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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1994 or
[ ] 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 0-8628
FOUR CORNERS FINANCIAL CORPORATION
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(Exact Name of Registrant as specified in its charter)
Delaware 22-2044086
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
370 East Avenue, Rochester, New York 14604
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 454-2263
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.04 par value
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES NO X
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Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and to the best of registrant's
knowledge, will not be contained 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. [ ]
As of December 31, 1994, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $32,870.
As of December 31, 1994, the number of shares outstanding of the registrant's
common stock was 3,338,802.
Documents Incorporated By Reference
None.
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TABLE OF CONTENTS
PART I PAGE
Item 1: Business 4
Item 2: Properties 15
Item 3: Legal Proceedings 15
Item 4: Submission of Matters to a Vote of Security Holders 15
Executive Officers of Registrant 15
PART II
Item 5: Market for Registrant's Common Equity and Related 17
Security Holder Matters
Item 6: Selected Financial Data 18
Item 7: Management's Discussion and Analysis of Financial 19
Condition and Results of Operations
Item 8: Financial Statements and Supplementary Data 25
Item 9: Changes in and Disagreements with Accountants on 25
Accounting and Financial Disclosure
Part III
Item 10: Directors and Executive Officers of Registrant 26
Item 11: Executive Compensation 27
Item 12: Security Ownership of Certain Beneficial Owners 28
and Management
Item 13: Certain Relationships and Related Transactions 29
PART IV
Item 14: Exhibits, Financial Statement Schedules, and 31
Reports on Form 8-K
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PART I
Item 1. Business
Four Corners Financial Corporation is a Delaware corporation formed under
the name American Management Educational Corporation ("Educational Corp.") in
1974. In 1981 Educational Corp. changed its name to American Management Energy
Corporation ("AMEC") and commenced a limited oil and gas operation.
Subsequently, it discontinued the educational financial management consulting
and security investigation business which it had been conducting as well as the
oil and gas operation. Thus, AMEC was inactive and without employees from 1983
until May 12, 1987.
On that date, AMEC sold to a former principal stockholder all of its
assets, consisting of certain oil and gas leases valued at approximately $40,000
in consideration of his assumption of all of the liabilities of AMEC and his
agreement to indemnify AMEC against specified claims.
On May 14, 1987, control of AMEC was transferred to Frank B. Iacovangelo
and Bernard J. Iacovangelo through the acquisition of shares from certain
stockholders.
On April 12, 1988, AMEC acquired all of the issued and outstanding stock of
Four Corners Abstract Corporation ("Abstract") which was then owned by Frank B.
Iacovangelo and Bernard J. Iacovangelo and their affiliates, in exchange for
9,293,100 shares of AMEC. Abstract was formed in 1980 and has conducted
operations since that date. At the time of the acquisition of Abstract, AMEC
changed its name to Four Corners Financial Corporation ("FCFC"). Messrs.
Iacovangelo are also officers, directors and principal stockholders of FCFC.
Since that time, the main source of FCFC's business has been conducted through
Abstract which remains a wholly owned subsidiary of FCFC.
On October 17, 1988, FCFC acquired a controlling interest in Mid-State
Abstract Corporation ("Mid-State") for $95,000. In January 1989, FCFC made an
exchange offer to acquire the remaining shares of Mid-State, resulting in FCFC
owning approximately 84% of the outstanding voting shares being held by parties
not affiliated with FCFC. In February, 1991, Mid-State merged into Abstract and
all outstanding shares of Mid-State were changed and converted into shares of
FCFC Common Stock.
In January, 1989, FCFC acquired all of the outstanding shares of Livingston
Abstract Corporation ("Livingston") in Geneseo, New York for a purchase price of
$8,000, the assumption and agreement to pay the balance of three notes
aggregating $17,985, and the issuance (at a later date) of 20,000 shares of the
Company's Common Stock and commenced operations at the location at that time.
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In January, 1990, FCFC acquired all of the outstanding shares of Picciano
Abstract Company, Inc. ("Picciano") of Binghamton, New York for a purchase price
of $15,000 and the issuance of 20,000 shares of the Company's Common Stock and
commenced operations at that location at that time.
On July 1, 1990, Livingston and Picciano merged into Abstract.
On December 23, 1991, the Company acquired all of the outstanding shares of
Proper Appraisal Specialists, Inc. ("Proper Appraisal") of Buffalo, New York for
a purchase price of $10,000 and the issuance of 90,000 shares of the Company's
Common Stock and commenced operations at that location at that time.
In May, 1992, the Company opened a branch office in Goshen, New York
(Orange County) to service the Hudson Valley area.
In February, 1993, the Company closed its Geneseo Office and consolidated
those operations with its Rochester location. The Company also consolidated its
Cheektowaga Appraisal office with its branch in downtown Buffalo, New York in
December, 1993.
In September, 1994, the Company relocated its Goshen office to Newburgh,
New York.
Four Corners Financial Corporation and its subsidiaries, Four Corners
Abstract Corporation ("Abstract") and Proper Appraisal, provide services and
products that are utilized in substantially all commercial and residential real
estate transactions. As used herein, "Company" includes Four Corners Financial
Corporation, Abstract and Proper Appraisal unless the context otherwise
requires.
These services and products are offered through offices in Buffalo,
Rochester, Newburgh, Syracuse, Utica, Lockport, Binghamton and Albany, all
located in central and western New York and through subcontractors in other
areas of New York State.
Services and Products
The Company's services and products include real estate title and other
public record searching, the preparation of abstracts of title and the issuance
of title insurance as agent for certain national underwriting companies. Other
services and products include real estate appraisals, abstract storage and
escrow services. All of the Company's services and products may be required in
connection with the mortgaging, sale or purchase of commercial or residential
real property. Substantially all of the Company's revenues were derived from its
abstracting and title insurance services. Although all of the Company's services
and products can be obtained from other vendors at prices comparable to those of
the Company, the Company believes that dealing with a single source for all of
these products is convenient for
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customers and helps to reduce the time required for the performance of these
services for a particular real estate transaction.
Response time is important in many real estate transactions and the ability
of the Company to provide its services and products in a timely manner is
significant in the attraction and retention of customers.
Abstracts
The purchase, sale, leasing and financing of a parcel of real estate in New
York State outside of New York City, usually require the preparation of an
abstract of title. The abstract is a summary of each transaction affecting the
parcel which is reflected in the records of the Clerk of the County where the
subject property is located. The abstract is examined by attorneys and others to
determine prior interests in, or encumbrances on, the property which have to be
disposed of in order to have "clear" title. The information used to create or
redate an abstract is obtained by title searchers, that is, persons who search
various official records for interests which may affect the ownership interest
in, or title to, real property. Such interests may include real property taxes,
corporate franchise taxes, bankruptcies, mechanics liens, income tax or sales
tax liens, litigation liens, judgment liens, security interests in fixtures and
mortgages as well as interests of prior owners (including deceased owners) which
have not been adequately transferred. Title searchers summarize their findings
and deliver them to word processors who produce the abstract of title.
An abstract usually exists for most properties. Thus, the Company is most
often requested merely to "redate" it. This involves examining the records only
from the date of the last transaction summarized in the abstract. However, where
no abstract is available or when newly subdivided parcels are involved, a new
abstract is created starting with a warranty deed which meets the local
standards for title certification (e.g. at least 60 years old for Rochester, New
York property).
The information contained in abstracts which the Company creates or redates
is indexed and retained by the Company, becoming part of its "title plant".
These "back titles" are valuable assets which facilitate the preparation and
redating of future abstracts. The title plant also aids the expeditious
preparation of title insurance reports and policies.
The Company also offers an abstract storage service. When mortgages are
placed on real property, the bank or mortgage company usually retains the
abstract of title. Thus, a large volume mortgagee would require substantial
storage space as well as numerous personnel to index, store and retrieve these
abstracts. Through its abstract storage service, the Company picks up these
abstracts and stores them for the lender, redelivering them when requested. At
the present time, the Company stores approximately 20,000 abstracts. The Company
does not
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charge for this service but believes that it helps to generate abstract
"redating" revenues, since a person needing a redate of an abstract stored by
the Company can, by ordering that redate from the Company, avoid having to
deliver the abstract elsewhere for the redate. The Company estimates that
revenues thus generated amounted to approximately $35,000 in 1994, $82,000 in
1993 and $88,000 in 1992.
Abstract and title companies are often asked to act as an escrow closing
agent in a real estate transaction. This practice is allowable under New York
State law. In this capacity, usually as a function of providing title insurance
on real estate, the Company is asked to hold funds in escrow bank accounts until
certain requirements are met or title defects are cured by the parties involved
in the transaction. For this service the Company charges a fee based upon the
length of time which the funds are to be held and/or the number of transactions
(deposits, checks) to be handled. Also, the Company acts as a conduit for the
sale and purchase of mortgages between financial institutions insuring that
mortgage documents are received and funds for the purchase of mortgages are
wired from buyer to seller in the correct amount and in a specified time frame.
The Company also acts as settlement agent on Home Equity loans and refinanced
mortgage loans for its Title Insurance underwriters and certain banks/lenders.
During 1994, escrow closing services generated approximately $44,000 as compared
to $40,000 and $35,000 in 1993 and 1992, respectively.
Other public record searches provided by the Company include guaranteed tax
searches, surrogate court searches, UCC financing searches, franchise tax
searches, judgment searches, new name searches, back title searches, bankruptcy
searches and foreclosure searches. While these searches are most often needed by
attorneys in connection with real estate transactions, they may be useful to
other customers for other purposes, for example, to lenders extending credit.
Title Insurance
Title insurance policies are statements of the terms and conditions upon
which the title insurance underwriter will insure title to real estate, showing
ownership, outstanding liens, encumbrances and other matters of public record.
The beneficiaries of title insurance policies are generally buyers of real
property and secured lenders, and the policy amount is usually based upon either
the purchase price of the property or the amount of the loan secured by the
property. The title policy protects the insured against title defects, liens and
encumbrances not specifically excepted from its coverage. Most lenders require
title insurance as a condition to making loans secured by real estate.
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Title insurance is substantially different from other types of insurance.
Fire, auto, health and life insurance protect against losses due to future
events that cannot generally be eliminated. Title insurers, however, seek to
eliminate future losses by accurately performing record searches and
examinations of title to real property, and to the extent possible, requiring
that obvious defects be "cured" as a condition of and prior to issuance of the
policy.
Among the most commonly issued title insurance policies are standard or
extended coverage policies for owners and lenders. Owners' policies insure title
to real estate against defects in or liens or encumbrances against title,
unmarketability of title and lack of access to the subject property. Lenders'
policies insure against the invalidity of the lien of the insured mortgage,
insure the priority of the lien or encumbrance as stated in the title policy,
and insure against the invalidity of any assignment of the insured mortgage
provided the assignment is shown in the policy. The terms of coverage have
generally become standardized in accordance with forms approved by industry
groups such as the American Land Title Association.
Since title insurance premiums are based upon mortgage amounts and tend to
be higher on a per unit basis than amounts charged for abstract services, labor
costs as a percentage of revenue in title insurance are lower than in abstract
services. As a result, gross margin levels are higher. Therefore, one of the
Company's main goals has been to increase its revenues from title insurance.
Although the Company's total revenues for 1994 decreased by 18% mainly due
to a significant downturn in real estate activity caused by sharply increasing
interest rates, revenues from title insurance increased to $1,966,849. This
represented 41% of the Company's revenue mix as compared to $1,858,264 in 1993
or 32% of total revenue. Much of this increased demand for title insurance was
experienced during the first half of 1994 when mortgage interest rates were
lowest and consumers continued to refinance mortgages which require title
insurance.
The title insurance premium is based upon the policy amount and the type of
coverage provided by the policy. Title insurance rates, including those of the
Company's competitors, are regulated by the State of New York Insurance
Department. The premium for title insurance is due and must be paid in full
prior to the issuance of the policy which is generally on the closing date of
the real estate transaction.
The use of title insurance in connection with real estate transactions,
particularly residential purchases and financing, in the Company's marketing
area has been significantly increased since the early 1980's by the expanded
role of the national secondary residential mortgage market, and the growth of
nationwide lending, both residential and commercial, by banks and insurance
companies. As a result, almost
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all residential and commercial real estate transfers and/or financings, except
most home equity transactions, involve the issuance of a title insurance policy.
This same period of time has seen, until recently, a general inflation of real
estate prices resulting in increasing levels of insurance coverage and related
premiums. However, this expanding market has also seen a significant increase in
the number of companies providing such insurance in the Company's marketing
area, both directly and through agents. See "Competition".
The Company is not a title insurance underwriter. In selling title
insurance, the Company acts as agent for several national title insurance
underwriting companies. The Company has agency relationships with the following
title insurance underwriters: Old Republic National Title Insurance Company,
Albany, New York; Stewart Title Insurance Company, New York City; and Lawyers
Title Insurance Corporation, Richmond, Virginia. Generally, such relationships
are cancelable by either party upon short notice. The Company believes that in
the event of the cancellation of its existing agency relationships, it would
have no difficulty in securing similar relationships with other title insurance
underwriters.
The choice of an underwriter by the Company is based upon such
considerations as the amount of the premium "split" offered, which varies among
underwriters, the terms under which the title underwriter will require
indemnification for policy losses attributable to errors made by the Company in
searching and examining the title, the scope of services offered to the agent by
the title underwriter, and the fact that certain underwriters will not insure
titles in certain geographical areas within New York State. Typically, the title
insurance premium "split" is approximately 80% to the Company and 20% to the
underwriter.
The title insurance underwriters for which the Company acts as agent are
licensed by the State of New York. Currently, there is no requirement under New
York law that requires an agent such as the Company to hold a license.
Appraisals
In 1989, the Company added to its services the furnishing of residential
real estate appraisals. With the purchase of Proper Appraisal Specialists, Inc.
in 1991 the Company added the appraisal of commercial properties to its product
line. Appraisals are performed under the guidance of Senior Residential
Appraisers, who are certified and/or licensed by New York State and are
employees of the Company. The Company also procures the services of licensed
appraisers on a subcontractor basis in areas where it does not have a direct
branch operation. Appraisal services provide an estimated value for a particular
property. Appraisals are required in a variety of situations including transfer
of ownership, financing, tax matters, relocation services, insurance purposes,
estimation of liquidation
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value and divorce. The Company's customers for appraisals have included lending
institutions, banks, attorneys, municipalities, relocation companies, government
agencies, corporations and private individuals. The Company's errors and
omissions insurance coverage also covers appraisal services. During 1994, the
Company derived approximately 10% of its gross revenues from the furnishing of
real estate appraisals versus 12% in 1993 and 14% in 1992.
New Services and Products
At the present time, the Company has discontinued the evaluation of new
products in the area of environmental services as previously reported.
As a result of the Company's continuing desire to expand its service levels
to new and/or existing customers and to decrease turnaround times, during 1993
the Company introduced an on-line customer based automated order entry system
called "EXPERDITE". The system can be customized by the user and is designed to
aid in the rapid, error-free entry and tracking of title search and title
insurance orders placed with the Company.
Marketing
Services and products provided by the Company are utilized in substantially
all commercial and residential real estate transactions. Therefore, its
marketing efforts are directed primarily toward the persons who place the orders
for such services and products in the typical real estate transaction or other
real estate related activity - attorneys, mortgage brokers, lenders, builders,
and other persons and entities engaged in the real estate business generally.
Marketing activities are conducted by a direct sales force of three
employees under the direction of the Company's Director of Sales and Marketing.
Marketing efforts include direct solicitation and advertising in publications
targeted to serve mortgage lenders and attorneys, attendance at trade shows and
conventions, and news releases.
The Company believes that its ability to offer many of the services and
products necessary in a real estate transaction is an important factor in the
attraction and retention of business, since customers can therefore order those
items from a single source. In its marketing activities, the Company emphasizes
this factor and the equally important factors of competitive price, accuracy,
response time, excellent service and reliability, all of which the Company
believes it provides to its customers.
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Significant Customers
During 1994, there were no customers accounting for more than 10% of the
Company's gross revenues.
Management Information Systems and Equipment
During 1994, the Company continued with an upgrade of its management
information systems with the objective of providing better financial, marketing
and customer service by linking its branch operations, including its Appraisal
Division, to its computer system at corporate headquarters. When completed in
1995, this system will enable management to obtain status reports on orders
placed throughout New York State, and will allow access at all locations to
stored abstracts and to the Company's title plant containing back titles used to
prepare and update abstracts.
Industry Considerations and Seasonality
The Company's business is related to the general real estate market and the
fluctuations which occur therein. As a result of economic factors affecting the
real estate industry in recent years, there was a downturn in real estate
transactions in 1990 and 1991, as measured by the number of deeds and mortgages
recorded publicly. During 1992, as interest rates continued to decline and as
the country slowly emerged from recession, that trend was reversed. Statistics
compiled by the New York State Land Title Association indicate that, for New
York State, the number of deeds and mortgages increased approximately 29% in
1992, compared to 1991 while total revenues of the Company increased
accordingly. During 1993, deeds and mortgages increased by an average of 8% as
compared to 1992. The Company's revenues in this period declined, which the
Company attributes to several competitive factors as well as a decrease in "home
equity" or second mortgage transactions in favor of refinanced mortgages.
Mortgage refinances continued during the first quarter of 1994 at which time
long term interest rates were at very low levels. However, beginning in the
second quarter and fearing an increase in the levels of inflation, the Federal
Reserve Board began increasing interest rates. By year end 1994 there were an
unprecedented number of consecutive monthly interest rate increases. As a direct
result, deeds and mortgages recorded in New York State during 1994 fell by 7.18%
as compared to 1993. As a consequence, the Company's revenues fell sharply
causing the company to incur a significant net loss for the year ended December
31, 1994. There can be no assurance that these or other factors will enable the
Company to maintain its revenue and profitability in periods of declining real
estate activity.
The demand for the Company's services and products is directly dependent
upon the activity of the real estate market which, in turn, is closely related
to changes in interest rates. Thus, the Company's
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business is cyclical as well as seasonal, with lowest volume when interest rates
are high and in the winter and early spring.
Banking Relationship
As a result of considerations set forth above, falling revenues during 1994
caused the Company to incur a net loss for the period of $469,000. As a
consequence, the Company was in violation of the financial covenants associated
with its note payable to a bank (see Note 5 of the accompanying Consolidated
Financial Statements as of December 31, 1994 and 1993). Since year end 1994,
Company management has worked closely with bank officials and its public
accounting firm to develop a plan to restructure Company expenses and improve
operations and cash flow. Subsequent to year end 1994, payroll, rent and various
other costs were reduced and the terms of the note payable were also negotiated.
Management estimates that these actions will reduce costs by approximately
$965,000 on an annual basis beginning in 1995. Management believes that these
actions in conjunction with other cost reduction measures will return the
Company to profitability in 1995.
Potential Liabilities
Abstract companies, including the Company, certify their searches and
abstracts for accuracy. In its title insurance business, the Company relies upon
its abstracts and other information and considerations, including standards
prescribed by its principals, in determining whether title is insurable. If the
Company makes a determination of insurability, it issues a policy of title
insurance on behalf of its principal, the underwriting company. As an issuer of
certified searches and abstracts, the Company may, depending on applicable law
and the facts of a particular case, be liable for money damages in the event of
errors in its searches and abstracts. As an agent issuing title policies on
behalf of an underwriter, the Company may, again depending on applicable law and
the facts of a particular case, be liable to either the underwriter or the
insured in the event of errors in abstracting or determinations of insurability,
negligence, or breaches of agreements with its principals. There are no
significant claims pending against the Company based upon any of the foregoing
considerations, but the potential for such claims, and possible liability
thereon, is a risk that is inherent in the Company's business, and such claims
may be asserted at any time. During the most recent past five years, the amount
paid by the Company for such claims, in the aggregate, is less than $35,000. The
Company has errors and omissions insurance coverage of $1,000,000, which
complies with requirements of its principals and is also deemed adequate by the
Company's management.
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Employees
The Company and its subsidiaries employed approximately 94 persons at
December 31, 1994. Certain members of the Company's management must sign
Confidentiality Agreements which prohibits the solicitation of information or
resources to existing or potential competitors. The employees of the Company are
not covered by any collective bargaining or other agreements and management
believes its employee relations to be good.
Service Marks
The names "Four Corners Financial Corporation" and "Four Corners Abstract"
have been registered as service marks with the U.S. Patent and Trademark Office.
While the Company considers its service marks to be important, management does
not consider any service mark to be critical to future operations of the Company
or the marketing of any of the Company's services or products.
Competition
The Company competes with numerous providers of abstract and title
insurance services, most of which fall into two main categories. The first are
the large, integrated national or statewide companies which underwrite their own
title insurance policies either directly or through agents. Such agents include
not only independent companies, but also attorneys who sell title insurance
policies as "examining counsel" for underwriters of title insurance. The second
are the small, local companies which provide abstracts and write policies only
as agents for others. Both types of companies are found in the markets served by
the Company and offer substantial competition. Because of the relative ease of
entry into the market place, the Company may meet additional competition from
newly formed companies in one or more of its market areas.
The use of title insurance in residential real estate transactions has
grown in recent years because of the development of the national secondary
residential mortgage market which requires title insurance for virtually all
residential mortgages. Also, in recent years, institutional lenders have
generally required title insurance in virtually all commercial mortgages.
However, during the same period, there has been a significant increase in the
number of companies providing such insurance in the Company's market area, both
directly and through agents.
The Company also competes with numerous residential and commercial
appraisal companies, most of which are smaller than the Company and are
independently owned in the geographical area in which they operate.
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The principal elements of competition are accuracy and speed (response
time). Prices for abstract and appraisal services are generally comparable among
vendors. However, during 1993 and 1994 the Company experienced significant price
competition from new abstract companies entering its market areas. Prices for
title insurance are standardized and regulated by the New York State Insurance
Department which requires that rates be filed for approval by the New York State
Title Insurance Rate Service Association, Inc. (TIRSA). Personal relationships
are extremely important in retaining business and obtaining new business.
Excellent service and reliability, which the Company believes it provides, are
the principal means of developing and maintaining such relationships.
Item 2. Properties
During 1994, principal offices of the Company were located at 80 West Main
Street, Rochester, New York. These facilities, approximately 15,000 square feet,
were leased from Wegman Building Associates, a partnership in which Messrs.
Frank B., Bernard J. and Anthony M. Iacovangelo, directors and/or officers of
the Company, are partners. Abstract had a one year lease for this space expiring
on 12/31/95, which provided for an annual net rent of $68,000. However,
effective 7/31/95, the Company moved its Rochester facilities to 370 East
Avenue. These facilities are leased from Fitch Building Associates, another
partnership in which Messrs. Frank B., Bernard J., and Anthony M. Iacovangelo
are partners. Abstract now leases approximately 9,000 square feet of such space
at a net annual rent of $72,000. The Company believes that the terms of its
rental are at least comparable to those which it might have obtained if dealing
with a non-affiliated third person. Rent and common charges were approximately
$58,372, $213,000 and $263,000 in 1994, 1993 and 1992, respectively. During
1994, total unpaid rent of $109,000 was forgiven by Wegman Building Associates
and reflected as an extraordinary item. The Company owed approximately $20,000
for unpaid rent at December 31, 1995.
In addition, the Company leases space for its branch offices in Buffalo
(3,993 square feet), Albany (1,410 square feet), Syracuse (2,087 square feet),
Lockport (625 square feet) and Binghamton (760 square feet). The building which
houses the Utica branch (2,000 square feet) was sold by the Company in 1994. Per
this agreement, the Company was allowed to operate from this location on a
month-to-month tenancey through July, 1995.
The Company also leases space in the County Clerk's offices in Monroe,
Erie, Onondaga, Chenango and Niagara counties, and occupies space in the County
Clerk's office in Oneida County.
The Company believes it has adequate insurance coverage with respect to
fire and other casualty losses.
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Item 3. Legal Proceedings
There are no pending legal proceedings to which the Company is a party or
of which any of its property is the subject.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
last quarter of the fiscal year covered by this report.
Executive Officers of Registrant
The executive officers of the Company are as follows:
Name Age Position with the Company
---- --- -------------------------
Frank B. Iacovangelo 55 President, Treasurer and Director
Bernard J. Iacovangelo 47 Vice President, Secretary and
Director
William S. Gagliano 45 Executive Vice President and
Director
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Business Background of Executive Officers
Set forth below is a brief description of the business backgrounds of the
executive officers of the Company.
Frank B. Iacovangelo has served as President, Treasurer, and a director of
the Company since May, 1987. He is a practicing attorney and has been a partner
in the law firm of Gallo & Iacovangelo of Rochester, New York for more than five
years. Mr. Iacovangelo is also an officer, director and principal shareholder of
Faber Construction Co., Inc. and Forest Creek Equity Corp., real estate
development companies, and an owner of numerous real estate projects. In
addition, Mr. Iacovangelo is President and director of Four Corners Abstract
Corp., a wholly-owned subsidiary of the Company, which he co-founded in 1980.
From 1987 until June, 1989, Mr. Iacovangelo was Chairman of the Board of
Directors of a food service business which filed a petition under Chapter 11 of
the U.S. Bankruptcy Code on November 20, 1989.
