SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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 0-8937
FIRST BANKS AMERICA, INC.
-------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-1604965
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
135 North Meramec Avenue, Clayton, Missouri 63105
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
(314) 854-4600
--------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class October 31, 1999
----- ----------------
Common Stock, $0.15 par value 3,187,801
Class B Common Stock, $0.15 par value 2,500,000
<PAGE>
FIRST BANKS AMERICA, INC.
INDEX
<TABLE>
<CAPTION>
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets as of September 30, 1999
<S> <C> <C>
and December 31, 1998............................................................ -1-
Consolidated Statements of Income for the three and nine
months ended September 30, 1999 and 1998......................................... -3-
Consolidated Statements of Changes in Stockholders' Equity and
Comprehensive Income for the nine months ended September 30,
1999 and 1998 and the three months ended
December 31, 1998................................................................ -4-
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1999 and 1998................................................ -5-
Notes to Consolidated Financial Statements......................................... -6-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................. -13-
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................................... -24-
SIGNATURES........................................................................................... -25-
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST BANKS AMERICA, INC.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
ASSETS
------
Cash and cash equivalents:
<S> <C> <C>
Cash and due from banks................................................... $ 27,294 34,312
Interest-bearing deposits with other financial institutions
with maturities of three months or less................................. 367 1,001
Federal funds sold........................................................ 16,000 11,000
------- -------
Total cash and cash equivalents....................................... 43,661 46,313
------- -------
Investment securities:
Available for sale, at fair value......................................... 91,851 114,937
Held to maturity, at amortized cost (fair value of $1,795 and
$2,013 at September 30, 1999 and December 31, 1998,
respectively)........................................................... 1,898 2,026
------ -------
Total investment securities........................................... 93,749 116,963
------- -------
Loans:
Commercial and financial.................................................. 189,792 140,151
Real estate construction and development.................................. 236,561 161,696
Real estate mortgage...................................................... 241,696 155,443
Consumer and installment.................................................. 47,652 61,907
------- -------
Total loans........................................................... 715,701 519,197
Unearned discount......................................................... (2,146) (2,794)
Allowance for possible loan losses........................................ (14,717) (12,127)
------- -------
Net loans............................................................. 698,838 504,276
------- -------
Bank premises and equipment, net of
accumulated depreciation.................................................. 12,572 11,542
Intangibles associated with the purchase of subsidiaries..................... 16,972 8,405
Accrued interest receivable.................................................. 5,538 4,443
Other real estate............................................................ 136 161
Deferred tax assets.......................................................... 11,715 12,121
Other assets................................................................. 21,201 15,773
------- -------
Total assets.......................................................... $ 904,382 719,997
======= =======
</TABLE>
<PAGE>
FIRST BANKS AMERICA, INC.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
(continued)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
LIABILITIES
-----------
Deposits:
Demand:
<S> <C> <C>
Non-interest-bearing....................................................... $130,808 105,949
Interest-bearing........................................................... 74,865 72,662
Savings...................................................................... 248,682 179,152
Time deposits:
Time deposits of $100 or more.............................................. 86,874 52,132
Other time deposits........................................................ 233,514 189,252
-------- -------
Total deposits........................................................... 774,743 599,147
Short-term borrowings........................................................... 7,243 4,141
Accrued interest payable........................................................ 1,692 538
Deferred tax liabilities........................................................ 1,568 1,722
Accrued expenses and other liabilities.......................................... 4,599 4,449
-------- -------
Total liabilities........................................................ 789,845 609,997
-------- -------
Guaranteed preferred beneficial interest in First Banks
America, Inc. subordinated debenture....................................... 44,202 44,155
-------- -------
STOCKHOLDERS' EQUITY
--------------------
Common Stock:
Common stock, $0.15 par value; 6,666,666 shares authorized; 3,874,697 shares
and 3,872,697 shares issued at
September 30, 1999 and December 31, 1998, respectively..................... 581 581
Class B common stock, $0.15 par value; 4,000,000 shares
authorized; 2,500,000 shares issued and outstanding........................ 375 375
Capital surplus................................................................. 69,433 68,743
Retained earnings since elimination of accumulated deficit
of $259,117, effective December 31, 1994..................................... 11,772 5,693
Common treasury stock, at cost; 676,896 shares and 651,867
shares at September 30, 1999 and December 31, 1998,
respectively................................................................. (10,531) (10,088)
Accumulated other comprehensive (loss) income................................... (1,295) 541
-------- -------
Total stockholders' equity............................................... 70,335 65,845
-------- -------
Total liabilities and stockholders' equity............................... $904,382 719,997
======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
FIRST BANKS AMERICA, INC.
Consolidated Statements of Income (unaudited)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------- ------------------
1999 1998 1999 1998
---- ---- ---- ----
Interest income:
<S> <C> <C> <C> <C>
Interest and fees on loans................................................ $ 16,268 11,928 44,852 33,498
Investment securities..................................................... 1,434 2,012 4,862 6,167
Federal funds sold and other.............................................. 326 307 550 979
-------- ------ ------ ------
Total interest income................................................. 18,028 14,247 50,264 40,644
-------- ------ ------ ------
Interest expense:
Deposits:
Interest-bearing demand................................................. 304 311 857 994
Savings................................................................. 2,137 1,638 6,086 4,587
Time deposits of $100 or more........................................... 969 717 2,609 2,278
Other time deposits..................................................... 3,093 2,762 8,493 8,437
Promissory note payable and other borrowings.............................. 137 324 603 1,390
-------- ------ ------ ------
Total interest expense................................................ 6,640 5,752 18,648 17,686
-------- ------ ------ ------
Net interest income................................................... 11,388 8,495 31,616 22,958
Provision for possible loan losses........................................... 90 225 303 725
-------- ----- ------ ------
Net interest income after provision for possible loan losses.......... 11,298 8,270 31,313 22,233
-------- ------ ------ ------
Noninterest income:
Service charges on deposit accounts and customer service fees............. 752 771 2,382 2,114
Gain on sales of securities, net.......................................... -- 240 174 341
Other income.............................................................. 417 296 1,272 881
-------- ------ ------ ------
Total noninterest income.............................................. 1,169 1,307 3,828 3,336
-------- ------ ------ ------
Noninterest expense:
Salaries and employee benefits............................................ 2,846 2,076 8,048 6,367
Occupancy, net of rental income........................................... 777 551 2,138 1,617
Furniture and equipment................................................... 446 424 1,294 1,251
Advertising and business development...................................... 233 157 396 527
Postage, printing and supplies............................................ 213 201 600 607
Data processing fees...................................................... 842 520 2,398 1,426
Legal, examination and professional fees.................................. 1,204 1,122 3,451 3,191
Communications............................................................ 183 157 483 584
Gain on sales of other real estate, net of expenses....................... (333) (89) (326) (2)
Amortization of intangibles associated with the purchase of
subsidiaries............................................................ 322 154 830 442
Guaranteed preferred debenture............................................ 993 765 2,979 765
Other..................................................................... 653 894 2,277 2,555
-------- ------ ------ ------
Total noninterest expense............................................. 8,379 6,932 24,568 19,330
-------- ------ ------ ------
Income before provision for income tax expense........................ 4,088 2,645 10,573 6,239
Provision for income tax expense............................................. 1,699 1,125 4,494 2,598
-------- ------ ------ ------
Net income............................................................ $ 2,389 1,520 6,079 3,641
======== ====== ====== = =====
Earnings per common share:
Basic................................................................. $ 0.42 0.30 1.06 0.72
Diluted............................................................... 0.42 0.29 1.06 0.71
======== ====== ===== =====
Weighted average shares of common stock outstanding (in thousands)........... 5,707 5,151 5,713 5,090
======== ====== ===== =====
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
FIRST BANKS AMERICA, INC.
Consolidated Statements of Changes in Stockholders' Equity
and Comprehensive Income (unaudited) Nine months ended
September 30, 1999 and 1998 and three months ended December 31, 1998
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
Accu-
mulated
other
compre- Total
Class B Compre- Common hensive stock-
Common common Capitalhensive Retained treasury income holders'
stock stock surplusincome earnings stock (loss) equity
----- ----- ------------- -------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated balances, January 1, 1998........... $ 322 375 47,329 1,083 (4,350) 332 45,091
Nine months ended September 30, 1998:
Comprehensive income:
Net income.................................. -- -- -- 3,641 3,641 -- -- 3,641
Other comprehensive income, net of tax -
unrealized gains on securities, net of
reclassification adjustment (1)......... -- -- -- 421 -- -- 421 421
-- -----
Comprehensive income........................ 4,062
=====
Issuance of common stock for purchase
accounting acquisition of FCB............... 43 -- 2,965 -- -- -- 3,008
Exercise of stock options..................... -- -- 13 -- -- -- 13
Redemption of stock options................... -- -- (48) -- -- -- (48)
Compensation paid in stock.................... -- -- 27 -- -- -- 27
Conversion of promissory note payable......... 121 -- 9,879 -- -- -- 10,000
Repurchases of common stock................... -- -- -- -- (5,368) -- (5,368)
------- --- ------ ----- ------ --- ------
Consolidated balances, September 30, 1998........ 486 375 60,165 4,724 (9,718) 753 56,785
Three months ended December 31, 1998:
Comprehensive income:
Net income.................................. -- -- -- 969 969 -- -- 969
Other comprehensive income, net of tax -
unrealized losses on securities, net of
reclassification adjustment (1)......... -- -- -- (212) -- -- (212) (212)
----
Comprehensive income........................ 757
====
Conversion of 12% convertible debentures...... 95 -- 8,578 -- -- -- 8,673
Repurchases of common stock................... -- -- -- -- (370) -- (370)
------- --- ------ ----- ------- --- ------
Consolidated balances, December 31, 1998......... 581 375 68,743 5,693 (10,088) 541 65,845
Nine months ended September 30, 1999:
Comprehensive income:
Net income.................................. -- -- -- 6,079 6,079 -- -- 6,079
Other comprehensive income, net of tax -
unrealized losses on securities, net of
reclassification adjustment (1)......... -- -- -- (1,836) -- -- (1,836) (1,836)
-- ------
Comprehensive income........................ 4,243
======
Reduction of deferred tax valuation reserve... -- -- 654 -- -- -- 654
Compensation paid in stock.................... -- -- 36 -- -- -- 36
Repurchases of common stock................... -- -- -- -- (443) -- (443)
------- --- ------ ------ ------- ------ -------
Consolidated balances, September 30, 1999........ $ 581 375 69,433 11,772 (10,531) (1,295) 70,335
=== ===== ======= === ====== ====== ====== ====== =======
</TABLE>
- ---------------------
(1) Disclosure of reclassification adjustment:
<TABLE>
<CAPTION>
Nine months Three months
ended September 30, ended
1999 1998 December 31, 1998
<S> <C> <C> <C>
Unrealized (losses) gains arising during the period.............. $ (1,723) 643 (212)
Less: reclassification adjustment for gains included in net income 113 222 --
-------- --- ----
Unrealized (losses) gains on securities.......................... $ (1,836) 421 (212)
======== === ====
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
FIRST BANKS AMERICA, INC.
Consolidated Statements of Cash Flows (unaudited)
(dollars expressed in thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------
1999 1998
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income......................................................................... $ 6,079 3,641
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion, net.................................... 1,498 1,326
Provision for possible loan losses............................................... 303 725
Provision for income tax expense................................................. 4,494 2,598
Payments of income taxes......................................................... (834) (226)
Gain on sales of securities, net................................................. (174) (341)
(Increase) decrease in accrued interest receivable............................... (147) 709
Interest accrued on liabilities.................................................. 18,648 17,681
Payments of interest on liabilities.............................................. (18,441) (18,787)
Other operating activities, net.................................................. (7,280) 1,175
--------- -------
Net cash provided by operating activities...................................... 4,146 8,501
--------- -------
Cash flows from investing activities:
Cash (paid) received for acquired entities, net of cash and
cash equivalents received (paid)................................................. (17,244) 3,241
Proceeds from sales of investment securities available for sale.................... 30,260 22,624
Maturities of investment securities available for sale............................. 74,298 51,967
Maturities of investment securities held to maturity............................... 126 1
Purchases of investment securities available for sale.............................. (52,304) (54,340)
Purchases of investment securities held to maturity................................ -- (2,033)
Net increase in loans.............................................................. (58,749) (33,433)
Recoveries of loans previously charged off......................................... 1,830 1,930
Purchases of bank premises and equipment........................................... (481) (1,576)
Proceeds from sales of other real estate........................................... 618 1,311
Other investing activities, net.................................................... (464) (14,600)
-------- -------
Net cash used in investing activities.......................................... (22,110) (24,908)
-------- -------
Cash flows from financing activities:
Other (decreases) increases in deposits:
Demand and savings deposits...................................................... (940) 11,678
Time deposits.................................................................... 13,592 (7,272)
Increase in federal funds purchased................................................ 4,000 3,900
Decrease in Federal Home Loan Bank advances........................................ -- (585)
(Decrease) increase in securities sold under agreements to repurchase.............. (897) 2,511
Decrease in promissory note payable................................................ -- (4,900)
Decrease in payable to former shareholders of Surety Bank.......................... -- (3,829)
Proceeds from issuance of guaranteed preferred subordinated debenture.............. -- 44,124
Repurchases of common stock for treasury........................................... (443) (5,368)
Exercise of stock options.......................................................... -- 13
Redemption of stock options........................................................ -- (48)
--------- -------
Net cash provided by financing activities...................................... 15,312 40,224
--------- -------
Net (decrease) increase in cash and cash equivalents........................... (2,652) 23,817
Cash and cash equivalents, beginning of period........................................ 46,313 35,162
--------- -------
Cash and cash equivalents, end of period.............................................. $ 43,661 58,979
========= =======
Noncash investing and financing activities:
Loans transferred to other real estate............................................. $ 1,014 680
Reduction of valuation reserve..................................................... 654 --
Compensation paid in stock......................................................... 36 27
Issuance of common stock in purchase accounting acquisition........................ -- 3,008
Conversion of promissory note payable to common stock.............................. -- 10,000
======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
FIRST BANKS AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying consolidated financial statements of First Banks
America, Inc. (FBA or the Company) are unaudited and should be read in
conjunction with the consolidated financial statements contained in the 1998
annual report on Form 10-K. In the opinion of management, all adjustments,
consisting of normal recurring accruals considered necessary for a fair
presentation of the results of operations for the interim periods presented
herein, have been included. Operating results for the nine month period ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
The consolidated financial statements include the accounts of FBA and
its subsidiaries, all of which are wholly owned. All significant intercompany
accounts and transactions have been eliminated. Certain reclassifications of
1998 amounts have been made to conform with the 1999 presentation.
FBA is majority owned by First Banks, Inc., St. Louis, Missouri (First
Banks). At September 30, 1999 and December 31, 1998, First Banks' ownership
interest in FBA was 82.67% and 76.84%, respectively.
FBA operates through three banking subsidiaries, First Bank Texas N.A.,
headquartered in Houston, Texas (FB Texas), First Bank of California,
headquartered in Roseville, California (FB California) and Redwood Bank,
headquartered in San Francisco, California. FB Texas, FB California and Redwood
Bank are collectively referred to as the Subsidiary Banks.
(2) Transactions with Related Parties
FBA purchases certain services and supplies from or through First
Banks. FBA's financial position and operating results could significantly differ
from those that would be obtained if FBA's relationship with First Banks did not
exist.
First Banks provides management services to FBA and its Subsidiary
Banks. Management services are provided under management fee agreements whereby
FBA compensates First Banks on an hourly basis for its use of personnel for
various functions including internal audit, loan review, income tax preparation
and assistance, accounting, asset/liability and investment services, loan
servicing and other management and administrative services. Fees paid under
these agreements were $737,000 and $2.1 million for the three and nine months
ended September 30, 1999, in comparison to $528,000 and $1.5 million for the
three and nine months ended September 30, 1998, respectively. Fees payable to
First Banks generally increase as FBA expands through acquisitions and internal
growth, reflecting the higher levels of service needed to operate the Subsidiary
Banks. The fees for management services are at least as favorable as could have
been obtained from unaffiliated third parties.
Because of the affiliation with First Banks and the geographic
proximity of certain of their offices, FBA shares the cost of certain personnel
and services used by FBA and First Banks. This includes the salaries and
benefits of certain loan and administrative personnel. The allocation of the
shared costs is charged and/or credited under the terms of cost sharing
agreements entered into in 1996. First Banks and Redwood Bank have executed a
similar cost sharing agreement in 1999. Because this involves distributing
essentially fixed costs over a larger asset base, it allows each bank to receive
the benefit of personnel and services at a reduced cost. Fees paid under these
agreements were $208,000 and $640,000 for the three and nine months ended
September 30, 1999, and $287,000 and $811,000 for the comparable periods in
1998, respectively.
<PAGE>
First Services L.P., a limited partnership indirectly owned by First
Banks' Chairman and his children, provides data processing and various related
services to FB Texas and FB California under the terms of data processing
agreements. Fees paid under these agreements were $770,000 and $2.2 million for
the three and nine months ended September 30, 1999, and $516,000 and $1.3
million for the comparable periods in 1998, respectively. Fees payable to First
Services L.P. generally increase as FBA expands through acquisitions and
internal growth, reflecting the higher levels of service needed to operate the
Subsidiary Banks. In addition, fees associated with Year 2000 preparations have
further contributed to the overall increase in data processing fees. The fees
paid for data processing services are at least as favorable as could have been
obtained from unaffiliated third parties.
FBA's Subsidiary Banks had $98.1 million and $86.2 million in whole
loans and loan participations outstanding at September 30, 1999 and December 31,
1998, respectively, that were purchased from banks affiliated with First Banks.
In addition, FBA's Subsidiary Banks had sold $272.3 million and $182.9 million
in whole loans and loan participations to affiliates of First Banks at September
30, 1999 and December 31, 1998, respectively. These loans and loan
participations were acquired and sold at interest rates and terms prevailing at
the dates of their purchase or sale and under standards and policies followed by
FBA's Subsidiary Banks.
FBA has a $20.0 million revolving note payable from First Banks (Note
Payable). The borrowings under the Note Payable bear interest at an annual rate
of one-quarter percent less than the "Prime Rate" as reported in the Wall Street
Journal. The outstanding principal balance and accrued interest under the Note
Payable are due and payable on October 31, 2001. In July 1998, FBA repaid all
outstanding borrowings under the Note Payable and has not utilized the Note
Payable since that time. The interest expense under the Note Payable was $53,000
and $599,000 for the three and nine months ended September 30, 1998,
respectively.
In connection with FBA's acquisition of First Commercial Bancorp, Inc.
(FCB) and its wholly-owned subsidiary, First Commercial Bank (First Commercial),
FBA issued a convertible debenture to First Banks of $6.5 million plus accrued
interest. This debenture replaced similar FCB debentures previously owned by
First Banks. In December 1998, First Banks converted the $6.5 million principal
and $2.4 million accrued and unpaid interest into 629,557 shares of FBA common
stock. The related interest expense associated with this debenture was $200,000
and $604,000 for the three and nine months ended September 30, 1998,
respectively.
(3) Regulatory Capital
FBA and the Subsidiary Banks are subject to various regulatory capital
requirements administered by the federal and state banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on FBA's financial statements. Under capital adequacy
guidelines and the regulatory framework for Prompt Corrective Action, the
Subsidiary Banks must meet specific capital guidelines that involve quantitative
measures of assets, liabilities and certain off-balance-sheet items as
calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
Quantitative measures established by regulations to ensure capital
adequacy require FBA and the Subsidiary Banks to maintain certain minimum
capital ratios. FBA and the Subsidiary Banks are required to maintain a minimum
risk-based capital to risk-weighted assets ratio of 8.00%, with at least 4.00%
being "Tier 1" capital (as defined in the regulations). In addition, a minimum
leverage ratio (Tier 1 capital to average assets) of 3.00% plus an additional
cushion of 100 to 200 basis points is expected. In order to be considered well
capitalized under Prompt Corrective Action provisions, a bank is required to
maintain a risk-weighted asset ratio of at least 10.00%, a Tier 1 risk-weighted
asset ratio of at least 6.00%, and a leverage ratio of at least 5.00%. As of
March 31, 1999, the date of the most recent notification from FBA's primary
regulator, FB Texas and FB California were categorized as well capitalized under
the regulatory framework for Prompt Corrective Action. Management believes, as
of September 30, 1999, FBA and the Subsidiary Banks were each well capitalized.
<PAGE>
At September 30, 1999 and December 31, 1998, FBA's and the Subsidiary
Banks' capital ratios were as follows:
<TABLE>
<CAPTION>
Risk-based capital ratios
-------------------------
Total Tier 1 Leverage ratio
----- ------ --------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
FBA 13.28% 16.66% 9.28% 11.51% 8.49% 10.25%
FB Texas 12.41 11.37 11.15 10.11 10.06 9.15
FB California 11.41 10.63 10.15 9.37 9.48 8.34
Redwood Bank (1) 10.94 -- 10.06 -- 9.55 --
---------------
(1) Redwood Bank was acquired by FBA on March 4, 1999.
</TABLE>
(4) Acquisitions
On March 4, 1999, FBA completed its acquisition of Redwood and its
wholly-owned subsidiary, Redwood Bank, for cash consideration of $26.0 million.
The acquisition was accounted for using the purchase method of accounting. The
excess of the cost over the fair value of the net assets acquired was $9.5
million and is being amortized over 15 years. The acquisition was funded from
the sale of the 8.50% Cumulative Trust Preferred Securities completed in July
1998. Redwood is headquartered in San Francisco, California and operates four
banking locations in the San Francisco Bay area. Redwood had $183.9 million in
total assets, $134.4 million in loans, net of unearned discount, $32.4 in
investment securities and $162.9 million in deposits at the acquisition date.
The following information presents unaudited pro forma condensed
results of operations of FBA for the nine months ended September 30, 1999 and
1998, combined with the acquisition of Redwood, as if FBA had completed the
transaction on January 1, 1998.
<TABLE>
<CAPTION>
September 30,
-------------
1999 1998
---- ----
(dollars expressed in thousands,
except per share data)
<S> <C> <C>
Net interest income........................................... $ 32,953 28,337
Provision for possible loan losses............................ 513 790
Net income.................................................... 6,091 3,985
=========== ======
Weighted average shares of common stock
outstanding (in thousands)............................... 5,713 5,090
=========== ======
Earnings per common share:
Basic.................................................... $ 1.07 0.78
Diluted.................................................. 1.07 0.78
=========== ======
</TABLE>
The unaudited pro forma condensed results of operations reflect the
application of the purchase method of accounting for Redwood and certain other
assumptions. Purchase accounting adjustments have been applied to loans,
investment securities, bank premises and equipment, deferred tax assets and
liabilities and excess cost required to reflect the assets acquired and
liabilities assumed at fair value. The resulting premiums and discounts are
amortized or accreted to income consistent with the accounting policies of FBA.
The unaudited pro forma condensed results of operations do not reflect the
acquisition of Pacific Bay Bank completed on February 2, 1998 as this
acquisition did not have a material impact on FBA's results of operations for
the nine months ended September 30, 1998.
<PAGE>
On October 8, 1999, FBA and Lippo Bank entered into an Agreement and
Plan of Reorganization providing for the acquisition of Lippo Bank, San
Francisco, California. Under the agreement, FBA will purchase all of the issued
and outstanding capital stock of Lippo Bank for an estimated purchase price of
$17.2 million. Lippo Bank operates three banking locations in San Francisco, San
Jose and Los Angeles, California. At September 30, 1999, Lippo Bank had $90.2
million in total assets, $46.0 million in loans, net of unearned discount, $33.9
million in investment securities and $80.1 million in total deposits. The
transaction, which has received the approval of Lippo Bank's majority
shareholder and is subject to regulatory approvals, is expected to be completed
during the first quarter of 2000.
(5) Earnings Per Common Share
The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share (EPS) computations for the periods
indicated:
<TABLE>
<CAPTION>
Income Shares Per share
(numerator) (denominator) amount
----------- ------------- ------
(dollars expressed in thousands,
except per share data)
Three months ended September 30, 1999:
<S> <C> <C> <C>
Basic EPS - income available to common stockholders.......... $ 2,389 5,707 $ 0.42
========
Effect of dilutive securities - stock options................ -- 5
--------- -----
Diluted EPS - income available to common stockholders........ $ 2,389 5,712 $ 0.42
========= ===== ========
Three months ended September 30, 1998:
Basic EPS - income available to common stockholders.......... $ 1,520 5,151 $ 0.30
========
Effect of dilutive securities - stock options................ -- 8
--------- -----
Diluted EPS - income available to common stockholders........ $ 1,520 5,159 $ 0.29
========= ===== ========
Nine months ended September 30, 1999:
Basic EPS - income available to common stockholders.......... $ 6,079 5,713 $ 1.06
========
Effect of dilutive securities - stock options................ -- 6
--------- -----
Diluted EPS - income available to common stockholders........ $ 6,079 5,719 $ 1.06
========= ===== ========
Nine months ended September 30, 1998:
Basic EPS - income available to common stockholders.......... $ 3,641 5,090 $ 0.72
========
Effect of dilutive securities - stock options................ -- 10
--------- -----
Diluted EPS - income available to common stockholders........ $ 3,641 5,100 $ 0.71
========= ===== ========
</TABLE>
<PAGE>
(6) Business Segment Results
FBA's business segments are its Subsidiary Banks. The reportable
business segments are consistent with the management structure of FBA, the
Subsidiary Banks and the internal reporting system that monitors performance.
Through the respective branch networks, the Subsidiary Banks provide
similar products and services in their defined geographic areas. The products
and services offered include a broad range of commercial and personal banking
services, including certificates of deposit, individual retirement and other
time deposit accounts, checking and other demand deposit accounts, interest
checking accounts, savings accounts and money market accounts. Loans include
commercial and financial, commercial and residential real estate, real estate
construction and development and consumer loans. Other financial services
include mortgage banking, credit and debit cards, brokerage services,
credit-related insurance, automatic teller machines, telephone account access,
safe deposit boxes, trust and private banking services and cash management
services. The revenues generated by each business segment consist primarily of
interest income, generated from the loan and investment security portfolios, and
service charges and fees, generated from the deposit products and services. The
geographic areas include Houston, Dallas, Irving and McKinney, Texas (FB Texas)
and northern California (FB California and Redwood Bank). The products and
services are offered to customers primarily within their respective geographic
areas, with the exception of loan participations executed between the Subsidiary
Banks and other banks affiliated with First Banks. There are no foreign
operations.
The business segment results are summarized as follows and are
consistent with FBA's internal reporting system and, in all material respects,
with generally accepted accounting principles and practices predominant in the
banking industry. The balance sheet information is presented as of September 30,
1999 and December 31, 1998, and the statement of income information is presented
for the three and nine months ended September 30, 1999 and 1998, respectively.
The business segment results include Redwood Bank, which was acquired on March
4, 1999, for the period subsequent to the acquisition date.
<PAGE>
<TABLE>
<CAPTION>
FB California Redwood Bank (1)
---------------------------- ---------------------------
September 30, December 31, September 30, December 31,
1999 1998 1999 1998
---- ---- ---- ----
(dollars expressed in thousands)
Balance sheet information:
<S> <C> <C> <C> <C>
Investment securities.......................... $ 24,573 53,449 33,582 --
Loans, net of unearned discount................ 346,685 314,977 145,767 --
Total assets................................... 422,458 410,110 195,791 --
Deposits....................................... 373,322 363,422 168,162 --
Stockholders' equity........................... 45,568 42,825 26,413 --
============ ======= ======= ===
FB California Redwood Bank (1)
------------------------ --------------------
Three months ended Three months ended
September 30, September 30,
------------------------ --------------------
1999 1998 1999 1998
(dollars expressed in thousands)
Income statement information:
Interest income................................ $ 8,582 8,472 3,866 --
Interest expense............................... 3,050 3,314 1,447 --
---------- ----- -----
Net interest income......................... 5,532 5,158 2,419 --
Provision for possible loan losses............. 15 150 60 --
---------- ----- ------ ---
Net interest income after provision
for possible loan losses.................. 5,517 5,008 2,359 --
---------- ----- ----- ---
Noninterest income............................. 934 836 122 --
Noninterest expense............................ 3,785 3,918 1,496 --
---------- ----- ----- ---
Net income before provision
for income tax expense.................... 2,666 1,926 985 --
Provision for income tax expense............... 1,089 928 443 --
---------- ----- ----- ---
Net income.................................. $ 1,577 998 542 --
========== ===== ===== ===
FB California Redwood Bank (1)
------------------------ ----------------------
Nine months ended Nine months ended
September 30, September 30,
------------------------ ----------------------
1999 1998 1999 1998
---- ---- ---- ----
(dollars expressed in thousands)
Income statement information:
Interest income................................ $ 24,714 24,346 8,796 --
Interest expense............................... 9,125 10,066 3,282 --
Net interest income......................... 15,589 14,280 5,514 --
---------- ------ ----- ---
Provision for possible loan losses............. 95 450 133 --
---------- ------ ----- ---
Net interest income after provision
for possible loan losses.................. 15,494 13,830 5,381 --
---------- ------ ----- ---
Noninterest income............................. 2,358 2,165 325 --
Noninterest expense............................ 11,410 11,725 3,403 --
---------- ------ ----- ---
Net income before provision
for income tax expense.................... 6,442 4,270 2,303 --
Provision for income tax expense............... 2,742 1,895 1,087 --
---------- ------ ----- ---
Net income.................................. $ 3,700 2,375 1,216 --
========== ====== ===== ===
</TABLE>
- -----------------
(1) Redwood Bank was acquired by FBA on March 4, 1999.
(2) Corporate and other includes $645,000 and $1.9 million of guaranteed
preferred debenture expense, after applicable income tax benefit of
$348,000 and $1.0 million, for the three and nine months ended September
30, 1999, respectively. Corporate and other includes $497,000 of guaranteed
preferred debenture expense, after applicable income tax benefit of
$268,000, for the three and nine months ended September 30, 1998.
<PAGE>
<TABLE>
<CAPTION>
FB Texas Corporate and other (2) Consolidated total
----------------------------- ------------------------------- --------------------------------
September 30, December 31, September 30, December 31, September 30, December 31,
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
<S> <C> <C> <C> <C> <C> <C>
31,797 59,914 3,797 3,600 93,749 116,963
221,103 201,426 -- -- 713,555 516,403
277,572 300,984 8,561 8,903 904,382 719,997
238,714 264,425 (5,455) (28,700) 774,743 599,147
29,926 30,249 (31,572) (7,229) 70,335 65,845
======= ======= ======= ======= ======= =======
FB Texas Corporate and other (2) Consolidated total
---------------------- ------------------------ ------------------------
Three months ended Three months ended Three months ended
September 30, September 30, September 30,
--------------------- ----------------------- ------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
5,500 5,706 80 69 18,028 14,247
2,185 2,337 (42) 101 6,640 5,752
-------- -------- ------ ------ -------- --------
3,315 3,369 122 (32) 11,388 8,495
15 75 -- -- 90 225
-------- -------- ------ ------ -------- --------
3,300 3,294 122 (32) 11,298 8,270
-------- -------- ------ ------ -------- --------
504 590 (391) (119) 1,169 1,307
2,367 2,119 731 895 8,379 6,932
-------- -------- ------ ------ -------- --------
1,437 1,765 (1,000) (1,046) 4,088 2,645
492 598 (325) (401) 1,699 1,125
-------- -------- ------ ------ ------- --------
945 1,167 (675) (645) 2,389 1,520
======== ======== ====== ====== ======= ========
FB Texas Corporate and other (2) Consolidated total
---------------------- ------------------------ ------------------------
Nine months ended Nine months ended Nine months ended
September 30, September 30, September 30,
--------------------- ----------------------- ------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
16,523 16,229 231 69 50,264 40,644
6,510 6,569 (269) 1,051 18,648 17,686
--------- ------- ------ ------- ------- --------
10,013 9,660 500 (982) 31,616 22,958
75 275 -- -- 303 725
--------- ------- ------ ------- ------- --------
9,938 9,385 500 (982) 31,313 22,233
--------- ------- ------ ------- ------- --------
1,560 1,342 (415) (171) 3,828 3,336
6,877 6,507 2,878 1,098 24,568 19,330
--------- ------- ------ ------- ------- --------
4,621 4,220 (2,793) (2,251) 10,573 6,239
1,588 1,452 (923) (749) 4,494 2,598
--------- ------- ------ ------ ------- -------
3,033 2,768 (1,870) (1,502) 6,079 3,641
========= ======= ====== ====== ======= =======
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The discussion set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations contains certain forward looking
statements with respect to the financial condition, results of operations and
business of FBA. These forward looking statements are subject to certain risks
and uncertainties, not all of which can be predicted or anticipated. Factors
that may cause actual results to differ materially from those contemplated by
the forward looking statements herein include market conditions as well as
conditions affecting the banking industry generally and factors having a
specific impact on FBA, including but not limited to fluctuations in interest
rates and in the economy; the impact of laws and regulations applicable to FBA
and changes therein; competitive conditions in the markets in which FBA conducts
its operations, including competition from banking and non-banking companies
with substantially greater resources than FBA, some of which may offer and
develop products and services not offered by FBA; and the ability of FBA to
respond to changes in technology, including effects of the Year 2000 issue. With
regard to FBA's efforts to grow through acquisitions, factors that could affect
the accuracy or completeness of forward looking statements contained herein
include the potential for higher than acceptable operating costs arising from
the geographic dispersion of the offices of FBA, as compared with competitors
operating solely in contiguous markets; the competition of larger acquirers with
greater resources than FBA; fluctuations in the prices at which acquisition
targets may be available for sale and in the market for FBA's securities; and
the potential for difficulty or unanticipated costs in realizing the benefits of
particular acquisition transactions. Additional factors potentially affecting
the Company's results were identified in the Annual Report on Form 10-K filed
with the Securities and Exchange Commission.
General
FBA is a registered bank holding company, incorporated in Delaware and
headquartered in Clayton, Missouri. At September 30, 1999, FBA had approximately
$904.4 million in total assets; $713.6 million in total loans, net of unearned
discount; $774.7 million in total deposits; and $70.3 million in total
stockholders' equity. FBA operates through its Subsidiary Banks.
Through the Subsidiary Banks' six locations in Texas and 14 locations
in northern California, FBA offers a broad range of commercial and personal
banking services including certificates of deposit, individual retirement and
other time deposit accounts, checking and other demand deposit accounts,
interest checking accounts, savings accounts and money market accounts. Loans
include commercial and financial, commercial and residential real estate, real
estate construction and development and consumer loans. Other financial services
include mortgage banking, credit and debit cards, brokerage services,
credit-related insurance, automatic teller machines, telephone account access,
safe deposit boxes, trust and private banking services and cash management
services.
