995/96 tax year. Notwithstanding the foregoing, Base Year Taxes
applicable to each Offer Space shall be the taxes actually due and payable for
the fiscal tax year in which such Offer Space is added to the Premises.
(iii) "Escalation Year" shall mean each calendar year which shall
include any part of the Demised Ten.
(iv) "Real Property" shall be the land upon which the Building
stands and any part or parts thereof utilized for parking, landscaped areas or
otherwise used in connection with the Building, and the Building and other
improvements appurtenant thereto.
(B) Tenant shall pay Landlord increases in Taxes levied against the
Real Property as follows: If the Taxes actually due and payable with respect to
the Real Property in any Escalation Year shall be increased above the Base Year
Taxes, then Tenant shall pay to Landlord, as additional rent for such Escalation
Year, a sum equal to Tenant's Proportionate Share of said increase ("Tenant's
Tax Payment" or "Tax Payment").
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(C) Landlord shall render to Tenant, together with the then current
tax bill, a statement containing a computation of Tenant's Tax Payment
("Landlord's Statement"). Within fifteen (15) days after the rendition of the
Landlord's Statement, Tenant shall pay to Landlord the amount of Tenant's Tax
Payment. On the first day of each month following the rendition of each
Landlord's Statement, Tenant shall pay to Landlord, on account of Tenant's next
Tax Payment, a sum equal to one-twelfth (1/12th) of Tenant's last Tax Payment
due hereunder, which sum shall be subject to adjustment for subsequent increases
in Taxes.
(D) If during the Term Taxes are required to be paid as a tax escrow
payment to a mortgagee, then, at Landlord's option, the installments of Tenant's
Tax Payment shall be correspondingly accelerated so that Tenant's Tax Payment or
any installment thereof shall be due and payable by Tenant to Landlord at least
thirty (30) days prior to the date such payment is due to such mortgagee.
(E) Tenant shall not, without Landlord's prior written consent,
institute or maintain any action, proceeding or application in any court or body
or with any governmental authority for the purpose of changing the Taxes.
However, if Landlord fails to commence such a proceeding within thirty (30) days
prior to the final date to file challenges for the tax year in question and
Landlord has not provided a reasonable justification for not doing so by such
thirtieth (30th) day, then Tenant shall be permitted to commence such a
proceeding for the tax year in question at Tenant's sole cost and expense and
upon prior notice to Landlord. In the event Tenant commences such a proceeding
as permitted by this Article, Tenant shall furnish Landlord with copies of all
documents delivered and received by or on behalf of Tenant in connection with
said proceeding. In the event any such action initiated by Landlord or Tenant is
successful, then Landlord and Tenant shall share any tax refund or credit
obtained thereby (after reimbursement to the appropriate party for reasonable
legal fees and other customary out of pocket expenses) on the basis of the Taxes
paid by each such party.
(F) Landlord's failure to render a Landlord's Statement with respect
to any Escalation Year shall not prejudice Landlord's right to render a
Landlord's Statement with respect to any Escalation Year, unless more than three
(3) years have transpired since the expiration or sooner termination of this
lease. The obligation of Landlord and Tenant under the provisions of this
Article with respect to any additional rent for any Escalation Year shall
survive the expiration or any sooner termination of the Demised Term.
TENANT'S REPAIRS
12. Tenant shall take good care of the Demised Premises and, subject
to the provisions of Article 7 hereof, Landlord, at the expense of Tenant, shall
make as and when needed as a result of misuse or neglect by Tenant or Tenant's
servants, employees, agents or licensees, all repairs in and about the Demised
Premises necessary to preserve them in good order and condition. Except as
specifically provided in this lease, there shall be no allowance to Tenant for a
diminution of rental value and no liability on the part of Landlord by reason of
inconvenience, annoyance or injury to business arising from Landlord, Tenant or
others making any repairs, alterations, additions or
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improvements in or to any portion of the Building or of Demised Premises, or in
or to the fixtures, appurtenances or equipment thereof, and no liability upon
Landlord for failure of Landlord or others to make any repairs, alterations,
additions or improvements in or to any portion of the Building or of the Demised
Premises, or in or to the fixtures, appurtenances or equipment thereof, except
that Landlord shall be subject to a claim for damages to Tenant (without a right
of rent setoff except as specifically provided in this lease) if Landlord shall
be negligent in the performance of any repairs Landlord shall elect or be
required to make to the Building or the Demised Premises or if Landlord shall
unreasonably interfere with the conduct of Tenant's business when performing
such repairs. Any rights which Tenant may have at law to claim constructive
eviction by reason of the foregoing shall be subject to Article 35(C) (i) below.
FIXTURES & INSTALLATIONS
13. All appurtenances, fixtures, improvements, additions and other
property attached to or built into the Demised Premises whether by Landlord or
Tenant or others, and whether at Landlord's expense, or Tenant's expense, or the
joint expense of Landlord and Tenant, shall be and remain the property of
Landlord (except for purposes of sales tax which shall remain Tenant's
obligation), except that any trade fixtures, furniture, furnishings and other
articles of movable personal property belonging to Tenant, and which are
removable without material damage to the Demised Premises or the Building
("Tenant's Property"), may be removed by Tenant on condition that Tenant shall
repair, at its expense, any damage to the Demised Premises or the Building
resulting from such removal. Tenant, before so removing Tenant's Property, shall
establish to Landlord's reasonable satisfaction that no structural damage or
change will result from such removal and that Tenant can and promptly will
repair and restore any damage caused by such removal without cost or charge to
Landlord. Any such repair and removal shall itself be deemed an Alteration (as
defined in Article 14 below) within the purview of this lease. All the outside
walls of the Demised Premises including corridor walls and the outside entrance
doors to the Demised Premises, any balconies, terraces or roofs adjacent to the
Demised Premises, and any space in the Demised Premises used for shafts, stacks,
pipes, conduits, ducts or other building facilities, and the use thereof, as
well as access thereto in and through the Demised Premises for the purpose of
operation, maintenance, decoration and repair, are expressly reserved to
Landlord, and Landlord does not convey any rights to Tenant therein.
Notwithstanding the foregoing, Tenant shall enjoy full right of access to the
Demised Premises through the public entrances, public corridors and public areas
within the Building.
ALTERATIONS
14. (A) Tenant shall make no alterations, decorations,
installations, additions or improvements (hereinafter collectively referred to
as "Alterations") in or to the Demised Premises without Landlord's prior written
consent, which consent shall not be unreasonably withheld or delayed, and then
only by contractors or mechanics reasonably approved by Landlord and at such
times and in such manner as Landlord may from time to time reasonably designate.
Notwithstanding the foregoing, Tenant shall be permitted to paint and install
wall coverings and floor coverings and make other similar decorative alterations
in the Premises ("Decorative Alterations") without Landlord's prior consent, but
Tenant must notify Landlord prior to performing such Decorative Alterations.
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(B) All Alterations done by Tenant shall at all times comply with
(i) laws, rules, orders and regulations of governmental authorities having
jurisdiction thereof, and (ii) rules and regulations of the Landlord attached as
Schedule D.
(C) With respect to all Alterations, except Decorative Alterations,
plans and specifications prepared by and at the expense of Tenant shall be
submitted to Landlord for its prior written approval which shall not be
unreasonably withheld or delayed in accordance with the following requirements:
(i) With respect to any Alterations to be performed by Tenant
pursuant to this lease, except Decorative Alterations, Tenant shall, at its
expense, furnish Landlord with all drawings, plans, layouts and specifications
for work to be performed by Tenant, including, without limitation,
architectural, plumbing, electrical, mechanical and heating, ventilating and air
conditioning plans (the "Tenant's Plans"). All of the Tenant's Plans shall: (a)
be compatible with the Landlord's building plans, (b) comply with all applicable
laws and the rules, regulations, requirements and orders of any and all
governmental agencies, departments or bureaus having jurisdiction, and (c) be
fully detailed, including locations and complete dimensions;
(ii) Tenant's Plans shall be subject to approval by Landlord
which shall not be unreasonably withheld or delayed;
(iii) Tenant shall, at Tenant's expense, (a) cause Tenant's Plans to
be filed with the governmental agencies having jurisdiction thereover, (b)
obtain when necessary all governmental permits, licenses and authorizations
required for the work to be done in connection therewith, and (c) obtain all
necessary certificates of occupancy, both temporary and permanent. Landlord
shall execute such documents as may be reasonably required in connection with
the foregoing and Landlord shall otherwise cooperate with Tenant in connection
with obtaining the foregoing, but without any expense to Landlord. Tenant shall
make no amendments or additions to Tenant's Plans without the prior written
consent of Landlord in each instance;
(iv) No work shall commence in the Premises until (a) Tenant has
procured all necessary permits therefor and has delivered copies of same to
Landlord, (b) Tenant has procured a paid builder's risk insurance policy naming
Landlord as an additional insured and has delivered to Landlord a certificate of
insurance evidencing such policy, and (c) Tenant or its contractor has procured
a workmen's compensation insurance policy covering the activities of all persons
working at the Premises naming Landlord as an additional insured and has
delivered to Landlord a certificate of insurance evidencing such policy;
(v) Tenant may use any licensed architect or engineer to prepare its
plans and to file for permits. However, all such plans and permit applications
shall be subject to review, revision and approval by Landlord or its architect
which approval shall not be unreasonably withheld or delayed;
(vi) Tenant, at its expense, shall perform all work in accordance
with Tenant's Plans (except Decorative Alterations), and all Alterations, unless
Landlord performs same, shall be subject to Landlord's supervisory fee charge of
10% of the cost thereof (excluding the cost of
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Decorative Alterations). In receiving such fee, Landlord assumes no
responsibility for the quality or manner in which such work has been performed;
and
(vii) Tenant agrees that it will not, either directly or indirectly,
use any contractors and/or labor and/or materials if the use of such contractors
and/or labor and/or materials would or will create any difficulty with other
contractors and/or labor engaged by Tenant or Landlord or others in the
construction, maintenance or operations of the Building or any part thereof.
Tenant hereby agrees that only "AFL-ClO Building Trades" workers and contractors
shall be used for any work to be performed by or on behalf of Tenant.
(D) Tenant's right to make Alterations shall be subject to the
following additional conditions: (i) the Alterations will not result in a
violation of, or require a change in, any Certificate of Occupancy applicable to
the Premises or the Building; (ii) the outside appearance, character or use of
the Building shall not be affected; (iii) no part of the Building outside of the
Premises shall be physically affected; (iv) subject to Landlord's consent
provisions set forth in this Article, functioning of any air-conditioning,
elevator, plumbing, electrical, sanitary, mechanical and other service or
utility system of the Building shall not be affected.
(E) Except if arising out of the Contractor's performance of
Tenant's Initial Construction, Tenant shall defend, indemnify and save harmless
Landlord against any and all mechanics' and other liens filed in connection with
its Alterations, repairs or installations, including the liens of any
conditional sales of, or Chattel mortgages upon, any materials, fixtures or
articles so installed in and constituting part of the Premises and against any
loss, cost, liability, claim, damage and expense, including reasonable counsel
fees, penalties and fines incurred in connection with any such lien, conditional
sale or chattel mortgage or any action or proceeding brought thereon.
(F) Tenant, at its expense, shall procure the satisfaction or
discharge of all such liens within thirty (30) days of the filing of such lien
against the Premises or the Building. If Tenant shall fail to cause such lien to
be discharged within the aforesaid period, then, in addition to any other right
or remedy, Landlord may, but shall not be obligated to, discharge the same
either by paying the amount claimed to be due or 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 lien by the lienor and to pay the amount of the
judgment in favor of the lienor with interest, costs and allowances. Any amount
so paid by Landlord, and all costs and expenses incurred by Landlord in
connection therewith, together with interest thereon at the maximum rate
permitted by law from the respective dates of Landlord's making of the payments
or incurring of the cost and expense, shall constitute additional rent and shall
be paid on demand.
(G) Nothing in this lease contained shall be construed in any way as
constituting the consent or request of Landlord, expressed or implied, to any
contractor, subcontractor, laborer or materialman for the performance of any
labor or the furnishing of any material for any improvement, alteration or
repair of the Premises, nor as giving any right or authority to contract for the
rendering of any services or the furnishing of any materials that would give
rise to the filing of any mechanics' liens against the Premises.
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REQUIREMENTS OF LAW
15. (A) Except with respect to violations existing as of the date of
this lease, Tenant, as Tenant's sole cost and expense, shall comply with all
statutes, laws, ordinances, orders, regulations and notices of Federal, State,
County and Municipal authorities, and with all directions, pursuant to law, of
all public officers, which shall impose any duty upon Landlord or Tenant with
respect to the Demised Premises or the use or occupation thereof, if arising out
of Tenant's use or manner of use thereof, except that Tenant shall not be
required to make any structural alterations in order so to comply unless such
alterations shall be necessitated or occasioned, in whole or in part, by the
acts, omissions, or negligence of Tenant or any person claiming through or under
Tenant or any of their servants, employees, contractors, agents, visitors or
licensees, or by the specific use or occupancy or specific manner of use or
occupancy of the Demised Premises by Tenant, or any such person.
(B) The parties acknowledge that there are certain Federal, State
and local laws, regulations and guidelines now in effect and that additional
laws, regulations and guidelines may hereafter be enacted, relating to or
affecting the Premises, the Building, and the land of which the Premises and the
Building may be a part, concerning the impact on the environment of
construction, land use, the maintenance and operation of structures and the
conduct of business. Tenant will not cause, or permit to be caused, any act or
practice, by negligence, omission, or otherwise, that would adversely affect the
environment or do anything or permit anything to be done that would violate any
of said laws, regulations, or guidelines. Any violation of this covenant shall
be an event of default under this lease.
(C) Tenant shall keep or cause the Premises to be kept free of
Hazardous Materials (hereinafter defined). Without limiting the foregoing,
Tenant shall not cause or permit the Premises to be used to generate,
manufacture, refine, transport, treat, store, handle, dispose, transfer, produce
or process Hazardous Materials, except in compliance with all applicable
Federal, State and Local laws or regulations, nor shall Tenant cause or permit,
as a result of any intentional or unintentional act or omission on the part of
Tenant or any person or entity claiming through or under Tenant or any of their
employees, contractors, agents, visitors or licensees (collectively, "Related
Parties"), a release of Hazardous Materials onto the Premises or onto any other
property. Tenant shall comply with and ensure compliance by all Related Parties
with all applicable Federal, State and Local laws, ordinances, rules and
regulations, whenever and by whomever triggered, and shall obtain and comply
with, and ensure that all Related Parties obtain and comply with, any and all
approvals, registrations or permits required thereunder. With respect to
Hazardous Materials for which Tenant is responsible hereunder, Tenant shall (i)
conduct and complete all investigations, studies, samplings, and testing, and
all remedial removal and other actions necessary to clean up and remove such
Hazardous Materials, on, from, or affecting the Premises (a) in accordance with
all applicable Federal, State and Local laws, ordinances, rules, regulations,
policies, orders and directives, and (b) to the reasonable satisfaction of
Landlord, and (ii) defend, indemnify, and hold harmless Landlord, its employees,
agents, officers, and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs, or expenses of
whatever kind or nature, known or unknown, contingent or otherwise, arising out
of, or in any way related to, (a) the presence, disposal, release, or threatened
release of such Hazardous Materials which are on, from, or affecting the soil,
water, vegetation, buildings, personal property, persons, animals, or otherwise;
(b) any
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personal injury (including wrongful death) or property damage (real or personal)
arising out of or related to such Hazardous Materials; (c) any lawsuit brought
or threatened, settlement reached, or government order relating to such
Hazardous Materials; and/or (d) any violation of laws, orders, regulations,
requirements, or demands of government authorities, or any policies or
requirements of Landlord which are based upon or in any way related to such
Hazardous Materials, including, without limitation, reasonable attorney and
consultant fees, investigation and laboratory fees, court costs, and litigation
expenses. In the event this lease is terminated, or Tenant is dispossessed,
Tenant shall deliver the Premises to Landlord free of any and all Hazardous
Materials so that the conditions of the Premises shall conform with all
applicable Federal, State and Local laws, ordinances, rules or regulations
affecting the Premises. For purposes of this paragraph, "Hazardous Materials"
includes, without limitation, any flammable explosives, radioactive materials,
hazardous materials, hazardous wastes, hazardous or toxic substances, or related
materials defined in the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et seq.), the
Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801 et
seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C.
