FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
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 0-13423
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FNB ROCHESTER CORP.
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(Exact name of registrant as specified in its charter)
New York 16-1231984
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
35 State Street, Rochester, New York 14614
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 546-3300
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Securities registered pursuant to Section 12 (b) of the Act:
None None
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(Title of Each Class) (Name of Each Exchange on
Which Registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value Per Share
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(Title of Each Class)
Indicate by check Mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES ____X____ NO ________
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy of information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___
The aggregate market value of the 2,534,117 shares of Common
Stock-Voting held by non-affiliates of the registrant at March
20, 1997 (based on the average of high and low prices on March
20, 1997) was $35,636,020. Solely for the purposes of this
calculation, all persons who are directors and executive officers
of the Registrant and all persons who are believed by the
Registrant to be beneficial owners of more than 5% of its
outstanding common stock have been deemed to be affiliates.
Number of shares of Common Stock outstanding as of the close of
business on March 20,1997 was 3,574,424.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference
in the following parts of this report; Parts I and II - - the
Registrant's 1996 Annual Report to Shareholders; Part III -- the
Registrant's definitive proxy statement as filed or to be filed
with the Securities and Exchange Commission and as used in
connection with the solicitation of proxies for the Registrant's
annual meeting of shareholders to be held on May 27, 1997.
<PAGE>
Part I
Item 1. Business
General
FNB Rochester Corp. (the "Company") is a bank holding company.
First National Bank of Rochester ("First National" or the "Bank")
is its only subsidiary. The Company was organized under the New
York Business Corporation Law and commenced operations on
September 10, 1984. At December 31, 1996, the Company had
consolidated assets and deposits of $437.9 million and $404.8
million, respectively. The Bank is a member of the Federal
Reserve System and its deposits are insured by the Federal
Deposit Insurance Corporation ("FDIC"). Until April 1, 1994, the
Company also owned Atlanta National Bank ("Atlanta") in Atlanta,
NY. Atlanta was sold to Bath National Bank.
The Bank was established in 1965, in Rochester, New York as a
national bank. It provides a full range of commercial banking,
trust, and consumer banking services to businesses and
individuals.
Market Area
The Company's business is conducted from its corporate
headquarters located in the Powers Building at the corner of
State and Main Streets in downtown Rochester, New York. The
Bank's fifteen banking offices are located in Monroe, Chemung,
Erie, and Onondaga Counties in New York State. The Bank sold
its Odessa office in Schuyler County in 1996 and its Shop City
office in Onondaga County in 1994, but still provides services in
Onondaga County through its Downtown Syracuse office. The Bank
expanded into the metropolitan Buffalo area in 1993 with the
addition of a loan production office to serve business and
professional customers in a suburban section of Erie County. In
August 1994, the Buffalo office became a full service branch.
Both the Buffalo and Downtown Syracuse banking offices focus
their sales and service efforts on business and professional
customers.
The Bank considers its primary service and market area to be the
City of Rochester and surrounding towns, which have a total
population of approximately 1 million. Rochester, located in the
western part of New York State on the south shore of Lake
Ontario, is the third largest city in New York State. Greater
Rochester has a diversified manufacturing base. Four national
firms with significant manufacturing facilities and other major
business operations in the Greater Rochester area are Eastman
Kodak Company, Xerox Corporation, Bausch & Lomb Inc. and General
Motors Corporation. Rochester is the home of the corporate
headquarters of both Eastman Kodak and Bausch & Lomb. Other
institutions that add stability to the area's employment include
the University of Rochester, Rochester Institute of Technology,
eight other institutions of higher education, and seven large
hospitals. Although primarily agricultural and residential in
nature, the surrounding communities served by the Company also
have office, commercial, educational, retail, and light
industrial facilities. Businesses in these communities constitute
an important part of the Bank's customer base.
Banking Services
First National's services are provided through thirteen full-
service community banking offices, twelve of which have drive-up
facilities, plus the Buffalo and Syracuse offices. Automated
teller machines (ATM's) are located at the eleven Monroe County
banking offices, and customers may use ATM's throughout the
United States and abroad through ATM networks. The Bank opened
its newest banking office in Monroe County (Town of Perinton) in
March 1996. Three new Monroe County banking offices were opened
in 1995.
The Bank is engaged in general commercial banking, providing a
wide range of loan and deposit services. As of December 31, 1996,
the Bank had approximately 42,100 deposit accounts and 11,300
loans outstanding. The Bank offers a wide range of retail
services, including installment loans, credit cards, checking
accounts, savings accounts, money market accounts, and various
types of time-deposit instruments. Mortgage lending activities
include commercial, industrial, and residential loans secured by
real estate. Commercial lending activities include originating
secured and unsecured loans and lines of credit and providing
cash management and accounts receivable financing services to a
variety of businesses. The Bank also operates a merchant credit
card program. The Bank's installment loan department makes
direct auto, home equity, home improvement, and personal loans
to individuals. The Bank offers safe deposit box services at
twelve of the banking offices.
The Trust & Investment Division of First National was expanded in
1993. The Trust & Investment Division at First National Bank
acts as executor and/or trustee and provides administration,
record-keeping, and professional portfolio management for
individuals, corporations, institutions, and not-for-profits.
Assets under management increased $23.9 million, or 58.6%, from
$40.7 million at year end 1995 to $64.6 million at year end 1996,
through product offerings such as 401(k) plans, investment
management, corporate and cash management services, mutual funds,
annuities, and traditional trust and record-keeping services.
The Trust & Investment Division has established various strategic
alliances with service partners to reduce costs, provide better
and more efficient services, obtain access to other markets and
enhance its capabilities and product offerings. As with any
major business expansion, this is a long-term commitment on the
part of the Bank.
Employees
At December 31, 1996, the Company had 241 employees of whom 46
worked on a part-time basis. None of the employees are covered by
a collective bargaining agreement. The Company considers its
relations with its employees to be good.
Competition
The Bank is one of approximately fourteen commercial and savings
institutions competing for deposits and loans in Monroe County.
Approximately nine commercial and savings institutions compete in
Chemung County. The Bank considers its business to be highly
competitive in its service areas. Many of the competitors are
larger than First National in terms of number of offices, assets,
and resources, and many have higher lending limits than First
National.
The primary competition for the Trust & Investment Division comes
from investment advisory and brokerage firms, as well as other
bank trust departments in the Bank's primary market area.
In recent years, non-bank financial institutions such as credit
unions, money market funds, stock brokerage firms, insurance
companies, and mortgage banking firms have been an increased
source of competition. Non-bank financial institutions continue
to be subject to less regulation than commercial banks in certain
areas.
Supervision and Regulation
As a bank holding company, the Company is subject to the Bank
Holding Company Act of 1956, as amended (the "Act"), and is
required to file annual reports and such additional information
as may be required by the Federal Reserve Board (the "FRB")
pursuant to the Act. The FRB has the authority to examine the
Company and its subsidiaries.
The Act and regulations thereunder limit, with certain
exceptions, the business which a bank holding company may engage
in, directly or indirectly through subsidiaries, to banking,
managing or controlling banks, furnishing or performing services
for banks controlled by the Company, and services incident
thereto. In addition, the Act and regulations thereunder require
the prior approval of the FRB for the acquisition of a bank or
bank holding company if thereafter the bank holding company will,
directly or indirectly, control more than 5% of the voting stock
of such bank or bank holding company, or substantially all the
assets of such bank or bank holding company.
Among the activities permitted to bank holding companies is the
ownership of shares of any company which engages in activities
that the FRB determines to be so closely related to banking,
managing, or controlling banks as to be a proper incident
thereto. The FRB has determined a number of activities to be
closely related to banking, and has proposed others for
consideration. Such activities include leasing real or personal
property under certain conditions; operating as a mortgage
financing or factoring company; servicing loans and other
extensions of credit; acting as a fiduciary; acting as an
investment or financial advisor under certain conditions; acting
as an insurance agent or broker principally in connection with
the extension of credit by the bank holding company or any
subsidiary; acting as underwriter for credit life insurance and
credit accident and health insurance that is directly related to
extension of credit by the bank holding company or any
subsidiary; providing bookkeeping or data processing services for
the bank holding company, its affiliates, other financial
institutions and others, with certain limitations; making certain
equity and debt investments in community rehabilitation and
development corporations; and providing certain kinds of
management consulting advice to unaffiliated banks.
The Federal Reserve Act imposes restrictions on extensions of
credit by subsidiary banks of a bank holding company to the bank
holding company or any of its subsidiaries, or investments in the
stock or other securities of the holding company, and on the use
of such stock or securities as collateral for loans to any
borrower. Further, under the FRB's regulations, a bank holding
company and its subsidiaries are prohibited from engaging in
certain tie-in arrangements in connection with any extension of
credit, lease or sale of property, or furnishing of services.
From time to time the FRB may adopt further regulations pursuant
to the Act. The Company cannot predict whether any further
regulations will be adopted or how such regulations will affect
the consolidated operating results or business of the Company.
The primary supervisory authority of the Bank is the Office of
the Comptroller of the Currency (the " OCC"), which regularly
examines such risk areas as capital adequacy, reserves, loans,
investments, management practices, and other aspects of the
Bank's' operations. In addition to these regular examinations,
the Bank must furnish quarterly and annual reports to the OCC.
The OCC has the authority to issue cease-and-desist orders to
prevent a bank from engaging in an unsafe or an unsound practice
or violating the law in conducting its business.
The Bank is also a member of the Federal Reserve System, and as
such, is subject to certain laws and regulations administered by
the FRB. As a member of the Federal Reserve System, the Bank is
required to maintain non-interest bearing reserves against
certain accounts. The amount of reserves required to be
maintained is established by regulations of the FRB and is
subject to adjustment from time to time.
The Bank's deposits are insured by the Bank Insurance Fund (BIF)
of the FDIC up to a maximum of $100,000 per insured deposit
account, subject to the rules and regulations of the FDIC. For
this protection, the Banks pay a quarterly statutory assessment.
The policies of regulatory authorities have had a significant
effect on the operating results of commercial banks in the past,
and are expected to do so in the future. An important function
of the Federal Reserve System is to regulate aggregate national
credit and money supply through such means as open market
dealings in securities, establishment of the discount rate on
bank borrowing, changes in reserve requirements against bank
deposits, and limitations on the deposits on which a bank may pay
interest. Policies of these agencies may be influenced by many
factors including inflation, unemployment, short-term and long-
term changes in the international trade balance, and fiscal
policies of the United States Government. Supervision,
regulation, or examination of the Company by bank regulatory
agencies is not intended for the protection of the Company's
shareholders.
Loans made by the Bank are also subject to numerous other federal
and state laws and regulations, including the Truth in Lending
Act, the Community Reinvestment Act, the Equal Credit Opportunity
Act, the Real Estate Settlement Procedures Act, and the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989.
The United States Congress has periodically considered and
adopted legislation that has resulted in deregulation of both
banks and other financial institutions. Congress has adopted
further legislation to modify or eliminate geographic
restrictions on banks and bank holding companies, and could
modify or eliminate current prohibitions against banks engaging
in one or more non-banking activities. Such legislative changes
could place the Bank in more direct competition with other
financial institutions including mutual funds, securities
brokerage firms, insurance companies, and investment banking
firms. The effect of any such legislation on the business of the
Bank cannot be predicted.
Statistical data required to be disclosed by bank holding
companies is included under the caption Management's Discussion
and Analysis of Financial Condition and Results of Operations
included in the Company's Annual Report to Shareholders for the
year ended December 31, 1996.
Item 2. Properties
The Bank operates fifteen banking offices. Eight of the banking
offices are owned (five are on leased land), six are leased, and
one is rented on a month to month basis. The Bank also owns the
building at 35 State Street, Rochester, New York and leases
additional office space in the adjacent Powers Building. The
leases are long-term and non-cancelable and expire at various
dates from 2000 through 2016 with optional renewal terms of five
to ten years and rent escalation clauses. Some of the leases also
provide for contingency rent to be paid annually based upon
increases in deposits or the cost of living. The properties are
as follows:
<PAGE>
<TABLE>
<CAPTION>
Owned(O)
Leased(L)
Leased Lease
Location Principal Use Land(LL) Exp Date
________ _____________ ________ ________
<S> <C> <C> <C>
35 State St.,
Rochester, NY Bank Office Space O
Powers Building, Four Corners Banking Office L 12/31/09
Rochester, NY Bank Office Space
1 E. Main St.,
Rochester, NY Partially subleased L 08/31/01
3140 Monroe Ave.,
Rochester, NY Pittsford Banking Office O
2147 W. Ridge Rd.,
Rochester, NY Greece Banking Office O
Hard & Ridge Rd.,
Webster, NY Webster Banking Office O
1000 E. Ridge Rd.,
Rochester, NY Irondequoit Banking Office LL 11/30/02
28 N. Main St.,
Honeoye Falls, NY Honeoye Falls Banking Office L 01/31/11
3333 W. Henrietta Rd.,
Rochester, NY Henrietta Banking Office L 01/07/16
Warren & Washington Sts.,
Syracuse, NY Syracuse Banking Office L 05/31/05
Miracle Mile,
Elmira, NY Horseheads Banking Office LL 06/30/03
Broadway & Pennsylvania Ave.,
Elmira, NY Southport Banking Office L 02/28/00
Snyder Square,
Amherst, NY Buffalo Banking Office L Monthly
214 W. Commercial St.,
E. Rochester, NY E. Rochester Banking Office L 02/28/03
3175 Chili Ave.,
Rochester, NY Chili Banking Office LL 09/09/15
Penfield Rd. & Rt. 250,
Rochester, NY Penfield Banking Office LL 12/24/15
Pittsford/Palmyra Rd.
& Rt. 250 Perinton Banking Office LL 03/31/16
Rochester, NY
</TABLE>
The Banking Offices in the above table range in size from
approximately 2,000 square feet to 4,500 square feet.
The Bank took occupancy of 36,000 square feet in the Powers
Building during 1994 and vacated two floors (approximately 9,800
square feet) in the Wilder Building at 1 E. Main Street,
consolidating all operations including the banking office into
the Powers Building and the adjacent 35 State Street Building.
These consolidated facilities have increased efficiency and are
strategically located in downtown Rochester. The space in the
Wilder Building that the Bank continues to lease is approximately
4,700 square feet and of that space 2,700 square feet is
subleased.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 1996, no matter was submitted to a
vote of Company's shareholders.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Dividends Paid and Market Prices of Registrant's Stock
The following table displays the range of bid price quotations
for the Company's common stock for the years ended December 31,
1996 and December 31, 1995. The Company declared a $.05 per share
dividend on common stock in December 1996 payable January 31,
1997 to shareholders of record January 15, 1997. No dividends
were paid on common stock in 1995. The Company's common stock
trades on the over-the-counter market and is quoted on the NASDAQ
National Market System under the symbol FNBR.
Price Quotations:
Price Quotations
Bid Price (low-high)
____________________
1996
____
First quarter $ 9.38 - 10.00
Second quarter 9.00 - 10.25
Third quarter 8.63 - 10.38
Fourth quarter 10.13 - 13.13
_____ _____
$ 8.63 - 13.13
===== =====
1995
____
First quarter $ 5.25 - 6.25
Second quarter 5.75 - 7.88
Third quarter 7.38 - 9.50
Fourth quarter 7.88 - 9.75
_____ -___
$ 5.25 - 9.75
===== =====
The above prices were furnished by NASDAQ, and such quotations
reflect inter-dealer prices, without retail mark-up, mark-down,
or commissions. The prices may not reflect actual transactions.
At the close of business on March 20, 1997, the Company had
approximately 789 shareholders of record.
Item 6. Selected Financial Data
The financial information included under the caption "Five-year
Summary of Selected Financial Information" in the Company's
Annual Report to Shareholders for the year ended December 31,
1996, submitted herewith as an exhibit, is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information included under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" included in the Company's Annual Report to
Shareholders for the year ended December 31, 1996, submitted
herewith as an exhibit, is incorporated herein by reference.
Item 8. Consolidated Financial Statements and Supplementary Data
The consolidated statements of financial condition of FNB
Rochester Corp. and Subsidiaries as of December 31, 1996 and 1995
and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1996 together with the
related notes and the report of KPMG Peat Marwick LLP,
independent auditors, dated January 28, 1997, and the information
under the caption "Quarterly Financial Information" (unaudited),
all contained in the Company's 1996 Annual Report to
Shareholders, submitted herewith as an exhibit, are incorporated
herein by reference.
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure
Not Applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information in response to this item is incorporated herein
by reference to the information under the caption "Nominees for
Election as Directors" and "Executive Officers" presented in the
Company's definitive proxy statement filed or to be filed
pursuant to Regulation 14A and used in connection with the
Company's 1997 annual meeting of shareholders to be held on or
about May 27, 1997.
Item 11. Executive Compensation.
The information in response to this item is incorporated herein
by reference to the information under the caption "Executive
Compensation" presented in the Company's definitive proxy
statement filed or to be filed pursuant to Regulation 14A in
connection with the Company's 1997 annual meeting of shareholders
to be held on or about May 27, 1997, provided, however, that
information appearing under the captions "Compensation Committee
Report on Executive Compensation" and "Share Performance Graph"
is not incorporated herein and should not be deemed included in
this document for any purpose.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information in response to this item is incorporated herein
by reference to the information under the caption "Beneficial
Ownership of the Company's Stock by Certain Persons and
Management" presented in the Company's definitive proxy statement
filed or to be filed pursuant to Regulation 14A and used in
connection with the Company's 1997 annual meeting of shareholders
to be held on or about May 27, 1997.
Item 13. Certain Relationships and Related Transactions.
The information in response to this item is incorporated herein
by reference to the information under the captions "Certain
Relationships and Related Party Transactions" and "Compensation
Committee Interlocks and Insider Participation" presented in the
Company's definitive proxy statement filed or to be filed
pursuant to Regulation 14A and used in connection with the
Company's 1997 annual meeting of shareholders to be held on or
about May 27, 1997.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) The following documents are filed as part of this report:
(1.0) Consolidated Financial Statements are contained in
the Company's 1996 Annual Report to Shareholders which, as
indicated below, is included as Exhibit 13 of this report.
Page
- Independent Auditors' Report 119
- Consolidated Statements of Financial Condition
as of December 31, 1996 and 1995 120
- Consolidated Statements of Operations for the
Years Ended December 31, 1996, 1995, and 1994 121
- Consolidated Statements of Changes in
Shareholders' Equity for the Years
Ended December 31, 1996, 1995, and 1994 123
- Consolidated Statements of Cash Flows for the
Years Ended December 31, 1996, 1995, and 1994 124
- Notes to Consolidated Financial Statements 126
(2.0) Schedules
Schedules are omitted because of the absence of conditions under
which they are required or because the required information is
provided in the consolidated financial statements or notes
thereto.
(3.0) Exhibits
Exhibit Incorporation by
Reference or page in
sequential numbering
where exhibit may be
found:
(3.1) Certificate of Exhibits 4.2-4.5 to
Incorporation, of the Registration Statement
Registrant, as amended No. 33-7244, filed July
22, 1986
(3.2) Amendment to Exhibit 3 to Form 10-Q
Certificate of for period ended
Incorporation of June 30, 1992
Registrant dated August
6, 1992
(3.3) By-laws of the Exhibit 3.3 to Annual
Registrant, as Report on Form 10-K
amended. for the year ended
December 31, 1992
(10.1) 1992 Stock Option Appendix A to Proxy
Plan (as amended May 28, Statement dated April 24,
1996)* 1996 for Annual Meeting
of Shareholders held May
28, 1996
(10.2) 1995 Non-employee Appendix B to Proxy
Director Stock Option Statement dated April 24,
Plan* 1996 for Annual Meeting
of Shareholders held May
28, 1996
(10.3) Employment Exhibit 1 to Form 8-K
Agreement dated June filed June 23, 1992
8, 1992 between the
Registrant and R.
Carlos Carballada*
(10.4) Extension of Exhibit 10.1 to Form 10-Q
Employment Agreement for period ended June 30,
between the Registrant 1996
and R. Carlos Carballada*
(10.5) Change of Control Exhibit 10.4 to Annual
Employment Agreement Report on Form 10-K for
among the Registrant, the year ended December
First National and R. 31, 1995
Carlos Carballada*
(10.6) Form of Change of Exhibit 10.5 to Annual
Control Employment Report to Form 10-K for
Agreement between First the year ended December
National and each 31, 1995
Executive Officer other
than R. Carlos
Carballada*
(10.7) Form of Stock Exhibit 4.2 to Form S-8
Option Agreement pursuant Registration Statement
to 1992 Stock Option Plan No. 333-15325, filed
between the Registrant November 1, 1996
and each Executive
Officer*
(10.8) Form of Stock Exhibit 4.4 to Form S-8
Option Agreement pursuant Registration Statement
to 1995 Non-employee No. 333-15325, filed
Director Stock Option November 1, 1996
Plan between the
Registrant and each
outside Director of the
Registrant*
(10.9) 401(k) Stock Exhibit 4.5 to Form S-8
Purchase Plan* Registration Statement
No. 333-15325, filed
November 1, 1996
(10.10) Employee Stock Exhibit 4.6 to Form S-8
Purchase Plan* Registration Statement
No. 333-15325, filed
November 1, 1996
(10.11) Loan agreements Exhibit 10.14 and 10.15
between First National to Form 8 filed April 22,
and Executive Square 1992
Associates, related to
Estate of Fred B. Kravetz
(10.12) Loan agreement Exhibit 10.17 to Form 8
between First National filed April 22, 1992
and Prioneer Daycare
Company, related to
Michael J. Falcone
(10.13) Loan agreements Exhibit 10.19 to Form 8
between First National filed April 22, 1992
and Carl R. Reynolds
(10.14) Line of Credit Exhibit 10.17 to Annual
agreements between First Report on Form 10-K for
National and JML Optical year ended December 31,
Industries, Inc., related 1993
to Joseph M. Lobozzo II
(10.15) Loan agreements Exhibit 10.13 to Annual
between First National Report on Form 10-K for
and Joseph M. Lobozzo II year ended December 31,
1994
(10.16) Loan modification Exhibit 10.15 to Annual
agreements between First Report on form 10-K for
National and Executive year ended December 31,
Square Associates, 1994
related to Estate of Fred
B. Kravetz
(10.17) Loan Exhibit 10.16 to Annual
modification agreements Report on form 10-K for
between First National year ended December 31,
and Pioneer Daycare 1994
Company, related to
Michael J. Falcone
(10.18) Residential Exhibit 10.1 to Form 10-Q
Mortgage Loan Agreement for period ended June 30,
between Stacy C. Campbell 1995
and First National
(10.19) Lease Agreement Exhibit 10.2 to Form 10-Q
between Southtown Plaza for period ended June 30,
Associates, related to 1995
William Levine, and First
National
(10.20) Residential Exhibit 10.1 to Form 10-Q
Mortgage Loan Agreements for period ended
between Russell Family September 30, 1995
Associates, related to H.
Bruce Russell, and First
National
(10.21) Commercial Loan Exhibit 10.2 to Form 10-Q
Agreements between Estate for period ended
of Fred B. Kravetz and September 30, 1995
First National
(10.22) Commercial Line Exhibit 10.3 to Form 10-Q
of Credit Agreement for period ended
between GLC Outsourcing September 30, 1995
Services, Inc., related
to James D. Ryan, and
First National
(10.23) Commercial Loan Page 19
Agreements between Estate
of Fred B. Kravetz and
First National
(10.24) Commercial Loan Page 43
Agreements between Deal
Road Associates, L.P.,
related to Estate of Fred
B. Kravetz, and First
National
(10.25) Commercial Line Page 66
of Credit Agreements
between Lauri Kuskin and
First National
(10.26) Commercial Loan Page 73
Agreements between Fred
Kravetz and William
Levine Partners, related
to the Estate of Fred B.
Kravitz and to William
Levine, and First
National
(11) Statement of
Computation of Page 91
Earnings per share
(13) Annual Report to Page 92
Shareholders for
the year ended December
31, 1996
(21) Subsidiaries Page 151
(23) Consent of KPMG Page 152
Peat Marwick LLP
(27) Financial Data Page 153
Schedule
* Management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Report pursuant
to Item 14 (c).
(b) Reports on Form 8-K:
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FNB ROCHESTER CORP.