The following table lists the Subsidiary Banks at September 30, 1999:
<TABLE>
<CAPTION>
Loans, net of
Number of Total unearned Total
locations assets discount deposits
--------- ------ -------- --------
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
FB California.................... 10 $ 422,458 346,685 373,322
FB Texas ........................ 6 277,572 221,103 238,714
Redwood Bank..................... 4 195,791 145,767 168,162
</TABLE>
<PAGE>
Financial Condition
FBA's total assets were $904.4 million and $720.0 million at September
30, 1999 and December 31, 1998, respectively. The increase in total assets is
primarily attributable to FBA's acquisition of Redwood, which provided assets of
$183.9 million, and internal loan growth primarily concentrated in the areas of
commercial and financial, real estate construction and development and real
estate mortgage. Offsetting this increase and providing an additional source of
funds for the loan growth was a reduction in investment securities of $23.3
million to $93.7 million at September 30, 1999 from $117.0 million at December
31, 1998. In addition, total deposits, excluding the deposits provided by the
acquisition of Redwood, increased by $12.7 million and short-term borrowings
increased by $3.1 million to $7.2 million at September 30, 1999 from $4.1
million at December 31, 1998.
During the nine months ended September 30, 1999, FBA purchased $443,000
of its common stock for treasury at an average cost of $17.67 per share. FBA
utilized available cash to fund its repurchase of common stock. In 1998, the
Board of Directors authorized the purchase of an additional 5% of common stock
for treasury. At September 30, 1999, FBA has purchased an aggregate total of
676,896 common shares for treasury and could purchase approximately 140,000
additional shares under the existing authorization.
Results of Operations
Net Income
Net income was $2.39 million, or $0.42 per share on a diluted basis,
for the three months ended September 30, 1999, in comparison to $1.5 million, or
$0.29 per share on a diluted basis, for the comparable period in 1998. For the
nine months ended September 30, 1999 and 1998, net income was $6.08 million, or
$1.06 per share on a diluted basis, and $3.6 million, or $0.71 per share on a
diluted basis, respectively. The earnings progress was primarily driven by
increased net interest income generated from the acquisition of Redwood,
internal loan growth in both the California and Texas markets and continued
improvement in asset quality, resulting in a reduced provision for loan losses.
As previously mentioned, the loan growth was funded through a reduction in
investment securities, deposit growth and a slight increase in short-term
borrowings.
The increase in net interest income for the nine months ended September
30, 1999 was partially offset by increased operating expenses. The increased
operating expenses are primarily attributable to the guaranteed preferred
debenture expense associated with the formation of First America Capital Trust
(FACT) in July 1998 and FACT's issuance of Cumulative Trust Preferred
Securities, increased data processing fees, operating expenses of Redwood
subsequent to the acquisition date and amortization of intangibles associated
with the purchase of subsidiaries.
Net Interest Income
Net interest income was $11.4 million, or 5.48% of average
interest-earning assets, for the three months ended September 30, 1999, in
comparison to $8.5 million, or 5.33% of average interest-earning assets, for the
comparable period in 1998. For the nine months ended September 30, 1999 and
1998, net interest income was $31.6 million, or 5.47% of average earning assets,
in comparison to $23.0 million, or 4.98% of average earning assets,
respectively. The improved net interest income is primarily attributable to the
net interest-earning assets provided by the acquisitions of First Commercial
Bancorp, Inc., Pacific Bay Bank and Redwood and internal loan growth.
Contributing further to the improved net interest income is the effect of (a)
the exchange of $10.0 million of the Note Payable for common stock in February
1998; (b) the repayment of all borrowings outstanding under the Note Payable in
July 1998; (c) the conversion of a debenture in December 1998 and (d) the
earnings impact of the interest rate swap agreements.
Although the net interest rate margin improved, the yield on the loan
portfolio declined to 9.18% for the three and nine months ended September 30,
1999, from 9.90% and 9.78% for the comparable periods in 1998, respectively.
This reduction primarily results from the overall decline in the prime lending
rate experienced during the latter part of 1998. In addition, increased
competition within the market areas served by FBA has lead to reduced lending
rates. The effect of the reduced yield on the loan portfolio was partially
mitigated by the earnings impact of the interest rate swap agreements and a
reduced rate paid on interest-bearing liabilities. For the nine months ended
September 30, 1999 and 1998, the aggregate weighted rate paid on the deposit
portfolio was 4.04% and 4.45%, respectively, representing FBA's ongoing
realignment of the portfolio, while the aggregate weighted rate paid on
promissory notes payable and short-term borrowings was 5.51% and 7.90%,
respectively, reflecting the exchange and repayment of the Note Payable and the
debenture conversion.
The following table sets forth certain information relating to FBA's
average balance sheets, and reflects the average yield on earning assets, the
average cost of interest-bearing liabilities and the resulting net interest
income and net interest margin for the three and nine month periods ended
September 30:
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
--------------------------------------------- ------------------------------------------------
1999 1998 1999 1998
--------------------- ----------------------- ------------------------ -----------------------
Interest Interest Interest Interest
Average income/ Yield/ Average income/ Yield/ Average income/ Yield/ Average income/ Yield/
balance expense rate balance expense rate balance expense rate balance expense rate
(dollars expressed in thousands)
Assets
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans(1)(2)(3)................ $ 703,274 16,268 9.18% $478,150 11,928 9.90% $653,228 44,852 9.18% $457,957 33,498 9.78%
Investment securities(3)...... 94,016 1,434 6.05 130,909 2,012 6.10 104,798 4,862 6.20 135,013 6,167 6.11
Federal funds sold and other.. 26,652 326 4.85 22,841 307 5.33 15,181 550 4.84 23,487 979 5.57
--------- ------ -------- ------ -------- ------ -------- ------
Total interest-earning
assets................. 823,942 18,028 8.68 631,900 14,247 8.94 773,207 50,264 8.69 616,457 40,644 8.82
------ ------ ------ ------
Nonearning assets................ 79,574 73,325 79,805 67,286
--------- -------- -------- --------
Total assets................ $ 903,516 $705,225 $853,012 $ 83,743
========= ======== ======== ========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand
deposits............ $ 85,584 304 1.41% $75,197 311 1.64% $ 81,852 857 1.40% $ 74,293 994 1.79%
Savings deposits.............. 233,504 2,137 3.63 164,954 1,638 3.94 223,619 6,086 3.64 156,717 4,587 3.91
Time deposits of $100 or more. 75,168 969 5.11 51,669 717 5.51 67,247 2,609 5.19 52,367 2,278 5.82
Other time deposits........... 245,798 3,093 4.99 201,094 2,762 5.45 234,471 8,493 4.84 206,073 8,437 5.47
-------- ------ -------- ------ ---- -------- ------ -------- ------
Total interest-bearing
deposits............. 640,054 6,503 4.03 492,914 5,428 4.37 597,189 18,045 4.04 489,450 16,296 4.45
Promissory notes payable and
short term-borrowings........ 8,350 137 6.51 17,821 324 7.21 14,633 603 5.51 23,527 1,390 7.90
-------- ------ -------- ------ -------- ------- -------- ------
Total interest-bearing
liabilities............... 648,404 6,640 4.06 510,735 5,752 4.47 611,822 18,648 4.08 512,977 17,686 4.61
------ ------ ------- ------
Noninterest-bearing liabilities:
Demand deposits............... 128,781 95,079 117,449 94,196
Other liabilities............. 55,987 42,847 55,416 20,661
-------- ------- -------- --------
Total liabilities........... 833,172 648,661 784,687 627,834
Stockholders' equity............. 70,344 56,564 68,325 55,909
-------- -------- -------- --------
Total liabilities and
stockholders' equity...... $903,516 $705,225 $853,012 $683,743
======== ======== ======== ========
Net interest income.............. 11,388 8,495 31,616 22,958
====== ===== ====== ======
Net interest margin.............. 5.48% 5.33% 5.47% 4.98%
==== ==== ==== ====
- -------------
</TABLE>
(1) Nonaccrual loans are included in the average loan amounts.
(2) Includes the effects of interest rate exchange agreements.
(3) FBA has no tax exempt income.
Provision for Possible Loan Losses
The provision for possible loan losses was $90,000 and $303,000 for the
three and nine months ended September 30, 1999, compared to $225,000 and
$725,000 for the comparable periods in 1998. The decrease in the provision for
possible loan losses is primarily attributable to improved asset quality as
determined by management's review and evaluation of the credit quality of the
loans in the portfolio, and management's assessment of the adequacy of the
allowance for possible loan losses. For the nine months ended September 30,
1999, nonperforming assets decreased by $4.3 million from $8.8 million at
December 31, 1998 to $4.5 million at September 30, 1999, resulting in a reduced
ratio of nonperforming loans to loans from 1.67% at December 31, 1998 to 0.61%
at September 30, 1999.
<PAGE>
FBA's loan loss experience for the three and nine months ended
September 30, 1999 further contributed to the reduced provision for possible
loan losses. Net loan recoveries were $244,000 and $821,000 for the three and
nine months ended September 30, 1999, in comparison to net loan recoveries of
$379,000 and net loan charge-offs of $568,000 for the comparable periods in
1998, respectively. The overall improvement results from improved asset quality
reflected in a decrease in the amount of loans requiring charge-off accompanied
by an increase in the collection of previously charged-off loans. The
acquisitions of Redwood, completed on March 4, 1999, and Pacific Bay Bank,
completed on February 2, 1998, provided $1.5 million and $885,000, respectively,
in additional allowance for possible loan losses.
Tables summarizing nonperforming assets, past due loans and charge-off
experience are presented under "--Lending and Credit Management" of this Form
10-Q.
Noninterest Income
Noninterest income was $1.2 million and $3.8 million for the three and
nine months ended September 30, 1999, in comparison to $1.3 million and $3.3
million for the comparable periods in 1998, respectively. Noninterest income
consists primarily of service charges on deposit accounts, and customer service
fees, and other income.
Service charges on deposit accounts and customer service fees remained
relatively stable for the three months ended September 30, 1999, in comparison
to the comparable period in 1998. However, services charges on deposit accounts
and customer service fees increased to $2.4 million for the nine months ended
September 30, 1999, from $2.1 million for the comparable period in 1998. This
increase is primarily attributable to the acquisitions of Redwood and Pacific
Bay Bank and increased utilization of commercial banking services by FBA's
customers.
Other income was $417,000 and $1.3 million for the three and nine
months ended September 30, 1999, in comparison to $296,000 and $881,000 for the
comparable periods in 1998, respectively. The increase is primarily attributable
to increased income earned on FBA's investment in bank owned life insurance
(BOLI), established in April 1998. For the nine months ended September 30, 1999
and 1998, BOLI income totaled $504,000 and $255,000, respectively. In addition,
FBA's expansion of its brokerage services and private banking and trust services
further contributed to the overall increase in other income.
Noninterest Expense
Noninterest expense was $8.4 million and $24.6 million for the three
and nine months ended September 30, 1999, in comparison to $6.9 million and
$19.3 million for the comparable periods in 1998, respectively. The increase is
reflective of: (a) the guaranteed preferred debenture expense associated with
the formation of FACT and FACT's issuance of Cumulative Trust Preferred
Securities; (b) the noninterest expense of Redwood and Pacific Bay Bank; (c)
increased data processing fees primarily associated with FBA's Year 2000
Program; (d) increased amortization of intangibles associated with the purchase
of subsidiaries; and (e) FBA's continuing expansion of its corporate lending,
retail banking and specialized services development staff, including the
necessary operational support, associated with the expansion of its product and
service offerings. The overall increase in noninterest expense for the nine
months ended September 30, 1999 is partially offset by a reduction in
advertising and business development expenses and communications expenses, and
is consistent with management's continued efforts to more effectively manage
these expenditures.
Data processing fees increased to $842,000 and $2.4 million for the
three and nine months ended September 30, 1999, from $520,000 and $1.4 million
for the comparable periods in 1998. The increased data processing fees are
attributable to growth and technological advancements consistent with FBA's
product and service offerings, increased expenses attributable to communication
data lines related to the expansion of the branch infrastructure and expenses
associated with FBA's Year 2000 Program.
<PAGE>
Amortization of intangibles associated with the purchase of
subsidiaries increased to $322,000 and $830,000 for the three and nine months
ended September 30, 1999, from $154,000 and $442,000 for the comparable periods
in 1998. This increase is attributable to the acquisitions of Redwood, completed
in March 1999, and Pacific Bay Bank, completed in February 1998.
In July 1998, FACT, a newly-formed Delaware business trust subsidiary
of FBA, issued 1.84 million shares of 8.50% Cumulative Trust Preferred
Securities (FACT Preferred Securities) at $25.00 per share in an underwritten
public offering, and issued 56,908 shares of common securities to FBA at $25.00
per share. FBA owns all of FACT's common securities. The primary purposes of the
offering were to raise capital with which to fund acquisitions and to repay the
Note Payable. The gross proceeds of the offering were used by FACT to purchase
$47.4 million of 8.50% Subordinated Debentures (Subordinated Debentures) from
FBA, maturing on June 30, 2028. The Subordinated Debentures are the sole asset
of FACT. In connection with the issuance of the FACT Preferred Securities, FBA
made certain guarantees and commitments that, in the aggregate, constitute a
full and unconditional guarantee by FBA of the obligations of FACT under the
FACT Preferred Securities. FBA's proceeds from the issuance of the Subordinated
Debentures, net of underwriting fees and offering expenses, were approximately
$44.0 million. Guaranteed preferred debenture expense was $993,000 and $3.0
million for the three and nine months ended September 30, 1999 and is recorded
as noninterest expense in the accompanying consolidated statements of income.
Lending and Credit Management
Interest earned on the loan portfolio is the primary source of income
of FBA. Total loans, net of unearned discount, represented 78.9% and 71.7% of
total assets as of September 30, 1999 and December 31, 1998, respectively. Total
loans, net of unearned discount, were $713.6 million and $516.4 million at
September 30, 1999 and December 31, 1998, respectively. The increase in loans,
as summarized on the consolidated balance sheets, is attributable to the
acquisition of Redwood and the growth of the commercial and financial,
commercial real estate and real estate construction and development loan
portfolios, partially offset by a continuing decline in FB Texas' consumer
indirect automobile loan portfolio. FBA's corporate lending function continues
to focus its efforts toward further redistribution of the Company's loan
portfolios. Commensurate with the growth in corporate lending and FBA's
prescribed credit exposure guidelines for extending credit to an individual
borrower, loan participations sold to and purchased from banks affiliated with
First Banks have increased to $272.3 million and $98.1 million, respectively,
from $182.9 million and $86.2 million, respectively, at September 30, 1999 and
December 31, 1998. See Note 2 to the accompanying consolidated financial
statements for a further discussion of transactions with related parties.
FBA's nonperforming loans consist of loans on nonaccrual status and
loans on which the original terms have been restructured. The following is a
summary of nonperforming assets and past due loans at the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
(dollars expressed in thousands)
Nonperforming assets:
<S> <C> <C>
Nonperforming loans............................................... $ 4,328 8,632
Other real estate................................................. 136 161
----------- -------
Total nonperforming assets.................................. $ 4,464 8,793
=========== =======
Loans past due and still accruing:
Over 30 days to 90 days........................................... $ 4,045 6,269
Over 90 days...................................................... 97 306
----------- -------
Total past due loans........................................ $ 4,142 6,575
=========== =======
Loans, net of unearned discount..................................... $ 713,555 516,403
=========== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
Asset quality ratios:
<S> <C> <C>
Allowance for possible loan losses to loans....................... 2.06% 2.35%
Nonperforming loans to loans ..................................... 0.61 1.67
Allowance for possible loan losses to
nonperforming loans ........................................... 340.04 140.49
Nonperforming assets to loans and other real estate............... 0.63 1.70
====== ======
</TABLE>
Nonperforming loans, consisting of loans on nonaccrual status and
restructured loans, were $4.3 million at September 30, 1999, in comparison to
$8.6 million at December 31, 1998. The decrease is a result of: (a) management's
continued efforts to effectively monitor and manage the loan portfolios of
acquired entities; and (b) continued aggressive collection efforts. The acquired
allowances for possible loan losses of Pacific Bay Bank and Redwood totaled
$885,000 and $1.5 million at the respective acquisition dates.
Impaired loans, consisting of loans on nonaccrual status and indirect
consumer and installment loans 60 days or more past due, were $4.5 million and
$9.0 million at September 30, 1999 and December 31, 1998, respectively.
The following is a summary of loan loss experience for the three and
nine months ended September 30:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
Allowance for possible loan losses, beginning of period........... $ 14,383 11,845 12,127 11,407
Acquired allowances for possible loan losses................... -- -- 1,466 885
-------- ------ ------ ------
14,383 11,845 13,593 12,292
-------- ------ ------ ------
Loans charged-off.............................................. (211) (488) (1,009) (2,498)
Recoveries of loans previously charged-off..................... 455 867 1,830 1,930
-------- ------ ------ ------
Net loan (charge-offs) recoveries.............................. 244 379 821 (568)
-------- ------ ------ ------
Provision for possible loan losses............................. 90 225 303 725
-------- ------ -- --- -- ---
Allowance for possible loan losses, end of period................. $ 14,717 12,449 14,717 12,449
======== ====== ====== ======
</TABLE>
The allowance for possible loan losses is monitored on a monthly basis.
Each month, the credit administration department provides FBA's management with
detailed lists of loans on the watch list and summaries of the entire loan
portfolio of each Subsidiary Bank by risk rating. These are coupled with
analyses of changes in the risk profiles of the portfolios, changes in past due
and nonperforming loans and changes in watch list and classified loans over
time. In this manner, the overall increases or decreases in the levels of risk
in the portfolios are monitored continually. Factors are applied to the loan
portfolios for each category of loan risk to determine acceptable levels of
allowance for possible loan losses. These factors are derived primarily from the
actual loss experience of the Subsidiary Banks and from published national
surveys of norms in the industry. The calculated allowances required for the
portfolios are then compared to the actual allowance balances to determine the
provisions necessary to maintain the allowances at appropriate levels. In
addition, management exercises judgment in its analysis of determining the
overall level of the allowance for possible losses. In its analysis, management
considers the change in the portfolio, including growth, composition and the
ratio of net loans to total assets, and the economic conditions of the regions
in which FBA operates. Based on this quantitative and qualitative analysis, the
allowance for possible loan losses is adjusted. Such adjustments are reflected
in the consolidated statements of income.
<PAGE>
Interest Rate Risk Management
FBA utilizes off-balance-sheet derivative financial instruments to
assist in the management of interest rate sensitivity and to modify the
repricing, maturity and option characteristics of on-balance-sheet assets and
liabilities. Derivative financial instruments held by FBA for purposes of
managing interest rate risk are summarized as follows:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
-------------------- --------------------
Notional Credit Notional Credit
amount exposure amount exposure
-------- -------- -------- --------
(dollars expressed in thousands)
Interest rate swap agreements - pay
<S> <C> <C> <C> <C>
adjustable rate, receive fixed rate....... $ 120,000 234 65,000 667
Interest rate swap agreements - pay
adjustable rate, receive adjustable rate.. 75,000 -- -- --
Interest rate cap agreement................. 10,000 50 10,000 135
=========== === ====== ===
</TABLE>
The notional amounts of derivative financial instruments do not
represent amounts exchanged by the parties and, therefore, are not a measure of
FBA's credit exposure through its use of derivative financial instruments. The
amounts and the other terms of the derivatives are determined by reference to
the notional amounts and the other terms of the derivatives. The credit exposure
represents the accounting loss FBA would incur in the event the counterparties
failed completely to perform according to the terms of the derivative financial
instruments and the collateral was of no value.
During 1998, FBA entered into $65.0 million notional amount of interest
rate swap agreements to effectively lengthen the repricing characteristics of
certain interest-earning assets to correspond more closely with its funding
source with the objective of stabilizing cash flow, and accordingly, net
interest income, over time. These swap agreements provide for FBA to receive a
fixed rate of interest and pay an adjustable rate of interest equivalent to the
90-day London Interbank Offering Rate (LIBOR). The terms of these swap
agreements provide for FBA to pay quarterly and receive payment semi-annually.
The amount receivable by FBA under these swap agreements was $368,000 and
$820,000 at September 30, 1999 and December 31, 1998, respectively, and the
amount payable by FBA under these swap agreements was $138,000 and $153,000 at
September 30, 1999 and December 31, 1998, respectively.
During May 1999, FBA entered into $75.0 million notional amount of
interest rate swap agreements with the objective of stabilizing the net interest
margin during the six-month period surrounding the Year 2000 century date
change. These swap agreements provide for FBA to receive an adjustable rate of
interest equivalent to the daily weighted average 30-day LIBOR and pay an
adjustable rate of interest equivalent to the daily weighted average prime
lending rate minus 2.665%. The terms of these swap agreements, which have an
effective date of October 1, 1999 and a maturity date of March 31, 2000, provide
for FBA to pay and receive interest on a monthly basis.
During September 1999, FBA entered into $55.0 million notional amount
of interest rate swap agreements to effectively lengthen the repricing
characteristics of certain interest-earning assets to correspond more closely
with its funding source with the objective of stabilizing cash flow, and
accordingly, net interest income, over time. These swap agreements provide for
FBA to receive a fixed rate of interest and pay an adjustable rate of interest
equivalent to the weighted average prime lending rate minus 2.70%. The terms of
these swap agreements provide for FBA to pay and receive interest on a quarterly
basis. The amount receivable by FBA under these swap agreements was $38,000 at
September 30, 1999 and the amount payable by FBA under these swap agreements was
$34,000 at September 30, 1999.
<PAGE>
The maturity dates, notional amounts, interest rates paid and received
and fair values of the swap agreements outstanding as of September 30, 1999 were
as follows:
<TABLE>
<CAPTION>
Notional Interest rate Interest rate
Maturity Date amount paid received Fair value
(dollars expressed in thousands)
<S> <C> <C> <C>
March 31, 2000 (1)...................... $ 50,000 --% --% $ (46)
March 31, 2000 (1)...................... 25,000 -- -- (23)
September 27, 2001...................... 40,000 5.55 6.14 18
September 27, 2001...................... 15,000 5.55 6.14 7
June 11, 2002........................... 15,000 5.51 6.00 (115)
September 16, 2002...................... 20,000 5.51 5.36 (523)
September 18, 2002...................... 30,000 5.51 5.33 (810)
---------- -------
$ 195,000 5.53 5.79 $(1,492)
========== ==== ==== =======
</TABLE>
-----------------
(1) These interest rate swap agreements became effective on October 1, 1999.
FBA has a $10.0 million interest rate cap agreement outstanding to
limit the interest expense associated with certain interest-bearing liabilities.
The interest rate cap agreement has a maturity date of May 15, 2000. At
September 30, 1999 and December 31, 1998, the unamortized costs of this
agreement were $47,000 and $130,000, respectively, and were included in other
assets. The net amount due to FBA under this agreement was $3,000 and $5,000 at
September 30, 1999 and December 31, 1998, respectively.
Year 2000 Compatibility
FBA and the Subsidiary Banks are subject to risks associated with the
"Year 2000" issue, a term which refers to uncertainties about the ability of
various data processing hardware and software systems to interpret dates
correctly surrounding the beginning of the Year 2000. Financial institutions are
particularly vulnerable to Year 2000 issues because of heavy reliance in the
industry on electronic data processing and funds transfer systems.
As described in Note 2 to the accompanying consolidated financial
statements, data processing services are provided to FBA by First Services, L.P.
under the terms of data processing agreements. To address the Year 2000 issue,
FBA, working jointly with First Banks, has established a dedicated team to
coordinate the overall Year 2000 Preparedness Program (Program) under the
guidelines of the Comprehensive Year 2000 Plan (Plan) as approved by the Board
of Directors. The Plan summarizes each major phase of the Program and the
estimated costs to remediate and test systems in preparation for the Year 2000.
The Plan addresses both Information Technology (IT) projects, such as data
processing and data network, and non-IT projects, such as building facilities
and security. The major phases of the Program are awareness, assessment,
remediation, validation and implementation.
The awareness phase included a company-wide campaign to communicate the
Year 2000 issue and the potential ramifications to the organization. Concurrent
with this phase, the Year 2000 Program Team (Team) began the assessment phase of
the Program. The assessment phase included the inventorying of systems that may
be impacted by the Year 2000 issue. The business use of each inventoried item
was analyzed and prioritized from critical to non-critical, based upon the
perceived adverse effect on the financial condition of FBA in the event of a
loss or interruption in the use of each system. The awareness and assessment
phases of the Program were completed as scheduled.
FBA's critical systems are purchased from industry-known vendors. Such
systems are generally used in their standard configuration, that is, with minor
modification. Focusing on these critical systems, FBA continues to closely
<PAGE>
review and monitor the Year 2000 progress as reported by each vendor, and has
tested, in most cases, on a system separate from the on-line production system.
The review and testing of critical data processing service providers was
substantially complete as of March 31, 1999.
For the critical systems that have been modified, the vendors provided
remediation for such systems that were not otherwise reported as "Year
2000-ready." As the remediation phase was completed within the stated deadline,
FBA did not invoke any remediation contingency efforts.
Concurrent with the completion of the remediation phase of the Program,
FBA commenced the final analysis of the validation phase for critical systems,
including remediated systems provided by third party vendors. This portion of
the Program was substantially complete as of December 31, 1998.
FBA, along with First Banks, accelerated the replacement of its
existing teller system (ISC), since certain functions of ISC were not Year 2000
compliant. Planning for the replacement of ISC has been underway for several
years with the primary objectives of adding functionality to meet expanding
product and service offerings and improving efficiency in serving customers. As
the newly selected teller system (CFI) also provided a solution for the Year
2000 problem, the overall implementation schedule was accelerated. Recognizing
the heightened risks of deploying the CFI system within the narrowed timeline
created by the Year 2000 issue, emphasis was first given to the Year 2000
solution for ISC, with simultaneous deployment of CFI occurring throughout 1999.
The testing of the Year 2000 solution for ISC was completed and ISC was upgraded
throughout FBA's branch network by June 30, 1999, thereby maintaining compliance
with appropriate regulatory guidelines associated with Year 2000.
The testing of CFI was completed by December 31, 1998. The CFI system
was installed in selected bank test locations of First Banks during the fourth
quarter of 1998. FB Texas converted to CFI during the second quarter of 1999 and
FB California converted to CFI during the third quarter of 1999. Redwood Bank
will not convert to CFI in 1999. The estimated cost of the teller system
replacement was $1.4 million and is being charged to expense over a 60-month
period. First Banks also upgraded its local area network-based systems, networks
and core processor, and purchased certain item processing equipment, as the
previous equipment, which was fully depreciated, was not Year 2000 compliant.
FBA's portion of the cost of these upgrades and the item processing equipment
are included in the billings under the terms of existing data processing and
management services agreements. See Note 2 to the accompanying consolidated
financial statements for a further discussion of transactions with related
parties.
The final phase of the Program was the implementation of remediated and
other systems into the operating environment of FBA and First Banks. With the
final phase of the Program substantially completed by June 30, 1999, FBA
continues to focus its efforts on overall contingency planning and specific Year
2000 event preparation.
FBA has also assessed the Year 2000 risks relating to its lines of
business separate from its dependence on data processing. The assessment
includes a review of larger commercial loan and deposit customers to ascertain
their overall preparedness regarding Year 2000 risks. The process requires
lending and other banking officers to periodically meet with certain of their
customers to review and assess their overall preparedness for Year 2000 risks.
While the process of evaluating the potential adverse effects of Year 2000 risks
on these customers revealed no probable adverse effect to FBA, it is not
possible to quantify the overall potential adverse effects to FBA resulting from
the failure of these customers, or other customers not meeting the review
criteria, to adequately prepare for the Year 2000. The failure of a commercial
bank customer to adequately prepare for Year 2000 could have a significant
adverse effect on such customer's operations and profitability, in turn
inhibiting its ability to repay loans in accordance with their terms or
requiring the use of its deposited funds. FBA continues to review and structure
certain funding sources to facilitate the Subsidiary Banks' liquidity
requirements under varying cash flow assumptions. In addition, Year 2000 risks
associated with adversely rated credits are monitored more frequently in
conjunction with the internal watch list review committee meetings, while new
credit relationships include parameters to assess and evaluate Year 2000 risks
at the time of the initial credit decision.
<PAGE>
The Plan also provides for the identification and communication with
significant non-data processing third party vendors regarding their preparedness
for Year 2000 risks. While the results of this process have not revealed any
quantifiable loss to FBA, the absence of certain basic services such as
telecommunications, electric power and service provided by other financial
institutions and governmental agencies would have a serious impact on the
operations of FBA. FBA has developed processes to monitor significant non-data
processing third party vendors regarding their preparedness for Year 2000 risks.
The total cost of the Program is currently estimated at $2.3 million,
comprised of capital improvements of $1.4 million and direct expenses
reimbursable to First Services L.P. of $900,000. The capital improvements, as
previously discussed, will be charged to expense in the form of depreciation
expense or lease expense, generally over a period of 60 months. FBA incurred
direct expenses related to the Program of approximately $135,000 and $405,000
for the three and nine months ended September 30, 1999, respectively, and
$180,000 for the year ended December 31, 1998. In addition, FBA is estimating
direct expenses of $315,000 for the duration of the Program. The acquisition of
Redwood is not expected to have a significant impact on the total cost of FBA's
Program. The total cost could vary significantly from those currently estimated
for unforeseen circumstances that could develop in carrying out the Program.
Concurrent with the development and execution of the Plan is the
evolution of FBA's Year 2000 Contingency Plan (Contingency Plan). The
Contingency Plan is intended to be an evolving document changing and developing
to reflect the results, progress and current status of the Program. The
Contingency Plan addresses a variety of issues including critical and common
systems, credit risk, liquidity, loan and deposit customers, facilities,
supplies and computer back-up locations. Additionally, FBA has developed
business resumption plans and process resumption test plans for each functional
area deemed to be critical to the operations of FBA. These business resumption
plans, collectively with the Contingency Plan, also serve as evolving documents
and will continue to be modified to appropriately address Year 2000 risks
associated with the individual needs and responsibilities of each of these
critical functional areas based upon the results of the process resumption
testing efforts.
In the remaining weeks leading up to the Year 2000 century date change,
FBA will continue to focus its efforts on implementation of the overall Year
2000 Event Plan (Event Plan). The Event Plan was developed to establish a
coordinated management process for responding to potential Year 2000 disruptions
that addresses communications among appropriate officers, directors, employees,
customers and third party suppliers. The Event Plan assigns overall
responsibility for implementation to specific individuals, designates key
personnel who are responsible for carrying out specific tasks and outlines a
program for notification of involved parties, including employees, customers and
third parties. FBA is in the process of testing the Event Plan in order to
validate its completeness and accuracy. Based upon the results of this testing,
FBA will determine if additional Year 2000 event preparations are deemed
necessary.
While FBA is making a substantial effort to become Year 2000 compliant,
there is no assurance the Year 2000 issue will not have a material adverse
effect on its financial condition or results of operations.
Liquidity
The liquidity of FBA and the Subsidiary Banks is the ability to
maintain a cash flow which is adequate to fund operations, service debt
obligations and meet obligations and other commitments on a timely basis. The
Subsidiary Banks receive funds for liquidity from customer deposits, loan
payments, maturities of loans and investments, sales of investments and
earnings. In addition, FBA and the Subsidiary Banks may avail themselves of more
volatile sources of funds through the issuance of certificates of deposit in
denominations of $100,000 or more, federal funds borrowed, securities sold under
agreements to repurchase and borrowings from the Federal Home Loan Bank. The
aggregate funds acquired from these more volatile sources were $94.1 million and
$56.3 million at September 30, 1999 and December 31, 1998, respectively.
<PAGE>
The following table presents the maturity structure of volatile funds,
which consists of certificates of deposit of $100,000 or more and short-term
borrowings, at September 30, 1999.
<TABLE>
<CAPTION>
(dollars expressed in thousands)
<S> <C>
Three months or less....................................................... $ 27,811
Over three months through six months....................................... 15,070
Over six months through twelve months...................................... 38,645
Over twelve months......................................................... 12,591
----------
Total................................................................ $ 94,117
==========
</TABLE>
In addition to these more volatile sources of funds, FBA has previously
borrowed from First Banks under the Note Payable. Borrowings under the Note
Payable have been utilized to facilitate the funding of FBA's acquisitions,
support the possible repurchases of common stock from time to time and for other
corporate purposes. There were no amounts outstanding under the Note Payable at
September 30, 1999 and December 31, 1998. Furthermore, FB Texas and FB
California have established borrowing relationships with the Federal Reserve
Bank in their respective districts. These borrowing relationships, which are
secured by commercial loans, provide an additional liquidity facility that may
be utilized for contingency purposes. At September 30, 1999, FBA's borrowing
capacity under these agreements was approximately $192.7 million.
Management believes the available liquidity and operating results of
the Subsidiary Banks will be sufficient to provide funds for growth and to
permit the distribution of dividends to FBA sufficient to meet FBA's operating
and debt service requirements both on a short-term and long-term basis and to
pay the dividends on the FACT Preferred Securities.
Effect of New Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133 -- Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
SFAS 133 requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. If certain conditions are met, a derivative may be specifically
designated as a hedge in one of three categories. The accounting for changes in
the fair value of a derivative (that is, gains and losses) depends on the
intended use of the derivative and the resulting designation. Under SFAS 133, an
entity that elects to apply hedge accounting is required to establish, at the
inception of the hedge, the method it will use for assessing the effectiveness
of the hedging derivative and the measurement approach for determining the
ineffective aspect of the hedge. Those methods must be consistent with the
entity's approach to managing risk. SFAS 133 applies to all entities. In June
1999, the FASB issued SFAS No. 137 Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133,
an Amendment of FASB Statement No. 133, which defers the effective date of SFAS
133 from fiscal years beginning after June 15, 1999 to fiscal years beginning
after June 15, 2000. Initial application should be as of the beginning of an
entity's fiscal quarter; on that date, hedging relationships must be designated
and documented pursuant to the provisions of SFAS 133, as amended. Earlier
application of all of the provisions is encouraged but is permitted only as of
the beginning of any fiscal quarter that begins after the issuance date of SFAS
133, as amended. Additionally, SFAS 133, as amended, should not be applied
retroactively to financial statements of prior periods. FBA is currently
evaluating the requirements of SFAS 133, as amended, to determine its potential
impact on the consolidated financial statements.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits are numbered in accordance with the Exhibit Table of Item 601
of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C> <C>
10(x) Management Services Agreement by and between First Banks, Inc. and Redwood Bank, dated
June 1, 1999
10(y) Brokerage Service Agreement by and between First Bank of California and First
Brokerage America, L.L.C., dated July 1, 1999
10(z) Service Agreement by and between First Bank of California, First Brokerage America,
L.L.C. and BTI Insurance Agency, Inc. d/b/a BTI Coastal Insurance Agency, Inc.
10(aa) Brokerage Service Agreement by and between First Bank Texas N.A. and First Brokerage
America, L.L.C., dated July 1, 1999
10(bb) Service Agreement by and between First Bank Texas, N.A., First Brokerage America,
L.L.C. and BTI Insurance Agency, Inc.