Sections 9601, et seq.), and in the regulations adopted and publications
promulgated pursuant thereto, or any other Federal, State or Local environmental
law, ordinance, rule, or regulation.
(D) Landlord hereby covenants, warrants and represents as follows:
(i) to the best of its knowledge, the Demised Premises are currently
in full compliance with all applicable federal, state and local governmental
laws, rules and regulations relating to environmental and occupational hygiene
matters; (ii) Landlord has not received any notice of and has no knowledge of
any claim, suit or other action or investigation with respect to the violation
of any federal, state or local environmental or occupational hygiene laws, rules
or regulations due to the presence of Hazardous Materials in or about the
Demised Premises. In addition, the Landlord shall indemnify and save Tenant
harmless from and against any and all claims, obligations, liabilities,
violations, penalties, fines, suits, governmental orders, causes of actions,
judgments, damages, whether civil or criminal or both, of any and all kind or
nature in connection with any remedial action required of Tenant for the
existence of toxic or Hazardous Materials at the premises which are not covered
by Tenant's Indemnification as provided above, including, without limitation,
claims caused by actions or omissions of persons other than Tenant prior to the
commencement of the Term of this lease or by Landlord or other tenants during
the Term of this lease. This indemnification shall include, but not be limited
to, reasonable legal fees and other charges to which Tenant may be put,
including cleanup costs, in defending against any proceeding in connection with
the foregoing.
(E) If a written notice or order shall be received by Landlord or
Tenant relating to requirements to conform to the Americans with Disabilities
Act ("A.D.A.") from any governmental body or agency having jurisdiction thereof:
(i) Tenant, at its own expense, shall be obligated to comply and cure any
violation thereof caused or occasioned by work in the Demised Premises completed
by or on behalf of Tenant (with the exception of work completed by Landlord or
the Contractor as part of Tenant's Initial Construction); and (ii) Landlord
shall be obligated to comply and cure any violation within the Demised Premises
caused or occasioned by work in the Demised Premises completed by Landlord or
the Contractor and within portions of the Building beyond the Demised Premises.
In any such instance, the affected party need not
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commence compliance until a court of final jurisdiction (or a court whose
decision is not appealed) shall determine that such compliance is mandatory;
provided however, that the expense of any such contest shall be borne by the
party to be charged as above provided and further provided that such contest
shall not cause or result in the party not so contesting (or its employees and
agents) being subject to fines or other criminal penalties.
(F) Tenant will have the right to contest, by appropriate
proceedings diligently conducted in good faith in the name of Tenant or, with
the prior consent of the Landlord (which will not be unreasonably withheld or
delayed), in the name of Landlord, or both, without cost or expense to Landlord,
the validity or application of any law, ordinance, order, rule, regulation or
legal requirement of any nature. If compliance with any law, ordinance, order,
rule, regulation, or requirement may legally be delayed pending the prosecution
of any proceeding without incurring any lien, charge, or liability of any kind
against the Premises, or Tenant's interest in the Premises, and without
subjecting Tenant or Landlord to any liability, civil or criminal, for failure
to comply, Tenant may delay compliance until the final determination of the
proceeding. Landlord will not be required to join any proceedings pursuant to
this Paragraph unless the provision of any applicable law, rule, or regulation
at the time in effect requires that the proceedings be brought by or in the name
of Landlord, or both. In that event, Landlord will join the proceedings or
permit them to be brought in its name if Tenant pays all related expenses,
including, without limitation, Landlord's reasonable attorney's fees.
END OF TERM
16. (A) Upon the expiration or other termination of the Term of this
lease, Tenant shall, at its own expense, quit and surrender to Landlord the
Demised Premises, broom clean, in good order and condition, ordinary wear, tear
and damage by fire or other insured casualty excepted, and Tenant shall remove
all of its property and shall pay the cost to repair all damage to the Demised
Premises or the Building occasioned by such removal. Any property not removed
from the Premises shall be deemed abandoned by Tenant and may be retained by
Landlord, as its property, or disposed of in any manner deemed appropriate by
the Landlord. Any expense incurred by Landlord in removing or disposing of such
property shall be reimbursed to Landlord by Tenant on demand. Tenant expressly
waives, for itself and for any person claiming through or under Tenant, any
rights which Tenant or any such person may have under the provisions of Section
2201 of the New York Civil Practice Law and Rules and of any successor law of
like import then in force, in connection with any holdover or summary proceeding
which Landlord may institute to enforce the foregoing provisions of this
Article. Tenant's obligation to observe or perform this covenant shall survive
the expiration or other termination of the Term of this lease. If the last day
of the Term of this lease or any renewal hereof falls on Sunday or a legal
holiday, this lease shall expire on the business day immediately preceding.
Tenant's obligations under this Article 16 shall survive the Expiration Date or
sooner termination of this lease.
(B) In the event of any holding over by Tenant after the expiration
or termination of this Lease without the consent of Landlord, Tenant shall:
(i) pay as holdover rental for each month of the holdover tenancy an
amount equal to the greater of (a) the fair market rental value of the Premises
for such month (as
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reasonably determined by Landlord) or (b) one hundred fifty (150%) percent of
the Rent payable by Tenant for the third month prior to the Expiration Date of
the term of this lease for the first three (3) months of said holdover and two
hundred (200%) percent of the Rent payable by Tenant for such third month prior
to the Expiration Date thereafter, and otherwise observe, fulfill and perform
all of its obligations under this lease, including but not limited to, those
pertaining to additional rent, in accordance with its terms; and
(ii) be liable to Landlord for any payment or rent concession which
Landlord may be required to make to any tenant in order to induce such tenant
not to terminate an executed lease covering all or any portion of the Premises
by reason of the holdover over by Tenant less an amount equal to the holdover
rent paid by Tenant pursuant to Paragraph (B) (i) above minus 100% of the
monthly Rent payable by Tenant for the third month prior to the Expiration Date
of the term of this lease.
No holding over by Tenant after the Term shall operate to extend the
Term.
The holdover, with respect to all or any part of the Premises, of a
person deriving an interest in the Premises from or through Tenant, including,
but not limited to, an assignee or subtenant, shall be deemed a holdover by
Tenant.
Notwithstanding anything in this Article contained to the contrary,
the acceptance of any Rent paid by Tenant pursuant to this Paragraph 16(B),
shall not preclude Landlord from commencing and prosecuting a holdover or
eviction action or proceeding or any action or proceeding in the nature thereof.
The preceding sentence shall be deemed to be an "agreement expressly providing
otherwise" within the meaning of Section 232-c of the Real Property Law of the
State of New York and any successor law of like import.
(C) If at any time during the last month of the Term Tenant shall
have removed all or substantially all of Tenant's property from the Premises,
Landlord may, and Tenant hereby irrevocably grants to Landlord a license to,
immediately enter and alter, renovate and redecorate the Premises, without
elimination, diminution or abatement of Rent, or incurring liability to Tenant
for any compensation, and such acts shall have no effect upon this lease.
QUIET ENJOYMENT
17. Landlord covenants and agrees with Tenant that upon Tenant
paying the Rent and additional rent and observing and performing all the terms,
covenants and conditions on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the Demised Premises during the Term of this
lease without hindrance or molestation by anyone claiming by or through
Landlord, subject, nevertheless, to the terms, covenants and conditions of this
lease including, but not limited to, Article 22.
SIGNS
18. No signs or lettering of any nature may be put on or in any
window or on the exterior of the Building or elsewhere within the Demised
Premises such as will be visible from the street. No sign or lettering in the
public corridors or on the doors is permitted except
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Landlord's standard name plaque. Notwithstanding the foregoing, to the extent
permitted by applicable laws and regulations, Landlord, at Landlord's sole
expense, shall provide Tenant with two (2) monument signs on the side of the
Building which faces Route 110. Tenant's right to such monument signage shall
not be exclusive. To the extent permitted by applicable laws and regulations,
such monument signs shall each have an area equal to fifty (50%) percent larger
than the Ernst & Young monument sign currently located at 395 North Service
Road, Melville, New York, and shall be located at the north and south entrances
to the Real Property along Route 110. If the number of such monuments signs is
limited by applicable laws and regulations, Tenant shall be entitled to the
first two (2) monument signs excluding any Building monument sign used by
Landlord. In connection with the monument signs to be provided to Tenant, in the
event it becomes necessary to obtain a variance in order to maintain either or
both monument signs outside the Building, Tenant shall be responsible for and
shall pay for such variance application(s) and proceeding(s) but Landlord agrees
to cooperate with Tenant's variance application(s) provided Tenant shall afford
Landlord a reasonable period to review and approve Tenant's variance
application(s) and other submittals relating thereto (which approval shall not
be unreasonably withheld or delayed).
RULES AND REGULATIONS
19. Tenant and Tenant's agents, employees, visitors, and licensees
shall faithfully observe and comply with, and shall not permit violation of, the
Rules and Regulations set forth on Schedule C annexed hereto and made part
hereof, and with such further reasonable Rules and Regulations as Landlord at
any time may make and communicate in writing to Tenant which, in Landlord's
judgment, shall be necessary for the reputation, safety, care and appearance of
the Building and the land allocated to it or the preservation of good order
therein, or the operation or maintenance of the Building, and such land, its
equipment, or the more useful occupancy or the comfort of the tenants or others
in the Building. Landlord shall not be liable to Tenant for the violation of any
of said Rules and Regulations, or the breach of any covenant or condition, in
any lease by any other tenant in the Building. Landlord agrees to apply Rules
and Regulations in a manner which does not discriminate against Tenant.
RIGHT TO SUBLET OR ASSIGN
20. (A) Tenant covenants that it shall not assign this lease nor
sublet the Demised Premises or any part thereof by operation of law or
otherwise, including, without limitation, an assignment or subletting as defined
in (C) below, without the prior written consent of Landlord in each instance
which consent shall not be unreasonably withheld or delayed, except on the
conditions hereinafter stated. Tenant may assign this lease or sublet all or a
portion of the Demised Premises with Landlord's written consent which consent
shall not be unreasonably withheld or delayed, provided:
(i) That such assignment or sublease is for a use which is in
compliance with the then existing zoning regulations and the Certificate of
Occupancy;
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(ii) That, at the time of such assignment or subletting, there is no
default under the terms of this lease on the Tenant's part beyond any applicable
notice and cure periods provided herein for the cure thereof;
(iii) That, in the event of an assignment, the assignee shall
assume in writing the performance of all of the terms and obligations of the
within lease;
(iv) That a duplicate original of said assignment or sublease shall
be delivered by certified mail to the Landlord at the address herein set forth
within ten (10) days from the said assignment or sublease and within ninety (90)
days of the date that Tenant first advises Landlord of the name and address of
the proposed subtenant or assignee, as required pursuant to subparagraph (B)
hereof;
(v) Such assignment or subletting shall not, however, release the
within Tenant or any successor tenant or any guarantor from their liability for
the full and faithful performance of all of the terms and conditions of this
lease;
(vi) If this lease be assigned, or if the Demised Premises or any
part thereof be underlet or occupied by anybody other than Tenant, Landlord may
after default by Tenant collect rent from the assignee, undertenant or occupant,
and apply the net amount collected to the rent herein reserved.
(B) Notwithstanding anything contained in this Article 20 to the
contrary, no assignment or underletting shall be made by Tenant in any event
until, with respect to an assignment, Tenant has offered to terminate this
entire lease and, with respect to a sublease, Tenant has offered to terminate
this lease with respect to the portion of the Demised Premises which is the
subject of the proposed sublease, as of the last day of any calendar month
during the Term hereof and to vacate and surrender the Demised Premises, or the
portion of the Demised Premises which is the subject of the proposed sublease,
as the case may be, to Landlord on the date fixed in the notice served by Tenant
upon Landlord (which date shall be prior to the date of such proposed assignment
or the commencement date of such proposed lease). Simultaneously with said offer
to terminate this lease in whole or in part, as the case may be, Tenant shall
advise the Landlord, in writing, of the name and address of the proposed
assignee or subtenant, a reasonably detailed statement of the proposed
subtenant/assignee's business, reasonably detailed financial references, and all
the terms, covenants, and conditions of the proposed sublease or assignment.
Within thirty (30) days after Landlord shall have received from Tenant such
offer to terminate and the information on the proposed assignee or subtenant
required in the preceding sentence, Landlord shall advise Tenant of its election
as to whether it shall recapture the applicable space.
(C) Except as otherwise permitted in Paragraph (D) below, for
purposes of this Article 20, (i) the transfer of a majority of the issued and
outstanding capital stock of any corporate tenant, or of a corporate subtenant,
or the transfer of a majority of the beneficial interest in any noncorporate
tenant or subtenant, however accomplished, whether in a single transaction or in
a series of related or unrelated transactions, shall be deemed an assignment of
this lease, or of such sublease, as the case may be; (ii) any person or legal
representative of Tenant, to whom Tenant's interest under this lease passes by
operation of law or otherwise, shall
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be bound by the provisions of this Article 20; and (iii) a modification or
amendment of a sublease shall be deemed a sublease. Notwithstanding the
foregoing, the conversion of Tenant from a not-for-profit corporation to a
for-profit corporation, and the issuance of shares in connection therewith to
substantially the same persons that currently hold membership interests in
Tenant, shall not be deemed to be an assignment of this lease which requires
Landlord's consent.
(D) Tenant may, without the consent of Landlord, assign this lease
to an affiliate (i.e., a corporation or other entity 20% or more of whose
capital stock or beneficial interest is owned by the same stockholders or
beneficial owners owning 20% or more of Tenant's capital stock or beneficial
interest), parent or subsidiary corporation or entity of Tenant or (whether
through a private or public offering) to a corporation or entity to which it
sells or assigns all or substantially all of its assets or stock or beneficial
interest or with which it may be consolidated or merged, provided such
purchasing, consolidated, merged, affiliated or subsidiary corporation or entity
shall have assets and good will having a fair market value of at least
$10,000,000 over such corporation or entity's liabilities and shall, in writing,
assume and agree to perform all of the obligations of Tenant under this lease
and it shall deliver such assumption with a copy of such assignment to Landlord
within ten (10) days thereafter, and provided further than Tenant shall not be
released or discharged from any liability under this lease by reason of such
assignment. The right of recapture set forth in Paragraph B above shall not
apply to any assignments which are permitted under this paragraph to be made
without Landlord's consent.
(E) Whenever Tenant shall claim under this Article or any other part
of this lease that Landlord has unreasonably withheld or delayed its consent to
some request of Tenant, Tenant shall have no claim for damages by reason of such
alleged withholding or delay, and Tenant's sole remedy thereof shall be a right
to obtain specific performance or injunction but in no event with recovery of
damages.
(F) Tenant shall not mortgage, hypothecate, pledge, or otherwise
encumber its interest in this lease, without Landlord's prior written consent
which shall not be unreasonably withheld or delayed.
LANDLORD'S ACCESS TO PREMISES
21. (A) Landlord or Landlord's agents shall have the right to enter
and/or pass through the Demised Premises at all reasonable times on reasonable
notice, except in an emergency, to examine the same, and to show them to ground
lessors, prospective purchasers or lessees or mortgagees of the Building, and to
make such repairs, improvements or additions as Landlord may deem necessary or
desirable, and Landlord shall be allowed to take all material into and upon
and/or through said Demised Premises that may be required therefor. When
entering the Demised Premises pursuant to this Article 21, Landlord will use
reasonable efforts to minimize disruption of Tenant's business operations (but
such obligation shall not require Landlord to use overtime or after hour
services unless Tenant shall pay Landlord the additional cost for such
services). During the twelve (12) months prior to the expiration of the Term of
this lease, or any renewal term, Landlord may exhibit the Demised Premises to
prospective tenants or purchasers at all reasonable hours and without
unreasonably interfering with Tenant's business. If Tenant shall not be
personally present to open and permit an entry into said premises at any
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time after the notice required hereunder, when for any reason an entry therein
shall be necessary or permissible, Landlord or Landlord's agents may enter the
same by a master key, or forcibly in an emergency situation, without rendering
Landlord or such agent liable therefor (if during such entry Landlord or
Landlord's agents shall accord reasonable care to Tenant's property).