Bernard J. Iacovangelo has served as Vice President, Secretary, and a
director of the Company since May, 1987. He is an attorney and has had more than
five years of experience as a partner in the law firm of Gallo & Iacovangelo.
His principal activity for the last five years has been as President, director
and principal shareholder of Forest Creek Equity Corp., a real estate
development company. Mr. Iacovangelo is also a principal shareholder of Faber
Construction Co., Inc. and an owner of numerous real estate projects as well as
co-founder, officer and director of Four Corners Abstract Corp., a wholly-owned
subsidiary of the Company.
William S. Gagliano has served as Executive Vice President of the Company
and Four Corners Abstract Corp. since June, 1990. He was elected Director of the
Company in July, 1992. As Executive Vice President, he is responsible for day to
day operations of the Company. He joined Four Corners Abstract Corp. in 1987 as
Vice President of Finance and Administration.
Messrs. Frank and Bernard Iacovangelo are brothers.
<PAGE>
-17-
PART II
Item 5. Market for Registrant's Common Equity and Related Security
Holder Matters
There is a very limited trading in the Company's Common Stock. The range of
high and low bid prices and high and low asked prices for the years 1992, 1993
and 1994 is shown below, as reported by the National Quotations Bureau, Inc. and
as adjusted to reflect the Company's one for four (1 for 4) reverse stock split
which became effective July 31, 1992.
COMMON STOCK DATA
1992 BID ASKED
---- --- -----
1st Quarter *Unpriced *Unpriced
2nd Quarter *Unpriced *Unpriced
3rd Quarter *Unpriced *Unpriced
4th Quarter *Unpriced *Unpriced
1993
----
1st Quarter *Unpriced *Unpriced
2nd Quarter *Unpriced *Unpriced
3rd Quarter *Unpriced *Unpriced
4th Quarter *Unpriced *Unpriced
1994
----
1st Quarter *Unpriced *Unpriced
2nd Quarter *Unpriced *Unpriced
3rd Quarter *Unpriced *Unpriced
4th Quarter *Unpriced *Unpriced
February 16, 1989 $2.00 $2.00 $3.00 $3.00
(last available)
* = Listed in pink sheets without prices
The above quotations represent prices between dealers and do not include
retail markup, markdown or commission. They do not represent actual transactions
and have not been adjusted for stock dividends or splits.
The Company's agreement with its Bank places a restriction on its payment
of dividends. No dividends were declared or paid during 1992, 1993 or 1994.
On December 31, 1994, the Company had 1,210 holders of record of its common
stock.
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
The financial data included in this tablehas been selected by the Company
and has been dreived from the financial statements for those years. The
following statement should be read in conjunction with the financial
statements and related notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue $ 4,780 $ 5,828 $ 6,818 $ 5,505 $ 4,257
Income (loss) before taxes (581) 66 33 312 30
Net income (loss) (469) 56 25 288 26
Net income (loss) per share (1) $ (.14) $ .02 $ .01 $ .08 $ .01
BALANCE SHEET DATA:
Total assets $ 1,315 $ 1,804 $ 1,584 $ 1,685 $ 1,293
Long-term obligations 564 507 625 271 281
Stockholders' investment (42) 427 377 345 19
</TABLE>
Notes:
(1) In 1992, the Company's stockholders approved a one-for-four reverse stock
split. In conjunction with this reverse stock split, the authorized number
of shares was reduced to 15,000,000 and par value was increased to $.04 per
share. All years have been restated to reflect this action.
-18-
<PAGE>
-19-
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
1. Liquidity and Capital Resources
The Company's cash flow resulted from operations, bank loans and advances
made by principal stockholders.
In 1994, the operations of the Company generated cash of $52,351. This cash
flow, along with cash reserves of $99,652, was sufficient to fund investments in
assets of $62,399 and a net debt reduction of $60,672. Cash flow from operations
of $216,433 funded investments in assets of $147,597 and a net debt reduction of
$22,147 in 1993. During the calendar year 1992, cash reserves of $150,302 and
cash flow from operating activities of $107,450 funded an investment in assets
of $223,903 and a $19,114 increase in debt financing.
Cash Flow from Operations. The cash provided by operations was lower in
1994, being $52,351 versus $216,433 in 1993. This change was primarily due to a
substantial net loss for 1994. The impact from a gain on debt extinguishment, a
decrease of accounts receivable, an increase in bad debt provision and non-cash
depreciation and amortization expense was sufficient to offset the $534,030 net
loss before extraordinary item incurred in 1994. The cash provided by operations
in 1993 was higher than the 1992 amount of $107,450. This was primarily due to
higher net income in 1993 and an increase in accounts payable in 1993.
Cash Flow from Investing Activities. The Company made capital expenditures
of $31,469, $103,108 and $186,931 in 1994, 1993 and 1992, respectively,
primarily related to computer system upgrades and furniture and fixture
purchases at various Company locations. The Company also made investments in
title plant of $36,985, $44,013 and $41,072 in 1994, 1993 and 1992,
respectively, to support its ongoing business.
As of December 31, 1994, the Company had no material purchase commitments.
The Company has, in the past, acquired other businesses for cash, notes and
common stock. Additional acquisitions may be made in the future. These
acquisitions may be made, in part or in whole, for cash.
Cash Flow from Financing Activities. Primary cash flows from financing
activities relate to changes in financing under lines-of-credit, notes payable
and advances by principal stockholders.
During March, 1992, the Company secured a $500,000 note payable with
another bank. Proceeds from this new note were used to repay the $375,000
balloon payment discussed earlier and to completely retire the Company's note
payable obligation established in 1989. This note
<PAGE>
-20-
payable calls for monthly installment payments of $8,333 plus interest at the
prime rate plus 3/4%, maturing in April, 1997. This note is guaranteed by the
principal stockholders/officers of the Company and is collateralized by
substantially all of the Company's assets. The note payable requires the Company
to meet certain financial measures as follows: (a) Total liabilities to tangible
net worth including subordinated debt of 2.00 to 1 at December 31, 1992; 2.00 to
1 to December 30, 1993 and 1.50 to 1 thereafter; (b) Current ratio of 1.46 to 1
at December 31, 1992; 1.36 to 1.75 to 1 to December 31, 1993 and 1.75 to 1
thereafter. This requirement varies by quarter in 1993; (c) Working capital of
$425,000 at December 31, 1992; $425,000 to December 30, 1993 and $500,000
thereafter. The agreement also limits the Company's ability to make
acquisitions, pay dividends and make capital expenditures, and requires the
Company to submit certain financial information. Also in March, 1992, the
Company secured a revolving line-of-credit bearing interest at the prime rate
plus 1/2%. The maximum borrowing capacity under this agreement is $250,000. At
December 31, 1994, 1993 and 1992, there was $235,000, $140,000 and $25,000,
respectively, outstanding on this line-of-credit. It is anticipated that these
financial requirements will be rewritten in 1995 to allow compliance by the
Company. The balance on this note payable at December 31, 1994 was $225,000.
At December 31, 1994, the Company was not in compliance with the financial
covenants related to the note payable to a bank. On December 13, 1995, the
amount outstanding on this note and $185,000 of the amount borrowed under its
line-of-credit agreement were refinanced with the same bank. Under the terms of
the new note payable, the Company is required to make 22 consecutive monthly
principal payments of $7,674, plus interest at the bank's prime rate plus 1.25%,
beginning January 1, 1996 through October 1, 1997. Beginning November 1, 1997
through September 1, 1999, the Company is required to make 23 monthly payments
of $6,230, plus interest at the bank's prime rate plus 1.25%. All unpaid
principal and interest is due on October 1, 1999. This note is guaranteed by the
officers/ stockholders of the Company and is collateralized by substantially all
of the Company's assets. The note payable and line-of-credit have been
classified in accordance with the new agreement as of December 31, 1994.
The refinanced note payable to the bank requires the Company to meet certain
financial measures at December 31, 1995 as follows:
a. Working capital deficit of $140,000.
b. Current ratio of .85 to 1.
c. Minimum tangible net worth of $250,000.
d. Total liabilities to tangible net worth of not more than 3.9
to 1.
e. Debt service ratio of not less than 1.75 to 1.
<PAGE>
-21-
These ratios are adjusted on a quarterly or semi-annual basis during 1996
and thereafter.
The agreement also limits the Company's ability to make acquisitions, pay
dividends and make capital expenditures, and required the Company to submit
certain financial information.
The Company also has available an unsecured line of credit of $100,000 with
a bank with interest on amounts borrowed at the bank's prime rate plus 1%. There
were no borrowings as of the years ended December 31, 1992, 1993 and 1994.
Borrowings under this line-of-credit are personally guaranteed by the Company's
principal officers/stockholders.
The Company repaid $164,033, $179,215 and $212,151 under its long term debt
agreements in 1994, 1993 and 1992, respectively. Long term borrowings were
$8,361, $41,693 and $232,765 in 1994, 1993 and 1992, respectively. At December
31, 1992, the Company owed $194,000 to a principal stockholder/director. For the
years ended December 31, 1993 and 1994 this amount increased slightly to
$200,000. This debt bears interest at the prime rate plus three percent (3%) and
has no set repayment terms, however, the principal stockholder has agreed not to
require payment prior to January, 1997.
The Company expects cash flow generated from operations and bank
lines-of-credit currently available will be adequate to meet its anticipated
working capital and fixed capital expenditure needs for the next twelve months.
Long term liquidity requirements, related primarily to expansion of the
Company's business through the establishment of additional branch offices as
well as new services and product offerings. These needs are expected to be met
with a combination of cash generated from operations and borrowings.
Impact of Inflation. The Company believes that the impact of inflation on
its results of operations has been and will continue to be minimal due to the
recent and expected continued low rates of inflation.
2. Results of Operations
(a) Percentage Comparison
The following table presents certain financial data derived from the
consolidated statements of operations of the Company for the years ended
December 31, 1994, 1993, 1992, expressed as a percentage of total revenues.
<PAGE>
-22-
Percentage of Total Revenues
Years Ended December 31
----------------------------
1994 1993 1992
---- ---- ----
Title insurance premiums 41.15% 31.88% 28.89%
Abstract, appraisal fees 58.85 68.12 71.11
------ ------ ------
Total revenues 100.00 100.00 100.00
Direct costs of revenue (21.87) (16.80) (18.78)
------ ------ ------
Gross profit 78.13 83.20 81.22
Operating expenses:
Personnel costs (61.77) (56.61) (44.92)
Other operating expenses (27.01) (24.33) (32.94)
------ ------ ------
Operating income/(loss) (10.65) 2.26 3.36
Other expenses (.14) (1.13) (2.88)
Income tax expense .98 (.17) (.11)
------ ------ ------
Net income/(loss) (9.81)% .96% .37%
====== ====== ======
(b) Operating Revenues
Combined revenues of the Company decreased 14.51% from $6,817,717 for the
year ended December 31, 1992 to $5,828,136 for the year ended December 31, 1993.
The combined revenues further decreased approximately 17.99% to $4,779,546 for
the year ended December 31, 1994.
The Company experienced a revenue increase in 1992 primarily due to the
emergence of the nationwide economy from a recession and the continued stability
of low interest rates. In order to further penetrate the financial institution
revenue market and to better service its institutional client base throughout
New York State, the Company broadened its operational capabilities to include
the Hudson Valley and Long Island areas during the second quarter of 1992 with
the establishment of a new branch location in Goshen, New York. In 1993,
however, operating revenues declined due to strong competition within the
abstract and title service industry, a weaker demand for home equity (second
mortgage) loans, and the continuance of a sluggish real estate market in the
northeast. This trend continued in a more dramatic fashion in 1994 leading to
lower overall revenues within the title search and appraisal divisions. The
Company expects total revenues to increase during 1995 as the housing rebound
begins to take hold in the market areas which it serves and the volume of orders
increases from those customers lost to lower priced non-performing competitors.
<PAGE>
-23-
Specifically, revenue from title insurance premiums increased by 5.81%
during 1994 to $1,966,849 versus $1,858,264 in 1993. This occurred despite a
decrease in 1993 of 5.65% from $1,969,592 in 1992. Even though a slight increase
in title sales was recognized for 1994, a significant decline in title searches
and appraisal sales caused an overall decline in the gross revenues of the
Company. Abstract and appraisal service revenues declined from $4,848,125 to
$3,969,872 to $2,812,697 in 1992, 1993 and 1994, respectively. These
fluctuations represented an 18.11% reduction in abstract and appraisal revenues
from 1992 to 1993 and a corresponding reduction of 29.15% from 1993 to 1994. As
stated earlier, the decline in this segment of the Company's revenues from the
years ended 1992 to 1994 resulted from more intense competition within the
industry in addition to a lower volume of home equity (second mortgages) loans.
As a result of the acquisition of the Buffalo-based Proper Appraisal
Specialists, Inc. in December, 1991, the Company has the capability to offer
commercial/industrial real estate appraisals throughout New York State. As a
percentage of total revenue, appraisal income has fallen from fourteen percent
(14%) of total revenues in 1992 to twelve percent (12%) in 1993. Appraisal
revenues decreased slightly from $983,145 in 1992 to $701,540 in 1993. A similar
decrease of $236,753 occurred in 1994 when appraisal revenues decreased to
$464,787 representing ten percent (10%) of total revenues. These decreases were
attributable to a decreased volume of abstract and title orders.
(c) Direct Costs of Revenue
Direct costs of revenue consist of commissions paid to underwriters of
title insurance and subcontractor costs paid to other title companies and to
appraisers. As a result of a decrease in the volume of title search and
appraisal orders in geographic areas where the Company does not have a direct
operation, as well as the positive aspect of producing a higher percentage of
orders using its own labor force, direct costs of revenue decreased from 18.78%
in 1992 to 16.80% for the year ended December 31, 1993. These same costs
increased to 21.87% in 1994 due to greater competition within the title
insurance markets.
(d) Operating Expenses
Direct and indirect personnel costs and other operating expenses are
incurred in connection with the production of title searches, title
examinations, the maintenance of the Company's title plant and the preparation
of real estate appraisals. Total operating expenses decreased from $5,308,324
for the year ended December 31, 1992 to $4,717,398 for the same period in 1993.
Operating expenses further declined in 1994 to $4,228,331 for the year ended
December 31, 1994. These decreases were primarily attributable to declining
payroll costs associated with a reduction in staffing requirements.
<PAGE>
-24-
In 1993, gross payroll and benefits amounted to $3,299,116 as compared to
$3,526,657 in 1992. Office supplies including postage decreased from $370,581 in
1992 to $237,238 in 1993. Bad debt expense decreased from $114,912 to $33,533
for the same time period. The decrease in operating expenses experienced by the
Company in 1994 can be attributable to a cost containment and downsizing program
implemented as a result of a lower than anticipated sales volume. The
significant decreases in expense for 1994 are shown in the table below.
Expense Item 1994 1993
------------ ---- ----
Gross payroll $2,952,187 $3,299,116
& benefits
Dues & subscriptions 17,061 33,103
Office supplies 173,122 237,238
& postage (freight)
Travel expenses 85,938 109,401
As with any service company, the major item of expense and corresponding
increase in expense level associated with the Company's operations is gross
payroll and employee benefits. As a percentage of revenues, personnel costs and
other operating expenses represented 89% in 1994, 81% in 1993 and 78% in 1992.
This increase in operating expenses as a percentage of revenues resulted from a
constant level of payroll expenditures versus a decreasing revenue base in 1993
and 1994. This diminishing revenue base is attributable to a period of
increasing interest rates for mortgage loans during the second half of 1994 and
an increased level of competitiveness within the industry. The Company is
continuing a strategic emphasis on productivity, geographic full service, and
total quality standards. The Company's work force has decreased significantly
from 127 in 1992 to 94 in 1994.
Based on a decrease in sales order volume, income from operations for 1993
was $131,870 as compared to $229,037 for 1992. Net income for 1993 was $56,013
compared to $25,085 in 1992. Net income for the year ended December 31, 1992 was
adversely affected by costs associated with a discontinued common stock offering
of $127,500. Since there were no such costs incurred during 1993, net income was
higher as compared to 1992. The Company suffered a significant decrease in
income from operations and net income for the year ending December 31, 1994. Due
to the economic downturn of the real estate market, the Company incurred a loss
from normal operations of $534,030. After the $65,000 gain from the early
extinguishment of debt from a related party are considered, the net loss for
1994 was $469,030.
<PAGE>
-25-
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated herein by reference
to pages 34 to 54 of this Form 10-K and are indexed under Item 14(a)(1). See
also the Financial Statement Schedules appearing herein, as indexed under Item
14(a)(2).
Item 9. Disagreements on Accounting and Financial Disclosure
There have been no disagreements on accounting and financial disclosure
matters.
<PAGE>
-26-
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table names the directors and indicates their age, their
position with the Company or their principal occupation or employment, and the
approximate number of shares of Common Stock beneficially owned by each director
and all directors and officers as a group as of December 31, 1994.
<TABLE>
<CAPTION>
Shares of
Position with the Common Stock Percent
Company or Princi- Director Beneficially of
Name Age pal Occupation Since Owned Class
- ---- --- -------------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Frank B. 55 President and 1987 1,366,339 (3) 40.92%
Iacovangelo Treasurer (1)
Bernard J. 47 Vice President 1987 1,376,339 (4) 41.22%
Iacovangelo Secretary (1)
William S. 45 Executive Vice 1992 140,758 (5) 4.22%
Gagliano President and
Director (1)
Anthony M. 54 President, director 1987 87,913 (6) 2.64%
Iacovangelo and principal share-
holder of Faber
Construction Co., Inc.
Rochester, NY (2)
All Directors and Officers of the 2,971,349 88.99%
Company as a group (four persons) (3)(4)(5)(6)
</TABLE>
(1) See information contained in the section entitled "Executive Officers of
Registrant" in Part I of Form 10-K for the fiscal year ended December 31,
1994. In addition, from 1987 until June 1989, Frank B. Iacovangelo was a
director, and on an interim basis for a period of approximately 11 months
was Chairman of the Board of Charlie Bubbles, Ltd. food service business
which filed a petition under Chapter 11 of the U S Bankruptcy Code on
November 20, 1989.
(2) During the past five years, Anthony Iacovangelo has also been an owner of
numerous real estate projects.
(3) Includes 300,000 shares owned by children of Frank B. Iacovangelo,
beneficial ownership of which is disclaimed. Also includes 40% of the
368,879 shares owned by Wegman Building Associates, a partnership in which
Frank Iacovangelo owns a 40% interest.
<PAGE>
-27-
(4) Includes 500,000 shares owned by a Trust for the benefit of Bernard J.
Iacovangelo's children, the Trustees of which are Mr. Iacovangelo's wife,
Patricia, and his brother, Frank. Mr. Iacovangelo disclaims beneficial
ownership of these shares. Also includes 40% of the 368,879 shares owned by
Wegman Building Associates, a partnership in which Bernard Iacovangelo has
a 40% interest.
(5) Includes an option to purchase 125,000 shares of Common Stock.
(6) Includes 10% of the 368,869 shares owned by Wegman Building Associates, a
partnership in which Anthony Iacovangelo has a 10% interest. Also includes
options to purchase 1,000 shares of Common Stock.
Messrs. Frank, Bernard and Anthony Iacovangelo are brothers.
Item 11. Executive Compensation
Executive Compensation
The following table sets forth the cash compensation for each of the last
three financial years awarded to or earned by the Chief Executive Officer of the
Company. No other executive officer of the Company received a total salary and
bonus in excess of $100,000 and accordingly no reporting is required under the
regulations of the Securities and Exchange Commission.
Name and Annual Compensation (1)
Principal Position -----------------------
------------------ Yearly Salary
-------------
Frank B. Iacovangelo 1994 -- $61,800
President, Chief 1993 -- $21,923
Executive Officer 1992 -- $51,923
and Treasurer
- --------------------
(1) Mr. Iacovangelo receives no other compensation or benefits from the Company.
He neither received nor exercised any options during 1994 and he held no options
at December 31, 1994.
Remuneration of Directors
During 1994, directors of the Company received no cash remuneration for
serving as directors or as members of committees.
The Company's 1992 Stock Option Plan (the "Option Plan") provides for
automatic grants of stock options to each member of the Board of Directors who
is not also an employee of the Company. Messr. Anthony Iacovangelo is a
non-employee director.
<PAGE>
-28-
Pursuant to the Option Plan, a Non-Employee Director Stock Option ("NEDSO")
for 500 shares is granted to each non-employee director automatically every year
on the date of the Annual Meeting of Stockholders. The first such grants were
made on the date of the 1992 Annual meeting of Stockholders (July 29, 1992), and
each non-employee director received a NEDSO for 500 shares at an exercise price
of $.75 per share, the fair market value of the Company's Common Stock on the
date of grant.
Each NEDSO is immediately exercisable in full. Each NEDSO terminated upon
the expiration of ten years from the date upon which such NEDSO was granted. A
NEDSO is not transferable other than by will or by the laws of dissent and
distribution.
In the event a non-employee director terminates services on the Board other
than by reason of death or disability, such person's NEDSO (to the extent
exercisable upon such termination) will expire three months from the date of
termination of service, provided that in no event may a NEDSO be exercised
beyond its original expiration date.
In the event of death or disability of a non-employee director, any
outstanding NEDSOs will expire one year from the date of death or disability,
provided that in no event may a NEDSO be exercised beyond its original
expiration date.
Employment Agreements
Employment agreements between the Company and each of Messrs. Frank B.
Iacovangelo, Bernard J. Iacovangelo and William S. Gagliano provide for
employment terms which commenced January 1, 1992, year to year indefinite
renewal terms subject to either the Company or the employee electing not to
renew, as amended, minimum base salaries of $60,000 per year in the case of
Frank Iacovangelo, $52,000 per year in the case of Bernard J. Iacovangelo and
$75,000 in the case of Mr. Gagliano, additional salary and bonus compensation to
be determined by the Board of Directors of the Company in its sole discretion,
and restrictions against competition with the Company. Messrs. Frank B.
Iacovangelo, Bernard J. Iacovangelo and William S. Gagliano received $61,800.27,
$55,270.16 and $78,720.77 respectively during 1994.
Item 12. Security Ownership of Certain Beneficial owners and Management
On December 31, 1994, the Company had outstanding and entitled to vote with
respect to all matters to be acted upon at the Annual Meeting of Stockholders,
3,338,802 shares of Common Stock ($.04 par value). Each share of Common Stock is
entitled to one vote. The Company currently has no other outstanding class of
equity securities.
The following table sets forth information as of December 31, 1994 showing
all persons who, to the Company's knowledge, were beneficial owners of 5% or
more of any class of its shares. All persons listed below have sole voting and
investment power with respect to their shares unless otherwise indicated.
<PAGE>
-29-
Amount and Nature of Percent of
Name and Address Beneficial Ownership Class
- ---------------- -------------------- -----
Frank B. Iacovangelo 1,366,339 (1) (3) 40.92%
80 West Main St.
Rochester, NY 14614
Bernard J. Iacovangelo 1,376,339 (2) (3) 41.22%
80 West Main St.
Rochester, NY 14614
Wegman Building 368,879 (3) 11.05%
Associates
80 West Main St.
Rochester, NY 14614
(1) Includes 300,000 shares owned by children of Frank B. Iacovangelo,
beneficial ownership of which is disclaimed. Also includes 40% of the
368,879 shares owned by Wegman Building Associates, a partnership in which
Mr. Iacovangelo has a 40% interest.
(2) Includes 500,000 shares owned by a Trust for the benefit of Bernard J.
Iacovangelo's children, the Trustees of which are Mr. Iacovangelo's wife,
Patricia, and his brother, Frank. Mr. Iacovangelo disclaims beneficial
ownership of these shares. Also includes 40% of the 368,879 shares owned by
Wegman Building Associates, a partnership in which Bernard Iacovangelo has
a 40% interest.
(3) Wegman Building Associates is a general partnership in which Messrs. Frank,
Bernard and Anthony Iacovangelo have a 40%, 40% and 10% interest,
respectively. They have shared voting and investment power with respect to
the shares owned by the partnership.
Item 13. Certain Relationships and Related Transactions
The principal offices of the Company are located at 80 West Main Street,
Rochester, New York. These facilities are leased from Wegman Building
Associates, a partnership in which Messrs. Frank B., Bernard J., and Anthony M.
Iacovangelo, directors and/or officers of the Company, are partners. Four
Corners Abstract Corporation ("FCAC"), a subsidiary of the Company, currently
leases approximately 15,000 square feet os such space, pursuant to a lease
expiring on December 31, 1995. Effective January 1, 1994, the lease agreement
requires annual rental payments of $159,660 plus common area charges.
Annual rental payments, pursuant to the lease, including common area
charges, were approximately $58,372, $213,000 and $263,000 in 1994, 1993 and
1992 respectively. During 1994, total unpaid rent of $109,000 was forgiven by
the related partners. The Company owed approximately $66,000 for unpaid rent at
December 31, 1993.
<PAGE>
-30-
Messrs. Frank and Bernard Iacovangelo, officers and directors of the
Company, are members of the law firm of Gallo & Iacovangelo, general counsel to
the Company.