10(cc) Federal Funds Agency Agreement by and between First Banks, Inc. and Redwood Bank,
dated May 26, 1999
27 Article 9 - Financial Data Schedule (EDGAR only)
</TABLE>
(b) FBA filed no reports on Form 8-K during the three months ended September
30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST BANKS AMERICA, INC.
Registrant
Date: November 10, 1999 By: /s/ James F. Dierberg
-------------------------
James F. Dierberg
Chairman, President and
Chief Executive Officer
Date: November 10, 1999 By: /s/ Allen H. Blake
--------------------
Allen H. Blake
Executive Vice President,
Chief Operating Officer
and Secretary
(Principal Financial Officer)
<PAGE>
Exhibit 10(x)
FIRST BANKS, INC.
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (the Agreement) is made this 1st day of
June 1999, by and between Redwood Bank, a California banking corporation (the
Bank) and First Banks, Inc., a Missouri corporation (First Banks).
WHEREAS First Banks is a multi-bank and thrift holding company which
provides certain services to its subsidiary financial institutions on a
centralized basis and is willing to provide such services to Bank, and
WHEREAS the Bank is currently operating as a commercial and retail bank in
the State of California, and desires to avail itself of such centralized
services in connection with its operations.
Services to be performed:
First Banks shall undertake to perform certain services for the benefit of
the Bank, and any affiliates thereof, including, but not limited to those
enumerated below. These services may be provided by employees of First Banks,
any subsidiary of First Banks, or external sources retained by First Banks on
behalf of the Bank and/or its affiliates. First Banks will prepare a monthly
statement to the Bank indicating the nature of the services performed and the
fees charged for such services.
Services performed by employees of First Banks will be billed to the Bank
on the basis of actual hours required to perform the services using standard
hourly rates established for each type of service. The hourly rates in effect as
of the date of this Agreement are listed in Attachment A. These rates will be
reviewed periodically and adjusted as necessary to reflect First Banks current
costs in delivering the services, but may only be adjusted once during any
calendar year. The Bank will be provided at least ninety (90) days notice prior
to any change in the hourly rates to be used The Bank may terminate this
Agreement at any time if any rate increase is deemed excessive by the Banks
Board of Directors.
Services performed by employees of the Bank for the benefit of other
subsidiaries of First Banks, or services performed by other subsidiaries of
First Banks for the benefit of the Bank will be charged to the subsidiary
receiving the service based on actual hours required to perform the services
suing the same standard hourly rates as used for employees of First Banks. The
subsidiary management fees statement for the amount charged for the services.
Services provided by external sources will be charged to the Bank at First
Banks cost. Services which benefit more than one subsidiary will be allocated
between them using the basis deemed most appropriate for the particular service
and the charge for that service.
Included in the services to be provided will be the following:
1. Lending:
a. Loan Review
b. Loan administration and support
c. Loan and business development
d. Loan servicing
e. Loan collection and workout
<PAGE>
2. Human resources:
a. Human resources administration
b. Records and compliance
c. Employee recruiting and training
e. Other human resources activities
3. Corporate audit:
a. Assisting external auditors
b. Internal auditing
c. Compliance and Community Reinvestment Act assistance
d. Assisting examinations and replies to reports
e. Other audit activities
4. General Accounting
a. Regulatory examinations and compliance
b. Income tax returns and tax audits
c. Estimated tax payments and tax accruals
d. State and local taxes
e. Fixed asset records and accounting
f. General accounting assistance
g. Regulatory reporting
h. SEC reporting and compliance
I. Systems and procedures
j. Other accounting activities
5. Asset/liability management
6. Investments 7. Planning and budgets
8. Branch administration activities
9. Purchasing and accounts payable
10. Preparation for and participation in meetings
In addition, First Banks will contract for certain services to be provided
to the Bank and its affiliates, which may be charged through management fees, or
through separate direct charges to the Bank. These will include advertising and
promotional expenses, property and liability insurance, certain external legal,
audit and tax assistance, and employee benefit programs. Generally, charges for
insurance and employee benefits will be made through separate statements outside
the management fee structure. Charges for other items will usually be included
in management fee statements.
Travel expenses associated with performance of management services will be
changed to the Bank based on the expense reports received from the employees.
Travel time, or other non-productive time, will not be charged to the Bank.
<PAGE>
Activities not includable in management fees:
1. Accounting
a. Parent company accounting, including:
(1) General ledger
(2) Accounts payable and bill paying
(3) Consolidations and financial reporting
(4) Regulatory reports and examinations
(5) SEC accounting and reporting
b. Accounting, taxes and other services performed for entities not
paying management fees, such as second tier holding companies,
FirstServ, Inc. and inactive corporations.
2. Mergers and acquisitions:
a. Negotiations and contracts
b. Regulatory matters and applications
c. Due diligence and analysis
d. Operations and consolidations
e. Human resources and other activities
3. Financing
a. Working with current or prospective lenders
b. Loan agreements and contracts
c. Due diligence and rating agencies
Expenses not includable in management fees:
Included in First Banks expenses are various items which are not to be
included in the base for calculating management fees. Among these are the
following:
1. Interest expense
2. Amortization of deferred inter-company gains and losses 3. Land leases
for possible future bank sites
4. Legal, accounting and advertising expenses in excess of amounts charged
to the Bank and other subsidiaries on a specific basis.
5. Contributions
6. Amortization of purchase adjustments and excess cost
7. Provision for income taxes
First Banks may identify other accounts or specific expense items which are
deemed inappropriate to include in the base for management fees. These may be
excluded at the discretion of First Banks as identified.
Billing of fees:
First Banks shall prepare and submit to the Bank a monthly bill for
services rendered in sufficient detail to provide the Bank a basis for
evaluating the cost/benefit of items charged. It shall be the responsibility of
First Banks to maintain time reports, worksheets and summaries supporting the
amounts billed. These will be furnished to the Bank, examiners or auditors upon
request.
<PAGE>
Amounts billed will be payable to First Banks by either a direct charge to
the Banks account at First Bank (Missouri), or, if appropriate, a credit to that
account. Management fee statements will be provided to the Bank at least five
working days prior to payment.
General:
The Bank shall make available to First Banks all records, facilities and
personnel necessary to enable First Banks to perform the services required.
First Banks shall furnish the necessary forms and instructions to the Banks
personnel. The Bank shall furnish all data, documents or input material as
required, which material shall be returned to the Bank when the services are
completed.
First Banks shall give the same care to Banks work as it gives to its own
work. However, First Banks does not warrant the work free of error, and shall be
liable only for First Banks own gross negligence of willful misconduct.
The services performed under this Agreement by First Banks will be subject
to the regulations and examination of the Federal or state agencies having
supervisory jurisdiction over the Bank and its affiliates and First Banks to the
same extent as if such services were being performed solely by Bank on its own
premises. The provisions of this Agreement are subject to modification,
regulation or ruling of any governmental agency having jurisdiction over the
Bank or its affiliates or First Banks. Otherwise this Agreement shall be
modifiable only upon written agreement of the parties thereto.
First Banks will hold in confidence all information relating to the Banks
assets, liabilities, business or affairs, or those of any of its customers,
which is received by First Banks in the course of rendering the services
hereunder. It will make the same effort to safeguard such information as it does
to protect its own proprietary data.
The term of the Agreement is for one year, but it shall be
automatically renewable for additional periods of one year each unless the Bank
shall give ninety (90) days written notice of termination prior to the end of
any term.
This Agreement shall be binding upon the parties and their successors or
assigns, and may only be amended by a writing executed by both parties.
IN WITNESS WHEREOF, the parties hereto have, by their duly authorized
officers executed this Agreement this 1st day of June, 1999.
REDWOOD BANK FIRST BANKS, INC.
By: /s/ Anthony S. Dee By: /s/ Allen H. Blake
- -------------------------- -------------------------
Title: President Title: President and Chief Operating Officer
- ----------------- --------------------------------------------
<PAGE>
FIRST BANKS, INC.
MANAGEMENT FEE BILLING RATES
JANUARY 1, 1999
Services Provided Rate Per Hour
Lending:
Loan Review $50.00
Administration/Support 40.00
Business Development 60.00
Loan Service 40.00
Loan Collection/Workout 55.00
Other 40.00
Human Resources:
Administration 45.00
Records/Compliance 40.00
Recruiting/Training 40.00
Payroll/Benefits 35.00
Other 40.00
Internal Audit:
Assisting External Auditors 50.00
Internal Audit 45.00
Compliance and CRA 40.00
Examinations/Reports 45.00
Other 40.00
Accounting:
PCO/Consolidated 50.00
Examinations/Compliance 50.00
Tax Returns 66.00
Estimated Tax/Accruals 50.00
State Taxes 60.00
Fixed Assets/Other 40.00
General Accounting Assistance 45.00
` Regulatory Reports 50.00
SEC Reporting 65.00
Systems/Procedures 50.00
Mergers and Acquisitions:
Negotiations/Contracts 75.00
Regulations/Applications 50.00
Due Diligence 50.00
Operations/Human Resources 50.00
Asset/Liability Management 60.00
Investments 50.00
Planning/Budgets 50.00
Branch Administration:
Marketing/Business Development 45.00
Branch Operations 45.00
Customer Service/Training 45.00
Other 45.00
Purchasing/Accounts Payable 50.00
Meetings 65.00
Other 45.00
<PAGE>
Exhibit 10(y)
Brokerage Service Agreement
This Brokerage Service Agreement (this "Agreement") is made and entered into
this 1st day of July, 1999, by and between First Bank of California ("FI"), a
financial institution organized under the banking laws of the State of
California, and First Brokerage America, L.L.C. ("FBAL"), a Nevada limited
liability company and registered broker/dealer member of the National
Association of Securities Dealers ("NASD") and the Securities Investor
Protection Corporation ("SIPC").
WITNESSETH:
WHEREAS, FBAL has developed a program to provide customers of banks affiliated
with First Banks, Inc., a Missouri corporation and bank holding company ("First
Banks"), access to Products (defined herein), on such terms and conditions as
set forth herein; and
WHEREAS, FBAL is a registered broker/dealer ("Broker/Dealer") in the business of
providing Nondeposit Investment Products ("NIP") at various banking locations of
banks affiliated with FI or First Banks; and
WHEREAS, FI has reviewed the reputation and business practices of FBAL prior to
entering into this Agreement; and
WHEREAS, FI desires to have FBAL make itself available to execute orders to
purchase and sell NIP for customers of FI; and
WHEREAS, the parties desire to establish a NIP program (the "Program") that
complies with all applicable laws and regulations and in accordance with the
terms of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements made
herein and other good and valuable consideration, FBAL and FI hereby agree as
follows:
SECTION 1. LEASE AND SERVICE PROGRAM DESCRIPTION AND
----------------------------------------------------
PRODUCTS
--------
(a) FI will lease space (the exact nature, size, and location to be agreed
upon by FI and FBAL) to FBAL, in accordance with that certain Lease
Agreement, attached hereto and incorporated herein by reference for
all purposes as Exhibit A. In addition to office space, FI shall
provide to FBAL desk and other office furniture, copiers, fax
machines and other office equipment, computer maintenance, software
and hardware support, tracking services, customer lists (as permitted
by applicable law), paper supplies, lights, modem lines, custodial fees
and all other incidental costs related to the conduct of the business
or services necessary to offer Products at the locations of FI. FI
shall also provide telephones and telephone lines (any direct lines
will be answered with FBAL's name). FI may provide occasional
administrative or clerical support as requested by FBAL and if agreed
to by FI. The Products offered will be through FBAL on a fully-
disclosed basis.
<PAGE>
(b) Customers of FI will be offered the Products through FBAL at each
Branch Office. FBAL will make available and execute transactions of
Products on an agency or riskless principal basis upon the order and
for the account of customers as defined in and required by the NASD
Rules of Fair Practice, through Registered Representatives (as
described in Section 2(b), below) for the following: equity securities,
debt securities, open-end/closed end mutual funds and Fixed annuities
and variable insurance products (collectively, the "Securities
Products"). Each such Registered Representative shall be subject to the
continuing approval of FI and may be terminated by management of FI if
the Registered Representative is not qualified to be associated with
the Program as required by this Agreement.
(c) All the Products offered through the Program are subject to the prior
approval of FI and FBAL. FBAL shall recommend and advise FI on the
selection of Products that will be available for sale at each Branch
Office, which Products shall be subject to the continuing approval of
FI.
(d) Any amendments to this Agreement to maintain compliance with any and
all applicable rules, regulations and statutes ("Applicable Law") shall
be deemed made automatically, without any action required of any party
hereto, on the date of enactment.
(e) Travel costs and other fees generated solely for the benefit of FI will
be reimbursed by FI to FBAL. This shall include airfare, hotels and
meals, but shall not include printing and other such costs that are the
obligation of FBAL to provide so that business can be conducted.
SECTION 2: BRANCH OFFICE DESIGNATION
------------------------------------
(a) FBAL will advise and assist regarding the placement and setup of each
FBAL Branch Office on FI premises. The Program will operate at
all mutually agreeable offices of FI. To comply with applicable
securities laws and regulations, Branch Office premises shall (i) be
held out as a place where securities business is transacted and (ii)
meet the most conservative definition of a "branch office" as defined
in Rule 3010(g)(2) of NASD Manual--Conduct Rules. FBAL and FI shall
maintain strict and total separation of their respective businesses,
including separation of records and physical facilities, and shall
conduct their respective businesses at all times so as not to lead to
confusion between the business conducted by FI and the business
conducted by FBAL. Any space used by FBAL within an FI branch pursuant
to the Lease Agreement should be located in an area which is
physically distinct from the area where retail deposits are taken, and
FBAL shall prominently display its name and logo in such space.
<PAGE>
(b) Securities-related activities shall be conducted solely through
individuals who shall be properly registered representatives (the
"Registered Representatives") of FBAL in its Broker/Dealer capacity.
These individuals may also be dual employees of FI and shall be
licensed agents ("Agents") of FBAL in its Agency capacity. Designated
principals of FBAL management will exclusively supervise all sales
activities under NASD rules and will train, supervise, control and
assume responsibility for all the activities contemplated herein.
Registered Representatives shall provide all securities services as
directed by that certain FBAL Supervisory Procedures Manual. No one who
has been barred from membership in any Self Regulatory Organization
("SRO") shall be allowed to associate with the Program.
(c) FBAL and FI agree that all sums due and owing FI under this Agreement
shall originate with the sales of Products by FBAL. FBAL will, in turn,
be responsible for distribution of the amounts due each Registered
Representative, provided that such Registered Representative is being
compensated for activities conducted in accordance herewith, and
provided further that the Registered Representative is properly
licensed to conduct the activity. FBAL will be responsible for payment
of all non-securities and non-insurance related wages, including any
withholding or other taxes required by Applicable Law. Compensation
will be paid to FI in accordance with Section 3, below.
(d) FI and FBAL agree and acknowledge that no unregistered or non-licensed
employees will engage in any securities activities, nor will they
receive any compensation based on transactions or sales. Unregistered
employees shall be prohibited from (i) recommending any Products or
(ii) handling any question that might require any familiarity with the
securities industry. The same employees may not handle or maintain
customer securities or funds other than providing clerical or
ministerial assistance. FI and FBAL will monitor the activities of
their respective employees to ensure their compliance with the
limitations as set forth in this Agreement. FI understands that dual
employees must comply fully with the terms of this Agreement and any
employment agreements when acting in a capacity as a FI employee or a
NIP provider.
(e) FI and FBAL will mutually agree to a marketing plan and budget.
It will be mutually determined who will bear the cost of such
marketing plans. All marketing relating to the offering of Products
shall comply with Applicable Law. FI agrees and understands that it
may not advertise or communicate with the public in or through any
medium without prior written approval of FBAL. The parties may agree
from time to time on advertising and promoting the advice and services
of FBAL through (i) promotional literature mailed to current FI
customers and others, (ii) newspaper and other media advertisements,
(iii) seminars and (iv) other approaches. Any such advertisements and
promotions shall contain conspicuous and easy to comprehend
disclosures concerning the nature of and risks associated with
nondeposit investment products, including the Products, all in
compliance with the Interagency Statement (defined in Section 6(a),
below) . The costs of all such marketing shall be shared by the
parties as they may agree. Each party must obtain prior written
permission from the other party before distributing any advertisement
or promotional material of any kind that refers to the other party or
the advice and services available from it.
<PAGE>
SECTION 3: COMPENSATION TO FI
-----------------------------
(a) Consideration shall be payable by FBAL to FI on the 15th day of each
month at the applicable office of FI in the form of payment (the
"Variable Services Payment") equal to the calculation described on
Exhibit B and Table 1, each of which are attached hereto. In no event
shall the Variable Services Payment due to FI in connection with the
Insurance Products constitute the payment of compensation for services
of a broker/dealer or insurance agent. The Variable Services Payment is
in consideration for the services described in Section 1(a).
(b) FBAL shall prepare for FI a written statement for delivery to FI by the
15th day of each month, showing in reasonable detail the amount of
original sales of products by FBAL during the prior accounting period
and the amount of the Variable Services Payment due FI. Each report
prepared on the 15th shall be accompanied by payment in full of such
total amount due FI for the prior month.
(c) FBAL and FI shall not structure the compensation of Registered
Representatives in such a way as to result in unsuitable
recommendations or sales being made to customers.
(d) FI's employees or tellers who participate in referral programs that
include compensation features shall not be compensated based on whether
or not such referrals result in the sale of Products to the referred
party. No referral fees shall be paid by FBAL.
(e) FI's employees who perform compliance and/or audit functions in
connection with FBAL's sale of Products pursuant to the terms of this
Agreement shall not receive incentive compensation which is directly
related to the sale of such Products.
SECTION 4: CUSTOMER ACCOUNTS
----------------------------
(a) A designated principal of FBAL must approve in writing each account to
be opened by a Registered Representative. Each Registered
Representative will promptly forward all appropriate information
regarding each new account to FBAL's Service Center, presently at 11901
Olive Blvd., Creve Coeur, MO 63141.
<PAGE>
(b) At the time the customer account is opened, a Registered Representative
shall disclose, both orally (including telemarketing contacts) and in
writing to each customer, that the Products:
(a) are NOT FDIC insured; (b) are neither obligations of FI or FBAL nor deposits
of FI or FBAL; (c) are not guaranteed by FI, their parent companies or FBAL; and
(d) involve investment risk including the possible loss of principal
(collectively the "Required Disclosures"). Written acknowledgment of the
customer's receipt of the Required Disclosures presented must be obtained when
the customer account is opened.
(c) All general securities transactions shall be effected on a
fully-disclosed basis through clearing brokers designated by FBAL. No
customer funds or securities shall be held at a Branch Office or by the
Registered Representative.
(d) FI agrees to provide FBAL reasonable access to the names and addresses
of its customers and its parent or affiliates to the extent permissible
under Applicable Law. Any information obtained will be used only in
conjunction with the marketing of FBAL services and shall remain
confidential and shall not be disclosed to third parties without prior
written permission of the other party or as may be required by
Applicable Law. Any books and records relating to the sale of
securities and insurance securities shall remain the property of FBAL,
and FBAL shall ensure that those books and records comply with all the
statutory and regulatory requirements of the Securities and Exchange
Commission ("SEC"), state insurance departments and SROs.
SECTION 5. MUTUAL COVENANTS OF FBAL AND FI
------------------------------------------
(a) FBAL and FI covenant to each other that it is the joint responsibility
of FBAL and FI to assure that each Registered Representative shall make
the Required Disclosures (i) orally to each customer during any sales
presentation (including telemarketing contacts), (ii) orally whenever a
non-deposit investment product is presented; (iii) orally and in
writing prior to or at the time an investment account is opened, and
(iv) at other such times as may be required by Applicable Law.
<PAGE>
(b) INDEMNIFICATION BY FI. FI AGREES TO INDEMNIFY FBAL FOR ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES), OR
DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER THAT MAY BE IMPOSED
ON, INCURRED BY OR ASSERTED AGAINST FBAL BY ANY PARTY, IN ANY WAY
RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR ANY ACTION TAKEN OR OMITTED BY THE FBAL UNDER
THIS AGREEMENT (INCLUDING ANY OF THE FOREGOING ARISING FROM THE
NEGLIGENCE OF FBAL); PROVIDED THAT NO PARTY SHALL BE LIABLE FOR ANY OF
THE FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE PERSON TO BE INDEMNIFIED. WITHOUT LIMITING
ANY PROVISION OF THIS AGREEMENT, IT IS THE EXPRESS INTENTION OF THE
PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION
SHALL BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL
LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) ARISING
OUT OF OR RESULTING FROM THE NEGLIGENCE OF SUCH PERSON, WHETHER SOLE,
CONTRIBUTORY, CONCURRENT OR OTHERWISE. THE AGREEMENTS CONTAINED IN
THIS SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.
(c) INDEMNIFICATION BY FBAL. FBAL AGREES TO INDEMNIFY FI FOR ANY AND
ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS'
FEES), OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER THAT
MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST FI BY ANY
PARTY, IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION TAKEN OR
OMITTED BY THE FI UNDER THIS AGREEMENT (INCLUDING ANY OF THE
FOREGOING ARISING FROM THE NEGLIGENCE OF FI); PROVIDED THAT NO
PARTY SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE EXTENT THEY
ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
PERSON TO BE INDEMNIFIED. WITHOUT LIMITING ANY PROVISION OF THIS
AGREEMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT
EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE
INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES)
ARISING OUT OF O RESULTING FROM THE NEGLIGENCE OF SUCH PERSON,
WHETHER SOLE, CONTRIBUTORY, CONCURRENT OR OTHERWISE. THE
AGREEMENTS CONTAINED IN THIS SECTION SHALL SURVIVE THE
TERMINATION OF THIS AGREEMENT.
<PAGE>
SECTION 6. COMPLIANCE
---------------------
(a) FI and FBAL acknowledge their respective obligation to comply with
Applicable Law and specifically reference the Securities and Exchange
Commission ("SEC"), the NASD, and the provisions of the Interagency
Statement on Retail Sales of Nondeposit Investment Products published
by the Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, the Office of Comptroller of the
Currency and the Office of Thrift Supervision dated February 15, 1994,
as such statement may be amended from time to time (the "Interagency
Statement") and state insurance regulatory authorities. FI further
agrees to comply with the provisions of FBAL's policies and practices
guides, as such guides may be modified from time to time ("FBAL's
Guides"), to the extent such procedures and policies relate to FI,
current copies of which FBAL has provided or will provide to FI. FBAL's
and FI's duties and obligations pursuant to the Interagency Statement,
FBAL's Guides and FI's compliance manual shall include, but not be
limited to, the following:
(1) FI shall not make any loans to FBAL customers if FI has actual
knowledge that the proceeds of the loan are to be used for the
purchase of Products through FBAL.
(2) FI further acknowledges that its employees and/or insurance
agents associated with FBAL who are not Registered
Representatives shall not recommend the purchase of, or
provide detailed information on, the purchase or sale of any
Products. FI shall only inform potential customers of the
availability of the services of FBAL.
(3) FI shall institute policies and procedures reasonably
necessary to insure compliance by its employees with all
applicable governmental rules, regulations, orders and
statements, including, but not limited to, the provisions of
the Interagency Statement. In particular, FI shall issue a
written statement (the "Policy Statement") that assesses the
risks associated with the activities contemplated by this
Agreement and provides a summary of the policies and
procedures that FI has established to address these risks.
Such policies and procedures and the Policy Statement shall be
periodically reviewed, approved and adopted by the board of
directors of FI. FI shall make such Policy Statement available
to FBAL, and FBAL agrees to abide by its requirements.
(4) FBAL and FI shall each establish and maintain compliance
programs which monitor customer complaints and periodically
review customer accounts to detect and prevent abusive
practices.
(5) At each Branch Office, transactions shall be effected only by
Registered Representatives associated with FBAL who shall have
all necessary securities and insurance licenses required by
federal and state authorities to sell Products as contemplated
by this Agreement. Such persons shall undertake such
affiliation with FBAL in addition to their employment by FI.
Each dual employee shall enter into a contract with FI and
FBAL on terms acceptable to FBAL and FI setting forth the
terms of such individual's affiliation as an FBAL Registered
Representative and as an FI employee. FI shall not have any
responsibility for supervision of the brokerage or insurance
activities performed by any Registered Representative or for
compliance by Registered Representatives with FBAL's
guidelines established for such dual employees.
(b) FBAL and FI agree that they will actively promote the services
contemplated herein, and all FBAL employees and Registered
Representatives shall abide by Applicable Law, and the FBAL Guides, as
each may change from time to time.
(c) All Branch Office operations shall be conducted under the joint
supervision of FBAL and FI in accordance with Applicable Law.
(d) FBAL shall be responsible for compliance with SEC, NASD, state
securities rules and regulations, and other rules or regulations of
other governmental or self-regulating bodies as may be applicable to
securities brokerages, operations, or transactions.
<PAGE>
SECTION 7. CONFIDENTIALITY AND ACCESS TO RECORDS
------------------------------------------------
(a) FBAL agrees that all customer account information obtained by FBAL from
FI is confidential and proprietary in nature and that said information
shall not be divulged by FBAL to any third party without FI's prior
written consent. Where Applicable Law provides, customers of FI must be
given the prior opportunity to object to the sharing of confidential
information or give written consent.
(b) All information, materials, and any other documents or data associated
with the Program are confidential and proprietary in nature and shall
not be used by or disclosed to any person or entity by any of the
parties hereto or their employees except as necessary in operation of
the Program, as required by Applicable Law or as may be consented to in
writing.
(c) Each party to this Agreement shall permit officers or authorized
designees of the other parties, any governmental agency, exchange, or
association having regulatory jurisdiction over the affairs of that
party, or independent accountants retained for the purpose of
conducting an audit of the financial affairs of the requesting party,
full and complete access to inspect records and books, and monitor
activities at any Branch Office or other location of information during
normal business hours.
SECTION 8. SERVICES TO BE PROVIDED BY FBAL TO FI
------------------------------------------------
FBAL hereby agrees to provide to FI appropriate signage for the
identification of the Program on FI premises, together with hiring,
training, marketing, accounting and compliance review support as
mutually agreed upon by FI and FBAL.
SECTION 9. REPRESENTATIONS
--------------------------
(a) FBAL represents and warrants to FI that (i) it is a Nevada limited
liability company, validly existing and in good standing,
(ii) the terms and provisions of this Agreement have been adopted and
approved by its members, (iii) it has or will have all governmental
licenses and permits necessary for it to carry on the activities
contemplated by this Agreement, (iv) it is not the subject of any
disciplinary or license revocation proceeding in any jurisdiction and
(v) it may enter into and perform this Agreement without violating any
contractual or other obligation owed to third parties. FBAL shall
promptly inform FI if it becomes the subject of any disciplinary or
license revocation proceeding, or if it is the subject of any
governmental order that affects its right or ability to perform its
obligations under this Agreement. These representations shall
survive the termination of this Agreement.
<PAGE>
(b) FI represents and warrants to FBAL that (i) it is a state banking
association in good standing under the laws of the State of
California, (ii) the terms and provisions of this Agreement have
been adopted and approved by its board of directors, (iii) it has
or will have all governmental licenses and permits necessary for
it to carry on the activities contemplated by this Agreement,
(iv) it is not the subject of any disciplinary or license
revocation proceeding in any jurisdiction, and (v) it may enter
into and perform this Agreement without violating any contractual
or other obligation it has to anyone else. FI shall promptly
inform FBAL if it becomes the subject of any disciplinary or
license revocation proceeding, or if it is the subject of any
governmental order, that affects its right or ability to perform
its obligations under this Agreement. FI shall indemnify and hold
FBAL harmless against all claims and damages, including
attorneys' fees, arising out of the breach by FI of this
Agreement or of the provisions contained in the FBAL Guides.
These representations shall survive the termination of this
Agreement.
SECTION 10. MISCELLANEOUS
-------------------------
(a) Scope of Assumption. FI acknowledges and agrees that under this
Agreement FBAL obtains certain rights to offer advice and services to
customers of FI and to others.
(b) Right of Inspection and Confidentiality. FBAL hereby authorizes FI to
monitor and periodically review and verify FBAL's and each Registered
Representative's compliance with the terms of this Agreement and agrees
to provide FI with reasonable access to appropriate records in
connection with any such activities. FBAL shall also provide FI or its
regulatory examiners with reasonable access to appropriate records in
connection with any inspection by FI or its regulatory examiners of
FBAL or any Branch Office which FI is required to make pursuant to the
rules and regulations of state or federal regulatory agencies.
FI shall provide FBAL with reasonable access to appropriate records in
connection with any inspection by FBAL or its regulatory examiners of
FI or any Branch Office and shall permit FBAL to copy such records,
provided that such inspection and copying is limited to the
broker/dealer activities contemplated by this Agreement.
All information obtained or reviewed in such inspections or through the
course of business during the term of this Agreement shall be held in
the strictest confidence by FBAL or FI. FI agrees to return to FBAL any
materials provided by FBAL upon termination of this Agreement and shall
not use the same thereafter. FBAL agrees to return to FI any customer
lists or other materials provided by FI upon termination of this
Agreement and shall not use the same thereafter. Neither party shall
permit any third party to copy or use these materials at any time.
(c) Termination. The terms of this Agreement are continuous unless one
party gives notice of its intention to terminate the contract giving 30
days' written notice. This Agreement shall terminate on any earlier
date required by order of any governmental agency with jurisdiction
over either party.
(d) Arbitration. Any claim or controversy arising out of or relating to the
negotiation, performance or breach of this Agreement, the meaning of or
obligations imposed by this Agreement, or the arbitrability of any such
question including any issue as to the jurisdiction of the arbitrator,
shall be decided by arbitration pursuant to the rules of the American
Arbitration Association then in effect.
<PAGE>
(e) Attorneys' Fees. The prevailing party in any arbitration or litigation
arising from the interpretation or enforcement of this Agreement shall
be entitled to recover its attorneys' fees and costs, including those
incurred on appeal, as determined by the arbitrator or court.
(f) Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been
given on the earlier of the date of actual receipt, or three days after
mailing if mailed first class, postage prepaid, and addressed to the
party at the following address:
FI: First Bank of California
1625 Douglas Boulevard
Roseville, CA 95661
FBAL: First Brokerage America, L.L.C.
11901 Olive Boulevard
Creve Coeur, MO 63141
(g) Partial Invalidity. If any portion of this Agreement is held to be
invalid or unenforceable, the remainder of the Agreement shall continue
in full force and effect.
(h) Relationship of Parties. FI and FBAL are independent of each other and
each party has sole responsibility and authority for the conduct of its
own business. By the terms of this Agreement, no party is the agent,
employee, joint venturer or partner to the other. No party has the
right to bind any other party in any way.
(i) Assignment. This Agreement shall inure to the benefit of the parties
and their legal representatives, successors and assigns, but no party
may assign any of its rights or obligations under this Agreement
without the prior written approval of the other party/parties hereto.
(j) Governing Law; Submission to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
MISSOURI AND APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE
PARTIES HERETO HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MISSOURI
AND OF ANY MISSOURI STATE COURT SITTING IN CREVE COEUR, MISSOURI, FOR
THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
THE PARTIES IRREVOCABLY CONSENT TO THE SERVICE OF ANY AND ALL PROCESS
IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH
PROCESS TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 10(f), ABOVE.
THE PARTIES IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(k) Entire Agreement. This Agreement, together with any other document
executed in connection herewith, represent the final agreement between
the parties and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties. There
are no oral agreements among the parties. No amendment, modification,
or waiver of this Agreement shall be binding unless executed in
writing. No waiver of any of the provisions of this Agreement shall be
a continuing waiver unless expressly provided.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
[SEE FOLLOWING PAGE FOR SIGNATURES]
<PAGE>
The undersigned hereby agree to the terms and conditions of this Agreement as of
the date first written above.
FI: FIRST BANK OF CALIFORNIA
By: /s/ Terrance M. McCarthy
----------------------------
Name: Terrance M. McCarthy
Title: President and
Chief Executive Officer
FBAL: FIRST BROKERAGE AMERICA, L.L.C.
By: /s/ Edward D. Furman
------------------------
Name: Edward D. Furman
Title: Manager
<PAGE>
Exhibit A
LEASE AGREEMENT
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE -- GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Provisions ("Basic Provisions").
1.1 Parties: This Lease ("Lease"), dated for reference purposes only,
- - July 1, 1999 , is made by and between First Bank of California
("Lessor") and First Brokerage America, LLC Lessee"), (collectively the
"Parties," or Individually a "Party").
1.2(a) Premises: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of - , located In the City of
- -_______________________, County of - , State of California with zip code - as
outlined on Exhibit A attached hereto ("Premises"), the exact nature, size and
location to be agreed upon between the parties.
In addition to Lessee's rights to use and occupy the Premises as hereinafter
specified, Lessee shall have non-exclusive rights to the Common Areas (as
defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any
rights to the roof, exterior walls or utility raceways of the Building or to any
other buildings in the Industrial Center. The Premises, the Building, the Common
Areas, the land upon which they are located, along with all other buildings and
improvements thereon, are herein collectively referred to as the "Industrial
Center." (Also see Paragraph 2.)
1.2(b) Material deleted.
1.3 Term: - 1 years and - 0 months ("Original Term") commencing
July 1, 1999 ("Commencement Date") and ending June 30, 2000 ("Expiration Date").
(Also see Paragraph 3.)
1.4 Material deleted.
1.5 Base Rent:$ per month ("Base Rent"), payable on the day of each
month commencing (Also see Paragraph 4.) As outlined on Exhibit B.
|__| If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum _ attached hereto.
1.6(a) Base Rent Paid Upon Execution: $ as Base Rent for the period
1.6(b) Material deleted.
1.7 Material deleted.
1.8 Permitted Use: Securities brokerage and insurance sales
("Permitted Use") (Also see Paragraph 6.)
1.9 Insuring Party. Lessor is the "Insuring Party." (Also see
Paragraph 8.)
1.10 Material deleted.
1.11 Material deleted.
1.12 Addenda and Exhibits. Attached hereto Is an Addendum or Addenda
consisting of Paragraphs 49 through 51 and Exhibits A & B, all of which
constitute a part of this Lease.
2. Premises, Parking and Common Areas.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term at the rental. and upon all of the terms
covenants and conditions set forth In this Lease. Unless otherwise provided
herein, any statement of square footage set forth in this Lease, or that may
have been used in calculating rental and/or Common Area Operating Expenses, is
an approximation which Lessor and Lessee agree is reasonable and the rental and
Lessee's Share (as defined In Paragraph 1.6(b)) based thereon Is not subject to
revision whether or not the actual square footage is more or less.
<PAGE>
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and, heating systems and loading doors, if any, in the Premises, other than
those constructed by Lessee, shall be in good operating condition on the
Commencement Date. If a non-compliance with said warranty exists as of the
Commencement Date. Lessor shall, except as otherwise provided In this Lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify same at
Lessor's expense. If Lessee does not give Lessor written notice of a
noncompliance with this warranty within thirty (30) days after the Commencement
Date, correction of that non-compliance shall be the obligation of Lessee at
Lessee's sole cost and expense.