(B) Landlord shall also have the right, at any time, to change the
arrangement and/or location of entrances or passageways, doors and doorways, and
corridors, elevators, stairs, toilets, or other public parts of the Building,
provided, however, that Landlord shall make no change in the arrangement and/or
location of entrances or passageways or other public parts of the Building which
will adversely affect in any material manner Tenant's use and enjoyment of the
Demised Premises. Landlord shall also have the right, at any time, to install
signs and/or lettering on any or all entrances to the Building, and to change
the number or designation by which the Building is commonly known.
(C) Neither this lease nor any use by Tenant shall give Tenant any
right or easement to the use of any door or passage or concourse connecting with
any other building or to any public conveniences, and the use of such doors and
passages and concourse and of such conveniences may be regulated and/or
discontinued at any time and from time to time by Landlord without notice to
Tenant.
(D) The exercise by Landlord or its agents of any right reserved to
Landlord in this Article shall not constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any abatement or diminution
of rent, or relieve Tenant from any of its obligations under this lease, or
impose any liability upon Landlord, or its agents, or upon any lessor under any
ground or underlying lease, by reason of inconvenience or annoyance to Tenant,
or injury to or interruption of Tenant's business, or otherwise.
SUBORDINATION
22. (A) Subject to the provisions of this Section 22 set forth
below, this lease and all rights of Tenant hereunder are, and shall be, subject
and subordinate in all respects to all ground leases and/or underlying leases
and to all mortgages and building loan agreements which may now or hereafter be
placed on or affect such leases and/or the Real Property of which the Demised
Premises form a part, or any part or parts of such Real Property, and/or
Landlord's interest or estate therein, and to each advance made and/or hereafter
to be made under any such mortgages, and to all renewals, modifications,
consolidations, replacements and extensions thereof and all substitutions
therefor. This Section A shall be self-operative and no further instrument of
subordination shall be required. In confirmation of such subordination, Tenant
shall execute and deliver promptly any certificate that Landlord and/or any
mortgagee and/or the lessor under any ground or underlying lease and/or their
respective successors in interest may request.
(B) Without limitation of any of the provisions of this lease, in
the event that any mortgagee or its assigns shall succeed to the interest of
Landlord or of any successor-Landlord and/or shall have become lessee under a
new ground or underlying lease, then, at the option of such mortgagee, this
lease shall nevertheless continue in full force and effect and
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Tenant shall and does hereby agree to attorn to such mortgagee or its assigns
and to recognize such mortgagee or its respective assigns as its Landlord.
(C) Either party shall, at any time and from time to time, upon not
less than ten (10) days prior notice by the other party, execute, acknowledge
and deliver to the requesting party a statement in writing certifying that this
lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified and stating
the modification) and the dates to which the Rent, additional rent and other
charges have been paid in advance, if any, and stating whether or not to the
best knowledge of the signer of such certificate, the other party is in default
in performance of any covenant, agreement, term, provision or condition
contained in this lease, and if so, specifying each such default of which the
signer may have knowledge. In the case of any such statement requested of Tenant
by Landlord, Tenant acknowledges that it is intended that any such statement
delivered pursuant hereto may be relied upon by any prospective purchaser or
lessee of the Building or the land on which it is situated or any interest or
estate therein, any mortgagee or prospective mortgagee thereof, or any
prospective assignee of any mortgage thereof. If, in connection with obtaining
financing for the Building and the land allocated to it, a banking, insurance or
other recognized institutional lender shall request reasonable modifications in
this lease as a condition to such financing, Tenant will not unreasonably
withhold, delay or defer its consent thereof, provided that such modifications
do not increase the obligations of Tenant hereunder or materially adversely
affect the leasehold interest hereby created. If, in connection with such
financing, such institutional lender shall reasonably require financial audited
information on the Tenant, Tenant shall promptly comply with such request.
(D) The Tenant covenants and agrees that if by reason of a default
under any underlying lease (including an underlying lease through which the
Landlord derives its leasehold estate in the premises), such underlying lease
and the leasehold estate of the Landlord in the premises demised hereby is
terminated, providing notice has been given to the Tenant and leasehold
mortgagee, the Tenant will attorn to the then holder of the reversionary
interest in the premises demised by this lease or to anyone who shall succeed to
the interest of the Landlord or to the lessee of a new underlying lease entered
into pursuant to the provisions of such underlying lease, and will recognize
such holder and/or such lessee as the Tenant's landlord of this lease. The
Tenant agrees to execute and deliver, at any time and from time to time, upon
the request of the Landlord or of the lessor under any such underlying lease,
any instrument which may be necessary or appropriate to evidence such
attornment. The Tenant further waives the provision of any statute or rule of
law now or hereafter in effect which may give or purport to give the Tenant any
right of election to terminate this lease or to surrender possession of the
premises hereby in the event any proceeding is brought by the lessor under any
underlying lease to terminate the same, and agrees that unless and until any
such lessor, in connection with any such proceeding, shall elect to terminate
this lease and the rights of the Tenant hereunder, this lease shall not be
affected in any way whatsoever by any such proceeding.
(E) Landlord represents that there are currently no mortgages or
ground or underlying leases (herein referred to as "ground leases") affecting
the Building or the Real Property appurtenant thereto. With respect to future
mortgages and ground leases, Landlord shall deliver to Tenant a subordination,
attornment and nondisturbance agreement ("Nondisturbance Agreement") from such
future mortgage lender or ground lessor which shall
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be in recordable form and shall provide, inter alia, that the leasehold estate
granted to Tenant under this lease will not be terminated or disturbed by reason
of the foreclosure of any such mortgage or by reason of the termination of any
such ground lease, so long as Tenant shall not be in default under this lease
beyond any applicable notice or cure period, and shall pay all sums due under
this lease without offsets (unless specifically permitted under this lease) or
defenses thereto, and shall fully perform and comply with all of the terms,
covenants, and conditions of this lease on the part of Tenant to be performed
and/or complied with, and in the event a mortgagee or ground lessor or its
respective successors or assigns shall enter into and lawfully become possessed
of the Premises covered by this lease and shall succeed to the rights of
Landlord hereunder, Tenant will attorn to the successor as its landlord under
this lease and, upon the request of such successor landlord, Tenant will execute
and deliver an attornment agreement in favor of the successor landlord. Such
Nondisturbance Agreement shall also provide that, in the event Tenant shall not
be in default under this lease beyond any applicable notice and cure period,
neither the holder of any such mortgage nor any ground lessor shall name or join
Tenant as a party-defendant or otherwise in any suit, action or proceeding to
enforce such mortgagee's rights under such mortgage or to terminate any such
ground lease, nor will this lease nor the term hereof be terminated (except as
permitted by the provisions of this lease), nor will the rights and obligations
of Tenant under this lease be adversely affected by any enforcement action
against Landlord under such mortgage or ground lease by the holder of any such
mortgage or the lessor under any such ground lease. In addition, the
Nondisturbance Agreement which the holder of any future mortgage or ground
lessor shall deliver to Tenant shall provide that condemnation awards and
insurance proceeds covered by this lease shall be applied in the manner provided
in this lease. Tenant hereby acknowledges that such Nondisturbance Agreements
may contain other reasonable provisions in favor of the lender or ground lessor
or their respective designee including, without limitation, reasonable
limitations on such lender's or ground lessor's or designee's liability after
such party shall become a successor landlord under this lease for the prior acts
or defaults of Landlord under this lease, and reasonable limitations on Tenant's
ability to terminate this lease prior to giving such lender or ground lessor or
designee a reasonable opportunity to cure the default giving rise to such
termination right. In the event such mortgagee or ground lessor shall be
unwilling to enter into a Nondisturbance Agreement substantially in the form
required hereunder, this lease shall remain in full force and effect and the
obligations of Tenant shall not in any manner be affected except that, anything
to the contrary contained in this lease notwithstanding, this lease shall not be
subject and subordinate to such mortgage or ground lease.
property loss, damage reimbursement
23. (A) Landlord or its agents shall not be liable for any damages
to property of Tenant or of others entrusted to employees of the Building, nor
for the loss of or damage to any property of Tenant by theft. Unless due to the
negligence of Landlord, its agents, servants or employees and not covered by
Tenant's insurance, Landlord or its agents shall not be liable for any injury or
damage to persons or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, electrical disturbance, water, rain or snow or leaks
from any part of the Building or from the pipes, appliances or plumbing works or
from the roof, street or subsurface or from any other place or by dampness or by
any other cause of whatsoever nature; nor shall Landlord or its agents be liable
for any such damage caused by other tenants or persons
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in the Building or caused by operations in construction of any private, public
or quasi-public work; nor shall Landlord be liable for any latent defect in the
Demised Premises or in the Building. If at any time any windows of the Demised
Premises are temporarily closed or darkened incident to or for the purpose of
repairs, replacements, maintenance and/or cleaning in, on, to or about the
Building or any part or parts thereof, Landlord shall not be liable for any
damage Tenant may sustain thereby and Tenant shall not be entitled to any
compensation therefor nor abatement of rent nor shall the same release Tenant
from its obligations hereunder nor constitute an eviction. Tenant shall
reimburse and compensate Landlord as additional rent for all expenditures
(including, without limitation, reasonable attorneys' fees) made by, or damages
or fines sustained or incurred by, Landlord due to non-performance or
non-compliance with or breach or failure to observe any term, covenant or
condition of this lease upon Tenant's part to be kept, observed, performed or
complied with. Tenant shall give immediate notice to Landlord in case of fire or
accidents in the Demised Premises or in the Building or of defects therein or in
any fixtures or equipment.
TENANT'S INDEMNITY
(B) To the extent Landlord is not reimbursed for same by insurance,
Tenant shall indemnify and save harmless Landlord against and from any and all
claims by or on behalf of any person or persons, firm or firms, corporation or
corporations arising from the conduct or management of or from any work or
breach of lease, negligence or willful misconduct (other than by Landlord or its
contractors or the agents or employees of either) in and on the Demised Premises
during any other period of occupancy by Tenant including the Term of this lease
and during the period of time, if any, prior to the specified commencement date
that Tenant may have been given access to the Demised Premises for the purpose
of making installations, and will further indemnify and save harmless Landlord
against and from any and all claims arising from any condition of the Demised
Premises or Tenant's occupancy thereof due to or arising from any act or
omissions or negligence of Tenant or any of its agents, contractors, servants,
employees, licensees or invitees and against and from all costs, expenses, and
liabilities incurred in connection with any such claim or claims or action or
proceeding brought thereon; and in case any action or proceeding be brought
against Landlord by reason of any such claim, Tenant, upon notice from Landlord,
agrees that Tenant, at Tenant's expense, will resist or defend such action or
proceeding and will employ counsel therefor reasonably satisfactory to Landlord.
DESTRUCTION - FIRE OR OTHER CASUALTY
24. (A) If the Premises or any part thereof shall be damaged by fire
or other casualty Tenant shall give notice thereof to Landlord, Landlord shall
proceed with reasonable diligence to repair or cause to be repaired such damage.
The Rent shall be abated to the extent that the Premises shall have been
rendered untenantable, such abatement to be from the date of such damage or
destruction to the date the Premises shall be substantially repaired or rebuilt,
in proportion which the area of the part of the Premises so rendered
untenantable bears to the total area of the Premises.
(B) If a fire or other casualty shall render at least twenty (20%)
percent of the Premises totally damaged or wholly untenantable and such damage
shall substantially interfere
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with the conduct of Tenant's business in the Premises, or if such fire or
casualty damage shall render the Premises materially inaccessible, and Landlord
has not terminated this lease pursuant to Subsection (C) and Landlord has not
completed the making of the required repairs and restored and rebuilt the
Premises and/or access thereto within six (6) months from the date of such
damage or destruction, and such additional time after such date (but in no event
to exceed three (3) months) as shall equal the aggregate period Landlord may
have been delayed in doing so by unavoidable delays, Tenant may serve notice on
Landlord of its intention to terminate this lease, and, if within thirty (30)
days thereafter Landlord shall not have completed the making of the required
repairs and restored and rebuilt the Premises, this lease shall terminate on the
expiration of such thirty (30) day period as if such termination date were the
Expiration Date, and the Rent and additional rent shall be apportioned as of
such date and any prepaid portion of Rent and additional rent for any period
after such date shall be refunded by Landlord to Tenant. Notwithstanding the
foregoing, in the event Landlord shall provide Tenant with reasonably suitable
substitute space, within a seven (7) mile radius of the Building, at a rental
rate and additional rent rate not higher than that payable by Tenant prior to
the fire or other casualty, then the six (6) month and three (3) month periods
set forth in this Paragraph (B) above shall be extended to nine (9) months and
six (6) months, respectively.
(C) If a fire or other casualty shall so damage the Building that
substantial alteration or reconstruction of the Building shall, in Landlord's
opinion, be required (whether or not the Premises shall have been damaged by
such fire or other casualty), then in any of such events Landlord may, at its
option, terminate this lease and the Term and estate hereby granted, by giving
Tenant thirty (30) days notice of such termination within ninety (90) days after
the date of such damage provided Landlord also terminates leases covering at
least ninety (90%) percent of the usable area of the Building other than the
Premises and such other leases being terminated by Landlord cover at least forty
(40%) percent of the usable area of the entire Building. In the event that such
notice of termination shall be given, this lease and the Term and estate hereby
granted, shall terminate as of the date provided in such notice of termination
(whether or not the Term shall have commenced) with the same effect as if that
were the Expiration Date, and the Rent and additional rent shall be apportioned
as of such date or sooner termination and any prepaid portion of Rent and
additional rent for any period after such date shall be refunded by Landlord to
Tenant.
(D) Landlord shall not be liable for any inconvenience or annoyance
to Tenant or injury to the business of Tenant resulting in any way from such
damage by fire or other casualty or the repair thereof. Landlord will not carry
insurance of any kind on Tenant's property, and Landlord shall not be obligated
to repair any damage thereto or replace the same.
(E) This lease shall be considered an express agreement governing
any case of damage to or destruction of the Building or any part thereof by fire
or other casualty, and Section 227 of the Real Property Law of the State of New
York providing for such a contingency in the absence of such express agreement,
and any other law of like import now or hereafter enacted, shall have no
application in such case.
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INSURANCE
25. (A) Tenant shall not do anything, or suffer or permit anything
to be done, in or about the Premises which shall (i) invalidate or be in
conflict with the provisions of any fire or other insurance policies covering
the Building or any property located therein, or (ii) result in a refusal by
fire insurance companies of good standing to insure the Building or any such
property in amounts reasonably satisfactory to Landlord, or (iii) subject
Landlord to any liability or responsibility for injury to any person or property
by reason of any activity being conducted in the Premises or (iv) cause any
increase in the fire insurance rates applicable to the Building or equipment or
other property located therein at the beginning of the Term or at any time
thereafter. Tenant, at Tenant's expense, shall comply with all rules, orders,
regulations or requirements of the New York Board of Fire Underwriters and the
New York Fire Insurance Rating organization or any similar body except to the
extent such compliance results from a condition which existed on the day
preceding the Term Commencement Date and which was not created or caused by
Tenant. Landlord shall obtain and maintain throughout the Term of this lease
fire and casualty insurance covering the Building for at least eighty (80%)
percent of the insurable value of the Building.
(B) If, by reason of any act or omission on the part of Tenant, the
rate of fire insurance with extended coverage on the Building or equipment or
other property of Landlord or any other tenant or occupant of the Building shall
be higher than it otherwise would be, Tenant shall reimburse Landlord and all
such other tenants or occupants, on demand, for the part of the premiums for
fire insurance and extended coverage paid by Landlord and such other tenants or
occupants because of such act or omission on the part of Tenant.
(C) In the event that any dispute should arise between Landlord and
Tenant concerning insurance rates, a schedule or make up of insurance rates for
the Building or the Premises, as the case may be, issued by the New York Fire
Insurance Rating Organization or other similar body making rates for fire
insurance and extended coverage for the Premises concerned, shall be conclusive
evidence of the facts therein stated and of the several items and charges in the
fire insurance rates with extended coverage then applicable to such Premises.