During 1994, 1993 and 1992, Frank Iacovangelo, President of the Company,
made advances to the Company. The advances bear interest at the prime rate plus
3% and repayment is subordinated to the amounts outstanding under the Company's
line of credit agreements. Mr. Iacovangelo has agreed not to require payment of
these advances through January 1, 1996. At December 31, 1994, December 31, 1993
and December 31, 1992, $200,000, $200,000 and $194,000 were outstanding
respectively. in 1994, the Company paid Mr. Iacovangelo $13,008.93 in interest.
In 1994, 1993 and 1992, approximately 4%, 4% and 3% respectively, of the
Company's revenue was derived from the law firm of Gallo and Iacovangelo. At
December 31, 1994, 1993, and 1992, the Company was owed $59,284, $57,966 and
$44,006 respectively, from Gallo and Iacovangelo. Rates charged were comparable
to those charged similar customers.
<PAGE>
-31-
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) The following documents are filed as a part of this report and as
response to Item 8:
(1) Financial Statements
- Auditors' Report dated February 17, 1995 (except for Notes 5 and
6, as to which the date is December 13, 1995).
- Consolidated Balance Sheets - December 31, 1994 and 1993
- Consolidated Statements of Income for the Years Ended December
31, 1994, 1993 and 1992
- Consolidated Statements of Changes in Stockholders' Investment
for the Years Ended December 31, 1994, 1993 and 1992
- Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992
- Notes to Consolidated Financial Statements (1) through (13)
(2) Financial Statement Schedules
- Auditors' Report Dated February 17, 1995
- Schedule II - Amounts Receivable From Related Parties for the
Years Ended December 31, 1994, 1993 and 1992
- Schedule VI -Accumulated Depreciation of Property and Equipment
for the Years Ended December 31, 1994, 1993 and 1992
- Schedule VIII - Valuation and Qualifying Accounts for the Years
Ended December 31, 1994, 1993 and 1992
- Schedule IX - Short-Term Borrowings for the Years Ended December
31, 1994, 1993 and 1992
<PAGE>
-32-
(3) Exhibits
(a)
10.1 Revolving Credit and Term Loan Agreement with Marine Midland
Bank, N. A., dated December 13, 1995.
10.2 Lease agreement dated May 1, 1995, by and between North Pearl
Partners and Four Corners Abstract Corporation for property
located at 99 Pine Street, Albany, NY.
10.3 Lease agreement dated June 21, 1995, by and between Fitch
Building Associates and Four Corners Abstract Corporation for
property located at 370 East Ave, Rochester, NY.
10.4 Lease agreement (licensing) dated June 1, 1994, by and between
the Chenango County Clerk and Four Corners Abstract Corporation
for property located at 5 Court Street, Norwich, NY.
10.5 Sale agreement dated December 5, 1994, by and between J. K. Hage,
III and Four Corners Financial Corporation for property located
at 612 Charlotte Street, Utica, NY.
22 Subsidiaries of Registrant
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the fourth quarter of
the year ended december 31, 1994.
(c) Exhibits
See (a) (3) above.
(d) Financial Statement Schedules
See (a) (2) above.
<PAGE>
-33-
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May , 1996 FOUR CORNERS FINANCIAL CORPORATION
By:
------------------------------------------
Frank B. Iacovangelo, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capabilities on the dates indicated.
May , 1996
- -----------------------------------------
Frank B. Iacovangelo
President, Treasurer and Director
(Chief Executive Officer and
Chief Financial Officer
May , 1996
- -----------------------------------------
William S. Gagliano
Executive Vice President, Chief
Accounting Officer and Director
/s/Bernard J. Iacovangelo May , 1996
- -----------------------------------------
Bernard J. Iacovangelo
Vice President, Secretary and
Director
/s/Anthony M. Iacovangelo May , 1996
- -----------------------------------------
Anthony M. Iacovangelo
Director
<PAGE>
-34-
FOUR CORNERS FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 AND 1993
TOGETHER WITH
INDEPENDENT AUDITORS' REPORT
June 12, 1996 (04:52pm)
<PAGE>
-35-
INDEPENDENT AUDITORS' REPORT
February 17, 1995
(except for Notes 5 and 6,
as to which the date
is December 13, 1995)
To the Stockholders of
Four Corners Financial Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Four Corners
Financial Corporation and Subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations, changes in stockholders'
investment, and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Four Corners Financial
Corporation and Subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994 in conformity with generally accepted accounting
principles.
<PAGE>
-36-
FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
ASSETS LIABILITIES AND STOCKHOLDERS' INVESTMENT
1994 1993 1994 1993
---- ---- ---- ----
CURRENT ASSETS: CURRENT LIABILITIES:
<S> <C> <C> <C> <C> <C>
Cash $ 28,932 $ 99,652 Lines-of-credit $ 50,000 $ 140,000
Cash - escrow deposits 70,633 46,873 Current portion of notes payable 106,745 114,629
Accounts receivable, net of Current portion of obligations under
allowance for capital leases 45,805 42,220
doubtful accounts of $100,000
and $30,000 in
1994 and 1993, respectively 478,094 843,377 Accounts payable 455,866 361,175
Prepaid expenses 9,090 8,948 Accounts payable - related parties -- 65,663
Other receivables 1,085 32,129 Escrow deposits 70,633 46,873
Income tax receivable 6,725 -- Other accrued expenses 63,639 93,520
---------- ---------- Accrued income taxes -- 6,600
---------- ----------
Total current assets 594,559 1,030,979 Total current liabilities 792,688 870,680
---------- ----------
LONG-TERM LIABILITIES:
PROPERTY AND EQUIPMENT, net 305,358 399,053
---------- ---------- Notes payable, net of current portion 330,937 244,096
Obligations under capital leases, net
OTHER ASSETS: of current portion 33,325 62,432
Subordinated debt due to officer/
Deposits 7,246 8,871 principal stockholder 200,000 200,000
---------- ----------
Cash value of officer life 20,070 --
insurance
Intangible assets, net of Total long-term liabilities 564,262 506,528
accumulated ---------- ----------
amortization of $81,269
in 1994 and
$66,666 in 1993 20,655 35,258 Total liabilities 1,356,950 1,377,208
---------- ---------- ---------- ----------
47,971 44,129 STOCKHOLDERS' INVESTMENT:
---------- ----------
Common stock, $.04 par value, 15,000,000
TITLE PLANT 367,283 330,298 shares authorized, 3,343,802 issued in 1994
---------- ---------- and 1993 and 3,338,802 outstanding in 1994
and 1993 133,752 133,752
Additional paid-in capital 835,402 835,402
Accumulated deficit (1,005,308) (536,278)
---------- ----------
(36,154) 432,876
Less: Treasury stock at cost, 5,000 shares (5,625) (5,625)
---------- ----------
Total stockholders' investment (41,779) 427,251
---------- ----------
$1,315,171 $1,804,459 $1,315,171 $1,804,459
========== ========== ========== ==========
</TABLE>
<PAGE>
-37-
FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
REVENUE:
Title insurance premiums $ 1,966,849 $ 1,858,264 $ 1,969,592
Abstract and appraisal services 2,812,697 3,969,872 4,848,125
----------- ----------- -----------
4,779,546 5,828,136 6,817,717
----------- ----------- -----------
DIRECT COSTS OF REVENUE:
Title insurance premiums (539,390) (351,015) (349,583)
Abstract and appraisal services (505,929) (627,853) (930,773)
----------- ----------- -----------
(1,045,319) (978,868) (1,280,356)
----------- ----------- -----------
Gross profit 3,734,227 4,849,268 5,537,361
OPERATING EXPENSES (4,228,331) (4,717,398) (5,308,324)
----------- ----------- -----------
Income (loss) from operations (494,104) 131,870 229,037
----------- ----------- -----------
OTHER EXPENSES:
Interest (71,845) (66,063) (68,796)
Cost of discontinued stock offering -- -- (127,500)
Loss on sale of property (14,932) -- --
----------- ----------- -----------
(86,777) (66,063) (196,296)
----------- ----------- -----------
Income (loss) before income taxes and
extraordinary item (580,881) 65,807 32,741
BENEFIT FROM (PROVISION FOR) INCOME TAXES 46,851 (9,794) (7,656)
----------- ----------- -----------
Income (loss) before extraordinary item (534,030) 56,013 25,085
EXTRAORDINARY ITEM - GAIN ON EXTINGUISHMENT OF
DEBT, net of income tax of $44,000 65,000 -- --
----------- ----------- -----------
NET INCOME (LOSS) $ (469,030) $ 56,013 $ 25,085
=========== =========== ===========
NET INCOME (LOSS) PER SHARE:
Income (loss) before extraordinary item $ (.16) $ .02 $ .01
Extraordinary item .02 -- --
----------- ----------- -----------
Net income (loss) $ (.14) $ .02 $ .01
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
-38-
FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
---- Common Stock ---- Additional Total
Paid-in Accumulated Treasury Stockholders'
Shares Amount Capital Deficit Stock Investment
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - December 31, 1991 3,330,042 $ 133,202 $ 829,137 $ (617,376) $ -- $ 344,963
Exercise of stock options 12,500 500 6,000 -- -- 6,500
Net income -- -- -- 25,085 -- 25,085
----------- ----------- ----------- ----------- ----------- -----------
BALANCE - December 31, 1992 3,342,542 133,702 835,137 (592,291) -- 376,548
Shares issued in exchange for
Mid-State
Abstract Corporation stock 1,260 50 265 -- -- 315
Purchase of treasury stock -- -- -- -- (5,625) (5,625)
Net income -- -- -- 56,013 -- 56,013
----------- ----------- ----------- ----------- ----------- -----------
BALANCE - December 31, 1993 3,343,802 133,752 835,402 (536,278) (5,625) 427,251
Net loss -- -- -- (469,030) -- (469,030)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE - December 31, 1994 3,343,802 $ 133,752 $ 835,402 $(1,005,308) $ (5,625) $ (41,779)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
-39-
FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) before extraordinary item $(534,030) $ 56,013 $ 25,085
Adjustments to reconcile net income (loss) before extraordinary
item to net cash flow from operating activities:
Extraordinary item - gain on extinguishment of debt 65,000 -- --
Provision for bad debts 121,678 33,533 118,047
Loss on sale of property 14,932 -- --
Deferred stock offering costs -- -- 18,964
Depreciation and amortization 124,442 124,788 137,360
Common stock issued in exchange for Mid-State
Abstract Corporation stock -- 315 --
Changes in:
Accounts receivable 243,605 (152,690) (56,763)
Prepaid expenses (142) (2,983) 20,203
Other receivables 31,044 (26,489) 16,846
Income tax receivable (6,725) 21,718 (21,718)
Accounts payable 29,028 124,288 (106,237)
Other accrued expenses (29,881) 31,340 (44,337)
Accrued income taxes (6,600) 6,600 --
--------- --------- ---------
Net cash flow from operating activities 52,351 216,433 107,450
--------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment (31,469) (103,108) (186,931)
Proceeds from sale of property and equipment 24,500 -- --
(Increase) decrease in deposits 1,625 (476) 4,100
Increase in cash value of officer life insurance (20,070) -- --
Investment in title plant (36,985) (44,013) (41,072)
--------- --------- ---------
Net cash flow from investing activities (62,399) (147,597) (223,903)
--------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase (decrease) in lines-of-credit 95,000 115,000 (8,000)
Borrowings on notes payable 8,361 41,693 232,765
Repayment of notes payable and obligations under
capital leases (164,033) (179,215) (212,151)
Increase in subordinated debt due to officer/
principal stockholder -- 6,000 --
Proceeds from exercise of stock options -- -- 6,500
Purchase of treasury stock -- (5,625) --
--------- --------- ---------
Net cash flow from financing activities (60,672) (22,147) 19,114
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH (70,720) 46,689 (97,339)
CASH - beginning of year 99,652 52,963 150,302
--------- --------- ---------
CASH - end of year $ 28,932 $ 99,652 $ 52,963
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
-40-
FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
(1) The Company
Four Corners Financial Corporation (FCFC) and its Subsidiaries, Four
Corners Abstract Corporation (FCAC) and Proper Appraisal Specialists, Inc.
provide services and products including real estate title searching,
preparation of abstracts of title, issuance of title insurance as an agent
for certain national underwriting companies and real estate appraisals,
primarily in Western and Central New York State. All of these services and
products are required in connection with the mortgaging, sale or purchase
of real property.
Unless otherwise indicated, the term "Company" refers to Four Corners
Financial Corporation and its subsidiaries. The Company operates in one
business segment.
(2) Summary of Significant Accounting Policies
Principles of Consolidation -
The consolidated financial statements include the accounts of FCFC and all
subsidiaries. All significant intercompany transactions and balances have
been eliminated.
Results of Operations -
In 1994, the Company incurred a loss of $469,030. As a result, at December
31, 1994, current liabilities exceeded current assets by $198,129 and total
liabilities exceeded total assets by $41,779. Further, the Company was in
violation of the financial covenants of its note payable to a bank.
Management has developed a plan to improve operations and cash flow.
Subsequent to year end, payroll, rent and other costs were reduced and the
terms of the note payable were also renegotiated (see Note 5). Management
estimates that these actions will reduce costs approximately $965,000 on an
annual basis beginning in 1995. Management believes that these actions in
conjunction with other cost reduction measures will return the Company to
profitability in 1995.
<PAGE>
-41-
Cash -
Cash includes demand deposit and money market accounts. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation up to
$100,000. At times, the cash balances in an institution may exceed this
federally insured limit. However, the Company has not experienced losses in
such accounts and believes it is not exposed to any significant credit risk
with respect to these cash accounts.
Property and Equipment -
Property and equipment is stated at cost and is depreciated using
accelerated and straight-line methods over the following useful lives:
Building and improvements 15 - 31.5 years
Furniture and equipment 3 - 10 years
Vehicles 5 years
Leasehold improvements Term of lease
At the time of retirement or other disposition of property, the cost and
accumulated depreciation are removed from the accounts and any gain or loss
is reflected in the statements of operations. Repairs and maintenance costs
are charged to expense when incurred.
Depreciation expense for 1994, 1993 and 1992 was $109,839, $108,287, and
$126,719, respectively.
Property and equipment consisted of the following at December 31:
1994 1993
---- ----
Land, building and improvements $ -- $ 77,331
Furniture and equipment 986,630 942,042
Vehicles 96,732 95,125
Leasehold improvements 58,770 58,118
----------- -----------
1,142,132 1,172,616
Less: Accumulated depreciation (836,774) (773,563)
----------- -----------
$ 305,358 $ 399,053
=========== ===========
<PAGE>
-42-
Intangible Assets -
Intangible assets consist of goodwill and covenants not-to-compete
resulting from the 1987 acquisition of the Albany branch, the 1989
acquisition of Livingston Abstract Corporation, the 1990 acquisition of
Picciano Abstract Company, Inc. and the 1991 acquisition of Proper
Appraisal Specialists, Inc. The goodwill and covenants not-to-compete are
being amortized on a straight-line basis over a five-year period.
Title Plant -
Title plant consists of copies of public records, maps and other relevant
historical documents which facilitate the preparation of title abstract
reports without the necessity of manually searching official public
records.
The Company has incurred identifiable costs related to the activities
necessary to construct a title plant which are reflected as assets. A title
plant is regarded as a tangible asset having an indefinite economic life;
accordingly, title plant costs are not depreciated. Costs incurred to
perform full title search additions to the title plant are capitalized in
the year incurred. Costs incurred to maintain or update existing title
files in the title plant are expensed as incurred.
Revenue Recognition -
Title insurance is provided to purchasers or financers of real property.
The related revenue is recognized when policies become effective, generally
at the property or mortgage loan closing. Under terms of the Company's
agreements with its title insurance underwriters, a commission of 15 - 20%
is paid to its underwriter on all title insurance policies written. Pricing
is based on a rate schedule established by the Insurance Department of the
State of New York which provides for varying rates for services rendered.
Commission expense is reflected as a direct cost of title insurance revenue
in the statements of income.
The Company also performs title abstract research and prepares appraisals
on real properties. Abstract and appraisal revenue is recognized as earned.
Direct costs of abstract and appraisal revenue include the cost of work
performed by subcontractors in geographical areas where the Company does
not maintain an office, among other direct costs.
Net Income Per Share -
Net income per share is computed on the basis of the weighted average
number of common and common equivalent shares outstanding during the
periods. The weighted average number of shares outstanding is as follows:
<PAGE>
-43-
1994 1993 1992
---- ---- ----
Average number of common shares
outstanding:
Common shares 3,338,802 3,338,873 3,330,419
Common equivalent shares -- 145,752 187,081
--------- --------- ---------
3,338,802 3,484,625 3,517,500
========= ========= =========
Fully diluted earnings per share did not differ materially from primary
earnings per share in any of these three years. As a result of the loss
incurred in 1994, common equivalent shares have not been considered in the
calculation of average number of common shares outstanding.
(3) Escrow Deposits
As a service to its customers, FCAC administers escrow deposits
representing undisbursed amounts received for settlements of mortgage loans
or property sales and indemnities against specific title risks. These funds
are recorded as both a current asset and a current liability in the
accompanying balance sheets.
(4) Income Taxes
During 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes". SFAS 109
requires an asset and liability approach to measuring deferred income
taxes. Previous standards required an income statement approach.
The (benefit from) provision for income taxes consisted of the following at
December 31:
1994 1993 1992
---- ---- ----
Federal:
Current $ (4,200) $ 5,000 $ --
Deferred (37,400) -- --
State:
Current 1,349 4,794 7,656
Deferred (6,600) -- --
-------- -------- --------
$(46,851) $ 9,794 $ 7,656
======== ======== ========
<PAGE>
-44-
Income tax expense for 1994, 1993 and 1992 differs from the expected tax
expense, computed by applying the U.S. Federal corporate income tax rate of
34% to income before income taxes as follows:
1994 1993 1992
---- ---- ----
Expected tax expense (benefit) $(139,000) $ 22,500 $ 11,000
Effect of graduated Federal rates -- (12,000) (6,100)
State income taxes, net of Federal
income tax benefit (23,000) 3,100 5,000
Change in valuation allowance 123,000 (3,800) (5,500)
Other, net (7,851) (6) 3,256
--------- --------- ---------
$ (46,851) $ 9,794 $ 7,656
========= ========= =========
At December 31, 1994, the Company has available a net operating loss
carryforward of approximately $388,000. This net operating loss
carryforward will begin to expire in 2002. The Company has recorded a
valuation allowance equal to the deferred tax asset related to the
carryforward.
Taxes paid in 1994, 1993 and 1992 were $3,425, $5,096 and $29,374,
respectively.
(5) Notes Payable and Obligations Under Capital Leases
Notes Payable -
Notes payable consisted of the following at December 31:
1994 1993
---- ----
Note payable to a bank $ 410,000 $ 325,000
Various notes payable in aggregate
monthly installments of $1,391,
including interest at rates ranging
from 8% to 9%. These notes mature
through February, 1997 and are 27,682 33,725
collateralized by the related -------- ---------
equipment. 437,682 358,725
Less: Current portion (106,745) (114,629)
--------- ---------
$ 330,937 $ 244,096
========= =========
<PAGE>
-45-
At December 31, 1994, the Company was not in compliance with the financial
covenants related to the note payable to a bank. On December 13, 1995, the
amount outstanding on this note and $185,000 of the amount borrowed under
its line-of-credit agreement were refinanced with the same bank. Under the
terms of the new note payable, the Company is required to make 22
consecutive monthly principal payments of $7,674, plus interest at the
bank's prime rate plus 1.25%, beginning January 1, 1996 through October 1,
1997. Beginning November 1, 1997 through September 1, 1999, the Company is
required to make 23 monthly principal payments of $6,230, plus interest at
the bank's prime rate plus 1.25%. All unpaid principal and interest is due
on October 1, 1999. This note is guaranteed by the officers/stockholders of
the Company and is collateralized by substantially all of the Company's
assets. The note payable and line-of-credit have been classified in
accordance with the new agreement as of December 31, 1994.
Future scheduled principal payments at December 31, 1994 are as follows:
1995 ........................ $ 106,745
1996 ........................ 103,744
1997 ........................ 90,148
1998 ........................ 74,760
1999 ........................ 62,285
---------
$ 437,682
=========
The refinanced note payable to the bank requires the Company to meet
certain financial measures at December 31, 1995 as follows:
a. Working capital deficit of $140,000.
b. Current ratio of .85 to 1.
c. Minimum tangible net worth of $250,000.
d. Total liabilities to tangible net worth of not more than 3.9 to 1.
e. Debt service ratio of not less than 1.75 to 1.
These ratios are adjusted on a quarterly or semi-annual basis during 1996
and thereafter.
The agreement also limits the Company's ability to make acquisitions, pay
dividends and make capital expenditures, and requires the Company to submit
certain financial information.
<PAGE>
-46-
Obligations Under Capital Leases -
The Company has entered into several capital lease agreements for
equipment. These obligations consisted of the following at December 31:
1994 1993
--------- ---------
Various leases payable in aggregate
monthly installments of $4,877,
including interest at rates ranging
from 8.4% to 15.7%. These leases
mature through January, 1997 and are
collateralized by the related equipment $ 79,130 $ 104,652
Less: Current portion (45,805) (42,220)
--------- ---------
$ 33,325 $ 62,432
========= =========
The following is a schedule of future minimum lease payments under the
capital lease obligations together with the present value of the minimum
lease payments at December 31, 1994:
1995 .......................................... $ 51,706
1996 .......................................... 34,340
1997 .......................................... 598
--------
Total minimum lease payments 86,644
Less: Amount representing interest (7,514)
--------
Present value of future minimum
lease payments under capital
lease obligations $ 79,130
========
(6) Lines-of-Credit
The Company may borrow up to $250,000 under the terms of a line-of-credit
agreement with a bank. At December 31, 1994 and 1993 there was $235,000 and
$140,000 outstanding under this line-of-credit, respectively.
On December 13, 1995, $185,000 of the amount borrowed under this
line-of-credit was refinanced as part of the note payable described in Note
5. At the same time, the Company entered into a new line-of-credit
agreement with a maximum borrowing of $50,000 through October 31, 1997.
Amounts borrowed on the new line-of-credit bear interest at the bank's
prime interest rate plus 1% and are collateralized by substantially all
assets of the Company and are guaranteed by the officers/stockholders of
the Company.
<PAGE>
-47-
(6) Lines-of-Credit (continued)
The Company may also borrow up to $100,000 under the terms of an unsecured
line-of-credit with another bank. Amounts borrowed bear interest at the
bank's prime rate plus 1%. Borrowings under this line-of-credit are
personally guaranteed by the Company's principal officers/stockholders.
There were no borrowings on this line-of-credit at December 31, 1994 and
1993.
Interest paid in 1994, 1993 and 1992 on all notes payable, obligations
under capital leases and the lines-of-credit was $67,536, $66,536, and
$70,657, respectively.
(7) Stockholders' Investment
Stock Options -
In July, 1992, the Company's Board of Directors adopted and the
stockholders approved the 1992 Stock Option Plan (1992 Plan) which replaced
the 1988 Stock Incentive Plan (1988 Plan).
Under the 1992 Plan, the Company may issue incentive stock options,
non-statutory options, non-employee director options and reload options.
The exercise price of incentive, non-statutory and reload options will not
be less than fair market value at date of grant. Incentive and
non-statutory options will generally expire ten years from date of grant.
Reload options will have a term equal to the remaining option term of the
underlying option.
The 1992 Plan also provides for annual grants of stock options to purchase
500 shares of the Company's common stock to non-employee directors of the
Company with an exercise price not less than fair market value at date of
grant. These options will expire ten years from date of grant.
Options issued under the 1988 Plan expire in 1995. No further options will
be granted under the 1988 Plan.
The Company has reserved 520,000 common shares for issuance under both
plans.
Following is a summary of option activity under the 1992 and 1988 Plans:
--- Shares Under Option ---
1994 1993
-------- --------
Outstanding, beginning of year 271,000 376,000
Expired during the year -- (105,000)
-------- --------
Outstanding, end of year 271,000 271,000
(at $.52 per share) ======== ========
<PAGE>
-48-
(8) Related Party Transactions
Subordinated Debt Due to Officer/Principal Stockholder -
During 1994, 1993 and 1992, one of the Company's officers/principal
stockholders made advances to the Company. These advances were $200,000 at
December 31, 1994 and 1993, and $194,000 at December 31, 1992, and bear
interest at the prime rate plus 3%. Repayment of these advances is
subordinated to the amounts outstanding under all other bank debt
agreements. The officer/principal stockholder has agreed not to require
payment of this amount through January, 1996.
Office Lease Commitment -
The Company leases its Rochester facility through December 31, 1995, from a
company related through common management at an annual rental of $68,000.
Rent and common area charges were approximately $58,372, $213,000 and
$263,000 in 1994, 1993, and 1992, respectively.
During 1994, total unpaid rent of $109,000 was forgiven by the related
party. This amount has been reflected as an extraordinary item, net of
income taxes of $44,000. The Company owed approximately $66,000 for unpaid
rent at December 31, 1993.