2.3 Compliance with Covenants. Restrictions and Building Code. Lessor
warrants that any Improvements (other than those constructed by Lessee or at
Lessee's direction) on or In the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances In effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation of violations of
applicable building codes, regulations. or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined In Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor
shall, except as otherwise provided In this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non-compliance, take such action. at Lessor's expense, as may be reasonable
or appropriate to rectify the non-compliance. Lessor makes no warranty that the
Permitted Use In Paragraph 1.8 is permitted for the Premises under Applicable
Laws (as defined In Paragraph 2.4).
2.4 Acceptance of Promises. Lessee hereby acknowledges: (a) that It has
been advised to satisfy Itself with respect to the condition of the Premises
(including. but not limited to, the electrical and fire sprinkler systems,
security. environmental aspects. seismic and earthquake requirements, and
compliance with the Americans with Disabilities Act and applicable zoning.
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively. "Applicable Laws") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such Investigation as it deems necessary with reference to
such matters, Is satisfied with reference thereto. and assumes all
responsibility therefore as the same relate to Lessee's occupancy of the
Premises and/or the terms of this Lease. and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth in this Lease.
2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor In
this Paragraph 2 shall be of no force or effect if immediately prior to the date
set forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In
such event, Lessee shall, at Lessee's sole cost and expense. Correct any
non-compliance of the Premises with said warranties.
2.6 Material deleted.
2.7 Common Areas - Definition. The term "Common Areas" Is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general
nonexclusive use of Lessor, Lessee and other lessees of the Industrial Center
and their respective employees, suppliers. shippers, customers. contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways. parkways, driveways and landscaped areas.
<PAGE>
2.8 Common Areas - Lessee's Rights. Lessor hereby grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease. the non-exclusive right
to use, In common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the terms hereof or under the terms of any rules and regulations
or restrictions governing the use of the Industrial Center. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Lessor or Lessors designated agent, which consent may be revoked at
any time. In the event that any unauthorized storage shall occur then Lessor
shall have the right, without notice. In addition to such other rights and
remedies that it may have, to remove the property and charge the cost to Lessee,
which cost shall be immediately payable upon demand by Lessor.
2.9 Common Areas - Rules and Regulations. Lessor or such other person(s)
as Lessor may appoint shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to establish, modify,
amend and enforce reasonable Rules and Regulations with respect thereto In
accordance with Paragraph 40. Lessee agrees to abide by and conform to all such
Rules and Regulations, and to cause its employees, suppliers, shippers,.
Customers, contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the noncompliance with said rules and regulations by
other lessees of the Industrial Center.
2.10 Common Areas - Changes. Lessor shall have the right. In Lessor's
sole discretion. from time to time:
(a) To make changes to the Common Areas, Including, without
limitation. changes in the location. size, shape and number of driveways,
entrances, parking spaces, parking areas. loading and unloading areas,
Ingress, egress, direction of traffic. landscaped areas. walkways and utility
raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available.
(c) To designate other land outside the boundaries of the
Industrial Center to be a part of the Common Areas; (d) To add additional
buildings and Improvements to the Common Areas;
(e) To use the Common Areas while engaged In making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof: and
(f) To do and perform such other acts and make such other changes
In. to or with respect to the Common Areas and Industrial Center as Lessor may,
in the exercise of sound business judgment, deem to be appropriate.
<PAGE>
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 Material deleted.
3.3 Delay In Possession. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Commencement Date. Lessor shall
not be subject to any liability therefor, nor shall such failure affect the
validity of this Lease, or the obligations of Lessee hereunder, or extend the
term hereof, but in such case, Lessee shall not, except as otherwise provided
herein, be obligated to pay rent or perform any other obligation of Lessee under
the terms of this Lease until Lessor delivers possession of the Premises to
Lessee. If possession of the Premises is not delivered to Lessee within sixty
(60) days after the Commencement Date, Lessee may, at its option, by notice
in writing to Lessor within ten (10) days after the end of said sixty (60) day
period, cancel this Lease, in which event the Parties shall be discharged
from all obligations hereunder; provided further, however. that If such
written notice of Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease hereunder shall terminate and be
of no further force or effect. Except as may be otherwise provided, and
regardless of when the Original Term actually commences, if possession is not
tendered to Lessee when required by this Lease and Lessee does not terminate
this Lease, as aforesaid, the period free of the obligation to pay Base Rent, if
any, that Lessee would otherwise have enjoyed shall run from the date of
delivery of possession and continue for a period equal to the period during
which the Lessee would have otherwise enjoyed under the terms hereof, but minus
any days of delay caused by the acts, changes or omissions of Lessee.
4. Rent.
4.1 Base Rent. Lessee shall pay Base Rent and other rent or charges. as
the same may be adjusted from time to time, to Lessor In lawful money of the
United States, without offset or deduction, on or before the day on which It Is
due under the terms of this Lease. Base Rent and all other rent and charges for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at Its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate In writing to Lessee.
4.2 Material deleted.
5. Material deleted.
6. Use.
6.1 Permitted Use.
(a) Lessee shall use and occupy the Premises only for the
Permitted Use set forth In Paragraph 1.8, or any other legal use which is
reasonably comparable thereto, and for no other purpose. Lessee shall not use or
permit the use of the Premises In a manner that is unlawful, creates waste or a
nuisance, or that disturbs owners and/or occupants of, or causes damage to the
Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee, Lessee's assignees or subtenants, and
by prospective assignees and subtenants of Lessee. Its assignees and subtenants,
for a modification of said Permitted Use, so long as the same will riot impair
the structural integrity of the Improvements on the Premises or In the Building
or the mechanical or electrical systems therein, does not conflict with uses by
other lessees, Is not significantly more burdensome to the Premises or the
Building and the Improvements thereon, and Is otherwise permissible pursuant to
this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall within
five (5) business days after such request give a written notification of same,
which notice shall include an explanation of Lassoes reasonable objections to
the change In use.
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous
Substance" as used in this Lease shall mean any product, substance. chemical,
material or waste whose presence, nature. quantity and/or Intensity of
existence. use, manufacture, disposal, transportation, spill, release of effect,
either by itself or In combination with other materials expected to be on the
Premises, Is either: (1) potentially injurious to the public health, safety or
welfare, the environment, or the Premises'. (11) regulated or monitored by any
governmental authority; or (ill) a basis for potential liability of Lessor to
any governmental agency or third party under any applicable statute or common
law theory. Hazardous Substance shall Include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil or any products or by-products
thereof. Lessee shall not engage In any activity in or about the Premises which
constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances
without the express prior written consent of Lessor and compliance in a timely
manner (at Lessee's sole cost and expense) with all Applicable Requirements (as
defined in Paragraph 6.3). "Reportable Use" shall mean (I) the installation or
use of any above or below ground storage tank, (ii) the generation. possession,
storage. use. transportation. or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice. registration or
business plan Is required to be filed with. any governmental authority, and
(III) the presence in, on or about the Premises of a Hazardous Substance with
respect to which any Applicable Laws require that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
<PAGE>
the foregoing, Lessee may, without Lessor's prior consent. but upon notice to
Lessor and in compliance with all Applicable Requirements. use any ordinary and
customary materials reasonably required to be used by Lessee In the normal
course of the Permitted Use, so long as such use is not a Reportable Use and
does not expose the Premises, or neighboring properties to any meaningful risk
of contamination of damage or expose Lessor to any liability therefor. In
addition, Lessor may (but without any obligation to do so) condition its consent
to any Reportable Use of any Hazardous Substance by Lessee upon Lessee's giving
Lessor such additional assurances as Lessor, In Its reasonable discretion, deems
necessary to protect itself, the public, the Premises and the environment
against damage, contamination or Injury and/or liability therefor, Including,
but not limited to, the installation (and, at Lessor's option, removal on or
before Lease expiration or earlier termination) of reasonably necessary
protective modifications to the Premises (such as concrete encasements) and/or
the deposit of an additional Security Deposit under Paragraph 5 hereof.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable
cause to believe. that a Hazardous Substance has come to be located in, on,
under or about the Premises or the Building, other than as previously consented
to by Lessor, Lessee shall Immediately give Lessor written notice thereof,
together with a copy of any statement, report, notice. registration,
application, permit, business plan, license, claim, action. or proceeding given
to, or received from, any governmental authority or private party concerning the
presence, spill, release, discharge of, or exposure to. such Hazardous Substance
including, but not limited to, all such documents as may be involved In any
Reportable Use Involving the Premises. Lessee shall not cause or permit any
Hazardous Substance to be spitted or released In. on, under or about the
Premises (including. without limitation, through the plumbing or sanitary sewer
system).
(c) Indemnification. Lessee shall indemnity. protect, defend and
hold Lessor, Its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs. claims. lions, expenses. penalties, loss of permits and attorneys' and
consultants' fees arising out of or Involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations under this Paragraph 6.2(c) shall Include, but not be limited to,
the effects of any contamination or Injury to person, property or the
environment created or suffered by Lessee, and the cost of Investigation
(Including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof. or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
Initials: termination, cancellation or release agreement entered Into by Lessor
and Lessee shall release Lessee from Its obligations from this Lease with
respect to Hazardous Substances, unless specifically so agreed by Lessor In
writing at the time of such agreement.
6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's
sole cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Requirements," which term is used in this Lease to mean all laws.
rules. regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
Insurance underwriter or rating bureau. and the recommendations of Lessor's
engineers and/or consultants. relating in any manner to the Premises (including.
but not limited to, matters pertaining to (1) industrial hygiene. (ii)
environmental conditions on, in, under or about the Premises. Including soft and
groundwater conditions, and (ill) the use. generation, manufacture, production.
installation, maintenance, removal. transportation, storage, spill, or release
of any Hazardous Substance), now in effect or which may hereafter come into
effect. Lessee shall. within five (5) days after receipt of Lassoes written
request. provide Lessor with copies of all documents and Information, Including,
but not limited to. permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall Immediately upon receipt. notify Lessor In
writing (with copies of any documents Involved) of any threatened or actual
claim, notice. citation, warning, complaint or report pertaining to or Involving
failure by Lessee or the Premises to comply with any Applicable Requirements.
6.4 Inspection; Compliance with Law. Lessor, Lessor's agents. employees,
contractors and designated representatives, and the holders of any mortgages,
deeds of trust or ground leases on the Premises ("Lenders") shall have the right
to enter the Premises at any time In the case of an emergency, and otherwise at
reasonable times. for the purpose of Inspecting the condition of the Premises
and for verifying compliance by Lessee with this Lease and all Applicable
Requirements (as defined In Paragraph 6.3), and Lessor shall be entitled to
employ experts and/or consultants in connection therewith to advise Lessor with
respect to Lessee's activities, Including. but not limited to. Lessee's
Installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance on or from the Promises. The costs and expenses of any such
inspections shall be paid by the party requesting same. unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent. or unless the Inspection Is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case. Lessee shall upon request reimburse Lessor or
Lassoes Lender, as the case may be, for the costs and expenses of such
inspections.
<PAGE>
7. Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations.
7.1 Lessee's Obligations.
(a)Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations). 9 (Damage or Destruction). and 14 (Condemnation). Lessee shall. at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order. condition and repair (whether or not such portion of
the Premises requiring repair. or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises), Including. without limiting the generality
of the foregoing, all equipment or facilities specifically serving the Premises,
such as plumbing, heating, air conditioning. ventilating, electrical, lighting
facilities. boilers, fired or unfired pressure vessels, fire hose connections if
within the Premises, fixtures. interior walls, Interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass. and skylights. but
excluding any items which are the responsibility of Lessor pursuant to Paragraph
7.2 below. Lessee, In keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof In good order, condition
and state of repair.
(b) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the Premises In good order, condition and repair, In accordance with Paragraph
13.2 below.
7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition). 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses). 6 (Use). 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep In good order, condition and repair the
foundations. exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (if located In the
Common Areas) or other automatic fire extinguishing system including fire alarm
and/or smoke detection systems and equipment, fire hydrants, parking lots,
walkways. parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all parts thereof, as well as providing the
services for which there Is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or Interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Promises. Lessee expressly waives
the benefit of any statute now or hereafter In effect which would otherwise
afford Lessee the right to make repairs at Lassoes expense or to terminate this
Lease because of Lassoes failure to keep the Building, Industrial Center of
Common Areas in good order, condition and repair.
7.3 Utility Installations, Trade Fixtures, Alterations.
(a) Definitions; Consent Required. The term "Utility
Installations" Is used in this Lease to refer to all air lines, power panels,
electrical distribution, security, fire protection systems. communications
systems, lighting fixtures. heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "Alterations" shall mean any
modification of the Improvements on the Premises which are provided by Lessor
under the terms of this Lease. other than Utility Installations or Trade
Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be
made any Alterations or Utility Installations In, on, under or about the
Premises without Lassoes prior written consent. Lessee may, however, make
non-structural Utility Installations to the Interior of the Premises (excluding
the roof without Lessor's consent but upon notice to Lessor, so long as they are
not visible from the outside of the Premises. do not Involve puncturing.
relocating or removing the roof or any existing walls. or changing or
interfering with the fire sprinkler or fire detection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed
$2,500.00.
<PAGE>
(b) Consent. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed conditioned upon: (I) Lessee's acquiring all applicable permits
required by governmental authorities: (it) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon: and
(iii) the compliance by Lessee with all conditions of said permits In a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor. Lessor may (but without obligation
to do so) condition Its consent to any requested Alteration or Utility
Installation that costs $2,500.00 or more upon Lessee's providing Lessor with a
lien and completion bond In an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation.
(c) Lien Protection. Lessee shall pay when due all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
a( or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work In, on, or about the Premises, and Lessor shall have
the fight to post notices of non -responsibility In or on the Premises as
provided by law, If Lessee shall, In good faith, contest the validity of any
such lien, claim or demand then Lessee shall, at Its sole expense, defend and
protect Itself, Lessor and the Premises against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Lessor or the Premises. If Lessor shall require.
Lessee shall furnish to Lessor a surety bond satisfactory to Lessor. In an
amount equal to one and one-half times the amount of such contested lien claim
or demand, indemnifying Lessor against liability for the same. as required by
law for the holding of the Premises free from the effect of such lien or claim.
In addition, Lessor may require Lessee to pay Lessor's attorneys' fees and costs
In participating In such action If Lessor shall decide it is to Its best
interest to do so.
<PAGE>
7.4 Ownership. Removal, Surrender, and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal
and to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4. all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Promises and be surrendered
with the Premises by Lessee.
(b)Removal. Unless otherwise agreed in writing. Lessor may
require that any or all Lessee-Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease, notwithstanding
that their Installation may have been consented to by Lessor. Lessor may require
the removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) Surrender/Restoration. Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination date, clean
and free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease. Except
as otherwise agreed or specified herein, the Premises as surrendered. shall
Include the Alterations and Utility Installations. The obligation of Lessee
shall Include the repair of any damage occasioned by the Installation,
maintenance or removal of Lessee's Trade Fixtures, furnishings. equipment, and
LesseeOwned Alterations and Utility Installations, as well as the removal of any
storage tank Installed by or for Lessee, and the removal, replacement, or
remediation of any soil, material or ground water contaminated by Lessee, all as
may then be required by Applicable Requirements and/or good practice. Lessee's
Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to Its obligation to repair and restore the Premises per this
Lease.
8. Insurance; Indemnity.
8.1 Material deleted.
8.2 Liability insurance.
(a) Carried by Lessee. protecting Lessee, Lessor and any Lender(s)
whose names have been provided to Lessee in writing (as additional insureds)
against claims for bodily injury, personal injury and property damage based
upon. involving or arising out of the ownership, use, occupancy or maintenance
of the Premises and all areas appurtenant thereto. Such insurance shall be on an
occurrence basis providing single limit coverage In an amount not less than
$1,000,000 per occurrence with an "Additional Insured-Managers or Lessors of
Premises" endorsement and contain the "Amendment of the Pollution Exclusion'
endorsement for damage caused by heat, smoke or fumes from a hostile fire. The
policy shall not contain any Intra-insured exclusions as between insured persons
or organizations. but shall Include coverage for liability assumed under this
Lease as an "Insured contract" for the performance of Lessee's indemnity
obligations under this Lease. The limits of said Insurance required by this
Lease or as carried by Lessee shall not, however, limit the liability of Lessee
nor relieve Lessee of any obligation hereunder. All Insurance to be carried by
Lessee shall be primary to and not contributory with any similar insurance
carried by Lessor, whose insurance shall be considered excess Insurance only.
(b) Carried by Lessor. Lessor shall also maintain liability Insurance
described in Paragraph 8.2(a) above, in addition to and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
<PAGE>
8.3 Property Insurance - Building, Improvements and Rental Value.
(a) Building and Improvements. Lessor shall obtain and keep In force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and to any Lender(s), Insuring against loss or damage to
the Premises. Such insurance shall be for full replacement cost, as [tie same
shall exist from time to time, or the amount required by any Lender(s), but In
no event more than the commercially reasonable and available insurable value
thereof it. by reason of the unique nature or age of the Improvements Involved,
such latter amount Is less than full replacement cost. Lessee-Owned Alterations
and Utility Installations, Trade Fixtures and Lessee's personal property shall
be Insured by Lessee pursuant to Paragraph 8.4. If the coverage is available and
commercially appropriate, Lessor's policy or policies shall Insure against all
risks of direct physical loss or damage except the perils of flood and/or
earthquake unless required by a Lender or Included in the Base Premium),
Including coverage for any additional costs resulting from debris removal and
reasonable amounts of coverage for the enforcement of any ordinance or law
regulating the reconstruction or replacement of any undamaged sections of the
Building required to be demolished or removed by reason of the enforcement of
any building. zoning, safety or land use laws as the result of a covered loss,
but not including plate glass Insurance. Said policy or policies shall also
contain an agreed valuation provision in lieu of any co-insurance clause, waiver
of subrogation. and inflation guard protection causing an Increase in the annual
properly insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located.
(b) Rental Value. Lessor shall also obtain and keep In force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to Lessor and any Lender(s), Insuring the loss of the full rental and
other charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, Insurance costs, all Common Area Operating
Expenses and any scheduled rental increases). Said insurance may provide that in
the event the Lease is terminated by reason of an Insured loss, the period of
indemnity for such coverage shall be extended beyond the date of the completion
of repairs or replacement of the Premises, to provide for one full year's loss
of rental revenues from the date of any such loss. Said insurance shall contain
an agreed valuation provision In lieu of any co-Insurance clause, and the amount
of coverage shall be adjusted annually to reflect the projected rental income.
Real Properly Taxes. Insurance premium costs and other expenses, It any,
otherwise payable, for the next 12-month period. Common Area Operating Expenses
shall include any deductible amount in the event of such loss.
(c) Adjacent Premises. Lessee shall pay for any Increase In the
premiums for the property Insurance of the Building and for the Common Areas or
other buildings In the Industrial Center If said Increase Is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
(d) Lessee's Improvements. Since Lessor Is the Insuring Party. Lessor
shall not be required to insure Lessee-Owned Alterations and Utility
installations unless the item In ques0on has become the property of Lessor under
the terms of this Lease.
8.4 Lessee's Property Insurance. Subject to the requirements of
Paragraph 8.5, Lessee at Its cost shall either by separate policy or, at
Lessor's option. by endorsement to a policy already carried, maintain Insurance
coverage on all of Lessee's personal property. Trade Fixtures and Lessee-Owned
Alterations and Utility Installations In. on, or about the Premises similar In
coverage to that carried by Lessor as the Insuring Party under Paragraph 8.3(a).
Such insurance shall be full replacement cost coverage with a deductible not to
exceed $1,000 per occurrence. The proceeds from any such insurance shall be used
by Lessee for the replacement of personal property and the restoration of Trade
Fixtures and Lessee-Owned Alterations and Utility Installations. Upon request
from Lessor, Lessee shall provide Lessor with written evidence that such
insurance is in force.
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business In the stale where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V. or such other rating as may be required by a Lender, as set
forth in the most current issue of "Best's insurance Guide.- Lessee shall not do
or permit to be done anything which shall Invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor,
within seven (7) days after the earlier of the Early Possession Date of the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of, the Insurance required under Paragraphs 8.2(a) and 8.4. No such
policy shall be cancelable or subject to modification except after thirty (30)
days' prior written notice to Lessor. Lessee shall at least thirty (30) days
prior to the expiration of such policies, furnish Lessor with evidence of
renewals or *Insurance binders' evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand.
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages (whether In contract or In tort) against
the other, for loss or damage to their property arising out of or Incident to
the perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of Insurance carried or requited, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective Insurance companies
issuing property damage Insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be. so long as the
insurance is not Invalidated thereby.
<PAGE>
8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall Indemnity, protect, defend and hold harmless the
Premises, Lessor and its agents. Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act. omission or neglect of Lessee. its agents, contractors, employees of
invitees, and out of any Default or Breach by Lessee In the performance In a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment. In case any action or proceeding be brought against Lessor by reason
of any of the foregoing matters. Lessee, upon notice from Lessor. shall defend
the same at Lessee's expense by counsel reasonably satisfactory to Lessor and
Lessor shall cooperate with Lessee In such defense. Lessor need not have first
paid any such claim In order to be so Indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees. contractors, invitees. customers. or any other
person In or about the Premises, whether such damage or injury. is caused by or
results from fire, steam. electricity, gas, water or rain. or from the breakage,
leakage. obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part. from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect of any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable for Injury
to Lessee's business or for any loss of income or profit therefrom.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in Paragraph 9. 1 (d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) Immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall mean damage or destruction
to the Premises, other than Lessee-Owned Alterations and Utility Installations,
the repair cost of which damage or destruction Is fifty percent (50%) or more of
the then Replacement Cost of (tie Premises (excluding Lessee Owned Alterations
and Utility Installations and Trade Fixtures) Immediately prior to such damage
or destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage of destruction is fifty
percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall. at the option of Lessor, be deemed to be
Premises Total Destruction.
(c) "Insured Loss" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
Insurance described In Paragraph 8.3(a) irrespective of any deductible amounts
or coverage limits Involved.
(d)"Replacement Cost" shall mean the cost to repair or rebuild
the Improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, Including demolition. debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation.
(e)"Hazardous Substance Condition" shall mean the occurrence
or discovery of a condition involving the presence of, or a contamination by
a Hazardous Substance as defined in Paragraph 6.2(a), In, on, or under the
Premises.
<PAGE>
9.2 Premises Partial Damage - Insured Loss. If Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. In the event. however, that there Is a
shortage of Insurance proceeds and such shortage is due to the fact that, by
reason of the unique nature of the Improvements In the Premises, full
replacement cost Insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage In Insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same. or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor It Lessor receives said funds or adequate assurance thereof
within said ten (10) day period. Lessor shall complete them as soon as
reasonably possible and this Lease shall remain In full force and effect. If
Lessor does not receive such funds or assurance within said period. Lessor may
nevertheless elect by written notice to Lessee within ten (10) days thereafter
to make such restoration and repair as Is commercially reasonable with Lessor
paying any shortage in proceeds, In which case this Lease shall remain In full
force and effect. If Lessor does not receive such funds or assurance within such
ten (10) day period. and it Lessor does not so elect to restore and repair, then
this Lease shall terminate sixty (60) days following the occurrence of the
damage or destruction. Unless otherwise agreed, Lessee shall In no event have
any right to reimbursement from Lessor for any funds contributed by Lessee to
repair any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some Insurance coverage, but the net proceeds
of any such Insurance shall be made available for the repairs if made by either
Party.
9.3 Partial Damage - Uninsured Loss. If Premises Partial Damage that Is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect), Lessor may, at Lessor's
option, either (i) repair such damage as soon as reasonably possible at Lessors
expense, in which event this Lease shall continue in full force and effect. or
(ii) give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the repair of such damage totally at Lessee's expense and without
reimbursement from Lessor. Lessee shall provide Lessor with the required funds
or satisfactory assurance thereof within thirty (30) days following such
commitment from Lessee. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the funds or assurance thereof within the times specified
above, this Lease shall terminate as of the date specified in Lessor's notice of
termination.
9.4 Total Destruction. Notwithstanding any other provision hereof. If
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lassoes damages from Lessee
except as released and waived In Paragraph 9.7.
9.5 Damage Near End of Term. If at any time during the last six (6)
months of the term of this Lease there Is damage for which the cost to repair
exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lassoes
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided. however. If Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises. then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
In insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (I) I the date which Is ten (10) days after Lessee's
receipt of Lessor's written notice purporting to terminate this Lease, or (ii)
the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage In Insurance proceeds. Lessor
shall, at Lessor's expense, repair such damage as soon as reasonably possible
and this Lease shall continue In full force and effect. If Lessee falls to
exercise such option and provide such funds or assurance during such period then
this Lease shall terminate as of the date set forth In the first sentence of
this Paragraph 9.5.
<PAGE>
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible. the Base Rent,
Common Area Operating Expenses and other charges. If any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues. shall be abated in proportion to the
degree to which Lessee's use of the Premises Is Impaired. but not in excess of
proceeds from Insurance required to be carded under Paragraph 8.3(b). Except for
abatement of Base Rent, Common Area Operating Expenses and other charges, if
any. as aforesaid, all other obligations of Lessee hereunder shall be performed
by Lessee. and Lessee shall have no claim against Lessor for any damage suffered
by reason of any such damage, destruction. repair, remediation or restoration.
(b) It Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
Substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may. at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and Such Lenders
and such repair or restoration Is not commenced within thirty (30) days after
receipt of such notice. this Lease shall terminate as of the date specified in
said notice, If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after the receipt of such notice. this Lease
shall continue in full force and effect. "Commence" as used In this Paragraph
9.6 shall mean either the unconditional authorization of the preparation of the
required plans, or the beginning of the actual work on the Premises, whichever
occurs first.
9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs, unless Lessee Is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue In full force and effect, but subject
to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor may at
Lassoes option either (I) Investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's expense. in
which event this Lease shall continue in full force and effect. or (ii) if the
estimated cost to investigate and remediate such condition exceeds twelve (12)
times the then monthly Base Rent or $100,000. whichever is greater, give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease. Lessee shall have the right ' I within ten (10) days after
the receipt of such notice to give written notice to Lessor of Lessee's
commitment to pay for the excess costs of (a) Investigation and remediation of
such Hazardous Substance Condition to the extent required by Applicable
Requirements, over (b) an amount equal to twelve (12) times the then monthly
Base Rent or $100,000, whichever Is greater. Lessee shall provide Lessor with
the funds required of Lessee or satisfactory assurance thereof within thirty
(30) days following said commitment by Lessee. In such event this Lease shall
continue in full force and effect, and Lessor shall proceed to make such
Investigation and remediation as soon as reasonably possible after the required
funds are available. It Lessee does not give such notice and provide the
required funds or assurance thereof within the time period specified above, this
Lease shall terminate as of the date specified In Lassoes notice of termination.
9.8 Termination - Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment
made by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or Is not then required to be. used by Lessor under the terms of this
Lease.
9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as
defined In Paragraph 10.2(a), applicable to the Industrial Center, and except as
otherwise provided In Paragraph 10.3.
10.2 Real Property Tax Definitions.
(a)As used herein, the term "Real Property Taxes" shall include
any form of real estate tax or assessment, general, special, ordinary or
extraordinary. and any license fee, commercial rental tax, Improvement bond or
bonds. levy or tax (other than Inheritance, personal income or estate taxes)
imposed upon the Industrial Center by any authority having the direct or
Indirect power to tax, Including any city, state or federal government, or any
school, agricultural, sanitary. fire street, drainage. or other Improvement
district thereof. levied against any legal or equitable interest of Lessor in
the Industrial Center of any portion thereof. Lessors right to rent or other
income therefrom, and/or Lessor's business of leasing the Premises. The term
"Real Property Taxes" shall also include any tax, fee, levy, assessment or
charge, or any increase therein, imposed by reason of events occurring, or
changes in Applicable Law taking effect, during the term of this Lease,
including but not limited to a change In the ownership of the Industrial Center
or in the improvements thereon, the execution of this Lease, or any
modification, amendment or transfer thereof, and whether or not contemplated by
the Parties.
(b)Material deleted.
<PAGE>
10.3 Additional Improvements. Common Area Operating Expenses shall not
Include Real Property Taxes specified In the tax assessor's records and work
sheets as being caused by additional Improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees, Notwithstanding Paragraph 10.1 hereof, Lessee, however, pay to Lessor
promptly upon notice from Lessor, the entirety of any increase In Real Properly
Taxes if assessed solely by reason of Alterations, Trade Fixtures or Utility
Installations placed upon the Premises by Lessee or at Lessee's request.
10.4 Material deleted.
10.5 Lessee's Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained In the Premises or stored within the Industrial Center. When
possible. Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. Utilities. Lessor shall pay directly for al utilities and services
supplied to the Premises, including, but not limited to, electricity. telephone,
security, gas and cleaning of the Premises, together with any taxes thereon.
12. Assignment and Subletting.
12.1 Lessor's Consent Required.
(a)Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's Interest in this Lease or In the Premises
without Lessor's prior written consent given under and subject to the terms of
Paragraph 36.
(b)A change In the control of Lessee shall constitute an
assignment requiring Lessor's consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change In control for this purpose.
(c)The Involvement of Lessee or ft assets In any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing. transfer. leveraged buy-out or otherwise). whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs. which
results or will result In a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the time of full
execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as It exists Immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was of is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may reasonably withhold its consent. "Net
Worth of Lessee" for purposes of this Lease shall be the net worth of Lessee
(excluding any Guarantors) established under generally accepted accounting
principles consistently applied.
(d)An assignment or subletting of Lessee's Interest In this Lease
without Lassoes specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1, or a non-curable Breach without
the necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a non-curable Breach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days' written notice ("Lessor's Notice"), Increase the monthly Base Rent for the
Premises to the greater of the then fair market rental value of the Premises, as
reasonably determined by Lessor. or one hundred ten percent (110%) of the Base
Rent then In effect. Pending determination of the new fair market rental value.
if disputed by Lessee, Lessee shall pay the amount set forth In Lessors Notice,
with any overpayment credited against the next installment(s) of Base Initials.
Rent coming due. and any underpayment for the period retroactively to the
effective date of the adjustment being due and payable immediately upon the
determination thereof. Further, in the event of such Breach and rental
adjustment, (1) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to the then fair market value
as reasonably determined by Lessor (without the Lease being considered an
encumbrance or any deduction for depreciation or obsolescence, and considering
the Premises at Its highest and best use and In good condition) or one hundred
ten percent (110%) of the price previously In effect, (11) any Index-oriented
rental or price adjustment formulas contained in this Lease shall be adjusted to
require that the base Index be determined with reference to the Index applicable
to the time of such adjustment, and (iii) any fixed rental adjustments scheduled
during the remainder of the Lease term shall be Increased In the same ratio as
the new rental bears to the Base Rent in effect immediately prior the adjustment
specified In Lessor's Notice.
(e)Lessee's remedy for any breach of this Paragraph 12.1 by
Lessor shall be limited to compensatory damages and/or injunctive relief.
<PAGE>
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not (1) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease. (11)
release Lessee of any obligations hereunder. nor (ill) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval I of such
assignment nor the acceptance of any rent for performance shall constitute a
waiver or estoppel of Lessor's right to exercise its remedies for the Default or
Breach by Lessee of any of the terms. covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall
not constitute a consent to any subsequent assignment or subletting by Lessee or
to any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relieve such persons from
liability under this Lease or the sublease.
(d)In the event of any Default or Breach of Lessee's obligation
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
anyone else responsible for the performance of the Lessee's -obligations under
this Lease. Including any sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor.
(e)Each request for consent to an assignment or subletting shall
be In writing, accompanied by Information relevant to Lessor's determination as
to the financial and operational responsibility and appropriateness of the
proposed assignee or sublessee. Including, but not limited to, the intended use
and/or required modification of the Premises, It any, together with a
non-refundable deposit of $1,000 or ten percent (10%) of the monthly Base Rent
applicable to the portion of the Premises which Is the subject of the proposed
assignment or sublease. whichever Is greater, as reasonable consideration for
Lessor's considering and processing the request for consent. Lessee agrees to
provide Lessor with such other or additional information and/or documentation as
may be reasonably requested by Lessor.
(f)Any assignee of. or sublessee under, this Lease shall. by
reason of accepting such assignment or entering Into such sublease, be deemed,
for the benefit of Lessor, to have assumed and agreed to conform and comply with
each and every term. covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented In writing.
(g)The occurrence of a transaction described In Paragraph 12.2(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased by an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
Security Deposit increase a condition to Lessor's consent to such transaction.
(h)Lessor, as a condition to giving Its consent to any assignment
or subletting, may require that the amount and adjustment schedule of tile rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment schedule for property similar to the Premises as then constituted, as
determined by Lessor.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed Included In all subleases under
this Lease whether or not expressly Incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
Interest In all rentals and Income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and Income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined In Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided In this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor. nor by reason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee's obligations
to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
[lie sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
<PAGE>
(b)In the event of a Breach by Lessee in the performance of Its
obligations under this Lease, Lessor. at Its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall
further assign or sublet all or any part of the Premises without Lessor's prior
written consent.
(e)Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the sublessee, who shall have the right to cure the Default of
Lessee within the grace period. if any, specified In such notice. The sublessee
shall have a right of reimbursement and offset from and against Lessee for any
such Defaults cured by the sublessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that If an attorney Is
consulted by Lessor In connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 Is a reasonable minimum sum per such occurrence
for legal services and costs In the preparation and service of a notice of
Default, and that Lessor may Include the cost of such services and costs In said
notice as rent due and payable to cure said default. A "Default" by Lessee is
defined as a failure by Lessee to observe. comply with or perform any of the
terms. covenants, conditions or rules applicable to Lessee under this Lease. A
"Breach" by Lessee Is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is specified
herein, the failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided In this Lease. the
failure by Lessee to make any payment of Base Rent,
Lessee's Share of Common Area Operating Expenses, or any other monetary payment
required to be made by Lessee hereunder as and when due, the failure by Lessee
to provide Lessor with reasonable evidence of insurance or surety bond required
under this Lease, or the failure of Lessee to fulfill any obligation under this
Lease which endangers or threatens life or property, where such failure
continues for a period of three (3) days following written notice thereof by or
on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (1) compliance with Applicable
Requirements per Paragraph 6.3. (11) the Inspection, maintenance and service
contracts required under Paragraph 7.1(b). (ill) the rescission of an
unauthorized assignment or subletting per Paragraph 12.1, (iv) a Tenancy
Statement per Paragraphs `16 or 37, (v) the subordination or non-subordination
of this Lease per Paragraph 30. (vi) the guaranty of the performance of Lessee's
obligations under this Lease it required under Paragraphs 1. 11 and 37. (vii)
the execution of any document requested under Paragraph 42 (easements), or
(viii) any other documentation or information which Lessor may reasonably
require of Lessee under the terms of this Lease. where any such failure
continues for a period of ten (10) days following written notice by or on behalf
of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants,
conditions or provisions of this Lease, or of the rules adopted under Paragraph
hereof that are to be observed, compiled with or performed by Lessee, other than
those described In Subparagraphs 13.1 (a), (b) or (c). above. where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee: provided. however. that if the nature of Lessee's
Default is such that more than thirty (30) days are reasonably required for Its
cure. then It shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making
by Lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor' as defined In 11 U.S. Code Section
101 or any successor statute thereto (unless, in the case of a petition filed
against Lessee, the same is dismissed within thirty (30) days), (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Lessee's assets located at the Premises or of Lessee's Interest In this Lease.
where possession Is not restored to Lessee within thirty (30) days; or (iv) the
attachment, execution or other Judicial seizure of substantially all of Lessee's
assets located at the Premises or of Lessee's Interest in this Lease. where
such seizure is not discharged within thirty (30) days: provided, however. In
the event that any provision of this Subparagraph 13.1 (e) Is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.