March 25, 1997 By: s/ R. Carlos Carballada
R. Carlos Carballada,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
_________ _____ ____
<S> <C> <C>
(i) Principal Executive Officer: President and Chief March 25, 1997
Executive Officer
s/ R. Carlos Carballada
(R. Carlos Carballada)
(ii) Principal Accounting and Senior Vice President March 25, 1997
Financial Officer: and Chief Financial
Officer
s/ Stacy C. Campbell
(Stacy C. Campbell)
(iii) Directors:
s/ R. Carlos Carballada Director March 25, 1997
(R. Carlos Carballada)
s/Michael J. Falcone Director March 25, 1997
(Michael J. Falcone)
s/Gayle C. Johnston Director March 25, 1997
(Gayle C. Johnston)
s/ Joseph M. Lobozzo II Director March 25, 1997
(Joseph M. Lobozzo II)
s/ Francis T. Lombardi Director March 25, 1997
(Francis T. Lombardi)
s/ Carl R. Reynolds Director March 25, 1997
(Carl R. Reynolds)
s/ James D. Ryan Director March 25, 1997
(James D. Ryan)
s/H. Bruce Russell Director March 25, 1997
(H. Bruce Russell)
s/Linda Cornell Weinstein Director March 25, 1997
(Linda Cornell Weinstein)
</TABLE>
<PAGE>
INDEX OF EXHIBITS
Exhibit Incorporation by
Reference or page in
sequential numbering
where exhibit may be
found:
(3.1) Certificate of Exhibits 4.2-4.5 to
Incorporation, of the Registration Statement
Registrant, as amended No. 33-7244, filed July
22, 1986
(3.2) Amendment to Exhibit 3 to Form 10-Q
Certificate of for period ended
Incorporation of June 30, 1992
Registrant dated August
6, 1992
(3.3) By-laws of the Exhibit 3.3 to Annual
Registrant, as Report on Form 10-K
amended. for the year ended
December 31, 1992
(10.1) 1992 Stock Option Appendix A to Proxy
Plan (as amended May 28, Statement dated April 24,
1996) 1996 for Annual Meeting
of Shareholders held May
28, 1996
(10.2) 1995 Non-employee Appendix B to Proxy
Director Stock Option Statement dated April 24,
Plan 1996 for Annual Meeting
of Shareholders held May
28, 1996
(10.3) Employment Exhibit 1 to Form 8-K
Agreement dated June filed June 23, 1992
8, 1992 between the
Registrant and R.
Carlos Carballada
(10.4) Extension of Exhibit 10.1 to Form 10-Q
Employment Agreement for period ended June 30,
between the Registrant 1996
and R. Carlos Carballada
(10.5) Change of Control Exhibit 10.4 to Annual
Employment Agreement Report on Form 10-K for
among the Registrant, the year ended December
First National and R. 31, 1995
Carlos Carballada
(10.6) Form of Change of Exhibit 10.5 to Annual
Control Employment Report to Form 10-K for
Agreement between First the year ended December
National and each 31, 1995
Executive Officer other
than R. Carlos Carballada
(10.7) Form of Stock Exhibit 4.2 to Form S-8
Option Agreement pursuant Registration Statement
to 1992 Stock Option Plan No. 333-15325, filed
between the Registrant November 1, 1996
and each Executive
Officer
(10.8) Form of Stock Exhibit 4.4 to Form S-8
Option Agreement pursuant Registration Statement
to 1995 Non-employee No. 333-15325, filed
Director Stock Option November 1, 1996
Plan between the
Registrant and each
outside Director of the
Registrant
(10.9) 401(k) Stock Exhibit 4.5 to Form S-8
Purchase Plan Registration Statement
No. 333-15325, filed
November 1, 1996
(10.10) Employee Stock Exhibit 4.6 to Form S-8
Purchase Plan Registration Statement
No. 333-15325, filed
November 1, 1996
(10.11) Loan agreements Exhibit 10.14 and 10.15
between First National to Form 8 filed April 22,
and Executive Square 1992
Associates, related to
Estate of Fred B. Kravetz
(10.12) Loan agreement Exhibit 10.17 to Form 8
between First National filed April 22, 1992
and Prioneer Daycare
Company, related to
Michael J. Falcone
(10.13) Loan agreements Exhibit 10.19 to Form 8
between First National filed April 22, 1992
and Carl R. Reynolds
(10.14) Line of Credit Exhibit 10.17 to Annual
agreements between First Report on Form 10-K for
National and JML Optical year ended December 31,
Industries, Inc., related 1993
to Joseph M. Lobozzo II
(10.15) Loan agreements Exhibit 10.13 to Annual
between First National Report on Form 10-K for
and Joseph M. Lobozzo II year ended December 31,
1994
(10.16) Loan modification Exhibit 10.15 to Annual
agreements between First Report on form 10-K for
National and Executive year ended December 31,
Square Associates, 1994
related to Estate of Fred
B. Kravetz
(10.17) Loan Exhibit 10.16 to Annual
modification agreements Report on form 10-K for
between First National year ended December 31,
and Pioneer Daycare 1994
Company, related to
Michael J. Falcone
(10.18) Residential Exhibit 10.1 to Form 10-Q
Mortgage Loan Agreement for period ended June 30,
between Stacy C. Campbell 1995
and First National
(10.19) Lease Agreement Exhibit 10.2 to Form 10-Q
between Southtown Plaza for period ended June 30,
Associates, related to 1995
William Levine, and First
National
(10.20) Residential Exhibit 10.1 to Form 10-Q
Mortgage Loan Agreements for period ended
between Russell Family September 30, 1995
Associates, related to H.
Bruce Russell, and First
National
(10.21) Commercial Loan Exhibit 10.2 to Form 10-Q
Agreements between Estate for period ended
of Fred B. Kravetz and September 30, 1995
First National
(10.22) Commercial Line Exhibit 10.3 to Form 10-Q
of Credit Agreement for period ended
between GLC Outsourcing September 30, 1995
Services, Inc., related
to James D. Ryan, and
First National
(10.23) Commercial Loan Page 19
Agreements between Estate
of Fred B. Kravetz and
First National
(10.24) Commercial Loan Page 43
Agreements between Deal
Road Associates, L.P.,
related to Estate of Fred
B. Kravetz, and First
National
(10.25) Commercial Line Page 66
of Credit Agreements
between Lauri Kuskin and
First National
(10.26) Commercial Loan Page 73
Agreements between Fred
Kravetz and William
Levine Partners, related
to the Estate of Fred B.
Kravitz and to William
Levine, and First
National
(11) Statement of
Computation of Page 91
Earnings per share
(13) Annual Report to Page 92
Shareholders for
the year ended December
31, 1996
(21) Subsidiaries Page 151
(23) Consent of KPMG Page 152
Peat Marwick LLP
(27) Financial Data Page 153
Schedule
[EXHIBIT 10.23]
RESTATED MORTGAGE NOTE
$575,000.00 Rochester, New York
FOR VALUE RECEIVED, the undersigned, THE ESTATE OF FRED
B. KRAVETZ, with an office c/o Kravetz Realty, Inc., with an
office at 150 Linden Oaks Drive, Suite C, Rochester, New York
14625 (hereinafter called "Borrower"), promises to pay FIRST
NATIONAL BANK OF ROCHESTER, a national banking association, or
order, (hereinafter called "Lender") at its principal office at
35 State Street, Rochester, New York, or at such other place as
may be designated in writing by the holder of this Restated
Mortgage Note ("Mortgage Note" or "Note"), the sum of FIVE
HUNDRED SEVENTY-FIVE THOUSAND and 00/100 DOLLARS ($575,000.00),
in lawful money of the United States, or so much as may be
advanced, referred to as "principal sum", with interest thereon
to be computed from the date hereof, or of each advance, at the
rate of eight and three quarters percent (8.75%) per annum.
Interest only on the unpaid principal sum, from the date of
this Note to December 31, 1996 shall be due and payable the
date of this Note.
Commencing on the first day of February 1997, installments
of principal and interest shall be paid in the sum of
$5,746.83 based upon an amortization period of fifteen (15)
years, and a like amount on the first day of each and every
month thereafter until the principal sum and interest are
fully paid; said monthly payments to be applied first to the
payment of accrued interest at the above rate and the
balance to be applied to the reduction of the principal sum.
The entire principal sum evidenced hereby, if not sooner
paid, shall be due and payable on January 1, 2002.
The rate of interest set forth herein shall continue in
effect until all sums owed Lender are paid in full.
The rate of interest shall not exceed that permitted by
applicable Federal and New York State law.
Interest shall be computed for the actual number of days
elapsed on the basis of a year consisting of 360 days.
If for any reason whatsoever this Note is prepaid in part or
in full within one (1) year from the date hereof, a prepayment
fee of five percent (5.0%) of the original amount of the
principal sum will be charged. Beginning with the second loan
year, the prepayment fee shall be reduced by one percent (1.0%)
each year. A loan year begins on the date this Mortgage Note is
executed and on each anniversary thereof.
In the event any payment due hereunder shall remain unpaid
for more than ten days, the holder hereof may collect a late
charge in the amount of $50.00 or 6.0% of said payment, whichever
is greater, to cover its extra handling expense.
If this Note is referred to attorneys for collection, all
parties now or hereafter personally liable for the indebtedness
hereby evidenced, jointly and severally agree to pay, the
principal and interest due, all costs and expenses, including
reasonable attorneys' fees, incurred by the holder hereof, with
or without the institution of an action or proceeding.
The rate of interest hereunder shall increase to three
percent (3.0%) above the rate of interest then applicable to this
Note upon the maturity date of this Note or upon an event of
default under this Note or the Mortgage securing the Note.
This Note is secured by a Mortgage and Consolidation
Agreement ("Mortgage") of even date herewith on property known as
1059 Lake Avenue and 4-6 Eldorado Place, City of Rochester,
Monroe County, New York ("Property").
In the event the Debt Service Coverage Ratio ("DSCR"), as
defined below, for the Property at any time is less than 1.0
("Minimum DSCR"), as reasonably determined by the Lender, the
Lender may, by written notice to Mortgagor, require a payment
toward principal within thirty (30) days of such notice so as to
achieve the Minimum DSCR, with failure to make such principal
payment to bring a default under the Mortgage. In such event,
the applicable prepayment fee shall not be collected by Lender,
and the monthly payment of principal and interest shall be
recalculated based upon the reduced principal sum and the
remaining amortization period. DSCR shall mean Net Income (as
defined below) divided by annual payments of principal and
interest pursuant to this Note. Net Operating Income shall mean
annual rental income available after payment of annual real
estate taxes, utilities, management fees, repairs, maintenance,
property insurance, reasonable salaries, reasonable
administrative expenses, and other normal operating expenses,
exclusive of depreciation amortization and interest expense.
This Note is being delivered solely for the purpose of
modifying, amending and restating the terms of the notes which
are secured by the Mortgage. This Note does not create a new or
additional indebtedness or obligation other than the principal
indebtedness or obligation secured by or which under any
contingency may be secured by the Mortgage.
It is hereby expressly agreed, that the principal sum
secured by this Note shall become due at the option of the holder
thereof on the happening of any default or event by which under
the terms of the Mortgage, the principal sum may or shall become
due and payable; also, that all of the covenants, conditions and
agreements contained in the Mortgage are hereby made part of this
instrument.
Presentment for payment, notice of dishonor, protest and
notice of protest are hereby waived.
This Note shall be governed by and construed in accordance
with the laws of the State of New York.
In the event any one or more of the provisions of the Note
shall for any reason be invalid, illegal or unenforceable in
whole or in part, then only such provision or provisions shall be
deemed to be null and void and of no force or effect, but shall
not affect any other provision of the Note.
This Note may not be changed or terminated orally.
Signed and sealed as of the 3rd day of December, 1996.
ESTATE OF FRED B. KRAVETZ
By:s/Laurie Kuskin
Laurie Kuskin, Executrix
STATE OF NEW JERSEY)
COUNTY OF MONMOUTH ) SS:
On this 27th day of November, 1996, before me, the
subscriber, personally appeared LAURIE KUSKIN, Executrix of the
Last Will and Testament of FRED B. KRAVETZ, to me personally
known and known to me to be the same person described in and who
executed the within Instrument, and she acknowledged to me that
she executed the same as such Executrix.
s/Deborah A. Maretzky
Notary Public
Notary Public State of New Jersey
Qualified in Ocean County
Commission Expires October 28, 1999
<PAGE>
MORTGAGE
WITH CONSOLIDATION AGREEMENT
This Mortgage, made as of the 3rd day of December, 1996
between THE ESTATE OF FRED B. KRAVETZ, with an office c/o Kravetz
Realty, Inc., 150 Linden Oaks Drive, Suite C, Rochester, New York
14625 (herein called the "Mortgagor"), and FIRST NATIONAL BANK OF
ROCHESTER, a national banking association with its principal
office at 35 State Street, Rochester, Monroe County, New York,
(herein called the "Mortgagee").
W I T N E S S E T H, to secure the payment of an
indebtedness in the sum of FIFTY-TWO THOUSAND ONE HUNDRED FORTY
ONE AND 79/100 DOLLARS ($52,141.79) lawful money of the United
States (or so much as may be advanced) to be paid with interest
thereon to be computed from the date hereof, to be paid according
to a certain bond, note, or obligation bearing even date herewith
("Note"), the Mortgagor hereby mortgages to the Mortgagee the
premises described in Schedule "A" attached hereto and made a
part hereof (herein called the "Mortgaged Premises" or
"Premises").
TOGETHER with all the right, title and interest of the
Mortgagor in and to any and all unearned premiums accrued,
accruing or to accrue under any and all insurance policies now or
hereafter obtained by the Mortgagor on the Mortgaged Premises,
TOGETHER with the appurtenances and all the estate and
rights of the Mortgagor in and to said Premises,
TOGETHER with all and singular the tenements, hereditaments,
and appurtenances belonging or in any way appertaining to said
Premises, and the reversion and reversions, remainder and
remainders, rents, issues and profits thereof.
TOGETHER with and including any and all strips and gores of
land adjoining or abutting said Premises,
TOGETHER with all right, title, and interest of the
Mortgagor in and to the land lying in the bed of any street,
road, avenue or alley, open or proposed, in front of, running
through or adjoining said Premises,
TOGETHER with all buildings, structures, and improvements
now or at any time hereafter erected, constructed or situated
upon the Premises, and apparatus, fixtures, chattels, and
articles of personal property now or hereafter attached to or
used in connection with said Premises, including but not limited
to furnaces, boilers, oil boilers, radiators and piping, coal
stokers, plumbing and bathroom fixtures, refrigeration, air-
conditioning and sprinkler systems, wash-tubs, sinks, gas and
electric fixtures, stoves, ranges, awnings, screens, window
shades, elevators, motors , dynamos, refrigerators, kitchen
cabinets, incinerators, plants and shrubbery and all other
equipment and machinery, appliances, fittings and fixtures of
every kind in or used in the operation of the buildings standing
on said Premises, together with any and all replacements thereof
and additions thereto,
TOGETHER with all awards heretofore and hereafter made to
the Mortgagor for taking by eminent domain the whole or any part
of said Premises or any easement therein, including any awards
for changes of grade of streets, which said awards are hereby
assigned to the Mortgagee, who is hereby authorized to collect
and receive the proceeds of such awards and to give proper
receipts and acquittances therefor, and to apply the same toward
the payment of the mortgage debt, except as otherwise provided in
this Mortgage, notwithstanding the fact that the amount owing
thereof may not then be due and payable; and the Mortgagor hereby
agrees, upon request, to make, execute and deliver any and all
assignments and other instruments sufficient for the purpose or
assigning said awards to the Mortgagee, free, clear, and
discharged of any encumbrances of any kind or nature whatsoever,
The Mortgagor covenants with the Mortgagee that:
PAY INDEBTEDNESS. The Mortgagor will pay the indebtedness
secured hereby with interest thereon as herein provided and
according to the Note, and if default shall be made in the
payment of part thereof, the Mortgagee shall have power to sell
the Mortgaged Premises according to law.
INSURANCE. The Mortgagor will keep the buildings on the
Premises and the fixtures and articles of personal property
covered by the Mortgage insured against loss by fire and other
hazards, casualties and contingencies, including flood insurance
if required by law, regulation or Mortgagee, for the benefit of
the Mortgagee in an amount not less than the unpaid principal
balance due hereunder. The fire insurance policy as required
hereby shall contain the usual extended coverage endorsement and
shall provide for twenty (20) days written notice to Mortgagee
prior to cancellation. Mortgagor will maintain liability
insurance in minimum amounts of $1,000,000.00 per occurrence for
bodily injury and $100,000.00 for property damage. In addition
thereto the Mortgagor within thirty (30) days after notice and
demand will keep the Premises insured against any other hazard
that may reasonably be required by law, regulation or Mortgagee.
The Mortgagor will assign and deliver said policies to the
Mortgagee and the Mortgagor will reimburse the Mortgagee for any
premiums paid for the insurance made by the Mortgagee on the
Mortgagor's default in so insuring the buildings or in so
assigning and delivering the policies. All the provisions of
this paragraph or of any other provisions of the Mortgage
pertaining to fire insurance or any other additional insurance
which may be required hereunder shall be construed in accordance
with Section 254 Subdivision 4 of the New York Real Property Law.
Notwithstanding the provisions of the aforesaid Section 254,
Subdivision 4, the Mortgagor consents that the Mortgagee may
without qualification or limitation by virtue of said section,
retain and apply the proceeds of any such insurance in
satisfaction or reduction of the Mortgage, or it may at its
election pay the same, either in whole or in part, to the
Mortgagor or its successors or assigns for the repair or
replacement of the buildings or of the insured articles of
personal property or for any other purpose or object reasonably
satisfactory to the holder of the Mortgage, and if the Mortgagee
shall receive and retain such insurance money, the lien of the
Mortgage shall be affected only by a reduction of the amount of
such lien by the amount of such insurance money received and
retained by the Mortgagee.
Notwithstanding the foregoing election available to
Mortgagee, the proceeds of such insurance shall be made available
to Mortgagor if, at the time such proceeds are delivered to
Mortgagee, there is no uncured default under the Note or this
Mortgage and the loan to value ratio (i.e. the then unpaid
principal balance pursuant to the Note divided by the value of
the Premises as reasonably determined by Mortgagee) shall not be
more than 75%. Mortgagee shall disburse such proceeds to
Mortgagor upon completion of work and invoices therefor approved
by Mortgagee, and any excess proceeds shall be utilized to reduce
the unpaid principal sum secured by this Mortgage.
ALTERATIONS, DEMOLITION OR REMOVAL. No building, fixtures
or personal property covered by the Mortgage shall be removed,
demolished, or substantially altered without the prior written
consent of the Mortgagee.
WASTE, MAINTENANCE AND REPAIRS. The Mortgagor will not
commit any waste on the Premises or make any change in the use of
the Premises which will in any way increase any ordinary fire or
other hazard arising out of construction or operation. The
Mortgagor will keep and maintain or cause to be kept and
maintained all buildings and other improvements now or at any
time hereafter erected upon or constituting any portion of the
Mortgaged Premises, and the sidewalks and curbs abutting the
same, in good order and condition and in a rentable and
tenantable state or repair, and will make or cause to be made, as
and when the same shall become necessary, all structural and non-
structural exterior and interior, ordinary and extraordinary,
foreseen and unforeseen repairs, renewals, and replacements
necessary to that end. In the event that the Mortgaged Premises
shall be damaged or destroyed in whole or in part, by fire or any
other casualty, or in the event of a taking of a portion of the
Mortgaged Premises as a result of any exercise of the power of
eminent domain, the Mortgagor shall promptly restore, replace,
rebuild or alter the same as nearly as possible to the condition
they were in immediately prior to such fire, other casualty or
taking, provided the proceeds of the condemnation or any
insurance policy are made available to Mortgagor. Although
damage to or destruction of the Mortgaged Premises, or any
portion thereof, shall not of itself constitute a default
hereunder, the failure of the Mortgagor to restore, replace,
rebuild, or alter the same, as hereinabove provided, shall
constitute a default hereunder. The Mortgagor covenants that it
will give to the Mortgagee prompt written notice of any damage or
injury to the Mortgaged Premises and will give like notice to the
Mortgagee of the commencement of any condemnation proceeding
affecting the whole or any portion of Mortgaged Premises. The
Mortgagor shall have the right, at any time and from time to
time, to remove and dispose of building service equipment which
may have become obsolete or unfit for use or which is no longer
useful in the operation of the building now or hereafter
constituting a portion of the Mortgaged Premises. The Mortgagor
agrees promptly to replace with other building service equipment,
free of superior title, liens or claims, not necessarily of the
same character but of at least equal usefulness and quality, any
such building service equipment so removed or disposed of, except
that, if by reason of technological or other developments in the
operation and maintenance of buildings of the general character
of the building constituting a portion of the Mortgaged Premises,
no replacement of the building service equipment so removed or
disposed of is necessary or desirable in the proper operation or
maintenance of said building, the Mortgagor shall not be required
to replace the same.
TAXES, ASSESSMENTS, ETC. The Mortgagor will pay all taxes,
assessments, insurance premiums, sewer rents, or water rates, and
in default thereof, the Mortgagee may pay the same. Any sums so
advanced by the Mortgagee shall bear interest at the maximum
legal rate of interest at the time of such advance or at the
highest rate of interest set forth herein or in the Note,
whichever is greater, and any such sum and the interest thereon
shall be a lien on said Premises, prior to any right, or title
to, interest in or claim upon said Premises, or accruing
subsequent to the lien of the Mortgage and shall be deemed
secured hereby. Upon written request from Mortgagee, Mortgagor
shall deliver to Mortgagee receipted tax bills showing payment of
all taxes on the Premises within the applicable grace period.
ESTOPPEL STATEMENT. The Mortgagor within ten (10) days upon
request in person or within twenty (20) days upon request by mail
will furnish a written statement duly acknowledged of the amount
due on the Mortgage and whether any offsets or defenses exist
against the Note and Mortgage.
MORTGAGEE MAY CURE MORTGAGOR'S DEFAULTS. The Mortgagor
covenants and agrees with the Mortgagee that the holder of the
Mortgage may cure any default of Mortgagor on the Mortgage or any
prior or subsequent mortgage, including payment of any
installments of principal and interest or part thereof, and that
all costs and expenses, including reasonable attorneys' fees
together with interest thereon at the highest legal rate of
interest at the time of such default or at the highest rate of
interest set forth herein or in the Note secured by the Mortgage,
whichever is the greater, paid by the Mortgagee in so curing said
default, shall be repaid by the Mortgagor to the Mortgagee on
demand and the same shall be deemed to be secured by the Mortgage
and to be collectible in like manner as the principal sum.
WARRANTY OF TITLE. The Mortgagor warrants the title to the
Premises and will execute any further assurance of the title to
the Premises as Mortgagee may require.
LIEN LAW COVENANT. The Mortgagor will, in compliance with
Section 13 of the New York Lien Law, receive the advances secured
hereby and will hold the right to receive such advances as a
trust fund to be applied first for the purpose of paying the cost
of the improvement and will apply the same first to the payment
of the cost of the improvements before using any part of the
total of the same for any other purpose.
ESCROW FOR TAXES/INSURANCE. The Mortgagee may request at
any time after a default by Mortgagor in payment when due of
property taxes and/or insurance premiums on the Mortgaged
Premises that, in addition to the monthly payments of principal
and interest, the Mortgagor will pay monthly to the Mortgagee on
or before the first day of each and every calendar month, until
the Note is fully paid, a sum equal to one-twelfth of the known
or estimated yearly taxes, assessments, liens and charges levied
or to be levied against the Mortgaged Premises and/or premiums
for insurance held or required by Mortgagee. The Mortgagee shall
hold such payments in trust without obligation to pay interest
thereon, except such interest as may be made mandatory by law or
regulation, to pay such taxes, assessments, liens, charges and
insurance premiums within a reasonable time after they become
due. If the total of payments made by the Mortgagor for taxes,
assessments, liens, charges and insurance premiums shall exceed
the amount of payments actually made by the Mortgagee, such
excess shall be credited by the Mortgagee on subsequent payments
to be made by the Mortgagor or refunded upon payment in full of
the Note. If the total of payments made by the Mortgagor for
taxes, assessments, liens, charges and insurance premiums shall
not be sufficient to pay therefor, then the Mortgagor shall pay
to the Mortgagee any amount necessary to make up the deficiency
on or before the date when such amounts shall be due.
LATE CHARGES. If any payment required to be made under the
Mortgage or the note or the obligations secured by the Mortgage
shall be overdue in excess of 10 days, a late charge of $.06 of
each $1.00 so overdue or $50.00, whichever is greater, will be
paid by the Mortgagor for the purpose of defraying the expenses
incident to handling such delinquent payments.
LEASES. Pursuant to the provisions of Section 291-f of the
New York Real Property Law, the Mortgagor, except for residential
leases with a term not exceeding one (1) year, shall not (a)
amend, cancel, abridge, terminate, or otherwise modify any lease
of said Premises or of any part thereof, or (b) accept prepayment
of rent or installments of rent for more than one month in
advance, without the written consent of the Mortgagee and in the
event of any default under the terms of this paragraph the whole
of said principal sum shall become due immediately upon the
happening thereof at the option of the Mortgagee.