(D) Tenant shall obtain and keep in full force and effect during the
Term, at its own cost and expense, (i) Public Liability Insurance, such
insurance to afford protection in an amount of not less than Three Million
($3,000,000) Dollars for injury or death arising out of any one occurrence, and
Five Hundred Thousand ($500,000) Dollars for damage to property, protecting
Landlord and Tenant as insureds against any and all claims for personal injury,
death or property damage and (ii) Fire and Extended Coverage Insurance on
Tenant's property, insuring against damage by fire, and such other risks and
hazards as are insurable under present and future standard forms of fire and
extended coverage insurance policies, to Tenant's property for the full
insurable value thereof, protecting Landlord and Tenant as insureds.
(E) Said insurance is to be written in form and substance reasonably
satisfactory to Landlord by a good and solvent insurance company of recognized
standing, admitted to do business in the State of New York, which shall be
reasonably satisfactory to Landlord. Tenant shall procure, maintain and place
such insurance and pay all premiums and charges therefor and upon failure to do
so Landlord may, but shall not be obligated to, procure,
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maintain and place such insurance or make such payments, and in such event the
Tenant agrees to pay the amount thereof, plus interest at the maximum rate
permitted by law, to Landlord on demand and said sum shall be in each instance
collectible as additional rent on the first day of the month following the date
of payment by Landlord. Tenant shall cause to be included in all such insurance
policies a provision to the effect that the same will be non-cancelable except
upon twenty (20) days written notice to Landlord. On the Term Commencement Date
the original insurance policies or appropriate certificates shall be deposited
with Landlord. Any renewals, replacements or endorsements thereto shall also be
deposited with Landlord to the end that said insurance shall be in full force
and effect during the Term.
(F) Each party agrees to use its best efforts to include in each of
its insurance policies (insuring the Building and Landlord's property therein,
in the case of Landlord, and insuring Tenant's property, in the case of Tenant,
against loss, damage or destruction by fire or other casualty) a waiver of the
insurer's right of subrogation against the other party, or if such waiver should
be unobtainable or unenforceable (i) an express agreement that such policy shall
not be invalidated if the insured waives or has waived before the casualty, the
right of recovery against any party responsible for a casualty covered by the
policy, or (ii) any other form of permission for the release of the other party,
or (iii) the inclusion of the other party as an additional insured, but not a
party to whom any loss shall be payable. If such waiver, agreement or permission
shall not be, or shall cease to be, obtainable without additional charge or at
all, the insured party shall so notify the other party promptly after learning
thereof. In such case, if the other party shall agree in writing to pay the
insurer's additional charge therefor, such waiver, agreement or permission shall
be included in the policy, or the other party shall be named as an additional
insured in the policy, but not a party to whom any loss shall be payable. Each
such policy which shall so name a party hereto as an additional insured shall
contain, if obtainable, agreements by the insurer that the policy will not be
cancelled without at least twenty (20) days prior notice to both insureds and
that the act or omission of one insured will not invalidate the policy as to the
other insured.
(G) As long as Landlord's fire insurance policies then in force
include the waiver of subrogation or agreement or permission to release
liability referred to in Subsection (F) or name the Tenant as an additional
insured, Landlord hereby waives (i) any obligation on the part of Tenant to make
repairs to the Premises necessitated or occasioned by fire or other casualty
that is an insured risk under such policies, and (ii) any right of recovery
against Tenant, any other permitted occupant of the Premises, and any of their
servants, employees, agents or contractors, for any loss occasioned by fire or
other casualty that is an insured risk under such policies. In the event that at
any time Landlord's fire insurance carriers shall not include such or similar
provisions in Landlord's fire insurance policies, the waivers set forth in the
foregoing sentence shall be deemed of no further force or effect.
(H) As long as Tenant's fire insurance policies then in force
include the waiver of subrogation or agreement or permission to release
liability referred to in Subsection (F), or name the Landlord as an additional
insured, Tenant hereby waives (and agrees to cause any other permitted occupants
of the Premises to execute and deliver to Landlord written instruments waiving)
any right of recovery against Landlord, any other tenants or occupants of the
Building, and any servants, employees, agents or contractors of Landlord or of
any such other tenants or occupants, for any loss occasioned by fire or other
casualty which is an insured risk under such
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policies. In the event that at any time Tenant's fire insurance carriers shall
not include such or similar provisions in Tenant's fire insurance policies, the
waiver set forth in the foregoing sentence shall, upon notice given by Tenant to
Landlord, be deemed of no further force or effect with respect to any insured
risks under such policy from and after the giving of such notice. During any
period while the foregoing waiver of right of recovery is in effect, Tenant, or
any other permitted occupant of the Premises, as the case may be, shall look
solely to the proceeds of such policies to compensate Tenant or such other
permitted occupant for any loss occasioned by fire or other casualty which is an
insured risk under such policies.
EMINENT DOMAIN
26. (A) In the event that the whole of the Demised Premises shall be
lawfully condemned or taken in any manner for any public or quasi-public use,
this lease and the Term and estate hereby granted shall forthwith cease and
terminate as of the date of vesting of title. In the event that only a part of
the Demised Premises shall be so condemned or taken, then effective as of the
date of vesting of title, the Rent hereunder shall be abated in an amount
thereof apportioned according to the area of the Demised Premises so condemned
or taken. In the event that a substantial part of the Building or the parking
servicing same shall be so condemned or taken, then (i) Landlord (whether or not
the Demised Premises be affected) may, at its option, terminate this lease and
the Term and estate hereby granted as of the date of such vesting of title by
notifying Tenant in writing of such termination within sixty (60) days following
the date on which Landlord shall have received notice of vesting of title, and
(ii) if such condemnation or taking shall be of a substantial part of the
Demised Premises or a substantial part of the means of access thereto or a
substantial part of the parking area servicing the Demised Premises, Tenant
shall have the right, by delivery of notice in writing to Landlord within sixty
(60) days following the date on which Tenant shall have received notice of
vesting of title, to terminate this lease and the Term and estate hereby granted
as of the date of vesting of title, except that Landlord shall have the right to
render such termination notice null and void if, within sixty (60) days after
Landlord's receipt of such notice, Landlord shall advise Tenant of its intention
to provide Tenant with substitute access or parking, as the case may be, of
substantially the same convenience as the access or parking being taken and
Landlord shall, prior to the vesting of such taking, provide Tenant with such
substitute access or parking; or (iii) if neither Landlord nor Tenant elects to
terminate this lease, as aforesaid, this lease shall be and remain unaffected by
such condemnation or taking, except that the Rent shall be abated to the extent,
if any, hereinabove provided in this Article 26. In the event that only a part
of the Demised Premises shall be so condemned or taken and this lease and the
Term and estate hereby granted are not terminated as hereinbefore provided,
Landlord will, at its expense, restore the remaining portion of the Demised
Premises as nearly as practicable to the same condition as it was in prior to
such condemnation or taking.
(B) In the event of a termination in any of the cases hereinabove
provided, this lease and the Term and estate granted shall expire as of the date
of such termination with the same effect as if that were the date hereinbefore
set for the expiration of the Term of this lease, and the Rent hereunder shall
be apportioned as of such date.
(C) In the event of any condemnation or taking hereinabove mentioned
of all or part of the Building, Landlord shall be entitled to receive the entire
award in the condemnation
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proceeding, including any award made for the value of the estate vested by this
lease in Tenant, and Tenant hereby expressly assigns to Landlord any and all
right, title and interest of Tenant now or hereafter arising in or to any such
award or any part thereof, and Tenant shall be entitled to receive no part of
such award, except that the Tenant may file a separate claim in a separate
proceeding for any taking of nonmovable fixtures owned by Tenant and for moving
expenses incurred by Tenant and leasehold improvements paid for by Tenant. It is
expressly understood and agreed that the provisions of this Article 26 shall not
be applicable to any condemnation or taking for governmental occupancy for a
limited period.
nonliability of landlord
27. (A) If Landlord or a successor in interest is an individual
(which term as used herein includes aggregates of individuals, such as joint
ventures, general or limited partnerships or associations), such individual
shall be under no personal liability with respect to any of the provisions of
this lease, and if such individual hereto is in breach or default with respect
to its obligations under this lease, Tenant shall look solely to the equity of
such individual in the land and Building of which the Demised Premises form a
part for the satisfaction of Tenant's remedies and in no event shall Tenant
attempt to secure any personal judgment against any such individual or any
partner, employee or agent of Landlord by reason of such default by Landlord.
(B) The word "Landlord" as used herein means only the owner of the
landlord's interest for the time being in the land and Building (or the owners
of a lease of the Building or of the land and Building) of which the Premises
form a part, and in the event of any sale of the Building and land of which the
Demised Premises form a part, Landlord shall be and hereby is entirely freed and
relieved of all covenants and obligations of Landlord hereunder arising after
the date of such sale and, it shall be deemed and construed without further
agreement between the parties or between the parties and the purchaser of the
Premises, that such purchaser has assumed and agreed to carry out any and all
covenants and obligations of Landlord hereunder.
DEFAULT
28. (A) Upon the occurrence, at any time prior to or during the
Demised Tern, of any one or more of the following events (referred to as "Events
of Default"):
(i) If Tenant shall default in the payment when due of any
installment of Rent or in the payment when due of any additional rent, and such
default shall continue for a period of ten (10) days after notice by Landlord to
Tenant of such default; or
(ii) If Tenant shall default in the observance or performance of any
term, covenant or condition of this lease on Tenant's part to be observed or
performed (other than the covenants for the payment of Rent and additional rent)
and Tenant shall fail to remedy such default within thirty (30) days after
notice by Landlord to Tenant of such default, or if such default is of such a
nature that it cannot be completely remedied within said period of thirty (30)
days and Tenant shall not commence within said period of thirty (30) days, or
shall not thereafter diligently prosecute to completion, all steps necessary to
remedy such default; or
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(iii) If Tenant shall file a voluntary petition in bankruptcy or
insolvency, or shall be adjudicated a bankrupt or become insolvent, or shall
file any petition or answer seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under the
present or any future federal bankruptcy code or any other present or future
applicable federal, state or other statute or law, or shall make an assignment
for the benefit of creditors or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of Tenant or of all or any
part of Tenant's property; or
(iv) If, within sixty (60) days after the commencement of any
proceeding against Tenant, whether by the filing of a petition or otherwise,
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the present or any future federal bankruptcy
code or any other present or future applicable federal, state or other statute
or law, such proceedings shall not have been dismissed, or if, within sixty (60)
days after the appointment or any trustee, receiver or liquidator of Tenant, or
of all or any part of Tenant's property, such appointment shall not have been
vacated or otherwise discharged, or if any execution or attachment shall be
issued against Tenant or any of Tenant's property pursuant to which the Demised
Premises shall be taken or occupied or attempted to be taken or occupied; or
(v) If Tenant shall default in the observance or performance of any
term, covenant or condition on Tenant's part to be observed or performed under
any other lease with Landlord in the Building and such default shall continue
beyond any grace period set forth in such other lease for the remedying of such
default; or
(vi) If seventy (70%) percent or more of the Demised Premises shall
become deserted or abandoned for a period of thirty (30) consecutive days; or
(vii) If Tenant's interest in this lease shall devolve upon or pass
to any person, whether by operation of law or otherwise, except as expressly
permitted under Article 20;
Then, upon the occurrence, at anytime prior to or during the Demised
Term, of any one or more of such Events of Default, Landlord, at any time
thereafter, at Landlord's option, may give to Tenant a five (5) days' notice of
termination of this lease and, in the event such notice is given, this lease and
the Term shall come to an end and expire (whether or not said term shall have
commenced) upon the expiration of said five (5) days with the same effect as if
the date of expiration of said five (5) days were the Expiration Date, but
Tenant shall remain liable for damages as provided in Article 30.
(B) If, at any time (i) Tenant shall be comprised of two (2) or more
persons, or (ii) Tenant's obligations under this lease shall have been
guaranteed by any person other than Tenant, or (iii) Tenant's interest in this
lease shall have been assigned, the word "Tenant", as used in subsection (iii)
and (iv) of Section 28(A), shall be deemed to mean any one or more of the
persons primarily or secondarily liable for Tenant's obligations under this
lease. Any monies received by Landlord from or on behalf of Tenant during the
pendency of any proceeding of the types referred to in said subsections (iii)
and (iv) shall be deemed paid as compensation for the use and occupation of the
Demised Premises and the acceptance of such compensation by
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Landlord shall not be deemed an acceptance of Rent or a waiver on the part of
Landlord of any rights under Section 28(A).
TERMINATION ON DEFAULT
29. (A) If Tenant shall default in the payment when due of any
installment of rent or in the payment when due of any additional rent and such
default shall continue for a period of ten (10) days after notice by Landlord to
Tenant of such default, or if this lease and the Demised Term shall expire and
come to an end as provided in Article 28:
(i) Landlord and its agents and servants may immediately, or at any
time after such default or after the date upon which this lease and the Demised
Term shall expire and come to an end, re-enter the Demised Premises or any part
thereof, without notice, either by summary proceedings or by any other
applicable action or proceeding, or by force or other means provided such force
or other means are lawful (without being liable to indictment, prosecution or
damages therefor), and may repossess the Demised Premises and dispossess Tenant
and any other persons from the Demised Premises and remove any and all of their
property and effects from the Demised Premises; and
(ii) Landlord, at Landlord's option, may relet the whole or any part
or parts of the Demised Premises from time to time, either in the name of
Landlord or otherwise, to such tenant or tenants, for such term or terms ending
before, on or after the Expiration Date, at such rental or rentals and upon such
other conditions, which may include concessions and free rent periods, as
Landlord, in its sole discretion, may determine. Landlord will make reasonable
efforts to relet the Demised Premises or any part thereof and shall in no event
be liable for failure to relet the Demised Premises or any part thereof, or, in
the event of any such reletting, for failure to collect any rent due upon any
such reletting, and no such failure shall operate to relieve Tenant of any
liability under this lease or otherwise to affect any such liability; Landlord,
at Landlord's option, may make such repairs, replacements, alterations,
additions, improvements, decorations and other physical changes in and to the
Demised Premises as Landlord, in its sole discretion, considers advisable or
necessary in connection with any such reletting or proposed reletting, without
relieving Tenant of any liability under this lease or otherwise affecting any
such liability.
(B) Tenant, on its own behalf and on behalf of all persons claiming
through or under Tenant, including all creditors, does hereby waive any and all
rights which Tenant and all such persons might otherwise have under any present
or future law to redeem the Demised Premises, or to re-enter or repossess the
Demised Premises, or to restore the operation of this lease, after (i) Tenant
shall have been dispossessed by a judgment or by warrant of any court or judge,
or (ii) any re-entry by Landlord permitted by law, or (iii) any expiration or
termination of this lease and the Demised Term, whether such dispossess,
re-entry, expiration or termination shall be by operation of law or pursuant to
the provisions of this lease provided it's permitted by law. In the event of a
breach or threatened breach by Tenant or any persons claiming through or under
Tenant, of any term, covenant or condition of this lease on Tenant's part to be
observed or performed, Landlord shall have the right to enjoin such breach and
the right to invoke any other remedy allowed by law or in equity as if re-entry,
summary proceeding and other special remedies were not provided in this lease
for such breach. The rights to invoke the remedies
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hereinbefore set forth are cumulative and shall not preclude Landlord from
invoking any other remedy allowed at law or in equity.
DAMAGES
30. (A) If this lease and the Demised Term shall expire and come to
an end as provided in Article 28 or by or under any summary proceeding or any
other action or proceeding, or if Landlord shall re-enter the Demised Premises
as provided in Article 29 or by or under any summary proceedings or any other
action or proceeding, then, in any of said events:
(i) Tenant shall pay to Landlord all Rent, additional rent and other
charges payable under this lease by Tenant to Landlord to the date upon which
this lease and the Demised Term shall have expired and come to an end or to the
date of re-entry upon the Demised Premises by Landlord, as the case may be; and
(ii) Tenant shall also be liable for and shall pay to Landlord, as
damages, any deficiency (referred to as "Deficiency") between the Rent and
additional rent reserved in this lease for the period which otherwise would have
constituted the unexpired portion of the Demised Term and the net amount, if
any, of rents collected under any reletting effected pursuant to the provisions
of Section 29(A) for any part of such period (first deducting from the rents
collected under any such reletting all of Landlord's expenses in connection with
the termination of this lease or Landlord's re-entry upon the Demised Premises
and with such reletting including, but not limited to, all repossession costs,
customary and usual brokerage commissions, legal expenses, reasonable attorneys'
fees, alteration costs and other expenses of preparing the Demised Premises for
such reletting). Any such Deficiency shall be paid in monthly installments by
Tenant on the days specified in this lease for payment of installments of Rent.