(f) The management of Lessee's affairs being assumed by any
governmental. regulatory or judicial authority, or if Lessee is prohibited by
any governmental or regularity authority from continuing Ito primary line of
business, if such assumed management is not relinquished by such governmental or
regulatory authorities within 30 days.
(g) Lessee's breach or default under the certain Services
Agreement between Lessee and Lessor, which breach remains uncured after the
expiration of any applicable "cure" period stated therein.
<PAGE>
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice). Lessor may, at Its
option (but without obligation to do so), perform such duty or obligation on
Lessee's behalf, including, but not limited to, the obtaining of reasonably
required bonds. Insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee to Lessor upon Invoice therefor. If any check given to
Lessor by Lessee shall not be honored by the bank upon which It Is drawn,
Lessor, at Its own option, may require all future payments to be made under this
Lease by Lessee to be made only by cashier's check. In the event of a Breach of
this Lease by Lessee (as defined In paragraph 13.1), with or without further
notice or demand, and without limiting Lessor In the exercise of any right or
remedy which Lessor may have by reason of such Breach, Lessor may:
(a)Terminate Lessee's right to possession of the Premises by any
lawful means. In which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (I) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (if) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (if!) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform Its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom. including. but not limited to, the cost of
recovering possession of the Premises, expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorneys' fees.
and that portion of any leasing commission paid by Lessor in connection with
this Lease applicable to the unexpired term of this Lease. The worth at the time
of award of the amount referred to in provision (iii) of the immediately
preceding sentence shall be computed by discounting such amount at the discount
rate of the Federal Reserve Bank of San Francisco or the Federal Reserve Bank
District in which the Premises are located at the time of award plus one percent
(1%). Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach
of this Lease shall not waive Lessor's right to recover damages under this
Paragraph 13.2. If termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein. or Lessor may
reserve the right to recover all or any part thereof in a separate suit for such
rent and/or damages. If a notice and grace period required under Subparagraph
13. 1 (b), (c) or (d) was not previously given. a notice to pay rent or quit. or
to perform or quit, as the case may be. given to Lessee under any statute
authorizing the forfeiture of leases for unlawful detainer shall also constitute
the applicable notice for grace period purposes required by Subparagraph
13-1(b),(c)or(d). In such case, the applicable grace period under the unlawful
detainer statute shall run concurrently after the one such statutory notice, and
the failure of Lessee to cure the Default within the greater of the two (2) such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for In this Lease and/or by said
statute.
(b)Continue the Lease and Lessee's right to possession in effect
(in California under California Civil Code Section 1951.4) after Lessee's Breach
and recover the rent as It becomes due, provided Lessee has the right to sublet
or assign, subject only to reasonable limitations. Lessor and Lessee agree that
the limitations on assignment and subletting In this Lease are reasonable. Acts
of maintenance or preservation, efforts to relet the Premises, or the
appointment of a receiver to protect the Lessor's Interest under this Lease.
shall not constitute a termination of the Lessee's right to possession,
(c)Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
(d)The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 Inducement Recapture In Event of Breach. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises. or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
Inducement or consideration for Lessee's entering into this Lease. all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined In Paragraph 13.1) of this Lease by Lessee. any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect. and any rent, other charge, bonus, Inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be Immediately due and payable by Lessee to Lessor,
and recoverable by Lessor. as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.
<PAGE>
13.4 Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be Imposed upon
Lessor by the terms of any ground lease, mortgage or deed of trust covering the
Premises. Accordingly, if any installment of rent or other sum due from Lessee
shall not be received by Lessor or Lessor's designee within ten (10) days after
such amount shall be due. Then without any requirement for notice to Lessee,
Lessee shall pay to Lessor a late charge equal to six percent (6%) of such
overdue amount. The parties hereby agree that such late charge represents a fair
and reasonable estimate of the costs Lessor will incur by reason of late payment
by Losses. Acceptance of such late charge by Lessor shall In no event constitute
a waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive Installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 Breach by Lessor. Lessor shall not be deemed In breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall In no event be less than thirty (30) days after receipt by
Lessor, and by any Lender(s) whose name and address shall have been furnished to
Lessee In writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that If the
nature of Lessor's obligation Is such that more than thirty (30) days after such
notice are reasonably required for its performance. then Lessor shall not be in
breach of this Lease If performance Is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ton percent (10%) of the floor
area of the Premises. or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee's parking, Is taken by condemnation.
Lessee may. at Lessee's option, to be exercised In writing within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining. except that the Base Rent shall be
reduced in the same proportion as the rentable floor area of the Premises taken
bears to the total rentable floor area of the Premises. No reduction of Base
Rent shall occur if the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the Premises under the
power of eminent domain or any payment made under threat of the exercise of such
power shall be the property of Lessor, whether such award shall be made as
compensation for diminution of value of the leasehold or for the taking of the
fee, or as severance damages; provided. however, that Lessee shall he entitled
to any compensation, separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is
not terminated by reason of such condemnation. Lessor shall to the extent of Its
net severance damages received, over and above Lessee's share of the legal and
other expenses Incurred by Lessor In the condemnation matter. repair any damage
to the Premises caused by such condemnation authority, Lessee shall be
responsible for the payment of any amount in excess of such net severance
damages required to
complete such repair.
15. Material deleted.
<PAGE>
16. Tenancy and Financial Statements.
16.1 Tenancy Statement. Each Party (as "Responding Party") shall within
ten (10) days after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a statement In writing
in a form similar to the then most current "Tenancy Statement" form published by
the American Industrial Real Estate Association, plus such additional
Information. confirmation and/or statements as may be reasonably requested by
the Requesting Party.
16.2 Financial Statement. If Lessor desires to finance, refinance, or
sell the Premises or the Building. or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors as may be
reasonably required by such lender or purchaser. Including, but not limited to,
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser In
confidence and shall be used only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the owner or
owners at the time In question of the fee title to the Premises. in the event of
a transfer of Lessor's title or Interest In the Premises or In this Lease.
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided In Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid. the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed
by the Lessor shall be binding only upon the Lessor as herein above defined.
18. Severability. The invalidity of any provision of this Lease. as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. Interest on Past-Due Obligations. Any monetary payment due Lessor hereunder,
other than late charges, not received by Lessor within ten (10) (lays following
the date on which It was due, shall bear Interest from the date due at the prime
rate charged by the largest state chartered bank in the state In which the
Premises are located plus four percent (4%) per annum. but not exceeding the
maximum rate allowed by law, In addition to the potential late charge provided
for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties tinder this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent. No Prior or other Agreements. This Lease
contains all agreements between the Parties with respect to any matter mentioned
herein, and no other prior or contemporaneous agreement or understanding shall
be effective.
22. No Prior or other Agreements. This Lease contains all agreements between the
Parties with respect to any matter mentioned herein, and no other prior or
contemporaneous agreement or understanding shall be effective.
23. Notices.
23.1 Notice Requirements. All notices required or permitted by this
Lease shall be In writing and may be delivered in person (by hand or by
messenger or courier service) or may be sent by regular, certified or registered
mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission during normal business hours, and shall be deemed sufficiently
given If served In a manner specified In this Paragraph 23. The addresses noted
adjacent to a Party's signature on this Lease shall be that Party's address for
delivery or mailing of notice purposes. Either Party may by written notice to
the other specify a different address for notice purposes. except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for the purpose of mailing or delivering notices to Lessee. A
copy of all notices required or permitted to be given to Lessor hereunder shall
be concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail, the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice Is received on a Saturday or a Sunday or a legal
holiday, it shall be deemed received on the next business day.
<PAGE>
24. Waivers. Nowaiver by Lessor of the Default or Breach of any term.covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or any other term, covenant or condition hereof. Lessor's consent
to, or approval of any such act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of
any provision hereof. Any payment given Lessor by Lessee may be accepted by
Lessor on account of monies or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee In connection therewith,
which such statements and/or conditions shall be of act force or effect
whatsoever unless specifically agreed to In writing by Lessor at or before the
time of deposit of such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short-form memorandum in o
this Lease for recording purposes. The Party requesting recordation shall
be responsible for payment of any fees or taxes applicable thereto.
26. No Right to Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over In violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be Increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed
or performed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the
Parties, their personal representatives, successors and assign and be
governed by the laws of the state in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall be
initiated in the county in which the Premises are located.
30. Subordination, Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"). now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals.
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease. but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee In writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device. and
that In the event of such foreclosure, such new owner shall not: (I) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (if) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (III) be bound by
prepayment of more than one (1) month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered Into by
Lessor after the execution of this Lease. Lessee's subordination of this Lease
shall be subject to receiving assurance (a 'non-disturbance agreement) from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee Is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 Self-Executing. The agreements contained In this Paragraph 30 shall
be effective without the execution of any further documents: provided, however,
that upon written request from Lessor or a Lender In connection with a sale.
financing or refinancing of Premises. Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as Is provided for herein.
31. Attorneys' Fees. If any Party brings an action or proceeding to enforce the
terms hereof or declare rights hereunder, the Prevailing Party (as hereafter
defined) in any such proceeding, action, or appeal thereon, shall be entitled
to reasonable attorneys' fees. Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not such action or proceeding is
pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party who substantially obtains or defeats the relief
sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party of its claim or defense. The attorneys'
fee award shall not be computed in accordance with any court fee schedule, but
shall be such as to fully reimburse all attorneys' fees reasonably incurred.
Lessor shall be entitled to attorneys' fees. costs and expenses incurred in
preparation and service of notices of Default and consultations In
connection therewith, whether or not a legal action is subsequently
commenced in connection with such Default or resulting Breach.
32. Lessor's Access; Showing Promises; Repairs. Lessor and Lessor's agents shall
have the right to enter the Premises at any time, in the case of an emergency.
and otherwise at reasonable times for the purpose of showing the same to
prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary "For Sale" signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement of rent or liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or Involuntarily, any auction upon the Premises without first
having obtained Lessor's prior written consent. Notwithstanding anything to the
contrary In this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs.Lessee shall not place any sign upon the exterior of the Premises or
the Building. except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The Installation of any sign
on (tie Premises by or for Lessee shall be subject to the provisions of
Paragraph 7 (Maintenance, Repairs, Utility Installations, Trade Fixtures
and Alterations). Unless otherwise expressly agreed herein, Lessor reserves
all rights to the use of the roof of the Building, and the right to Install
advertising signs on the Building, including the roof, which do not unreasonably
Interfere with the conduct of Lessee's.
business; Lessor shall be entitled to all revenues from such advertising signs.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises, provided; however, Lessor shall, In the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such Interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever In this Lease the consent of a Party is required to an
act by or for the other Party. such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including. but not
limited to, architects', attorneys'. engineers' and other consultants' fees)
Incurred In the consideration of, or response to. a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises. Including, but not
limited to. consents to an assignment a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
Invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e). Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit hold under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will Incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without Interest. Lessors consent to any act, assignment of
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgement that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach.
except as may be otherwise specifically stated In writing by Lessor at the time
of such consent.
(b)All conditions to Lessor's consent authorized by this Lease
are acknowledged by Lessee as being reasonable. The failure to specify herein
any particular condition to Lessor's consent shall not preclude the impositions
by Lessor at the time of consent of such further of other conditions as are then
reasonable with reference to the particular matter for which consent Is being
given.
<PAGE>
37. Material deleted.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.
39. Material deleted.
40. Rules and Regulations. Lessee agrees that It will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to lime, for the management. safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for & convenience of other occupants
or tenants of the Building and the Industrial Center and their invitees.
41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include (he cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide
same. Lessee assumes all responsibility for the protection of the Premises,
Lessee, its agents and Invitees and their properly from the acts of third
parties.
42. Reservations. Lessor reserves the right, from time to time. to grant,
without the consent or joinder of Lessee, such easements, rights of way.
utility raceways, and dedications that Lessor deems necessary, and to cause
the recordation of parcel maps and restrictions. so long as such easements,
rights of way, utility raceways, dedications, maps and restrictions do not
reasonably Interfere with the use of the Premises by Lessee. Lessee agrees
to sign any documents reasonably requested by Lessor to effectuate any
such easement rights, dedication. map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money Is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. Authority. If either Party hereto Is a corporation, trust, or general or
limited partnership, each Individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute
and deliver this Lease on Its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease arid
the typewritten or handwritten provisions shall be controlled by th
typewritten or handwritten provisions.
46. Offer. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not
be denied an offer to lease. This Lease is not (Intended to be binding until
executed and delivered by all Parties hereto..
47. Amendments. This Lease may be modified only In writing, signed by the
Parties In interest at the time of the modification, The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional Insurance company or pension plan Lender In
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. Multiple Parties. Except as otherwise expressly provided herein, If more
than one person or entity Is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
<PAGE>
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN. AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY-S
REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND
STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE
BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY.
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS
TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN A
STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS
LOCATED SHOULD BE CONSULTED.
<PAGE>
The Parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at:Concord, California Executed at: 11901 Olive, Creve Coeur, MO 63141
- ------------------------------- -----------------------------------------------
On: August 3, 1999 On: August 3, 1999
-------------- --------------
By LESSOR: By LESSEE:
First Bank of California First Brokerage America, LLC
- ------------------------ ----------------------------
By: /s/ Terrance M. McCarthy By: /s/ Edward D. Furman
------------------------ --------------------
Title: President Title: Manager
--------- -------
NOTE: These forms are often modified to meet changing requirements of law and
needs of the Industry. Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 South Flower
Street, Suite 600, Los Angeles. California 90017, (213) 687-8777.
<PAGE>
ADDENDUM
THIS ADDENDUM modifies and amends that certain American Industrial Real
Estate Association Standard Commercial/Industrial Multi-Tenant Lease - Gross to
which it is attached, between First Bank of California, as Lessor, and First
Brokerage America, LLC relating to the Premises described therein. To the extent
that any provisions of this Addendum conflict or are inconsistent with any
provisions in the Lease, or any other addendum or exhibit attached thereto, the
provisions hereof shall control.
49. Throughout the Term of this Lease, Lessee shall have the right to
use, without charge, certain furniture, fixtures and equipment, including but
not limited to telephone and computer systems (collectively, "FF&E"), which are
owned by Lessor. All such FF&E is leased in its "as-is" condition, without
representation or warranty by Lessor as to physical condition or fitness for
Lessee's intended use.
50. Notwithstanding any thing to the contrary contained in the Lease,
the lease may be terminated by either party thereto, with or without cause, for
any reason or no reason, upon 90 days written notice to the other party.
51. Without limiting the provisions of Paragraph 50 and notwithstanding
anything to the contrary contained in the Lease, Lessee may terminate the Lease
upon notice to Lessor upon the occurrence of any of the following events:
(1) an assignment by Lessor for the benefit of its creditors;
(2) the levying on or against Lessor property of a writ of execution o
attachment that is not released or discharged within 30 days;
(3) Lessor's breach or default under the Services Agreement between Lessor and
Lessee, which breach remains uncured after expiration of any "cure" period
stated therein;
(4) the institution in a court of competent jurisdiction of proceeding for the
reorganization, liquidation, or insolvency dissolution of Lessor, or for its
adjudication as a bankrupt or insolvent, or for the appointment of a receiver of
Lessor's property, if such proceedings are not dismissed, and any receiver,
trustee, or liquidator appointed therein is not discharged within 30 days after
the proceedings are instituted; and
(5) the management of Lessor's affairs being assumed by any governmental,
regulatory or judicial authority, or if such party is prohibited by any
governmental or regulatory authority from continuing its primary line of
business.
IN WITNESS WHEREOF the undersigned have duly executed this
Addendum on the day and year first above set forth.
By LESSOR: By LESSEE:
First Bank of California First Brokerage America, LLC
- ------------------------ ----------------------------
By: /s/ Terrance M. McCarthy By: /s/ Edward D. Furman
------------------------ ---------------------
Title: President Title: Manager
------------------------ ---------------------
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
BRANCH LOCATIONS - CALIFORNIA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BR. # BRANCH BANK HOURS TYPE ATM MISC. INFO.
- ---------------------------------------------------------------------------------------------------------------------------
-------------------------
CAMPBELL Lobby: Walk-Up Campbell Ave. at
419 First Bank of California Mon.-Thurs. 9am-5pm Union Ave.
790 E. Campbell Ave. Fri. 9am-6pm
Campbell, CA 95008 Sat. - Closed Closest Branch:
Phone: 408-558-5100 San Jose
Fax: 408-558-5118
Eric Ferenchak, Mgr. Database 10
- ---------------------------------------------------------------------------------------------------------------------------
CONCORD Lobby: Drive-Up East Street & Colpak
418 First Bank of California Mon.-Thurs. 9am-5pm Street
2395 Willow Pass Road Fri. 9am-6pm
Concord, CA 94520 Sat. - Closed Closest Branch:
Phone: 925-689-9100 Walnut Creek
Fax: 925-689-2934
Russell Clune, Mgr. Database 10
- ---------------------------------------------------------------------------------------------------------------------------
DOUGLAS Lobby & Drive-Up: Drive-Up Douglas & Santa Clara
417 First Bank of California Mon.-Thurs. 9am-5pm
1625 Douglas Blvd. Fri. 9am-6pm Closest Branch:
Roseville, CA 95661 Sat. 9am-1pm Vernon
Phone: 916-782-5561
Fax: 916-782-5539 Database 10
Janette Moynier, Mgr.
- ---------------------------------------------------------------------------------------------------------------------------
FAIRFIELD Lobby: Walk-Up Hillborn & Waterman
430 First Bank of California Mon.-Thurs. 9am-5pm
2407 Waterman Blvd. Fri. 9am-6pm Closest Branch:
Fairfield, CA 94533 Sat. 9am-1pm Vallejo
Phone: 707-421-0390
Fax: 707-427-0958 Database 10
Jeanne Twitchell, Mgr.
- ---------------------------------------------------------------------------------------------------------------------------
HOWE Lobby: Walk-Up Northrop & Howe Ave.
415 First Bank of California Mon.-Fri. 9am-5pm
865 Howe Ave. Sat. - Closed Closest Branch:
Sacramento, CA 95825 Vernon
Phone: 916-924-1778
Fax: 916-641-2830 Database 10
Margie Inderbitzen, Mgr.
- ---------------------------------------------------------------------------------------------------------------------------
RANCHO CORDOVA Lobby: Walk-Up Sunrise & Sun Center
425 First Bank of California Mon.-Thurs. 9am-5pm So. Hwy. 50
2880 Sunrise Blvd., Suite 100 Fri. 9am-6pm
Rancho Cordova, CA 95742 Sat. - Closed Closest Branch:
Phone: 916-635-4553 Douglas
Fax: 916-635-5219
Cassidy Crist, Supervisor Database 10
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SAN FRANCISCO Lobby: Walk-Up 20th & Taraval Street
420 First Bank of California Mon.-Thurs. 9am-4pm
1000 Taraval Street Fri. 9am-6pm; Sat. Closed Closest Branch:
San Francisco, CA 94116 Drive-Up: San Pablo
Phone: 415-661-7070 Mon.-Fri. 8:30am-5pm
Fax: 415-665-3008 Sat. - Closed Database 10
Roseanna Hughes, Mgr.
- ---------------------------------------------------------------------------------------------------------------------------
SAN PABLO Lobby: Walk-Up Church Lane & San
431 First Bank of California Mon.-Thurs. 9am-5pm Pablo Avenue
13830-A San Pablo Ave. Fri. 9am-6pm
San Pablo, CA 94806 Sat. - Closed Closest Branch:
Phone: 510-215-3355 Vallejo
Fax: 510-237-0678
Ken Knudsen, Mgr. Database 10
- ---------------------------------------------------------------------------------------------------------------------------
VALLEJO Lobby: Walk-Up Springs Road and
429 First Bank of California Mon.-Thurs. 9am-5pm Oakwood
116 Springstowne Center Fri. 9am-6pm
Vallejo, CA 94591 Sat. 9am-1pm Closest Branch:
Phone: 707-554-0390 Fairfield
Fax: 707-554-9876
Michael Goodnight, Mgr. Database 10
- ---------------------------------------------------------------------------------------------------------------------------
VERNON Lobby: Walk-Up Lincoln Street
416 First Bank of California Mon.-Thurs. 9am-5pm
201 Vernon Street Fri. 9am-6pm Closest Branch:
Roseville, CA 95678 Sat. Closed Howe
Phone: 916-783-1267
Fax: 916-781-2302 Database 10
Dianne Hall, Mgr.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT B
First Brokerage L.L.C.
Rental Calculation by Charter
<TABLE>
<CAPTION>
Company # Square Feet Number of Average Charter Monthly
Occupied Dedicated Rate per month rent paid to
Per Rep. Reps. Charter
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Bank of 998 75 1 $ 2.25 $ 168.75
California
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Assumptions:
- -Each brokerage representative occupies the equivalent of one desk.
- -Unoccupied desks can be used by the branches for activities other than taking
deposits.
- -Desks occupied by the Reps. take up 75 square feet of space in the branches.
- -The "Average Charter Rate" is an estimated average rental rate for all the
branches in the charter.
<PAGE>
Exhibit B
VARIABLE SERVICES PAYMENT
Variable Services Payment: FBAL agrees to pay to each designated Branch Office
each month the Variable Services Payment pursuant to the number of sales of
Products achieved in accordance with the calculation appearing on Table 1,
attached hereto.
FI will absorb MCIF Fees incurred by FBAL associated with the tracking, data
preparation and reporting in proportion to the asset size of the charter.
<PAGE>
TABLE 1
$59 (per representative per location)
plus
$15 (per representative per location) multiplied by the number of sales of
Products
<PAGE>
Exhibit 10(z)
SERVICE AGREEMENT
THIS SERVICE AGREEMENT ("Agreement") is made and entered into this 1st
day of July, 1999, by and between First Bank of California (hereinafter called
"Institution"), a financial institution organized under the laws of the State of
California, First Brokerage America L.L.C., a Nevada limited liability company
and registered broker/dealer member of the National Association of Securities
Dealers ("NASD") and the Securities Investor Protection Corporation ("SIPC")
(hereinafter called "B/D"; Institution and B/D are collectively referred to
herein as "Affiliates" when services are to be provided by both) and BTI
Insurance Agency, Inc., d/b/a BTI Coastal Insurance Agency, Inc., a corporation
organized and existing under the laws of Texas (hereinafter called "Agency").
WHEREAS, Agency is empowered to engage in the solicitation of,
negotiation for, procurement of and collection of premiums on insurance and
annuity contracts issued by legal reserve life insurance companies authorized to
transact business in the State of California; and
WHEREAS, Agency is licensed by the California State Board of Insurance
to engage in the authorized business as a legal reserve life insurance agent in
California under lawful appointment by one or more duly licensed life insurance
companies; and
WHEREAS, Institution desires for Agency to make available a broad range
of tax deferred insurance and annuity products to its customers within the
limits of applicable statutory and regulatory restrictions; and
WHEREAS, Agency desires to provide Institution's customers with such
insurance and annuity products through individually licensed agents of Agency;
and
WHEREAS, B/D leases office space on a non-exclusive basis at
Institution and has a business relationship with Agency for the offering of
variable annuities; and
WHEREAS, B/D desires to provide and Agency desires to receive general
support for the marketing and sales of such insurance and annuity products on
subleased premises at one or more locations of Institution pursuant to that
certain Sublease dated July 1, 1999 by and between B/D and Agency ("Sublease");
and
WHEREAS, Institution and B/D are affiliates through common ownership or
control, and Affiliates have entered into that certain Brokerage Service
Agreement, dated as of July 1, 1999, whereby B/D offers Nondeposit Securities
Products on various Institution premises; and
WHEREAS, Institution and B/D each wish to make services available to
Agency under mutually agreeable terms and conditions as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, Institution, B/D and
Agency do hereby agree as follows:
<PAGE>
I.
Agency shall insure that each person who shall act as a life insurance
agent in the State of California for and on behalf of Agency (hereinafter called
the "Agency Representative" or "Agency Representatives") shall first become duly
licensed pursuant to the applicable requirements of the California Insurance
Code, as amended, and shall become duly appointed by each respective life
insurance company to be represented by such person. B/D shall furnish to Agency
such services and assistance as Agency may from time to time reasonably require
in connection with the training of the Agency Representatives. Institution will
allow certain of its employees (hereinafter called the "Institution Employees")
to become Agency Representatives and will allow such Institution Employees,
after becoming licensed, to market, during normal business hours,
Agency-sponsored products on Institution's premises subleased to Agency and
located in the State of California (subject to permissibility under California
law). Nothing in this Agreement shall preclude an Institution Employee from
offering and selling Institution's financial services and products. Institution
shall be responsible for supervising each Institution Employee's activities
involving the offer or sale of Institution's products and services. Institution
will allow Agency, through its Agency Representatives, access to Institution's
customers for the purpose of marketing Agency-sponsored products; and
Institution and B/D will support Agency's marketing efforts by notifying their
customers of the availability of Agency-sponsored insurance and annuity
products, through posters in Institution's offices, brochure supplies, inserts
in monthly statements, and similar activities. Institution, B/D and Agency shall
keep confidential any information not otherwise generally available to the
public which it may acquire as a result of this Agreement regarding the business
and affairs of each other and its customers.
II.
B/D shall provide, by sublease, certain undivided portions of the
office space leased by Institution to B/D as evidenced by the Sublease, attached
hereto as Exhibit A. B/D shall also furnish Agency such services as may be
reasonably necessary, including secretarial, filing, bookkeeping, clerical
assistance, and similar services through Institution personnel made available to
B/D pursuant to the Brokerage Service Agreement by and between Institution and
B/D (the "Main Service Agreement") dated July 1, 1999.
III.
B/D shall provide product review services for Agency in order to
determine that the products to be sold by Agency meet Affiliates' standards of
excellence. B/D shall also review the suitability of products sold to given
customers of Agency in light of such customers' stated investment objectives and
needs.
IV.
Agency will collect and provide safekeeping of all monies and
considerations received within the course and scope of Agency's insurance agency
business and will transmit the proper portions of such monies and considerations
to insurance companies whose policies are sold through Agency. Payments will be
made to each Agency Representative entitled to commissions or compensation, if
any, arising from the sale of insurance or annuity products, all according to
such terms and conditions as may be agreed upon in writing by Agency and such
agent and as required by applicable state law. Nothing contained in this
paragraph permits any person to engage in the act of selling or offering for
sale any insurance product without first securing an applicable license for that
purpose.
<PAGE>
V.
Affiliates shall assist Agency in the preparation and maintenance of
any reports and miscellaneous correspondence as Agency may reasonably require or
request in order to enable its Agency Representatives to comply with all
applicable requirements of any governmental entity or authority having
jurisdiction over Agency's insurance agency business. Agency agrees to permit
personnel from regulatory authorities, including regulatory authorities having
jurisdiction over the affairs of Institution or of B/D, reasonable access to its
offices to make audits and examinations of records pertaining to Agency
activities on the subleased premises.
VI.
As consideration for Institution's performance of the services and
furnishing of the facilities described in this Agreement, Agency agrees to pay
at the location of B/D designated by B/D immediately without demand or notice by
B/D an amount equal to seventy percent (70%) of Gross Commissions per month per
location, less the amount of $50.00. For purposes of this Agreement, "Gross
Commissions" shall be equal to the gross commissions received by, or discounts
or concessions allowed to, Agency and shall include any charge or fee due to
Agency from issuers of Products that are paid to any Agent, net of clearing
costs, if any; provided, however, that Gross Commissions shall not include any
sum until actually received by Agency. Any chargebacks, or errors caused wholly
as a result of the acts of any Agent will reduce the amount accordingly. Gross
Commissions shall not include due diligence points, wholesaling commissions,
non-accountable fees or reimbursements, or any commission not directly stated as
subject to customary direct offsets, including, but not limited to, direct
offsets for errors, settlements with clients and trade adjustments. All service
fees shall be payable no later than the first day of the second month subsequent
to the month during which B/D provides the above-described support activities.
It is expressly agreed and understood by and between Agency and B/D that no part
of the service fees payable under this Agreement shall constitute, directly or
indirectly, payment to Institution of any compensation, remuneration or other
valuable consideration for services as a life insurance agent.
VII.
Agency, B/D and Institution agree to cooperate fully with each other
with respect to any governmental investigation or administrative or judicial
proceeding and in connection with any customer complaint with respect to the
transaction of insurance and annuity business by Agency or by any of its Agency
Representatives. Each party shall consult with the other party before responding
to any such investigation, administrative or judicial proceeding or customer
complaint, and each party shall keep the other fully advised as to the status
thereof.
VIII.
B/D shall assist Agency in its compliance with all applicable federal
and state securities laws, state insurance laws, and all other provisions of
law, including federal, state, county, and city laws, ordinances, and
regulations, building codes, and other governmental or municipal regulations
which relate to the occupancy and use of the subleased premises, including,
without limitation, the applicable provisions and requirements of the
Interagency Statement on Retail Sales of Nondeposit Investment Products
published by the Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, the Office of Comptroller of the Currency and the
Office of Thrift Supervision dated February 15, 1994, as such statement may be
amended from time to time. Agency shall, however, be ultimately responsible for
such compliance.
<PAGE>
IX.
Agency shall not prepare or publish any advertising or solicitation
material of any kind whatsoever containing any reference of any kind to B/D,
Institution or any person or company affiliated with B/D or Institution, or use
or refer to the name of B/D, Institution or any affiliate of either, in
connection with the solicitation or sale of insurance or annuity products,
unless the prior written consent of B/D or Institution, as applicable, is
obtained. B/D and Institution shall, prior to use, obtain the prior written
approval of Agency in connection with the use of any and all advertising, sales
literature and other sales materials that reference any insurance or annuity
product distributed or sponsored by Agency. B/D shall provide Agency with such
technical and marketing assistance as Agency shall reasonably require or request
in connection with the preparation of advertising and the dissemination thereof,
but it shall be the duty of Agency to secure the approval of each insurance
company and governmental or regulatory authority from whom approval is required
prior to the use of such advertising. Agency understands that all documents,
records, lists or other information relating to customers of Institution are the
proprietary property of Institution and shall not be used for any purpose other
than as contemplated by this Agreement.
X.
Institution shall use its best efforts to cause its customers to be
aware of the existence of Agency on Institution's subleased premises and to make
appropriate referrals of its customers to Agency, as permitted under applicable
state law. Agency shall cooperate fully with Institution in the rendition of
Agency's services hereunder and shall provide and furnish Institution with such
information as may be reasonably required by Institution in connection
therewith. Agency, B/D and Institution hereby agree to protect, indemnify, and
hold and save harmless each from the other, to include all agents, servants and
employees of each, against any and all claims, costs, losses, damages, and
liability incurred by either of them as a result of the breach or violation of
any of the terms of this Agreement by the other, or because of any
misrepresentation, negligence or other misdeed by the other in dealing with all
third parties.
XI.
Any provision of this Agreement to the contrary notwithstanding,
Institution and Agency agree that the Agency Representatives shall be
independent contractors with Agency and no Institution Employee shall be deemed
to be an employee of Agency for any purpose whatsoever. No Institution Employee
shall be entitled to receive any remuneration or other compensation from Agency
or any insurance company in connection with the sale of any insurance or annuity
product by such Institution Employee or such Institution Employee's services as
an Agency Representative hereunder, except for commissions to be paid the Agency
Representative as set forth in Paragraph V hereof.
XII.
This Agreement may be terminated by any party hereto with or without
cause, upon thirty (30) days written notice by certified mail to the other party
at the address respectively set forth in Paragraph XVI, or if such address be
insufficient to permit delivery of notice, then such notice may be mailed to the
party's last known address. Either party may automatically terminate this
Agreement upon the happening of any one, or more, of the following events:
(i) Any party making an assignment for the benefit of its creditors;
(ii) The levying on or against any party's property of a writ of
execution or attachment that is not released or discharged within
thirty (30) days;
<PAGE>
(iii) The institution in a court of competent jurisdiction of
proceedings for the reorganization, liquidation, or involuntary
dissolution of any party, or for its adjudication as a bankrupt or
insolvent, or for the appointment of a receiver of any party's
property, if the proceedings are not dismissed, and any receiver,
trustee, or liquidator appointed therein is not discharged within
thirty (30) days after the proceedings are instituted;
(iv) The management of any party's affairs being assumed by any
governmental, regulatory or judicial authority, or if the sale of the
products covered by this Agreement is prohibited by any regulatory
authority having jurisdiction over any party;
(v) Agency's doing or permitting to be done any act that creates a
mechanics' lien or claim against the land or building of which the
premises are a part that is not released or otherwise provided for by
indemnification satisfactory to B/D within thirty (30) days;
(vi) Agency's failing to pay any service fee installment, or other
charge or money obligation required by this Agreement, within ten (10)
days after written notice, or to perform any other covenant under this
Agreement within thirty (30) days after written notice; and
(vii) Agency's deserting or vacating any substantial portion of the
premises for five or more consecutive days.
XIII.
Except for the Main Lease, the Brokerage Service Agreement and the
Sublease, this Agreement constitutes the entire Agreement and understanding
between the parties hereto with respect to the subject matter hereof. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective subsidiaries,
affiliates, successors and assigns of the parties hereto. Neither this Agreement
nor any of the rights, obligations or liabilities of either party hereunder
shall be assigned without the prior written consent of the other party hereto,
which consent shall not be unreasonably withheld. The assigning party will
remain liable for each obligation under this Agreement until the assignee
assumes all obligations under this Agreement. For the duration of this Agreement
and for twenty four (24) months after its termination, Institution agrees that
it will not promote, recommend or consult or in any manner encourage the
termination, surrender, or cancellation of any insurance or annuity contracts
sold by Agency Representatives. However, the foregoing shall not prevent
Institution from promoting, recommending, consulting regarding, or encouraging
the termination of an insurance or annuity contract sold by Agency
Representatives if Institution reasonably believed such action to be in the best
interest of its customer considering all financial factors including termination
penalties. Institution acknowledges that replacement of a contract sold
hereunder may be subject to all applicable laws and regulations, including the
filing by a licensed agency of appropriate replacement forms and reports with
state insurance departments as required.
XIV.