In addition thereto, except for residential leases with a
term not exceeding one (1) year, (a) the Mortgagor shall not make
any new lease or lease renewal or extension (other than those the
Mortgagor as landlord may be required to grant by the terms of an
existing lease) without the prior written consent of the
Mortgagee and (b) the Mortgagor shall furnish to the Mortgagee,
within thirty (30) days after a request by the Mortgagee to do
so, a written statement containing the names of all lessees of
the Premises, the terms of their respective leases, the space
occupied and the rentals payable thereunder.
FINANCIAL STATEMENTS. The Mortgagor will furnish the
Mortgagee with copies of its signed Federal Tax returns as they
are timely filed, but not later than 120 days after the end of
Mortgagor's fiscal year.
Any guarantor(s) of payment of the indebtedness also shall
provide Mortgagee with copies of their signed Federal Tax Returns
as they are timely filed and with annual personal financial
statements on forms provided by Mortgagee.
The Mortgagee shall have the right to examine the financial
records covering the operation of the Premises at least once a
year or as often as the Mortgagee may require if the Mortgagor be
in default.
PREPAYMENT FEE. If for any reason whatsoever the
indebtedness secured by the Mortgage is prepaid in part or in
full within one (1) year from the date hereof, a prepayment fee
of five percent (5.0%) of the original amount of the consolidated
principal sum will be charged. Beginning with the second loan
year, the prepayment fee shall be reduced by one percent (1.0%)
each year. A loan year begins on the date the Mortgage is
executed and on each anniversary thereof. The amount of such
prepayment consideration shall be added to and secured by the
Note and Mortgage and shall be recoverable by the Mortgagee in
the same manner as the principal balance hereof, and in addition
thereto, in any action brought either on the Note or for the
foreclosure of the Mortgage.
ACCELERATION OF PRINCIPAL ON TRANSFER, ETC. The principal
sum with interest thereon shall become immediately due and
payable, upon the voluntary or involuntary conveyance or transfer
by operation of law or otherwise of all or any part of the
Mortgaged Premises, or any interest or estate therein, including
testate or intestate succession and conveyance by land contract.
Acceptance of payments by the Mortgagee subsequent to any such
conveyance, transfer, or encumbering shall not be deemed a waiver
of any of the Mortgagee's rights.
If the Mortgagor is a corporation, the sale, assignment,
transfer, or other disposition of any stock by any party owning
ten (10%) percent or more of the stock, of any corporation owning
all or any part of the Mortgaged Premises or any other similar
significant change in ownership of such stock or in the relative
distribution thereof, by any method or means, whether by
increased capitalization, merger with another corporation,
corporate or other amendments, issuance of additional or new
stock, reclassification of stock or otherwise shall be deemed a
conveyance or transfer within the meaning of this provision.
If the Mortgagor is a partnership, a sale or transfer by
operation of law or otherwise of any partners' interest in the
partnership or a change in the identity or composition of the
partners of the Mortgagor shall be deemed a conveyance or
transfer within the meaning of this provision.
Notwithstanding the foregoing, transfers of interests in the
Premises to Gary and/or Laurie Kuskin or their children, or to
trusts or other entities controlled by Gary Kuskin and/or Laurie
Kuskin, shall be permitted without the Mortgagee's consent
provided that (a) notice of transfer is given to Mortgagee; (b)
such transferee assumes the indebtedness evidenced by this
Mortgage; and (c) such transfer shall not affect the liability of
any guarantor.
ACCELERATION OF PRINCIPAL ON DEFAULT, ETC. The whole of the
principal sum and interest shall become due at the option of the
Mortgagee, after (a) default in the payment of any installment of
principal or of interest for thirty (30) days; or, (b) default in
the payment of any tax, water rate, assessment, insurance
premiums, or sewer rent for thirty (30) days after notice and
demand or default after notice and demand either in assigning and
delivering the policies insuring the buildings against any
casualty or in reimbursing the Mortgagee for premiums paid on
such insurance, as herein provided; or (c) default upon request
in furnishing a statement of the amount due and whether any
offsets or defenses exist against the mortgage debt, as provided
herein in the Section entitled "Estoppel Statement"; or (d)
failure to exhibit to the Mortgagee, within ten (10) days after
demand, receipts showing payment of all taxes, water rates, sewer
rents and assessments; or (e) the actual or alteration,
demolition or removal of any building on the Premises without the
written consent of the Mortgagee; or (f) the assignment of the
rents of the Premises or any part thereof without the written
consent of the Mortgagee; or (g) the buildings on said Premises
are not maintained in reasonably good repair; or (h) failure to
comply with any requirement or order or notice of violation of
law or ordinance issued by any governmental department claiming
jurisdiction over the Premises within two (2) months from the
issuance thereof unless such requirement, order or notice is
being lawfully challenged by Mortgagor and there is no risk of
forfeiture of any of Mortgagor's rights in the Premises; or (i)
refusal of two or more fire insurance companies lawfully doing
business in the State of New York to issue policies insuring the
buildings on the premises; or (j) the removal, demolition or
destruction in whole or in part of any of the fixtures, chattels
or articles of personal property covered hereby, unless the same
are promptly replaced by similar fixtures, chattels and articles
of personal property at least in quality and condition to those
replaced, free from security interests or other encumbrances
thereon and free from any reservation of title thereof; or (k)
thirty (30) days notice to the Mortgagor, in the event of the
passage of any law deducting from the value of land for the
purposes of taxation any lien thereon, or changing in any way the
laws for the taxation of mortgages or debts secured thereby for
state or local purposes; or (1) the Mortgagor fails to keep,
observe and perform any of the other covenants, conditions or
agreements contained in the Mortgage; or (m) use of said Premises
for any unlawful purpose or public or private nuisance; or (n)
the Mortgagor commits or permits waste; or (o) any default under
any mortgage or other lien on the Premises or any default under
any other note, loan agreement or other instrument evidencing
Mortgagor's indebtedness to Mortgagee; or (p) the Note becomes
non-recourse to the Mortgagor.
NOTICES. Notice and demand to or request upon the Mortgagor
may be oral or in writing and, if in writing, may be served in
person or by mail.
APPOINTMENT OF RECEIVER. The Mortgagee, in any action to
foreclose the Mortgage, shall be entitled, without notice or
demand and without regard to the adequacy of any security for the
indebtedness hereby or the solvency or insolvency of any person
liable for the payment thereof, to the appointment of a receiver
of the rents, issues and profits of the Mortgaged Premises.
SALE IN ONE PARCEL. In case of a foreclosure sale, said
Premises, or so much thereof as may be affected by the Mortgage,
may be sold in one parcel, any provision of law to the contrary
notwithstanding.
ASSIGNMENT OF RENTS. The Mortgagor hereby absolutely and
unconditionally assigns, transfers and conveys to the Mortgagee
the rents, issues, and profits of the Premises as further
security for the payment of the Note, it being the intention of
Mortgagor and Mortgagee that this assignment be treated and
construed as an absolute assignment and not an assignment for
additional security only. The Mortgagor further grants to the
Mortgagee the right to enter upon and to take possession of the
Premises for the purpose of collecting the same and to let the
Premises or any part thereof, and to apply the rents, issues and
profits, after payment of all necessary charges and expenses, on
account of the Note. This assignment and grant shall continue in
effect until the Note is paid. The Mortgagee hereby waives the
right to enter upon and to take possession of the Premises for
the purpose of collecting the rents, issues, and profits, and the
Mortgagor shall be entitled to collect and receive the rents,
issues and profits as trustee for the benefit of Mortgagee and
Mortgagor until default under any of the covenants, conditions,
or agreements contained in the Mortgage; Mortgagor agrees to use
such rents, issues and profits in payment of principal and
interest and in payment of taxes, assessments, sewer rents, water
rates, and carrying charges against the Premises, but such right
of the Mortgagor may be revoked by the Mortgagee upon any
default, on five (5) days written notice. The Mortgagor will
not, without the written consent of the Mortgagee, receive or
collect rent from any tenant of the Premises or any part thereof
for a period of more than one month in advance, and in the event
of any default under the Mortgage will pay monthly in advance to
the Mortgagee, or to any receiver appointed to collect the rents,
issues and profits, the fair and reasonable rental value for the
use and occupation of the Premises or of such part thereof as may
be in the possession of the Mortgagor, and upon default in any
such payment will vacate and surrender the possession of the
Premises to the Mortgagee or to such receiver, and in default
thereof may be evicted by summary proceedings. Mortgagor shall
and does hereby agree to indemnify and hold Mortgagee and its
representatives harmless of and from any and all liability, loss
of damage which Mortgagor or its representatives may or might
incur under or by reason of (a) any tenant of the Premises, (b)
this Mortgage, (c) any action taken by Mortgagee or its
representatives hereunder, unless constituting willful
misconduct, or (d) claims and demands which may be asserted
against Mortgagee or its representatives by reason of any alleged
obligations or undertakings on its or their part to perform or
discharge any of the terms, covenants or agreements contained in
any lease affecting the Premises. This Mortgage shall not
operate to place upon Mortgagee any responsibility for the
management, operation or maintenance of the Premises, and the
execution of this Mortgage by Mortgagor shall constitute
conclusive evidence that all responsibility for the management,
operation and maintenance of the Premises is, shall be and shall
remain that of Mortgagor, in the absence of the taking of actual
possession of the Premises by Mortgagee. The provisions of the
foregoing indemnification obligation shall survive the assignment
or repayment of the Note, the assignment, satisfaction,
foreclosure or other termination of this Mortgage and the sale or
other transfer or conveyance of the Premises.
SECURITY AGREEMENT. The Mortgage constitutes a security
agreement under the Uniform Commercial Code and creates a
security interest in all fixtures and equipment and other
personal property (and the proceeds thereof) now or hereafter
affixed to or constituting a portion of the Premises. Mortgagor
shall execute, deliver, file and refile any financing statement,
continuation statements, or other security agreements Mortgagee
may require from time to time to confirm the lien of the Mortgage
with respect to such property.
ANTI-MARSHALLING. The Mortgagee may resort for the payment
of any indebtedness, liability, or obligation secured hereby to
its several securities therefor, in such order and manner as it
may see fit, and the Mortgagee may maintain an action to
foreclose the Mortgage notwithstanding the pendency of any action
to recover any part of the indebtedness secured hereby, or the
recovery of any judgment in such action. The Mortgagee shall not
be required during the pendency of any action to foreclose the
Mortgage, to obtain leave of any court in order to commence or
maintain any other action to recover any part of the indebtedness
secured hereby.
The Mortgagee shall also have the right in the event of
default under the Mortgage or the obligation secured hereby to
proceed against any or all interests of the Mortgagor and the
Mortgagor agrees that the Mortgagee shall have the right to elect
in writing not to cut off any interest that any Mortgagor might
have and in the event that Mortgagee shall so elect, Mortgagor
agrees that all of its duties and obligations as to such interest
shall continue.
COMPLIANCE WITH LAWS, ETC. The Mortgagor will comply with,
or cause compliance with, all present and future laws,
ordinances, rules, regulations, zoning and other requirements of
all governmental authorities whatsoever having jurisdiction of or
with respect to the Mortgaged Premises or any portion thereof or
the use or occupation thereof; provided, however, that the
Mortgagor may postpone such compliance if and so long as the
validity or legality of any such governmental requirement shall
be contested by the Mortgagor, with diligence and in good faith,
by appropriate legal proceedings.
COMPLIANCE WITH ZONING, ETC. The Mortgagor covenants: (a)
that the buildings and improvements now on the Mortgaged Premises
are in full compliance with all applicable zoning codes,
ordinances and regulations and deed restrictions, if any; and (b)
that such compliance is based solely upon Mortgagor's ownership
of such Premises, and not upon title to or interest in any other
Premises; and (c) buildings or improvements hereafter constructed
on such Premises shall be in compliance as in (a) and (b) hereof
provided, shall lie wholly within the boundaries of such Premises
and, shall be independent and self-contained operating units
(except for utility lines and conduits coming directly to the
Premises from a public road or from a private road an easement
over which for the maintenance of such utilities is covered by
the lien hereof.)
LEGAL EXPENSES. If any action or proceeding be commenced
(except an action to foreclose the Mortgage or to collect the
debt secured thereby), to which action or proceeding the
Mortgagee is made a party, or in which it becomes necessary to
defend or uphold the lien of the Mortgage, all sums paid by the
Mortgagee for the expense of any litigation to prosecute or
defend the rights and lien created by the Mortgage (including
counsel fees), shall be paid by the Mortgagor, together with
interest thereon at the legal rate of interest at the time of
said payment or at the highest rate of interest set forth herein
or in the Note secured by the Mortgage, whichever is greater, and
any such sum and interest thereon shall be a lien on said
Premises, prior to any right, or title to, interest in or claim
upon said Premises attaching or accruing subsequent to the lien
of the Mortgage, and shall be deemed to be secured by the
Mortgage.
If the Mortgage is referred to attorneys for collection or
foreclosure, the Mortgagor shall pay all sums, including
attorneys' fees, incurred by the Mortgagee, together with all
statutory costs, disbursements, and allowances, with or without
the institution of an action or proceeding. All such sums with
interest thereon at the rate set forth herein shall be deemed to
be secured by the Mortgage and collectible out of the Mortgaged
Premises.
CONDEMNATION AWARD. In the event of a condemnation award
for a portion of the Premises payable to Mortgagee and Mortgagor,
Mortgagee shall make the proceeds of such award available to
Mortgagor if, at the time such proceeds are delivered to
Mortgagee, there is no uncured default under the Note or this
Mortgage and the loan to value ratio (i.e. the then unpaid
principal balance pursuant to the Note divided by the value of
the Premises as reasonably determined by Mortgagee) shall not be
more than 75%. Mortgagee shall disburse such proceeds to
Mortgagor upon completion of work and invoices therefor approved
by Mortgagee, and any excess proceeds shall be utilized to reduce
the unpaid principal sum secured by this Mortgage.
INTEREST ON CONDEMNATION AWARD. In the event of
condemnation, or taking by eminent domain, the Mortgagee shall
not be limited to the interest paid on the award by the
condemning authority but shall be entitled to receive out of the
award interest on the entire unpaid principal sum at the rate
herein provided; the Mortgagor does hereby assign to the
Mortgagee so much of the balance of the award payable by the
condemning authority as is required to pay such total interest.
INTEREST IN THE EVENT OF DEFAULT. If default be made in the
payment of the said indebtedness when due, pursuant to the terms
hereof, the Mortgagee shall be entitled to receive interest on
the entire unpaid principal sum at the legal rate of interest at
the time of such default or at the highest rate of interest set
forth herein or in the Note secured by the Mortgage, whichever is
the greater, to be computed from the due date and until the
actual receipt and collection of the entire indebtedness. This
charge shall be added to and shall be deemed secured by the
Mortgage. The within clause, however, shall not be construed as
an agreement or privilege to extend the Mortgage, nor as a waiver
of any other right or remedy accruing to the Mortgagee by reason
of any such default.
RENT/BUSINESS INTERRUPTION INSURANCE. The Mortgagor will
keep the buildings and improvements now erected or hereafter to
be erected on the Mortgaged Premises and all personal property
and fixtures covered by the Mortgage insured for the benefit of
the Mortgagee against loss of rents or business income, as the
case may be, by reason of fire or other casualties and in such
amounts as may from time to time be reasonably required by the
Mortgagee and in companies reasonably satisfactory to the
Mortgagee, and will assign and deliver to the Mortgagee such
policies of insurance.
NO SECONDARY FINANCING. The Mortgagor will not, without the
Mortgagee's prior written consent, mortgage (including the so-
called "wrap-around mortgage"), pledge, assign, grant a security
interest in, cause any lien or encumbrance to attach to or any
levy to be made on the Mortgaged Premises except for (a) taxes
and assessments not yet delinquent and (b) any mortgage, pledge,
security interest, assignment or other encumbrance to the
Mortgagee.
BANKRUPTCY. Upon the making of an assignment for the
benefit of creditors by, or upon the filing of a petition in
bankruptcy by or against the Mortgagor, or any person or
corporation who is the guarantor hereof or whose indebtedness is
secured hereby, or upon the application for the appointment of a
receiver of the property of the Mortgagor or any such person or
corporation, or of the property of any person or corporation
which may become and be owner of the Mortgaged Premises, or upon
any act of insolvency or bankruptcy of the Mortgagor or any such
person or corporation or of any such subsequent owner, or upon
the legal incapacity of the Mortgagor or any such person or
corporation or owner, or any of them, the whole of said
indebtedness of every kind or nature held by the Mortgagee and
now or hereafter secured hereby shall immediately become due and
payable with interest thereon, and Mortgagor and any guarantor(s)
hereby waive presentment, demand of payment, protest, notice of
non-payment, and/or protest of any instrument on which the
Mortgagor or such guarantors are or may become liable now or
hereafter secured hereby, and the Mortgagor expressly agrees that
the Mortgagee may release or extend the time of any party liable
on any such obligation without notice and without affecting his
obligation thereon or under this instrument.
LIENS. The Premises shall be kept free and clear from any
liens and/or encumbrances of any type and description after the
date hereof. Upon the recording of any lien or encumbrance, and
the same not having been cleared or bonded of record within
thirty (30) days after filing thereof, the entire debt secured
hereby shall immediately become due and payable.
RIGHT TO INSPECT. The Mortgagee and any persons authorized
by Mortgagee shall have the right to enter and inspect the
Mortgaged Premises at all reasonable times during usual business
hours.
WAIVER. No waiver by the Mortgagee of the breach of any of
the covenants contained in the Note, the Mortgage, or other loan
document, or failure of the Mortgagee to exercise any option
given to it, shall be deemed to be a waiver of any other breach
of the same or any other covenant, or of its rights thereafter to
exercise any such option.
MODIFICATION. No change, amendment, modification,
cancellation or discharge hereof, or any part hereof, shall be
valid unless in writing and signed by the parties hereto or their
respective successors and assigns.
COVENANTS SHALL RUN WITH THE LAND, ETC. The covenants
contained in the Mortgage shall run with the land and bind the
Mortgagor, the heirs, personal representatives, successors and
assigns of the Mortgagor and all subsequent owners,
encumbrancers, tenants and subtenants of the Premises, and shall
enure to the benefit of the Mortgagee, the personal
representatives, successors and assigns of the Mortgagee and all
subsequent holders of the Mortgage.
CONSOLIDATION/SPREADING AGREEMENT. The Mortgage is
consolidated with prior existing mortgages according to Schedule
B attached hereto and made a part hereof.
ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND COVENANTS.
1. Except as otherwise disclosed in the Phase I
Assessment referenced in the Indemnification Agreement (as
hereinafter defined), Mortgagor makes the following
representations and warranties which shall survive the closing of
this loan:
A. Mortgagor is in compliance in all respects
with all applicable federal, state and local laws, including,
without limitation, those relating to toxic and hazardous
substances and other environmental matters.
B. No portion of the Premises is being used or
has been used at any previous time, for the disposal, storage,
treatment, processing or other handling of any hazardous or toxic
substances.
2. Mortgagor agrees that Mortgagee or its agents or
representatives may, at any reasonable time and at Mortgagor's
expenses inspect Mortgagor's books and records and inspect and
conduct any tests on the Property including taking soil samples
in order to determine whether Mortgagor is in continuing
compliance with all environmental laws and regulations.
3. If any environmental contamination is found on the
property for which any removal or remedial action is required
pursuant to law, ordinance, order, rule, regulation or
governmental action, Mortgagor agrees that it will at its sole
cost and expense remove or take such remedial action promptly and
to Mortgagee's satisfaction.
4. Mortgagor agrees to defend, indemnify and hold
harmless Mortgagee, its employees, agents, officers and directors
from and against any claims, actions, demands, penalties, fines,
liabilities, settlements, damages, costs or expenses (including,
without limitation, attorney and consultant fees, investigation
and laboratory fees, court costs and litigation expenses) of
whatever kind or nature known or unknown contingent or otherwise
arising out of or in any way related to:
A. The past or present disposal, release or
threatened release of any hazardous or toxic substances on the
Premises;
B. Any personal injury (including wrongful death
or property damage, real or personal) arising out of or related
to such hazardous or toxic substances;
C. Any lawsuit brought or threatened, settlement
reached or government order given relating to such hazardous or
toxic substances; and/or
D. Any violation of any law, order, regulation,
requirement, or demand of any government authority, or any
policies or requirements of Mortgagee, which are based upon or in
any way related to such hazardous or toxic substances.
5. Mortgagor knows of no on-site or off-site
locations where hazardous or toxic substances from the operation
of the facility on the Premises have been stored, treated,
recycled or disposed of.
6. Mortgagor agrees that it will conduct no
excavations at the Premises unless it gives Mortgagee ten days'
notice of its intention to do so. Mortgagor further agrees that
it will not commence such excavation until Mortgagee has had the
opportunity to sample and test at the excavation location if
Mortgagee so desires. Should the testing results disclose the
presence of hazardous or toxic substances which require removal
and/or remedy under any environmental laws or regulations, the
suspension of excavation activity at such location shall continue
until the hazardous or toxic substances are removed and/or
remedied to Mortgagee's reasonable satisfaction. Mortgagor shall
pay for any and all reasonable costs for any such testing and
removal and/or remedy conducted pursuant to this paragraph.
7. Unless waived in writing by Mortgagee, the breach
of any of the covenants and warranties contained in this section
shall be an event of default under the Mortgage.
8. For purposes of this section, "hazardous and toxic
substances" includes, without limit, any flammable explosives,
radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials defined in the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, the Hazardous Materials Transportation
Act, as amended, the New York State Environmental Conservation
Law, the Resource Conservation and Recovery Act, as amended, and
in the regulations adopted and publications promulgated pursuant
thereto. The provisions of this section shall be in addition to
any other obligations and liabilities Mortgagor may have to
Mortgagee at common law, and shall survive the transactions
contemplated herein. Mortgagee may, at its option, require
Mortgagor to carry adequate insurance, if available at a
reasonable cost, to fulfill Mortgagor's obligations under this
paragraph. Mortgagor's failure to obtain insurance within 30
days after being requested to do so by Mortgagee, shall
constitute an event of default hereunder.
9. When the terms and provisions contained in the
foregoing Paragraphs 1-8 in any way conflict with the terms and
provisions contained in a certain Environmental Compliance and
Indemnification Agreement of even date herewith ("Indemnification
Agreement"), the terms and provisions contained in the
Indemnification Agreement shall prevail, and, in the event of any
overlapping terms, covenants and conditions, insofar as possible,
the terms, covenants and conditions contained herein and in the
Indemnification Agreement shall both be applicable.
TAX ON NOTE. That in the event that hereafter it is
claimed by any governmental agency that any tax or other
governmental charge or imposition is due, unpaid and payable by
the Mortgagor or the Mortgagee upon the Note (other than a tax on
the interest receivable by the Mortgagee thereunder), the
Mortgagor will upon sixty (60) days prior written notice either
(a) pay such tax and within a reasonable time thereafter deliver
to the Mortgagee satisfactory proof of payment thereof or (b)
deposit with the Mortgagee the amount of such claimed tax,
together with interest and penalties thereon, pending an
application for a review of the claim for such tax, and within a
reasonable time, deliver to the Mortgagee either (i) evidence
satisfactory to the Mortgagee that such claim of taxability has
been withdrawn or defeated in which event any such deposit shall
be returned to the Mortgagor or (ii) a direction from the
Mortgagor to the Mortgagee to pay the same out of the deposit
above mentioned, any excess due over the amount of said deposit
to be paid by the Mortgagor directly to the taxing authority and
any excess of such deposit over such payment by the Mortgagee to
be returned promptly to the Mortgagor. Upon the failure of the
Mortgagor to comply with the provisions of this Article, the
whole of said principal sum and interest secured by the Mortgage
shall at the option of the Mortgagee become due and payable. If
liability for such tax is asserted against the Mortgagee, the
Mortgagee will give to the Mortgagor prompt notice of such claim,
and the Mortgagor, upon complying with the provisions of this
Article, shall have full right and authority to contest such
claim of taxability.
COMPLIANCE WITH ARTICLE 31-B OF NEW YORK STATE TAX LAW.
The Mortgagor will keep true and complete records pertaining to
its acquisition of title to the Premises, all subsequent
transfers of any interests in the Premises or any part thereof
and all changes in the controlling interest (by way of changes in
stock ownership, capital, profits, beneficial interest or
otherwise) in the Mortgagor or any related entity which may
hereafter own the Premises, including, but not limited to, a copy
of the contract of sale, title report, deed, closing statement,
transferor's affidavit, questionnaire or return, statement of
tentative assessment and any other notices or determinations of
tax received from the New York State Department of Taxation and
Finance, transferor's supplemental return, the date and cost of
all "capital improvements" made to the Premises or any part
thereof and evidence of the payment of any real property transfer
gains tax imposed by reason of Article 31-B of the New York State
Tax Law and the filing of all reports and any other information
or documentation required by the New York State Department of
Taxation and Finance by reason of said Article or any regulations
promulgated thereunder. All such records shall be made available
to Mortgagee for inspection from time to time upon its request.