Significant Customer -
In 1994, 1993 and 1992, 4%, 4%, and 3%, respectively, of revenue was
derived from a related party. At December 31, 1994, 1993 and 1992, the
Company was owed $59,284, $57,966, and $44,006, respectively, related to
these sales.
(9) Lease Commitments
The Company leases other office facilities under operating lease agreements
expiring through March, 1998.
Minimum future lease payments under non-cancelable lease agreements with
unrelated parties are as follows at December 31:
1995 ............................ $ 119,501
1996 ............................ 107,668
1997 ............................ 54,668
1998 ............................ 40,062
---------
$ 321,899
=========
Rent expense related to these operating leases was approximately $135,000,
$127,000 and $174,000 for the years ended December 31, 1994, 1993 and 1992,
respectively.
<PAGE>
-49-
(10) Supplemental Disclosure of Non-Cash Investing and Financing Activities
The Company had the following non-cash transactions:
1994
----
a. Capital lease obligations of $24,107 were incurred when the Company
entered into leases for new equipment.
b. An extraordinary gain of $109,000, net of income taxes of $44,000,
resulted from the forgiving of amounts due to a related party, as more
fully explained in Note 8.
1993
----
a. Issued 1,260 shares of common stock with a fair value of $315 in
exchange for common stock of Mid-State Abstract Corporation.
1992
----
a. Refinanced $375,000 in borrowings under a line-of-credit with the
proceeds of a term loan.
(11) Reverse Stock Split
In July, 1992, the Company's stockholders approved a one-for-four reverse
stock split. In conjunction with this reverse stock split, the authorized
number of shares was reduced to 15,000,000 and par value was increased to
$.04 per share. These actions have been retroactively reflected in the
financial statements.
(12) Significant Customers
In 1992, one customer accounted for 16% of revenue.
(13) Discontinued Stock Offering
During 1992 and 1991, in an effort to raise additional capital, the Company
incurred professional fees related to a proposed stock offering. This
offering was not completed and the related costs were charged to expense in
1992.
<PAGE>
-50-
INDEPENDENT AUDITORS' REPORT
February 17, 1995
(except for Notes 5 and 6,
as to which the date
is December 13, 1995)
To the Stockholders of
Four Corners Financial Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Four Corners
Financial Corporation and Subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations, changes in stockholders'
investment, and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Four Corners Financial
Corporation and Subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994 in conformity with generally accepted accounting
principles.
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
-------- Deductions -------- Balance at End of Period
------------------------
Balance at
Beginning Amounts Amounts
of Period Additions Collected Written off Current Not-Current
--------- --------- --------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994:
Gallo and Iacovangelo (1) $ 57,966 $ 165,437 $(148,119) $ (16,000) $ 59,284 $ --
========= ========= ========= ============== ========= ==========
YEAR ENDED DECEMBER 31, 1993:
Gallo and Iacovangelo (1) $ 44,006 $ 212,064 $(198,104) $ -- $ 57,966 $ --
========= ========= ========= ============== ========= ==========
YEAR ENDED DECEMBER 31, 1992:
Gallo and Iacovangelo (1) $ 45,384 $ 179,652 $(181,030) $ -- $ 44,006 $ --
========= ========= ========= ============== ========= ==========
</TABLE>
Note:
(1) All amounts receivable are normal receivables for services rendered.
-51-
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARIES
SCHEDULE IV - INDEBTEDNESS TO RELATED PARTIES
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Balance at
Beginning Balance at
of Year Additions(1) Repayments End of Year
------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994:
Note payable - officer/principal $200,000 $ -- $ -- $200,000
stockholder ======== =============== ================ ========
YEAR ENDED DECEMBER 31, 1993:
Note payable - officer/principal $194,000 $ 6,000 $ -- $200,000
stockholder ======== =============== ================ ========
YEAR ENDED DECEMBER 31, 1992:
Note payable - officer/principal $194,000 $ -- $ -- $194,000
stockholder ======== =============== ================ ========
</TABLE>
Note:
(1) All additions to indebtedness to related parties were used for general
working capital purposes.
-52-
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
<TABLE>
<CAPTION>
Additions
-----------------------------------
Balance at Balance at
Beginning Charges to Charges to End of
of Period Expenses Other Accounts Deductions Period
--------- -------- -------------- ---------- ------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994:
Allowance for doubtful accounts $ 30,000 $ 121,678 $ -- $ (51,678) $ 100,000
========= ========= ================ ========= =========
YEAR ENDED DECEMBER 31, 1993:
Allowance for doubtful accounts $ 30,000 $ 33,533 $ -- $ (33,533) $ 30,000
========= ========= ================ ========= =========
YEAR ENDED DECEMBER 31, 1992:
Allowance for doubtful accounts $ 30,000 $ 118,047 $ -- $(118,047) $ 30,000
========= ========= ================ ========= =========
</TABLE>
-53-
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Maximum Average Weighted
Amount Amount Average
Outstanding Interest Outstanding Outstanding Interest Rate
Balance at Rate at During During During
Borrowing Category End of Year End of Year the Year the Year (1) the Year (2)
------------------ ----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994:
Borrowing under lines-of-credit $ 50,000 9.00% $235,000 $184,583 6.69%
======== ==== ======== ======== ====
YEAR ENDED DECEMBER 31, 1993:
Borrowings under lines-of-credit $140,000 6.50% $249,000 $191,500 5.90%
======== ==== ======== ======== ====
YEAR ENDED DECEMBER 31, 1992:
Borrowings under lines-of-credit $ 25,000 6.50% $ 50,000 $ 35,889 6.53%
======== ==== ======== ======== ====
</TABLE>
Notes:
(1) Calculated as the average of month-end balances outstanding.
(2) Calculated as actual interest expense divided by the average amount
outstanding during the year.
-54-
<PAGE>
- 55 -
EXHIBIT 10.1
REVOLVING CREDIT AND TERM LOAN AGREEMENT
REVOLVING CREDIT AND TERM LOAN AGREEMENT dated as of December 13, 1995
between FOUR CORNERS FINANCIAL CORPORATION, a New York corporation (the
"Borrower") and MARINE MIDLAND BANK, a New York State banking corporation (the
"Bank").
RECITALS
WHEREAS, the Borrower and the Bank are parties to a certain Commercial
Installment Loan Agreement dated March 27, 1992, a certain Optional Advance Time
or Grid Note dated March 27, 1992, a Security Agreement (Accounts, General
Intangibles and Chattel Paper Including Leases) dated March 27, 1992, and a
Security Agreement (Equipment, Consumer Goods, Fixtures) dated March 27, 1992
(collectively, the "Prior Agreements"); and
WHEREAS, Bernard J. Iacovangelo and Frank B. Iacovangelo (the "Guarantors")
have unconditionally guaranteed the prompt payment to the Bank of any and all
indebtedness of Borrower pursuant to Unlimited Continuing Guaranties dated March
27, 1992 (the "Guaranties"); and
WHEREAS, the Bank has made Loans to the Borrower under the Prior Agreements
in the form of a term loan, the outstanding principal balance of which as of
December 12, 1995 is $133,333.48 plus accrued and unpaid interest in the amount
of $402.43 (the "Existing Term Loan") and various revolving credit loans, the
aggregate principal of which as of December 12, 1995 is $235,000.00 plus accrued
and unpaid interest in the amount of $664.20 (the "Existing Line") (together,
the "Existing Indebtedness"); and
WHEREAS, the Borrower is in default under the Prior Agreements by reason of
its failure to comply with certain covenants and conditions contained therein.
WHEREAS, the Bank, the Borrower and the Guarantors have agreed to
restructure the Existing Indebtedness on the terms and conditions hereinafter
set forth;
PROVISIONS
NOW, THEREFORE, in consideration of the foregoing Recitals and the
representations, warranties and covenants hereinafter set forth, the Borrower
and the Bank hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 DEFINED TERMS. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have the same
meaning when used in the plural and vice versa):
"Affiliate" means any Person (1) which directly or indirectly controls, or
is controlled by, or is under common control with the Borrower or a Subsidiary;
(2) which directly or indirectly beneficially owns or holds five percent (5 %)
or more of any class of voting stock of the Borrower; or (3) five percent (5%)
or more of the voting stock of which is directly or indirectly beneficially
owned or held by the Borrower or a Subsidiary. The term 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.
"Agreement" means this Revolving Credit and Term Loan Agreement, as
amended, supplemented, or modified from time to time.
<PAGE>
- 56 -
"Borrowing Base" shall have the meaning assigned to such term in Section
2.3.
"Business Day" means any day other than a Saturday, Sunday, or other day on
which banks in Rochester, New York are authorized or required to close under the
laws of the State of New York.
"Capital Lease" means all leases which have been or should be capitalized
on the books of the lessee in accordance with GAAP.
"Collateral" means all property which is subject to the Lien granted by the
Security Agreement.
"Confirmation of Guaranty" means the confirmation of guaranty in the form
of Exhibit A hereto to be executed by the Guarantors.
"Debt" means (1) indebtedness or liability for borrowed money or for the
deferred purchase price of property or services (including trade obligations);
(2) obligations as lessee under Capital Leases; (3) current liabilities in
respect of unfunded vested benefits under any Plans; (4) obligations under
letters of credit issued for the account of any Person; (5) all obligations
arising under acceptance facilities; (6) 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 otherwise to assure a creditor against loss;
and (7) obligations secured by any Lien on property owned by the Person, whether
or not the obligations have been assumed.
"Default" means any of the events specified in Section 9.1, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Environmental Laws" means all federal, state and local environmental, land
use, zoning, health, chemical use, safety and sanitation laws, statutes,
ordinances, regulations, codes and rules relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of hazardous
substances and the regulations, rules, ordinances, by-laws, policies,
guidelines, procedures, interpretations, decisions, orders and directives of
federal, state and local governmental agencies and authorities with respect
thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
which together with the Borrower would be treated as a single employer under
Section 4001 of ERISA.
"Event of Default" means any of the events specified in Section 9.1,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Existing Indebtedness" has the meaning given it in the Recitals to this
Agreement.
"Existing Term Loan" has the meaning given it in the Recitals to this
Agreement.
"GAAP" means generally accepted accounting principles in the United States.
"Guarantors" means Frank B. Iacovangelo and Bernard J. Iacovangelo.
"Head Office" means the principal place of business of the Bank at One
Marine Midland Plaza, Rochester, New York 14639.
<PAGE>
- 57 -
"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).
"Line Expiration Date" shall have the meaning assigned to such term in
Section 2.3.
"Loan(s)" means, as the context may require, the Restructured Term Loan,
the Revolving Credit Loans or the Take-Out Term Loan.
"Loan Documents" means this Agreement, the Notes, the Security Agreement
and the Guaranties.
"Multiemployer Plan" means a Plan described in Section 4001(a)(3! of ERISA
which covers employees of the Borrower or any ERISA Affiliate.
"Note(s)" means, as the context may require, the Restructured Term Note,
the Revolving Credit Note or the Take-Out Term Note.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA
"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, maintained, or
to which contributions have been made by the Borrower or any ERISA Affiliate.
"Prime Rate" means the rate of interest publicly announced by the Bank from
time to time to be its prime rate and is a base rate for calculating interest on
certain loans.
"Prior Agreement" has the meaning given it in the Recitals to this
Agreement.
"Prohibited Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended from time
to time.
"Property" means all real property owned, occupied or operated by the
Borrower or its Subsidiaries.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"Restructured Term Loan" shall have the meaning assigned to such term in
Section 2. 1.
"Restructured Term Note" shall have the meaning assigned to such term in
Section 2.2.
"Revolving Credit Line and Revolving Credit Loans" shall have the meaning
assigned to such terms in Section 2.3.
"Revolving Credit Note" shall have the meaning assigned to such term in
Section 2.8.
"Security Agreement" means the Security Agreement in substantially the form
of Exhibit B, to be delivered by the Borrower under the terms of this Agreement.
"Subordinated Notes" means the notes evidencing the subordinated
indebtedness owing to Frank B. Iacovangelo as referenced in Sections 5.16 and
7.11.
<PAGE>
- 58 -
"Subsidiary" means, as to any Person, a corporation of which shares of
stock having ordinary voting power (other than stock having such power only by
reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation are at the time owned, or the
management of which is otherwise controlled. directly, or indirectly through one
or more intermediaries, or both, by such Person.
"Termination Date" means October 1, 1999, the date that the Commitment
expires.
SECTION 1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with those applied
in the preparation of the financial statements referred to in Section 5.4, and
all financial data submitted pursuant to this Agreement shall be prepared in
accordance with such principles.
ARTICLE II
AMOUNT AND CERTAIN TERMS OF THE LOANS
SECTION 2.1 RESTRUCTURED TERM LOAN. The Bank agrees on the terms and
conditions hereinafter set forth to increase the principal amount of the
Existing Term Loan to $318,333.48 and to place such increased principal amount
on a repayment schedule as hereafter provided (the "Restructured Term Loan").
The increased portion of the Restructured Term Loan shall be used to pay down
the Existing Line.
SECTION 2.2 RESTRUCTURED TERM NOTE. The Borrower s obligation to repay the
Restructured Term Loan shall be evidenced by its promissory note (the
"Restructured Term Note") in substantially the form of Exhibit C attached hereto
with blanks appropriately filled in and payable to the order of the Bank. The
Restructured Term Note shall be dated the date of this Agreement and the
principal of the Restructured Term Loan will be repaid in forty-six (46)
consecutive monthly installments as follows: beginning January 1, 1995 through
and including October 1, 1997, the Borrower shall make 22 consecutive monthly
payments of principal in the amount of $7,673.61 each, plus accrued interest;
beginning November 1, 1997 through and including September 1, 1999, Borrower
shall make 23 consecutive monthly payments of principal in the amount of
$6,229.75 each, plus accrued interest; and on October 1, 1999, the Borrower
shall make a final payment equal to all unpaid principal and interest owing
hereunder.
SECTION 2.3 REVOLVING CREDIT LINE. The Bank agrees on the terms and
conditions hereinafter set forth to make loans (the "Revolving Credit Loans") to
the Borrower from time to time during the period from the date of this Agreement
up to but not including November 1, 1997 (the "Line Expiration in an aggregate
amount not to exceed at any time the lesser of (a) $50,000 or (b) the Borrowing
Base.
(a) 75% of the Borrower's eligible accounts receivable from abstracting
services (after giving effect to a 95% conversion rate); plus
(b) 75% of the Borrower's eligible accounts receivable from appraisal
services (after giving effect to a 95% conversion rate); plus
(c) 100% of the Borrower's eligible work-in-process from title insurance,
(after giving effect to an 85% conversion rate); plus
(d) 100% of the cash surrender value of William Penn Life Insurance of New
York Policy No. 0700000587 on the life of Frank B. Iacovangelo, as
evidenced by the most recent statement of insurance coverage provided
by the Borrower to the Bank; plus
<PAGE>
- 59 -
(e) 100% of the appraised liquidation value (after expenses of sale) of
the Borrower's equipment, based on a "desk top" liquidation appraisal
(which must be satisfactory to the Bank in its sole discretion), net
of any purchase money liens; less
(f) the aggregate outstanding principal balance on the Restructured Term
Loan.
Without limiting the Bank's discretion to deem accounts, inventory and
work-in-process not eligible for inclusion in the calculation of the Borrowing
Base for any reason in the Bank's sole and absolute discretion, the following
will not be deemed eligible:
(1) Accounts receivable which remain unpaid for more than 180 days after
the specified due date.
(2) All accounts receivable from a single debtor if 50% or more of the
accounts receivable owing from such debtor are more than 180 days past due.
(3) Accounts receivable or work-in process referred to a collection agency.
SECTION 2.4 NOTICE AND MANNER OF BORROWING. The Borrower shall give the
Bank at least one (1) Business Days' written or telegraphic notice (effective
upon receipt) of any Revolving Credit Loans under this Agreement, specifying the
date and amount thereof. Not later than 2:00 P.M. Eastern Standard Time on the
date of such Revolving Credit Loan and upon fulfillment of the applicable
conditions set forth in Article IV, the Bank will make such Revolving Credit
Loan available to the Borrower in immediately available funds by crediting the
amount thereof to the Borrower's account with the Bank.
SECTION 2.5 TAKE OUT TERM LOAN. Subject to satisfaction of the conditions
set forth in Section 4.3 hereof, on the Line Expiration Date, the Borrower
shall, convert the principal balance of the Revolving Credit Loans then
outstanding to a term loan (the "Takeout Term Loan") on the terms and conditions
contained herein.
SECTION 2.6 USE OF PROCEEDS. The proceeds of the Restructured Term Loan and
the initial Revolving Credit Loan hereunder shall be used by the Borrower to
payoff the Existing Indebtedness. Subsequent Revolving Credit Loans shall be
used to provide for working capital needs. The Take-Out Term Loan shall be used
to pay off the outstanding balance of the Revolving Credit Loans on the
Termination Date. The Borrower will not, directly or indirectly, use any part of
such proceeds 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 or to extend credit to any Person for the purpose of purchasing or
carrying any such margin stock.
SECTION 2.7 REVOLVING CREDIT AND TAKE OUT NOTES.
(1) All Revolving Credit Loans made by the Bank under this Agreement shall
be evidenced by, and repaid with interest in accordance with, a single
promissory note of the Borrower in substantially the form of Exhibit D duly
completed, in the principal amount of Fifty Thousand Dollars ($50,000), dated
the date of this Agreement, payable to the Bank, and maturing as to principal on
the Line Expiration Date (the "Revolving Credit Note"). The Bank is hereby
authorized by the Borrower to endorse on the schedule attached to the Note the
amount of each Revolving Credit Loan and of each payment of principal received
by the Bank on account of the Revolving Credit Loans, which endorsement shall be
prima facie evidence of the outstanding balance of the Revolving Credit Loans
made by the Bank; provided, however, that the failure to make such notation with
respect to any Revolving Credit Loan or payment shall not limit or otherwise
affect the obligations of the Borrower under this Agreement or the Revolving
Credit Note.
<PAGE>
- 60 -
(2) The Take-Out Term Loan shall be evidenced by, and repaid with interest
in accordance with, a single promissory note (the "Take-Out Term Note") of the
Borrower in substantially the form of Exhibit E duly completed and with blanks
appropriately filled in. The Take-Out Term Note shall be dated as of the Line
Expiration Date and the principal of the Take-Out Term Note will be repaid in
twenty-four (24) consecutive monthly installments of principal plus accrued
interest, beginning November 1, 1997 and on the first day of each month
thereafter to and including October 1, 1999.
SECTION 2.8 COMMITMENT FEES. The Borrower agrees to pay to the Bank a
onetime commitment fee of one percent (1 %) of the amount of the Revolving
Credit Line, or $500 payable on the date hereof.
SECTION 2.9 PREPAYMENTS. The Borrower may prepay any of the Notes in whole
or in part with accrued interest to the date of such prepayment on the amount
prepaid, provided that any such prepayment resulting from borrowings from
another financial institution shall be accompanied by a prepayment premium equal
to 1% of the principal amount of such prepayment. Each prepayment shall be
applied to the principal installments thereof in the inverse order of their
maturities.
SECTION 2.10 METHOD OF PAYMENT. The Borrower shall make each payment under
this Agreement and under the Notes not later than 11:59 A.M. Eastern Standard
Time on the date when due in lawful money of the United States to the Bank at
the Head Office in immediately available funds. The Borrower hereby authorizes
the Bank, if and to the extent payment is not made when due under this Agreement
or under the Notes, to charge from time to time against any account of the
Borrower with the Bank any amount so due. Whenever any payment to be made under
this Agreement or under the Notes shall be stated to be due on a Saturday,
Sunday, or a public holiday, or the equivalent for the Bank generally under the
laws of the State of New York, 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 and the commitment fee, as the case may
be.
ARTICLE III
INTEREST ON THE LOANS
SECTION 3.1 INTEREST ON RESTRUCTURED TERM LOAN. Subject to Section 3.3
hereof, the Borrower shall pay interest to the Bank on the outstanding and
unpaid principal amount of the Restructured Term Loan, made under this Agreement
at a rate per annum equal to one and one-quarter percent (1.25%) over the Prime
Rate. Any change in the interest rate resulting from a change in the Prime Rate
shall become effective as of the opening of business on the day on which such
change in the Prime Rate shall become effective. Interest shall be calculated on
the basis of a year of 360 days for the actual number of days elapsed. Interest
shall be paid in immediately available funds on the first day of each month at
the Head Office.
SECTION 3.2 INTEREST ON REVOLVING CREDIT LOANS AND TAKE OUT TERM LOAN
Subject to Section 3.3 hereof, the Borrower shall pay interest to the Bank on
the outstanding and unpaid principal amount of the Revolving Credit Loans and
the Take-Out Term Loan made under this Agreement at a rate per annum equal to
one percent (1.0%) over the Prime Rate. Any change in the interest rate
resulting from a change in the Prime Rate shall become effective as of the
opening of business on the day on which such change in the Prime Rate shall
become effective. Interest shall be calculated on the basis of a year of 360
days for the actual number of days elapsed. Interest shall be paid in
immediately available funds on the first day of each month at the Head Office.
SECTION 3.3 DEFAULT INTEREST RATE. Notwithstanding any other provision of
this Agreement to the contrary, the Borrower shall pay interest to the Bank on
the outstanding and unpaid principal amount of the Restructured Term Loan, the
Revolving Credit Loans and the Take-Out Term Loan at a rate which shall be five
percent (5%)
<PAGE>
- 61 -
above the rate that would otherwise apply upon the occurrence of an Event of
Default and for so long as the same shall continue. Without limiting the
generality of the foregoing, any principal amount not paid when due (at
maturity, by acceleration, or otherwise) shall bear interest thereafter until
paid at the default interest rate provided for in the preceding sentence.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 CONDITIONS PRECEDENT TO RESTRUCTURED TERM LOAN AND INITIAL
REVOLVING CREDIT LOAN. The obligation of the Bank to make the Restructured Term
Loan and the initial Revolving Credit Loan to Borrower is subject to the
condition precedent that the Bank shall have received on or before the day of
such Loans, each of the following, in form and substance satisfactory to the
Bank and its counsel:
(1) Corporate Documents. The following documents, each certified as
indicated below: (a) a copy of the charter, as amended and in effect, of the
Borrower certified as of a recent date by the Secretary of State of its
jurisdiction of incorporation, and a certificate from such Secretary of State
dated as of a recent date as to the good standing of and charter documents filed
by the Borrower; (b) a Certificate of the Secretary or an Assistant Secretary of
the Borrower, dated the date first above written and certifying (i) that
attached thereto is a true and complete copy of the by-laws of the Borrower as
amended and in effect at all times from the date of which the resolutions
referred to in clause (ii) were adopted to and including the date of such
certificate, (ii) that attached thereto is a true and complete copy of
resolutions duly adopted by the Board of Directors of the Borrower authorizing
the execution, delivery and performance of the Loan Documents to which Borrower
is a party, and the extensions of credit hereunder, and that such resolutions
have not been modified, rescinded or amended and are in full force and effect,
(iii) that the charter of the Borrower has not been amended since the date of
the certification thereto furnished pursuant to clause (1) above, and (iv) as to
the incumbency and specimen signature of each officer of the Borrower executing
the Loan Documents to which Borrower is a party, and each other document to be
delivered by the Borrower from time to time in connection therewith;
(2) Notes. The Restructured Term Note and Revolving Credit Note duly
executed by the Borrower;
(3) Security Agreement. A Security Agreement duly executed by Borrower,
together with: (a) acknowledgment copies of the Financing Statements (UCC-1)
duly filed under the Uniform Commercial Code of all jurisdictions necessary or,
in the opinion of the Bank, desirable to perfect the security interest created
by the Security Agreement; and (b) certified copies of Requests for Information
(Form UCC-11) identifying all of the financing statements on file with respect
to the Borrower in all jurisdictions referred to under (a), including the
Financing Statements filed by Bank against the Borrower, indicating that no
party claims an interest in any of the Collateral;
(4) Reaffirmation of Guaranties. The Guaranties duly executed by the
Guarantors;
(5) Assignment of Life Insurance. An assignment of life insurance policy
No. 0700000587 on the life of Frank B. Iacovangelo in the form of Exhibit F.
SECTION 4.2 CONDITIONS PRECEDENT TO ALL REVOLVING CREDIT LOANS. The
obligation of the Bank to make each Revolving Credit Loan (including the initial
Revolving Credit Loan) shall be subject to the further conditions precedent that
on the date of such Loan:
(1) The following statements shall be true and the Bank shall have received
a certificate signed by a duly authorized officer of the Borrower dated the date
of such Revolving Credit Loan, stating that:
<PAGE>
- 62 -
(a) The representations and warranties contained in Article V of this
Agreement, and in Section III of the Security Agreement, are correct on and as
of the date of such Loan as though made on and as of such date; and
(b) No Default or Event of Default has occurred and is continuing, or
would result from such Loan; and
(2) The Borrower shall have delivered a Borrowing Base Certificate, in form
and substance satisfactory to the Bank demonstrating that after giving effect to
such Loan, the aggregate amount of Revolving Credit Loans does not exceed the
Eligible Borrowing Base.