Landlord shall be entitled to recover from Tenant each monthly Deficiency as the
same shall arise, and no suit to collect the amount of the Deficiency for any
month shall prejudice Landlord's rights to collect the Deficiency for any
subsequent month by a similar proceeding; and
(B) If the Demised Premises, or any part thereof, shall be relet
together with other space in the Building, the rents collected or reserved under
any such reletting and the expenses of any such reletting shall be equitably
apportioned for the purposes of this Article 30. Tenant shall in no event be
entitled to any rents collected or payable under any reletting, whether or not
such rents shall exceed the rent reserved in this lease. Solely for the purposes
of this Article, the term "Rent" as used in Section 30(A) shall mean the rent in
effect immediately prior to the date upon which this lease and the Demised Term
shall have expired and come to an end, or the date of re-entry upon the Demised
Premises by Landlord, as the case may be, plus any additional rent payable
pursuant to the provisions of Article 11 for the Escalation Year (as defined in
Article 11) immediately preceding such event. Nothing contained in Articles 28
and 29 of this lease shall be deemed to limit or preclude the recovery by
Landlord from Tenant of the maximum amount allowed to be obtained as damages by
any statute or rule of law, or of any sums or damages to which Landlord may be
entitled in addition to the damages set forth in Section 30(A).
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SUMS DUE LANDLORD
31. If Tenant shall default in the performance of any covenants on
Tenant's part to be performed under this lease, Landlord may immediately, or at
anytime thereafter, with notice, and without thereby waiving such default,
perform the same for the account of Tenant and at the expense of Tenant. If
Landlord at any time is compelled to pay or elects to pay any sum of money, or
do any act which will require the payment of any sum of money by reason of the
failure of Tenant to comply with any provision hereof, or, if Landlord is
compelled to or elects to incur any expense, including reasonable attorneys'
fees, instituting, prosecuting and/or defending any action or proceeding
instituted by reason of any default of Tenant hereunder, the sum or sums so paid
by Landlord, with all interest, costs and damages, shall be deemed to be
additional rent hereunder and shall be due from Tenant to Landlord on the first
day of the month following the incurring of such respective expenses or, at
Landlord's option, on the first day of any subsequent month. Any sum of money
(other than Rent) accruing from Tenant to Landlord pursuant to any provisions of
this lease, including, but not limited to, the provisions of Schedule C, whether
prior to or after the Term Commencement Date, may, at Landlord's option, be
deemed additional rent, and Landlord shall have the same remedies for Tenant's
failure to pay any item of additional rent when due as for Tenant's failure to
pay any installment of Rent when due. Tenant's obligations under this Article
shall survive the expiration or sooner termination of the Demised Term. In any
case in which the Rent or additional rent is not paid within ten (10) days of
the day when same is due, Tenant shall pay a late charge equal to 8-1/2 cents
for each dollar so due. This late payment charge is intended to compensate
Landlord for its additional administrative costs resulting from Tenant's failure
to pay in a timely manner and has been agreed upon by Landlord and Tenant as a
reasonable estimate of the additional administrative costs that will be incurred
by Landlord as a result of Tenant's failure as the actual cost in each instance
is extremely difficult, if not impossible, to determine. This late payment
charge will constitute liquidated damages and will be paid to Landlord together
with such unpaid amounts. The payment of this late payment charge will not
constitute a waiver by Landlord of any default by Tenant under this lease.
NO WAIVER
32. No act or thing done by Landlord or Landlord's agents during the
term hereby demised shall be deemed an acceptance of a surrender of said Demised
Premises, and no agreement to accept such surrender shall be valid unless in
writing signed by Landlord. No employee of Landlord or of Landlord's agents
shall have any power to accept the keys of the Demised Premises prior to the
termination of this lease. The delivery of keys to any employee of Landlord or
of Landlord's agents shall not operate as a termination of this lease or a
surrender of the Demised Premises. In the event Tenant shall at any time desire
to have Landlord underlet the Demised Premises for Tenant's account, Landlord or
Landlord's agents are authorized to receive said keys for such purposes without
releasing Tenant from any of the obligations under this lease, and Tenant hereby
relieves Landlord of any liability for loss of or damage to any of Tenant's
effects in connection with such underletting. The failure of Landlord to seek
redress for violation of, or to insist upon the strict performance of, any
covenants or conditions of this lease, or any of the Rules and Regulations
annexed hereto and made a part hereof or hereafter adopted by Landlord, shall
not prevent a subsequent act, which would have originally constituted a
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violation, from having all the force and effect of an original violation. The
receipt by Landlord of rent with knowledge of the breach of any covenant of this
lease shall not be deemed a waiver of such breach. The failure of a party to
enforce any of the Rules and Regulations annexed hereto and made a part hereof,
or hereafter adopted, against the other party and/or, in Landlord's case,
against any other tenant in the Building, shall not be deemed a waiver of any
such Rules and Regulations. No provision of this lease shall be deemed to have
been waived by a party, unless such waiver be in writing signed by that party.
No payment by Tenant or receipt by Landlord of a lesser amount then the monthly
Rent herein stipulated shall be deemed to be other than on account of the
earliest stipulated Rent nor shall any endorsement or statement on any check or
any letter accompanying any check or payment of Rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such Rent or pursue any other remedy
in this lease provided.
WAIVER OF TRIAL BY JURY
33. To the extent such waiver is permitted by law, Landlord and
Tenant hereby waive trial by jury in any action, proceeding or counterclaim
brought by Landlord or Tenant against the other on any matter whatsoever arising
out of or in any way connected with this lease, the relationship of landlord and
tenant, the use or occupancy of the Demised Premises by Tenant or any person
claiming through or under Tenant, any claim of injury or damage, and any
emergency or other statutory remedy. The provisions of the foregoing sentence
shall survive the expiration or any sooner termination of the Demised Term. If
Landlord commences any summary proceeding for nonpayment, Tenant agrees not to
interpose any counterclaim of whatever nature or description in any such
proceeding or to consolidate such proceeding with any other proceeding.
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 for any cause, or in the event of Landlord's obtaining
possession of the Demised Premises, by reason of the violation by Tenant of any
of the covenants and conditions of this lease or otherwise.
notices
34. Except as otherwise expressly provided in this lease, any bills,
statements, notices, demands, requests or other communications (other than
bills, statements or notices given in the regular course of business) given or
required to be given under this lease shall be effective only if rendered or
given in writing, sent by regular, registered or certified mail (return receipt
requested) , addressed (A) to Tenant (to the attention of Tenant's Chief
Financial Officer) (i) at Tenant's address set forth in this lease if mailed
prior to Tenant's taking possession of the Demised Premises, or (ii) at the
Building if mailed subsequent to Tenant's taking possession of the Demised
Premises, or (iii) at any place where Tenant or any agent or employee of Tenant
may be found if mailed subsequent to Tenant's vacating, deserting, abandoning or
surrendering the Demised Premises, or (B) to Landlord (to the attention of
Landlord's Chief Financial Officer) at Landlord's address set forth in this
lease, or (C) addressed to such other address as either Landlord or Tenant may
designate as its new address for such purpose by notice given to the other in
accordance with the provisions of this Article. Any such bills, statements,
notices,
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demands, requests or other communications shall be deemed to have been rendered
or given on the third day after it is mailed as provided in this Article.
INABILITY TO PERFORM
35. (A) (i) Except as otherwise provided in this lease, if, by
reason of strikes or other labor disputes, fire or other casualty, accidents,
orders or regulations of any Federal, State, County or Municipal authority, or
any other cause beyond Landlord's reasonable control, whether or not such other
cause shall be similar in nature to those hereinbefore enumerated, Landlord is
unable to furnish or is delayed in furnishing any utility or service required to
be furnished by Landlord under the provisions of this lease or any collateral
instrument or is unable to perform or make or is delayed in performing or making
any installations, decorations, repairs, alterations, additions or improvements,
whether or not required to be performed or made under this lease, or under any
collateral instrument, or is unable to fulfill or is delayed in fulfilling any
of Landlord's other obligations under this lease, or any collateral instrument,
no such inability or delay shall entitle Tenant to any abatement or diminution
of rent, or relieve Tenant from any of its obligations under this lease, or
impose any liability upon Landlord or its agents, by reason of inconvenience or
annoyance to Tenant, or injury to or interruption of Tenant's business, or
otherwise except that Landlord shall be subject to a claim for damages to Tenant
(without a right of setoff against Rent or additional rent) if such
inconvenience, injury or interruption is caused by Landlord's negligence.
(ii) If, by reason of strikes or other labor disputes, fire or other
casualty, accidents, orders or regulations of any Federal, State, County or
Municipal authority, or any other cause beyond Tenant's reasonable control,
Tenant is unable to perform or is delayed in performance of its obligations
under this lease, except obligations which may be met by the payment of a sum of
money, no such inability or delay on the part of Tenant shall impose any
liability upon Tenant.
(iii) Notwithstanding the foregoing, if delays in performance
permitted above by either party shall exceed ninety (90) days, each party
hereunder shall have the remedies against the other party for such default
otherwise permitted under this lease or otherwise permitted at law or equity to
the extent not limited by this lease.
INTERRUPTION OF SERVICE
(B) Landlord reserves the right to stop the services of the air
conditioning, elevator, escalator, plumbing, electrical or other mechanical
systems or facilities in the Building when necessary by reason of accident or
emergency, or for repairs, alterations or replacements, which, in the reasonable
judgment of Landlord are necessary, until such repairs, alterations or
replacements shall have been completed. The exercise of such rights by Landlord
shall not entitle Tenant to any abatement or diminution of rent, or relieve
Tenant from any of its obligations under this lease, or impose any liability
upon Landlord or its agents by reason of inconvenience or annoyance to Tenant,
or injury to or interruption of Tenant's business or otherwise except that
Landlord shall be subject to a claim for damages to Tenant (without a right of
rent setoff) if such injury to or interruption of Tenant's business is caused by
Landlord's
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negligence. Landlord shall use reasonable efforts to diligently and promptly
complete repairs, alterations and replacements made pursuant to this Paragraph
(B) (but such obligation shall not require Landlord to use overtime or after
hour services unless Tenant shall pay the additional cost for such services).
CONDITIONS OF LANDLORD'S LIABILITY
(C) (i) In addition to the requirements for constructive eviction
imposed by law, Tenant shall not be entitled to claim a constructive eviction
from the Demised Premises unless Tenant shall have first notified Landlord of
the condition or conditions giving rise thereto, and if the complaints be
justified, unless Landlord shall have failed to remedy such conditions within a
reasonable time after receipt of such notice.
(ii) If Landlord shall be unable to give possession of the Demised
Premises on any date specified for the commencement of the term by reason of the
fact that the Premises have not been sufficiently completed to make the Premises
ready for occupancy, or for any other reason, Landlord shall not be subject to
any liability for the failure to give possession on said date, nor shall such
failure in any way affect the validity of this lease or the obligations of
Tenant hereunder except that Tenant shall be entitled to the remedies set forth
in Article 5(E) above, and Landlord shall be subject to a claim for damages to
Tenant (without a right of setoff against Rent or additional rent except as
specifically permitted under this lease) if such failure to give possession is
caused by Landlord's negligence.
TENANT'S TAKING POSSESSION
(D) (i) Tenant, by entering into occupancy of the Premises, shall be
conclusively deemed to have agreed that Landlord, up to the time of such
occupancy has performed all of its obligations hereunder and that the Premises
were in satisfactory condition as of the, date of such occupancy, unless, with
respect to those defects of "which it has actual knowledge, Tenant, within sixty
(60) days after such date, shall have given written notice to Landlord
specifying the respects in which the same were not in such condition.
(ii) Subject to Landlord's prior written consent, if Tenant shall
use or occupy all or any part of the space in the Demised Premises prior to the
Term Commencement Date, such use or occupancy shall be deemed to be under all of
the terms, covenants and conditions of this lease, except that Tenant shall not
be required to pay annual minimum rent during such period. If Tenant shall be
permitted by Landlord to so occupy any portion of the Demised Premises prior to
the Term Commencement Date, Tenant shall not interfere with the performance by
Landlord or the Contractor of Tenant's Initial Construction or other work being
performed by Landlord or the Contractor in the Demised Premises.
ENTIRE AGREEMENT
36. This lease (including the Schedules and Exhibits annexed hereto)
contains the entire agreement between the parties and all prior negotiations and
agreements are merged herein. Tenant hereby acknowledges that neither Landlord
nor Landlord's agent or
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representative has made any representations or statements, or promises, upon
which Tenant has relied, regarding any matter or thing relating to the Building,
the land allocated to it (including the parking area) or the Demised Premises,
or any other matter whatsoever, except as is expressly set forth in this lease,
including, but without limiting the generality of the foregoing, any statement,
representation or promise as to the fitness of the Demised Premises for any
particular use, the services to be rendered to the Demised Premises, or the
prospective amount of any item of additional rent. No oral or written statement,
representation or promise whatsoever with respect to the foregoing or any other
matter made by Landlord, its agents or any broker, whether contained in an
affidavit, information circular, or otherwise, shall be binding upon the
Landlord unless expressly set forth in this lease. No rights, easements or
licenses are or shall be acquired by Tenant by implication or otherwise unless
expressly set forth in this lease. This lease may not be changed, modified or
discharged, in whole or in part, orally, and no executory agreement shall be
effective to change, modify or discharge, in whole or in part, this lease or any
obligations under this lease, unless such agreement is set forth in a written
instrument executed by the party against whom enforcement of the change,
modification or discharge is sought. All references in this lease to the consent
or approval of Landlord shall be deemed to mean the written consent of Landlord,
or the written approval of Landlord, as the case may be, and no consent or
approval of Landlord shall be effective for any purpose unless such consent or
approval is set forth in a written instrument executed by Landlord.
DEFINITIONS
37. The words "re-enter", "re-entry", and "re-entered" as used in
this lease are not restricted to their technical legal meanings. The term
"business days" as used in this lease shall exclude Saturdays (except such
portion thereof as is covered by specific hours in Article 6 hereof), Sundays
and all days observed by the State or Federal Government as legal holidays. The
terms "person" and "persons" as used in this lease shall be deemed to include
natural persons, firms, corporations, partnerships, associations and any other
private or public entities, whether any of the foregoing are acting on their
behalf or in a representative capacity. The various terms which are defined in
other Articles of this lease or are defined in Schedules or Exhibits annexed
hereto, shall have the meanings specified in such other Articles, Exhibits and
Schedules for all purposes of this lease and all agreements supplemental
thereto, unless the context clearly indicates the contrary.
partnership tenant
38. If Tenant is a partnership (or is comprised of two (2)or more
persons, individually or as co-partners of a partnership) or if Tenant's
interest in this lease shall be assigned to a partnership (or to two (2) or more
persons, individually or as co-partners of a partnership) pursuant to Article 20
(any such partnership and such persons are referred to in this Section as
"Partnership Tenant"), the following provisions of this Section shall apply to
such Partnership Tenant: (a) the liability of each of the parties comprising
Partnership Tenant shall be joint and several, and (b) each of the parties
comprising Partnership Tenant hereby consents in advance to, and agrees to be
bound by, any modifications of this lease which may hereafter be made, and by
any notices, demands, requests or other communications which may hereafter be
given, by Partnership Tenant or by any of the parties comprising Partnership
Tenant, and (c) any
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bills, statements, notices, demands, requests and other communications given or
rendered to Partnership Tenant or to any of the parties comprising Partnership
Tenant shall be deemed given or rendered to Partnership Tenant and to all such
parties and shall be binding upon Partnership Tenant and all such parties, and
(d) if Partnership Tenant shall admit new partners, all of such new partners
shall, by their admission to Partnership Tenant, be deemed to have assumed
performance of all of the terms, covenants and conditions of this lease on
Tenant's part to be observed and performed, and (e) Partnership Tenant shall
give prompt notice to Landlord of the admission of any such new partners, and
upon demand of Landlord, shall cause each such new partner to execute and
deliver to Landlord an agreement in form satisfactory to Landlord, wherein each
such new partner shall assume performance of all of the terms, covenants and
conditions of this lease on Tenant's part to be observed and performed (but
neither Landlord's failure to request any such agreement nor the failure of any
such new partner to execute or deliver any such agreement to Landlord shall
vitiate the provisions of subdivision (d) of this Section).