This Agreement shall be interpreted, construed and enforced in
accordance with the laws of the State of California. If any provision of this
Agreement shall be held invalid or unenforceable by a court or tribunal of
competent jurisdiction, the remainder shall not be affected thereby, but shall
have the same force and effect as if the invalid or unenforceable provision had
not been inserted. This Agreement constitutes the sole agreement of the parties
and supersedes any prior understandings or written or oral agreements between
the parties respecting the subject matter. If any action at law or in equity,
including an action for declaratory relief, is brought to enforce or interpret
this Agreement, the prevailing party is entitled to recover reasonable
attorney's fees from the other. The fees may be set by the court in the trial of
the action or may be enforced in a separate action for that purpose, and the
fees will be in addition to any other relief that may be awarded. The parties
declare that it is impossible to measure in money the damages that will accrue
<PAGE>
to either party, their heirs, executors, administrators, legal representatives,
successors, or assigns by reason of a failure to perform any of the obligations
under this agreement. Therefore, if a party, its heirs, executors,
administrators, legal representatives, successors, or assigns institute any
action or proceeding to enforce this sublease, any person against whom the
action or proceedings are brought agrees that specific performance may be sought
and obtained for any breach of this Agreement. This Agreement and all other
copies of it, insofar as they relate to the rights, duties, and remedies of the
parties, will be considered one agreement. This Agreement may be executed
concurrently in one or more counterparts, each of which will be considered an
original, but all of which together will constitute one instrument. Time is of
the essence in this Agreement.
XV.
Unless this Agreement provides otherwise, any notice, tender, or
delivery to be given by either party to the other may be effected by personal
delivery in writing or by registered or certified mail, postage prepaid, return
receipt requested, (i) if to Agency at 5555 San Felipe, 5th Floor, Houston, TX
77056, or (ii) if to Institution at 1625 Douglas Blvd., Roseville, CA 95661 or
(iii) if to B/D at 11901 Olive Blvd., Creve Coeur, MO 63141. Such notices will
be considered received as of mailing.
<PAGE>
IN WITNESS HEREOF, the undersigned parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the date first
above written.
Agency
By: /s/ David B. Frank
Name: David B. Frank
----------------------
Title: President
----------------------
Institution
By: /s/ Terrance M. McCarthy
-------------------------
Name:Terrance M. McCarthy
-------------------------
Title: President
-------------------------
B/D
By: /s/ Edward D. Furman
-----------------------
Name:Edward D. Furman
-----------------------
Title:Manager
-----------------------
<PAGE>
EXHIBIT A
SUBLEASE
<PAGE>
SUBLEASE
THIS SUBLEASE ("Sublease") is entered into as of this 1st day of July,
1999 by and between FIRST BROKERAGE AMERICA LLC ("Sublessor") and BTI
INSURANCE AGENCY, INC. d/b/a BTI Coastal Insurance Agency, Inc. ("Sublessee").
A. Sublessor is the lessee under that certain lease dated July 1, 1999
(the "Master Sublease"), pursuant to which Sublessor leases certain premises
described in Exhibit A attached hereto (the "Premises") from First Bank of
California, headquartered in Roseville, California (the "Master Lessor").
B. Sublessee desires to sublease from Sublessor that certain undivided
portion of the Premises described in Exhibit B attached hereto, together with
furniture, fixtures, equipment, office supplies and other items Sublessee may
require in its insurance and annuity business (the "Subleased Premises") upon
the terms and subject to conditions set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. Demise. Sublessor hereby leases, lets and demises unto Sublessee, and
Sublessee hereby leases and rents from Sublessor, upon the terms, covenants and
conditions herein contained, the Subleased Premises.
2. Term. The term of this Sublease (the "Term") shall commence on July 1, 1999
(the "Commencement Date") and continue until July 1, 2000, unless earlier
terminated as provided herein.
3. Rent. Sublessee shall pay, as rent hereunder, to Sublessor, at 11901 Olive
Blvd., Creve Coeur, Missouri 63141, or to such other person or at such other
address as Sublessor may from time to time hereafter designate by notice to
Sublessee, without demand and without set-off or deduction whatsoever, rent in
an amount equal to $50.00 per month per branch location of Master Lessor. It is
the intention of the parties that this Sublease be a "gross" Sublease, and that
Sublessee shall not be obligated to make any payment to Sublessor other than
Rent. Without limiting the generality of the foregoing, Sublessee shall not be
obligated to pay any premiums for insurance, to pay any real property taxes, or
to pay any common area maintenance charges, percentage rent or any other amounts
which may be payable by Sublessor to the Master Lessor under the Master Lease.
4. Master Lease. This Sublease is subject to all of the terms, covenants and
conditions of the Master Lease. Sublessee agrees that it will not take any
actions which constitute a breach or default under the Master Lease. As long as
Sublessee performs its obligations under this Sublease, including but not
limited to the payment of Rent, Sublessor will pay all rent and other sums due
and payable to the Master Lessor under the Master Lease, and will not take any
actions which constitute a breach or default under the Master Lease, and will
not take any actions which constitute a breach or default under the Master
Lease. To the extent that the consent of the Master Lessor shall also be
required for the performance of any acts by Sublessor under the Master Lease,
the consent of Sublessor shall also be required for the performance of such acts
by Sublessee under this Sublease, and such consent shall also be conditioned
upon receipt of the consent of the Master Lessor.
5. Use. Sublessee may only use the Subleased Premises for the purposes of
providing insurance agent and brokerage services.
6. Utilities, Services and Maintenance; Personal Property.
a) Utilities (HVAC, water, sewer, electricity,
telephone and other utilities required for the transaction of insurance
business contemplated by this Sublease), services (janitorial, heat and air
conditioning) and maintenance will be provided by the Master Lessor.
<PAGE>
b) Throughout the Term of this Sublease,
Sublessee shall have the right to use, without charge, certain furniture,
fixtures and equipment, including but not limited to telephone and computer
systems (collectively, "FF&E"), which are owned by Master Lessor. All such FF&E
is leased in its "as-is" condition, without representation or warranty by
Sublessor as to physical condition or fitness for Sublessee's intended use.
7. Quiet Enjoyment; Access. Subject to the provisions of this Sublease and the
Master Lease, as long as Sublessee is not in default hereunder, Sublessee shall
have and enjoy the quiet enjoyment of Subleased Premises. Sublessee shall also
have the right to use the "common areas" of the Premises for ingress and egress
to the Subleased Premises. Notwithstanding the foregoing, upon reasonable prior
notice (except in the case of an emergency) and during business hours, Sublessor
and Sublessor's agents or representatives may inspect the Subleased Premises for
the purpose of making audits and examinations of records pertaining to
Sublessee's activities at the Subleased Premises.
8. Indemnification and Release. Sublessee agrees to defend, indemnify and hold
harmless Sublessor from any and all claims, demands, expenses, actions, causes
of action, and other liabilities, including attorneys' fees and costs, which
arise in connection with Sublessee's use or occupancy of the Subleased Premises.
Sublease hereby releases Sublessor from all liability for damages from any cause
whatsoever which Sublessee may incur in connection with the use or occupancy of
the Subleased Premises, except for acts involving willful misconduct or gross
negligence of Sublessor or its employees or agents.
9. Sublessor Warranty. Sublessor warrants and represents to Sublessee that the
Master Lease has not been amended or modified except as disclosed in writing to
Sublessee, that Sublessor is not now, and as of the commencement of the Term
hereof will not be, in default or breach of any of the provisions of the Master
Lease, and that the Master Lessor is not now, and as of the commencement of the
Term will not be, in default or breach of any of the provisions of the Master
Lease.
10. Termination; Default.
10.1 This Sublease may be terminated by either party hereto, with or without
cause, for any reason or no reason, upon thirty (30) days written notice to the
other party.
10.2 Without limiting the foregoing, either party may terminate this Sublease
immediately upon notice to the other party upon the occurrence of any of the
following events by the other party:
(i) an assignment by such party for the benefit
of its creditors;
(ii) the levying on or against such party's
property of a writ of execution or attachment that is not released or discharged
within thirty (30) days;
(iii) such party's breach or default under the
Services Agreement between Sublessor and Sublessee, which
breach remains uncured after expiration of any "cure" period stated therein;
(iv) the institution in a court of competent
jurisdiction of proceeding for the reorganization, liquidation, or insolvency
dissolution of such party, or for its adjudication as a bankrupt or insolvent,
or for the appointment of a receiver of such party's property, if such
proceedings are not dismissed, and any receiver, trustee, or liquidator
appointed therein is not discharged within 30 days after the proceedings
are instituted; and
(v) the management of such party's affairs being
assumed by any governmental, regulatory or judicial authority, or if such party
is prohibited by any governmental or regulatory authority from continuing its
primary line of business
<PAGE>
10.3 Without limiting the foregoing, Sublessor may terminate this agreement
immediately upon notice to Sublessee upon the occurrence of any of the following
events:
(i) Sublessee's failure to pay Sublessor any
installment of Rent or any other fee, charge or monies due to Sublessor, within
10 days after the same shall have been due,
(ii) Sublessee's failure to perform any other
covenant under this Sublease within thirty (30) days
after written notice from Sublessor.
11. Remedies.
11.1 Upon any of the events described in Sections 10.2 or 10.3 above, Sublessor
may terminate Sublessee's right to possession of the Subleased Premises by any
lawful means, in which case this Sublease and the Term hereof shall terminate
and Sublessee shall immediately surrender possession of the Subleased Premises
to Sublessor. In such event, in addition to any other rights or remedies
Sublessor may have at law or in equity, Sublessor may (i) recover any amounts
permitted pursuant to California Civil Code Section 1951.2 or any successor
statute thereto, or (ii) exercise the remedy provided in California Civil Code
Section 1951.4 (Sublessor may continue Sublease in effect after Sublessee's
breach and abandonment and recover rent as it becomes due, if Sublessee has the
right to sublet or assign, subject to reasonable limitations).
11.2 Sublessor's failure to enforce any default or breach of covenant on the
part of Sublessee shall not be, or be construed as a waiver thereof, nor shall
any custom or practice between the parties in the course of administering this
instrument be construed to waive or lessen the right of Sublessor to insist upon
the performance by Sublessee of any term, covenant or condition hereof, or to
exercise any right given it on account of any such default. The acceptance of
Rent hereunder shall not become or be construed to become a waiver of any term,
covenant or condition of this Sublease.
12. Notices. Any notice under or relating to this Sublease shall be given in
writing and shall be deemed sufficiently given and served for all purposes when
personally delivered or given by telex or machine-confirmed facsimile or three
business days after a writing is deposited in the United States mail, first
class postage or other charges prepaid and registered, return receipt requested,
addressed as follows:
If to Sublessor: First Brokerage America, L.L.C.
Attn: Edward D. Furman, Manager
11901 Olive Blvd.
Creve Coeur, Missouri 63141
Fax No.: (314) 995-8781
If to Sublessee: BTI Insurance Agency, Inc.
Attn: David B. Frank, President
450 Gears Suite 770
Houston TX 77067
Fax No.: (281) 953-4143
13. Entire Agreement. Except for that certain Service Agreement dated July 1,
1999, ("Service Agreement") this Sublease is and shall be considered to be the
only agreement between the parties hereto with respect to the subject matter
hereof. All negotiations and agreements with respect to the subject matter of
this Sublease have been merged herein and in the Service Agreement and are
included herein or therein. There are no other representations or warranties
between the parties and all reliance with respect to representations are
contained in this Sublease or the Service Agreement.
<PAGE>
14. Consent to Sublease by the Master Lessor. It is understood and agreed
between Sublessor and Sublessee that this Sublease is subject to receipt of the
written consent of Master Lessor.
15. Construction. This Agreement has been executed in and is to be performed in
the State of California, and this Agreement shall be interpreted in accordance
with the laws of the State of California.
16. Amendments. This Agreement may not be amended, modified or altered except by
a written instrument executed by all parties hereto.
17. Gender; Number. As used herein, the masculine, feminine or neuter gender,
and the singular or plural number, shall each be deemed to include the others
whenever the context so indicates.
18. Counterparts. This Agreement may be executed in one (1) or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one (1) and the same instrument.
19. Waiver. The failure of any party, at any time, to require timely performance
by any other party of any provision of this Agreement shall not affect such
party's rights thereafter to enforce the same, nor shall the waiver by any party
of any breach of any provision of this Agreement, whether or not agreed to in
writing, be taken or held to be a waiver of the breach of any other provision or
a waiver of any subsequent breach of the same provision of this Agreement. No
extension of time for the performance of any obligation or act hereunder shall
be deemed to be an extension of time for the performance of any other obligation
or act hereunder.
20. Additional Acts. The parties agree to perform such further acts and to
execute, acknowledge and deliver such documents as may be necessary to
effectuate the provisions of this Agreement.
IN WITNESS WHEREOF the undersigned have duly executed this
Agreement on the day and year first above set forth.
"Sublessor"
FIRST BROKERAGE AMERICA, L.L.C.
/s/ Edward D. Furman
- -------------------------------------------
By: Edward D. Furman
Its: Manager
"Sublessee"
BTI INSURANCE AGENCY, INC.
d/b/a BTI COASTAL INSURANCE AGENCY, INC.
/s/ David B. Frank
- -------------------------------------------
By: David B. Frank
Its: President
<PAGE>
Exhibit B
CONSENT OF MASTER LESSOR
------------------------
The undersigned, lessor ("Master Lessor") under the above-referenced
Master Lease, hereby consents to the attached Sublease, on the terms and
conditions set forth above, provided that the granting of such consent shall not
constitute a consent to any subsequent sublease of the Subleased Premises.
Master Lessor agrees that if the Sublease shall be terminated, canceled
or surrendered prior to the end of the Term of the attached Sublease,
Sublessee's possession of the Subleased Premises under the Sublease or Sublease
shall not be disturbed or interfered with by Master Lessor in the exercise of
any of its rights under the Sublease and all of the terms and conditions set
forth in the attached Sublease shall continue in full force and effect between
Master Lessor and Sublessee as though said Sublease were originally made and
entered into between Master Lessor and Sublessee.
"Master Lessor"
FIRST BANK OF CALIFORNIA
/s/ Terrance M. McCarthy
- ------------------------
By: Terrance M. McCarthy
- ------------------------
Its: President
- ------------------------
<PAGE>
Exhibit 10(aa)
Brokerage Service Agreement
[Texas Version]
This Brokerage Service Agreement (this "Agreement") is made and entered into
this 1st day of July, 1999, by and between First Bank TEXAS, N.A. ("FI"), a
financial institution organized under the banking laws of the State of Texas,
and First Brokerage America, L.L.C. ("FBAL"), a Nevada limited liability company
and registered broker/dealer member of the National Association of Securities
Dealers ("NASD") and the Securities Investor Protection Corporation ("SIPC").
WITNESSETH:
WHEREAS, FBAL has developed a program to provide customers of banks affiliated
with First Banks, Inc., a Missouri corporation and bank holding company ("First
Banks"), access to Products (defined herein), on such terms and conditions as
set forth herein; and
WHEREAS, FBAL is a registered broker/dealer ("Broker/Dealer") in the business of
providing Nondeposit Investment Products ("NIP") at various banking locations of
banks affiliated with FI or First Banks; and
WHEREAS, FI has reviewed the reputation and business practices of FBAL prior to
entering into this Agreement; and
WHEREAS, FI desires to have FBAL make itself available to execute orders to
purchase and sell NIP for customers of FI; and
WHEREAS, the parties desire to establish a NIP program (the "Program") that
complies with all applicable laws and regulations and in accordance with the
terms of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements made
herein and other good and valuable consideration, FBAL and FI hereby agree as
follows:
SECTION 1. LEASE AND SERVICE PROGRAM DESCRIPTION AND
----------------------------------------------------
PRODUCTS
--------
(a) FI will lease space (the exact nature, size, and location to be
agreed upon by FI and FBAL) to FBAL at FI's main office and one or more
of its branch office locations (each location being a "Branch
Office"), in accordance with that certain Lease Agreement, attached
hereto and incorporated herein by reference for all purposes as
Exhibit A . In addition to office space, FI shall provide to FBAL desks
and other office furniture, copiers, fax machines and other office
equipment, computer maintenance, software and hardware support,
tracking services, customer lists (as permitted by applicable law),
paper supplies, lights, modem lines, custodial fees, and all other
incidental costs related to the conduct of the business or services
necessary to offer Products at the locations of FI. FI shall also
provide telephones and telephone lines (any direct lines will be
answered with FBAL's name). FI may provide occasional administrative
or clerical support as requested by FBAL and if agreed to by FI. The
Products offered will be through FBAL on a fully-disclosed basis.
(b) Customers of FI will be offered the Products through FBAL at each
Branch Office. FBAL will make available and execute transactions of
Products on an agency or riskless principal basis upon the order and
for the account of customers as defined in and required by the NASD
Rules of Fair Practice, through Registered Representatives (as
described in Section 2(b), below) for the following: equity securities,
<PAGE>
debt securities, open-end/closed end mutual funds and fixed annuities
and variable insurance products (collectively, the "Securities
Products"). Each such Registered Representative shall be subject to the
continuing approval of FI and may be terminated by management of FI if
the Registered Representative is not qualified to be associated with
the Program as required by this Agreement.
(c) All the Products offered through the Program are subject to the prior
approval of FI and FBAL. FBAL shall recommend and advise FI on the
selection of Products that will be available for sale at each Branch
Office, which Products shall be subject to the continuing approval of
FI.
(d) Any amendments to this Agreement to maintain compliance with any and
all applicable rules, regulations and statutes ("Applicable Law") shall
be deemed made automatically, without any action required of any party
hereto, on the date of enactment.
(e) Travel costs and other fees generated solely for the benefit of FI will
be reimbursed by FI to FBAL. This shall include airfare, hotels and
meals, but shall not include printing and other such costs that are the
obligation of FBAL to provide so that business can be conducted.
SECTION 2: BRANCH OFFICE DESIGNATION
------------------------------------
(a) FBAL will advise and assist regarding the placement and setup of each
FBAL Branch Office on FI premises. The Program will operate at all
mutually agreeable offices of FI. To comply with applicable securities
laws and regulations, Branch Office premises shall (i) be held out as
a place where securities business is transacted and (ii) meet the
most conservative definition of a "branch office" as defined in Rule
3010(g)(2) of NASD Manual--Conduct Rules. FBAL and FI shall maintain
strict and total separation of their respective businesses, including
separation of records and physical facilities, and shall conduct their
respective businesses at all times so as not to lead to confusion
between the business conducted by FI and the business conducted by
FBAL. Any space used by FBAL within an FI branch pursuant to the Lease
Agreement should be located in an area which is physically distinct
from the area where retail deposits are taken, and FBAL shall
prominently display its name and logo in such space.
(b) Securities-related activities shall be conducted solely through
individuals who shall be properly registered representatives (the
"Registered Representatives") of FBAL in its Broker/Dealer capacity.
These individuals may also be dual employees of FI and shall be
licensed agents ("Agents") of FBAL in its Agency capacity. Designated
principals of FBAL management will exclusively supervise all sales
activities under NASD rules and will train, supervise, control and
assume responsibility for all the activities contemplated herein.
Registered Representatives shall provide all securities services as
directed by that certain FBAL Supervisory Procedures Manual. No one who
has been barred from membership in any Self Regulatory Organization
("SRO") shall be allowed to associate with the Program.
(c) FBAL and FI agree that all sums due and owing FI under this Agreement
shall originate with the sales of Products by FBAL. FBAL will, in turn,
be responsible for distribution of the amounts due each Registered
Representative, provided that such Registered Representative is being
compensated for activities conducted in accordance herewith, and
provided further that the Registered Representative is properly
licensed to conduct the activity. FBAL will be responsible for payment
of all non-securities and non-insurance related wages, including any
withholding or other taxes required by Applicable Law.
Compensation will be paid to FI in accordance with Section 3, below.
(d) FI and FBAL agree and acknowledge that no unregistered or non-licensed
employees will engage in any securities activities, nor will they
receive any compensation based on transactions or sales. Unregistered
employees shall be prohibited from (i) recommending any Products or
(ii) handling any question that might require any familiarity with the
securities industry. The same employees may not handle or maintain
customer securities or funds other than providing clerical or
ministerial assistance. FI and FBAL will monitor the activities of
<PAGE>
their respective employees to ensure their compliance with the
limitations as set forth in this Agreement. FI understands that dual
employees must comply fully with the terms of this Agreement and any
employment agreements when acting in a capacity as a FI employee or a
NIP provider.
(e) FI and FBAL will mutually agree to a marketing plan and budget. It
will be mutually determined who will bear the cost of such marketing
plans. All marketing relating to the offering of Products shall comply
with Applicable Law. FI agrees and understands that it may not
advertise or communicate with the public in or through any medium
without prior written approval of FBAL. The parties may agree from time
to time on advertising and promoting the advice and services of
FBAL through (i) promotional literature mailed to current FI
customers and others, (ii) newspaper and other media advertisements,
(iii) seminars and (iv) other approaches. Any such advertisements
and promotions shall contain conspicuous and easy to comprehend
disclosures concerning the nature of and risks associated with
nondeposit investment products, including the Products, all in
compliance with the Interagency Statement (defined in Section 6(a)
below). The costs of all such marketing shall be shared by the parties
as they may agree. Each party must obtain prior written permission
from the other party before distributing any advertisement or
promotional material of any kind that refers to the other party or the
advice and services available from it.
SECTION 3: COMPENSATION TO FI
-----------------------------
(a) Consideration shall be payable by FBAL to FI on the 15th day of each
month at the applicable office of FI in the form of payment (the
"Variable Services Payment") equal to the calculation described on
Exhibit B and Table 1, each of which are attached hereto. In no event
shall the Variable Services Payment due to FI in connection with the
Insurance Products constitute the payment of compensation for services
of a broker/dealer or insurance agent. The Variable Services Payment is
in consideration for the services described in Section 1(a).
(b) FBAL shall prepare for FI a written statement for delivery to FI by the
1st and 15th day of each month, showing in reasonable detail the amount
of all such Gross Commissions received by FBAL during the prior
accounting period and the amount of the Variable Services Payment due
FI. Each report prepared on the 15th shall be accompanied by payment in
full of such total amount due FI for the prior month.
(c) FBAL and FI shall not structure the compensation of Registered
Representatives in such a way as to result in unsuitable
recommendations or sales being made to customers.
(d) FI's employees or tellers who participate in referral programs that
include compensation features shall not be compensated based on whether
or not such referrals result in the sale of Products to the referred
party. No referral fees shall be paid by FBAL.
(e) FI's employees who perform compliance and/or audit functions in
connection with FBAL's sale of Products pursuant to the terms of this
Agreement shall not receive incentive compensation which is directly
related to the sale of such Products.
SECTION 4: CUSTOMER ACCOUNTS
----------------------------
(a) A designated principal of FBAL must approve in writing each account to
be opened by a Registered Representative. Each Registered
Representative will promptly forward all appropriate information
regarding each new account to FBAL's Service Center, presently at 11901
Olive Blvd., Creve Coeur, MO 63141.
(b) At the time the customer account is opened, a Registered Representative
shall disclose, both orally (including telemarketing contacts) and in
writing to each customer, that the Products: (a) are NOT FDIC insured;
(b) are neither obligations of FI or FBAL nor deposits of FI or FBAL;
<PAGE>
(c) are not guaranteed by FI, their parent companies or FBAL; and (d)
involve investment risk including the possible loss of principal
(collectively the "Required Disclosures"). Written acknowledgment of
the customer's receipt of the Required Disclosures presented must be
obtained when the customer account is opened.
(c) All general securities transactions shall be effected on a
fully-disclosed basis through clearing brokers designated by FBAL. No
customer funds or securities shall be held at a Branch Office or by the
Registered Representative.
(d) FI agrees to provide FBAL reasonable access to the names and addresses
of its customers and its parent or affiliates to the extent permissible
under Applicable Law. Any information obtained will be used only in
conjunction with the marketing of FBAL services and shall remain
confidential and shall not be disclosed to third parties without prior
written permission of the other party or as may be required by
Applicable Law. Any books and records relating to the sale of
securities and insurance securities shall remain the property of FBAL,
and FBAL shall ensure that those books and records comply with all the
statutory and regulatory requirements of the Securities and Exchange
Commission ("SEC"), state insurance departments and SROs.
SECTION 5. MUTUAL COVENANTS OF FBAL AND FI
------------------------------------------
(a) FBAL and FI covenant to each other that it is the joint responsibility
of FBAL and FI to assure that each Registered Representative shall make
the Required Disclosures (i) orally to each customer during any sales
presentation (including telemarketing contacts), (ii) orally whenever a
non-deposit investment product is presented; (iii) orally and in
writing prior to or at the time an investment account is opened, and
(iv) at other such times as may be required by Applicable Law.
(b) INDEMNIFICATION BY FI. FI AGREES TO INDEMNIFY FBAL FOR ANY
AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES), OR
DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER THAT MAY BE IMPOSED
ON, INCURRED BY OR ASSERTED AGAINST FBAL BY ANY PARTY, IN ANY WAY
RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR ANY ACTION TAKEN OR OMITTED BY THE FBAL UNDER
THIS AGREEMENT (INCLUDING ANY OF THE FOREGOING ARISING FROM THE
NEGLIGENCE OF FBAL); PROVIDED THAT NO PARTY SHALL BE LIABLE FOR ANY OF
THE FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE PERSON TO BE INDEMNIFIED. WITHOUT LIMITING
ANY PROVISION OF THIS AGREEMENT, IT IS THE EXPRESS INTENTION OF THE
PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION
SHALL BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL
LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) ARISING
OUT OF OR RESULTING FROM THE NEGLIGENCE OF SUCH PERSON, WHETHER SOLE,
CONTRIBUTORY, CONCURRENT OR OTHERWISE. THE AGREEMENTS CONTAINED IN
THIS SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.
(c) INDEMNIFICATION BY FBAL. FBAL AGREES TO INDEMNIFY FI FOR ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES), OR
DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER THAT MAY BE IMPOSED
ON, INCURRED BY OR ASSERTED AGAINST FI BY ANY PARTY, IN ANY WAY
RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR ANY ACTION TAKEN OR OMITTED BY THE FI UNDER
THIS AGREEMENT (INCLUDING ANY OF THE FOREGOING ARISING FROM THE
NEGLIGENCE OF FI); PROVIDED THAT NO PARTY SHALL BE LIABLE FOR ANY OF
<PAGE>
THE FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE PERSON TO BE INDEMNIFIED. WITHOUT LIMITING
ANY PROVISION OF THIS AGREEMENT, IT IS THE EXPRESS INTENTION OF THE
PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION
SHALL BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL
LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) ARISING
OUT OF OR RESULTING FROM THE NEGLIGENCE OF SUCH PERSON, WHETHER SOLE,
CONTRIBUTORY, CONCURRENT OR OTHERWISE. THE AGREEMENTS CONTAINED IN
THIS SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.
SECTION 6. COMPLIANCE
---------------------
(a) FI and FBAL acknowledge their respective obligation to comply
with Applicable Law and specifically reference the Securities and
Exchange Commission ("SEC"), the NASD, and the provisions of the
Interagency Statement on Retail Sales of Nondeposit Investment
Products published by the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation, the Office of
Comptroller of the Currency and the Office of Thrift Supervision dated
February 15, 1994, as such statement may be amended from time to time
(the "Interagency Statement") and state insurance regulatory
authorities. FI further agrees to comply with the provisions of FBAL's
policies and practices guides, as such guides may be modified from
time to time ("FBAL's Guides"), to the extent such procedures and
policies relate to FI, current copies of which FBAL has provided or
will provide to FI. FBAL's and FI's duties and obligations pursuant to
the Interagency Statement, FBAL's Guides and FI's compliance manual
shall include, but not be limited to, the following:
(1) FI shall not make any loans to FBAL customers if FI has actual
knowledge that the proceeds of the loan are to be used for the
purchase of Products through FBAL.
(2) FI further acknowledges that its employees and/or insurance
agents associated with FBAL who are not Registered
Representatives shall not recommend the purchase of, or
provide detailed information on, the purchase or sale of any
Products. FI shall only inform potential customers of the
availability of the services of FBAL.
(3) FI shall institute policies and procedures reasonably
necessary to insure compliance by its employees with all
applicable governmental rules, regulations, orders and
statements, including, but not limited to, the provisions of
the Interagency Statement. In particular, FI shall issue a
written statement (the "Policy Statement") that assesses the
risks associated with the activities contemplated by this
Agreement and provides a summary of the policies and
procedures that FI has established to address these risks.
Such policies and procedures and the Policy Statement shall be
periodically reviewed, approved and adopted by the board of
directors of FI. FI shall make such Policy Statement available
to FBAL, and FBAL agrees to abide by its requirements.
(4) FBAL and FI shall each establish and maintain compliance
programs which monitor customer complaints and periodically
review customer accounts to detect and prevent abusive
practices.
(5) At each Branch Office, transactions shall be effected only by
Registered Representatives associated with FBAL who shall have
all necessary securities and insurance licenses required by
federal and state authorities to sell Products as contemplated
by this Agreement. Such persons shall undertake such
affiliation with FBAL in addition to their employment by FI.
Each dual employee shall enter into a contract with FI and
FBAL on terms acceptable to FBAL and FI setting forth the
terms of such individual's affiliation as an FBAL Registered
Representative and as an FI employee. FI shall not have any
<PAGE>
responsibility for supervision of the brokerage or insurance
activities performed by any Registered Representative or for
compliance by Registered Representatives with FBAL's
guidelines established for such dual employees.
(b) FBAL and FI agree that they will actively promote the services
contemplated herein, and all FBAL employees and Registered
Representatives shall abide by Applicable Law, and the FBAL Guides, as
each may change from time to time.
(c) All Branch Office operations shall be conducted under the joint
supervision of FBAL and FI in accordance with Applicable Law.
(d) FBAL shall be responsible for compliance with SEC, NASD, state
securities rules and regulations, and other rules or regulations of
other governmental or self-regulating bodies as may be applicable to
securities brokerages, operations, or transactions.
SECTION 7. CONFIDENTIALITY AND ACCESS TO RECORDS
------------------------------------------------
(a) FBAL agrees that all customer account information obtained by FBAL from
FI is confidential and proprietary in nature and that said information
shall not be divulged by FBAL to any third party without FI's prior
written consent. Where Applicable Law provides, customers of FI must be
given the prior opportunity to object to the sharing of confidential
information or give written consent.
(b) All information, materials, and any other documents or data associated
with the Program are confidential and proprietary in nature and shall
not be used by or disclosed to any person or entity by any of the
parties hereto or their employees except as necessary in operation of
the Program, as required by Applicable Law or as may be consented to in
writing.
(c) Each party to this Agreement shall permit officers or authorized
designees of the other parties, any governmental agency, exchange, or
association having regulatory jurisdiction over the affairs of that
party, or independent accountants retained for the purpose of
conducting an audit of the financial affairs of the requesting party,
full and complete access to inspect records and books, and monitor
activities at any Branch Office or other location of information during
normal business hours.
SECTION 8. SERVICES TO BE PROVIDED BY FBAL TO FI
------------------------------------------------
FBAL hereby agrees to provide to FI appropriate signage for the identification
of the Program on FI premises, together with hiring, training, marketing,
accounting and compliance review support as mutually agreed upon by FI and FBAL.
SECTION 9. REPRESENTATIONS
--------------------------
(a) FBAL represents and warrants to FI that (i) it is a Nevada
limited liability company, validly existing and in good standing, (ii)
the terms and provisions of this Agreement have been adopted and
approved by its members, (iii) it has or will have all governmental
licenses and permits necessary for it to carry on the activities
contemplated by this Agreement, (iv) it is not the subject of any
disciplinary or license revocation proceeding in any jurisdiction and
(v) it may enter into and perform this Agreement without violating any
contractual or other obligation owed to third parties. FBAL shall
promptly inform FI if it becomes the subject of any disciplinary or
license revocation proceeding, or if it is the subject of any
governmental order that affects its right or ability to perform its
obligations under this Agreement. These representations shall survive
the termination of this Agreement.
<PAGE>
(b) FI represents and warrants to FBAL that (i) it is a national
banking association in good standing under the laws of the United
States and the State of Texas, (ii) the terms and provisions of this
Agreement have been adopted and approved by its board of directors,
(iii) it has or will have all governmental licenses and permits
necessary for it to carry on the activities contemplated by this
Agreement, (iv) it is not the subject of any disciplinary or license
revocation proceeding in any jurisdiction, and (v) it may enter into
and perform this Agreement without violating any contractual or other
obligation it has to anyone else. FI shall promptly inform FBAL if it
becomes the subject of any disciplinary or license revocation
proceeding, or if it is the subject of any governmental order, that
affects its right or ability to perform its obligations under this
Agreement. FI shall indemnify and hold FBAL harmless against all
claims and damages, including attorneys' fees, arising out of the
breach by FI of this Agreement or of the provisions contained in the
FBAL Guides. These representations shall survive the termination of
this Agreement.
SECTION 10. MISCELLANEOUS
-------------------------
(a) Scope of Assumption. FI acknowledges and agrees that under this
Agreement FBAL obtains certain rights to offer advice and services to
customers of FI and to others.
(b) Right of Inspection and Confidentiality. FBAL hereby authorizes FI to
monitor and periodically review and verify FBAL's and each Registered
Representative's compliance with the terms of this Agreement and agrees
to provide FI with reasonable access to appropriate records in
connection with any such activities. FBAL shall also provide FI or its
regulatory examiners with reasonable access to appropriate records in
connection with any inspection by FI or its regulatory examiners of
FBAL or any Branch Office which FI is required to make pursuant to the
rules and regulations of state or federal regulatory agencies.
FI shall provide FBAL with reasonable access to appropriate records in
connection with any inspection by FBAL or its regulatory examiners of
FI or any Branch Office and shall permit FBAL to copy such records,
provided that such inspection and copying is limited to the
broker/dealer activities contemplated by this Agreement.
All information obtained or reviewed in such inspections or through the
course of business during the term of this Agreement shall be held in
the strictest confidence by FBAL or FI. FI agrees to return to FBAL any
materials provided by FBAL upon termination of this Agreement and shall
not use the same thereafter. FBAL agrees to return to FI any customer
lists or other materials provided by FI upon termination of this
Agreement and shall not use the same thereafter. Neither party shall
permit any third party to copy or use these materials at any time.
(c) Termination. The terms of this Agreement are continuous unless one
party gives notice of its intention to terminate the contract giving 30
days' written notice. This Agreement shall terminate on any earlier
date required by order of any governmental agency with jurisdiction
over either party.
(d) Arbitration. Any claim or controversy arising out of or relating to the
negotiation, performance or breach of this Agreement, the meaning of or
obligations imposed by this Agreement, or the arbitrability of any such
question including any issue as to the jurisdiction of the arbitrator,
shall be decided by arbitration pursuant to the rules of the American
Arbitration Association then in effect.
(e) Attorneys' Fees. The prevailing party in any arbitration or litigation
arising from the interpretation or enforcement of this Agreement shall
be entitled to recover its attorneys' fees and costs, including those
incurred on appeal, as determined by the arbitrator or court.