(3) The Bank shall have received such other approvals, opinions, or
documents as the Bank may reasonably request.
SECTION 4.3 CONDITIONS PRECEDENT TO THE TAKE OUT TERM LOAN. The Borrower's
right to convert the Revolving Credit Loans to the Take-Out Term Loan shall be
subject to the condition precedent that the Bank shall have received on or
before the Termination Date all of the documents required by Sections 4.1 and
4.2 and each of the following, in form and substance satisfactory to the Bank
and its counsel:
(1) Interest. All accrued interest on the Revolving Credit Loans through
the Termination Date shall be paid;
(2) Note. The Take-Out Term Note duly executed by the Borrower;
(3) Officer's certificate, etc. The following statements shall be true and
the Bank shall have received a certificate signed by a duly authorized officer
of the Borrower dated the date of the Take-Out Term Loan stating that:
(a) The representations and warranties contained in Article V of this
Agreement, and in Section III of the Security Agreement, are correct on and as
of the date of the Take-Out Term Loan as though made on and as of such date; and
(b) No Default or Event of Default has occurred and is continuing, or
would result from the Take-Out Term Loan; and
(4) Additional Documentation. The Bank shall have received such other
approvals, opinions, or documents as the Bank may reasonably request.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and make the Loans to the
Borrower, Borrower represents and warrants and, so long as the Notes remain
unpaid or this Agreement remains in effect, shall be deemed continuously (except
as expressly noted otherwise) to represent and warrant as follows:
SECTION 5.1 INCORPORATION, GOOD STANDING, AND DUE QUALIFICATION. The
Borrower is a corporation duly incorporated, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation; has the
corporate power and authority to own its assets and to transact the business in
which it is now engaged or proposed to be engaged in; and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required.
SECTION 5.2 CORPORATE POWER AND AUTHORITY. The execution, delivery, and
performance by the Borrower of the Loan Documents to which each is a party have
been duly authorized by all necessary corporate action and do not and will not
(1) require any consent or approval of the stockholders of such corporation; (2)
contravene such corporation's charter or bylaws; (3) violate any provision of
any law, rule, regulation (including, without limitation, Regulation U of the
Board of Governors of the Federal
<PAGE>
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Reserve System), order, writ, judgment, injunction, decree, determination, or
award presently in effect having applicability to such corporation; (4) result
in a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease, or instrument to which such corporation
is a party or by which it or its properties may be bound or affected; (5) result
in, or require, the creation or imposition of any Lien, upon or with respect to
any of the properties now owned or hereafter acquired by such corporation; and
(6) cause such corporation to be in default under any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination, or award
or any such indenture, agreement, lease, or instrument.
SECTION 5.3 LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, legal,
valid, and binding obligations of the Borrower enforceable against the Borrower
in accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency, and other
similar laws affecting creditors' rights generally.
SECTION 5.4 FINANCIAL STATEMENTS. The balance sheet of the Borrower as at
June 30, 1995, and the related statements of income and retained earnings of the
Borrower and its Subsidiaries for the six month period then ended, copies of
which have been furnished to the Bank, are complete and correct and fairly
present the financial condition of the Borrower and its Subsidiaries as at such
dates and the results of the operations of the Borrower and its Subsidiaries for
the periods covered by such statements, all in accordance with GAAP consistently
applied (subject to year-end adjustments), and since June 30, 1995, there has
been no material adverse change in the condition (financial or otherwise),
business, or operations of the Borrower or any Subsidiary.
SECTION 5.5 LABOR DISPUTES AND ACTS OF GOD. Neither the business nor the
properties of the Borrower are affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy, or other casualty (whether or not
covered by insurance) materially and adversely affecting such business or
properties or the operation of the Borrower. The foregoing representation and
warranty is made as of the date of this Agreement only, notwithstanding the
preamble of Article V hereof.
SECTION 5.6 OTHER AGREEMENTS. The Borrower is not a party to any indenture,
loan, or credit agreement, or to any lease or other agreement or instrument, or
subject to any charter or corporate restriction which could have a material
adverse effect on the business, properties, assets, operations, or conditions,
financial or otherwise, of the Borrower or the ability of the Borrower to carry
out its obligations under the Loan Documents to which it is a party. 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 material to its business to which it is a party.
SECTION 5.7 LITIGATION. There is no pending or threatened action or
proceeding against or affecting the Borrower before any court, governmental
agency, or arbitrator, which may, in any one case or in the aggregate,
materially adversely affect the financial condition, operations, properties, or
business of the Borrower or the ability of the Borrower to perform its
obligation under the Loan Documents to which it is a party. The foregoing
representation and warranty is made as of the date of this Agreement only,
notwithstanding the preamble of Article V hereof.
SECTION 5.8 NO DEFAULTS 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.
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SECTION 5.9 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 interest reflected in the
financial statements referred to in Section 5.4 (other than any properties or
assets disposed of in the ordinary course of business), and none of the
properties and assets owned by the Borrower or any Subsidiary and none of their
leasehold interests is subject to any Lien, except such as may be permitted
pursuant to Section 7.1 of this Agreement.
SECTION 5.10 SUBSIDIARIES. Except for Four Corners Abstract Corp., the
Borrower does not have any Subsidiaries.
SECTION 5.11 ERISA. The Borrower is in compliance in all material respects
with all applicable provisions of ERISA, the breach of which could create a
substantial material liability for the Borrower which in the aggregate exceeds,
or may exceed, Twenty-Five Thousand Dollars ($25,000). Neither a Reportable
Event nor a Prohibited Transaction has occurred and is continuing with respect
to any Plan; no notice of intent to terminate a Plan has been filed nor has any
Plan been terminated; no circumstances exist which constitute grounds under
Section 4042 of ERISA entitling the PBGC to institute proceedings to terminate,
or appoint a trustee to administrate, a Plan, nor has the PBGC instituted any
such proceedings; neither the Borrower nor any ERISA Affiliate has completely or
partially withdrawn under Sections 4201 or 4204 of ERISA from a Multiemployer
Plan; the Borrower and each ERISA Affiliate has met its minimum funding
requirements under ERISA with respect to all of its Plans and the present value
of all vested benefits under each Plan does not exceed the fair market value of
all Plan assets allocable to such benefits, as determined on the most recent
valuation date of the Plan and in accordance with the provisions of ERISA and
the regulations thereunder for calculating the potential liability of the
Borrower or any ERISA Affiliate to the PBGC or the Plan under Title IV of ERISA;
and neither the Borrower nor any ERISA Affiliate has incurred any liability
(other than to pay annual premiums) to the PBGC under ERISA.
SECTION 5.12 OPERATION OF BUSINESS. The Borrower and its Subsidiaries
possess all licenses, permits, franchises, patents, copyrights, trademarks, and
trade names, or rights thereto, to conduct its respective 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.
SECTION 5.13 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 thereon to be due, including interest and
penalties.
SECTION 5.14 DEBT. Exhibit G is a complete and correct list of all credit
agreements, indentures, purchase agreements, guaranties, Capital Leases, and
other investments, agreements, and arrangements presently in effect providing
for or relating to extensions of credit (including agreements and arrangements
for the issuance of letters of credit or for acceptance financing) in respect of
which the Borrower is in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question, which are
outstanding and which can be outstanding, are correctly stated, and all Liens of
any nature given or agreed to be given as security therefor are correctly
described or indicated in such Exhibit.
SECTION 5.15 FINANCIAL COVENANTS. The Financial Covenants contained in
Article VII are based upon financial projections provided by the Borrower to the
Bank and represent a level of financial performance which the Borrower believes
it can achieve.
SECTION 5.16 SUBORDINATED NOTES TO FRANK B.IACOVANGELO. The Borrower is not
in any way obligated to or for the benefit of Frank B. Iacovangelo or any member
of his family except for the Borrower's obligation to Frank B. Iacovangelo under
that certain promissory note dated - 3/27/92 in the principal amount of $194,000
(the "Subordinated Note"). True and correct copies of the Subordinated Notes are
attached hereto as Exhibit H. There are no understandings relating to the
Subordinated Notes other than the terms and conditions contained therein. No
principal payment has been made on account of the debt evidenced by the
Subordinated Notes. No default or event of default has occurred under or with
respect to the Subordinated Notes.
<PAGE>
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ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Notes shall remain unpaid or the Bank shall have any
Commitment under this Agreement, the Borrower will:
SECTION 6.1 MAINTENANCE OF EXISTENCE. Preserve and maintain its corporate
existence in good standing in the jurisdiction of its incorporation, and qualify
and remain qualified as a foreign corporation in each jurisdiction in which such
qualification is required.
SECTION 6.2 MAINTENANCE OF RECORDS. Keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Borrower.
SECTION 6.3 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 6.4 CONDUCT OF BUSINESS. Continue to engage in an efficient and
economical manner in a business of the same general type as now conducted by it
on the date of this Agreement.
SECTION 6.5 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, which insurance may provide for
reasonable deductibility from coverage thereof.
SECTION 6.6 COMPLIANCE WITH LAWS. Comply in all respects with all
applicable laws, rules, regulations, 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.
SECTION 6.7 PAYMENT OF TAXES. Promptly pay all taxes as they become due.
SECTION 6.8 RIGHT OF INSPECTION. At any reasonable time and from time to
time, permit the Bank or any agent or representative thereof to examine and make
copies of 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 any of their respective officers and directors and the
Borrower's independent accountants. In addition, without limiting the generality
of the foregoing, Borrower shall permit Bank to perform quarterly audits, at
Borrower's expense, to appraise the value of the collateral and determine
compliance with covenants contained in this Article VI.
SECTION 6.9 REPORTING REQUIREMENTS. Furnish to the Bank:
(1) Accounts Receivable and Work-in-Process. Monthly, an aging of all of
the Borrower's accounts receivable, and a work-in-process schedule as of the end
of the prior month, in each case along with the Borrower's computation of the
available Commitment and a certificate of no default as set forth in Section
5.8(5), all in reasonable detail and certified by the chief executive officer or
chief financial officer of the Borrower.
(2) Monthly Financial Statements. As soon as available and in any event
within twenty (20) days after the end of each fiscal month of the Borrower, a
statement of income of the Borrower for the period commencing at the end of the
previous fiscal year and ending with the end such month, all in reasonable
detail and stating in comparative form the respective figures for 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 (subject to year-end adjustments);
<PAGE>
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(3) Quarterly Financial Statements. As soon as available and in any event
within forty-five (45) days after the end of each fiscal quarter of the
Borrower, balance sheets 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 a statement of changes in cash flow of the Borrower for the
portion of the fiscal year ended with the last day of such quarter, all in
reasonable detail and stating in comparative form the respective figures for 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 (subject to year-end adjustments);
(4) Annual Financial Statements. As soon as available and in any event
within one hundred twenty (120) days after the end of each fiscal year of the
Borrower, a balance sheet of the Borrower as of the end of such fiscal year and
a statement of income and retained earnings of the Borrower for such fiscal year
and a statement of change in financial position of the Borrower for such fiscal
year, all in reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the prior fiscal year and all
prepared in accordance with GAAP consistently applied and as to the consolidated
statements accompanied by an opinion thereon acceptable to the Bank by
independent accountants selected by the Borrower and acceptable to the Bank;
(5) Personal Financial Statements/Tax Returns. As soon as available, and in
any event before August 15 of each year, personal financial statements on the
Bank's approved form and personal income tax returns of the Guarantors.
(6) Management Letters. Promptly upon receipt thereof, copies of any
reports submitted to the Borrower by independent certified public accountants in
connection with examination of the financial statements of the Borrower made by
such accountants;
(7) Certificate of No Default. Within thirty (30) days after the end of
each month, a certificate of the chief financial officer of the Borrower (a)
certifying that to the best of his knowledge no Default or Event of Default has
occurred or is continuing or, if a Default or Event of Default has occurred or
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;
(8) Accountant's Report. Simultaneously with the delivery of the annual
financial statements referred to in Section 6.8(3), a certificate of the
independent public accountants who audited such statements to the effect that,
in making the examination necessary for the audit of such statements, they have
obtained no knowledge of any condition or event which constitutes a Default or
Event of Default, or if such accountants shall have obtained knowledge of any
such condition or event, specifying in such certificate each such condition or
event of which they have knowledge and the nature and status thereof;
(9) Notice of Litigation. Promptly after the commencement thereof, notice
of all actions, suits, and proceedings before any court or governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, affecting the Borrower which, if determined adversely to the Borrower,
could have a material adverse effect on the financial condition, properties, or
operations of the Borrower;
(10) Notice of Defaults and Events of Default. As soon as possible and in
any event within ten (10) 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;
(11) ERISA Reports. Promptly after the filing or receiving thereof, copies
of all reports, including annual reports, and notices which the Borrower files
with or receives from the PBGC or the U.S. Department of Labor under ERISA; and
as soon as possible and in any event within ten (10) days after the Borrower
knows or has reason to know that any Reportable Event or Prohibited Transaction
has occurred with respect
<PAGE>
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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, 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;
(12) Reports to Other Creditors. Promptly after the furnishing thereof,
copies of any statement or report furnished to any other party pursuant to the
terms of any indenture. loan, or credit or similar agreement and not otherwise
required to be furnished to the Bank pursuant to any other clause of this
Section 6.8;
(13) Proxy Statements, etc. Promptly after the sending or filing thereof,
copies of all proxy statements, financial statements, and reports which the
Borrower sends to its stockholders, and copies of all regular, periodic, and
special reports, and all registration statements which the Borrower files with
the Securities and Exchange Commission or any governmental authority which may
be substituted therefor, or with any national securities exchange; and
(14) Notice of Certain Events. Promptly after the occurrence thereof,
provide notice of any event or circumstance that would cause the representations
and warranties of the Borrower contained herein to be untrue when made.
(15) Gallo & Iacovangelo Receivables. The Borrower shall collect all past
due accounts receivable owing to the Borrower by Gallo & Iacovangelo before
December 31, 1995.
(16) General Information. Such other information respecting the condition
or operations, financial or otherwise, of the Borrower or any Subsidiary as the
Bank may from time to time reasonably request.
SECTION 6.10 ENVIRONMENTAL COMPLIANCE. Comply with all Environmental Laws
concerning the Collateral, any related personal property, or any Property where
the Collateral is located.
SECTION 6.11 LIFE INSURANCE ASSIGNMENT. Obtain, within 45 days of the date
hereof, an acknowledgment by the insurance company of the Assignment of Life
Insurance referenced in Section 4.1(6).
ARTICLE VII
NEGATIVE COVENANTS
So long as any Notes shall remain unpaid or the Bank shall have any
Commitment under this Agreement, the Borrower will not:
SECTION 7.1 LIENS. Create, incur, assume, or suffer to exist any Lien upon
or with respect to any of its properties, now owned or hereafter acquired,
except:
(1) Liens in favor of the Bank;
(2) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or, if due and payable, only to the extent
they are being contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
(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 (30) days, or, if so past due, only to the extent
they are being contested in good faith by appropriate proceedings and for which
appropriate reserves have been established;
<PAGE>
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(4) Liens under workmen's 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), or public or statutory
obligations, surety, stay, appeal, indemnity, performance, or other similar
bonds; or other similar obligations arising in the ordinary course of business;
(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 being actively contested
in good faith and by appropriate proceedings;
(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 its 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, or
a Lien incurred in connection with any conditional sale or other title retention
agreement or a Capital Lease; provided that
(a) Any property subject to any of the foregoing is acquired by the
Borrower in the ordinary course of business and the Lien on any
such property is created contemporaneously with such acquisition;
(b) In the case of purchase-money Liens, the obligation secured by
any Lien so created, assumed, or existing shall not exceed
seventy-five percent (75 %) of the lesser of cost or fair market
value as of the time of acquisition by the Borrower of the
property covered thereby;
(c) Each such Lien shall attach only to the property so acquired and
fixed improvements thereon;
(d) The Debt secured by all such Liens shall not exceed Twenty-five
Thousand Dollars ($25.000) at any time outstanding in the
aggregate; and
(e) The obligation secured by such Lien is permitted by the
provisions of Section 7.2 and the related expenditure is
permitted under Section 8.8.
SECTION 7.2 DEBT. Create, incur, assume, or suffer to exist any Debt,
except:
(1) Debt of the Borrower under this Agreement or the Note;
(2) Debt described in Exhibit G, but no renewals, extensions, or
refinancings thereof;
(3) Debt of the Borrower subordinated on terms satisfactory to the Bank to
the Borrower's obligations under this Agreement and the Note;
(4) Accounts payable to trade creditors for goods or services which are
not aged more than ninety (90) days from billing date and current
operating liabilities (other than for borrowed money) which are not
more than thirty (30) days past due, in each case incurred in the
ordinary course of business and paid within the specified time, unless
contested in good faith and by appropriate proceedings and for which
appropriate reserves have been established;
(5) Debt of the Borrower secured by purchase-money Liens permitted by
Section 7.1(8)(d).
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SECTION 7.3 MERGERS, ETC. Merge or consolidate with, or sell, assign,
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 without prior consent of the Bank.
SECTION 7.4 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 7.1; (2) leases existing on
the date of this Agreement and any extensions or renewals thereof; (3) leases
(other than Capital Leases) which do not in the aggregate require the Borrower
on a consolidated basis to make payments (including taxes, insurance,
maintenance, and similar expense which the Borrower is required to pay under the
terms of any lease) in any fiscal year of the Borrower in excess of Twenty-five
Thousand Dollars ($25,000).
SECTION 7.5 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 7.6 DIVIDENDS. Declare or pay any dividends; or purchase, redeem,
retire, or otherwise acquire for value any of its capital stock now or hereafter
outstanding; or make any distribution of assets to its stockholders whether in
cash, assets, or obligations of the Borrower; or allocate or otherwise set apart
any sum for the payment of any dividend or distribution on, or for the purchase,
redemption, or retirement of, any shares of its capital stock; or make any other
distribution by reduction of capital or otherwise in respect of any shares of
its capital stock.
SECTION 7.7 SALE OF ASSETS. Sell, lease, assign, transfer, or otherwise
dispose of any of its now owned or hereafter acquired assets without the prior
written consent of the Bank.
SECTION 7.8 INVESTMENTS. Make any loan or advance to any Person, 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 except: (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-1"
by Standard & Poor's Corporation or "P-1" 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 Hundred Million Dollars ($100,000,000); and (4) stock, obligations, or
securities received in settlement of debts (created in the ordinary course of
business) owing to the Borrower.
SECTION 7.9 GUARANTIES, ETC. Assume, guarantee, 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, assets, goods, or services, or 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
deposit or collection or other transactions in the ordinary course of business.
SECTION 7.10 TRANSACTIONS WITH AFFILIATE. 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.
SECTION 7.11 SUBORDINATED DEBT. Make, permit or suffer any prepayment of
the principal or interest owing under the Subordinated Notes to Frank B.
Iacovangelo described in Section 5.16 above or any replacement note.
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SECTION 7.12 HAZARDOUS SUBSTANCES. Suffer, cause or permit the disposal of
hazardous substances at any real property on which the Collateral is located,
nor suffer, cause or permit the generation, handling, processing, use or storage
of hazardous substances on any such real property except in compliance with all
Environmental Laws.
ARTICLE VIII
FINANCIAL COVENANTS
So long as any Notes shall remain unpaid or the Bank shall have any
commitment under this Agreement:
SECTION 8.1 MINIMUM WORKING CAPITAL. The Borrower shall maintain at all
times an excess (deficit) of current assets over current liabilities of not less
(more) than the following amounts during the following periods:
Applicable Time Period: Working Capital:
----------------------- ----------------
- 12/31/95 $(140,000)
1/1/96 - 6/29/96 (180,000)
6/30/96 - 9/29/96 (100,000)
9/30/96 - 12/30/96 -0
12/31/96 - thereafter 20,000
SECTION 8.2 CURRENT RATIO. The Borrower shall maintain at all times a ratio
of current assets to current liabilities of not less than the following amounts
during the following periods:
Applicable Time Period: Current Ratio:
----------------------- --------------
- 12/31/95 .85
3/31/96 - 6/29/96 .70
6/30/96 - 9/29/96 .75
9/30/96 - 12/30/96 .95
12/31/96 - thereafter 1.1
SECTION 8.3 MINIMUM TANGIBLE NET WORTH. The Borrower shall maintain a
tangible net worth of not less than the following amounts during the following
periods:
Applicable Time Period: Minimum Net Worth:
----------------------- ------------------
- 12/31/95 $250,000
3/31/96 - 6/29/96 200,000
6/30/96 - 9/29/96 260,000
9/30/96 - thereafter 400,000
For the purposes of this covenant, the Subordinated Notes payable to Frank B.
Iacovangelo shall be deemed equity.
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SECTION 8.4 LEVERAGE RATIO. The Borrower shall maintain a ratio of total
liabilities to tangible net worth of not more than the following amounts during
the following periods:
Applicable Time Period Maximum Leverage Ratio:
---------------------- -----------------------
- 12/31/95 3.90
1/1/96 - 6/29/96 4.45
6/30/96 - 9/29/96 3.25
9/30/96 - 12/30/96 2.00
12/31/96 - thereafter 1.90
For the purposes of this covenant, the Subordinated Notes payable to Frank B.
Iacovangelo shall be deemed equity.
SECTION 8.5 MINIMUM PROFITS. From the date hereof, the Borrower shall
achieve a quarterly net profit (loss) before taxes of no less (more) than the
following amounts:
Quarter Ending: Net Profit: Cumulative Profit (Loss):
--------------- ----------- -------------------------
March 31 $(60,000) $ (60,000)
June 30 70,000 10,000
September 30 100,000 110,000
December 31 - 0 - 110,000
SECTION 8.6 ANNUAL DEBT SERVICE COVERAGE RATIO. As of December 31, 1995 and
as of each December 31 thereafter, the Borrower shall maintain a debt service
coverage ratio (that being (i) the sum of net profit before taxes plus
depreciation divided by (ii) current maturities of long-term debt) of not less
than 1.75 to 1.0.
SECTION 8.7 CAPITAL EXPENDITURES. The Borrower shall not make any
expenditures for fixed or capital assets which would cause the aggregate of all
such expenditures made by the Borrower to exceed $25,000 during any fiscal year
without the prior written consent of the Bank.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1 EVENTS OF DEFAULT. If any of the following events ("Events of
Default") shall occur:
(1) The Borrower should fail to pay the principal of, or interest on,
any Notes, or any amount of a commitment fee, as and when due and payable;
(2) The aggregate principal amount outstanding of all Loans shall
exceed the Borrowing Base for more than five (S) Business Days after the
Borrower knew or should have known that such was the case;
(3) Any representation or warranty made or deemed made by the Borrower
in this Agreement or the Security Agreement or by any Guarantor in the
Guaranties or which is contained in any certificate, document, opinion, or
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;
(4) The Borrower or any Guarantor shall fail to perform or observe any
term, covenant, or agreement contained in any Loan Document (other than the
Notes) to which it is a party on its part to be performed or observed;
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(5) Borrower or any Guarantor shall (a) fail to pay any indebtedness
for borrowed money (other than the Notes) of the Borrower or any Guarantor, as
the case may be, or any interest or premium thereon, 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
indebtedness, 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
after the giving of notice or passage of time, or both, of the maturity of such
indebtedness, whether or not such failure to perform or observe shall be waived
by the holder of such indebtedness; or any such indebtedness 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;
(6) The Borrower or any Guarantor (a) shall generally not, or shall 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, arrangements, readjustment of
debt, dissolution, or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect; or (d) shall have any such petition or application
filed or any such proceeding commenced against it in which an order for relief
is entered or adjudication or appointment is made and which remains undismissed
for a period of forty (40) days or more; 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
properties; or (f) shall suffer any such custodianship, receivership, or
trusteeship to continue undischarged for a period of forty (40) days or more;
(7) One or more judgments, decrees, or orders for the payment of money
in excess of Ten Thousand Dollars ($10,000) in the aggregate shall be rendered
against the Borrower or any Guarantor, and such judgments, decrees, or orders
shall continue unsatisfied and in effect for a period of forty (40) consecutive
days without being vacated, discharged, satisfied, or stayed or bonded pending
appeal or money paid into escrow to cover the same;
(8) The Security Agreement shall at any time after its execution and
delivery and for any reason cease (a) to create a valid and perfected first
priority security interest in and to the property purported to be subject to
such Security Agreement; or (b) to be in full force and effect or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by the Borrower, or the Borrower shall deny it has any further
liability or obligation under the Security Agreement, or the Borrower shall fail
to perform any of its obligations under the Security Agreement; or
(9) A Guaranty shall, at any time after its execution and delivery and
for any reason, cease to be in full force and effect or shall be declared null
and void, or the validity care enforceability thereof shall be contested by any
Guarantor, or any Guarantor shall deny it has any further liability or
obligation under or shall fail to perform its obligations under the Guaranty;
(10) Any of the following events occur or exist with respect to the
Borrower or any ERISA Affiliate: (a) any Prohibited Transaction involving any
Plan; (b) any Reportable Event 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 that 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 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 Bank subject the
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Borrower to any tax, penalty, or other liability to a Plan, a Multiemployer
Plan, the PBGC, or otherwise (or any combination thereof) which in the aggregate
exceed or may exceed Twenty-Five Thousand Dollars ($25,000);
then, and in any such event, the Bank may, by notice to the Borrower, (1)
declare its obligation to make Loans to be terminated whereupon the same shall
forthwith terminate, and (2) declare the outstanding Notes, all interest
thereon, and all other amounts payable under this Agreement to be forthwith due
and payable, whereupon the Notes, all such interest, and all such amounts 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.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 AMENDMENTS, ETC. No amendment, modification, termination, or
waiver of any provision of any Loan Document to which the Borrower is a party,
nor consent to any departure by the Borrower from any Loan Document to which it
is a party, shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 10.2 NOTICES, ETC. Any notice or other communication required or
permitted under this Agreement or under the other Loan Documents to which
Borrower is a party shall be in writing and shall be deemed to have been duly
given; (1) upon hand delivery or; (2) on the third day following delivery to the
U.S. Postal Service as certified or registered mail, return receipt requested
and postage prepaid or; (3) on the first day following delivery to a nationally
recognized United States overnight courier service, fee prepaid, return receipt
or other confirmation of delivery requested; except that notices to the Bank
pursuant to the provisions of Article II shall not be effective until received
by the Bank. Any such notice or communication shall be delivered or directed, if
to the Borrower, at its address at 80 West Main Street, Rochester, New York
14614 Attn: Frank B. Iacovangelo, and if to the Bank at One Marine Midland
Plaza, Rochester, New York 14639, Attn: Rudolph J. Napodano, Vice President; or
as to each party, at such other address as may be designated by a party in a
notice given to the other party in accordance with the provisions of this
Section 10.2.