If any real property transfer gains tax shall be due
and payable upon the conveyance of the Premises pursuant to a
judicial sale in any action, suit or proceeding brought to
foreclose the Mortgage or deed in lieu of foreclosure, the
Mortgagor will, at Mortgagee's request, (a) provide Mortgagee
with a copy of all such records and will prepare, execute,
deliver and file any affidavits, records questionnaires, returns
or supplemental returns required of the Mortgagor, as transferor,
including, but not limited to, a statement in affidavit form as
to the "original purchase price" of the Premises and the cost of
all "capital improvements" made to the Premises or any part
thereof by the Mortgagor or any related entity and the date or
dates on which such improvements were made and (b) pay or cause
to be paid any real property transfer gains tax, together with
interest and penalties thereon, which may be due and payable by
reason of such conveyance. The Mortgagor hereby irrevocably
appoints Mortgagee its agent and attorney-in-fact (which
appointment shall be deemed to be an agency coupled with an
interest), with full power of substitution in the Premises, to
prepare, execute, deliver and file on its behalf any and all
affidavits, questionnaires, returns and supplemental returns
which the Mortgagor, as transferor, has failed or refused to
execute and deliver to Mortgagee within 10 days after notice and
request therefor by Mortgagee. In the event that the Mortgagor
fails to pay any such tax, interest and penalties within 20 days
after notice and demand for payment is given by Mortgagee,
Mortgagee is hereby authorized to pay the same, and the amount
thereof so paid by Mortgagee, together with all costs and
expenses incurred by Mortgagee in connection with such payment,
including, but not limited to, reasonable attorneys' fees and
disbursements and interest on all such amounts, costs and
expenses at the rate of one percent (1%) in excess of the rate
specified in the Note, but in no event in excess of the maximum
interest rate permitted by law, shall be paid by the Mortgagor to
Mortgagee on demand. Until paid by the Mortgagor, all such
amounts, costs and expenses, together with interest thereon,
shall be secured by the Mortgage and may be added to the judgment
in any suit brought by Mortgagee against the Mortgagor hereon.
The foregoing shall not be applicable if the aforesaid
Article 31-B does not pertain to the Premises.
CONSTRUCTION. The word "Mortgagor" shall be construed as if
it read "Mortgagors" and the "Mortgagee" shall be construed as if
it read "Mortgagees" whenever the sense of the Mortgage so
requires. This Mortgage shall be governed by and construed in
accordance with the laws of the State of New York.
CONFLICT WITH OTHER LOAN AGREEMENTS. Mortgagor represents
and warrants to Mortgagee that the execution and delivery of this
Mortgage and all related documents and the performance of any
term, covenant, or condition herein provided in any agreement or
instrument executed in connection therewith, have been duly
authorized on behalf of the Mortgagor by all proper and necessary
action, and are not in conflict with, or result in any breach of,
or constitute a default under or violate:
A. Any of the terms, conditions, or provisions of any
agreement, lease or other instrument to which Mortgagor
is a party or subject to; or,
B. Any law, regulation, order, writ, injunction or decree
to which Mortgagor is subject or any rules or
regulations of any administrative agency which have
jurisdiction over Mortgagor or over any property of
Mortgagor that would have a material adverse affect on
Mortgagor's business or financial condition.
SEVERABILITY. In the event any one or more of the
provisions of the Mortgage or the Note shall for any reason be
invalid, illegal or unenforceable in whole or in part, then only
such provision or provisions shall be deemed to be null and void
and of no force or effect, but shall not affect any other
provision of the Mortgage or the Note.
ASSIGNMENT OF MORTGAGE. Upon Mortgagee's receipt of payment
in full of the indebtedness evidenced by the Note and Mortgage
and receipt of a $200.00 assignment processing fee to Mortgagee,
Mortgagee covenants to assign the Mortgage to any new lender
selected by Mortgagor on the following conditions:
A. The Assignment shall be in accordance with Section
275 of the Real Property Law and in a form reasonably acceptable
to Mortgagee and such new lender, suitable for recording in the
Monroe County Clerk's Office, but without any representation or
warranty by, or recourse to, Mortgagee.
B. The Note shall be endorsed, without recourse, as
reasonably requested by such new lender.
C. The Note, Mortgage and Assignment shall be
delivered to such new lender.
IN WITNESS WHEREOF, the Mortgage has been duly executed by
the Mortgagor and Mortgagee, the day and year first above
written.
ESTATE OF FRED B. KRAVETZ
By: s/Laurie Kuskin
Laurie Kuskin, Executrix
FIRST NATIONAL BANK OF ROCHESTER
By: s/Dorian C. Chapman
Dorian C. Chapman
Vice President
STATE OF NEW JERSEY )
COUNTY OF MONMOUTH ) SS:
On this 27th day of November, 1996, before me, the
subscriber, personally appeared LAURIE KUSKIN, Executrix of the
Last Will and Testament of FRED B. KRAVETZ, to me personally
known and known to me to be the same person described in and who
executed the within Instrument, and she acknowledged to me that
she executed the same as such Executrix.
s/Deborah A. Maretzky
Notary Public
Notary Public State of New Jersey
Qualified in Ocean County
Commission Expires October 28, 1999
STATE OF NEW YORK)
COUNTY OF MONROE )
On this 4th day of December, 1996, before me, the
subscriber, personally appeared DORIAN C. CHAPMAN, to me known,
who, being by me duly sworn, did depose and say that he resides
in Rochester, New York, that he is the Vice President of FIRST
NATIONAL BANK OF ROCHESTER, the corporation described in, and
which executed the within Instrument, and that he signed his name
thereto by order of the Board of Directors.
s/Samuel O. Tilton
Notary Public
<PAGE>
SCHEDULE A
Description of Mortgaged Premises - omitted in this exhibit.
<PAGE>
SCHEDULE B
CONSOLIDATION/SPREADING AGREEMENT
The Mortgage is hereby consolidated, combined and made equal
and coordinate in lien without priority of one over the other
with certain note(s) and mortgage(s) owned and held by the
Mortgagee herein and made, executed and acknowledged by the then
owners of the Mortgaged Premises and described as follows in
attached Schedule C:
The above described mortgage(s), which may be valid liens on
only a portion of the Mortgaged Premises, are hereby modified so
that the liens thereof shall be spread over the whole of the
Mortgaged Premises.
The above described mortgage(s) and the Mortgage shall
constitute in law but one first mortgage and a single lien upon
the Mortgaged Premises for the total sum of FIVE HUNDRED SEVENTY-
FIVE THOUSAND and 00/100 Dollars ($575,000.00) which the
Mortgagor does hereby assume, agree and bind itself to pay to the
Mortgagee with interest thereon to be computed from the date
hereof, or of each advance, at the rate of interest set forth in
a certain Restated Mortgage Note ("Restated Note") executed by
Mortgagor on even date herewith and the terms of the above-
described mortgage(s) and the Mortgage and the notes which they
secure, are coordinated and consolidated and extended so that the
total mortgage indebtedness shall become due and payable with
interest in accordance with the Restated Note.
The terms, covenants and conditions of the Mortgage
containing these consolidation provisions are hereby incorporated
in and made the terms, covenants and conditions of the notes and
mortgages consolidated herewith and of the Restated Note to the
same effect as though originally incorporated therein, and the
same shall apply to the full amount of the mortgage debt as
consolidated hereby. When the terms and provisions contained
herein in any way conflict with the terms and provisions
contained in the notes and mortgages consolidated herewith, and
of the Restated Note, the terms and provisions herein contained
shall prevail, and, in the event of any overlapping terms,
covenants and conditions, insofar as possible, the terms,
covenants and conditions contained herein and in the notes and
mortgages consolidated herewith and the Restated Note shall both
be applicable. The said notes and mortgages shall otherwise
remain in full force and effect and as modified by this
Agreement, the notes and mortgages are hereby ratified and
confirmed. If the instruments which are being consolidated
herewith are bonds and mortgages, then whenever the words "Note"
or "Notes" appear herein, the same shall be construed to mean
"bond" or "bonds".
<PAGE>
SCHEDULE C
Mortgages Being Consolidated
1. Mortgage made by FRED B. KRAVETZ and RICHARD J.
CHIARENZA to HALE MANOR, INC. in the original principal amount of
$1,100,000.00, dated August 6, 1987 and recorded August 10, 1987
in the Monroe County Clerk's Office in Liber 8334 of Mortgages,
at page 230.
The above mortgage was assigned by HALE MANOR, INC. to KARL
H. KITTELBERGER, KARL W. KITTELBERGER, STEVEN KITTELBERGER, JAMES
KITTELBERGER, BRYAN KITTELBERGER and SCOTT KITTELBERGER, by an
assignment dated August 6, 1992 and recorded September 1, 1992 in
the Monroe County Clerk's Office in Liber 926 of Assignments of
Mortgages, page 495.
The above mortgage was assigned by SCOTT KITTELBERGER to
KARL H. KITTELBERGER, KARL W. KITTELBERGER, STEVEN KITTELBERGER,
JAMES KITTELBERGER and BRYAN KITTELBERGER, by an assignment dated
October 12, 1988 and recorded September 1, 1992 in the Monroe
County Clerk's Office in Liber 926 of Assignments of Mortgages,
page 498.
The above mortgage was assigned by JAMES KITTELBERGER to
FLEET BANK OF NEW YORK N.A., by an assignment dated August 31,
1992 and recorded September 1, 1992 in the Monroe County Clerk's
Office in Liber 926 of Assignments of Mortgages, page 501.
The above mortgage was assigned by STEVEN KITTELBERGER to
FLEET BANK OF NEW YORK N.A., by an assignment dated August 31,
1992 and recorded September 1, 1992 in the Monroe County Clerk's
Office in Liber 926 of Assignments of Mortgages, page 504.
The above mortgage was assigned by KARL H. KITTELBERGER,
KARL W. KITTELBERGER and BRYAN KITTELBERGER to FLEET BANK OF NEW
YORK N.A., by an assignment dated August 29, 1992 and recorded
September 1, 1992 in the Monroe County Clerk's Office in Liber
926 of Assignments of Mortgages, page 507.
The above mortgage was modified by a Mortgage Modification,
Extension, Spreading & Security Agreement made by and between
FRED B. KRAVETZ and FLEET BANK OF NEW YORK, N.A., dated September
1, 1992 and recorded September 1, 1992 in Liber 11119 of
Mortgages, page 518.
The unpaid principal balance on the above mortgage is
$522,858.21.
<PAGE>
CONTINUING UNLIMITED GUARANTY
In consideration of any extension of credit by FIRST
NATIONAL BANK OF ROCHESTER, (hereinafter called "Bank") to the
ESTATE OF FRED B. KRAVETZ, L.P., (hereinafter called "Customer"),
either alone or with one or more persons, the undersigned does
hereby (jointly and severally if the undersigned be more than one
person) guarantee the full and prompt payment to said Bank, when
due, whether accelerated or not, of any and all indebtedness,
liabilities and obligations of every nature and kind, whether
heretofore or hereafter arising of Customer to Bank, including
but not limited to all currently existing indebtedness of Company
to Bank, and all indebtedness of Company to Bank hereafter
incurred, all of which is referred to herein as the
"Indebtedness".
1. The undersigned further (jointly and severally, if the
undersigned be more than one person) agree(s) to pay all costs,
expenses and reasonable attorney's fees at any time paid or
incurred by the Bank in endeavoring to collect the Indebtedness
or any part thereof and in and about the enforcement of this
instrument.
2. This instrument is and is intended to be a continuing
guaranty for the Indebtedness (irrespective of the aggregate
amount thereof, or changes in the same from time to time) to the
extent above specified, independent of and in addition to any
other guaranty, endorsement or security held by Bank therefor,
and without right of subrogation on the part of the undersigned
until the Indebtedness is paid in full. The undersigned
acknowledge that this guaranty does not modify or terminate any
previous guaranties executed and delivered to Bank by the
undersigned or either of them, which guaranties, if any, remain
in full force and effect. This guaranty shall remain in full
force and effect until the Bank or its successors or assigns,
shall actually receive written notice of its discontinuance or
notice of the death of the undersigned and all of the
Indebtedness contracted for or created before the receiving of
such notice, and any extensions or renewals thereof whether made
before or after the receipt of such notice, together with
interest accrued thereon, shall be paid in full. In the event of
the discontinuance of this guaranty as to any of the undersigned
because of receipt by the Bank of notice of death or notice of
discontinuance, this guaranty shall, notwithstanding, still
continue and remain in full force against the survivor or
survivors of the undersigned until discontinued as to them in the
same manner. In the event all of the Indebtedness shall at any
time, or from time to time, be satisfied, this guaranty shall,
nevertheless, continue in full force and effect as to any such
Indebtedness contracted for or incurred thereafter, from time to
time, before receipt by Bank of written notice of discontinuance
or written notice of death of the undersigned.
3. If any default shall be made in the payment of any or
all of the Indebtedness, the undersigned hereby (jointly and
severally, if the undersigned be more than one person) agree(s)
to pay the same without requiring protest or notice of
non-payment or notice of default to the undersigned, to the
Customer, or to any other person, without proof of demand and
without requiring the Bank to resort first to the Customer or to
any other guaranty, security or collateral which it may have or
hold. The undersigned hereby waives demands of protest and
notice of non-payment and protest to the undersigned, to the
Customer, or to any other person; notice of acceptance hereof or
assent hereto by Bank; and notice that any Indebtedness has been
incurred by the Customer to Bank, and notice in the change of the
terms of payment of any of the Indebtedness, including but not
limited to a change in the interest rate on any or all of the
Indebtedness.
4. Upon default being made in the payment of any of the
Indebtedness, the undersigned authorize(s) and empowers the Bank,
in addition to its other remedies, to charge any account of
the undersigned, and if the undersigned be more than one person,
any account of any or all of the undersigned with the full amount
then due on this guaranty and to sell, at any broker's board or
at a public or private sale, (with such notice, if any, referred
under the Uniform Commercial Code, to the undersigned,) any
property of the undersigned (or any of them) in the possession or
custody of the Bank and to apply the proceeds thereof to any
balance due on this guaranty. Upon any such sale the Bank may
itself purchase the whole or any part of any property sold free
from any right of redemption which is expressly waived and
released.
5. The undersigned also further agree(s) that the Bank
shall have the irrevocable right, in its sole discretion, with or
without notice to the undersigned, either before or after the
institution of bankruptcy or other legal proceedings by or
against the undersigned or any of them, or before or after
receipt of written notice of the death of the undersigned, or any
of them, or written notice of discontinuance of any of the
undersigned's liability hereunder from any of the undersigned, to
extend the time given for the payment of the Indebtedness or any
part thereof. Bank may accept one or more renewal notes for the
Indebtedness which shall be considered not as new obligations but
as extensions of the obligations renewed, and no such extensions
shall discharge or in any manner affect the liability of the
undersigned, or the liability of the estate or estates of either
or any of the undersigned under this guaranty.
6. The liability of the undersigned hereunder shall not be
affected or impaired by any acceptance by the Bank of security
for payment of the Indebtedness, or any part thereof, or by any
disposition of or failure, neglect or omission on the part of the
Bank to realize upon any such security or any security at any
time held by or left with the Bank for any or all of the
Indebtedness, or upon which a lien may exist therefor, may be
exchanged, withdrawn or surrendered from time to time or
otherwise dealt with by the Bank without notice to or assent from
the undersigned, to the same extent as though this guaranty had
not been given. Bank shall have the exclusive right to determine
how, when and what application of payments and credits, if any,
shall be made on the Indebtedness, or any part thereof, and may
apply the same upon principal or interest or fees or expense as
it sees fit. The undersigned hereby (jointly and severally)
agree(s) and consent(s) that the Bank shall have the right to
make any agreement with the Customer or with any party to or any
one liable for the payment of all or any of the Indebtedness or
interested therein, for the compounding, compromise, discharge or
release thereof, in whole or in part, for any modification or
alteration of any of the terms thereof, including but not limited
to, a change in the interest rate, or of any contract between the
Bank and the Customer or any other party without notice to or
assent from the undersigned. The Bank shall also have the right
to discharge or release one or more of the undersigned from any
obligation hereunder, in whole or in part, without in any way
releasing, impairing or affecting its rights against the other or
others of the undersigned.
7. This guaranty is absolute and unconditional and shall
not be affected by any act or thing whatsoever, except the
payment in full of the Indebtedness hereby secured. This is a
guaranty of payment and not collection. The failure of any other
person to sign this guaranty shall not release or affect the
liability of any signer hereof. This guaranty has been
unconditionally delivered to Bank by each of the persons who have
signed it.
8. If a claim is made upon Bank at any time for repayment
or recovery of any amount of the Indebtedness, or other value
received by Bank from any source, in payment of or on account of
any of the Indebtedness, and Bank repays or otherwise becomes
liable for all or any part of such claim by reason of (a) any
judgment, decree, or order of any court or administrative body,
or (b) any settlement or compromise of such claim or claims, the
undersigned shall remain liable to Bank hereunder for the amount
so repaid or for which Bank is otherwise liable, to the same
extent as if any such amounts had not been received by Bank,
notwithstanding any return or destruction of the original of this
guaranty, or termination hereof or cancellation of any note, bond
or other obligation which evidences all or a portion of the
Indebtedness.
9. The undersigned unconditionally agrees that he will not
assert, and he does hereby waive, any right he may have against
Customer for indemnity, subrogation, reimbursement, contribution,
or any other claim to Customer's assets, thereby relinquishing
any right he may have to be a creditor of Customer.
10. This document is the final expression of this guaranty
of the undersigned in favor of Bank, and is the complete and
exclusive statement of the terms of this guaranty. No course of
prior dealings between the undersigned and Bank, nor any usage of
trade, nor any parol or extrinsic evidence of any nature or kind,
shall be used or be relevant to supplement, explain or modify
this guaranty.
11. All payments of principal or interest made on the
Indebtedness by the Customer to the Bank shall be deemed to have
been made as agent for the undersigned for the purpose of tolling
or renewing the Statute of Limitations.
12. This guaranty and every part hereof shall be binding
(jointly and severally) upon the undersigned and the heirs, legal
representatives, successors and assigns of the undersigned, and
shall inure to the benefit of the Bank, its successors and
assigns.
13. This instrument cannot be changed or modified or
discharged in whole or in part, orally, and shall be governed by
New York law. Any litigation involving this guaranty shall, at
Bank's option, be tried only in a court of competent jurisdiction
located in Monroe County, New York.
14. All obligations of the undersigned under this guaranty
are joint and several.
IN WITNESS WHEREOF the undersigned has signed and sealed
this instrument at Ocean County, New Jersey, as of the 3rd day of
December, 1996
s/Gary Kuskin
(L.S.)
Gary Kuskin
STATE OF NEW JERSEY )
COUNTY OF MONMOUTH ) SS:
On this 27th day of November, 1996, before me
personally appeared GARY KUSKIN, to me personally known and known
to me to be the same person described in and who executed the
within Guaranty, and he duly acknowledged to me that he executed
the same.
s/Deborah A. Maretzky
Notary Public
Notary Public State of New Jersey
Qualified in Ocean County
Commission Expires October 28, 1999
<PAGE>
CONTINUING UNLIMITED GUARANTY
In consideration of any extension of credit by FIRST
NATIONAL BANK OF ROCHESTER, (hereinafter called "Bank") to the
ESTATE OF FRED B. KRAVETZ, (hereinafter called "Customer"),
either alone or with one or more persons, the undersigned does
hereby (jointly and severally if the undersigned be more than one
person) guarantee the full and prompt payment to said Bank, when
due, whether accelerated or not, of any and all indebtedness,
liabilities and obligations of every nature and kind, whether
heretofore or hereafter arising of Customer to Bank, including
but not limited to all currently existing indebtedness of Company
to Bank, and all indebtedness of Company to Bank hereafter
incurred, all of which is referred to herein as the
"Indebtedness".
1. The undersigned further (jointly and severally, if the
undersigned be more than one person) agree(s) to pay all costs,
expenses and reasonable attorney's fees at any time paid or
incurred by the Bank in endeavoring to collect the Indebtedness
or any part thereof and in and about the enforcement of this
instrument.
2. This instrument is and is intended to be a continuing
guaranty for the Indebtedness (irrespective of the aggregate
amount thereof, or changes in the same from time to time) to the
extent above specified, independent of and in addition to any
other guaranty, endorsement or security held by Bank therefor,
and without right of subrogation on the part of the undersigned
until the Indebtedness is paid in full. The undersigned
acknowledge that this guaranty does not modify or terminate any
previous guaranties executed and delivered to Bank by the
undersigned or either of them, which guaranties, if any, remain
in full force and effect. This guaranty shall remain in full
force and effect until the Bank or its successors or assigns,
shall actually receive written notice of its discontinuance or
notice of the death of the undersigned and all of the
Indebtedness contracted for or created before the receiving of
such notice, and any extensions or renewals thereof whether made
before or after the receipt of such notice, together with
interest accrued thereon, shall be paid in full. In the event of
the discontinuance of this guaranty as to any of the undersigned
because of receipt by the Bank of notice of death or notice of
discontinuance, this guaranty shall, notwithstanding, still
continue and remain in full force against the survivor or
survivors of the undersigned until discontinued as to them in the
same manner. In the event all of the Indebtedness shall at any
time, or from time to time, be satisfied, this guaranty shall,
nevertheless, continue in full force and effect as to any such
Indebtedness contracted for or incurred thereafter, from time to
time, before receipt by Bank of written notice of discontinuance
or written notice of death of the undersigned.
3. If any default shall be made in the payment of any or
all of the Indebtedness, the undersigned hereby (jointly and
severally, if the undersigned be more than one person) agree(s)
to pay the same without requiring protest or notice of
non-payment or notice of default to the undersigned, to the
Customer, or to any other person, without proof of demand and
without requiring the Bank to resort first to the Customer or to
any other guaranty, security or collateral which it may have or
hold. The undersigned hereby waives demands of protest and
notice of non-payment and protest to the undersigned, to the
Customer, or to any other person; notice of acceptance hereof or
assent hereto by Bank; and notice that any Indebtedness has been
incurred by the Customer to Bank, and notice in the change of the
terms of payment of any of the Indebtedness, including but not
limited to a change in the interest rate on any or all of the
Indebtedness.
4. Upon default being made in the payment of any of the
Indebtedness, the undersigned authorize(s) and empowers the Bank,
in addition to its other remedies, to charge any account of
the undersigned, and if the undersigned be more than one person,
any account of any or all of the undersigned with the full amount
then due on this guaranty and to sell, at any broker's board or
at a public or private sale, (with such notice, if any, referred
under the Uniform Commercial Code, to the undersigned,) any
property of the undersigned (or any of them) in the possession or
custody of the Bank and to apply the proceeds thereof to any
balance due on this guaranty. Upon any such sale the Bank may
itself purchase the whole or any part of any property sold free
from any right of redemption which is expressly waived and
released.
5. The undersigned also further agree(s) that the Bank
shall have the irrevocable right, in its sole discretion, with or
without notice to the undersigned, either before or after the
institution of bankruptcy or other legal proceedings by or
against the undersigned or any of them, or before or after
receipt of written notice of the death of the undersigned, or any
of them, or written notice of discontinuance of any of the
undersigned's liability hereunder from any of the undersigned, to
extend the time given for the payment of the Indebtedness or any
part thereof. Bank may accept one or more renewal notes for the
Indebtedness which shall be considered not as new obligations but
as extensions of the obligations renewed, and no such extensions
shall discharge or in any manner affect the liability of the
undersigned, or the liability of the estate or estates of either
or any of the undersigned under this guaranty.
6. The liability of the undersigned hereunder shall not be
affected or impaired by any acceptance by the Bank of security
for payment of the Indebtedness, or any part thereof, or by any
disposition of or failure, neglect or omission on the part of the
Bank to realize upon any such security or any security at any
time held by or left with the Bank for any or all of the
Indebtedness, or upon which a lien may exist therefor, may be
exchanged, withdrawn or surrendered from time to time or
otherwise dealt with by the Bank without notice to or assent from
the undersigned, to the same extent as though this guaranty had
not been given. Bank shall have the exclusive right to determine
how, when and what application of payments and credits, if any,
shall be made on the Indebtedness, or any part thereof, and may
apply the same upon principal or interest or fees or expense as
it sees fit. The undersigned hereby (jointly and severally)
agree(s) and consent(s) that the Bank shall have the right to
make any agreement with the Customer or with any party to or any
one liable for the payment of all or any of the Indebtedness or
interested therein, for the compounding, compromise, discharge or
release thereof, in whole or in part, for any modification or
alteration of any of the terms thereof, including but not limited
to, a change in the interest rate, or of any contract between the
Bank and the Customer or any other party without notice to or
assent from the undersigned. The Bank shall also have the right
to discharge or release one or more of the undersigned from any
obligation hereunder, in whole or in part, without in any way
releasing, impairing or affecting its rights against the other or
others of the undersigned.