(f) Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been
given on the earlier of the date of actual receipt, or three days after
mailing if mailed first class, postage prepaid, and addressed to the
party at the following address:
<PAGE>
FI: First Bank TEXAS, N.A.
8820 Westheimer, P. O. Box 630369
Houston, TX 77263-0369
FBAL: First Brokerage America, L.L.C.
11901 Olive Boulevard
Creve Coeur, MO 63141
(g) Partial Invalidity. If any portion of this Agreement is held to be
invalid or unenforceable, the remainder of the Agreement shall continue
in full force and effect.
(h) Relationship of Parties. FI and FBAL are independent of each other and
each party has sole responsibility and authority for the conduct of its
own business. By the terms of this Agreement, no party is the agent,
employee, joint venturer or partner to the other. No party has the
right to bind any other party in any way.
(i) Assignment. This Agreement shall inure to the benefit of the parties
and their legal representatives, successors and assigns, but no party
may assign any of its rights or obligations under this Agreement
without the prior written approval of the other party/parties hereto.
(j) Governing Law; Submission to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF TEXAS AND APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE
PARTIES HERETO HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE [SOUTERN] DISTRICT OF TEXAS
AND OF AN TEXAS STATE COURT SITTING IN HOUSTON, TEXAS, FOR THE
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE
PARTIES IRREVOCABLY CONSENT TO THE SERVICE OF ANY AND ALL PROCESS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH
PROCESS TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 10(f), ABOVE.
THE PARTIES IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY
CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
(k) Entire Agreement. This Agreement, together with any other document
executed in connection herewith, represent the final agreement between
the parties and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties. There
are no oral agreements among the parties. No amendment, modification,
or waiver of this Agreement shall be binding unless executed in
writing. No waiver of any of the provisions of this Agreement shall be
a continuing waiver unless expressly provided.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
[SEE FOLLOWING PAGE FOR SIGNATURES]
<PAGE>
The undersigned hereby agree to the terms and conditions of this Agreement as of
the date first written above.
FI: FIRST BANK TEXAS, N.A.
By: /s/ Joseph Milcoun, Jr.
--------------------------
Name: Joseph Milcoun, Jr.
----- -------------------
Title: Vice President
------ --------------
FBAL: FIRST BROKERAGE AMERICA, L.L.C.
By: /s/ Edward D. Furman
--------------------
Name: Edward D. Furman
----- ----------------
Title: Manager
------ -------
<PAGE>
EXHIBIT A - LEASE AGREEMENT
TEXAS ASSOCIATION OF REALTORS
IMPROVED PROPERTY COMMERCIAL LEASE
THIS FORM BY PERSONS WHO ARE NOT MEMBERS OF THE TEXAS ASSOCIATION OF REALTORS
IS NOT AUTHORIZED
Texas Association of REALTORS& Inc. 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table of Contents
<S> <C> <C> <C> <C> <C>
No. Paragraph Description Pg. No. Paragraph Description Pg.
1 Parties 2 22 Holdover 7
2 Leased Premises 2 23 Landlord's Lien 7
3 Term 2 24 Assignment and Subletting 7
A Term 25 Relocation 7
B Delay of Occupancy '
4 Rent and Expenses 2 26 Subordination 7
A Base Monthly Rent 27 Estoppel Certificates 7
B Prorated Rent
C Additional Rent 28 Casualty Loss 8
0 Place of Payment 29 Condemnation 8
E Method of Payment
F Late Charges 30 Attorney's Fees 8
G Returned Checks 31 Representations 8
5 Security Deposit 3 32 Broker's Fees 3
6 Taxes 3 33 Addenda 9
7 Utilities 3 34 Agreement of Parties 9
8 Tenant's insurance 3 35 Notices 9
9 Use and Hours 3 36 Special Provisions 9
A Tenant's Normal Business Hours
B Building Operating Hours ADDENDA & EXHIBITS
10 Legal Compliance 4 (check all that apply)
11 Signs 4 |_| Property Description Exhibit
12 Access By Landlord 4 |_| Addendum for Broker's Fee
13 Move-In Condition 4 |_| Expense Addendum for Single-Tenant Property
14 Move-Out Condition 4 |_| Expense Reimbursement Addendum
15 Maintenance and Repairs 5 |_| Net Addendum
A Cleaning
B Repairs of Conditions Caused by a Party |_| Percentage Rent Addendum
C Repair and Maintenance Responsibility |_| Parking Addendum
D Repair Persons
E HVAC Service Contract |_| Landlord's Rules and Regulations
F Common Areas
G Notice of Repairs |_| Commercial Lease Guaranty
H Failure to Repair |_| Optional Space Addendum
16 Alterations 6 |_| Leasehold Construction Addendum (Landlord to
17 Liens 6 |_| Complete Construction)
|_| Leasehold Construction Addendum (Tenant to Complete
18 8Liability 6 |_| (Construction)
19 Indemnity 6 |_|
20 Default 6 |_|
21 Abandonment, interruption of Utilities, Lockout 7 |_|
</TABLE>
<PAGE>
TEXAS ASSOCIATION OF REALTORS'
IMPROVED PROPERTY COMMERCIAL LEASE
THIS FORM BY PERSONS WHO ARE NOT MEMBERS OF THE TEXAS ASSOCIATION OF REALTORS
IS NOT AUTHORIZED
Texas Association of REALTORS& Inc. 1998
- -------------------------------------------------------------------------------
1. PARTIES: The parties to this lease are the owner of the Property First Bank
Texas, N.A. (Landlord) and the tenant First Brokerage America. LLC (tenant)
(Tenant).
2. LEASED PREMISES: Landlord leases to Tenant that certain portion of the
Property, including all improvements therein or to be provided by Lessor
under the terms of this Lease, located in the State of Texas as described on
Exhibit A, the exact nature, size and location to be agreed upon between
parties.
"Property" means the building or complex in which the leased premises
are located, inclusive of any common areas, drives, parking areas, and walks.
The parties agree that the rentable area of the leased premises may not equal
the actual or useable area within the !eased premises and may include an
allocation of common areas in the Property.
3. TERM:
A. Term: The term of this lease is 12 months, commencing on
July, 1999 (Commencement Date) and ending on June 30, 2000
(Expiration Date).
8. Delay of Occupancy: If Tenant is unable to occupy the leased premises
on the Commencement Date because of construction on the leased
premises to be completed by Landlord that is not substantially
complete or a prior tenant's holding over of the leased premises,
Landlord will not be liable to Tenant for such delay and this lease
will remain enforceable. In the event of such a delay, the Commencement
Date will automatically be extended to the date Tenant is able to
occupy the Property and the Expiration Date will also be extended by
a like number of days, so that the term of this lease remains
unchanged. If Tenant is unable to occupy the leased premises after the
30" day after the Commencement Date because of construction on the
leased premises to be completed by Landlord that is not substantially
complete or a prior tenant's holding over of the leased premises.
Tenant may terminate this lease by giving written notice to Landlord
before the leased premises become available to be occupied by Tenant
and Landlord will refund to Tenant any amounts paid to Landlord by
Tenant. This Paragraph 38 does not apply to any delay in occupancy
caused by cleaning or repairs.
4. RENT AND EXPENSES:
A. Base Monthly Rent: As outlined on Exhibit "B".
B. Prorated Rent: If the Commencement Date is on a day other than the
first day of a month, Tenant will pay Landlord as prorated rent, an
amount equal to the base monthly rent multiplied by the following
fraction: the number of days from the Commencement Date to the first
day of the following month divided by the number of days in the month
in which this lease commences. The prorated rent is due on or before
the Commencement Date.
C. Additional Rent:In addition to any base monthly rent or prorated rent.
Tenant will pay Landlord all other amounts
as provide by the attached:
(1) Net Addendum
(2) Percentage Rent Addendum
(3) Expense Reimbursement Addendum
(4) Expense Addendum for Single-Tenant Property
(5) Parking Addendum
(6)
--------------------------------------------
<PAGE>
D Place of Payment: Tenant will remit all amounts due Landlord under this
lease to First Bank TEXAS, N.A. at 8820 Westheimer, PO Box 630369,
Houston, TX 77263-0369 or to such other person or at such other place
as Landlord may designate in writing.
E Method of Payment: Tenant must pay all rent timely without demand,
deduction. or offset, except as permitted by law or this lease. Time is
of the essence for the payment of rent. If Tenant fails to timely pay
any amounts due under this lease or if any check of Tenant is returned
to Landlord by the institution on which it was drawn. Landlord may
require Tenant to pay, in addition to any other available remedy, all
amounts due under this lease by certified funds by providing written
notice to Tenant.
F Late Charges: If Landlord does not actually receive a rent payment at
the designated place of payment within 5 days after the date the rent
is due. Tenant will pay Landlord a late charge equal to 5% of the base
monthly rent. The mailbox is not the agent for receipt for Landlord.
The late charge is a cost associated with the collection of rent and
Landlord's acceptance of a late charge does not waive Landlord's rights
to exercise remedies under Paragraph 20.
G. Returned Checks: Tenant will pay (not to exceed $25) for each check
Tenant tenders to Landlord which is returned by the institution or,
which it is drawn for any reason, plus any late charges until Landlord
receives payment.
5. SECURITY DEPOSIT: Material deleted.
6. TAXES: Unless otherwise agreed by the parties. Landlord will pay all real
property ad valorem taxes assessed against the leased premises.
7. UTILITIES: Material deleted.
8. TENANT'S INSURANCE:
A. During all times this lease is in effect. Tenant must maintain in full
force and effect:
(1) public liability insurance from an insurer acceptable to Landlord
in an amount not less than $1,000,000 on an occurrence basis
naming Landlord as an additional insured; and
(2) personal property damage insurance for Tenant's business
operations on the leased premises from an insurer acceptable to
Landlord in an amount not less than full replacement cost
coverage on an occurrence basis.
B. Before the Commencement Date, Tenant must provide Landlord with a copy
of the insurance certificates evidencing the required coverage. If the
insurance coverage changes in any manner or degree at any time this
lease is in effect. Tenant must provide Landlord a copy of an
insurance certificate evidencing such change within 10 days of the
change.
C. If Tenant fails to maintain the required insurance in full force and
effect at all times this lease is in effect. Landlord may: (1)
purchase such insurance on behalf of Tenant and Tenant must
immediately reimburse Landlord for such expense: or (2) exercise
Landlord's remedies under Paragraph 20.
D. If there is an increase in Landlord's insurance premiums for the
leased premises or Property or its contents that is caused by Tenant.
Tenant's use of the leased premises, or any improvements made by or
for Tenant. Tenant will, for each year this lease is in effect, pay
Landlord the increase immediately after Landlord notifies Tenant of
the increase.
9. USE AND HOURS: Tenant may use the leased premises for the following purpose
and no other: securities, brokerage and insurance sales.
|_| A. Tenant's Normal Business Hours: Tenant's normal business hours
are (specify hours, days of week. and if inclusive or exclusive
of weekends and holidays NYSE Regulated Business Hours Tenant
will keep the leased premises open substantially during Tenant's
normal business hours.
|_| B. Material deleted.
<PAGE>
10. LEGAL COMPLIANCE:
A Tenant may not use or permit any part of the leased premises to be used
for:
(1) any activity which is a nuisance or is offensive, noisy. or
dangerous:
(2) any activity that interferes with any other tenant's normal
business operations or Landlord's management of the Property:
(3) any activity that violates any applicable law, regulation, zoning
ordinance, restrictive covenant, governmental order.owners'
association rules. tenants' association rules. Landlord's rules or
regulations, or this lease:
(4) any hazardous activity that would require any insurance premium on
the Property or leased premises to increase or that would void any
such insurance:
(5) any activity trial violates any applicable federal, state, or
local law, including but not limited to those laws related to air
quality. water purity, hazardous materials, wastewater, waste
disposal, air emissions, or other environmental matters:
(6) the permanent or temporary storage of any hazardous material: or
(7)
------------------------------------------------------------------
B. "Hazardous material" means any pollutant, toxic substance, hazardous
waste, hazardous material, hazardous substance, solvent, or oil as
defined by any federal, state, or local environmental law, regulation,
ordinance, or rule existing as of the date of this lease or later
enacted.
C. Landlord does not represent or warrant that the leased premises or
Property conform to applicable restrictions, zoning ordinances, setback
lines, parking requirements, impervious ground cover ratio
requirements, and other matters that may relate to Tenant's intended
use. Tenant must satisfy itself that the leased premises may be used as
Tenant intends by independently investigating all matters related to
the use of the leased premises or Property. Tenant agrees that it is
not relying on any warranty or representation made by Landlord.
Landlord's agent, or any broker concerning the use of the leased
premises or Property.
11. SIGNS:
A. Tenant may not post or paint any signs at. on, or about the leased
premises or Property without Landlord's written consent. Landlord may
remove any unauthorized sign. and Tenant will promptly reimburse
Landlord for any expense related to the removal of any unauthorized
sign. Any authorized sign must comply with all laws, restrictions,
zoning ordinances, and any governmental order relating to signs on the
leased premises or Property. Landlord may temporarily remove any
authorized sign to complete repairs or alterations to the leased
premises or the Property.
B. By providing written notice to Tenant before this lease ends, Landlord
may require Tenant, upon move-out and at Tenant's expense. to remove,
without damage to the Property or leased premises, any or all signs
that were placed on the Property or leased premises by or at the
request of Tenant. Any signs that Landlord does not require Tenant to
remove and that are fixtures become the property of the Landlord and
must be surrendered to Landlord at the time this lease ends.
12. ACCESS BY LANDLORD:
A. During Tenant's normal business hours Landlord may enter the leased
premises for any reasonable purpose, including but not limited to
purposes for repairs, maintenance, alterations, and showing the leased
premises to prospective tenants or purchasers. Landlord may access the
leased premises after Tenant's normal business hours with Tenant's
permission or to complete emergency repairs. Landlord will not
unreasonably interfere with Tenant's business operations when
accessing the leased premises.
B. During the last 90 days of this lease, Landlord may place a 'For Lease'
or similarly worded sign in the leased premises.
13. MOVE-IN CONDITION: Tenant has inspected the leased premises and accepts it
in its present (as-is) condition unless expressly noted otherwise in this
lease. Landlord and any agent have made no express or implied warranties as
to the condition or permitted use of the leased premises or Property.
<PAGE>
14. MOVE-OUT CONDITION AND FORFEITURE OF TENANTS PERSONAL PROPERTY:
A. At the time this lease ends. Tenant will surrender the leased premises
in the same condition as when received, normal wear and tear excepted.
Tenant will leave the leased premises in a clean condition free of all
trash, debris, personal property, hazardous materials, and
environmental contaminants. Before this lease ends. Tenant will not
provide Landlord with a report, by an environmental engineer or
assessor acceptable to Landlord, dated net earlier than 20 days before
the date this lease ends that indicates tha no hazardous material
or other environmental hazard is on or affects the leased premises.
B. If Tenant leaves any personal property in the leased premises after
Tenant surrenders possession of the leased premises. Landlord may: (1)
require Tenant, at Tenant's expense to remove the personal property by
providing written notice to Tenant: or (2) retain such personal
property as forfeited property to Landlord.
C. "Surrender" means vacating the leased premises and returning all key
and access devices to Landlord. "Normal .wear and tear" means
deterioration that occurs without negligence, carelessness, accident,
or abuse
D By providing written notice to Tenant before this tease ends. Landlord
may require Tenant, upon move-out and at Tenant's expense. to remove,
without damage to the Property or !eased premises, any or all fixtures
that were placed or, the Property or leased premises by or at the
request of Tenant. Any fixtures that Landlord does not require Tenant
to remove become the property of the Landlord and must be surrendered
to Landlord at the time this lease ends.
15. MAINTENANCE AND REPAIRS:
A Cleaning: Tenant must keep the leased premises clean and sanitary and
promptly dispose of all garbage in appropriate receptacles.
Landlord Tenant will provide, at its expense, reasonable
janitorial services to the leased premises.
B Repairs of Conditions Caused by a Party: Each party must promptly
repair a condition caused, either intentionally or negligently, by
that party or that party's guests, patrons, invitees, contractors, or
permitted subtenants.
C. Repair and Maintenance Responsibility: Except as provided by Paragraph
158, the party designated below, at its expense, is responsible to
maintain and repair the following specified items in the leased
premises. The specified items must be maintained in: (i) clean
condition: (ii) good repair: and (iii) operable condition. If a
modification to any of the specified items is required by law or
governmental regulation or order, the party designated to maintain the
item must complete and pay the expense of the modification. The
specified items include and relate only to real Property in the leased
premises. Tenant is responsible for the repair and maintenance of its
personal property.
<TABLE>
<CAPTION>
N/A Landlord Tenant
<S> <C> <C> <C> <C>
(1) Foundation, exterior walls, roof, and other structural components |_| [X] |_|
(2) Glass and windows |_| [X] |_|
(3) Fire protection equipment and fire sprinkler systems |_| [X] |_|
(4) Exterior & overhead doors, including closure devices, molding,
locks, and hardware |_| [X] |_|
(5) Grounds maintenance, including landscaping and ground sprinklers |_| [X] |_|
(6) Interior doors, including closure devices, frames, molding, locks,
and hardware |_| [X] |_|
(7) Parking areas and walks |_| [X] |_|
(8) Plumbing systems, drainage systems, electrical systems (including
ballast and lamp replacement) & mechanical systems, except |_| [X] |_|
those specifically designated otherwise
(9) Heating Ventilation and Air Conditioning (HVAC) systems |_| [X] |_|
(10) Signs |_| [X] |_|
(11) Extermination and pest control, excluding wood-destroying insects |_| [X] |_|
(12) Storage yards and storage buildings [X] |_| |_|
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(13) Wood-destroying insect treatment and repairs |X] |_| |_|
(14) Cranes and related systems [X] |_| |_|
(15) |_| |_| |_|
-----------------------------------------------------------------
(16) |_| |_| |_|
-----------------------------------------------------------------
(17) All other items and systems |_| [X] |_|
</TABLE>
D. Repair Persons: Repairs must be completed by trained, qualified, and
insured repair persons.
E. HVAC Service Contract: If Tenant is responsible to maintain the HVAC
system. Tenant is not required to maintain, at its expense, a regularly
scheduled maintenance and service contract for the HVAC system. The
maintenance and service contract must be purchases from a HVAC
maintenance company that regularly provides such contracts to similar
properties. If Tenant fails to maintain a required HVAC maintenance and
service contract in effect at all times during this lease. Landlord may
do so and charge Tenant the expense of such a maintenance and service
contract or exercise Landlord's remedies under Paragraph 20.
F. Common Areas: Landlord will maintain any common areas in the Property
in a manner as Landlord determines to be in the best interest of the
Property. Landlord will maintain any elevator and signs in the common
area. Landlord may change the size dimension. and location of any
common areas, provided that such change does not materially impair
Tenant's use and access to the leased premises. If a modification to
the common areas is required by law or governmental regulation or order
Landlord will modify the item. Tenant has the non-exclusive license to
use the common areas in compliance with Landlord's rules and
restrictions. Tenant may not solicit any business in the common areas
or interfere with any other person's right to use the common areas.
G. Notice of Repairs: Tenant must promptly notify Landlord of any item
that is in need of repair and that is Landlord's responsibility to
repair. All requests for repairs to Landlord must be in writing.
H. Failure to Repair: Landlord must make a repair for which Landlord is
responsible within a reasonable period of time after Tenant provides
Landlord written notice of the needed repair. If Tenant fails to repair
or maintain an item for which Tenant s responsible within 10 days after
Landlord provides Tenant written notice of the needed repair or
maintenance. Landlord ma,: (1) repair or maintain the item, without
liability for any damage or loss to Tenant, and Tenant must immediately
reimburse Landlord for the cost to repair or maintain: or (2) exercise
Landlord's remedies under Paragraph 20.
16. ALTERATIONS:
A. Tenant may not alter, improve, or add to the Property or the leased
premises without Landlord's written consent. Landlord will not
unreasonably withhold consent for the Tenant to make reasonable
alterations, modifications, or improvements to the leased premises.
B. Tenant may not alter any locks or any security devices on the Property
or the leased premises without Landlord's consent. Landlord authorizes
the changing, addition, or rekeying of any locks or other security
devices. Tenant must immediately deliver the new keys and access
devices to Landlord.
C. If a governmental order requires alteration or modification to the
leased premises, the party obligated to maintain and repair the item to
be modified or altered as designated in Paragraph 15 will, at its
expense, modify or alter the item in compliance with the order.
D. Any alterations, improvements, fixtures or additions to the Property or
leased premises installed by either party during the term of this lease
will become Landlord's property and must be surrendered to Landlord at
the time this lease ends, except for those fixtures Landlord requires
Tenant to remove under Paragraph 14 or if the parties agree otherwise
in writing.
17. LIENS: Tenant may not do anything that will cause the title of the Property
or leased premises to be encumbered in any way. :' Tenant causes a lien to
be filed against the Property or leased premises, Tenant will within 20
days after Landlord demands Tenant to take action to remove the lien, pay
the lien or take whatever action is necessary to cause the lien to be
released of record. Tenant will provide Landlord a copy of any release
Tenant obtains pursuant to this paragraph.
<PAGE>
18. LIABILITY: To the extent permitted by law. Landlord is NOT responsible to
Tenant or Tenant's employees. patrons. guests, or invitees for any damages,
injuries, or losses to Person or Property caused by:
A. an act omission or neglect of: Tenant: Tenant's agent:Tenant's guest:
Tenant's employees: Tenant's patrons: Tenant's invitees: or any
other tenant on the Property:
B. fire, flood water leaks, ice, snow, hail, winds, explosion, smoke,
riot, strike, interruption of utilities, theft, burglary, robbers
assault vandalism other persons, environmental contaminants, or other
occurrences or casualty losses.
19. INDEMNITY: Tenant will indemnity and hold Landlord harmless from any
property damage, personal injury suits, actions, liabilities. damages, cost
of repairs or service to the leased Premises or Property, or any other loss
caused. negligently or otherwise, by Tenant or Tenant's employees, patrons,
guests. or invitees.
20. DEFAULT:
A. If Landlord fails to comply with this lease within 30 days after
Tenant notifies Landlord of Landlord's failure to comply, Landlord
will be in default and Tenant may seek any remedy provided by law. If.
however, Landlord's non-compliance reasonably requires more than 30
days to cure, Landlord will not be in default if the cure is commenced
within the 30 day period and is diligently pursued.
B. If Landlord does not actually receive at the place designated for
payment any rent due under this lease within 5 days after it is due.
Tenant will be in default. If Tenant fails to comply with this lease
for any other reason within 10 days after Landlord notifies Tenant of
its failure to comply. Tenant will be in default.
C. If Tenant is in default, Landlord may: (i) terminate Tenant's right to
occupy the leased premises by providing Tenant with at least 3 days
written notice and (iii) accelerate all rents which are payable during
the remainder of this lease or any renewal period without notice or
demand. Landlord will attempt to mitigate any damage or loss caused by
Tenant's breach. If Tenant is in default. Tenant will be liable for:
(1) any lost rent.
(2) Landlord's cost of resetting the leased premises including
brokerage fees. advertising fees. errs other fees necessary to
re!et the leases premises:
(3) repairs to the leased premises for use beyond normal wear and
tear:
(4) all Landlord's costs associated with eviction of Tenant, such as
attorney's fees, court costs, and prejudgment interest:
(5) all Landlord's costs associated with collection of rent such as
collection fees, late charges, and returned check charges.
(6) cost of removing any equipment and trade-fixtures left on the
leased premises by Tenant:
(7) cost to remove any trash, debris, personal property, hazardous
materials, or environmental contaminants left by Tenant or
Tenant's employees, patrons, guests. or invitees in the leases
premises or Property: and
(8) any other recovery to which Landlord may be entitled by law.
21. ABANDONMENT, INTERRUPTION OF UTILTIES, REMOVAL OF TENANT'S PROPERTY, AND
LOCKOUT: Chapter 93 of the Texas Property Code governs the rights and
obligations of the parties with regard to: (a) abandonment of the leased
premises: (b) interruption of utilities: (c) removal of Tenant's personal
property; and (d) "lock-out" of Tenant.
22. HOLDOVER: If Tenant fails to vacate the leased premises at the time this
lease ends. Tenant will become a tenant-at-will and must vacate the leased
premises immediately upon receipt of demand from Landlord. No holding over
by Tenant, with or without the consent of Landlord will extend this lease.
Tenant will indemnify Landlord and any prospective tenants for any and all
damages caused by the holdover. Rent for any holdover period will be 2
times the base monthly rent plus any additional rant calculates on a daily
basis and will be immediately due and payable daily without notice or
demand.
<PAGE>
23. LANDLORD'S LIEN AND SECURITY INTEREST: To secure Tenant's performance under
this lease. Tenant grants to Landlord a lien and security interest against
all or Tenant's nonexempt personal property that is in the !eased premises
or Property. This lease is a security agreement for the purposes of the
Uniform Commercial Code. Landlord may file a copy of this lease as a
financing statement.
24. ASSIGNMENT AND SUBLETTING: Tenant may not assign this lease or sublet any
part of the leased premises without Landlord's written consent. An
assignment of this lease or subletting of the leased premises without
Landlord's written consent is voidable by Landlord. If Tenant assigns this
lease or sublets any part of the leased premises, Tenant wilt remain liable
for all of Tenant's obligations under this lease regardless if the
assignment or sublease is made with or without the consent of Landlord.
25. RELOCATION: By providing Tenant with not less than 90 days advanced written
notice. Landlord may require Tenant to relocate to another location in the
Property, provided that the other location is equal in size or larger than
the leased premises then occupied by Tenant aril contains similar leasehold
improvements. Landlord will pay Tenant's reasonable out-of-pocket moving
expenses for moving to the other location. "Moving expenses" means expenses
payable to professional movers, utility companies for connection and
disconnection fees, wiring companies for connecting and disconnecting
Tenant's office equipment required by the relocation, and printing
companies for reprinting Tenant's stationary and business cards. A
relocation of Tenant will not change or affect any other provision of this
lease that is then in effect, including rent and reimbursement amounts,
except that he description of the suite or unit number will automatically
be amended.
26. SUBORDINATION:
A. This lease and Tenant'sleasehold interest are and will be subject,
subordinate, and inferior to:
(1) any lien, encumbrance, or ground lease now or hereafter placed on
the leased premises or the Property by Landlord:
(2) all advances made under any such lien, encumbrance, or ground
lease:
(3) the interest payable on any such lien or encumbrance:
(4) any and all renewals and extensions of any such lien, encumbrance,
or ground lease:
(5) any restrictive covenant affecting the leased premises or the
Property; and
(6) the rights of any owners' association affecting the leased
premises or Property.
B. Tenant must, on demand, execute any instrument subordinating this
lease as Landlord may request. Provided that such subordination is
made on the condition that this lease and Tenant's rights under this
lease are recognized by the lien holder.
27. ESTOPPEL CERTIFICATES:
Within 10 days after receipt of a written request from Landlord, Tenant
will execute and deliver to Landlord an estoppel certificate that
identifies: (a) when this lease commences and ands: (b) any amendments
to this lease: (c)Commercial Lease concerning: any rights that Tenant
may have to extend this lease or purchase the Property or leased
premises, (d) any default by Landlord, and (e) any other information
reasonably requested in the certificate.
28. CASUALTY LOSS.
A. Tenant must immediately notify Landlord of any casualty loss in the
!eased premises Within 20 days after receipt of Tenant notice of a
casualty loss. Landlord will notify Tenant if the leased premises are
less than or more than 50% unusable on a per square foot basis and if
Landlord can substantially restore the leased premises within 120 days
after Tenant notifies Landlord of the casualty loss.
B. If the leased premises are less than 50% unusable and Landlord can
substantially restore the leased premises within 120 days after Tenant
notifies Landlord of the casualty. Landlord will restore the leased
premises to substantially the same condition as before the casualty. If
Landlord fails to substantially restore within the time required,
Tenant may terminate this lease.
C. If the leased premises are more than 50% unusable and Landlord can
substantially restore the leased premises within 120 days after Tenant
notifies Landlord of the casualty. Landlord may: (1) terminate this
lease: or (2) restore the leased premises to substantially the same
condition as before the casualty. If Landlord chooses to restore and
does not substantially restore the leased premises within the time
required, Tenant may terminate this lease.
<PAGE>
D. If Landlord notifies Tenant that Landlord cannot substantially restore
the leased premises within 120 days after Tenant notifies Landlord of
the casualty loss. Landlord may: (1) choose not to restore and
terminate this lease: or (2) choose to restore, notify Tenant of the
estimated time to restore, and give Tenant the option to terminate this
lease by notifying Landlord within 10 days.
E. If this lease does not terminate because of a casualty loss, rent will
be reduced from the date Tenant notifies Landlord of the casualty loss
to the date the leased premises are substantially restored by an amount
proportionate to the extent the leased premises are unusable.
29. CONDEMNATION: If after a condemnation or purchase in lieu of condemnation
the leased premises are totally unusable for the purposes stated in this
lease, this lease will terminate. If after a condemnation or purchase in
lieu of condemnation the leased premises are partially unusable for the
purposes stated in this lease, this lease will continue and rent will be
reduced in an amount proportionate to the extent the leased premises are
unusable. Any condemnation award or proceeds in lieu of condemnation are
the property of Landlord and Tenant has no claim to such proceeds or award.
Tenant may seek compensation from the condemning authority for its moving
expenses and damages to Tenant's personal property.
30. ATTORNEY'S FEES: Any person who is a prevailing party in any legal
proceeding brought under or related to the transaction described in this
lease is entitled to recover prejudgment interest, reasonable attorney's
fees, and all other costs of litigation from the nonprevailing party.
31. REPRESENTATIONS: Tenant's statements in this lease and any application for
rental are material representations relied upon by Landlord. Each party
signing this lease represents that he or she is of legal age to enter into
a binding contract and is authorized to sign the lease. If Tenant makes any
misrepresentation in this lease or in any application for rental. Tenant is
in default. Landlord is not aware of any material defect on the Property
that would affect the health and safety of an ordinary person or any
environmental hazard on or affecting the Property that would affect the
health or safety of an ordinary person, except:____________________________
___________________________________________________________________________
___________________________________________________________________________
32. Material deleted.
33. ADDENDA: Incorporated into this lease are the addenda, exhibits and other
information marked in the Addenda and Exhibit section of the Table of
Contents. If Landlord's Rules and Regulations are made part of this lease.
Tenant agrees to comply with the Rules and Regulations as Landlord may, at
its discretion, amend from time to time.
34. AGREEMENT OF PARTIES:
A. Entire Agreement: This lease contains the entire agreement between
Landlord and Tenant and may not be changed except by written agreement.
B. Binding Effect: This lease is binding upon and inures to the benefit
of the parties and their respective heirs, executors, administrators,
successors, and permitted assigns.
C. Joint and Several: All Tenants are jointly and severally liable for all
provisions of this lease. Any act or notice to, or refund to, or
signature of, any one or more of the Tenants regarding any term of this
lease, its renewal, or its termination is binding on all Tenants.
D. Controlling Law: The laws of the State of Texas govern the
interpretation, performance, and enforcement of this lease.
E. Severable Clauses: If any clause in this lease is found invalid or
unenforceable by a court of law, the remainder of this lease will not
be affected and all other provisions of this lease will remain valid
and enforceable.
F. Waiver: Landlord's delay, waiver, or non-enforcement of acceleration,
contractual or statutory lien, rental due date, or any other right will
not be deemed a waiver of any other or subsequent breach by Tenant or
any other term in this lease.
G. Quiet Enioyment: Provided that Tenant is not in default of this lease.
Landlord covenants that Tenant will enjoy possession and use of the
leased premises free from serious interference.
H. Force Majeure: If Landlord's performance of a term in this lease is
delayed by strike, lock-out, shortage of material, governmental
restriction, riot, flood, or any cause outside Landlord's control, the
time for Landlord's performance will be abated until after the delay.
<PAGE>
35. NOTICES: All notices under this lease must be in writing and are effective
when hand-delivered, sent by mail, or sent by facsimile transmission to:
Tenant Landlord
at the address of the leased premises. at
---------------------
Fax:
--------------------
with a copy to: with a copy to:
-------------------------- --------------------
at at
-------------------------- --------------------
Fax: Fax:
-------------------------- --------------------
36. SPECIAL PROVISIONS:
Real estate brokers are not qualified to render legal advice, property
inspections, surveys, engineering studies (e.g., studies of the structures,
drainage, and soil conditions), environmental assessments, tax advice, financial
advice, or inspections to determine compliance with zoning, governmental
regulations, or any law (e.g., ADA, Texas Architectural Barriers Statute, etc.).
The parties should seek experts to render such services. Selection of such
experts is the responsibility of the parties and not the real estate broker. The
terms of this lease are negotiable among the parties. This is i t tided to be a
legal agreement binding upon final acceptance. READ IT CAREFULLY. If you do not
understand the effect o this Lease, consult your attorney BEFORE signing.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
/s/ Joseph Milcoun, Jr. September 20, 1999 /s/ Edward D. Furman September 20, 1999
- ------------------------------------------- ------------------------------------------------------
- ------------------------------------------- -----------------------------------------------------
Landlord Date Tenant Date
By
- ------------------------------------------ ----------------------------------------------------
Landlord Date Tenant Date
as for Landlord
--------------------------------------
</TABLE>
<PAGE>
ADDENDUM
(TEXAS)
THIS ADDENDUM modifies and amends that certain Texas Association of
Realtors Improved Commercial Property Least to which it is attached, between
First Bank Texas, N. A., as Landlord, and First Brokerage America, LLC, as
Tenant, relating to the Premises described therein. To the extent that any
provisions of this Addendum conflict or are inconsistent with any provisions in
the Lease, or any other addendum or exhibit attached thereto, the provisions
hereof shall control.
1. Throughout the Term of this Lease, Tenant shall have the right to
use, without charge, certain furniture, fixtures and equipment, including but
not limited to telephone and computer systems (collectively, "FF&E"), which are
owned by Landlord. All such FF&E is leased in its "as-is" condition, without
representation or warranty by Landlord as to physical condition or fitness for
Tenant's intended use.
2. Notwithstanding any thing to the contrary contained in the Lease,
the Lease may be terminated by either party thereto, with or without cause, for
any reason or no reason, upon 90 days written notice to the other party.
3. Without limiting the provisions of the preceding paragraph and
not-withstanding anything to the contrary contained in the Lease, Tenant may
terminate the Lease upon notice to Landlord upon the occurrence of any of the
following events:
(i) an assignment by Landlord for the benefit of
its creditors:
(ii) the levying on or against Landlord property
of a writ of execution or attachment that is not released or discharged within
30 days;
(iii) Landlord's breach or default under the
Services Agreement between Landlord and Tenant, which breach remains uncured
after expiration of any "cure" period stated therein:
(iv) the institution in a court of competent
jurisdiction of proceeding for the reorganization, liquidation, or insolvency
dissolution of Landlord. or for its adjudication as a bankrupt or insolvent, or
for the appointment of a receiver of Landlord's property, if such proceedings
are not dismissed, and any receiver, trustee, or liquidator appointed therein
is not discharged within 30 days after the proceedings are instituted: and
(v) the management of Landlord's affairs being
assumed by any governmental, regulatory or judicial authority, or if such party
is prohibited by any governmental or regulatory authority from continuing
its primary line of business.