SECTION 10.3 NO WAIVER; REMEDIES. No failure on the part of the Bank to
exercise, and no delay in exercising, any right, power, or remedy under any Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any Loan Documents preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
the Loan Documents are cumulative and not exclusive of any remedies provided by
law.
SECTION 10.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights under any Loan Document to which the Borrower is a party without
the prior written consent of the Bank.
SECTION 10.5 COSTS, EXPENSES, AND TAXES. The Borrower agrees to pay on
demand all costs and expenses in connection with the preparation, execution,
delivery, filing, recording, and administration of any of the Loan Documents,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Bank, and local counsel who may be retained by said counsel,
with respect thereto and with respect to advising the Bank as to its rights and
responsibilities under any of the Loan Documents, and all costs and expenses, if
any, in connection with the enforcement of any of the Loan Documents. Without
limiting the generality of the foregoing, the Borrower agrees to pay the costs
and expenses incurred by the Bank in connection with an annual appraisal of the
Borrower's real estate and equipment for purposes of establishing the Borrowing
Base and other purposes in connection with the Administration of the Loan
Documents, as well as the costs and expenses in connection
<PAGE>
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with the Bank's quarterly collateral audit, if any. In addition, the Borrower
shall pay any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing, and recording of any
of the Loan Documents and the other documents to be delivered under any such
Loan Documents, and agrees to save the Bank harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
SECTION 10.6 CERTAIN ACKNOWLEDGEMENTS AND RELEASES. The Borrower
represents, acknowledges and agrees with the Bank that it has no defenses,
setoffs, or counterclaims of any kind or nature whatsoever against the Bank with
respect to the indebtedness of the Borrower under the Prior Agreement or the
obligations of the Borrower thereunder which are restructured hereby, or any
action previously taken or not taken by the Bank with respect thereto or with
respect to any security interest, mortgage, encumbrance, lien or collateral in
connection therewith to secure such indebtedness. Without limiting the
generality of the foregoing, the Borrower waives, releases and forever
discharges the Bank from and against any and all rights, claims, or causes of
action against Bank arising out of the Bank's actions or inactions with respect
to the Prior Agreement or any security interest, mortgage encumbrance, lien or
collateral in connection therewith as well as any and all rights of setoff,
defenses, claims, causes of action and any other bar to enforcement of the
indebtedness or the Borrower thereunder. The Borrower further acknowledges and
agrees that the Bank is specifically relying upon the representations,
warranties and agreements contained herein in entering into this Agreement. The
Borrower further agrees that within ninety (90) days after it learns of any such
event, the Borrower will provide the Bank with a written notice setting forth
with reasonable specificity any claim that the Borrower believes it may have
against the Bank under the terms of this Agreement or by reason of any action or
inaction on the part of the Bank in connection therewith. Failure to timely give
any such notice shall not constitute the Borrower's waiver of such a claim, but
the Borrower agrees to indemnify, defend and hold harmless the Bank from and
against any damages incurred by it by reason of such failure on the part of the
Borrower.
SECTION 10.7 INDEMNIFICATION. The Borrower agrees to indemnify, defend, and
hold harmless the Bank from and against any and all liabilities, claims,
damages, penalties, expenditures, losses, or charges, including, but not limited
to, all costs of investigation, monitoring, legal representation, remedial
response, removal, restoration or permit acquisition, which may now or in the
future be undertaken, suffered, paid, awarded, assessed, or otherwise incurred
by the Bank or any other person or entity as a result of the presence of,
Release of or threatened Release of Hazardous Substances on, in, under or near
the Property. The liability of the Borrower to the Bank under the covenants of
this Section is not limited by any exculpatory provisions in the Notes or in the
other documents securing the Loans and shall survive any foreclosure on or
transfer of the Property by deed in lieu of foreclosure or any other transfer of
the Property regardless of the means of such transfer.
SECTION 10.8 RIGHT OF SETOFF. Upon the occurrence and during the
continuance of any Event of Default the Bank is hereby authorized at any time
and from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Bank to or for the credit or the
account of the Borrower against any and all of the obligations of the Borrower
now or hereafter existing under this Agreement or the Notes or any other Loan
Document, irrespective of whether or not the Bank shall have made any demand
under this Agreement or the Notes or such other Loan Document and although such
obligations may be unmatured. The Bank agrees promptly to notify the Borrower
after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
of the Bank under this Section 10.8 are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which the Bank may have.
SECTION 10.9 GOVERNING LAW. This Agreement and the Notes shall be governed
by, and construed in accordance with, the laws of the State of New York.
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SECTION 10.10 SEVERABILITY OF PROVISIONS. Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 10.11 HEADINGS. Article and Section headings in the Loan Documents
are included in such Loan Documents for the convenience of reference only and
shall not constitute a part of the applicable Loan Documents for any other
purpose.
<PAGE>
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
MARINE MIDLAND BANK
By:_____________________________________
Rudolph J. Napodano, Vice President
FOUR CORNERS FINANCIAL CORPORATION
By:_____________________________________
Frank B. Iacovangelo
President
Accepted and Agreed to by the
undersigned Guarantors as of
the date first above written.
_______________________________
Frank B. Iacovangelo
_______________________________
Bernard J. Iacovangelo
STATE OF NEW YORK )
COUNTY OF MONROE ) SS:
On this 13th day of December, 1995 before me personally came Rudolph J.
Napodano, to me known, who, being by me duly sworn did depose and say that he is
Vice President of Marine Midland Bank, the corporation described in and which
executed the foregoing instrument; and that the above-named person signed
thereto by order of the Board of Directors of said corporation.
_____________________________________
Notary Public
Wendy S. Keaty
Notary Public, State of New York
Qualified in Monroe County
Commission Expires May 2, 1996
<PAGE>
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STATE OF NEW YORK )
COUNTY OF MONROE ) SS:
On this 13th. day of December, 1995 before me personally came Frank B.
Iacovangelo to me known, who, being by me duly sworn did depose and say that he
is President of Four Corners Financial Corporation, the corporation described in
and which executed the foregoing instrument; and that the above-named person
signed thereto by order of the Board of Directors of said corporation. Notary
Public
_____________________________________
Notary Public
Wendy S. Keaty
Notary Public, State of New York
Qualified in Monroe County
Commission Expires May 2, 1996
<PAGE>
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EXHIBIT 10.2
LEASE
Between
NORTH PEARL PARTNERS,
- Landlord
and
FOUR CORNERS ABSTRACT CORPORATION,
- Tenant
<PAGE>
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INDEX
Page
Article I Leased Premises 1
Article II Term of Lease 2
Article III Rent 2
Article IV Additional Rent 3
Article V Taxes 6
Article VI Use & Care of Premises 7
Article VII Utilities and Cleaning 7
Article VIII Repairs 8
Article IX Alterations 9
Article X Landlord's Right of Access 10
Article XI Signs 10
Article XII Insurance, Indemnity and
Waiver of Subrogation 11
Article XIII Nonliability for Certain Damages 13
Article XIV Damages by Casualty 15
Article XV Eminent Domain 17
Article XVI Default 17
Article XVII Miscellaneous 20
EXHIBIT A - Premises 27
<PAGE>
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LEASE
This Agreement, made on May 1, 1995, by and between NORTH PEARL PARTNERS, a
New York partnership having its main office at Capital Center, 99 Pine Street,
Albany, New York 12207, (hereinafter referred to as "Landlord"), and FOUR
CORNERS ABSTRACT CORPORATION, having an office and place of business at 99 Pine
Street, Albany, New York 12207 (hereinafter referred to as the "Tenant").
W I T N E S S E T H :
In consideration of the mutual terms, covenants and conditions set forth
herein, the parties agree as follows:
ARTICLE I
Leased Premises
Section 1.1 Landlord, in consideration of the rents and common areas
charges to be paid and the covenants and agreements to be performed by Tenant:
(a) Leases to Tenant, and Tenant leases from Landlord the premises
highlighted on Exhibit "A" attached hereto and made a part hereof ("Premises"),
in the buildings located at 99 Pine Street, City of Albany, County of Albany and
State of New York ("hereinafter "Capital Center"), consisting of approximately
1,410 square feet of space. Landlord may determine the actual gross leasable
area of the Premises in square feet by directing Landlord's architect to perform
a retail measurement after the Premises have been made available to Tenant for
Tenant's improvements.
During the term of the Lease, Tenant shall have the non-exclusive right in
common with other tenants of the Capital Center (and their respective employees,
licensees, customers and invitees) to use common facilities as may be designated
from time to time by the Landlord, subject to the provisions of this Lease,
reserving unto the Landlord the unrestricted right to construct, operate,
maintain, repair, replace or remove such utility pipes, electrical, telephone,
computer or other lines or other facilities over, upon, under or through the
Premises or common areas as may be reasonably necessary for servicing the other
portions of the Capital Center.
ARTICLE II
Term of Lease
Section 2.1 The term of this Lease shall be for a period of one (1) year
commencing on May 1, 1995 (the "Lease Commencement Date"), and shall end on
April 30, 1996 (the "Expiration Date"). *
ARTICLE III
Rent
Section 3.1 Tenant agrees to pay Landlord commencing on May 1, 1995 (the
"Rent Commencement Date"), and continuing during the term of this Lease, a
Minimum Annual Rent of Eighteen Thousand Three Hundred Thirty Thousand and
00/100 Dollars ($18,330.00), (calculated at a rate of $13.00 per square foot)
payable in equal monthly installments of One Thousand Five Hundred Twenty-Seven
Dollars and 50/Cents ($1,527.50) each, on the first day of each month of this
Lease in advance.
* Notwithstanding the foregoing, either party may terminate this lease upon
provisions of 120 days prior written notice tot he other, the tenant remaining
obligated for payment of all rent and additional rent up to the effective
termination date.
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Section 3.2 Tenant shall pay such Minimum Annual Rental without deduction,
setoff, prior notice, or demand, in advance on the first day of each month,
commencing with the Rent Commencement Date, and continuing during the Lease
term. Minimum Monthly Rent for any partial month shall be prorated. All rent
shall be paid to Landlord at the address to which notices to Landlord are given.
Section 3.3 Tenant shall pay Landlord a late charge of 10% of any
installment of rent or additional rent which is not paid on the due date
thereof. In the event Tenant fails or refuses to pay rent or any additional
charge hereunder and Landlord institutes suit for the collection of same, Tenant
agrees to reimburse Landlord for all reasonable expenses incurred by Landlord in
connection therewith including but not limited to attorneys' fees. This Lease
does not constitute a waiver by Landlord of its claim and right to past due rent
from Tenant to Landlord currently totaling approximately $15,000.00. **
** However, the lease dated April 1, 1992 between landlord and tenant is
hereby terminated as of April 30, 1995, with all remaining obligations of tenant
thereunder liquidated to payment of past due rent in said amount.
ARTICLE IV
Additional Rent
Section 4.1 During any Calendar Year during the term of this Lease
("Comparison Year") in which the expenses for maintaining and operating the
Buildings known as Capital Center (as such expenses are hereinafter defined)
increase over the amount thereof of the Calendar Year 1995 ("Base Year"), Tenant
shall pay to Landlord as additional rent an amount equal to Tenant's
proportionate share of such increase, said amount to be payable in full within
fifteen (15) days of the rendering of the statement by Landlord as hereinafter
provided. For the purposes of the preceding section~ Tenant's proportionate
share shall be equal the ratio of the total number of square feet leased to
Tenant in the Premises over the total leasable square footage in the Buildings
known as Capital Center.
Section 4.2 Definition. For the Base Year and for each Comparison Year, the
term "expenses for maintaining and operating the Buildings" shall mean those
expenses incurred during such ear in respect of the operation and maintenance of
the Buildings in accordance with accepted principles of sound management and
accounting practice as applied to the operation and maintenance of first class
buildings of the type involved, including, without limitation, (1) heating,
lighting, cleaning, maintaining, insuring, managing, repairing and operating the
Buildings and the sidewalks and landscaping surrounding the Buildings plus (2)
the cost of maintaining the elevators and providing extermination, security and
other services to the Buildings. Such expenses shall not include (1) expenses
for any capital improvements made to the Land or Buildings, including without
limitation replacement costs of building fixtures, equipment, and facilities;
(2) expenses for painting, redecorating, or other work which Landlord performs
for Tenant or for any other tenants in the Buildings (such expenses for
maintaining and operating the Buildings shall, however, include the costs of
other work in public areas which is standard for the Buildings and the
proportionate cost of painting and redecorating in such public areas which is
done at intervals); (3) expenses for repairs or other work occasioned by fire,
windstorm, or other insured casualty; (4) expenses incurred in leasing or
procuring new tenants (including Lease commissions, advertising expenses, and
expenses of renovating space for new tenants); (5) legal expenses in enforcing
the terms of any Lease; and (6) interest or amortization payments on any
mortgage or mortgages.
In addition to the rental adjustments provided for hereunder, if the term
of this Lease shall terminate on a date other than a December 31st, then for the
fractional portion of such calendar year at the end of this Lease, the
additional rent for such period shall be adjusted at the same rate as the rent
for the Comparison Year immediately prior to such calendar year. The additional
rent adjustment for such period
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shall be made when Landlord shall render its statement for the last monthly
installment of the fixed rent payable under this Lease, or if that is not
reasonably feasible, as soon thereafter as is reasonably feasible, and this
obligation for the fractional portion of the Comparison Year in which this Lease
terminates shall survive the termination of this Lease.
Statements of the amount of Tenant's pro rata share of expenses for
maintaining and operating the Buildings to be paid by Tenant as additional rent
as herein above provided, shall be rendered by Landlord to Tenant as soon as
reasonably feasible during the calendar year following the first Comparison Year
and each Comparison Year thereafter, except as otherwise provided with respect
to any fractional period at the end of this Lease. Landlord shall have the right
however, after the rendering of such statement to send a corrected statement to
Tenant.
Any statement rendered by Landlord as provided in this Article shall be
final and binding upon the parties.
ARTICLE V
Taxes
Section 5.1 Tenant shall also pay as additional rent its proportionate
share (as hereinafter defined) of all increases in real property taxes and
general and special assessments, including, but not limited to state, county,
city, school, sewer and water taxes and assessments or payments in lieu of taxes
(real property taxes), levied and assessed against the Buildings of which the
Premises is a part, in excess of the taxes or payments in lieu of taxes assessed
against such Buildings during 1994 ("Tax Base Year").
Section 5.2 Tenant's proportionate share of such real property taxes shall
equal the ratio of such taxes that the total number of square feet in the
Premises bears to the total number of leasable square feet in the Buildings
known as Capital Center. Each year Landlord shall notify Tenant of Landlord's
calculation of Tenant's proportionate share of the real property taxes and
together with such notice shall furnish Tenant with a copy of the tax bill.
Tenant shall reimburse Landlord for Tenant's proportionate share of annual
increase in real property taxes within fifteen (15) days after the receipt of
the notice from Landlord.
ARTICLE VI
Use and Care of Premises
Section 6.1 Tenant shall use the Premises for the operation of an abstract
and title insurance company and no other use or purpose shall be permitted
without the Landlord's written consent. Tenant shall not at any time leave the
Premises vacant, but shall in good faith continually throughout the term of this
Lease conduct and carry on in the entire Premises the type of business for which
the Premises are Leased. Tenant shall operate its business in an efficient,
First-Class and reputable manner.
Section 6.2 The Tenant shall not occupy or permit or suffer the Leased
Premises to be occupied, for any business or purpose deemed disreputable or
extra-hazardous on account of fire, under penalty of damages and forfeiture, and
in the event of a breach thereof, the term herein shall immediately cease and
determine at the option of the Landlord as if it were the expiration of the
original term.
<PAGE>
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ARTICLE VII
Utilities and Cleaning
Section 7.1 The Landlord shall provide and pay for electricity, certain
minimal cleaning services as are provided to all tenants of the Building, and
air conditioning and heat for the Tenant, without cost to Tenant, except as
provided in Article IV above. Landlord shall provide and maintain the necessary
wiring, ducts and conduits in order to bring electricity, heat, telephone
service and other utilities to the Premises.
The Tenant shall pay for its own telephone service hook-ups in the
Premises. Landlord shall not be liable to Tenant for any interruption whatsoever
regarding any utility services for any reason.
ARTICLE VIII
Repairs
Section 8.1 Landlord shall keep and maintain the roof and structural
portions of the Premises except any damage thereto caused by any act or
negligence of Tenant, its employees, agents, invitees, subtenants, licensees,
assignees, or contractors, in which event such damage shall be promptly repaired
by Tenant. Other than as herein provided, Landlord shall not be responsible to
maintain or make any improvements or repairs of any kind, in or upon the
Premises.
Tenant shall keep and maintain in good order, condition and repair (which
repair shall mean replace if necessary) the Premises and every part thereof,
except as hereinbefore provided, including without limitation, the exterior and
interior portions of all doors, door checks, security gates, windows, glass,
fixtures, floors and ceilings, including compliance with the applicable building
codes relative to fire extinguishers.
If Tenant refuses or neglects to repair property as required above, the
Landlord may make such repairs without liability to Tenant for any loss or
damage to any of Tenant's property by reason thereof, and upon completion
thereof, Tenant shall pay the Landlord, as additional rent, the cost of such
repairs plus fifteen percent (15%) for overhead and supervision upon
presentation of a bill therefor.
ARTICLE IX
Alterations
Section 9.1 Tenant shall not make any alterations, additions or
improvements to the Premises and fixtures without the prior written consent of
the Landlord- All permitted alterations, additions, improvements which may be
made and fixtures which may be installed by either party upon the Premises shall
remain upon and be surrendered with the Premises and become the property of
Landlord at the termination of this Lease, unless Landlord requests their
removal in which event Tenant shall remove the same and restore the Premises to
its original condition at Tenant's expense.
Section 9.2 All construction work done by Tenant within the Premises shall
be performed in a good and workmanlike manner, in compliance with all
governmental requirements, and in such manner as to cause a minimum of
interference with other construction in progress and with the transaction of
business by other Tenants leasing any portion of the Building. Tenant agrees to
indemnify Landlord, and hold Landlord harmless against any loss, liability or
damage resulting from such work, and Tenant shall, if requested by Landlord,
furnish performance and payment bonds or other security satisfactory to the
Landlord against any such loss, liability or damage.
<PAGE>
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ARTICLE X
Landlord's Right of Access
Section 10.1 Landlord shall have the right to enter upon the Premises at
any time for the purpose of inspecting the same, or of making repairs,
alterations, or additions to adjacent Premises, or of showing the Premises to
prospective purchasers, Lessees or lenders.
ARTICLE XI
Signs
Section 11.1 Tenant shall not, without the Landlord's prior written
consent, erect or install any signs, window or door letterings, placards,
decorations or advertising media of any type which can be viewed from the
exterior of the Premises or within the Premises. All signs, lettering, placards
decorations and advertising media shall conform in all respects to the sign
criteria established by the Landlord from time to time in the exercise of its
sole discretion, and shall be subject to the prior written approval of Landlord
as to construction, method of attachment, size, shape, height, lighting, color
and general appearance. All signs shall be kept in good condition and in proper
operating order at all times.
Section 11.2 The Tenant acknowledges that the Buildings of which the
Premises are a part are situated within a Registered Historic District. Any
signs allowed under this Article shall in all respects comply with all local
laws and shall not be erected until such time as Tenant has also obtained all
local approvals as well as the approval of the New York State Historical
Preservation Office.
ARTICLE XII
Insurance. Indemnity and Waiver of Subrogation
Section 12.1 The Tenant at its own expense shall maintain public liability
insurance insuring the Tenant and the Landlord with minimum coverage as follows:
Property and
Liability Damage: $1,000,000 00 per occurrence
The Tenant, at its own expense, shall maintain plate glass insurance.
The Tenant shall provide the Landlord with a certificate of insurance from
an insurance company qualified to do business in the State of New York which is
reasonably acceptable to the Landlord as evidencing the existence of the
foregoing insurance. Landlord shall have the right from time to time (but not
more often than annually) to require that Tenant increase or otherwise modify
the insurance coverage referred to above so as to cause said coverage to be
consistent with the then current real estate industry standards in the City of
Albany, New York.
Landlord shall require all other Tenants in the Buildings of which this
Premises is a part to maintain coverage in amounts similar to Tenants.
Notwithstanding any terms of this Lease to the contrary, the Tenant shall
pay the cost of any increase in Landlord's insurance costs that the insurance
carrier of the Landlord attributes to the presence of Tenant upon the Premises
or to the transaction of Tenant's business activities thereon.
Tenant agrees throughout the term of this Lease to maintain insurance
against loss or damages 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 the personal property, furniture, furnishings and
fixtures belonging to Tenant located in the
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Premises, for the actual cash value thereof less depreciation, with the New York
standard co-insurance clauses for not less than 80% of such actual cash value.
Upon the occurrence of any casualty insured against, Tenant shall have full
authority to, and shall take all necessary measures to negotiate, compromise or
adjust any loss under Tenant's policy.
All fire and extended coverage insurance maintained by Landlord and Tenant
on the Premises, the property therein, and the building and its appurtenances
shall include a waiver by the insurer of all right of recovery against Landlord
or Tenant in connection with any loss or damage by fire or peril included within
fire and extended coverage insurance and neither party shall be liable to the
other for loss or damage resulting from such included claims with respect to any
such loss to the extent of the insurance proceeds paid with respect thereto.
Section 12.2 The Landlord shall not be liable for any damages to or loss
of, including loss due to petty theft, any property, occurring in the Premises
or any part thereof, and the Tenant agrees to hold the Landlord harmless from
any claims for damages, except where such damage or injury is the result of the
gross negligence or willful misconduct of the Landlord or its employees.
Section 12.3 Any insurance policies required to be carried by this section
shall name as Landlord an additional insured and shall have provision for at
least ten (10) days~ notice to Landlord of cancellation. At least (10) days
before the expiration of such policy, Tenant will supply Landlord with a
substitute therefore with evidence of payment of the premiums thereof.
ARTICLE XIII
Nonliability for Certain Damages
Section 13.1 Landlord and Landlord's agents and employees shall not be
liable to Tenant for any injury to person or damage to property caused by the
Premises, or other portions of the building owned by Landlord of which the
Premises is a part, becoming out of repair or by the defect or failure of any
structural element of the Premises or of any equipment, pipes, wiring, or broken
glass, or by the backing up of drains, or by gas, water, steam, electricity, or
oil leaking, escaping, or flowing into the Premises except where due to
Landlord's willful failure to make repairs required to be made hereunder, after
the expiration of a reasonable time after written notice to Landlord of the need
for such repairs, nor shall Landlord be liable to Tenant for any loss or damage
that may be occasioned by or through the acts or omissions of other tenants of
the Landlord or of any other persons whomsoever, excepting only duly authorized
employees and agents of Landlord.
Section 13.2 Tenant shall indemnify, defend and hold harmless Landlord, its
agents and employees from and against any and all liability (statutory or
otherwise), damages, claims, suits, demands, judgments, costs, interest and
expense (including but not limited to, attorneys' fees and disbursements both at
trial and appellate levels) arising, directly or indirectly, from any injury to,
or death of, any person or persons or damage to property (including loss of use
thereof) related to (A) Tenant's use of the Demised Premises or conduct of
business therein, (B) any work or thing whatsoever done, or any condition
created (other than by Landlord, its employees, agents or contractors) by or on
behalf of Tenant in or about the Premises, including during the period of time,
if any, prior to the Term Commencement Date, that Tenant may have been given
access to the Premises for the purposes of doing any work or making any
installations, (C) any condition of the Premises due to or resulting from any
default by Tenant in the performance of Tenant's obligations under this Lease,
or (D) any act, omission or negligence of Tenant or its agents, contractors,
employees, subtenants, licensees or invitees. In case any action or proceeding
is brought against Landlord by reason of any one or more thereof, Tenant shall
pay all costs, attorneys' fees, expenses and liabilities resulting therefrom and
shall defend such action or proceeding if Landlord shall so request, at Tenant's
expense, by counsel reasonably satisfactory to Landlord.