7. This guaranty is absolute and unconditional and shall
not be affected by any act or thing whatsoever, except the
payment in full of the Indebtedness hereby secured. This is a
guaranty of payment and not collection. The failure of any other
person to sign this guaranty shall not release or affect the
liability of any signer hereof. This guaranty has been
unconditionally delivered to Bank by each of the persons who have
signed it.
8. If a claim is made upon Bank at any time for repayment
or recovery of any amount of the Indebtedness, or other value
received by Bank from any source, in payment of or on account of
any of the Indebtedness, and Bank repays or otherwise becomes
liable for all or any part of such claim by reason of (a) any
judgment, decree, or order of any court or administrative body,
or (b) any settlement or compromise of such claim or claims, the
undersigned shall remain liable to Bank hereunder for the amount
so repaid or for which Bank is otherwise liable, to the same
extent as if any such amounts had not been received by Bank,
notwithstanding any return or destruction of the original of this
guaranty, or termination hereof or cancellation of any note, bond
or other obligation which evidences all or a portion of the
Indebtedness.
9. The undersigned unconditionally agrees that he will not
assert, and he does hereby waive, any right he may have against
Customer for indemnity, subrogation, reimbursement, contribution,
or any other claim to Customer's assets, thereby relinquishing
any right he may have to be a creditor of Customer.
10. This document is the final expression of this guaranty
of the undersigned in favor of Bank, and is the complete and
exclusive statement of the terms of this guaranty. No course of
prior dealings between the undersigned and Bank, nor any usage of
trade, nor any parol or extrinsic evidence of any nature or kind,
shall be used or be relevant to supplement, explain or modify
this guaranty.
11. All payments of principal or interest made on the
Indebtedness by the Customer to the Bank shall be deemed to have
been made as agent for the undersigned for the purpose of tolling
or renewing the Statute of Limitations.
12. This guaranty and every part hereof shall be binding
(jointly and severally) upon the undersigned and the heirs, legal
representatives, successors and assigns of the undersigned, and
shall inure to the benefit of the Bank, its successors and
assigns.
13. This instrument cannot be changed or modified or
discharged in whole or in part, orally, and shall be governed by
New York law. Any litigation involving this guaranty shall, at
Bank's option, be tried only in a court of competent jurisdiction
located in Monroe County, New York.
14. All obligations of the undersigned under this guaranty
are joint and several.
IN WITNESS WHEREOF the undersigned has signed and sealed
this instrument at Ocean County, New Jersey, as of the 3rd day of
December, 1996
s/Laurie Kuskin
(L.S.)
Laurie Kuskin
STATE OF NEW JERSEY )
COUNTY OF MONMOUTH ) SS:
On this 27th day of November, 1996, before me
personally appeared LAURIE KUSKIN, to me personally known and
known to me to be the same person described in and who executed
the within Guaranty, and she duly acknowledged to me that she
executed the same.
s/Deborah A. Maretzky
Notary Public
Notary Public State of New Jersey
Qualified in Ocean County
Commission Expires October 28, 1999
[EXHIBIT 10.24]
RESTATED MORTGAGE NOTE
$400,000.00 Rochester, New York
FOR VALUE RECEIVED, the undersigned, DEAL ROAD ASSOCIATES,
L.P., with an office c/o Kravetz Realty, Inc., 150 Linden Oaks
Drive, Suite C, Rochester, New York 14625 (hereinafter called
"Borrower"), promises to pay FIRST NATIONAL BANK OF ROCHESTER, a
national banking association, or order, (hereinafter called
"Lender") at its principal office at 35 State Street, Rochester,
New York, or at such other place as may be designated in writing
by the holder of this Restated Mortgage Note ("Mortgage Note" or
"Note"), the sum of FOUR HUNDRED THOUSAND and 00/100 DOLLARS
($400,000.00), in lawful money of the United States, or so much
as may be advanced, referred to as "principal sum", with interest
thereon to be computed from the date hereof, or of each advance,
at the rate of eight and three quarters percent (8.75%) per
annum.
Interest only on the unpaid principal sum, from the date of
this Note to December 31, 1996 shall be due and payable the
date of this Note.
Commencing on the first day of February, 1997, installments
of principal and interest shall be paid in the sum of
$3,997.79 based upon an amortization period of fifteen (15)
years, and a like amount on the first day of each and every
month thereafter until the principal sum and interest are
fully paid; said monthly payments to be applied first to the
payment of accrued interest at the above rate and the
balance to be applied to the reduction of the principal sum.
The entire principal sum evidenced hereby, if not sooner
paid, shall be due and payable on January 1, 2002.
The rate of interest set forth herein shall continue in
effect until all sums owed Lender are paid in full.
The rate of interest shall not exceed that permitted by
applicable Federal and New York State law.
Interest shall be computed for the actual number of days
elapsed on the basis of a year consisting of 360 days.
If for any reason whatsoever this Note is prepaid in part or
in full within one (1) year from the date hereof, a prepayment
fee of five percent (5.0%) of the original amount of the
principal sum will be charged. Beginning with the second loan
year, the prepayment fee shall be reduced by one percent (1.0%)
each year. A loan year begins on the date this Mortgage Note is
executed and on each anniversary thereof.
In the event any payment due hereunder shall remain unpaid
for more than ten days, the holder hereof may collect a late
charge in the amount of $50.00 or 6.0% of said payment, whichever
is greater, to cover its extra handling expense.
If this Note is referred to attorneys for collection, all
parties now or hereafter personally liable for the indebtedness
hereby evidenced, jointly and severally agree to pay, the
principal and interest due, all costs and expenses, including
reasonable attorneys' fees, incurred by the holder hereof, with
or without the institution of an action or proceeding.
The rate of interest hereunder shall increase to three
percent (3.0%) above the rate of interest then applicable to this
Note upon the maturity date of this Note or upon an event of
default under this Note or the Mortgage securing the Note.
This Note is secured by a Mortgage and Consolidation
Agreement ("Mortgage") of even date herewith on property known as
520 Panorama Trail, Penfield, Monroe County, New York
("Property").
In the event the Debt Service Coverage Ratio ("DSCR"), as
defined below, for the Property at any time is less than 1.0
("Minimum DSCR"), as reasonably determined by the Lender, the
Lender may, by written notice to Mortgagor, require a payment
toward principal so as to achieve the Minimum DSCR. In such
event, the applicable prepayment fee shall not be collected by
Lender, and the monthly payment of principal and interest shall
be recalculated based upon the reduced principal sum and the
remaining amortization period. DSCR shall mean Net Income (as
defined below) divided by annual payments of principal and
interest pursuant to this Note. Net Operating Income shall mean
annual rental income available after payment of annual real
estate taxes, utilities, management fees, repairs, maintenance,
property insurance, reasonable salaries, reasonable
administrative expenses, and other normal operating expenses,
exclusive of depreciation amortization and interest expense.
This Note is being delivered solely for the purpose of
modifying, amending and restating the terms of the notes which
are secured by the Mortgage. This Note does not create a new or
additional indebtedness or obligation other than the principal
indebtedness or obligation secured by or which under any
contingency may be secured by the Mortgage.
It is hereby expressly agreed, that the principal sum
secured by this Note shall become due at the option of the holder
thereof on the happening of any default or event by which under
the terms of the Mortgage, the principal sum may or shall become
due and payable; also, that all of the covenants, conditions and
agreements contained in the Mortgage are hereby made part of this
instrument.
Presentment for payment, notice of dishonor, protest and
notice of protest are hereby waived.
This Note shall be governed by and construed in accordance
with the laws of the State of New York.
In the event any one or more of the provisions of the Note
shall for any reason be invalid, illegal or unenforceable in
whole or in part, then only such provision or provisions shall be
deemed to be null and void and of no force or effect, but shall
not affect any other provision of the Note.
This Note may not be changed or terminated orally.
Signed and sealed as of the 3rd day of December, 1996.
DEAL ROAD ASSOCIATES, L.P.
BY: KUSKIN ADVISORS, INC.
GENERAL PARTNER
BY: s/Laurie Kuskin
Laurie Kuskin, President
STATE OF NEW JERSEY )
COUNTY OF MONMOUTH ) ss:
On this 27th day of November, 1996, before me
personally came Laurie Kuskin, to me known and known to me to be
the President of Kuskin Advisors, Inc. the general partner of
Deal Road Associates, L.P., the partnership described in, and
which executed the foregoing instrument, and who acknowledged
that she executed the foregoing Instrument for and on behalf of
said partnership.
s/Deborah A. Maretzky
Notary Public
Notary Public State of New Jersey
Qualified in Ocean County
Commission Expires October 28, 1999
<PAGE>
MORTGAGE
WITH CONSOLIDATION AGREEMENT
This Mortgage, made as of the 3rd day of December, 1996
between DEAL ROAD ASSOCIATES, L.P., with an office c/o Kravetz
Realty, Inc., 150 Linden Oaks Drive, Suite C, Rochester, New York
14625 (herein called the "Mortgagor"), and FIRST NATIONAL BANK OF
ROCHESTER, a national banking association with its principal
office at 35 State Street, Rochester, Monroe County, New York,
(herein called the "Mortgagee").
W I T N E S S E T H, to secure the payment of an
indebtedness in the sum of TWO HUNDRED FIFTY-FOUR THOUSAND
NINETY-TWO AND 76/100 DOLLARS ($254,092.76) lawful money of the
United States (or so much as may be advanced) to be paid with
interest thereon to be computed from the date hereof, to be paid
according to a certain bond, note, or obligation bearing even
date herewith ("Note"), the Mortgagor hereby mortgages to the
Mortgagee the premises described in Schedule "A" attached hereto
and made a part hereof (herein called the "Mortgaged Premises" or
"Premises").
TOGETHER with all the right, title and interest of the
Mortgagor in and to any and all unearned premiums accrued,
accruing or to accrue under any and all insurance policies now or
hereafter obtained by the Mortgagor on the Mortgaged Premises,
TOGETHER with the appurtenances and all the estate and
rights of the Mortgagor in and to said Premises,
TOGETHER with all and singular the tenements, hereditaments,
and appurtenances belonging or in any way appertaining to said
Premises, and the reversion and reversions, remainder and
remainders, rents, issues and profits thereof.
TOGETHER with and including any and all strips and gores of
land adjoining or abutting said Premises,
TOGETHER with all right, title, and interest of the
Mortgagor in and to the land lying in the bed of any street,
road, avenue or alley, open or proposed, in front of, running
through or adjoining said Premises,
TOGETHER with all buildings, structures, and improvements
now or at any time hereafter erected, constructed or situated
upon the Premises, and apparatus, fixtures, chattels, and
articles of personal property now or hereafter attached to or
used in connection with said Premises, including but not limited
to furnaces, boilers, oil boilers, radiators and piping, coal
stokers, plumbing and bathroom fixtures, refrigeration, air-
conditioning and sprinkler systems, wash-tubs, sinks, gas and
electric fixtures, stoves, ranges, awnings, screens, window
shades, elevators, motors, dynamos, refrigerators, kitchen
cabinets, incinerators, plants and shrubbery and all other
equipment and machinery, appliances, fittings and fixtures of
every kind in or used in the operation of the buildings standing
on said Premises, together with any and all replacements thereof
and additions thereto,
TOGETHER with all awards heretofore and hereafter made to
the Mortgagor for taking by eminent domain the whole or any part
of said Premises or any easement therein, including any awards
for changes of grade of streets, which said awards are hereby
assigned to the Mortgagee, who is hereby authorized to collect
and receive the proceeds of such awards and to give proper
receipts and acquittances therefor, and to apply the same toward
the payment of the mortgage debt, except as otherwise provided in
this Mortgage, notwithstanding the fact that the amount owing
thereof may not then be due and payable; and the Mortgagor hereby
agrees, upon request, to make, execute and deliver any and all
assignments and other instruments sufficient for the purpose or
assigning said awards to the Mortgagee, free, clear, and
discharged of any encumbrances of any kind or nature whatsoever,
The Mortgagor covenants with the Mortgagee that:
PAY INDEBTEDNESS. The Mortgagor will pay the indebtedness
secured hereby with interest thereon as herein provided and
according to the Note, and if default shall be made in the
payment of part thereof, the Mortgagee shall have power to sell
the Mortgaged Premises according to law.
INSURANCE. The Mortgagor will keep the buildings on the
Premises and the fixtures and articles of personal property
covered by the Mortgage insured against loss by fire and other
hazards, casualties and contingencies, including flood insurance
if required by law, regulation or Mortgagee, for the benefit of
the Mortgagee in an amount not less than the unpaid principal
balance due hereunder. The fire insurance policy as required
hereby shall contain the usual extended coverage endorsement and
shall provide for twenty (20) days written notice to Mortgagee
prior to cancellation. Mortgagor will maintain liability
insurance in minimum amounts of $1,000,000.00 per occurrence for
bodily injury and $100,000.00 for property damage. In addition
thereto the Mortgagor within thirty (30) days after notice and
demand will keep the Premises insured against any other hazard
that may reasonably be required by law, regulation or Mortgagee.
The Mortgagor will assign and deliver said policies to the
Mortgagee and the Mortgagor will reimburse the Mortgagee for any
premiums paid for the insurance made by the Mortgagee on the
Mortgagor's default in so insuring the buildings or in so
assigning and delivering the policies. All the provisions of
this paragraph or of any other provisions of the Mortgage
pertaining to fire insurance or any other additional insurance
which may be required hereunder shall be construed in accordance
with Section 254 Subdivision 4 of the New York Real Property Law.
Notwithstanding the provisions of the aforesaid Section 254,
Subdivision 4, the Mortgagor consents that the Mortgagee may
without qualification or limitation by virtue of said section,
retain and apply the proceeds of any such insurance in
satisfaction or reduction of the Mortgage, or it may at its
election pay the same, either in whole or in part, to the
Mortgagor or its successors or assigns for the repair or
replacement of the buildings or of the insured articles of
personal property or for any other purpose or object reasonably
satisfactory to the holder of the Mortgage, and if the Mortgagee
shall receive and retain such insurance money, the lien of the
Mortgage shall be affected only by a reduction of the amount of
such lien by the amount of such insurance money received and
retained by the Mortgagee.
Notwithstanding the foregoing election available to
Mortgagee, the proceeds of such insurance shall be made available
to Mortgagor if, at the time such proceeds are delivered to
Mortgagee, there is no uncured default under the Note or this
Mortgage and the loan to value ratio (i.e. the then unpaid
principal balance pursuant to the Note divided by the value of
the Premises as reasonably determined by Mortgagee) shall not be
more than 75%. Mortgagee shall disburse such proceeds to
Mortgagor upon completion of work and invoices therefor approved
by Mortgagee, and any excess proceeds shall be utilized to reduce
the unpaid principal sum secured by this Mortgage.
ALTERATIONS, DEMOLITION OR REMOVAL. No building, fixtures
or personal property covered by the Mortgage shall be removed,
demolished, or substantially altered without the prior written
consent of the Mortgagee.
WASTE, MAINTENANCE AND REPAIRS. The Mortgagor will not
commit any waste on the Premises or make any change in the use of
the Premises which will in any way increase any ordinary fire or
other hazard arising out of construction or operation. The
Mortgagor will keep and maintain or cause to be kept and
maintained all buildings and other improvements now or at any
time hereafter erected upon or constituting any portion of the
Mortgaged Premises, and the sidewalks and curbs abutting the
same, in good order and condition and in a rentable and
tenantable state or repair, and will make or cause to be made, as
and when the same shall become necessary, all structural and non-
structural exterior and interior, ordinary and extraordinary,
foreseen and unforeseen repairs, renewals, and replacements
necessary to that end. In the event that the Mortgaged Premises
shall be damaged or destroyed in whole or in part, by fire or any
other casualty, or in the event of a taking of a portion of the
Mortgaged Premises as a result of any exercise of the power of
eminent domain, the Mortgagor shall promptly restore, replace,
rebuild or alter the same as nearly as possible to the condition
they were in immediately prior to such fire, other casualty or
taking, provided the proceeds of the condemnation or any
insurance policy are made available to Mortgagor. Although
damage to or destruction of the Mortgaged Premises, or any
portion thereof, shall not of itself constitute a default
hereunder, the failure of the Mortgagor to restore, replace,
rebuild, or alter the same, as hereinabove provided, shall
constitute a default hereunder. The Mortgagor covenants that it
will give to the Mortgagee prompt written notice of any damage or
injury to the Mortgaged Premises and will give like notice to the
Mortgagee of the commencement of any condemnation proceeding
affecting the whole or any portion of Mortgaged Premises. The
Mortgagor shall have the right, at any time and from time to
time, to remove and dispose of building service equipment which
may have become obsolete or unfit for use or which is no longer
useful in the operation of the building now or hereafter
constituting a portion of the Mortgaged Premises. The Mortgagor
agrees promptly to replace with other building service equipment,
free of superior title, liens or claims, not necessarily of the
same character but of at least equal usefulness and quality, any
such building service equipment so removed or disposed of, except
that, if by reason of technological or other developments in the
operation and maintenance of buildings of the general character
of the building constituting a portion of the Mortgaged Premises,
no replacement of the building service equipment so removed or
disposed of is necessary or desirable in the proper operation or
maintenance of said building, the Mortgagor shall not be required
to replace the same.
TAXES, ASSESSMENTS, ETC. The Mortgagor will pay all taxes,
assessments, insurance premiums, sewer rents, or water rates, and
in default thereof, the Mortgagee may pay the same. Any sums so
advanced by the Mortgagee shall bear interest at the maximum
legal rate of interest at the time of such advance or at the
highest rate of interest set forth herein or in the Note,
whichever is greater, and any such sum and the interest thereon
shall be a lien on said Premises, prior to any right, or title
to, interest in or claim upon said Premises, or accruing
subsequent to the lien of the Mortgage and shall be deemed
secured hereby. Upon written request from Mortgagee, Mortgagor
shall deliver to Mortgagee receipted tax bills showing payment of
all taxes on the Premises within the applicable grace period.
ESTOPPEL STATEMENT. The Mortgagor within ten (10) days upon
request in person or within twenty (20) days upon request by mail
will furnish a written statement duly acknowledged of the amount
due on the Mortgage and whether any offsets or defenses exist
against the Note and Mortgage.
MORTGAGEE MAY CURE MORTGAGOR'S DEFAULTS. The Mortgagor
covenants and agrees with the Mortgagee that the holder of the
Mortgage may cure any default of Mortgagor on the Mortgage or any
prior or subsequent mortgage, including payment of any
installments of principal and interest or part thereof, and that
all costs and expenses, including reasonable attorneys' fees
together with interest thereon at the highest legal rate of
interest at the time of such default or at the highest rate of
interest set forth herein or in the Note secured by the Mortgage,
whichever is the greater, paid by the Mortgagee in so curing said
default, shall be repaid by the Mortgagor to the Mortgagee on
demand and the same shall be deemed to be secured by the Mortgage
and to be collectible in like manner as the principal sum.
WARRANTY OF TITLE. The Mortgagor warrants the title to the
Premises and will execute any further assurance of the title to
the Premises as Mortgagee may require.
LIEN LAW COVENANT. The Mortgagor will, in compliance with
Section 13 of the New York Lien Law, receive the advances secured
hereby and will hold the right to receive such advances as a
trust fund to be applied first for the purpose of paying the cost
of the improvement and will apply the same first to the payment
of the cost of the improvements before using any part of the
total of the same for any other purpose.
ESCROW FOR TAXES/INSURANCE. The Mortgagee may request at
any time after a default by Mortgagor in payment when due of
property taxes and/or insurance premiums on the Mortgaged
Premises that, in addition to the monthly payments of principal
and interest, the Mortgagor will pay monthly to the Mortgagee on
or before the first day of each and every calendar month, until
the Note is fully paid, a sum equal to one-twelfth of the known
or estimated yearly taxes, assessments, liens and charges levied
or to be levied against the Mortgaged Premises and/or premiums
for insurance held or required by Mortgagee. The Mortgagee shall
hold such payments in trust without obligation to pay interest
thereon, except such interest as may be made mandatory by law or
regulation, to pay such taxes, assessments, liens, charges and
insurance premiums within a reasonable time after they become
due. If the total of payments made by the Mortgagor for taxes,
assessments, liens, charges and insurance premiums shall exceed
the amount of payments actually made by the Mortgagee, such
excess shall be credited by the Mortgagee on subsequent payments
to be made by the Mortgagor or refunded upon payment in full of
the Note. If the total of payments made by the Mortgagor for
taxes, assessments, liens, charges and insurance premiums shall
not be sufficient to pay therefor, then the Mortgagor shall pay
to the Mortgagee any amount necessary to make up the deficiency
on or before the date when such amounts shall be due.
LATE CHARGES. If any payment required to be made under the
Mortgage or the note or the obligations secured by the Mortgage
shall be overdue in excess of 10 days, a late charge of $.06 of
each $1.00 so overdue or $50.00, whichever is greater, will be
paid by the Mortgagor for the purpose of defraying the expenses
incident to handling such delinquent payments.
LEASES. Pursuant to the provisions of Section 291-f of the
New York Real Property Law, the Mortgagor, except for residential
leases with a term not exceeding one (1) year, shall not (a)
amend, cancel, abridge, terminate, or otherwise modify any lease
of said Premises or of any part thereof, or (b) accept prepayment
of rent or installments of rent for more than one month in
advance, without the written consent of the Mortgagee and in the
event of any default under the terms of this paragraph the whole
of said principal sum shall become due immediately upon the
happening thereof at the option of the Mortgagee.
In addition thereto, except for residential leases with a
term not exceeding one (1) year, (a) the Mortgagor shall not make
any new lease or lease renewal or extension (other than those the
Mortgagor as landlord may be required to grant by the terms of an
existing lease) without the prior written consent of the
Mortgagee and (b) the Mortgagor shall furnish to the Mortgagee,
within thirty (30) days after a request by the Mortgagee to do
so, a written statement containing the names of all lessees of
the Premises, the terms of their respective leases, the space
occupied and the rentals payable thereunder.
FINANCIAL STATEMENTS. The Mortgagor will furnish the
Mortgagee with copies of its signed Federal Tax returns as they
are timely filed, but not later than 120 days after the end of
Mortgagor's fiscal year.
Any guarantor(s) of payment of the indebtedness also shall
provide Mortgagee with copies of their signed Federal Tax Returns
as they are timely filed and with annual personal financial
statements on forms provided by Mortgagee.
The Mortgagee shall have the right to examine the financial
records covering the operation of the Premises at least once a
year or as often as the Mortgagee may require if the Mortgagor be
in default.
PREPAYMENT FEE. If for any reason whatsoever the
indebtedness secured by the Mortgage is prepaid in part or in
full within one (1) year from the date hereof, a prepayment fee
of five percent (5.0%) of the original amount of the consolidated
principal sum will be charged. Beginning with the second loan
year, the prepayment fee shall be reduced by one percent (1.0%)
each year. A loan year begins on the date the Mortgage is
executed and on each anniversary thereof. The amount of such
prepayment consideration shall be added to and secured by the
Note and Mortgage and shall be recoverable by the Mortgagee in
the same manner as the principal balance hereof, and in addition
thereto, in any action brought either on the Note or for the
foreclosure of the Mortgage.
ACCELERATION OF PRINCIPAL ON TRANSFER, ETC. The principal
sum with interest thereon shall become immediately due and
payable, upon the voluntary or involuntary conveyance or transfer
by operation of law or otherwise of all or any part of the
Mortgaged Premises, or any interest or estate therein, including
testate or intestate succession and conveyance by land contract.
Acceptance of payments by the Mortgagee subsequent to any such
conveyance, transfer, or encumbering shall not be deemed a waiver
of any of the Mortgagee's rights.
If the Mortgagor is a corporation, the sale, assignment,
transfer, or other disposition of any stock by any party owning
ten (10%) percent or more of the stock, of any corporation owning
all or any part of the Mortgaged Premises or any other similar
significant change in ownership of such stock or in the relative
distribution thereof, by any method or means, whether by
increased capitalization, merger with another corporation,
corporate or other amendments, issuance of additional or new
stock, reclassification of stock or otherwise shall be deemed a
conveyance or transfer within the meaning of this provision.
If the Mortgagor is a partnership, a sale or transfer by
operation of law or otherwise of any partners' interest in the
partnership or a change in the identity or composition of the
partners of the Mortgagor shall be deemed a conveyance or
transfer within the meaning of this provision.