SUCCESSORS, ASSIGNS, ETC.
39. The terms, covenants, conditions and agreements contained in
this lease shall bind and inure to the benefit of Landlord and Tenant and their
respective heirs, distributees, executors, administrators, successors, and,
except as otherwise provided in this lease, their respective assigns.
broker
40. Tenant and Landlord each represent to the other that this lease
was brought about by Real Estate Strategies, Ltd. as broker and all negotiations
with respect to this lease were conducted exclusively with said broker. Each
party agrees that if any claim is made for commissions by any other broker
through or on account of any acts of a party, that party will hold the other
free and harmless from any and all liabilities and expenses in connection
therewith, including reasonable attorney's fees.
CAPTIONS
41. The captions in this lease are included only as a matter of
convenience and for reference, and in no way define, limit or describe the scope
of this lease nor the intent of any provisions thereof.
NOTICE OF ACCIDENTS
42. Tenant shall give notice to Landlord, promptly after Tenant
learns thereof, of (i) any accident in or about the Premises, (ii) all fires and
other casualties within the Premises, (iii) all damages to or defects in the
Premises, including the fixtures, equipment and appurtenances thereof for the
repair of which Landlord might be responsible, and (iv) all damage to or defects
in any parts or appurtenances of the Building's sanitary, electrical, heating,
ventilating, air-conditioning, elevator and other systems located in or passing
through the Premises or any part thereof.
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TENANT'S AUTHORITY TO ENTER LEASE
43. In the event that Landlord or Tenant hereunder is a corporation,
Landlord and/or Tenant, as the case may be, represents that the officer or
officers executing this lease have the requisite authority to do so. Tenant
agrees to give Landlord written notice of any change in the ownership of the
majority of the outstanding capital stock of Tenant or any change in the
ownership of the majority of the assets of Tenant as soon as legally permitted
after the occurrence thereof once same is announced to the public.
renewal option
44. Tenant shall have the right, to be exercised as hereinafter
provided, to extend the term of this lease for three (3) periods of five (5)
years each (hereinafter referred to individually as the "Renewal Term") upon the
following terms and conditions:
(A) That at the time of the exercise of each such right and at the
commencement of each Renewal Term, Tenant shall not be in default in the
performance of any of the terms, covenants or conditions which Tenant is
required to perform under this lease beyond any applicable notice and cure
period provided herein for the cure hereof.
(B) That Tenant shall notify Landlord in writing of Tenant's
election to exercise its option with respect to the applicable Renewal Tea at
least one (1) year prior to the expiration of the then current term or Renewal
Tern, as the case may be.
(C) That each Renewal Term shall be upon the same terms, covenants
and conditions as in this lease provided, except that (a) there shall be no
further option to extend this lease beyond the three (3) Renewal Terms referred
to above; (b) the Premises shall be delivered at the beginning of each Renewal
Term in its then "as is" condition; and (C) the Rent to be paid by Tenant during
each Renewal Term shall be as follows:
During the first year of each Renewal Term, the Rent shall be ninety
(90%) percent of the then fair market annual minimum rent being received by
Landlord for comparable size space in the Building, but in no event less than
the Rent payable under this lease for the Lease Year immediately preceding the
applicable Renewal Term. In the event a portion of the Demised Premises is in
1660 Walt Whitman Road (by reason of Tenant's taking over Offer Space in such
building pursuant to Article 45 below), the Rent applicable to such space shall
be ninety (90%) percent of the then fair market annual minimum rent being
received by Landlord for comparable size space in that building, but in no event
less than the Rent payable under this lease (or a separate lease covering such
space) for the Lease Year immediately preceding the applicable Renewal Tern. The
Rent applicable to the Renewal Term shall be payable in equal monthly
installments.
During each of the second through fifth years of each Renewal Ten,
the Rent shall be increased by three (3%) percent per year over the Rent payable
for the prior year. Said sums shall be payable in equal monthly installments.
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"Fair market annual minimum rent" shall mean the rate Landlord
generally receives or that is received for comparable space in the Building or
1660 Walt Whitman Road, whichever is applicable. In determining fair market
annual minimum rent, no adjustment shall be made in consideration of and Tenant
shall not be entitled to a credit for Tenant improvements, brokerage
commissions, rent concessions and other concessions which Landlord may from time
to time offer to other tenants. Landlord shall determine the fair market annual
minimum rent on the basis of the foregoing criteria. In the event Tenant
disputes Landlord's determination of fair market annual minimum rent, Tenant, by
written demand, may commence arbitration strictly in accordance with the terms
and conditions of this Subparagraph. The sole issue to be determined by such
arbitration shall be the fair market annual minimum rent to be charged in
accordance with this Subparagraph. Such written demand shall contain the name
and address of the arbitrator appointed by Tenant. Within ten (10) days after
its receipt of the written demand, Landlord will give Tenant written notice of
the name and address of its arbitrator. Within ten (10) days after the date of
the appointment of the second arbitrator, the two (2) arbitrators will meet. If
the two (2) arbitrators are unable to agree on the fair market annual minimum
rent as provided herein within ten (10) days after their first meeting, they
will select a third arbitrator. The third arbitrator will be designated as
chairman and will immediately give Landlord and Tenant written notice of its
appointment. The three (3) arbitrators will meet within ten (10) days after the
appointment of the third arbitrator. If they are unable to agree on the fair
market annual minimum rent within ten (10) days after their first meeting, the
third arbitrator will select a time, date and place for a hearing and will give
Landlord and Tenant thirty (30) days prior written notice of it. The date for
the hearing will not be more than sixty (60) days after the date of appointment
of the third arbitrator. The arbitrators must be licensed real estate appraisers
with at least five (5) years experience in the Nassau/Suffolk real estate
market. No arbitrator may be an active real estate broker. The arbitration will
be governed by the laws of the State of New York and, when not in conflict with
such law, by the general procedures in the commercial arbitration rules of the
American Arbitration Association. The arbitrators will not have the power to add
to, modify, detract from or alter in any way the provisions of this lease or any
amendments or supplements to this lease. The arbitrators will not have any power
to decide or consider anything other than the specific issue of the fair market
annual minimum rent in accordance with the terms of this lease. The written
decision of at least two (2) arbitrators will be conclusive and binding upon
Landlord and Tenant. No arbitrator is authorized to make an award for damages of
any kind, including, without limitation, an award for punitive, exemplary,
consequential or incidental damages. Landlord and Tenant will each pay for the
services of its appointees, attorneys and witnesses plus one-half of the fees of
the third arbitrator and of all other proper costs relating to the arbitration.
The decision of the arbitrators will be final and non-appealable and may be
enforced according to the laws of the State of New York. Notwithstanding
anything to the contrary contained herein, in the event Tenant disputes
Landlord's determination of the fair market annual minimum rent, Tenant shall
nevertheless continue to pay Rent at the same rate then being paid under this
lease. In the event the Rent as determined hereunder is at variance with the
Rent being paid by Tenant, Tenant shall either pay the difference in a lump sum
or receive a credit as the case may be.
This Renewal Option is personal to Choicecare Long Island, Inc. and
is non-transferable by operation of law or otherwise except to an assignee of
Tenant approved by Landlord pursuant to this lease or other transferee permitted
pursuant to this lease.
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RIGHT OF FIRST OFFER
45. Whenever space (the "Offer Space") becomes available in the
Building or in 1660 Walt Whitman Road (provided Landlord still owns such
building), and subject to the existing rights of first offer or refusal with
respect to applicable space held by existing tenants of such buildings, Landlord
will notify Tenant of the availability of the Offer Space and the annual minimum
rental rate for same which shall be equal to the minimum annual rental rate (on
a per square basis) then payable by Tenant for the Demised Premises.
Landlord's notice of the availability of the Offer Space (the "Offer
Notice") shall contain the minimum annual rent which will be required to be paid
for the Offer Space. If, within thirty (30) days after receipt of the Offer
Notice, Tenant shall notify Landlord in writing (the "Acceptance Notice") that
Tenant agrees to lease the Offer Space for a term of not less than five (5)
years with a rental commencing at the minimum annual rental rate stated in the
Offer Notice, Landlord and Tenant will execute a separate lease or lease
modification agreement covering the Offer Space, at Landlord's option (except
that if the Offer Space is located in 1660 Walt Whitman Road, the parties hereto
agree a new lease shall be used), within twenty (20) days thereafter which lease
or lease modification agreement shall be on all of the same terms as this lease
except:
(A) The term of the lease with respect to the Offer Space shall
commence upon substantial completion of Landlord's Work (hereinafter defined)
pursuant to the following schedule: Tenant shall deliver to Landlord its Program
of Space Requirements for the Offer Space no later than thirty (30) days after
Tenant shall have given Landlord the Acceptance Notice. The term "Program of
Space Requirements" as used in this Article 45 shall include (a) the number,
size and location of rooms required by Tenant, including, without limitation,
offices, conference rooms and file areas; (b) the number, size and location of
work stations Tenant requires in the open bullpen area; and (c) a description of
its power, data and telephone requirements including the number and location of
outlets for such services. Landlord shall prepare preliminary plans on the basis
of Tenant's Program of Space Requirements within fourteen (14) days after Tenant
shall deliver its Program of Space Requirements to Landlord. Tenant shall
comment on Landlord's preliminary plans and approve such plans, subject to such
comments, within seven (7) days after Tenant's receipt of such preliminary plans
from Landlord. Landlord shall prepare working plans on the basis of such
approved preliminary plans within thirty (30) days after Tenant shall have so
approved such preliminary plans and delivered such approval to Landlord. Tenant
shall comment on Landlord's working plans and approve such working plans,
subject to such comments, within (10) days after its receipt of Landlord's
working plans. Landlord shall substantially complete the work described in
Paragraph (E) below in the Offer Space within ninety (90) days after Tenant
shall have so approved Landlord's working plans and delivered such approval to
Landlord.
(ii) The term of this lease with respect to the Offer Space shall
expire five (5) years after the last day of the month in which such term shall
have commenced pursuant to the foregoing paragraph. In addition, in the event
the term of this lease with respect to the Offer Space extends beyond the
Expiration Date of this lease, then the lease or lease modification agreement
relating to the Offer Space shall extend the term of this lease as to the
balance of the Demised Premises so that it is coterminous with the end of the
term relating to the Offer Space.
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The Rent payable with respect to the balance of the Demised Premises during such
extension shall be that then applicable to such space plus the three (3%)
percent annual increases that would be applicable thereto if such extension were
part of the then current term of this lease, and the additional rent payable
with respect to the balance of the Demised Premises during such extension shall
be determined as if such extension were part of the then current term of this
lease.
(B) The annual minimum rental rate for the Offer Space for the first
Lease Year of such term shall be the rental rate stated in the Landlord's Offer
Notice as set forth above and the annual minimum rental rate for each subsequent
Lease Year shall be three (3%) percent more than the annual minimum rental rate
payable for the applicable Offer Space for the preceding Lease Year.
(C) Tenant's Proportionate Share shall be increased on a building by
building basis so that it equals the ratio which the Demised Premises (inclusive
of the Offer Space) located in the building in question bears to the total area
of the building in question.
(D) The number of parking spaces and directory listings shall be
increased proportionately, on a building by building basis, to reflect the
addition of the Offer Space.
(E) Landlord shall perform work in the Offer Space pursuant to the
specifications set forth in Schedule E hereto ("Landlord's Work"). Tenant's
obligation to pay Rent and additional rent with respect to the Offer Space shall
commence upon substantial completion by Landlord of Landlord's Work therein, but
the commencement of such Rent and additional rent obligation shall be
accelerated by any delays in substantial completion caused by Tenant as set
forth in Paragraph (F) below.
(F) For purposes of this Article 45, the term "substantially
completed" shall mean when the only items to be completed are those which do not
materially interfere with the Tenant's use and occupancy of the Demised Premises
(including, without limitation, minor construction details, mechanical
adjustments and decorations). The commencement of the Term and Tenant's
obligation to pay Rent with respect to the Offer Space shall commence upon
Landlord's substantial completion of Landlord's Work in the Offer Space; but if
Landlord shall be delayed in such "substantial completion" as a result of (i)
Tenant's failure to furnish its Program of Space Requirements or to approve
Landlord's preliminary or working plans within the time schedules set forth
above; (ii) Tenant's request for materials, finishes or installations other than
Landlord's standard; (iii) Tenant's changes in its Program of Space Requirements
or Landlord's preliminary or working plans; or (iv) the performance or
completion of any work, labor or services by a party employed by Tenant; then
the commencement of the Term of this lease and the payment of Rent hereunder
with respect to the space in question shall be accelerated by the number of days
of such delay.
(G) This Right of First Offer is personal to Choicecare Long Island,
Inc. and is nontransferable by operation of law or otherwise except to an
assignee of Tenant approved by Landlord pursuant to this lease or other
transferee permitted pursuant to this lease.
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BUILDING IMPROVEMENTS
46. As soon as reasonably possible after execution of this lease,
Landlord will perform, at its expense and as set forth in Schedule "E", the
following work in the Building:
(A) Renovate the lobby;
(B) Renovate and redecorate the bathrooms; and
(C) If the Demised Premises are currently serviced by electric
heating units, convert the Demised Premises from electric heat to gas heat.
REASONABLE CONSENT
47. Except as otherwise expressly set forth herein, whenever Tenant
is required to obtain Landlord's consent hereunder, Landlord agrees that said
consent shall not be unreasonably withheld or delayed.
TENANT'S REMEDY
48. In addition to the other remedies specifically provided in this
lease or at law or equity to the extent not limited by this lease, and subject
to the delays permitted under Article 35(A) above, in the event Landlord shall
fail to perform in a timely manner any obligation of Landlord under this lease
and Landlord shall fail to cure such default within thirty (30) days after
receipt from Tenant of written notice of such default (or, if such default
cannot reasonably be cured within such thirty (30) day period, Landlord shall
have failed to commence the cure of such default within such thirty (30) day
period and thereafter diligently pursued such cure to completion), then Tenant
shall have the right to cure such default and shall have a claim for damages
against Landlord in the amount it shall have reasonably expended in connection
with such cure (without a right of setoff against Rent or additional rent).
ROOF ANTENNA
49. Provided Tenant shall comply with the requirements of Article 14
above, Tenant shall have the right, at its expense, to install up to two (2)
telecommunications antennas on the roof of the Building which shall in no event
extend higher than ten (10) feet above the level of the Building's roof. In
addition to the other requirements of Article 14, Tenant shall indemnify and
hold Landlord harmless from any claim, damage, liability or expense, including
reasonable attorney fees, caused by Tenant's installation of such antennas,
including, without limitation, any leaks caused thereby. Prior to the expiration
or termination of this lease, Tenant, shall, at Landlord's option, remove such
antennas from the Building and repair in a workmanlike manner any damage caused
to the roof or any other portion of the Building.
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IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and
sealed this lease as of the day and year first above written.
Witness for Landlord: RECKSON OPERATING PARTNERSHIP, L.P.
By: RECKSON ASSOCIATES REALTY CORP.
/s/ By: /s/
- - ------------------------------ -----------------------------------
Witness for Tenant: CHOICECARE LONG ISLAND, INC.
/s/ By: /s/
- - ------------------------------ -----------------------------------
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STATE OF NEW YORK )
) ss.:
COUNTY OF )
On this day of , 1995, before me personally came
to me known, who being by me duly sworn, did depose and say that he
resides at , that he is the of ____________________________, the
corporation described in and which executed the foregoing instrument as
"Tenant"; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation, and that he signed his name thereto by
like order.