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ARTICLE XIV
Damages by Casualty
Section 14.1 Tenant shall give immediate written notice to Landlord of any
damage caused to the Premises by fire or other casualty.
Section 14.2 In the event that the Premises shall be damaged or destroyed
by fire or other casualty insurable under standard fire and extended coverage
insurance and Landlord does not elect to terminate this Lease (as hereinafter
provided), Landlord shall proceed with reasonable diligence and at its sole cost
and expense to rebuild and repair the Premises, to the extent of the insurance
proceeds available therefore. In the event (a) the building in which the
Premises is located shall be destroyed or substantially damaged by a casualty
not covered by Landlord's insurance, or (b) such building shall be destroyed or
rendered untenantable to an extent in excess of 508 of the first floor area by a
casualty covered by Landlord's insurance, or (c) the holder of a mortgage, deed
of trust or other lien on the Premises at the time of the casualty elects,
pursuant to such mortgage, deed of trust, or other lien, to require the use of
all or part of Landlord's insurance proceeds in satisfaction of all or part of
the indebtedness secured by the mortgage, deed of trust, or other lien, then
Landlord may elect either to terminate this Lease or to proceed to rebuild and
repair the Premises. Landlord shall give written notice to Tenant of such
election within 60 days after the occurrence of such casualty and if it elects
to rebuild and repair the Building shall proceed to do so with reasonable
diligence and at its sole cost and expense.
Section 14.3 Landlord's obligations to rebuild and repair under this
Article XIV shall in any event be limited to restoring (a) the Premises to
substantially the condition in which the same existed prior to such casualty,
exclusive of any alterations, additions, improvements, fixtures, and equipment
installed by Tenant, or the Landlord's Work, if any, to substantially the same
condition in which the same existed prior to the casualty, as the case may be.
Landlord further agrees that promptly after completion of such work by it,
Landlord will proceed or Landlord will, at its option cause Tenant to proceed
with reasonable diligence and at Tenant's sole cost and expense to restore,
repair, and replace all alterations, additions, improvements, fixtures, signs,
and equipment installed by Tenant.
Section 14.4 Tenant agrees that during any period of reconstruction or
repair of the Premises it will continue the operation of its business within the
Premises to the extent practicable. During the period from the occurrence of the
casualty until Landlord's repairs are completed, the Minimum Annual Rental shall
be reduced to such extent as may be fair and reasonable under the circumstances;
however, there shall be no abatement of additional rent or other charges
provided for herein. In the event that the Landlord is required to make
structural repairs to the Premises for damages to the Premises not caused by
Tenant's actions and such repairs result in a reduction of the amount of space
available to Tenant under this Lease, then the rent for the Premises will abate
by an amount equal to the percentage of area which is unavailable for use by the
Tenant for any day in which the Premises is not available.
ARTICLE XV
Eminent Domain
Section 15.1 Should the land and Buildings of which the Premises forms a
part, or any part thereof, be condemned for public or quasi-public use or
purpose, then in that event, upon the taking of the same for such public or
quasi-public use or purpose, this Lease, at the option of the Landlord, shall
terminate on the date when the same shall be taken and the rent shall be
apportioned as of said date. No part of any award shall belong to Tenant. In the
event that Landlord does not terminate this Lease following a condemnation, then
Landlord shall make all necessary repairs or alterations to the Buildings so as
to constitute the remaining premises a complete architectural unit to the extent
practicable under the circumstances; provided, that Landlord shall not be
obligated to undertake any such repairs or alterations if the estimated cost
thereof will exceed the amount of the award.
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ARTICLE XVI
Default
Section 16.1 The occurrence of any of the following shall constitute
default by the Tenant:
(a) Failure to pay rent or additional rent, for fifteen (15) days after,
when due.
(b) Abandonment, desertion or vacation of the Premises.
(c) Failure to perform other provisions of this Lease, if the failure to
perform is not cured within fifteen (15) days after written notice has
been given to Tenant. If the default cannot reasonably be cured within
fifteen (15) days, Tenant shall not be in default of this Lease if
Tenant commences to cure default within the fifteen (15) day period
and diligently and in good faith continues to cure the default.
(d) If proceedings are commenced by or against the Tenant in any Court
under a Bankruptcy Act or for the appointment of a trustee or receiver
either before or after the Commencement Date.
Section 16.2 If any default be made by the Tenant, the Landlord may, at its
option, (a) declare the entire sum of this lease due and payable; (b) terminate
this lease without further notice to the Tenant, and upon such termination the
Tenant shall quit and surrender the Demised Premises to the Landlord, but such
termination shall not affect Landlord's right to recover damages or exercise any
other right herein provided; or (c) re-enter the Premises by force, summary
proceedings or otherwise, and remove all persons therefrom, without being liable
to prosecution therefor, and the Landlord will provide Tenant with two days
written notice of Landlord's intention to re-enter excepting cases of
abandonment of the Premises, and the Tenant shall pay at the same time as the
rent becomes payable under the terms hereof a sum equivalent to the rent
reserved herein, and the Landlord may rent the Premises on behalf of the Tenant,
reserving the right to rent the Premises for a longer period of time than fixed
in the original Lease without releasing the original Tenant from any liability,
applying any moneys collected, first to the expense of resuming or obtaining
possession, second to restoring the Premises to a rentable condition, and then
to the payment of the rent and all other charges due and to grow due to the
Landlord, any surplus to be paid to the Tenant, who shall remain liable for any
deficiency.
Landlord will provide Tenant with two (2) days written notice of intention
to reenter or of instituting legal proceedings to that end. The Tenant waives
and will waive all right to trial by jury in any summary proceeding instituted
by the Landlord against the Tenant with respect to the leased property. The
Tenant waives all rights to redeem under Section 761 of the New York Real
Property Actions and Proceedings Law. The Tenant waives all rights to assert any
set-offs or counterclaims in any summary proceeding instituted by the Landlord
against the Tenant with respect to the leased property, it being the intention
of the parties that any such set-offs or counterclaims be adjudicated in a
separate action.
The Landlord shall be entitled to reasonable attorneys fees in the event
Landlord shall retain an attorney to enforce the provisions of this lease, and
if suit be brought to enforce the provisions of this lease or to recover
possession of the demised premises or for recovery of rent or additional rent,
Landlord shall be entitled to reasonable attorneys fees at both the trial and
appellate levels.
ARTICLE XVII
Miscellaneous
Section 17.1 At the expiration of this Lease, Tenant shall surrender the
Premises in the same condition as it was in upon delivery of possession thereto
under this Lease, reasonable wear and tear excepted, and shall deliver all keys
and combinations
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to locks to Landlord. Before surrendering said Premises, Tenant shall remove all
its personal property, and if requested to do so by the Landlord, remove all
trade fixtures, alterations, additions and decorations and shall repair any
damage caused thereby. Tenant's obligations to perform this provision shall
survive the end of the term of this Lease. If Tenant fails to remove its
property upon the expiration of this Lease, the said property shall be deemed
abandoned and shall become the property of Landlord.
Section 17.2 Any holding over after the expiration of the term shall be
construed to be a tenancy from month to month at one-hundred fifty percent
(150%) of the annual rents specified by Section 3.2 (prorated on a monthly
basis) and shall otherwise be on the terms herein specified so far as
applicable.
Section 17.3 Failure of Landlord to insist upon the strict performance of
any provision or to exercise any option shall not be construed as a waiver for
the future of any such provision or option. The receipt by Landlord of rent with
knowledge of the breach of any provision of this Lease shall not be deemed a
waiver of such breach. No provision of this Lease shall be deemed to have been
waived 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 shall be deemed
to be other than on account of the earliest rent then unpaid nor shall any
endorsement or statement on any check or any letter accompanying any such check
or payment as rent be deemed an accord and satisfaction. Landlord may accept
such check or payment as rent without prejudice to Landlord's right to recover
the balance of such rent or pursue any other remedy provided in this Lease.
Section 17.4 Any notice, demand, request or other instrument which may be
or is required to be given under this Lease, shall be delivered in person or
sent by United States certified or registered mail, postage prepaid, and shall
be addressed (a) if to Landlord, at the address as hereinabove given; and (b) if
to Tenant, at the Premises. Either party may designate such other address as
shall be given by written notice. In the case of notices sent through the United
States mails pursuant to this Section, each such notice shall be deemed as given
on the day that is placed in the mail.
Section 17.5
(a) This Lease is and shall be subordinate to any mortgage now of
record or hereafter recorded affecting the Premises or the Buildings, other
improvements and land of which the Premises are a part, including but not
limited to any construction loan mortgage and any advances made thereunder and
any and all documents required as additional security for said loan to be
executed in connection therewith. Such subordination is effective without any
further act of Tenant. Tenant shall from time to time on request from Landlord
execute and deliver any documents or instruments that may be required by a
lender to effectuate any subordination as required in connection with said
mortgage loan including, but not limited to, any assignment of rents and/or this
Lease as may be required by any mortgagee.
(b) Tenant agrees from time to time, but not more than two times
annually, upon not less than fifteen (15) days prior written request by
Landlord, to execute, acknowledge and deliver to Landlord a statement in writing
certifying that this Lease is unmodified and in full force and effect and that
Tenant has no defenses, offsets or counterclaims against its obligations to pay
the Rent provided for in Article III and any other rent and charges and to
perform its other covenants under this Lease (or, if there have been any
modifications, that the same is in full force and effect as modified and stating
the modifications and, if there are any defenses, offsets or counterclaims,
setting them forth in reasonable detail), and the dates to which the rent
provided for in Article III and any other rent and charges have been paid. Any
such statement delivered pursuant to this Section may be relied upon by any
prospective purchaser or mortgagee of the Premises or of Capital Center or any
prospective assignee of any such mortgage.
(c) No holder of a mortgage shall be liable either as mortgagee or as
assignee, to perform, or be liable in damages for failure to perform, any of the
obligations of Landlord unless and until such holder shall have acquired
indefeasible title to the Premises.
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(d) No assignment or sublease by Tenant of this Lease and no agreement
to make or accept any surrender, termination or cancellation of this Lease and
no agreement to modify so as to reduce the rent, change the Lease Term, or
otherwise materially change the rights of Landlord under this Lease or to
relieve Tenant of any obligations or liability under this Lease, shall be valid
unless consented to by Landlord's mortgagees of record, if any. No rent provided
for in Article III, additional rent, profit rent or any other charge shall be
paid more than ten (10) days prior to the due date thereof and payments made in
violation of this provision shall (except to the extent that such payments are
actually received by a mortgagee) be a nullity as against such mortgagee and
Tenant shall be liable for the amount of such payments to such mortgagee. No act
or failure to act on the part of Landlord which would entitle Tenant under the
terms of this Lease, or by Law, to be relieved of Tenant's obligations hereunder
or to terminate this Lease, shall result in a release or termination of such
obligations or a termination of this Lease unless (i) Tenant shall have first
given written notice of Landlord's act or failure to act to Landlord's
mortgagees of record, if any, specifying the act or failure to act on the part
of Landlord which could or would give basis to Tenant's rights; and (ii) such
mortgagees, after receipt of such notice, have failed or refused to correct or
cure the condition complained in this Section shall be deemed to impose any
obligation on any such mortgagees to correct or cure any such condition.
"Reasonable Time@' as used above means and includes a reasonable time to obtain
possession of the mortgaged Premises if the mortGagee elects to do so and a
reasonable time to correct or cure the condition if such condition is determined
to exist.
Section 17.6 The Tenant shall promptly execute and comply with all
statutes, ordinances, rules, orders, regulations, requirements and assessments
of the Federal, State and Local Governments and of any and all of their
Departments and Bureaus applicable to said Premises, for the correction,
prevention, and abatement of nuisances or other grievances, in, upon or
connected with the said Premises during said term; and shall also promptly
comply with and execute all rules, orders and regulations of the New York Board
of Fire Underwriters or any other similar body, at the Tenant's own cost and
expense.
Section 17.7 Tenant shall comply with all reasonable "Rules and
Regulations" as the same shall be promulgated by the Landlord from time to time
as Landlord deems necessary to safeguard the Buildings, its Tenants, the
reputation of the Buildings as a First Class office building, or for any other
reasonable purpose.
Section 17.8 The Tenant shall not assign or sublet this lease without the
Landlord's prior written consent.
Section 17.9 Tenant shall not permit to be created nor to remain
undischarged any lien, encumbrance, or charge arising out of any work of any
contractor, mechanic, laborer, or materialman which might be or become a lien or
encumbrance or charge upon the Premises and Tenant shall not suffer any other
matter or thing whereby the estate, right and interest of Landlord in the
Premises might be impaired. If any lien or notice of lien on account of an
alleged debt of Tenant or any notice of contract by a party engaged by Tenant or
Tenant's contractor to work in the Premises shall be filed against the Premises,
Tenant shall, within 20 days after notice of filing thereof, cause the same to
be discharged of record by payment, deposit, bond, order of a court of competent
jurisdiction, or otherwise. If Tenant shall fail to cause such lien or notice of
lien to be discharged within the period provided, then Landlord, in addition to
any other rights or remedies, may, but shall not be obligated to, discharge the
same by either paying the amounts 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 defend any
prosecution of an action for foreclosure of such lien by the lienor or to compel
the prosecution of any 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 paid by Landlord and all costs and expenses,
including attorney fees, incurred by Landlord in connection therewith, together
with interest thereon at the maximum legal rate from the respective dates of
Landlord's making of the payment or incurring of the cost and expense shall be
paid by Tenant to Landlord as additional rent.
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Section 17.10 If any provision of this Lease or application thereof to any
person or circumstance shall to any extent be invalid, the remainder of this
Lease or the application of such provision to persons or circumstances other
than those as to which it is held invalid shall not be affected therebY and each
provision of this Lease shall be valid and enforced to the fullest extent
permitted by law.
Section 17.11 All provisions herein shall be binding upon and shall insure
to the benefit of the parties, their legal representatives, successors and
assigns. In the event of any sale of the land, building or this Lease, or of a
Lease of the Capital Center, Landlord shall be entirely relieved of all
obligations hereunder.
Section 17.12 This Lease and the exhibits attached set forth the entire
agreement between the parties. Any prior conversations or writings are merged
herein and extinguished. No subsequent amendment to this Lease shall be binding
upon Landlord or Tenant unless reduced to writing and signed.
Section 17.13 This agreement shall be governed by the laws of the State of
New York.
Landlord: NORTH PEARL PARTNERS
By:_____________________________________
Carl W. Engstrom
Tenant: FOUR CORNERS ABSTRACT CORPORATION
By:_____________________________________
William S. Gagliano
Executive Vice President
5865E
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EXHIBIT 10.3
LEASE AGREEMENT
Between
FITCH BUILDING ASSOCIATES
Suite 400
80 West Main Street
Rochester, New York 14614
And
FOUR CORNERS ABSTRACT CORP.
80 West Main Street
Rochester,New York 14614
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INDEX
ARTICLE TITLE PAGE
- ------- ----- ----
1 DEMISE AND TERM 93
2 RENT 93
3 SECURITY DEPOSIT 94
4 COMMON AREAS 94
5 PARKING 94
6 INSURANCE 95
7 REPAIRS AND MAINTENANCE OF THE PROPERTY 95
8 CHANGES AND ALTERATIONS 96
9 INDEMNIFICATION 96
10 COMPLIANCE WITH LAWS 96
11 DAMAGE OR DESTRUCTION 97
12 CONDEMNATION 97
13 ASSIGNMENTS AND SUBLEASES 98
14 CONDITION LIMITATIONS; DEFAULT PROVISIONS:
RE-ENTRY; DAMAGES 98
15 LANDLORD'S RIGHT TO PERFORM TENANT'S
COVENANTS 99
16 MECHANICS' LIENS 100
17 LANDLORD'S RIGHT TO ENTER PREMISES 100
18 OFFSET STATEMENT, ATTORNMENT
SUBORDINATION 100
19 INVALIDITY OF PARTICULAR PROVISIONS 101
20 NOTICES 101
21 QUIET ENJOYMENT 101
22 SURRENDER 101
23 RENEWAL OPTION 102
24 BROKERS COMMISSIONS 102
25 RULES AND REGULATIONS 102
26 ENTIRE AGREEMENT AND TERMINATION 102
<PAGE>
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BUILDING LEASE
This Lease dated this 21 st day of June, 1995, between FITCH BUILDING
ASSOCIATES, a New York general partnership, with offices at Suite 400, 80 West
Main Street, Rochester, New York 14614, (hereinafter referred to as "Landlord")
and Four Corners Abstract Corp., a New York business corporation, with offices
at 80 West Main Street, Rochester, New York 14614 (hereinafter referred to as
"Tenant").
This Lease is granted and accepted upon the following covenants and
conditions, and each of the parties hereto agrees to perform and observe all the
terms, covenants and conditions hereof to be performed on his or its part.
ARTICLE 1
DEMISE AND TERM
Section 1: The Demised Premises are comprised of approximately 9,000 square
feet on the 1st and 2nd floors of the Landlord's building located at 360 East
Avenue, Rochester, New York 14604, as more fully described in Schedule "A"
attached hereto and made a part hereof, to be used by the Tenant for office
space. The Tenant agrees to take the Demised Premises in their current
condition, "as is" and "where is". Section 2: The term of this lease is for 5
years, commencing on July 1, 1995.
ARTICLE 2
RENT
Section 1: Tenant agrees to pay to the Landlord at its address indicated
above, or at such other place as the Landlord may designate by written notice, a
gross annual rental of Seventy Two Thousand Dollars ($72,000.00).
Such gross annual rental ("Gross Rent") shall be in addition to and over
and above all other payments to be made by Tenant as hereinafter provided, and
such Gross Rent shall be paid in equal monthly installments of $6,000.00 in
advance on the first day of each calendar month during the term of this Lease,
commencing as of the effective date hereof.
Section 2: All costs and expenses relating to the Demised Premises, which
may arise or become due during or out of the term, shall be paid by Tenant;
provided, however, that the Tenant shall not be required to pay interest or
principal amortization under any mortgage placed upon the Demised Premises by
the Landlord, or to pay any real estate taxes or insurance on the Building, or
to pay any costs or expenses relating to those obligations of the Landlord
hereunder to maintain the Building in which the Demised Premises are located,
and all common areas. However, the Gross Rent does not include the costs of all
utility services to the Demised Premises, including electricity, water, and gas.
Electricity usage to the Demised Premises is separately metered, and the Tenant
shall be responsible for arranging for said service and bearing all costs
thereof. Water and gas usage to the Demised Premises are not separately metered;
consequently, the Tenant shall pay to the Landlord as Additional Rent, within
ten (10) days after Tenant's receipt of a bill for the same, Tenant's pro rata
share of all water and gas usage for the Building. The Tenant's pro rata share
shall be that portion of the total usage for the Building corresponding to the
proportion between the leasable square footage of the Demised Premises and the
total square footage of the Building, plus the square footage of Common Areas.
Section 3: The Gross Rent shall be paid to the Landlord without notice or
demand and without abatement, deduction or set-off, except as otherwise
specifically provided herein.
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Section 4: Additional Rent. Any costs, charges, and expenses, in addition
to Gross Rent which Tenant assumes, agrees, or is obligated to pay pursuant to
the Lease shall be deemed Additional Rent, and in the event of non-payment, the
Landlord shall have all of the rights and remedies with respect thereto as is
herein provided in the case of non-payment of Gross Rent.
Section 5: Late Charges: The Tenant acknowledges that late payment by the
Tenant to the Landlord of Gross Rent, Additional Rent, or any other sum due
under the Lease will cause the Landlord to incur costs not contemplated by the
Lease. Therefore, if any installment of Gross Rent or Additional Rent, or any
other sum due under the Lease, is not received by the Landlord within ten (10)
calendar days of when due, the Tenant shall pay to the Landlord an additional
lump sum equivalent to five percent (5%) of the overdue rent or other sum as a
late charge. The parties agree that this late charge represents a fair and
reasonable estimate of the costs that the Landlord will incur by reason of late
payment by the Tenant. Acceptance of any late charge shall not constitute a
waiver of the Tenant's default with respect to the overdue amount, nor prevent
the Landlord from exercising any of the other rights and remedies available to
the Landlord.
ARTICLE 3
SECURITY DEPOSIT
Section 1: The Tenant has this day deposited with the Landlord the sum of $
0.00 as security for the full and faithful performance by the Tenant of all the
terms, covenants and conditions of this Lease upon the Tenant's part to be
performed, which said sum shall be returned to the Tenant after the time fixed
as the expiration of the term herein, provided the Tenant has fully and
faithfully carried out all of said terms, covenants and conditions on Tenant's
part to be performed. In the event of a bona fide sale, subject to this Lease,
the Landlord shall have the right to transfer the Security to the vendee for the
benefit of the Tenant, and Landlord shall be released from all liability for the
return of such Security; and the Tenant agrees to look to the new Landlord
solely for the return of the said Security, and it is agreed that this shall
apply to every transfer or assignment made of the Security to a new Landlord.
ARTICLE 4
COMMON AREAS
Section 1: The Landlord will provide for the benefit of the Tenant finished
common areas at the Landlord's expense. The Landlord shall exclusively provide
the design and finish for said common areas.
Section 2: The common areas shall be under the exclusive care and control
of the Landlord. The Tenant shall not have the right to enter into any
management decisions affecting the common areas.
Section 3: The term "common areas" as used in this Lease refers to all
components and areas of or within the building in which the Demised Premises are
located, interior and exterior, and the land underlying and surrounding same,
which are not specifically leased to Tenant or other tenants, including, without
limitation thereto by the specification thereof, all hallways, restrooms,
foyers, entries, lobbies, atriums, stairways, elevators, landscaped areas,
sidewalks, driveways, parking areas, and all areas used in common with other
tenants.
ARTICLE 5
PARKING
Section 1: The Tenant will utilize for parking twenty five (25) parking
spaces in the location designated by Landlord within walking distance of the
Building.
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ARTICLE 6
INSURANCE
Section 1: The Tenant, throughout the term of the Lease, shall maintain in
full force and effect for the benefit of, and naming, the Landlord and the
Landlord's agents as additional insureds, and the Tenant as parties insured
therein, comprehensive general public liability insurance, including without
limitation, umbrella liability coverage against claims for personal injury,
death, or damage to property occurring, in, on, or about the Demised Premises,
with limits of not less than $1,000,000 for personal injury or death of one
person and $1,000,000 arising out of one occurrence, and $100,000 for property
damage.
Section 2: The insurance required hereunder shall be issued by an insurance
company licensed to do business in the State of New York prior to any entry by
the Tenant into the Demised Premises, and thereafter, not less than ten (10)
days prior to the expiration of any expiring policy, the Tenant shall furnish
renewals thereof, together with proof of payment of the premiums therefor. If
such insurance is carried under a blanket policy, the Tenant may deliver a
certificate in lieu of the original policy. Each policy or renewal shall contain
a provision for notice to the Landlord at least ten (10) days prior to the
cancellation or any modification thereof.
ARTICLE 7
REPAIRS AND MAINTENANCE OF THE PROPERTY
Section 1: The Landlord shall maintain in good working order and repair the
exterior and the structural portion of the Building, including the structural
portions of the Demised Premises, the public portions of the Building interior,
and the Building plumbing, electrical, heating, and ventilating systems exterior
of the Demised Premises. Maintenance and repair of the Demised Premises and all
plumbing, electrical, heating and ventilating systems therein shall be the
Tenant's sole responsibility. The Tenant agrees to give prompt notice of any
defective condition in the Building or the Demised Premises for which the
Landlord may be responsible hereunder. There shall be no allowance to the Tenant
for a diminution of rental value and no liability on the part of the Landlord by
reason of inconvenience, annoyance, or injury to business arising from the
Landlord or others making repairs, additions, or improvements in or to any
portion of the Building or the Demised Premises or in and to the fixtures,
appurtenances, or equipment thereof. It is specifically agreed that the Tenant
shall not be entitled to any setoff or reduction of rent by reason of any
failure of the Landlord to comply with the covenants of this clause or any other
clause of the Lease. The Tenant agrees that the Tenant's sole remedy at law in
such instance will be by way of an action for damages for breach of contract.
The provisions of this clause shall not apply in the case of fire or other
casualty which are dealt with in ARTICLE 11 of the Lease.