IN WITNESS WHEREOF the undersigned have duly executed this Addendum on
the day and year first above set forth.
"Landlord" "Tenant"
FIRST BANK TEXAS, N. A. FIRST BROKERAGE AMERICA, LLC
By /s/ Joseph Milcoun, Jr. By /s/ Edward D. Furman
- -------------------------- -----------------------
Its Vice President Its Manager
- -------------------------- -----------------------
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
BRANCH LOCATIONS
TEXAS
- ----------------------------------------------------------------------------------------------------------------------------
BRANCH LOCATIONS -- TEXAS
- ----------------------------------------------------------------------------------------------------------------------------
- ---------- ---------------------------------- -------------------------------------- -------------- ------------------------
BRANCH BANK HOURS TYPE ATM MISC. INFO.
BR. #
- ---------- ---------------------------------- -------------------------------------- -------------- ------------------------
- ---------- ---------------------------------- -------------------------------------- -------------- ------------------------
<S> <C> <C> <C> <C>
507 ABRAMS Bank: Walk-Up Forest/Abrams
First Bank Texas, N.A. Mon.-Thurs. 9am-3pm 2 blocks south of LBJ
9605 Abrams Fri. 9am-6pm; Sat. - Closed (235)
Dallas, TX 75243 Drive-Up:
Phone: (214) 342-5200 Mon.-Fri. 8am-6pm Closest Branch:
Fax: (214) 342-5205 Sat. 9am-noon Las Colinas
Betsy Keisman, Mgr.
- ---------- ---------------------------------- -------------------------------------- -------------- ------------------------
- ---------- ---------------------------------- -------------------------------------- -------------- ------------------------
501 ALLEN PARKWAY Bank: Walk-Up Allen Parkway & Waugh
First Bank Texas, N.A. Mon.-Fri. 9am-4pm; Sat.-Closed Drive
2929 Allen Parkway Drive-Up:
Houston, TX 77019 Mon.-Fri. 7:30am-6pm; Sat. - Closest Branch:
Phone: (713) 522-7881 Closed Northside or
Fax: (713) 525-4555 Westheimer
Felecia Ellis, Mgr.
- ---------- ---------------------------------- -------------------------------------- -------------- ------------------------
- ---------- ---------------------------------- -------------------------------------- -------------- ------------------------
506 LAS COLINAS Bank: Drive-Thru 161 & Gateway (1 block
First Bank Texas, N.A. Mon.-Thurs. 9am-3pm east of 161)
2101 Gateway Drive Fri. 9am-6pm; Sat. - Closed
Irving, TX 75038 Drive-Up: Closest Branch:
Phone: (972) 550-1234 Mon.-Fri. 8am-6pm; Sat.-Closed Abrams
Fax: (972) 550-0893
Marla McMurray, Mgr.
- ---------- ---------------------------------- -------------------------------------- -------------- ------------------------
- ---------- ---------------------------------- -------------------------------------- -------------- ------------------------
505 McKINNEY Bank: Drive-Up North Central
First Bank Texas, N.A. Mon.-Thurs. 9am-3pm Expressway (I-75) @
321 N. Central Expressway Fri. 9am-6pm; Sat. - Closed Virginia Parkway
McKinney, TX 75070 Drive-Up: (northwest corner)
Phone: (972) 548-4000 Mon.-Fri. 8am-6pm
Fax: (972) 548-4042 Sat. 9am-noon
Karen Zachary, Mgr.
- ---------- ---------------------------------- -------------------------------------- -------------- ------------------------
- ---------- ---------------------------------- -------------------------------------- -------------- ------------------------
502 NORTHSIDE Bank: Walk-Up North Main between
First Bank Texas, N.A. Mon.-Thurs. 9am-3:30pm Hogan & Quitman
2010 N. Main Fri. 9am-6pm; Sat. - Closed
Houston, TX 77009 Drive-Up: Closest Branch:
Phone: (713) 226-5300 Mon.-Fri. 7:30am-6pm Allen Parkway or
Fax: (713) 226-5367 Sat. 8am-noon Westheimer
Richard Acosta, Mgr.
- ---------- ---------------------------------- -------------------------------------- -------------- ------------------------
- ---------- ---------------------------------- -------------------------------------- -------------- ------------------------
503 WESTHEIMER Bank: Drive-Up Westheimer/Fondren
First Bank Texas, N.A. Mon.-Thurs. 9am-3:30pm (northeast corner)
8820 Westheimer Fri. 9am-5pm; Sat. - Closed
Houston, TX 77063 Drive-Up: Closest Branch:
Phone:(713) 781-7171 Mon.-Fri. 7:30am-6pm Allen Parkway or
Fax: (713) 954-2458 Sat. 8am-noon Northside
Eileen Stork, Mgr.
- ---------- ---------------------------------- -------------------------------------- -------------- ------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit B
First Brokerage L.L.C.
Rental Calculation by Charter
Company # Square Feet Number of Average Charter Monthly
Occupied Dedicated Rate per month rent paid to
Per Rep. Reps. Charter
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Bank 581 75 3 $ 1.40 $ 315.00
Texas N.A.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Assumptions:
- -Each brokerage representative occupies the equivalent of one desk.
- -Unoccupied desks can be used by the branches for activities other than taking
deposits.
- -Desks occupied by the Reps. Take up 75 square feet of space in the branches.
- -The "Average Charter Rate" is an estimated average rental rate for all the
branches in the charter.
<PAGE>
Exhibit B
VARIABLE SERVICES PAYMENT
Variable Services Payment: FBAL agrees to pay to each designated Branch Office
each month the Variable Services Payment pursuant to the number of sales of
Products achieved in accordance with the calculation appearing on Table 1,
attached hereto.
FI will absorb MCIF Fees incurred by FBAL associated with the tracking, data
preparation and reporting in proportion to the asset size of the charter.
<PAGE>
TABLE 1
$41.00 (per representative per location)
plus
$15.00 (per representative per location) multiplied by the number of sales of
Products
<PAGE>
Exhibit 10(bb)
SERVICE AGREEMENT
THIS SERVICE AGREEMENT ("Agreement") is made and entered into this 1st
day of July, 1999, by and between First Bank TEXAS, N.A. (hereinafter called
"Institution"), a financial institution organized under the laws of the State of
Texas, First Brokerage America L.L.C., a Nevada limited liability company and
registered broker/dealer member of the National Association of Securities
Dealers ("NASD") and the Securities Investor Protection Corporation ("SIPC")
(hereinafter called "B/D"; Institution and B/D are collectively referred to
herein as "Affiliates" when services are to be provided by both) and BTI
Insurance Agency, Inc., a corporation organized and existing under the laws of
Texas (hereinafter called "Agency").
WHEREAS, Agency is empowered to engage in the solicitation of,
negotiation for, procurement of and collection of premiums on insurance and
annuity contracts issued by legal reserve life insurance companies authorized to
transact business in the State of Texas; and
WHEREAS, Agency is licensed by the Texas State Board of Insurance to
engage in the authorized business as a legal reserve life insurance agent in
Texas under lawful appointment by one or more duly licensed life insurance
companies; and
WHEREAS, Institution desires for Agency to make available a broad range
of tax deferred insurance and annuity products to its customers within the
limits of applicable statutory and regulatory restrictions; and
WHEREAS, Agency desires to provide Institution's customers with such
insurance and annuity products through individually licensed agents of Agency;
and
WHEREAS, B/D leases office space on a non-exclusive basis at
Institution and has a business relationship with Agency for the offering of
variable annuities; and
WHEREAS, B/D desires to provide and Agency desires to receive general
support for the marketing and sales of such insurance and annuity products on
subleased premises at one or more locations of Institution pursuant to that
certain Sublease dated July 1, 1999 by and between B/D and Agency ("Sublease");
and
WHEREAS, Institution and B/D are affiliates through common ownership or
control, and Affiliates have entered into that certain Brokerage Service
Agreement, dated as of July1, 1999, whereby B/D offers Nondeposit Securities
Products on various Institution premises; and
WHEREAS, Institution and B/D each wish to make services available to
Agency under mutually agreeable terms and conditions as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, Institution, B/D and
Agency do hereby agree as follows:
I.
Agency shall insure that each person who shall act as a life insurance
agent in the State of Texas for and on behalf of Agency (hereinafter called the
"Agency Representative" or "Agency Representatives") shall first become duly
licensed pursuant to the applicable requirements of the Texas Insurance Code, as
<PAGE>
amended, and shall become duly appointed by each respective life insurance
company to be represented by such person. B/D shall furnish to Agency such
services and assistance as Agency may from time to time reasonably require in
connection with the training of the Agency Representatives. Institution will
allow certain of its employees (hereinafter called the "Institution Employees")
to become Agency Representatives and will allow such Institution Employees,
after becoming licensed, to market, during normal business hours,
Agency-sponsored products on Institution's premises subleased to Agency and
located in the State of Texas (subject to permissibility under Texas law).
Nothing in this Agreement shall preclude an Institution Employee from offering
and selling Institution's financial services and products. Institution shall be
responsible for supervising each Institution Employee's activities involving the
offer or sale of Institution's products and services. Institution will allow
Agency, through its Agency Representatives, access to Institution's customers
for the purpose of marketing Agency-sponsored products; and Institution and B/D
will support Agency's marketing efforts by notifying their customers of the
availability of Agency-sponsored insurance and annuity products, through posters
in Institution's offices, brochure supplies, inserts in monthly statements, and
similar activities. Institution, B/D and Agency shall keep confidential any
information not otherwise generally available to the public which it may acquire
as a result of this Agreement regarding the business and affairs of each other
and its customers.
II.
B/D shall provide, by sublease, certain undivided portions of the
office space leased by Institution to B/D as evidenced by the Sublease, attached
hereto as Exhibit A. B/D shall also furnish Agency such services as may be
reasonably necessary, including secretarial, filing, bookkeeping, clerical
assistance, and similar services through Institution personnel made available to
B/D pursuant to the Brokerage Service Agreement by and between Institution and
B/D (the "Main Service Agreement") dated July1, 1999.
III.
B/D shall provide product review services for Agency in order to
determine that the products to be sold by Agency meet Affiliates' standards of
excellence. B/D shall also review the suitability of products sold to given
customers of Agency in light of such customers' stated investment objectives and
needs.
IV.
Agency will collect and provide safekeeping of all monies and
considerations received within the course and scope of Agency's insurance agency
business and will transmit the proper portions of such monies and considerations
to insurance companies whose policies are sold through Agency. Payments will be
made to each Agency Representative entitled to commissions or compensation, if
any, arising from the sale of insurance or annuity products, all according to
such terms and conditions as may be agreed upon in writing by Agency and such
agent and as required by applicable state law. Nothing contained in this
paragraph permits any person to engage in the act of selling or offering for
sale any insurance product without first securing an applicable license for that
purpose.
V.
Affiliates shall assist Agency in the preparation and maintenance of
any reports and miscellaneous correspondence as Agency may reasonably require or
request in order to enable its Agency Representatives to comply with all
applicable requirements of any governmental entity or authority having
jurisdiction over Agency's insurance agency business. Agency agrees to permit
personnel from regulatory authorities, including regulatory authorities having
jurisdiction over the affairs of Institution or of B/D, reasonable access to its
offices to make audits and examinations of records pertaining to Agency
activities on the subleased premises.
<PAGE>
VI.
As consideration for Institution's performance of the services and
furnishing of the facilities described in this Agreement, Agency agrees to pay
at the location of B/D designated by B/D immediately without demand or notice by
B/D an amount equal to seventy percent (70%) of Gross Commissions per month per
location, less the amount of $50.00. For purposes of this Agreement, "Gross
Commissions" shall be equal to the gross commissions received by, or discounts
or concessions allowed to, Agency and shall include any charge or fee due to
Agency from issuers of Products that are paid to any Agent, net of clearing
costs, if any; provided, however, that Gross Commissions shall not include any
sum until actually received by Agency. Any chargebacks, or errors caused wholly
as a result of the acts of any Agent will reduce the amount accordingly. Gross
Commissions shall not include due diligence points, wholesaling commissions,
non-accountable fees or reimbursements, or any commission not directly stated as
subject to customary direct offsets, including, but not limited to, direct
offsets for errors, settlements with clients and trade adjustments. All service
fees shall be payable no later than the first day of the second month subsequent
to the month during which B/D provides the above-described support activities.
It is expressly agreed and understood by and between Agency and B/D that no part
of the service fees payable under this Agreement shall constitute, directly or
indirectly, payment to Institution of any compensation, remuneration or other
valuable consideration for services as a life insurance agent.
VII.
Agency, B/D and Institution agree to cooperate fully with each other
with respect to any governmental investigation or administrative or judicial
proceeding and in connection with any customer complaint with respect to the
transaction of insurance and annuity business by Agency or by any of its Agency
Representatives. Each party shall consult with the other party before responding
to any such investigation, administrative or judicial proceeding or customer
complaint, and each party shall keep the other fully advised as to the status
thereof.
VIII.
B/D shall assist Agency in its compliance with all applicable federal
and state securities laws, state insurance laws, and all other provisions of
law, including federal, state, county, and city laws, ordinances, and
regulations, building codes, and other governmental or municipal regulations
which relate to the occupancy and use of the subleased premises, including,
without limitation, the applicable provisions and requirements of the
Interagency Statement on Retail Sales of Nondeposit Investment Products
published by the Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, the Office of Comptroller of the Currency and the
Office of Thrift Supervision dated February 15, 1994, as such statement may be
amended from time to time. Agency shall, however, be ultimately responsible for
such compliance.
IX.
Agency shall not prepare or publish any advertising or solicitation
material of any kind whatsoever containing any reference of any kind to B/D,
Institution or any person or company affiliated with B/D or Institution, or use
or refer to the name of B/D, Institution or any affiliate of either, in
connection with the solicitation or sale of insurance or annuity products,
unless the prior written consent of B/D or Institution, as applicable, is
obtained. B/D and Institution shall, prior to use, obtain the prior written
approval of Agency in connection with the use of any and all advertising, sales
literature and other sales materials that reference any insurance or annuity
product distributed or sponsored by Agency. B/D shall provide Agency with such
technical and marketing assistance as Agency shall reasonably require or request
in connection with the preparation of advertising and the dissemination thereof,
<PAGE>
but it shall be the duty of Agency to secure the approval of each insurance
company and governmental or regulatory authority from whom approval is required
prior to the use of such advertising. Agency understands that all documents,
records, lists or other information relating to customers of Institution are the
proprietary property of Institution and shall not be used for any purpose other
than as contemplated by this Agreement.
X.
Institution shall use its best efforts to cause its customers to be
aware of the existence of Agency on Institution's subleased premises and to make
appropriate referrals of its customers to Agency, as permitted under applicable
state law. Agency shall cooperate fully with Institution in the rendition of
Agency's services hereunder and shall provide and furnish Institution with such
information as may be reasonably required by Institution in connection
therewith. Agency, B/D and Institution hereby agree to protect, indemnify, and
hold and save harmless each from the other, to include all agents, servants and
employees of each, against any and all claims, costs, losses, damages, and
liability incurred by either of them as a result of the breach or violation of
any of the terms of this Agreement by the other, or because of any
misrepresentation, negligence or other misdeed by the other in dealing with all
third parties.
XI.
Any provision of this Agreement to the contrary notwithstanding,
Institution and Agency agree that the Agency Representatives shall be
independent contractors with Agency and no Institution Employee shall be deemed
to be an employee of Agency for any purpose whatsoever. No Institution Employee
shall be entitled to receive any remuneration or other compensation from Agency
or any insurance company in connection with the sale of any insurance or annuity
product by such Institution Employee or such Institution Employee's services as
an Agency Representative hereunder, except for commissions to be paid the Agency
Representative as set forth in Paragraph V hereof.
XII.
This Agreement may be terminated by any party hereto with or without
cause, upon thirty (30) days written notice by certified mail to the other party
at the address respectively set forth in Paragraph XVI, or if such address be
insufficient to permit delivery of notice, then such notice may be mailed to the
party's last known address. Either party may automatically terminate this
Agreement upon the happening of any one, or more, of the following events:
(i) Any party making an assignment for the benefit of its creditors;
(ii) The levying on or against any party's property of a writ of
execution or attachment that is not released or discharged within
thirty (30) days;
(iii) The institution in a court of competent jurisdiction of
proceedings for the reorganization, liquidation, or involuntary
dissolution of any party, or for its adjudication as a bankrupt or
insolvent, or for the appointment of a receiver of any party's
property, if the proceedings are not dismissed, and any receiver,
trustee, or liquidator appointed therein is not discharged within
thirty (30) days after the proceedings are instituted;
(iv) The management of any party's affairs being assumed by any
governmental, regulatory or judicial authority, or if the sale of the
products covered by this Agreement is prohibited by any regulatory
authority having jurisdiction over any party;
<PAGE>
(v) Agency's doing or permitting to be done any act that creates a
mechanics' lien or claim against the land or building of which the
premises are a part that is not released or otherwise provided for by
indemnification satisfactory to B/D within thirty (30) days;
(vi) Agency's failing to pay any service fee installment, or other
charge or money obligation required by this Agreement, within ten (10)
days after written notice, or to perform any other covenant under this
Agreement within thirty (30) days after written notice; and
(vii) Agency's deserting or vacating any substantial portion of the
premises for five or more consecutive days.
XIII.
Except for the Main Lease, the Brokerage Service Agreement and the
Sublease, this Agreement constitutes the entire Agreement and understanding
between the parties hereto with respect to the subject matter hereof. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective subsidiaries,
affiliates, successors and assigns of the parties hereto. Neither this Agreement
nor any of the rights, obligations or liabilities of either party hereunder
shall be assigned without the prior written consent of the other party hereto,
which consent shall not be unreasonably withheld. The assigning party will
remain liable for each obligation under this Agreement until the assignee
assumes all obligations under this Agreement. For the duration of this Agreement
and for twenty four (24) months after its termination, Institution agrees that
it will not promote, recommend or consult or in any manner encourage the
termination, surrender, or cancellation of any insurance or annuity contracts
sold by Agency Representatives. However, the foregoing shall not prevent
Institution from promoting, recommending, consulting regarding, or encouraging
the termination of an insurance or annuity contract sold by Agency
Representatives if Institution reasonably believed such action to be in the best
interest of its customer considering all financial factors including termination
penalties. Institution acknowledges that replacement of a contract sold
hereunder may be subject to all applicable laws and regulations, including the
filing by a licensed agency of appropriate replacement forms and reports with
state insurance departments as required.
XIV.
This Agreement shall be interpreted, construed and enforced in
accordance with the laws of the State of Texas. If any provision of this
Agreement shall be held invalid or unenforceable by a court or tribunal of
competent jurisdiction, the remainder shall not be affected thereby, but shall
have the same force and effect as if the invalid or unenforceable provision had
not been inserted. This Agreement constitutes the sole agreement of the parties
and supersedes any prior understandings or written or oral agreements between
the parties respecting the subject matter. If any action at law or in equity,
including an action for declaratory relief, is brought to enforce or interpret
this Agreement, the prevailing party is entitled to recover reasonable
attorney's fees from the other. The fees may be set by the court in the trial of
the action or may be enforced in a separate action for that purpose, and the
fees will be in addition to any other relief that may be awarded. The parties
declare that it is impossible to measure in money the damages that will accrue
to either party, their heirs, executors, administrators, legal representatives,
successors, or assigns by reason of a failure to perform any of the obligations
under this agreement. Therefore, if a party, its heirs, executors,
administrators, legal representatives, successors, or assigns institute any
action or proceeding to enforce this sublease, any person against whom the
action or proceedings are brought agrees that specific performance may be sought
and obtained for any breach of this Agreement. This Agreement and all other
copies of it, insofar as they relate to the rights, duties, and remedies of the
parties, will be considered one agreement. This Agreement may be executed
concurrently in one or more counterparts, each of which will be considered an
original, but all of which together will constitute one instrument. Time is of
the essence in this Agreement.
<PAGE>
XV.
Unless this Agreement provides otherwise, any notice, tender, or
delivery to be given by either party to the other may be effected by personal
delivery in writing or by registered or certified mail, postage prepaid, return
receipt requested, (i) if to Agency at 5555 San Felipe, 5th Floor, Houston, TX
77056, or (ii) if to Institution at 8820 Westheimer, P. O. Box 630369, Houston,
Texas 77263-0369 or (iii) if to B/D at 11901 Olive Blvd., Creve Coeur, MO 63141.
Such notices will be considered received as of mailing.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
[SEE FOLLOWING PAGE FOR SIGNATURES]
<PAGE>
IN WITNESS HEREOF, the undersigned parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the date first
above written.
Agency
By: /s/ David B. Frank
--------------------
Name: David B. Frank
--------------------
Title: President
--------------------
Institution
By: /s/ Joseph Milcoun, Jr.
------------------------
Name:Joseph Milcoun, Jr.
------------------------
Title: President
------------------------
B/D
By: /s/ Edward D. Furman
------------------------
Name: Edward D. Furman
------------------------
Title: Manager
------------------------
<PAGE>
EXHIBIT A
SUBLEASE
<PAGE>
SUBLEASE
THIS SUBLEASE ("Sublease") is entered into as of this 1st day of July,
1999, by and between FIRST BROKERAGE AMERICA LLC ("Sublessor") and BTI INSURANCE
AGENCY, INC. ("Sublessee").
A. Sublessor is the lessee under that certain lease dated July1, 1999
(the "Master Sublease"), pursuant to which Sublessor leases certain premises
described in Exhibit A attached hereto (the "Premises") from First Bank TEXAS,
N.A., headquartered in Houston, Texas (the "Master Lessor").
B. Sublessee desires to sublease from Sublessor that certain undivided
portion of the Premises described in Exhibit B attached hereto, together with
furniture, fixtures, equipment, office supplies and other items Sublessee may
require in its insurance and annuity business (the "Subleased Premises") upon
the terms and subject to conditions set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. Demise. Sublessor hereby leases, lets and demises unto
Sublessee, and Sublessee hereby leases and rents from Sublessor, upon the terms,
covenants and conditions herein contained, the Subleased Premises.
2. Term. The term of this Sublease (the "Term") shall commence
on July 1, 1999 (the "Commencement Date") and continue until July 1, 2000,
unless earlier terminated as provided herein.
3. Rent. Sublessee shall pay, as rent hereunder, to Sublessor,
at 11901 Olive Blvd., Creve Coeur, Missouri 63141, or to such other person or at
such other address as Sublessor may from time to time hereafter designate by
notice to Sublessee, without demand and without set-off or deduction whatsoever,
rent in an amount equal to $50.00 per month per branch location of Master
Lessor. It is the intention of the parties that this Sublease be a "gross"
Sublease, and that Sublessee shall not be obligated to make any payment to
Sublessor other than Rent. Without limiting the generality of the foregoing,
Sublessee shall not be obligated to pay any premiums for insurance, to pay any
real property taxes, or to pay any common area maintenance charges, percentage
rent or any other amounts which may be payable by Sublessor to the Master Lessor
under the Master Lease.
4. Master Lease. This Sublease is subject to all of the terms,
covenants and conditions of the Master Lease. Sublessee agrees that it will not
take any actions which constitute a breach or default under the Master Lease. As
long as Sublessee performs its obligations under this Sublease, including but
not limited to the payment of Rent, Sublessor will pay all rent and other sums
due and payable to the Master Lessor under the Master Lease, and will not take
any actions which constitute a breach or default under the Master Lease, and
will not take any actions which constitute a breach or default under the Master
Lease. To the extent that the consent of the Master Lessor shall also be
required for the performance of any acts by Sublessor under the Master Lease,
the consent of Sublessor shall also be required for the performance of such acts
by Sublessee under this Sublease, and such consent shall also be conditioned
upon receipt of the consent of the Master Lessor.
5. Use. Sublessee may only use the Subleased Premises
or the purposes of providing insurance agent and brokerage services.
6. Utilities, Services and Maintenance; Personal
Property.
a) Utilities (HVAC, water, sewer, electricity,
telephone and other utilities required for the transaction of insurance
business contemplated by this Sublease), services (janitorial, heat and air
conditioning) and maintenance will be provided by the Master Lessor.
<PAGE>
b) Throughout the Term of this Sublease,
Sublessee shall have the right to use, without charge, certain furniture,
fixtures and equipment, including but not limited to telephone and computer
systems (collectively, "FF&E"), which are owned by Master Lessor. All such FF&E
is leased in its "as-is" condition, without representation or warranty by
Sublessor as to physical condition or fitness for Sublessee's
intended use.
7. Quiet Enjoyment; Access. Subject to the provisions of this
Sublease and the Master Lease, as long as Sublessee is not in default hereunder,
Sublessee shall have and enjoy the quiet enjoyment of Subleased Premises.
Sublessee shall also have the right to use the "common areas" of the Premises
for ingress and egress to the Subleased Premises. Notwithstanding the foregoing,
upon reasonable prior notice (except in the case of an emergency) and during
business hours, Sublessor and Sublessor's agents or representatives may inspect
the Subleased Premises for the purpose of making audits and examinations of
records pertaining to Sublessee's activities at the Subleased Premises.
8. Indemnification and Release. Sublessee agrees to defend,
indemnify and hold harmless Sublessor from any and all claims, demands,
expenses, actions, causes of action, and other liabilities, including attorneys'
fees and costs, which arise in connection with Sublessee's use or occupancy of
the Subleased Premises. Sublease hereby releases Sublessor from all liability
for damages from any cause whatsoever which Sublessee may incur in connection
with the use or occupancy of the Subleased Premises, except for acts involving
willful misconduct or gross negligence of Sublessor or its employees or agents.
9. Sublessor Warranty. Sublessor warrants and represents to
Sublessee that the Master Lease has not been amended or modified except as
disclosed in writing to Sublessee, that Sublessor is not now, and as of the
commencement of the Term hereof will not be, in default or breach of any of the
provisions of the Master Lease, and that the Master Lessor is not now, and as of
the commencement of the Term will not be, in default or breach of any of the
provisions of the Master Lease.
<PAGE>
10. Termination; Default.
10.1 This Sublease may be terminated by either
party hereto, with or without cause, for any reason or no reason, upon thirty
(30) days written notice to the other party.
10.2 Without limiting the foregoing, either party
may terminate this Sublease immediately upon notice to the other party upon the
occurrence of any of the following events by the other party:
(i) an assignment by such party for the benefit
of its creditors;
(ii) the levying on or against such party's
property of a writ of execution or attachment that is not released or discharged
within thirty (30) days;
(iii) such party's breach or default under the
Services Agreement between Sublessor and Sublessee, which breach remains uncured
after expiration of any "cure" period stated therein;
(iv) the institution in a court of competent
jurisdiction of proceeding for the reorganization,
liquidation, or insolvency dissolution of such party, or for its adjudication as
a bankrupt or insolvent, or for the appointment of a receiver of such party's
property, if such proceedings are not dismissed, and any receiver, trustee, or
liquidator appointed therein is not discharged within 30 days after the
proceedings are instituted; and
(v) the management of such party's affairs being
assumed by any governmental, regulatory or judicial authority, or if such party
is prohibited by any governmental or regulatory authority from continuing its
primary line of business
10.3 Without limiting the foregoing, Sublessor
may terminate this agreement immediately upon notice to Sublessee upon the
occurrence of any of the following events:
(i) Sublessee's failure to pay Sublessor any
installment of Rent or any other fee, charge or monies due to Sublessor, within
10 days after the same shall have been due,
(ii) Sublessee's failure to perform any other
covenant under this Sublease within thirty (30) days
after written notice from Sublessor.
11. Remedies.
11.1 Upon any of the events described in
Sections 10.2 or 10.3 above, Sublessor may terminate Sublessee's right to
possession of the Subleased Premises by any lawful means, in which case this
Sublease and the Term hereof shall terminate and Sublessee shall immediately
surrender possession of the Subleased Premises to Sublessor. In such event, in
addition to any other rights or remedies Sublessor may have at law or in equity,
Sublessor may (i) recover any amounts permitted pursuant to applicable Texas
case law or (ii) exercise remedies provided in applicable Texas case law.
(Sublessor may continue Sublease in effect after Sublessee's breach and
abandonment and recover rent as it becomes due, if Sublessee has the right to
sublet or assign, subject to reasonable limitations).
<PAGE>
11.2 Sublessor's failure to enforce any default
or breach of covenant on the part of Sublessee shall not be, or be construed as
a waiver thereof, nor shall any custom or practice between the parties in the
course of administering this instrument be construed to waive or lessen the
right of Sublessor to insist upon the performance by Sublessee of any term,
covenant or condition hereof, or to exercise any right given it on account of
any such default. The acceptance of Rent hereunder shall not become or be
construed to become a waiver of any term, covenant or condition of this
Sublease.
12. Notices. Any notice under or relating to this Sublease
shall be given in writing and shall be deemed sufficiently given and served for
all purposes when personally delivered or given by telex or machine-confirmed
facsimile or three business days after a writing is deposited in the United
States mail, first class postage or other charges prepaid and registered, return
receipt requested, addressed as follows:
If to Sublessor: First Brokerage America, L.L.C.
Attn: Edward D. Furman, Manager
11901 Olive Blvd.
Creve Coeur, Missouri 63141
Fax No.: (314) 995-8781
If to Sublessee: BTI Insurance Agency, Inc.
Attn: David B. Frank, President
450 Gears Suite 770
Houston TX 77067
Fax No.: (281) 953-4143
13. Entire Agreement. Except for that certain Service
Agreement dated July 1, 1999, ("Service Agreement") this Sublease is and shall
be considered to be the only agreement between the parties hereto with respect
to the subject matter hereof. All negotiations and agreements with respect to
the subject matter of this Sublease have been merged herein and in the Service
Agreement and are included herein or therein. There are no other representations
or warranties between the parties and all reliance with respect to
representations are contained in this Sublease or the Service Agreement.
14. Consent to Sublease by the Master Lessor. It is understood
and agreed between Sublessor and Sublessee that this Sublease is subject to
receipt of the written consent of Master Lessor.
15. Construction. This Agreement has been executed in
and is to be performed in the State of Texas, and this Agreement shall be
interpreted in accordance with the laws of the State of Texas.
16. Amendments. This Agreement may not be amended, modified
or altered except by a written instrument executed by all parties hereto.
17. Gender; Number. As used herein, the masculine, feminine or
neuter gender, and the singular or plural number, shall each be deemed to
include the others whenever the context so indicates.
18. Counterparts. This Agreement may be executed in one (1) or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one (1) and the same instrument.
19. Waiver. The failure of any party, at any time, to require
timely performance by any other party of any provision of this Agreement shall
not affect such party's rights thereafter to enforce the same, nor shall the
waiver by any party of any breach of any provision of this Agreement, whether or
not agreed to in writing, be taken or held to be a waiver of the breach of any
other provision or a waiver of any subsequent breach of the same provision of
this Agreement. No extension of time for the performance of any obligation or
act hereunder shall be deemed to be an extension of time for the performance of
any other obligation or act hereunder.
20. Additional Acts. The parties agree to perform such further
acts and to execute, acknowledge and deliver such documents as may be necessary
to effectuate the provisions of this Agreement.
<PAGE>
IN WITNESS WHEREOF the undersigned have duly executed this
Agreement on the day and year first above set forth.
"Sublessor"
FIRST BROKERAGE AMERICA, L.L.C.
/s/ Edward D. Furman
- --------------------
By: Edward D. Furman
Its: Manager
"Sublessee"
BTI INSURANCE AGENCY, INC.
/s/ David B. Frank
- ------------------
By: David B. Frank
Its: President
<PAGE>
EXHIBIT A
<PAGE>
CONSENT OF MASTER LESSOR
The undersigned, lessor ("Master Lessor") under the above-referenced
Master Lease, hereby consents to the attached Sublease, on the terms and
conditions set forth above, provided that the granting of such consent shall not
constitute a consent to any subsequent sublease of the Subleased Premises.
Master Lessor agrees that if the Sublease shall be terminated, canceled
or surrendered prior to the end of the Term of the attached Sublease,
Sublessee's possession of the Subleased Premises under the Sublease or Sublease
shall not be disturbed or interfered with by Master Lessor in the exercise of
any of its rights under the Sublease and all of the terms and conditions set
forth in the attached Sublease shall continue in full force and effect between
Master Lessor and Sublessee as though said Sublease were originally made and
entered into between Master Lessor and Sublessee.
"Master Lessor"
FIRST BANK TEXAS, N.A.
By: /s/ Joseph Milcoun, Jr.
- ---------------------------
Its: Vice President
<PAGE>
Exhibit 10(cc)
FEDERAL FUNDS
AGENCY AGREEMENTS
This agreement between First Bank (the Agent), and Redwood Bank (the Bank) is to
be in effect until canceled or amended, and establishes the procedures and
conditions by which the Agent will arrange for the purchase or sale of Federal
Funds for the Bank.
1. The funds of the Bank will be bought or sold to one or more of the
banks on the attached list with a minimum of $25,000, and in
increments of $25,000. A list of specific banks to which the
Bank's funds were sold is available upon request. The Agent is
functioning only in an agency capacity, and shall not be liable to
the Bank if the funds or interest are not repaid at maturity; that
is to say the Agent assumes no credit risk regarding the repayment
of funds upon maturity.
2. The trade will be for one business day, observing the same
holidays that are observed by the Federal Reserve Bank of St.
Louis.
3. The principal on the settlement date and the principal and
interest on the maturity date will be debited or credited as
appropriate to the Bank's demand deposit account at First Bank.
The Agent will confirm the Bank's order daily with a trade
confirmation mailed to the Bank. Each business day, the Agent will
buy or sell the same amount of the Banks Federal Funds as was
bought or sold the previous day unless the Agent receives notice
from the Bank by 2:00 PM central time to change the total Federal
Funds order.
4. Under normal circumstances, our resale of your funds in the funds
market, as your agent, will not exceed the Bank's concentration of
funds limit as set forth on the attached schedule.
5. The agent will charge the Bank a fee for each transaction of 0.5%,
(sales), or .20% (purchases), which may be revised at a future
date at the Agent's discretion after giving written notice to the
Bank.
Agreed this 26th day of May, 1999
FIRST BANKS Redwood Bank
By: /s/ Edward Furman /s/ Anthony S. Dee
----------------- ------------------
(Agent) (Bank)
Senior Vice President President
<TABLE> <S> <C>
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<CIK> 0000310979
<NAME> First Banks, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Sep-30-1999
<CASH> 27,294
<INT-BEARING-DEPOSITS> 367
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<TRADING-ASSETS> 0
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<TOTAL-ASSETS> 904,382
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0
0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,079
<EPS-BASIC> 1.06
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<YIELD-ACTUAL> 8.69
<LOANS-NON> 4,328
<LOANS-PAST> 97
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<LOANS-PROBLEM> 4,234
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</TABLE>