---------------------------------------
Notary Public
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SCHEDULE "A"
LANDLORD'S CLEANING SERVICES AND MAINTENANCE OF PREMISES
(to be performed on all business days except those which are union holidays for
the employees performing cleaning services and maintenance in the Building and
grounds or those days in which the Building is closed)
I. CLEANING SERVICES - PUBLIC SPACES:
A. Floor of entrance lobby and public corridors will be vacuumed or swept
and washed nightly and waxed as necessary.
B. Entranceway glass and metal work will be washed and rubbed down daily.
C. Wall surfaces will be kept in polished condition.
D. Lighting fixtures will be cleaned and polished annually. Bulbs will be
replaced as needed.
E. Restrooms will be washed and disinfected once a day. The floors will
be mopped as many times as required. All brightwork and mirrors will be kept
in polished condition. Dispensers will be continuously checked and
receptacles continuously emptied.
F. Exterior surfaces and all windows of the building will be cleaned
quarterly.
II. CLEANING SERVICES - TENANT SPACES:
A. Floors will be swept and spot cleaned nightly. Carpets will be swept
daily with carpet sweeper and vacuumed weekly.
B. Office equipment, telephones, etc. will be dusted nightly.
C. Normal office waste in receptacles and ashtrays will be emptied nightly.
D. Interior surface of windows and sills will be washed and blinds dusted
quarterly.
E. There shall be regularly scheduled visits by a qualified exterminator.
III. EXTERIOR SERVICES:
A. Parking fields will be regularly swept, cleared of snow in excess of
two inches, and generally maintained so as to be well drained, properly
surfaced and striped.
B. All landscaping, gardening, exterior lighting and irrigation systems
will have regular care and servicing.
IV. EQUIPMENT SERVICE:
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A. All air-conditioning and heating equipment will be regularly serviced
and maintained.
B. Plumbing and electrical facilities, doors, hinges and locks will be
repaired as necessary.
C. All appurtenances, such as rails, stairs, etc. will be maintained in a
safe condition.
V. EXTRA CLEANING SERVICES
Tenant shall pay to Landlord, on demand, Landlord's charges for (a) cleaning
work in the Premises required because of (i) misuse or neglect on the part of
Tenant or its employees or visitors, (ii) use of portions of the Premises for
preparation, serving or consumption of food or beverages, or other special
purposes requiring greater or more difficult cleaning work than office areas;
(iii) unusual quantity of interior glass surfaces; (iv) non-building standard
materials or finishes installed by Tenant or at its request; (v) increases in
frequency or scope in any item set forth in Schedule B as shall have been
requested by Tenant; and (b) removal from the Premises and Building of (i) so
much of any refuse and rubbish of Tenant as shall exceed that normally
accumulated in the routine of ordinary business office activity and (ii) all of
the refuse and rubbish of any eating facility requiring special handling (wet
garbage).
VI. COMPLAINTS AS TO CLEANING SERVICE
Landlord represents that its contract with the cleaning service cleaning the
Building (the "service") is and shall continue to be terminable for cause, which
shall include, without limitation, the failure of the service to properly clean
the common areas and the rental spaces contained in the Building. Landlord
hereby agrees that if Tenant shall have complaints with respect to the quality
of the service's cleaning work and Landlord reasonably agrees that such
complaints are justified, Landlord shall notify the service of such complaints
and, if the service shall fail to cure such complaints within a reasonable
period of time, Landlord shall seek to terminate the service's contract for
cause. Notwithstanding the foregoing, Landlord shall not be required to commence
or defend a legal action against the service and, if the service shall commence
an action against Landlord, Landlord can settle such action on terms which
Landlord deems appropriate. In the event Landlord shall terminate its present
cleaning service contract, Landlord shall consult with Tenant as to a
satisfactory replacement service but Landlord shall have the right to select the
replacement service which Landlord deems appropriate.
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SCHEDULE "B"
1. Landlord shall have full and unrestricted access to all air-conditioning
and heating equipment, and to all other utility installations servicing
the Building and the Demised Premises. Landlord reserves the right
temporarily to interrupt, curtail, stop or suspend air-conditioning and
heating service, and all other utilities, or other services, because of
Landlord's inability to obtain, or difficulty or delay in obtaining, labor
or materials necessary therefor, or in order to comply with governmental
restrictions in connection therewith, or for any other cause beyond
Landlord's reasonable control. No diminution or abatement of Rent,
additional rent, or other compensation shall be granted to Tenant, nor
shall this Lease or any of the obligations of Tenant hereunder be affected
or reduced by reason of such interruptions, stoppages or curtailments, the
causes of which are hereinabove enumerated, nor shall the same give rise
to a claim in Tenant's favor that such failure constitutes actual or
constructive, total or partial, eviction from the Demised Premises, unless
such interruptions, stoppages or curtailments have been due to the
arbitrary, willful or negligent act, or failure to act, of Landlord or its
agents.
2. Telephone and service shall be the responsibility of Tenant. Tenant shall
make all arrangements for telephone service with the company supplying
said service, including the deposit requirement for the furnishing of
service. Landlord shall not be responsible for any delays occasioned by
failure of the telephone company to furnish service.
3. At Landlord's option, it shall furnish and install all lighting tubes,
bulbs and ballasts used in the Premises and Tenant shall pay Landlord's
reasonable charges therefor, on demand, as additional rent.
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SCHEDULE "C"
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or
encumbered by any Tenant or used for any purpose other than for ingress
to and egress from the Demised Premises and for delivery of merchandise
and equipment in a prompt and efficient manner using elevators and
passageways designated for such delivery by Landlord. There shall not
be used in any space, or in the public hall of the building, either by
any Tenant or by jobbers or others in the delivery or receipt of
merchandise, any hand trucks, except those equipped with rubber tires
and sideguards.
2. The water and wash closets and plumbing fixtures shall not be used for any
purposes other than those for which they were designed or constructed and
no sweepings, rubbish, rags, acids or other substances shall be deposited
therein, and the expense of any breakage, stoppage, or damage resulting
from the violation of this rule shall be borne by the Tenant who, or whose
clerks, agents, employees or visitors, shall have caused it.
3. No Tenant shall sweep or throw or permit to be swept or thrown from the
Premises any dirt or other substances into any of the corridors or
halls, elevators, or out of the doors or windows or stairways of the
building, and the Tenant shall not use, keep or permit to be used or
kept any coffee machine, vending machine, burner, microwave oven,
refrigerator or oven, food or noxious gas or substance in the Demised
Premises, or permit or suffer the Demised Premises to be occupied or
used in a manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors and/or vibrations,
or interfere in any way with other tenants or those having business
therein, nor shall any animals or birds be kept in or about the
Building. Smoking or carrying lighted cigars or cigarettes in the
elevators of the Building is prohibited.
4. No awnings or other projections shall be attached to the outside walls of
the Building without the prior written consent of the Landlord.
5. No sign, advertisement, notice or other lettering and/or window
treatment shall be exhibited, inscribed, painted or affixed by any
Tenant on any part of the outside of the Demised Premises or the
Building or on the inside of the Demised Premises if the same is
visible from the outside of the Demised Premises without the prior
written consent of the Landlord. In the event of the violation of the
foregoing by any Tenant, Landlord may remove same without any
liability, and may charge the expense incurred by such removal to
Tenant or Tenants violating this rule. Interior signs on doors and
directory tables shall be inscribed, painted or affixed for each Tenant
by Landlord at the expense of such Tenant, and shall be of a size,
color and style acceptable to Landlord.
6. No Tenant shall mark, paint, drill into, or in any way deface any part
of the Demised Premises or the Building of which they form a part. No
boring, cutting or stringing of wires shall be permitted, except with
the prior written consent of Landlord, and as Landlord may direct. No
tenant shall lay linoleum or other similar floor covering so that the
same shall come in direct contact with the floor of the Demised
Premises and, if
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linoleum or other similar floor covering is desired to be used, an
interlining of builder's deadening felt shall be first affixed to the
floor, by a paste or other water soluble material, the use of cement or
other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing
locks or in the mechanisms thereof. Each Tenant must, upon the termination
of his tenancy, restore to Landlord all keys of stores, offices and toilet
rooms, either furnished to, or otherwise procured by, such Tenant, and in
the event of the loss of any keys, so furnished, such Tenant shall pay to
Landlord the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of
any description shall be delivered to and removed from the Premises
only through the service entrances and corridors, and only during hours
and in a manner approved by Landlord. Landlord reserves the right to
inspect all freight to be brought into the Building and to exclude from
the Building all freight which violates any of these Rules and
Regulations or the lease of which these Rules and Regulations are a
part.
9. Canvassing, soliciting and peddling in the building is prohibited and
each Tenant shall cooperate to prevent the same.
10. Landlord reserves the right to exclude from the building between the hours
of 6:00 P.M. and 8:00 A.M. and at all hours on Sundays and legal holidays,
all persons who do not present a pass to the building signed by Landlord.
Landlord will furnish passes to persons for whom any Tenant requires same
in writing. Each Tenant shall be responsible for all persons for whom he
requires such a pass and shall be liable to Landlord for all acts of such
persons.
11. Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as an office building, and upon written
notice from Landlord, Tenant shall refrain from or discontinue such
advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
Premises, any inflammable, combustible, hazardous or explosive fluid,
material, chemical or substance, or cause or permit any odors of cooking
or other processes, or any unusual or other objectionable odors, to
permeate in or emanate from the Premises.
13. Tenant agrees to keep all entry doors closed at all times and to abide by
all rules and regulations issued by the Landlord with respect to such
services.
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SCHEDULE "D"
[Intentionally Omitted]
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<PAGE>
SCHEDULE "E"
SPECIFICATIONS FOR TENANT'S INITIAL CONSTRUCTION
OF THE PREMISES AND LANDLORD'S WORK IN THE OFFER SPACE
1. Initial office finishing schedule
Pursuant to the plans drawn by Landlord's architect based on Tenant's Program of
Space Requirements (as set forth in this lease), Landlord shall cause the
Contractor to perform Tenant's Initial Construction (as defined in this lease)
in the Demised Premises originally demised under this lease, at Tenant's
expense, pursuant to the following specifications. As to the Offer Space,
Landlord shall perform, pursuant to plans drawn by Landlord's architect based on
Tenant's Program of Space Requirements for such Offer Space, Landlord's Work
therein (as defined in this lease), at Landlord's expense, pursuant to these
same specifications.
Erect the necessary demising walls constructed of metal stud, 5/8" Fire X gypsum
board, with batts of 3" fiberglass for sound attenuation. Finish exterior walls
with 5/8" gypsum board on each side to underside of hung ceiling not to exceed 1
linear foot of partitioning for every 32 square feet of usable space, which is
proportionate to the Tenant's existing spaces.
Spackle and tape walls three coats to a smooth and true finish. Install in
executive offices, main conference room, reception area and extended conference
room, building standard vinyl wall covering. Paint all other walls two coats
flat latex and door trim in matching enamel.
Install in executive offices, main conference room, reception area and extended
conference room over padding J.P. Stevens durapoint #852 or equal. Balance of
space shall be carpeted with the same carpet installed (glued down). Building
standard vinyl reinforced tile shall be installed in place of carpet in all
storage, file, reception, pantry and lunch rooms (pantry and lunch rooms in a
pattern design). 4" vinyl cove base shall be installed. All colors shall be
selected from building standard selection.
Install a 2'-0" x 4'-0" Cortega Minaboard Armstrong acoustical tile ceiling with
a square-cut lay in 15/16" suspension system, or equal.
Provide interior 3'0" x 8'0" hollow core colony oak wood doors with hollow metal
bucks, numbered as shown on approved plan. All conference room doors shall have
a 2'-0" x 8'0" clear glass side lite.
In the original Demised Premises only, pantry area shall be provided with
plastic laminate wall and base cabinets, a sink, refrigerator and a dishwasher
in accordance with the approved plans. No pantry area will be provided in the
Offer Space.
2. Lavatory Area -- Public Spaces
a. Separate Male and Female toilet facilities.
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3. Landscaping
The Landlord will maintain the landscaping in a manner consistent with a class A
office building.
4. Additional Improvements Relating to 520 Broadhollow
At the 520 Broadhollow Road building, the lobby floor shall receive granite, and
toilet area walls and vanities shall receive Landlord's standard marble finish
or equal. There shall be installed Landlord's standard decorative lighting over
such vanities. Building standard vertical blinds shall be provided in all
exterior windows in the Demised Premises. Card-key access entry locks shall be
provided at all four (4) entrances to the Demised Premises. The landscaping at
the front entrance shall be upgraded, consistent with a Class A office building.
5. Electrical Specifications
All electrical work shall be installed in accordance with the National
Electrical Code, and the local building code. A "Certificate of Compliance"
shall be obtained from the New York Board of Fire Underwriters at the completion
of the project.
Lighting throughout the entire finished office area shall be obtained by the use
of recessed light 2' by 4' fluorescent fixtures with parabolic lenses or equal,
not to exceed one (1) fixture for each eighty (80) square feet of usable space,
which will deliver a lighting level of 65 F.C. Local wall switches shall be
provided for control of lighting. Toilet, corridor, lobby and other similar
areas shall be lit to 50 foot candles. In the original Demised Premises only and
not in the Offer Space, up to eight (8) incandescent down lights in the lobby,
four (4) in the Senior Vice President office, four (4) in the conference center
adjacent to the main lobby, eight (8) in the main conference room, and (1) in
each training room shall be installed in accordance with approved plans. Exit
light lighting for all paths of egress shall be provided in accordance with
local building department regulations, if required.
All branch circuit wiring shall be above hung ceiling or within dry-wall
construction in finished areas and shall be type BX. All exposed conduits in
non-finished areas shall be thin-walled "EMT".
Wall-mounted duplex convenience outlets shall be provided on the basis of one
duplex outlet for each 120 square feet of rentable area, which is proportionate
to the Tenant's existing space. This formula shall be used to establish the
quantity of outlets. However, the exact location of each outlet shall be
coordinated with the Tenant's furniture layout. All duplex outlets are to be
considered as normal convenience outlets and shall be wired up with an average
of 5 to 8 outlets on one 20 ampere, 120 volt circuit. Panel capacity shall be
adequate to handle all Tenant lighting and equipment provided load does not
exceed 2 watts per square foot of usable area.
No credits given for installation less than standard installation.
6. Heating, Ventilation and Air Conditioning Specifications General
The intent of this specification is to define a design concept for the subject
area.
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Design Criteria
Central air conditioning with modular systems with individual zone control shall
be capable of the following performance when the criteria noted are not
exceeded:
A) Between September 1 and June 1, the "heating system" shall be operative and
maintain a minimum of 70 degrees FDB when the outdoor temperature is 0 degrees
FDB and the prevailing wind velocity does not exceed 15 mph.
B) Between April 15 and October 14, the "cooling system" shall be operative and
maintain a maximum of 78 degrees FDB and 55% relative humidity when the outdoor
temperature is 95 degrees FDB and 75 degrees FDB with the prevailing wind
velocity not exceeding 13 mph. The Tenant's computer room shall receive a four
(4) ton supplemental cooling unit for year round operation. Landlord agrees to
equally share with Tenant the cost to install a one (1) ton supplemental cooling
unit in each of two (2) training rooms (in the original Demised Premises only)
if and only if the base Building cooling system is not capable of maintaining
the temperature range set forth herein.
C) During the overlapping seasons (April 15 - June 1 and September 1 - October
15) both systems shall be operative (cooling and heating).
D) Zoning temperature and balancing controls shall be operated solely by the
Landlord to assure the conditions above.
E) Maintenance of the foregoing temperature conditions is conditioned upon the
following criteria, which shall not be exceeded by the Tenant in any room, or
area, within the demised premises:
a) Population Density...............................1 person per 150
square feet
b) Lighting and Electrical Load Density.............4 watts per
square foot
c) Exhaust and Ventilation Load.....................5 cfm per person
6. Ventilation
Bathrooms and similar areas to be ventilated per code using rooftop fans.
7. System Design
Exterior Perimeter Zones
Heating/cooling of exterior offices and areas provided by variable air volume
terminals with integrated thermostats to meet Tenant's requirements for
individual control.