ACCELERATION OF PRINCIPAL ON DEFAULT, ETC. The whole of the
principal sum and interest shall become due at the option of the
Mortgagee, after (a) default in the payment of any installment of
principal or of interest for thirty (30) days; or, (b) default in
the payment of any tax, water rate, assessment, insurance
premiums, or sewer rent for thirty (30) days after notice and
demand or default after notice and demand either in assigning and
delivering the policies insuring the buildings against any
casualty or in reimbursing the Mortgagee for premiums paid on
such insurance, as herein provided; or (c) default upon request
in furnishing a statement of the amount due and whether any
offsets or defenses exist against the mortgage debt, as provided
herein in the Section entitled "Estoppel Statement"; or (d)
failure to exhibit to the Mortgagee, within ten (10) days after
demand, receipts showing payment of all taxes, water rates, sewer
rents and assessments; or (e) the actual or alteration,
demolition or removal of any building on the Premises without the
written consent of the Mortgagee; or (f) the assignment of the
rents of the Premises or any part thereof without the written
consent of the Mortgagee; or (g) the buildings on said Premises
are not maintained in reasonably good repair; or (h) failure to
comply with any requirement or order or notice of violation of
law or ordinance issued by any governmental department claiming
jurisdiction over the Premises within two (2) months from the
issuance thereof unless such requirement, order or notice is
being lawfully challenged by Mortgagor and there is no risk of
forfeiture of any of Mortgagor's rights in the Premises; or (i)
refusal of two or more fire insurance companies lawfully doing
business in the State of New York to issue policies insuring the
buildings on the premises; or (j) the removal, demolition or
destruction in whole or in part of any of the fixtures, chattels
or articles of personal property covered hereby, unless the same
are promptly replaced by similar fixtures, chattels and articles
of personal property at least in quality and condition to those
replaced, free from security interests or other encumbrances
thereon and free from any reservation of title thereof; or (k)
thirty (30) days notice to the Mortgagor, in the event of the
passage of any law deducting from the value of land for the
purposes of taxation any lien thereon, or changing in any way the
laws for the taxation of mortgages or debts secured thereby for
state or local purposes; or (1) the Mortgagor fails to keep,
observe and perform any of the other covenants, conditions or
agreements contained in the Mortgage; or (m) use of said Premises
for any unlawful purpose or public or private nuisance; or (n)
the Mortgagor commits or permits waste; or (o) any default under
any mortgage or other lien on the Premises or any default under
any other note, loan agreement or other instrument evidencing
Mortgagor's indebtedness to Mortgagee; or (p) the Note becomes
non-recourse to the Mortgagor.
NOTICES. Notice and demand to or request upon the Mortgagor
may be oral or in writing and, if in writing, may be served in
person or by mail.
APPOINTMENT OF RECEIVER. The Mortgagee, in any action to
foreclose the Mortgage, shall be entitled, without notice or
demand and without regard to the adequacy of any security for the
indebtedness hereby or the solvency or insolvency of any person
liable for the payment thereof, to the appointment of a receiver
of the rents, issues and profits of the Mortgaged Premises.
SALE IN ONE PARCEL. In case of a foreclosure sale, said
Premises, or so much thereof as may be affected by the Mortgage,
may be sold in one parcel, any provision of law to the contrary
notwithstanding.
ASSIGNMENT OF RENTS. The Mortgagor hereby absolutely and
unconditionally assigns, transfers and conveys to the Mortgagee
the rents, issues, and profits of the Premises as further
security for the payment of the Note, it being the intention of
Mortgagor and Mortgagee that this assignment be treated and
construed as an absolute assignment and not an assignment for
additional security only. The Mortgagor further grants to the
Mortgagee the right to enter upon and to take possession of the
Premises for the purpose of collecting the same and to let the
Premises or any part thereof, and to apply the rents, issues and
profits, after payment of all necessary charges and expenses, on
account of the Note. This assignment and grant shall continue in
effect until the Note is paid. The Mortgagee hereby waives the
right to enter upon and to take possession of the Premises for
the purpose of collecting the rents, issues, and profits, and the
Mortgagor shall be entitled to collect and receive the rents,
issues and profits as trustee for the benefit of Mortgagee and
Mortgagor until default under any of the covenants, conditions,
or agreements contained in the Mortgage; Mortgagor agrees to use
such rents, issues and profits in payment of principal and
interest and in payment of taxes, assessments, sewer rents, water
rates, and carrying charges against the Premises, but such right
of the Mortgagor may be revoked by the Mortgagee upon any
default, on five (5) days written notice. The Mortgagor will
not, without the written consent of the Mortgagee, receive or
collect rent from any tenant of the Premises or any part thereof
for a period of more than one month in advance, and in the event
of any default under the Mortgage will pay monthly in advance to
the Mortgagee, or to any receiver appointed to collect the rents,
issues and profits, the fair and reasonable rental value for the
use and occupation of the Premises or of such part thereof as may
be in the possession of the Mortgagor, and upon default in any
such payment will vacate and surrender the possession of the
Premises to the Mortgagee or to such receiver, and in default
thereof may be evicted by summary proceedings. Mortgagor shall
and does hereby agree to indemnify and hold Mortgagee and its
representatives harmless of and from any and all liability, loss
of damage which Mortgagor or its representatives may or might
incur under or by reason of (a) any tenant of the Premises, (b)
this Mortgage, (c) any action taken by Mortgagee or its
representatives hereunder, unless constituting willful
misconduct, or (d) claims and demands which may be asserted
against Mortgagee or its representatives by reason of any alleged
obligations or undertakings on its or their part to perform or
discharge any of the terms, covenants or agreements contained in
any lease affecting the Premises. This Mortgage shall not
operate to place upon Mortgagee any responsibility for the
management, operation or maintenance of the Premises, and the
execution of this Mortgage by Mortgagor shall constitute
conclusive evidence that all responsibility for the management,
operation and maintenance of the Premises is, shall be and shall
remain that of Mortgagor, in the absence of the taking of actual
possession of the Premises by Mortgagee. The provisions of the
foregoing indemnification obligation shall survive the assignment
or repayment of the Note, the assignment, satisfaction,
foreclosure or other termination of this Mortgage and the sale or
other transfer or conveyance of the Premises.
SECURITY AGREEMENT. The Mortgage constitutes a security
agreement under the Uniform Commercial Code and creates a
security interest in all fixtures and equipment and other
personal property (and the proceeds thereof) now or hereafter
affixed to or constituting a portion of the Premises. Mortgagor
shall execute, deliver, file and refile any financing statement,
continuation statements, or other security agreements Mortgagee
may require from time to time to confirm the lien of the Mortgage
with respect to such property.
ANTI-MARSHALLING. The Mortgagee may resort for the payment
of any indebtedness, liability, or obligation secured hereby to
its several securities therefor, in such order and manner as it
may see fit, and the Mortgagee may maintain an action to
foreclose the Mortgage notwithstanding the pendency of any action
to recover any part of the indebtedness secured hereby, or the
recovery of any judgment in such action. The Mortgagee shall not
be required during the pendency of any action to foreclose the
Mortgage, to obtain leave of any court in order to commence or
maintain any other action to recover any part of the indebtedness
secured hereby.
The Mortgagee shall also have the right in the event of
default under the Mortgage or the obligation secured hereby to
proceed against any or all interests of the Mortgagor and the
Mortgagor agrees that the Mortgagee shall have the right to elect
in writing not to cut off any interest that any Mortgagor might
have and in the event that Mortgagee shall so elect, Mortgagor
agrees that all of its duties and obligations as to such interest
shall continue.
COMPLIANCE WITH LAWS, ETC. The Mortgagor will comply with,
or cause compliance with, all present and future laws,
ordinances, rules, regulations, zoning and other requirements of
all governmental authorities whatsoever having jurisdiction of or
with respect to the Mortgaged Premises or any portion thereof or
the use or occupation thereof; provided, however, that the
Mortgagor may postpone such compliance if and so long as the
validity or legality of any such governmental requirement shall
be contested by the Mortgagor, with diligence and in good faith,
by appropriate legal proceedings.
COMPLIANCE WITH ZONING, ETC. The Mortgagor covenants: (a)
that the buildings and improvements now on the Mortgaged Premises
are in full compliance with all applicable zoning codes,
ordinances and regulations and deed restrictions, if any; and (b)
that such compliance is based solely upon Mortgagor's ownership
of such Premises, and not upon title to or interest in any other
Premises; and (c) buildings or improvements hereafter constructed
on such Premises shall be in compliance as in (a) and (b) hereof
provided, shall lie wholly within the boundaries of such Premises
and, shall be independent and self-contained operating units
(except for utility lines and conduits coming directly to the
Premises from a public road or from a private road an easement
over which for the maintenance of such utilities is covered by
the lien hereof.)
LEGAL EXPENSES. If any action or proceeding be commenced
(except an action to foreclose the Mortgage or to collect the
debt secured thereby), to which action or proceeding the
Mortgagee is made a party, or in which it becomes necessary to
defend or uphold the lien of the Mortgage, all sums paid by the
Mortgagee for the expense of any litigation to prosecute or
defend the rights and lien created by the Mortgage (including
counsel fees), shall be paid by the Mortgagor, together with
interest thereon at the legal rate of interest at the time of
said payment or at the highest rate of interest set forth herein
or in the Note secured by the Mortgage, whichever is greater, and
any such sum and interest thereon shall be a lien on said
Premises, prior to any right, or title to, interest in or claim
upon said Premises attaching or accruing subsequent to the lien
of the Mortgage, and shall be deemed to be secured by the
Mortgage.
If the Mortgage is referred to attorneys for collection or
foreclosure, the Mortgagor shall pay all sums, including
attorneys' fees, incurred by the Mortgagee, together with all
statutory costs, disbursements, and allowances, with or without
the institution of an action or proceeding. All such sums with
interest thereon at the rate set forth herein shall be deemed to
be secured by the Mortgage and collectible out of the Mortgaged
Premises.
CONDEMNATION AWARD. In the event of a condemnation award
for a portion of the Premises payable to Mortgagee and Mortgagor,
Mortgagee shall make the proceeds of such award available to
Mortgagor if, at the time such proceeds are delivered to
Mortgagee, there is no uncured default under the Note or this
Mortgage and the loan to value ratio (i.e. the then unpaid
principal balance pursuant to the Note divided by the value of
the Premises as reasonably determined by Mortgagee) shall not be
more than 75%. Mortgagee shall disburse such proceeds to
Mortgagor upon completion of work and invoices therefor approved
by Mortgagee, and any excess proceeds shall be utilized to reduce
the unpaid principal sum secured by this Mortgage.
INTEREST ON CONDEMNATION AWARD. In the event of
condemnation, or taking by eminent domain, the Mortgagee shall
not be limited to the interest paid on the award by the
condemning authority but shall be entitled to receive out of the
award interest on the entire unpaid principal sum at the rate
herein provided; the Mortgagor does hereby assign to the
Mortgagee so much of the balance of the award payable by the
condemning authority as is required to pay such total interest.
INTEREST IN THE EVENT OF DEFAULT. If default be made in the
payment of the said indebtedness when due, pursuant to the terms
hereof, the Mortgagee shall be entitled to receive interest on
the entire unpaid principal sum at the legal rate of interest at
the time of such default or at the highest rate of interest set
forth herein or in the Note secured by the Mortgage, whichever is
the greater, to be computed from the due date and until the
actual receipt and collection of the entire indebtedness. This
charge shall be added to and shall be deemed secured by the
Mortgage. The within clause, however, shall not be construed as
an agreement or privilege to extend the Mortgage, nor as a waiver
of any other right or remedy accruing to the Mortgagee by reason
of any such default.
RENT/BUSINESS INTERRUPTION INSURANCE. The Mortgagor will
keep the buildings and improvements now erected or hereafter to
be erected on the Mortgaged Premises and all personal property
and fixtures covered by the Mortgage insured for the benefit of
the Mortgagee against loss of rents or business income, as the
case may be, by reason of fire or other casualties and in such
amounts as may from time to time be reasonably required by the
Mortgagee and in companies reasonably satisfactory to the
Mortgagee, and will assign and deliver to the Mortgagee such
policies of insurance.
NO SECONDARY FINANCING. The Mortgagor will not, without the
Mortgagee's prior written consent, mortgage (including the so-
called "wrap-around mortgage"), pledge, assign, grant a security
interest in, cause any lien or encumbrance to attach to or any
levy to be made on the Mortgaged Premises except for (a) taxes
and assessments not yet delinquent and (b) any mortgage, pledge,
security interest, assignment or other encumbrance to the
Mortgagee.
BANKRUPTCY. Upon the making of an assignment for the
benefit of creditors by, or upon the filing of a petition in
bankruptcy by or against the Mortgagor, or any person or
corporation who is the guarantor hereof or whose indebtedness is
secured hereby, or upon the application for the appointment of a
receiver of the property of the Mortgagor or any such person or
corporation, or of the property of any person or corporation
which may become and be owner of the Mortgaged Premises, or upon
any act of insolvency or bankruptcy of the Mortgagor or any such
person or corporation or of any such subsequent owner, or upon
the legal incapacity of the Mortgagor or any such person or
corporation or owner, or any of them, the whole of said
indebtedness of every kind or nature held by the Mortgagee and
now or hereafter secured hereby shall immediately become due and
payable with interest thereon, and Mortgagor and any guarantor(s)
hereby waive presentment, demand of payment, protest, notice of
non-payment, and/or protest of any instrument on which the
Mortgagor or such guarantors are or may become liable now or
hereafter secured hereby, and the Mortgagor expressly agrees that
the Mortgagee may release or extend the time of any party liable
on any such obligation without notice and without affecting his
obligation thereon or under this instrument.
LIENS. The Premises shall be kept free and clear from any
liens and/or encumbrances of any type and description after the
date hereof. Upon the recording of any lien or encumbrance, and
the same not having been cleared or bonded of record within
thirty (30) days after filing thereof, the entire debt secured
hereby shall immediately become due and payable.
RIGHT TO INSPECT. The Mortgagee and any persons authorized
by Mortgagee shall have the right to enter and inspect the
Mortgaged Premises at all reasonable times during usual business
hours.
WAIVER. No waiver by the Mortgagee of the breach of any of
the covenants contained in the Note, the Mortgage, or other loan
document, or failure of the Mortgagee to exercise any option
given to it, shall be deemed to be a waiver of any other breach
of the same or any other covenant, or of its rights thereafter to
exercise any such option.
MODIFICATION. No change, amendment, modification,
cancellation or discharge hereof, or any part hereof, shall be
valid unless in writing and signed by the parties hereto or their
respective successors and assigns.
COVENANTS SHALL RUN WITH THE LAND, ETC. The covenants
contained in the Mortgage shall run with the land and bind the
Mortgagor, the heirs, personal representatives, successors and
assigns of the Mortgagor and all subsequent owners,
encumbrancers, tenants and subtenants of the Premises, and shall
enure to the benefit of the Mortgagee, the personal
representatives, successors and assigns of the Mortgagee and all
subsequent holders of the Mortgage.
PARTNERSHIP MORTGAGOR. The Mortgagor, if a partnership,
covenants that it is duly formed and validly existing under the
laws of the State of New York, and that execution of the Mortgage
and related instruments is authorized by the partnership
agreement and/or all partners.
CONSOLIDATION/SPREADING AGREEMENT. The Mortgage is
consolidated with prior existing mortgages according to Schedule
B attached hereto and made a part hereof.
ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND COVENANTS.
1. Except as otherwise disclosed in the Phase I Assessment
referenced in the Indemnification Agreement (as hereinafter
defined), Mortgagor makes the following representations and
warranties which shall survive the closing of this loan:
A. Mortgagor is in compliance in all respects with
all applicable federal, state and local laws, including, without
limitation, those relating to toxic and hazardous substances and
other environmental matters.
B. No portion of the Premises is being used or has
been used at any previous time, for the disposal, storage,
treatment, processing or other handling of any hazardous or toxic
substances.
2. Mortgagor agrees that Mortgagee or its agents or
representatives may, at any reasonable time and at Mortgagor's
expenses inspect Mortgagor's books and records and inspect and
conduct any tests on the Property including taking soil samples
in order to determine whether Mortgagor is in continuing
compliance with all environmental laws and regulations.
3. If any environmental contamination is found on the
property for which any removal or remedial action is required
pursuant to law, ordinance, order, rule, regulation or
governmental action, Mortgagor agrees that it will at its sole
cost and expense remove or take such remedial action promptly and
to Mortgagee's satisfaction.
4. Mortgagor agrees to defend, indemnify and hold harmless
Mortgagee, its employees, agents, officers and directors from and
against any claims, actions, demands, penalties, fines,
liabilities, settlements, damages, costs or expenses (including,
without limitation, attorney and consultant fees, investigation
and laboratory fees, court costs and litigation expenses) of
whatever kind or nature known or unknown contingent or otherwise
arising out of or in any way related to:
A. The past or present disposal, release or
threatened release of any hazardous or toxic substances on the
Premises;
B. Any personal injury (including wrongful death or
property damage, real or personal) arising out of or related to
such hazardous or toxic substances;
C. Any lawsuit brought or threatened, settlement
reached or government order given relating to such hazardous or
toxic substances; and/or
D. Any violation of any law, order, regulation,
requirement, or demand of any government authority, or any
policies or requirements of Mortgagee, which are based upon or in
any way related to such hazardous or toxic substances.
5. Mortgagor knows of no on-site or off-site locations
where hazardous or toxic substances from the operation of the
facility on the Premises have been stored, treated, recycled or
disposed of.
6. Mortgagor agrees that it will conduct no excavations at
the Premises unless it gives Mortgagee ten days' notice of its
intention to do so. Mortgagor further agrees that it will not
commence such excavation until Mortgagee has had the opportunity
to sample and test at the excavation location if Mortgagee so
desires. Should the testing results disclose the presence of
hazardous or toxic substances which require removal and/or remedy
under any environmental laws or regulations, the suspension of
excavation activity at such location shall continue until the
hazardous or toxic substances are removed and/or remedied to
Mortgagee's reasonable satisfaction. Mortgagor shall pay for any
and all reasonable costs for any such testing and removal and/or
remedy conducted pursuant to this paragraph.
7. Unless waived in writing by Mortgagee, the breach of
any of the covenants and warranties contained in this section
shall be an event of default under the Mortgage.
8. For purposes of this section, "hazardous and toxic
substances" includes, without limit, any flammable explosives,
radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials defined in the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, the Hazardous Materials Transportation
Act, as amended, the New York State Environmental Conservation
Law, the Resource Conservation and Recovery Act, as amended, and
in the regulations adopted and publications promulgated pursuant
thereto. The provisions of this section shall be in addition to
any other obligations and liabilities Mortgagor may have to
Mortgagee at common law, and shall survive the transactions
contemplated herein. Mortgagee may, at its option, require
Mortgagor to carry adequate insurance, if available at a
reasonable cost, to fulfill Mortgagor's obligations under this
paragraph. Mortgagor's failure to obtain insurance within 30
days after being requested to do so by Mortgagee, shall
constitute an event of default hereunder.
9. When the terms and provisions contained in the
foregoing Paragraphs 1-8 in any way conflict with the terms and
provisions contained in a certain Environmental Compliance and
Indemnification Agreement of even date herewith ("Indemnification
Agreement"), the terms and provisions contained in the
Indemnification Agreement shall prevail, and, in the event of any
overlapping terms, covenants and conditions, insofar as possible,
the terms, covenants and conditions contained herein and in the
Indemnification Agreement shall both be applicable.
TAX ON NOTE. That in the event that hereafter it is claimed
by any governmental agency that any tax or other governmental
charge or imposition is due, unpaid and payable by the Mortgagor
or the Mortgagee upon the Note (other than a tax on the interest
receivable by the Mortgagee thereunder), the Mortgagor will upon
sixty (60) days prior written notice either (a) pay such tax and
within a reasonable time thereafter deliver to the Mortgagee
satisfactory proof of payment thereof or (b) deposit with the
Mortgagee the amount of such claimed tax, together with interest
and penalties thereon, pending an application for a review of the
claim for such tax, and within a reasonable time, deliver to the
Mortgagee either (i) evidence satisfactory to the Mortgagee that
such claim of taxability has been withdrawn or defeated in which
event any such deposit shall be returned to the Mortgagor or (ii)
a direction from the Mortgagor to the Mortgagee to pay the same
out of the deposit above mentioned, any excess due over the
amount of said deposit to be paid by the Mortgagor directly to
the taxing authority and any excess of such deposit over such
payment by the Mortgagee to be returned promptly to the
Mortgagor. Upon the failure of the Mortgagor to comply with the
provisions of this Article, the whole of said principal sum and
interest secured by the Mortgage shall at the option of the
Mortgagee become due and payable. If liability for such tax is
asserted against the Mortgagee, the Mortgagee will give to the
Mortgagor prompt notice of such claim, and the Mortgagor, upon
complying with the provisions of this Article, shall have full
right and authority to contest such claim of taxability.
COMPLIANCE WITH ARTICLE 31-B OF NEW YORK STATE TAX LAW.
The Mortgagor will keep true and complete records pertaining to
its acquisition of title to the Premises, all subsequent
transfers of any interests in the Premises or any part thereof
and all changes in the controlling interest (by way of changes in
stock ownership, capital, profits, beneficial interest or
otherwise) in the Mortgagor or any related entity which may
hereafter own the Premises, including, but not limited to, a copy
of the contract of sale, title report, deed, closing statement,
transferor's affidavit, questionnaire or return, statement of
tentative assessment and any other notices or determinations of
tax received from the New York State Department of Taxation and
Finance, transferor's supplemental return, the date and cost of
all "capital improvements" made to the Premises or any part
thereof and evidence of the payment of any real property transfer
gains tax imposed by reason of Article 31-B of the New York State
Tax Law and the filing of all reports and any other information
or documentation required by the New York State Department of
Taxation and Finance by reason of said Article or any regulations
promulgated thereunder. All such records shall be made available
to Mortgagee for inspection from time to time upon its request.
If any real property transfer gains tax shall be due and
payable upon the conveyance of the Premises pursuant to a
judicial sale in any action, suit or proceeding brought to
foreclose the Mortgage or deed in lieu of foreclosure, the
Mortgagor will, at Mortgagee's request, (a) provide Mortgagee
with a copy of all such records and will prepare, execute,
deliver and file any affidavits, records questionnaires, returns
or supplemental returns required of the Mortgagor, as transferor,
including, but not limited to, a statement in affidavit form as
to the "original purchase price" of the Premises and the cost of
all "capital improvements" made to the Premises or any part
thereof by the Mortgagor or any related entity and the date or
dates on which such improvements were made and (b) pay or cause
to be paid any real property transfer gains tax, together with
interest and penalties thereon, which may be due and payable by
reason of such conveyance. The Mortgagor hereby irrevocably
appoints Mortgagee its agent and attorney-in-fact (which
appointment shall be deemed to be an agency coupled with an
interest), with full power of substitution in the Premises, to
prepare, execute, deliver and file on its behalf any and all
affidavits, questionnaires, returns and supplemental returns
which the Mortgagor, as transferor, has failed or refused to
execute and deliver to Mortgagee within 10 days after notice and
request therefor by Mortgagee. In the event that the Mortgagor
fails to pay any such tax, interest and penalties within 20 days
after notice and demand for payment is given by Mortgagee,
Mortgagee is hereby authorized to pay the same, and the amount
thereof so paid by Mortgagee, together with all costs and
expenses incurred by Mortgagee in connection with such payment,
including, but not limited to, reasonable attorneys' fees and
disbursements and interest on all such amounts, costs and
expenses at the rate of one percent (1%) in excess of the rate
specified in the Note, but in no event in excess of the maximum
interest rate permitted by law, shall be paid by the Mortgagor to
Mortgagee on demand. Until paid by the Mortgagor, all such
amounts, costs and expenses, together with interest thereon,
shall be secured by the Mortgage and may be added to the judgment
in any suit brought by Mortgagee against the Mortgagor hereon.
The foregoing shall not be applicable if the aforesaid
Article 31-B does not pertain to the Premises.
CONSTRUCTION. The word "Mortgagor" shall be construed as if
it read "Mortgagors" and the "Mortgagee" shall be construed as if
it read "Mortgagees" whenever the sense of the Mortgage so
requires. This Mortgage shall be governed by and construed in
accordance with the laws of the State of New York.
CONFLICT WITH OTHER LOAN AGREEMENTS. Mortgagor represents
and warrants to Mortgagee that the execution and delivery of this
Mortgage and all related documents and the performance of any
term, covenant, or condition herein provided in any agreement or
instrument executed in connection therewith, have been duly
authorized on behalf of the Mortgagor by all proper and necessary
action, and are not in conflict with, or result in any breach of,
or constitute a default under or violate:
A. Any of the terms, conditions, or provisions of any
agreement, lease or other instrument to which Mortgagor
is a party or subject to; or,
B. Any law, regulation, order, writ, injunction or decree
to which Mortgagor is subject or any rules or
regulations of any administrative agency which have
jurisdiction over Mortgagor or over any property of
Mortgagor that would have a material adverse affect on
Mortgagor's business or financial condition.