Section 2: The Tenant: (a) shall maintain at its sole cost and expense the
Demised Premises in a clean, orderly, well-ventilated, and sanitary condition,
it being specifically understood and agreed that Tenant shall select and pay for
its own janitorial and trash removal services; (b) shall not create or suffer to
be created in or about the Demised Premises any nuisance, including, but not
limited to, excessive noise; (c) the Tenant further agrees not to use the
lavatories, toilets, and other apparatus in said premises and in the building in
which said premises are located for any other purpose than that for which they
are constructed and the Tenant agrees to pay the Landlord any damage resulting
from the misuse thereof; (d) the Tenant shall at all times keep the Demised
Premises in good order and repair, reasonable wear and tear excepted. The Tenant
shall be responsible for all damage done to the Demised Premise or to said
building by the Tenant or the Tenant's agents, employees, invitees, licensees,
or servants, and the Tenant shall promptly on demand by the Landlord reimburse
the Landlord as additional rent for the full cost of repair of all such damage.
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Section 3: Landlord will keep and maintain common areas including
sidewalks, curbs and driveways.
Section 4: The term "structural" as used in this Lease as it relates to
repairs and similar obligations means the roof and permanent walls, ceilings and
floors.
ARTICLE 8
CHANGES AND ALTERATIONS
Section 1: Tenant shall have the right at any time and from time to time
during the term of this Lease to make, at its sole cost and expense, and using
its own contractors, changes and alterations in or of the building and other
improvements to the Demised Premises, but only after receiving written consent
of the Landlord, which consent shall not be unreasonably or unduly withheld or
delayed; subject, however, to the following:
(a) Landlord shall receive plans and specifications of any proposed
alterations;
(b) No change or alteration shall be undertaken until Tenant shall
have procured and paid for, so far as the same may be required from
time to time, all permits and authorizations of all municipal
departments and governmental subdivisions having jurisdiction.
(c) Any change or alteration shall be made in a good and workmanlike
manner and in compliance with all applicable permits and
authorizations and building and zoning laws and with all other laws,
ordinances, orders, rules, regulations and requirements of all
federal, state and municipal governments, departments, commissions,
boards and offices, or any other body hereafter exercising functions
similar to those of any of the foregoing, and shall not diminish the
value of the Demised Premises.
ARTICLE 9
INDEMNIFICATION
Section 1: Tenant agrees that except for acts or omissions of the Landlord,
it will indemnify and save the Landlord harmless from and against any and all
liabilities, losses, damages, costs, expenses, suits, judgments and claims by or
on behalf of any person, firm, corporation or governmental authority for injury
or damage to person or property, of any nature and howsoever caused, arising on
the Demised Premises and the building and improvements thereon, or out of the
use, occupation, operation, possession or control by Tenant of the Demised
Premises and the building and improvements thereon at any time during the term
of this Lease. Tenant further agrees to indemnify and save the Landlord harmless
from any and all liability arising from any failure by Tenant to perform any of
the agreements, terms, covenants or conditions of this Lease on Tenant's part to
be performed.
ARTICLE 10
COMPLIANCE WITH LAWS
Section 1: Tenant, in the use, occupation, operation, possession and
control of the Demised Premises and all buildings and improvements thereon,
shall comply with all requirements of all laws, orders, ordinances, rules and
regulations of the federal, state, county and municipal authorities and with any
direction or certificate of occupancy, pursuant to law, of any public officer
and with the requirements of the Board of Fire Underwriters or similar body,
with respect to the use, occupation, operation, possession and control of the
Demised Premises. The Tenant shall not be responsible for required improvements
to the Demised Premises made necessary by any such compliance which does not
arise from the Tenant's particular use of the Building.
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ARTICLE 11
DAMAGE OR DESTRUCTION
Section 1: In case of casualty to the Demised Premises resulting in damage
or destruction, Tenant shall promptly give written notice thereof to the
Landlord. Furthermore, subject to the provisions of Article 11, Section 2, of
this Lease, Landlord shall only repair the damaged structural parts of the
Premises. Landlord is not required to repair or replace any equipment, fixtures,
furnishings or decorations. Landlord is not responsible for delays due to
settling insurance claims, obtaining estimates, labor and supply problems or any
other cause not fully under Landlord's control. Such restoration, repairs,
replacements, rebuilding or alterations shall be commenced promptly and
prosecuted with reasonable diligence, unavoidable delays excepted. If the fire
or other casualty is caused by an act or neglect of Tenant, Tenant's employees
or invitees, then all repairs will be made at Tenant's expense. The cost of the
repairs will be added rent.
Section 2: If all or more than 50% of the Demised Premises shall be damaged
or destroyed by fire or otherwise, either party shall have the option of
terminating this Lease by written notice to the other party given within thirty
(30) days after such destruction or damage has been made known to the party.
ARTICLE 12
CONDEMNATION
Section 1: In the event that the Demised Premises, or any part thereof,
shall be taken in condemnation proceedings ar by exercise of any right of
eminent domain, the Landlord shall be entitled to collect from any condemnor the
entire award. Tenant shall retain its right to a separate award for movable
trade fixtures and moving expenses. Tenant agrees to execute any and all further
documents that may be required in order to facilitate collection by the Landlord
of any and all such awards.
Section 2: If at any time during the term of this Lease title to the whole
or materially all of the Demised Premises shall be taken by exercise of the
right of condemnation or eminent domain, or by agreement between the Landlord
and those authorized to exercise such right, this Lease shall terminate and
expire on the date title vests in the condemnor and the Net Rent provided to be
paid by Tenant shall be apportioned and paid to such date. For the purposes of
this Article 12, "materially all of the Demised Premises" shall be deemed to
have been taken if the portion of the Demised Premises not so taken, cannot be
so repaired as to be suitable for use in the conduct of Tenant's business as
conducted on the Demised Premises immediately prior to the taking.
Section 3: If at any time during the term of this Lease title to less than
the whole or less than materially all of the Demised Premises shall be taken as
aforesaid, all of the award or awards collected by the Landlord pursuant to
Article 12, Section 1, of this Lease shall be held by the Landlord and applied
and paid over toward the cost of any necessary demolition, repair and
restoration by Tenant. The Landlord shall be entitled, in any event, to retain
from the award the fair value of the land taken and the Net Rent will be
adjusted as provided in Article 12, Section 4.
Section 4: If title to less than the whole or less than materially all of
the Demised Premises shall be taken as aforesaid, this Lease shall continue, but
the Net Rent thereafter payable by Tenant shall be apportioned and reduced from
the date of such partial taking by a fair and reasonable amount determined by
the Landlord and Tenant.
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ARTICLE 13
ASSIGNMENTS AND SUBLEASES
Section 1: Tenant may not assign this Lease or sublet the Demised Premises
in whole or in part or otherwise transfer or encumber its leasehold estate in
whole or in part without the prior written consent of the Landlord, said consent
not to be unreasonably withheld.
ARTICLE 14
CONDITION LIMITATIONS; DEFAULT PROVISIONS; RE-ENTRY; DAMAGES
Section 1: Any one or more of the following events shall constitute a
default:
(a) default by Tenant in the due and punctual payment of any Gross
Rent or additional rent payable under this Lease or any part thereof when and as
the same shall become due and payable, and such default shall continue for a
period of ten (10) days after written notice thereof from the Landlord to
Tenant; or
(b) default by Tenant in the performance of or compliance with any of
the covenants, agreements, terms or provisions contained in this Lease, other
than those referred to in the foregoing paragraph (a), and such default shall
continue for a period of ten (10) days after written notice thereof from the
Landlord to Tenant, except that in connection with a default not susceptible of
being cured with due diligence within thirty (30) days, the time of Tenant
within which to cure the same shall be extended for such time as may be
necessary to cure the same with all due diligence, provided Tenant commences
promptly and proceeds diligently to cure the same and further provided that such
period of time shall not be so extended as to subject the Landlords to any
criminal liability or forfeitures; or
In the event any such default as set forth in paragraphs (a) through
(b) above shall occur and not be cured within the applicable grace period, the
Landlord at any time thereafter during the continuance of such default,.may give
written notice to Tenant, specifying such default or event of default and
stating that this Lease and the term hereby demised shall expire and terminate
on the date specified in such notice, which shall be at least twenty (20) days
after giving such notice, and upon the date specified in such notice, this Lease
and the term hereby demised and all rights of Tenant under this Lease shall
terminate.
Section 2: If this Lease shall terminate as provided in this Article or if
an event of default referenced in Section 1 above occurs and is not cured within
the allowed grace period, Landlord may immediately or any time after termination
of this Lease or expiration of the applicable grace period, re-enter into or
upon the Demised Premises, or any part thereof, by any suitable action or
proceeding at law, and may repossess the same and may remove any persons
therefrom, to the end that Landlord may have, hold and enjoy the Demised
Premises. The words "re-enter", "re-entry" and "re-entered" as used in this
Lease are not restricted to their technical legal meanings.
Section 3: In the event of any termination of this Lease under the
provisions of Section 1 above or in the event that the Landlord shall re-enter
the Premises under the provisions of Section 2 above or in the event of the
termination of this Lease (or of re-entry) by or under any summary dispossession
or other action of law, Tenant shall thereupon pay to Landlord all rents and
other charges payable hereunder by Tenant to Landlord up to the time of such
termination of this Lease, or of such recovery of possession of the Demised
Premises by Landlord, as the case may be, and shall also pay to the Landlord
damages as provided in Section 4 below. The specified remedies to which Landlord
may resort hereunder are cumulative and shall be in addition to every right or
remedy now or hereafter existing at law or in equity or by statute or otherwise,
and the exercise or the beginning of the exercise by the Landlord of any one or
more of the rights or remedies provided for in this Lease or now or hereafter
existing at law or
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in equity or by statute or otherwise shall not preclude the simultaneous or
later exercise by the Landlord of any or all other rights or remedies provided
for in this Lease or now or hereafter existing at law or in equity or by statute
or otherwise.
Section 4: In the event of any termination of this Lease under the
provisions of Section 1, above or in the event that Landlord shall re-enter the
Demised Premises under the provisions of Section 2 or in the event of the
termination of this Lease (or of re-entry) by or under any summary dispossession
or other proceeding or action or any provision of law, Tenant will pay to
Landlord as damages a sum equal to the aggregate of the rent and the additional
rent which would have been payable by Tenant hereunder had this Lease not so
terminated, or had Landlord not so re-entered the Demised Premises, payable upon
the due dates specified herein following such termination or such re-entry and
until the date for the expiration of the Lease Term as provided herein;
provided, however, that if Landlord shall re-let the Demised Premises during
said period, Landlord shall credit Tenant with the Gross Rents received by
Landlord from such re-letting, such Gross Rents to be determined by first
deducting from the gross rents as and when received by Landlord payment of such
expense, commissions and charges as the Landlord may have paid or incurred
including legal expenses and attorneys' fees, in terminating this Lease or of
re-entering the Demised Premises and of securing possession thereof, as well as
the expenses of re-letting, including altering and preparing the Demised
Premises and the rental therefor in connection with such re-letting, it being
understood that any such re-letting may be for a period equal to or shorter or
longer than the remaining term of this Lease; provided further, that (i) in no
event shall Tenant be entitled to receive any excess of such Gross Rents over
the sums payable by Tenant to Landlord hereunder, (ii) in no event shall Tenant
be entitled in any suit for the collection of damages pursuant to this
subparagraph (b) to a credit in respect of any Gross Rents from a re-letting
except to the extent that such Gross Rents are actually received by Landlord
prior to the commencement of such suit, and (iii) if the Demised Premises or any
part thereof should be re-let in combination with other space, then proper
apportionment on a square foot area basis shall be made of the rent received
from such re-letting and of the expenses of re-letting.
Suit or suits for the recovery of such damages, or any installments
thereof, may be brought by Landlord from time to time at its election and
nothing contained herein shall be deemed to require Landlord to postpone suit
until the date when the term of this Lease would have expired if it had not been
terminated under the provision of Section 1 above, or under any provision of
law, or had Landlord not re-entered the Demised Premises.
Nothing herein contained shall be construed as limiting or precluding the
recovery by Landlord against Tenant of any sums for damages to which, in
addition to the damages particularly provided above, Landlord may lawfully be
entitled by reason of any default hereunder on the part of Tenant.
Section 5: No failure by the Landlord to insist upon the strict performance
of any covenant, agreement, term or condition of this Lease or to exercise any
right or remedy consequent upon a breach thereof, and no acceptance of full or
partial rent during the continuance of any such breach shall constitute a waiver
of any such breach or of such covenant, agreement, term or condition.
ARTICLE 15
LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS
Section 1: Tenant covenants and Decrees that if Tenant shall at any time
fail to make any payment or perform any other act on its part to be made or
performed under this Lease, the Landlord, after fifteen (15) days written notice
to Tenant, may, but shall not be obligated to, and without waiving or releasing
Tenant from any obligation of Tenant under this Lease, make such payment or
perform such other act to the extent the Landlord may deem desirable, and in
connection therewith to pay reasonable and necessary expenses, including such
for the employment of counsel. All sums so paid by the Landlord and all expenses
in connection therewith, together with interest thereon at the prime rate per
annum as established by First National Bank in Rochester, New York, from the
date of such payment, shall be deemed additional rent hereunder and be payable
to the Landlord on demand.
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ARTICLE 16
MECHANICS' LIEN
Section 1: Tenant shall not suffer or permit any mechanics' or other liens
to be filed against the Demised Premises nor against Tenant's leasehold interest
therein by reason of work, labor, services or materials supplied or claimed to
have been supplied to Tenant or anyone holding the premises or any part thereof
through or under Tenant. If any such mechanics' liens or other liens shall at
any time be filed against the Demised Premises, Tenant shall cause the same to
be discharged of record or bonded within sixty (60) days after the date of
filing. If Tenant shall fail to discharge or bond such mechanics' liens within
such period, then in addition to any other right or remedy of the Landlord, the
Landlord may, but shall not be obligated to, procure their discharge and in such
event the Landlord shall be entitled, if the Landlord so elects, to compel the
prosecution of an action for the foreclosure of such mechanics' liens by the
lienor and to pay the amount of the judgment, if any, in favor of the lienor
with interest, costs and allowances. Any amount paid by the Landlord for any of
the aforesaid purposes and all reasonable legal and other expenses of the
Landlord, including reasonable counsel fees, in defending any such actions or in
or about procuring the discharge of such liens, with all necessary disbursements
in connection therewith, with interest thereon at the rate of ten percent (10%)
per annum from the date of payment, shall be repaid by Tenant to the Landlord on
demand.
ARTICLE 17
LANDLORD'S RIGHT TO ENTER PREMISES
Section 1: Tenant agrees to permit the Landlord and any authorized
representatives of the Landlord to enter the Demised Premises at all times
during usual business hours upon 24 hours prior notice (48 hours for repair or
other work) or any time in case of emergency, to inspect the same, or to exhibit
the Demised Premises to a prospective purchaser, and if the Landlord shall
desire, but without implying any obligation on Landlord to do so, to make any
necessary repairs under the terms of this Lease by the Landlord and to perform
any work in the Demised Premises by the Landlord to comply with any laws,
ordinances, orders, regulations or requirements of any insurer. During the
progress of such work, the Landlord may keep and store upon the premises all
necessary materials, tools and equipment. The Landlord shall not in any event be
liable for inconvenience, annoyance, disturbance, loss of business or other
damage to Tenant, provided it be as little as may be reasonably possible in the
circumstances, by reason of the performance of any such work or of bringing
materials, supplies and equipment into or through the Demised Premises during
the course thereof, and the obligations of Tenant under this Lease shall not be
affected thereby in any manner whatsoever.
ARTICLE 18
OFFSET STATEMENT, ATTORNMENT SUBORDINATION
Section 1: Subordination Agreement: The rights of Tenant under this Lease
shall be and are automatically subject and subordinate at all times to the lien
of any mortgage now or hereafter encumbering the Demised Premises, or any
refinancing, modification, renewal, extension, or consolidation thereof, without
need for the execution of any further documents by Tenant. Regardless, Tenant
agrees to execute upon ten (10) days' prior Written request, any further
instrument reasonably requested by Landlord or any present or future lender to
Landlord to evidence this subordination, and to attorn to any present or future
lender to Landlord, including but not limited to, execution without change or
modification of any such instrument reasonably required by any present or future
lender to Landlord.
Section 2: Estoppel Statement: Tenant agrees that at any time and from time
to time upon ten (10) days prior written request by Landlord, Tenant will
execute, acknowledge and deliver to Landlord a statement in writing stating that
this Lease is unmodified and in full force and effect (or, if there have been
modifications, stating the
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modifications, and that the Lease as so modified is in full force and effect),
the dates to which the rent and other charges have been paid and whether
Landlord has defaulted in the performance of any of its obligations under the
terms of this Lease, together with any other provisions in any form as
reasonably required by any present or future lender to Landlord.
ARTICLE 19
INVALIDITY OF PARTICULAR PROVISIONS
Section 1: If any covenant, agreement or condition of this Lease or the
application thereof to any person, firm or corporation or to any circumstance
shall to any extent be invalid or unenforceable, the remainder of this Lease, or
the application of such covenant, agreement or condition to persons, firms or
corporations or to circumstances other than those as to which it is invalid or
unenforceable shall not be affected thereby. Each covenant, agreement or
condition of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
ARTICLE 20
NOTICES
Section 1: All notices, demands and requests which may or are required to
be given by any party to another shall be in writing and either delivered
personally or sent by United States certified mail, return receipt requested,
postage prepaid, and addressed:
(a) if to Tenant: Four Corners Abstract Corp.
360 East Avenue
Rochester, New York 14604
(b) if to Landlord: Fitch Building Associates
Suite 400, Wegman Building
80 West Main Street
Rochester, New York 14614
or at such other address as the party to receive such notice may from time to
time indicate in writing to the other party. A notice, demand or request, which
is mailed as provided above shall be deemed given on the first business day
following the postmark date.
ARTICLE 21
QUIET ENJOYMENT
Section 1: The Landlord agrees that Tenant, upon paying the Net Rent and
all other charges herein provided for and performing and fulfilling the
covenants, agreements and conditions of this Lease on Tenant's part to be
performed and fulfilled, shall lawfully and quietly hold, occupy and enjoy the
Demised Premises during the term of this Lease without hindrance or molestation
by the Landlord or any person or persons claiming under the Landlord, subject,
however, to the matters herein set forth.
ARTICLE 22
SURRENDER
Section 1: On the last day of the Lease Term, or the last Renewal Term, or
any earlier date of termination, Tenant shall peaceably surrender the Demised
Premises in good order, condition and repair, ordinary wear and tear and damage
by the elements or other casualty excepted. All alterations, additions,
improvements and permanent fixtures which shall have been made by Tenant upon
the Demised Premises shall remain upon and be surrendered with the Demised
Premises as part thereof, provided, however, that Tenant shall have the right to
remove all trade fixtures and personal property, including but not limited to,
office furniture and equipment.
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ARTICLE 23
RENEWAL OPTION
Section 1: Provided that Tenant is not then in default under the terms of
this Lease and further provided that this Lease has not theretofore been
Terminated pursuant to the terms hereof, Tenant shall have the option to renew
this Lease for one (1 ) successive additional term of five (5) year(s). The
option to renew for the Renewal Term shall expire and be of no further force and
effect unless the option is exercised by Tenant giving written notice to
Landlord not less than six (6) months prior to the expiration of the original
term of the lease. The terms of the Lease shall remain the same during said
renewal period, except that the Gross Rent shall be increased to Eighty Five
Thousand Dollars ($85,000.00), payable in monthly installments of Seven Thousand
Eighty Three and 33/100 Dollars ($7,083.33).
ARTICLE 24
COMMISSIONS
Section 1: The parties hereto agree that no broker or realtor brought about
this Lease and Landlord agrees to be responsible for any broker's commissions
whatsoever.
ARTICLE 25
RULES AND REGULATIONS
Section 1: The Landlord reserves the right to make such reasonable rules
and regulations as in its judgment may from time to time be needful for the
safety, care, and cleanliness of said Demised Premises and said building and for
the preservation of good order therein and the Tenant agrees faithfully to
comply with the same, to be placed into effect no earlier that thirty (30)
calendar days after written notice thereof to Tenant.
ARTICLE 26
ENTIRE AGREEMENT
Section 1: The Lease is the total agreement of the parties thereto, and the
Landlord has made no representations or promises in respect to the Demised
Premises or the building in which the demised premises are located except those
contained therein, and those, if any, contained in a writing signed by the
parties. The Lease may not be changed, modified, discharged, or terminated
orally.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and year first above written.
TENANT: FOUR CORNERS ABSTRACT CORP.
Dated: June 22, 1995 By:______________________________________
William S. Gagliano
Executive Vice President
LANDLORD: FITCH BUILDING
ASSOCIATES
Dated: July 18, 1995 By:______________________________________
Bernard J. Iacovangelo
Managing Partner
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EXHIBIT 10.4
CHENANGO COUNTY CLERK'S OFFICE
LICENSE AGREEMENT
Made as of the 1st day of January, 1995 between the COUNTY OF CHENANGO, 5
Court Street in the City of Norwich, New York 13815, hereinafter referred to as
the "County" and FOUR-CORNERS ABSTRACT CORPORATION, 80 West Main Street,
Rochester, New York 14614, hereinafter referred to as "Four Corners".
WHEREAS, as of the 1st day of June, 1994 the parties have entered into a
certain lease agreement whereby the County agreed to lease to Four Corners a
certain area specified therein at an annual rental of One Thousand One Hundred
Fifty Dollars; and WHEREAS, the parties desire to terminate the lease agreement
and replace it with a license agreement pursuant to terms hereinafter specified.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. The aforesaid lease agreement made as of the 1st day of June, 1994
is terminated as of December 31, 1994, Four Corners to pay the County the pro
rata share of the rental amount for the calendar months in 1994; to wit,
$672.00.
2. The County will grant a license to Four Corners for such space as
is necessary to place a single four draw filing cabinet and a FAX machine, an
area of approximately eight square feet.
3. The term of this agreement, unless sooner terminated as provided
herein, shall be January 1, 1995 through December 31, 1995.
4. Four Corners agrees that it will pay to the County for the use of
said space the annual license fee of One Hundred Fifty Dollars (S150.00),
payable on or before the 15th day of April 1995.
5. County agrees to provide light and heat in said premises in the
same manner in which it heats and lights the premises for the use of the public.
6. It is understood and agreed that Four Corners shall keep the area
in the vicinity of its filing cabinet and FAX machine neat and clean and
presentable, and the County will not be responsible for safety of items stored
by Four Corners in the filing cabinet or the FAX machine. It is also understood
that Four Corners will only be able to use the space during the hours that the
Chenango County Clerk's Office is normally open to the public for business, and
not during any other period.
7. If Four Corners shall fail to pay said license fee, or if this
agreement is lawfully terminated by County, or if Four Corners shall breach its
obligations hereunder, it is agreed that County may remove said equipment
without need of legal process and that in that event the County will have no
responsibility for the said file cabinet or FAX machine.
8. The parties agree that the County reserves and shall have the right
to terminate this license agreement upon thirty (30) days written notice upon
determination by the County that the space is necessary for proper discharge of
County municipal affairs.
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WITNESS the hands and seals of the parties hereto the day and year opposite
their respective signatures.
COUNTY OF CHENANGO
Dated: __, 1995 By:______________________________________
Clifford W. Crouch, Chairman,
Board of Supervisors
FOUR CORNERS ABSTRACT CORPORATION
Dated: March 31, 1995 By:______________________________________
William S. Gagliano
Executive Vice President
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EXHIBIT 10.5
FOUR CORNERS ABSTRACT A Wholly Owned Subsidiary of FOUR CORNERS
FINANCIAL CORPORATION
December 17 1994
FAXED AND MAILED
----------------
J. K. Hage III, Esq.
610 Charlotte Street
P .0. Box 1769
Utica, NY 13503-1769 Re: Purchase of 612 Charlotte Street
Utica, New York
Dear J.K.:
Transmitted herewith is the signed purchase agreement for the above-captioned
property. Pursuant to our telephone conversation of November 10, 1994, I have
deleted and initialed the section relative to repairing damage to buyers
premises at 610 Charlotte Street, in favor of including the four-drawer file
cabinets ln the basement in the purchase price of $25.000.
We will begin to bring our abstract up to date immediately, which I will provide
to you along with a survey dated December 8, 1988. As we spoke} I would like to
close this transaction as soon as practicable prior to year end. To that end, I
would ask that you the deed for this exchange and any other necessary documents.
Furthermore, it is our understanding that we will be allowed to occupy the
building beyond the closing date on a month-to-month tenancy for $250/month
(net) through July 31, 1995. We will continue to be responsible for the cost of
utilities, maintenance, minor repairs or other municipal charges. If possible, I
would like to arrange or snow removal during the winter months using your snow
plowing contractor.
If this leasing arrangement meets with your approval, please indicate by signing
both copies of this letter and returning it to me as soon as possible. Thank you
in advance for your prompt attention to this matter I appreciate your expediency
and feel this is a mutually beneficial arrangement.
Agreed and Accepted: Sincerely,
________________________________ William S. Gagliano
J. K. Hage, III, Buyer Date Executive Vice President
WSG:lmr
Enclosure
cc: Frank B. Iacovangelo
Chris Annesi
Bonadio & Co,
<PAGE>
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EXHIBIT 22
Subsidiaries of Registrant
Name State Incorporated
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Four Corners Abstract Corporation New York
Proper Appraisal Specialists, Inc. New York