Interior Zones
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Heating/cooling provided by variable air volume system terminals with integrated
thermostats for areas of 2,000 square feet.
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EXHIBIT 1
RENTAL PLAN
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EXHIBIT 2
PRELIMINARY PLANS
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FIRST AMENDMENT OF LEASE
------------------------
AGREEMENT made as of the 30th day of September, 1999 by and between
RECKSON OPERATING PARTNERSHIP, L.P., a Delaware limited partnership having an
office at 225 Broadhollow Road, CS 5341, Melville, New York 11747 (hereinafter
called "Landlord"); VYTRA HEALTH PLANS LONG ISLAND, INC., a corporation having
an office at 395 North Service Road, Melville, New York 11747, formerly known as
Choice Care Long Island, Inc. (hereinafter called "Tenant" or "Assignor"); and
AMERICAN HOME MORTGAGE CORP., a corporation having an office at 12 East 49th
Street, New York, New York 10017 (hereinafter called "Assignee").
RECITALS
WHEREAS, Landlord and Tenant entered into a lease agreement dated
October 20, 1995 as clarified by letter agreement between Landlord and Tenant
dated October 20, 1995 (the lease agreement and letter agreement collectively
referred to as the "Lease") for the lease of 43,200 square feet in the building
located at 520 Broadhollow Road, Melville, New York (the "Building"); and
WHEREAS, Tenant intends to assign to Assignee, effective from and
after October 1, 1999 (the "Effective Date"), all of Tenant's right, title and
interest as tenant in to and under the Lease pursuant to that certain Assignment
and Assumption of Lease Agreement between Assignor and Assignee dated September
30, 1999 ("Assignment"); and
WHEREAS, Assignee shall assume all of Tenant's right, title and
interest as tenant in to and under the Lease from and after the Effective Date
pursuant to the Assignment; and
WHEREAS, Landlord shall grant its consent to the assignment of the
Lease, as modified by this First Amendment of Lease, subject to and in
accordance with that certain consent to assignment letter executed
simultaneously herewith by and among Landlord, Assignor and Assignee.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 The recitals are specifically incorporated into the body of
this Agreement and shall be binding upon the parties hereto.
<PAGE>
1.2 Unless expressly set forth to the contrary and except as
modified by this Agreement, all defined terms shall have the meanings ascribed
to them in the Lease.
ARTICLE II
LEASE MODIFICATIONS
-------------------
2.1 As of the Effective Date, the Lease is hereby modified and
amended as follows:
2.1.1 Tenant's Initial Construction. Article 5 of the Lease is hereby
deleted in its entirety.
2.1.2 Services. The third and fourth sentences of Article 6(B) of the
Lease are hereby deleted and the following is inserted in their place:
"Landlord has converted the Demised Premises to gas heat and,
prior to the Effective Date, shall install, at Landlord's
expense, a separate gas meter to measure the consumption of
gas in the Demised Premises. Tenant shall make arrangements to
secure gas directly from the utility servicing the Building
and shall pay all charges for such gas directly to such
utility in a timely manner."
2.1.3 Signs. (a) The third through seventh sentences of Article 18
are deleted and the following is inserted in their place: "Notwithstanding the
foregoing, to the extent permitted by applicable laws and regulations, Landlord,
at Landlord's sole expense, shall provide Tenant with one (1) monument sign on
the side of the Building which faces Route 110. The dimensions and design of
such sign have been approved by Landlord in the form annexed hereto as Exhibit
1, subject to applicable laws and regulations. Landlord may grant other tenants
the right to monument signage provided that such signage does not obstruct view
of Tenant's monument signage. Landlord shall not permit any other monument
signage to be affixed to Tenant's proposed monument signage. Provided that
Tenant physically occupies the entire Demised Premises, Landlord agrees that it
shall not grant monument signage to any other tenant in the Building that is
larger than Tenant's proposed monument sign. If the number of such monument
signs is limited by applicable laws and regulations, Tenant shall be entitled to
the first monument sign excluding any Building monument sign used by Landlord.
In connection with the monument sign to be provided to Tenant, in the event it
becomes necessary to obtain a variance to erect and maintain the monument sign,
Tenant shall be responsible for and shall pay for such variance application and
proceeding but Landlord agrees to cooperate with Tenant's variance application
provided Tenant shall afford Landlord a reasonable period to review and approve
Tenant's variance application and other submissions relating thereto (which
approval shall not be unreasonably withheld or delayed).
2.1.4 Right to Sublet or Assign. The last sentence of Article 20(C)
of the Lease is hereby deleted and the following is inserted in its place:
"Notwithstanding the foregoing, the public offering of shares of stock of
Assignee shall not be deemed to be an assignment of this lease which requires
Landlord's consent."
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<PAGE>
2.1.5 Notices. In Article 34 of the Lease, six (6) lines from the top
of the provision, delete the following: "regular,".
2.1.6 Renewal Option. Article 44 of the Lease is hereby deleted in
its entirety and the following is inserted in its place:
"Tenant shall have the right, to be exercised as hereinafter provided,
to extend the term of this lease for one period of five (5) years (hereinafter
referred to as the "Renewal Term") upon the following terms and conditions:
(A) That at the time of the exercise of such right and at the
commencement of the Renewal Term, Tenant shall not be in default in the
performance of any of the terms, covenants or conditions which Tenant is
required to perform under this lease beyond any applicable notice and cure
period provided herein for the cure hereof.
(B) That Tenant shall notify Landlord in writing of Tenant's election
to exercise its option with respect to the Renewal Term at least one (1) year
prior to the expiration of the term of this lease.
(C) That the Renewal Term shall be upon the same terms, covenants and
conditions as in this lease provided, except that (a) there shall be no further
option to extend this lease beyond the Renewal Term referred to above; (b) the
Premises shall be delivered at the beginning of the Renewal Term in its then "as
is" condition; and (c) the Rent to be paid by Tenant during the Renewal Term
shall be as follows:
During the first year of the Renewal Term, the Rent shall be ninety
(90%) percent of the then fair market annual minimum rent being received by
Landlord for comparable size space in the Building, but in no event less than
the Rent payable under this lease for the Lease Year immediately preceding the
Renewal Term. The Rent applicable to the first year of the Renewal Term shall be
payable in equal monthly installments.
During each of the second through fifth years of the Renewal Term, the
Rent shall be increased by three (3%) percent per year over the Rent payable for
the prior year. Said sums shall be payable in equal monthly installments.
"Fair market annual minimum rent" shall mean the rate Landlord
generally receives or that is received for comparable space in the Building. In
determining fair market annual minimum rent, no adjustment shall be made in
consideration of and Tenant shall not be entitled to a credit for Tenant
improvements, brokerage commissions, rent concessions and other concessions
which Landlord may from time to time offer to other tenants. Landlord shall
determine the fair market annual minimum rent on the basis of the foregoing
criteria. In the event Tenant disputes Landlord's determination of fair market
annual minimum rent, Tenant, by written demand, may commence arbitration
strictly in accordance with the terms and conditions of this Subparagraph. The
sole issue to be determined by such arbitration shall be the fair market annual
minimum rent to be charged in accordance with this Subparagraph. Such written
demand shall contain the name and address of the arbitrator appointed by Tenant.
Within ten (10) days after its receipt of the written demand, Landlord will give
Tenant written notice of the name and address of its arbitrator. Within ten (10)
days after the date of the appointment of the second
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<PAGE>
arbitrator, the two (2) arbitrators will meet. If the two (2) arbitrators are
unable to agree on the fair market annual minimum rent as provided herein within
ten (10) days after their first meeting, they will select a third arbitrator.
The third arbitrator will be designated as chairman and will immediately give
Landlord and Tenant written notice of its appointment. The three (3) arbitrators
will meet within ten (10) days after the appointment of the third arbitrator. If
they are unable to agree on the fair market annual minimum rent within ten (10)
days after their first meeting, the third arbitrator will select a time, date
and place for a hearing and will give Landlord and Tenant thirty (30) days prior
written notice of it. The date for the hearing will not be more than sixty (60)
days after the date of appointment of the third arbitrator. The arbitrators must
be licensed real estate appraisers with at least five (5) years experience in
the Nassau/Suffolk real estate market. No arbitrator may be an active real
estate broker. The arbitration will be governed by the laws of the State of New
York and, when not in conflict with such law, by the general procedures in the
commercial arbitration rules of the American Arbitration Association. The
arbitrators will not have the power to add to, modify, detract from or alter in
any way the provisions of this lease or any amendments or supplements to this
lease. The arbitrators will not have any power to decide or consider anything
other than the specific issue of the fair market annual minimum rent in
accordance with the terms of this lease. The written decision of at least two
(2) arbitrators will be conclusive and binding upon Landlord and Tenant. No
arbitrator is authorized to make an award for damages of any kind, including,
without limitation, an award for punitive, exemplary, consequential or
incidental damages. Landlord and Tenant will each pay for the services of its
appointees, attorneys and witnesses plus one-half of the fees of the third
arbitrator and of all other proper costs relating to the arbitration. The
decision of the arbitrators will be final and non-appealable and may be enforced
according to the laws of the State of New York. Notwithstanding anything to the
contrary contained herein, in the event Tenant disputes Landlord's determination
of the fair market annual minimum rent, Tenant shall nevertheless continue to
pay Rent at the same rate then being paid under this lease. In the event the
Rent as determined hereunder is at variance with the Rent being paid by Tenant,
Tenant shall either pay the difference in a lump sum or receive a credit as the
case may be.
This Renewal Option is personal to American Home Mortgage Corp., Inc.
and is non-transferable by operation of law or otherwise, except to an assignee
of Tenant approved by Landlord pursuant to this lease or other transferee
permitted pursuant to this lease."
2.1.7 Right of First Offer. Article 45 of the Lease is hereby deleted
in its entirety and the following is inserted in its place:
"(a) Whenever space in the Building that becomes available
during the term of this Lease (the "Offer Space"), and so long as Tenant is not
in default under this Lease beyond applicable notice and cure periods provided
herein for the cure thereof, Landlord shall notify Tenant ("Landlord's Notice")
of the market rent and market rental increases ("Market Rent") upon which it
would be willing to lease the Offer Space. This right of first offer shall not
apply during the last year of the initial term of this Lease or during the last
year of any Renewal Term unless Tenant shall have previously exercised the next
available renewal option. If, within thirty (30) days after receipt of
Landlord's Notice, Tenant notifies Landlord in writing ("Tenant's Notice") of
its intention to exercise Tenant's right to lease the entire Offer Space upon
the terms contained in Landlord's Notice (which Tenant's Notice shall be
effective only if sent by Tenant
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<PAGE>
to Landlord, via certified mail, return receipt requested, to the attention of
Landlord's Chief Financial Officer, at Landlord's address set forth in this
Lease), Landlord and Tenant shall execute a lease or lease modification
agreement (the "Offer Agreement"), at Landlord's option, for the Offer Space
within twenty (20) days after Landlord's receipt of Tenant's Notice. Such Offer
Agreement shall be upon all the same terms as this Lease, except (i) for the
Market Rent terms, (ii) for other matters dependent upon the size of the Offer
Space, such as Tenant's Proportionate Share, (iii) that Tenant is accepting the
Offer Space in its "as is" condition and Landlord shall not be required to
perform any work in or to the Offer Space in order to prepare such space for
Tenant's occupancy (except as otherwise set forth in Landlord's Notice), (iv)
the number of parking spaces and directory listings shall be increased
proportionately to reflect the addition of the Offer Space, and (v) for such
other terms and conditions as may be mutually agreed to by Landlord and Tenant.
The term of the Offer Agreement shall end on the Expiration Date. If Tenant does
not deliver such Tenant's Notice within such thirty (30) day period, or if
Tenant fails to enter into the Offer Agreement for the Offer Space within such
twenty (20) day period, then this Right of First Offer will lapse (only with
respect to the particular Offer Space that is the subject of that particular
Landlord's Notice) and be of no further force and effect and Landlord shall have
the right to lease the particular Offer Space that was the subject of Landlord's
Notice to a third party on the same or any other terms and conditions whether or
not such terms and conditions are more or less favorable than those offered to
Tenant. Time shall be of the essence with respect to all of Tenant's obligations
under this Article.
(b) This right of first offer is personal to American Home Mortgage
Corp., Inc. is non-transferable by operation of law or otherwise except to an
assignee of Tenant approved by Landlord pursuant to this lease or other
transferee permitted pursuant to this lease, and is subject to then existing
rights, if any, granted to other tenants at the Building."
2.1.8 Building Improvements. Article 46 of the Lease is hereby
deleted in its entirety and the following is inserted in its place:
"Intentionally Omitted."
2.1.9 Schedule E. Schedule E of the Lease is hereby deleted in its
entirety and the following is inserted in its place: "Intentionally Omitted."
ARTICLE III
BROKER
------
3.1 Tenant and Assignee represent that this First Amendment of Lease
was brought about by BDL Affiliates, Inc. and Real Estate Strategies, Ltd. as
brokers. Tenant agrees to pay the commissions due and payable to BDL Affiliates,
Inc. and Real Estate Strategies, Ltd. pursuant to one or more separate
agreements. Tenant and Assignee agree that if any claim is made for commissions
by any broker through or on account of any acts of Tenant or Assignee, Tenant
and Assignee will each hold Landlord harmless from any and all liabilities and
expenses in connection with the claims arising out of the acts of Tenant or
Assignee, respectively, including Landlord's reasonable attorney's fees. Tenant,
Assignee and Landlord understand that Real Estate Strategies, Ltd. shall waive
any claim for commissions that Real Estate Strategies Ltd. may have in
connection with a renewal of the Lease or the exercise of the right of first
offer pursuant to the Lease. Tenant will hold Landlord and Assignee harmless
from any and all
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<PAGE>
liability and expenses in connection with any claim for commissions by Real
Estate Strategies, Ltd. in connection with a renewal of the Lease or exercise of
the right of first offer pursuant to the Lease through or on account of any acts
of Tenant or Assignee, respectively, including Landlord's and Assignee's
respective reasonable attorney's fees. Assignee agrees that if any claim is made
for commissions by any broker other than BDL Affiliates, Inc. in connection with
a renewal of the Lease or the exercise of the right of first offer pursuant to
the Lease, through or on account of any acts of Assignee, Assignee will hold
Landlord harmless from any and all liability and expenses in connection
therewith, including Landlord's reasonable attorney's fees. Landlord shall pay a
commission to BDL Affiliates, Inc. in the event that Assignee exercises a
renewal of the Lease pursuant to and in accordance with the terms of a separate
agreement.
ARTICLE IV
RATIFICATION
------------
4.1 Tenant represents and warrants that the Lease is presently in
full force and effect, that no event of default has occurred on the part of
Landlord and that Tenant has no defense or right of offset in connection with
Landlord's performance under the Lease to this date.
4.2 The parties hereby ratify and confirm all of the terms,
covenants and conditions of the Lease except to the extent that those terms,
covenants and conditions are amended, modified or varied by this Agreement. If
there is a conflict between the provisions of the Lease and the provisions of
this Agreement, the provisions of this Agreement shall control.
IN WITNESS WHEREOF, the parties have executed this First Amendment of
Lease as of the day and year first above written.
RECKSON OPERATING PARTNERSHIP, L.P.
By: RECKSON ASSOCIATES REALTY CORP.,
its general partner
By: /s/
-----------------------------------
VYTRA HEALTH PLANS LONG ISLAND, INC.
By: /s/
-----------------------------------
AMERICAN HOME MORTGAGE CORP.
By: /s/ Michael Strauss
-----------------------------------
-6-
SUBSIDIARIES OF AMERICAN HOME MORTGAGE HOLDINGS, INC.
COMPANY STATE OF INCORPORATION
- - ------- ----------------------
American Home Mortgage Corp. Delaware
Marina Mortgage Company, Inc. California
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Annual Report pursuant
to Section 13 or 15(d) of the Securities and Exchange Act of 1934 of American
Home Mortgage Holdings, Inc. on Form 10-K of our report dated March 30, 2000,
appearing in the Annual Report on Form 10-K of American Home Mortgage Holdings,
Inc. for the year ended December 31, 1999.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
March 30, 2000
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<FISCAL-YEAR-END> DEC-31-1999
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