SEVERABILITY. In the event any one or more of the
provisions of the Mortgage or the Note shall for any reason be
invalid, illegal or unenforceable in whole or in part, then only
such provision or provisions shall be deemed to be null and void
and of no force or effect, but shall not affect any other
provision of the Mortgage or the Note.
ASSIGNMENT OF MORTGAGE. Upon Mortgagee's receipt of payment
in full of the indebtedness evidenced by the Note and Mortgage
and receipt of a $200.00 assignment processing fee to Mortgagee,
Mortgagee covenants to assign the Mortgage to any new lender
selected by Mortgagor on the following conditions:
A. The Assignment shall be in accordance with Section
275 of the Real Property Law and in a form reasonably acceptable
to Mortgagee and such new lender, suitable for recording in the
Monroe County Clerk's Office, but without any representation or
warranty by, or recourse to, Mortgagee.
B. The Note shall be endorsed, without recourse, as
reasonably requested by such new lender.
C. The Note, Mortgage and Assignment shall be
delivered to such new lender.
IN WITNESS WHEREOF, the Mortgage has been duly executed by
the Mortgagor and Mortgagee, the day and year first above
written.
DEAL ROAD ASSOCIATES, L.P.
BY: KUSKIN ADVISORS, INC.
GENERAL PARTNER
By:s/Laurie Kuskin
Laurie Kuskin, President
FIRST NATIONAL BANK OF ROCHESTER
By:s/Dorian C. Chapman
Dorian C. Chapman
Vice President
STATE OF NEW JERSEY )
COUNTY OF MONMOUTH ) ss:
On this 27th day of November, 1996, before me
personally came LAURIE KUSKIN, to me known and known to me to be
the President of KUSKIN ADVISORS, INC. the general partner of
Deal Road Associates, L.P., the partnership described in, and
which executed the foregoing instrument, and who acknowledged
that she executed the foregoing Instrument for and on behalf of
said partnership.
s/Deborah A. Maretzky
Notary Public
Notary Public State of New Jersey
Qualified in Ocean County
Commission Expires October 28, 1999
STATE OF NEW YORK)
COUNTY OF MONROE ) SS:
On this 4th day of December, 1996, before me, the
subscriber, personally appeared DORIAN C. CHAPMAN, to me known,
who, being by me duly sworn, did depose and say that he resides
in Rochester, New York, that he is the Vice President of FIRST
NATIONAL BANK OF ROCHESTER, the corporation described in, and
which executed the within Instrument, and that he signed his name
thereto by order of the Board of Directors.
s/Samuel O. Tilton
Notary Public
Notary Public State of New York
Qualified in Monroe County
Commission Expires June 30, 1997
<PAGE>
SCHEDULE A
Description of Mortgaged Premises is omitted from this exhibit.
<PAGE>
SCHEDULE B
CONSOLIDATION/SPREADING AGREEMENT
The Mortgage is hereby consolidated, combined and made equal
and coordinate in lien without priority of one over the other
with certain note(s) and mortgage(s) owned and held by the
Mortgagee herein and made, executed and acknowledged by the then
owners of the Mortgaged Premises and described in attached
Schedule C with an unpaid principal balance of $145,907.24.
The above described mortgage(s), which may be valid liens on
only a portion of the Mortgaged Premises, are hereby modified so
that the liens thereof shall be spread over the whole of the
Mortgaged Premises.
The above described mortgage(s) and the Mortgage shall
constitute in law but one first mortgage and a single lien upon
the Mortgaged Premises for the total sum of FOUR HUNDRED THOUSAND
and 00/100 DOLLARS ($400,000.00) which the Mortgagor does hereby
assume, agree and bind itself to pay to the Mortgagee with
interest thereon to be computed from the date hereof, or of each
advance, at the rate of interest set forth in a certain Restated
Mortgage Note ("Restated Note") executed by Mortgagor on even
date herewith and the terms of the above-described mortgage(s)
and the Mortgage and the notes which they secure, are coordinated
and consolidated and extended so that the total mortgage
indebtedness shall become due and payable with interest in
accordance with the Restated Note.
The terms, covenants and conditions of the Mortgage
containing these consolidation provisions are hereby incorporated
in and made the terms, covenants and conditions of the notes and
mortgages consolidated herewith and of the Restated Note to the
same effect as though originally incorporated therein, and the
same shall apply to the full amount of the mortgage debt as
consolidated hereby. When the terms and provisions contained
herein in any way conflict with the terms and provisions
contained in the notes and mortgages consolidated herewith, and
of the Restated Note, the terms and provisions herein contained
shall prevail, and, in the event of any overlapping terms,
covenants and conditions, insofar as possible, the terms,
covenants and conditions contained herein and in the notes and
mortgages consolidated herewith and the Restated Note shall both
be applicable. The said notes and mortgages shall otherwise
remain in full force and effect and as modified by this
Agreement, the notes and mortgages are hereby ratified and
confirmed. If the instruments which are being consolidated
herewith are bonds and mortgages, then whenever the words "Note"
or "Notes" appear herein, the same shall be construed to mean
"bond" or "bonds".
<PAGE>
CONTINUING UNLIMITED GUARANTY
In consideration of any extension of credit by FIRST
NATIONAL BANK OF ROCHESTER, (hereinafter called "Bank") to DEAL
ROAD ASSOCIATES, L.P., (hereinafter called "Customer"), either
alone or with one or more persons, the undersigned does hereby
(jointly and severally if the undersigned be more than one
person) guarantee the full and prompt payment to said Bank, when
due, whether accelerated or not, of any and all indebtedness,
liabilities and obligations of every nature and kind, whether
heretofore or hereafter arising of Customer to Bank, including
but not limited to all currently existing indebtedness of Company
to Bank, and all indebtedness of Company to Bank hereafter
incurred, all of which is referred to herein as the
"Indebtedness".
1. The undersigned further (jointly and severally, if the
undersigned be more than one person) agree(s) to pay all costs,
expenses and reasonable attorney's fees at any time paid or
incurred by the Bank in endeavoring to collect the Indebtedness
or any part thereof and in and about the enforcement of this
instrument.
2. This instrument is and is intended to be a continuing
guaranty for the Indebtedness (irrespective of the aggregate
amount thereof, or changes in the same from time to time) to the
extent above specified, independent of and in addition to any
other guaranty, endorsement or security held by Bank therefor,
and without right of subrogation on the part of the undersigned
until the Indebtedness is paid in full. The undersigned
acknowledge that this guaranty does not modify or terminate any
previous guaranties executed and delivered to Bank by the
undersigned or either of them, which guaranties, if any, remain
in full force and effect. This guaranty shall remain in full
force and effect until the Bank or its successors or assigns,
shall actually receive written notice of its discontinuance or
notice of the death of the undersigned and all of the
Indebtedness contracted for or created before the receiving of
such notice, and any extensions or renewals thereof whether made
before or after the receipt of such notice, together with
interest accrued thereon, shall be paid in full. In the event of
the discontinuance of this guaranty as to any of the undersigned
because of receipt by the Bank of notice of death or notice of
discontinuance, this guaranty shall, notwithstanding, still
continue and remain in full force against the survivor or
survivors of the undersigned until discontinued as to them in the
same manner. In the event all of the Indebtedness shall at any
time, or from time to time, be satisfied, this guaranty shall,
nevertheless, continue in full force and effect as to any such
Indebtedness contracted for or incurred thereafter, from time to
time, before receipt by Bank of written notice of discontinuance
or written notice of death of the undersigned.
3. If any default shall be made in the payment of any or
all of the Indebtedness, the undersigned hereby (jointly and
severally, if the undersigned be more than one person) agree(s)
to pay the same without requiring protest or notice of
non-payment or notice of default to the undersigned, to the
Customer, or to any other person, without proof of demand and
without requiring the Bank to resort first to the Customer or to
any other guaranty, security or collateral which it may have or
hold. The undersigned hereby waives demands of protest and
notice of non-payment and protest to the undersigned, to the
Customer, or to any other person; notice of acceptance hereof or
assent hereto by Bank; and notice that any Indebtedness has been
incurred by the Customer to Bank, and notice in the change of the
terms of payment of any of the Indebtedness, including but not
limited to a change in the interest rate on any or all of the
Indebtedness.
4. Upon default being made in the payment of any of the
Indebtedness, the undersigned authorize(s) and empowers the Bank,
in addition to its other remedies, to charge any account of
the undersigned, and if the undersigned be more than one person,
any account of any or all of the undersigned with the full amount
then due on this guaranty and to sell, at any broker's board or
at a public or private sale, (with such notice, if any, referred
under the Uniform Commercial Code, to the undersigned,) any
property of the undersigned (or any of them) in the possession or
custody of the Bank and to apply the proceeds thereof to any
balance due on this guaranty. Upon any such sale the Bank may
itself purchase the whole or any part of any property sold free
from any right of redemption which is expressly waived and
released.
5. The undersigned also further agree(s) that the Bank
shall have the irrevocable right, in its sole discretion, with or
without notice to the undersigned, either before or after the
institution of bankruptcy or other legal proceedings by or
against the undersigned or any of them, or before or after
receipt of written notice of the death of the undersigned, or any
of them, or written notice of discontinuance of any of the
undersigned's liability hereunder from any of the undersigned, to
extend the time given for the payment of the Indebtedness or any
part thereof. Bank may accept one or more renewal notes for the
Indebtedness which shall be considered not as new obligations but
as extensions of the obligations renewed, and no such extensions
shall discharge or in any manner affect the liability of the
undersigned, or the liability of the estate or estates of either
or any of the undersigned under this guaranty.
6. The liability of the undersigned hereunder shall not be
affected or impaired by any acceptance by the Bank of security
for payment of the Indebtedness, or any part thereof, or by any
disposition of or failure, neglect or omission on the part of the
Bank to realize upon any such security or any security at any
time held by or left with the Bank for any or all of the
Indebtedness, or upon which a lien may exist therefor, may be
exchanged, withdrawn or surrendered from time to time or
otherwise dealt with by the Bank without notice to or assent from
the undersigned, to the same extent as though this guaranty had
not been given. Bank shall have the exclusive right to determine
how, when and what application of payments and credits, if any,
shall be made on the Indebtedness, or any part thereof, and may
apply the same upon principal or interest or fees or expense as
it sees fit. The undersigned hereby (jointly and severally)
agree(s) and consent(s) that the Bank shall have the right to
make any agreement with the Customer or with any party to or any
one liable for the payment of all or any of the Indebtedness or
interested therein, for the compounding, compromise, discharge or
release thereof, in whole or in part, for any modification or
alteration of any of the terms thereof, including but not limited
to, a change in the interest rate, or of any contract between the
Bank and the Customer or any other party without notice to or
assent from the undersigned. The Bank shall also have the right
to discharge or release one or more of the undersigned from any
obligation hereunder, in whole or in part, without in any way
releasing, impairing or affecting its rights against the other or
others of the undersigned.
7. This guaranty is absolute and unconditional and shall
not be affected by any act or thing whatsoever, except the
payment in full of the Indebtedness hereby secured. This is a
guaranty of payment and not collection. The failure of any other
person to sign this guaranty shall not release or affect the
liability of any signer hereof. This guaranty has been
unconditionally delivered to Bank by each of the persons who have
signed it.
8. If a claim is made upon Bank at any time for repayment
or recovery of any amount of the Indebtedness, or other value
received by Bank from any source, in payment of or on account of
any of the Indebtedness, and Bank repays or otherwise becomes
liable for all or any part of such claim by reason of (a) any
judgment, decree, or order of any court or administrative body,
or (b) any settlement or compromise of such claim or claims, the
undersigned shall remain liable to Bank hereunder for the amount
so repaid or for which Bank is otherwise liable, to the same
extent as if any such amounts had not been received by Bank,
notwithstanding any return or destruction of the original of this
guaranty, or termination hereof or cancellation of any note, bond
or other obligation which evidences all or a portion of the
Indebtedness.
9. The undersigned unconditionally agrees that he will not
assert, and he does hereby waive, any right he may have against
Customer for indemnity, subrogation, reimbursement, contribution,
or any other claim to Customer's assets, thereby relinquishing
any right he may have to be a creditor of Customer.
10. This document is the final expression of this guaranty
of the undersigned in favor of Bank, and is the complete and
exclusive statement of the terms of this guaranty. No course of
prior dealings between the undersigned and Bank, nor any usage of
trade, nor any parol or extrinsic evidence of any nature or kind,
shall be used or be relevant to supplement, explain or modify
this guaranty.
11. All payments of principal or interest made on the
Indebtedness by the Customer to the Bank shall be deemed to have
been made as agent for the undersigned for the purpose of tolling
or renewing the Statute of Limitations.
12. This guaranty and every part hereof shall be binding
(jointly and severally) upon the undersigned and the heirs, legal
representatives, successors and assigns of the undersigned, and
shall inure to the benefit of the Bank, its successors and
assigns.
13. This instrument cannot be changed or modified or
discharged in whole or in part, orally, and shall be governed by
New York law. Any litigation involving this guaranty shall, at
Bank's option, be tried only in a court of competent jurisdiction
located in Monroe County, New York.
14. All obligations of the undersigned under this guaranty
are joint and several.
IN WITNESS WHEREOF the undersigned has signed and sealed
this instrument at Ocean, New Jersey, as of the 3rd day of
December, 1996
s/Laurie Kuskin
(L.S.)
Laurie Kuskin
STATE OF NEW JERSEY )
COUNTY OF MONMOUTH ) SS:
On this 27th day of November, 1996, before me
personally appeared LAURIE KUSKIN, to me personally known and
known to me to be the same person described in and who executed
the within Guaranty, and he duly acknowledged to me that he
executed the same.
s/Deborah A. Maretzky
Notary Public
Notary Public State of New Jersey
Qualified in Ocean County
Commission Expires October 28, 1999
<PAGE>
CONTINUING UNLIMITED GUARANTY
In consideration of any extension of credit by FIRST
NATIONAL BANK OF ROCHESTER, (hereinafter called "Bank") to DEAL
ROAD ASSOCIATES, L.P., (hereinafter called "Customer"), either
alone or with one or more persons, the undersigned does hereby
(jointly and severally if the undersigned be more than one
person) guarantee the full and prompt payment to said Bank, when
due, whether accelerated or not, of any and all indebtedness,
liabilities and obligations of every nature and kind, whether
heretofore or hereafter arising of Customer to Bank, including
but not limited to all currently existing indebtedness of Company
to Bank, and all indebtedness of Company to Bank hereafter
incurred, all of which is referred to herein as the
"Indebtedness".
1. The undersigned further (jointly and severally, if the
undersigned be more than one person) agree(s) to pay all costs,
expenses and reasonable attorney's fees at any time paid or
incurred by the Bank in endeavoring to collect the Indebtedness
or any part thereof and in and about the enforcement of this
instrument.
2. This instrument is and is intended to be a continuing
guaranty for the Indebtedness (irrespective of the aggregate
amount thereof, or changes in the same from time to time) to the
extent above specified, independent of and in addition to any
other guaranty, endorsement or security held by Bank therefor,
and without right of subrogation on the part of the undersigned
until the Indebtedness is paid in full. The undersigned
acknowledge that this guaranty does not modify or terminate any
previous guaranties executed and delivered to Bank by the
undersigned or either of them, which guaranties, if any, remain
in full force and effect. This guaranty shall remain in full
force and effect until the Bank or its successors or assigns,
shall actually receive written notice of its discontinuance or
notice of the death of the undersigned and all of the
Indebtedness contracted for or created before the receiving of
such notice, and any extensions or renewals thereof whether made
before or after the receipt of such notice, together with
interest accrued thereon, shall be paid in full. In the event of
the discontinuance of this guaranty as to any of the undersigned
because of receipt by the Bank of notice of death or notice of
discontinuance, this guaranty shall, notwithstanding, still
continue and remain in full force against the survivor or
survivors of the undersigned until discontinued as to them in the
same manner. In the event all of the Indebtedness shall at any
time, or from time to time, be satisfied, this guaranty shall,
nevertheless, continue in full force and effect as to any such
Indebtedness contracted for or incurred thereafter, from time to
time, before receipt by Bank of written notice of discontinuance
or written notice of death of the undersigned.
3. If any default shall be made in the payment of any or
all of the Indebtedness, the undersigned hereby (jointly and
severally, if the undersigned be more than one person) agree(s)
to pay the same without requiring protest or notice of
non-payment or notice of default to the undersigned, to the
Customer, or to any other person, without proof of demand and
without requiring the Bank to resort first to the Customer or to
any other guaranty, security or collateral which it may have or
hold. The undersigned hereby waives demands of protest and
notice of non-payment and protest to the undersigned, to the
Customer, or to any other person; notice of acceptance hereof or
assent hereto by Bank; and notice that any Indebtedness has been
incurred by the Customer to Bank, and notice in the change of the
terms of payment of any of the Indebtedness, including but not
limited to a change in the interest rate on any or all of the
Indebtedness.
4. Upon default being made in the payment of any of the
Indebtedness, the undersigned authorize(s) and empowers the Bank,
in addition to its other remedies, to charge any account of
the undersigned, and if the undersigned be more than one person,
any account of any or all of the undersigned with the full amount
then due on this guaranty and to sell, at any broker's board or
at a public or private sale, (with such notice, if any, referred
under the Uniform Commercial Code, to the undersigned,) any
property of the undersigned (or any of them) in the possession or
custody of the Bank and to apply the proceeds thereof to any
balance due on this guaranty. Upon any such sale the Bank may
itself purchase the whole or any part of any property sold free
from any right of redemption which is expressly waived and
released.
5. The undersigned also further agree(s) that the Bank
shall have the irrevocable right, in its sole discretion, with or
without notice to the undersigned, either before or after the
institution of bankruptcy or other legal proceedings by or
against the undersigned or any of them, or before or after
receipt of written notice of the death of the undersigned, or any
of them, or written notice of discontinuance of any of the
undersigned's liability hereunder from any of the undersigned, to
extend the time given for the payment of the Indebtedness or any
part thereof. Bank may accept one or more renewal notes for the
Indebtedness which shall be considered not as new obligations but
as extensions of the obligations renewed, and no such extensions
shall discharge or in any manner affect the liability of the
undersigned, or the liability of the estate or estates of either
or any of the undersigned under this guaranty.
6. The liability of the undersigned hereunder shall not be
affected or impaired by any acceptance by the Bank of security
for payment of the Indebtedness, or any part thereof, or by any
disposition of or failure, neglect or omission on the part of the
Bank to realize upon any such security or any security at any
time held by or left with the Bank for any or all of the
Indebtedness, or upon which a lien may exist therefor, may be
exchanged, withdrawn or surrendered from time to time or
otherwise dealt with by the Bank without notice to or assent from
the undersigned, to the same extent as though this guaranty had
not been given. Bank shall have the exclusive right to determine
how, when and what application of payments and credits, if any,
shall be made on the Indebtedness, or any part thereof, and may
apply the same upon principal or interest or fees or expense as
it sees fit. The undersigned hereby (jointly and severally)
agree(s) and consent(s) that the Bank shall have the right to
make any agreement with the Customer or with any party to or any
one liable for the payment of all or any of the Indebtedness or
interested therein, for the compounding, compromise, discharge or
release thereof, in whole or in part, for any modification or
alteration of any of the terms thereof, including but not limited
to, a change in the interest rate, or of any contract between the
Bank and the Customer or any other party without notice to or
assent from the undersigned. The Bank shall also have the right
to discharge or release one or more of the undersigned from any
obligation hereunder, in whole or in part, without in any way
releasing, impairing or affecting its rights against the other or
others of the undersigned.
7. This guaranty is absolute and unconditional and shall
not be affected by any act or thing whatsoever, except the
payment in full of the Indebtedness hereby secured. This is a
guaranty of payment and not collection. The failure of any other
person to sign this guaranty shall not release or affect the
liability of any signer hereof. This guaranty has been
unconditionally delivered to Bank by each of the persons who have
signed it.
8. If a claim is made upon Bank at any time for repayment
or recovery of any amount of the Indebtedness, or other value
received by Bank from any source, in payment of or on account of
any of the Indebtedness, and Bank repays or otherwise becomes
liable for all or any part of such claim by reason of (a) any
judgment, decree, or order of any court or administrative body,
or (b) any settlement or compromise of such claim or claims, the
undersigned shall remain liable to Bank hereunder for the amount
so repaid or for which Bank is otherwise liable, to the same
extent as if any such amounts had not been received by Bank,
notwithstanding any return or destruction of the original of this
guaranty, or termination hereof or cancellation of any note, bond
or other obligation which evidences all or a portion of the
Indebtedness.
9. The undersigned unconditionally agrees that he will not
assert, and he does hereby waive, any right he may have against
Customer for indemnity, subrogation, reimbursement, contribution,
or any other claim to Customer's assets, thereby relinquishing
any right he may have to be a creditor of Customer.
10. This document is the final expression of this guaranty
of the undersigned in favor of Bank, and is the complete and
exclusive statement of the terms of this guaranty. No course of
prior dealings between the undersigned and Bank, nor any usage of
trade, nor any parol or extrinsic evidence of any nature or kind,
shall be used or be relevant to supplement, explain or modify
this guaranty.
11. All payments of principal or interest made on the
Indebtedness by the Customer to the Bank shall be deemed to have
been made as agent for the undersigned for the purpose of tolling
or renewing the Statute of Limitations.
12. This guaranty and every part hereof shall be binding
(jointly and severally) upon the undersigned and the heirs, legal
representatives, successors and assigns of the undersigned, and
shall inure to the benefit of the Bank, its successors and
assigns.
13. This instrument cannot be changed or modified or
discharged in whole or in part, orally, and shall be governed by
New York law. Any litigation involving this guaranty shall, at
Bank's option, be tried only in a court of competent jurisdiction
located in Monroe County, New York.
14. All obligations of the undersigned under this guaranty
are joint and several.
IN WITNESS WHEREOF the undersigned has signed and sealed
this instrument at Belmar, New Jersey, as of the 3rd day of
December, 1996
s/Gary Kuskin
(L.S.)
Gary Kuskin
STATE OF NEW JERSEY )
COUNTY OF MONMOUTH ) SS:
On this 27th day of November, 1996, before me
personally appeared GARY KUSKIN, to me personally known and known
to me to be the same person described in and who executed the
within Guaranty, and he duly acknowledged to me that he executed
the same.
s/Deborah A. Maretzky
Notary Public
Notary Public State of New Jersey
Qualified in Ocean County
Commission Expires October 28, 1999
[EXHIBIT 10.25]
FIRST NATIONAL BANK
OF ROCHESTER
35 State Street COMMERCIAL LINE OF CREDIT NOTE
Rochester, New York 14614
Account Name: Laurie Kuskin
Dated: November 20, 1996
Maximum Credit
Amount: One hundred fifty thousand and no/100 DOLLARS
($150,000.00)
FOR VALUE RECEIVED, the undersigned (individually a
"Borrower") (if more than one, jointly and severally) promises to
pay to the order of FIRST NATIONAL BANK OF ROCHESTER, a national
banking association having its chief executive office at 35 State
Street, Rochester, New York 14614, ("Bank") at any of the banking
offices of the Bank in lawful money of the United States and in
immediately available funds, the outstanding principal sum on the
line of credit made available to the Borrower pursuant to the
terms and conditions hereof (the "Credit) plus interest on such
principal sum in accordance with the terms and conditions set
forth in the following paragraphs. (Check or "X" / / spaces
where applicable.)
1. Obtaining Advances on Credit. The Borrower may obtain
advances on the Credit in multiples of the lesser of (a)
$1,000.00 or (b) the unused balance of the Maximum Credit Amount
indicated above (the "Maximum Credit") by making written or oral
requests for such advances to Bank through any of its authorized
Commercial Lending Officers. The decision to make such an advance
or to refuse to make such an advance shall be subject to the
discretion of Bank. Such requests may be made by the Borrower, by
any authorized agent of the Borrower (including any partner or
officer of the Borrower) or by any other person designated by
Borrower as a person having authority to authorize an advance
under this Note. Bank shall be entitled to rely upon the request
of any person it in good faith believes to be authorized by
Borrower to borrow under this Note and Bank shall not be liable
to Borrower as a result of making or failing to make any advance
hereunder. Advances on the Credit will be deposited by Bank to a
demand deposit account of Borrower with Bank. Bank reserves the
right, at its sole discretion, to make advances on the Credit to
cover either overdrafts by Borrower on a deposit account with
Bank or any drawings by Borrower against uncollected funds in a
deposit account with Bank.
2. Statement of Balance Due. Bank shall provide periodic
statements to Borrower describing, as of the effective date of
such statement, the outstanding principal balance, the interest
owing, any other charges owing and the advances and payments made
during the period covered by the statement. The Bank's records
shall be presumptive evidence of the balances owing with respect
to the Credit.
3. _X_ Out of Debt Period. During each twelve-month period
that the Credit is available to Borrower, there shall be at least
one thirty-day period when Borrower is not indebted to Bank
pursuant to the Credit.
4. Interest Rate; Interest Payments. Borrower shall pay
interest on the outstanding principal sum of the Credit from and
including the date of this Note to but not including the date
such sum is paid in full (including each day on which Bank is
closed) at a variable rate per year that shall on each day be
0.50% above the rate per year in effect such day as that
designated by Bank as the prime rate of interest of Bank, with
such interest to be calculated on the basis of a 360-day year for
the actual number of days of each year. Notwithstanding the
foregoing, the rate of interest per year on and after maturity of
the outstanding principal balance, because of Bank's demand for
immediate payment in full of such outstanding principal balance,
shall on each day be 3% per year above the rate described in the
preceding sentence. Interest will be billed to Borrower / X /
monthly / / quarterly on the outstanding principal sum.
Notwithstanding the generality of the foregoing, in no event
shall interest be payable at a rate in excess of the maximum rate
permitted by applicable law.
/ / The interest rate applicable to this Note is further
affected by the Compensating Balance Addendum made applicable
hereto.
5. Credit Facility Fees. The Credit shall be subject to the
following fees (as checked or marked with "X"):
/ / Except with respect to any out of debt period
required by Section 3 hereof, Borrower shall pay to Bank
when billed therefor a non-usage fee based upon the Maximum
Credit that was available but was not in use by Borrower.
The fee shall be payable in arrears and shall be in an
amount equal to ____% of the average daily amount of the
available but unused credit.
3
/ / Borrower shall pay an annual facility fee equal to
___% of the Maximum Credit upon execution of this Note and
annually hereafter as long as the Credit is available. If
Bank exercises its termination rights under Section 10
hereof, Borrower shall be entitled to a pro-rata refund of
the annual facility fee described in this paragraph based
upon the amount of time that the Credit was unavailable to
Borrower.
6. Late Charges. Borrower shall pay a late charge equal to 6%
of the amount of any scheduled payment with respect to each
payment not received by Bank on or before the 10th day after it
is due.
7. Application of Payments; Charging Deposit Accounts for
Payments. All payments received by Bank shall be applied on the
date received first to late charges, if any, second to accrued
interest and third to Principal. Borrower agrees that Bank may,
at its option and in addition to the right of offset, charge any
demand deposit account of Borrower at Bank for any amount that
has become due and owing to Bank hereunder.
8. Use of Proceeds. Borrower represents and warrants to Bank
that the advances to be made hereunder shall be used solely for
business or commercial purposes.
9. Financial Information. Borrower agrees to provide Bank,
promptly upon Bank's request, with (a) periodic financial
statements in form satisfactory to Bank, (b) copies of federal
and state income tax returns and (c) all other financial
information requested by Bank from time to time.
9. Termination of Credit. Borrower may terminate its rights to
take advances under the Credit at any time by giving written
notice to Bank of its desire to do so. Notice should be directed
to the "Commercial Lending Department" at the address above or at
any other address provided to Borrower by Bank for the purposes
of such notices. The Credit shall become unavailable after Bank
has received such notice and has had a reasonable time to act
thereon. The Credit may be terminated by Bank at any time for any
or no reason without prior notice to Borrower. The Credit is also
subject to Bank's continuing rights of modification, restriction
or suspension, provided, however, that Bank may not modify the
interest rate applicable to outstanding balances or other fees or
charges except as specified in this Note. Termination of the
Credit shall not affect the Borrower's obligation to pay the
outstanding balance under the Credit and all interest and other
applicable charges.
10. Demand Obligation; Demands for Payment. All amounts owing
pursuant to this Note but not yet paid shall, without any notice,
demand, presentment or protest of any kind (each of which is
waived by Borrower), automatically become immediately due if
Borrower commences or has commenced against it any bankruptcy or
insolvency proceeding. This Note is payable "ON DEMAND" and Bank
may demand immediate payment in full of all amounts owing
hereunder in its sole discretion. Without limiting Bank's rights
as described in the previous sentence, all amounts owing pursuant
to this Note but not yet paid may become immediately due at
the sole option of Bank if (a) any amount owing pursuant to this
Note is not paid when due, (b) Borrower or any guarantor or
endorser of this Note (a "Guarantor") is dissolved, dies or
becomes incompetent or insolvent (however such insolvency is
evidenced), (c) any Guarantor commences or has commenced against
it any bankruptcy or insolvency proceeding, (d) Bank in good
faith deems itself insecure with respect to any amount owing
pursuant to this Note or is of the opinion that any guaranty,
endorsement, collateral or other security now or hereafter
securing the payment of or otherwise applicable to any amount
owing pursuant to this Note is not sufficient or has declined or
may decline in value, (e) there occurs or exists any event or
condition of default for purposes of any mortgage, security
agreement, collateral assignment agreement or other agreement now
or hereafter in effect between Bank and any Borrower or (f) there
occurs or exists any event or condition of default for purposes
of any mortgage, security agreement, collateral assignment
agreement, guaranty or other agreement that secures or applies to
the payment of any amount owing pursuant to this Note and that is
now or hereafter in effect between Bank and any person or entity
other than any Borrower. Borrower waives any and all rights to
any notice, demand, presentment for payment, notice of protest
and protest with respect to this Note.
11. Collection Expenses. Borrower shall pay all costs and
expenses incurred by Bank in endeavoring to collect any amount
owing pursuant to this Note or to otherwise protect its rights
with respect to this Note (including, but not limited to,
reasonable attorneys' fees for legal advice, litigation or other
representation of Bank).
12. New York Law; Consent to Jurisdiction and Venue; Waiver of
Trial by Jury. This Note shall be governed by and interpreted and
enforced in accordance with the internal law of the State of New
York, without regard to principles of conflict of laws. Borrower
consents to the jurisdiction of the courts of the State of New
York and agrees that any court located in the county in which
Bank has its chief executive office shall be the proper forum for
any action or proceeding between Borrower and Bank unless either
(a) Bank in its sole discretion chooses another forum or (b)
applicable law requires another forum. BORROWER AND BANK WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BETWEEN
THEM BASED UPON, ARISING OUT OF, OR IN ANY WAY CONNECTED TO, THIS
NOTE.
s/ Laurie Kuskin
______________________
Laurie Kuskin
STATE OF NEW YORK)
COUNTY OF MONROE) SS.:
On November 20, 1996, before me personally came Laurie
Kuskin to me known to be the individual described in, and who
executed the foregoing instrument, and she acknowledged that she
executed the same.
s/ Elizabeth E. Mogray
___________________________
Notary Public
<PAGE>
FIRST NATIONAL BANK
OF ROCHESTER
35 State Street CONTINUING UNLIMITED
GUARANTY
Rochester, New York 14614
Borrower: Laurie Kuskin
Dated: November 20, 1996
In consideration of all loans, advances, credit or other
financial accommodations previously extended or to be extended or
continued from time to time by FIRST NATIONAL BANK OF ROCHESTER,
a national banking association having its chief executive office
at 35 State Street, Rochester, New York 14614 ("Bank") to, or on
the guarantee, endorsement or other assurance of, the person or
entity identified above as "Borrower," the undersigned
("Guarantor") does hereby agree and make this Guaranty as
follows:
1. Definition of Certain Terms. As used in this Guaranty:
(a) "Obligations" shall mean and include all indebtedness,
liabilities and obligations for the payment of money (including,
but not limited to, any obligation to pay principal, interest,
costs, expenses and attorneys' fees) of Borrower to Bank and
whether direct or indirect, absolute or contingent, now existing
or hereafter arising and any and all extensions, renewals and
modifications thereof;
(b) "Collateral" shall mean all property, real, personal
(including both tangible and intangible personal property) and
mixed, wherever located, now owned or hereafter acquired, upon
which there has been conveyed or will be conveyed a security
interest, pledge or mortgage to secure the payment of the
Obligations;
(c) "guarantor" shall mean any maker, drawer, acceptor,
endorser, guarantor, surety, accommodation party or other person
liable upon or for any of the Obligations in any capacity
whatsoever including, but not limited to, Guarantor; and
(d) "Event of Default" shall mean (i) any event or
condition of default under any agreement between Bank and
Borrower governing or relating to any of the Obligations
including, but not limited to, a failure to make payment when
due, and (ii) any other event, occurrence or condition that
results in the Obligations, or any part of the Obligations, being
immediately, or at the sole option of Bank, due and payable by
Borrower to Bank.
2. Unconditional Guaranty of Payment. Guarantor does hereby
unconditionally guarantee the punctual payment to Bank when due,
whether at a stated maturity, by acceleration or otherwise, of
each and all of the Obligations, without any limitation as to
amount, strictly in accordance with all the terms and provisions
of the Obligations and subject to all rights of Bank arising from
or relating to the Obligations. The duty, liability and
obligation of Guarantor pursuant to this Guaranty shall not be
diminished, altered, terminated or changed in any respect,
notwithstanding any law, regulation, decree, action, proceeding,
equitable doctrine or other circumstance that would or might
otherwise diminish, alter, terminate, void or change the
liability or obligation of Borrower, any other guarantor or any
other entity or person to pay any or all of the Obligations. Any
payments required to be made pursuant to this Guaranty shall be
made in United States dollars in immediately available funds at
such place and time as shall be designated by Bank.
3. Continuing Agreement. This Guaranty is a continuing
agreement and applies to all present and future Obligations,
notwithstanding that at any particular time all of the
Obligations then outstanding shall have been paid in full. This
Guaranty shall be construed at all times to be a guaranty of
payment and not a guaranty of collection.
4. Guarantor's Indemnification of Bank. Guarantor agrees to
indemnify Bank and its employees, agents, officers and directors
and hold the same harmless from all claims, demands, penalties,
fines, obligations and liabilities claimed or asserted by any
other party, whether contingent or otherwise, and against all
losses and expenses (including, but not limited to, fees of
attorneys and other consultants, court costs and litigation
expenses) in any way suffered, incurred, or paid by Bank or by
any of its employees, agents, officers and directors, as a result
of or in any way arising out of, following, or consequential to,
Bank's transactions and relationships with either or both of
Borrower and Guarantor, whether with respect to the Obligations
or otherwise, and including, but not limited to, environmental
matters.
5. Certain Rights of Bank. Bank, in its sole discretion and
without notice to or further assent from Guarantor at any time or
from time to time, either before or after the occurrence of an
Event of Default, and without diminishing, altering, terminating
or changing in any respect the liability and obligation of
Guarantor pursuant to this Guaranty, may: (a) increase or
decrease the amount of, extend, change, or amend the time,
manner, place, amount or terms of payment of any or all of the
Obligations or any other terms or provisions governing the
Obligations, including those relating to any guarantor or
Collateral; (b) exchange, release, surrender, substitute or sell
any Collateral, or fail unintentionally or otherwise to perfect
its interest or create a valid security interest in any of the
Collateral; (c) waive, fail to exercise or delay in exercising
any right or remedy granted to Bank by any agreement or by law
with respect to Borrower, any of the Obligations, any guarantor
or any of the Collateral; (d) release, agree not to sue, settle
or compromise with Borrower, any guarantor or any other entity or
person who is otherwise obligated to pay any or all of the
Obligations; (e) subordinate the payment of any or all of the
Obligations to the payment of any other debt owed by Borrower to
any other entity or person; (f) sell or purchase all or any part
of the Collateral at any public or private sale, and after
deduction of all expenses incurred therefor, including attorneys'
fees, apply the proceeds to the Obligations in such manner as it
deems appropriate; (g) apply any payments or proceeds relating to
the Obligations in such manner as it deems appropriate; or (h)
act or refuse to act in any other manner which might constitute a
legal or equitable discharge or defense of a guarantor.
6. Financial Information. Guarantor agrees to provide Bank,
promptly upon Bank's request, with (a) periodic financial
statements in form satisfactory to Bank, (b) copies of federal
and state income tax returns and (c) all other financial
information requested by Bank from time to time.
7. Bank's Rights Upon Event of Default. Upon the occurrence
of any Event of Default, or at any time thereafter, any or all of
the Obligations, at the sole option of Bank, shall immediately
become due and payable in full, together with interest and all
costs and expenses of enforcing this Guaranty or any of the
Obligations, including court costs and reasonable attorneys'
fees. In such circumstances, the liability of Guarantor to Bank
shall be absolute, and it shall not constitute a defense,
counterclaim, set-off or recoupment thereto that Bank has not
made any demand or instituted any action or proceeding against
Borrower or against any other party who may be liable for all or
any of the Obligations or that Bank has not validly taken or
perfected a security interest in the Collateral or has not or has
improperly foreclosed upon the Collateral or any part of it, nor
shall Bank be required to perform any of the above acts against
Borrower, any guarantor or the Collateral as a condition to
enforcing its rights against Guarantor in accordance with the
terms of this Guaranty.
8. Right of Offset; Security Interest. In addition to the
rights that Bank has under applicable law (including, but not
limited to, the right of offset) and the other rights granted to
Bank pursuant to this Guaranty or the Obligations, Guarantor
hereby grants Bank a lien upon and security interest in any and
all of Guarantor's money, deposits or other property in the
possession, custody or control of Bank. Upon the occurrence of an
Event of Default, in addition to any other rights of Bank, Bank
may, in its sole discretion and without prior notice to
Guarantor, set-off or sell the same at any public or private sale
and apply the proceeds thereof to the Obligations in such manner
and order as Bank deems appropriate.
9. Persons or Entities Bound. If this Guaranty is executed by
two or more persons or entities or if two or more persons or
entities execute agreements similar to this Guaranty covering the
Obligations, they shall be jointly and severally liable, and all
provisions of this Guaranty shall apply to each and all of them.
The termination of this Guaranty or similar agreement as to one
or more of such persons or entities shall not terminate this
Guaranty or similar agreement as to any remaining persons or
entities. This Guaranty shall be binding upon the heirs,
executors, trustees, transferees, administrators, assigns and
successors of Guarantor and shall inure to the benefit of and be
enforceable by Bank, its successors, transferees and assigns.
10. Reinstatement of Guarantor's Liability. In the event any
payment or recovery is received by Bank with respect to the
Obligations during the time that this Guaranty is effective and
such payment or recovery is subsequently invalidated, declared
fraudulent or preferential or otherwise set aside under the terms
of any federal or state law or equitable doctrine, then the
liability of Guarantor shall be reinstated and Guarantor shall be
responsible for the amount of such payment or recovery to Bank
under the terms of this Guaranty together with any and all
interest and other charges related thereto and related to any
proceeding seeking to set aside or invalidate such payment or
recovery, including attorneys' fees, notwithstanding the fact
that this Guaranty was terminated voluntarily or by law at the
time that the payment or recovery was set aside or invalidated as
described above.
11. Waiver of Subrogation and Similar Rights. Until the
Obligations are finally and irrevocably paid in full, Guarantor
irrevocably waives each and every right of subrogation,
indemnity, contribution and reimbursement and each and every
similar right that Guarantor would have against either or both of
Borrower and any other guarantor of the Obligations because of
any payment by Guarantor of any portion of the Obligations or
because of the provision by Guarantor of any collateral security
for such Obligations. To the extent that any of the foregoing
rights survive such waiver, Guarantor assigns such rights to Bank
as collateral security for payment of the Obligations.
12. New York Law; Consent to Jurisdiction and Venue; Waiver of
Trial by Jury. This Guaranty shall be governed by and interpreted
and enforced in accordance with the internal law of the State of
New York, without regard to principles of conflict of laws.
Guarantor consents to the jurisdiction of the courts of the State
of New York and agrees that any court located in the county in
which Bank has its chief executive office shall be the proper
forum for any action or proceeding between them unless either (a)
Bank in its sole discretion chooses another forum or (b)
applicable law requires another forum. Guarantor also waives the
right to assert in any such action or proceeding any unrelated
offsets or counterclaims which it may otherwise have or claim to
have. GUARANTOR AND BANK WAIVE THE RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BETWEEN THEM BASED UPON, ARISING OUT OF, OR
IN ANY WAY CONNECTED TO, THIS GUARANTY, THE OBLIGATIONS OR ANY
TRANSACTION CONTEMPLATED HEREBY.
13. Certain Consents and Waivers; Miscellaneous Provisions.
(a) Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of
the Guaranty in that jurisdiction or affecting the validity or
enforceability of such provision in any other jurisdiction.
(b) This Guaranty constitutes the final, complete and
exclusive agreement between Bank and Guarantor with respect to
the guarantee by Guarantor of the Obligations.
(c) No delay by Bank in exercising any right hereunder, or
under any of the Obligations, shall operate as a waiver thereof,
nor shall any single or partial exercise of any right preclude
other or further exercises thereof or the exercise of any other
right. No waiver, amendment, modification or release of this
Guaranty or any provision of this Guaranty or of any of the
Obligations shall be enforceable against Bank unless it is in a
writing signed by an officer of Bank and expressly referring to
this Guaranty.
(d) Any termination of this Guaranty shall not be effective
until Bank has had reasonable time to act on written notice of
such termination that has been actually received by Bank by mail
or personal delivery directed to "Commercial Banking Division" at
the address of Bank indicated at the beginning of this Guaranty
or at such other address as Bank may hereafter specify in writing
for purposes hereof. Any such termination shall not affect any
existing Obligations owed by Borrower or any extensions or
continuations thereof. Furthermore, any such termination shall
not affect the indemnification provisions set forth in Section 4
of this Guaranty with respect to any acts (including omissions)
or occurrences that took place or are alleged by anyone to have
taken place prior to the effective date of the termination hereof
determined in accordance with the first sentence of this
subsection. Guarantor's liability with respect to all such
existing Obligations and with respect to such prior acts or
occurrences shall continue under the terms of this Guaranty
subsequent to any termination. It is further agreed in the case
where Guarantor is a natural person that any termination based
upon the death of Guarantor shall likewise not become effective
until the time that Bank received such notice of Guarantor's
death and had a reasonable time to act thereon.
(e) All rights granted Bank pursuant to this Guaranty shall be
cumulative and shall be in addition to those granted or available
to Bank with respect to the Obligations, any other guaranty
agreement and under applicable law and nothing herein shall be
construed as limiting any such other right.
(f) Guarantor represents and warrants that the execution,
delivery and performance of this Guaranty does not and will not
contravene any law, agreement, charter, by-law or undertaking to
which it is a party or by which it may in any way be bound.
(g) Guarantor waives notice of presentment, dishonor and
protest of any or all of the Obligations and of this Guaranty,
and furthermore waives promptness in the commencement of any
action relating to this Guaranty or the Obligations and in the
giving of notice or making of demand upon it or upon any other
entity or person.
(h) Words of the neuter gender may mean and include
correlative words of the masculine and feminine gender as
appropriate and vice versa. Words noting the singular number
shall mean and include the plural number as appropriate and vice
versa.
(i) The headings used in this Guaranty are for convenience
only and are not of substantive effect.
s\ Gary Kuskin
___________________________
Gary Kuskin
STATE OF NEW YORK)
COUNTY OF MONROE) SS.:
On November 20, 1996, before me personally came Gary Kuskin to
me known to be the individual described in, and who executed the
foregoing instrument, and he acknowledged that he executed the
same.
s/ Elizabeth E. Mogray
________________________
Notary Public
[EXHIBIT 10.26]
MORTGAGE NOTE
$450,000.00 Avon, Colorado
FOR VALUE RECEIVED, the undersigned, FRED KRAVETZ AND
WILLIAM LEVINE PARTNERS, a New York general partnership, with an
office c/o Kravetz Realty, Inc., 150 Linden Oaks Drive, Suite C,
Rochester, New York 14625 (hereinafter called "Borrower"),
promises to pay FIRST NATIONAL BANK OF ROCHESTER, a national
banking association, or order, (hereinafter called "Lender") at
its principal office at 35 State Street, Rochester, New York, or
at such other place as may be designated in writing by the holder
of this Restated Mortgage Note ("Mortgage Note" or "Note"), the
sum of FOUR HUNDRED FIFTY THOUSAND and 00/100 DOLLARS
($450,000.00), in lawful money of the United States, or so much
as may be advanced, referred to as "principal sum", with interest
thereon to be computed from the date hereof, or of each advance,
at the rate of eight and three quarters percent (8.75%) per
annum.
Interest only on the unpaid principal sum, from the date of
this Note to December 31, 1996 shall be due and payable the
date of this Note.
Commencing on the first day of February, 1997, installments
of principal and interest shall be paid in the sum of
$4,497.52 based upon an amortization period of fifteen (15)
years, and a like amount on the first day of each and every
month thereafter until the principal sum and interest are
fully paid; said monthly payments to be applied first to the
payment of accrued interest at the above rate and the
balance to be applied to the reduction of the principal sum.
The entire principal sum evidenced hereby, if not sooner
paid, shall be due and payable on January 1, 2002.
The rate of interest set forth herein shall continue in
effect until all sums owed Lender are paid in full.
The rate of interest shall not exceed that permitted by
applicable Federal and New York State law.
Interest shall be computed for the actual number of days
elapsed on the basis of a year consisting of 360 days.
If for any reason whatsoever this Note is prepaid in part or
in full within one (1) year from the date hereof, a prepayment
fee of five percent (5.0%) of the original amount of the
principal sum will be charged. Beginning with the second loan
year, the prepayment fee shall be reduced by one percent (1.0%)
each year. A loan year begins on the date this Mortgage Note is
executed and on each anniversary thereof.
In the event any payment due hereunder shall remain unpaid
for more than ten days, the holder hereof may collect a late
charge in the amount of $50.00 or 6.0% of said payment, whichever
is greater, to cover its extra handling expense.
If this Note is referred to attorneys for collection, all
parties now or hereafter personally liable for the indebtedness
hereby evidenced, jointly and severally agree to pay, the
principal and interest due, all costs and expenses, including
reasonable attorneys' fees, incurred by the holder hereof, with
or without the institution of an action or proceeding.
The rate of interest hereunder shall increase to three
percent (3.0%) above the rate of interest then applicable to this
Note upon the maturity date of this Note or upon an event of
default under this Note or the Mortgage securing the Note.
This Note is secured by a Mortgage ("Mortgage") of even date
herewith on property known as 1968 Ridge Road, West Seneca, Erie
County, New York ("Property").
In the event the Debt Service Coverage Ratio ("DSCR"), as
defined below, for the Property at any time is less than 1.2
("Minimum DSCR"), as reasonably determined by the Lender, the
Lender may, by written notice to Mortgagor, require a payment
toward principal so as to achieve the Minimum DSCR. In such
event, the applicable prepayment fee shall not be collected by
Lender, and the monthly payment of principal and interest shall
be recalculated based upon the reduced principal sum and the
remaining amortization period. DSCR shall mean Net Operating
Income (as defined below) divided by annual payments of principal
and interest pursuant to this Note. Net Operating Income shall
mean annual rental income available after payment of annual real
estate taxes, utilities, management fees, repairs, maintenance,
property insurance, reasonable salaries, reasonable
administrative expenses, and other normal operating expenses,
exclusive of depreciation amortization and interest expense.
It is hereby expressly agreed, that the principal sum
secured by this Note shall become due at the option of the holder
thereof on the happening of any default or event by which under
the terms of the Mortgage, the principal sum may or shall become
due and payable; also, that all of the covenants, conditions and
agreements contained in the Mortgage are hereby made part of this
instrument.
Presentment for payment, notice of dishonor, protest and
notice of protest are hereby waived.
This Note shall be governed by and construed in accordance
with the laws of the State of New York.
In the event any one or more of the provisions of the Note
shall for any reason be invalid, illegal or unenforceable in
whole or in part, then only such provision or provisions shall be
deemed to be null and void and of no force or effect, but shall
not affect any other provision of the Note.
Neither the Lender nor its successors, or assigns, nor any
other person, shall have any claim to proceed personally against
the partners of the Borrower, or any assignee, successor, heir or
representative of any of the partners, for any deficiency or any
other sum owing by virtue of this Note and the Lender will waive
and release such personal liability and agrees to look solely to
the Borrower's partnership assets including, without limitation,
the Property (but excluding the assets of any partner of Borrower
separate and apart from such partner's interest in Borrower) for
any sums due with respect to this Note; provided, however, that
nothing herein shall be deemed to be a release or impairment of
the debt or of the lien therefor upon the Property or shall
preclude Lender from foreclosing the lien of the Mortgage or
otherwise enforcing any and all of its rights under and by virtue
of the Mortgage, and provided further, that Borrower, and any
assignee, successor, heir or representative or any of the
foregoing, shall remain liable with respect to funds or property
constituting part of the Property coming into its/his/her
possession or control which, by the provisions hereof of the Note
or the Mortgage it/he/she was not entitled to receive or retain
or which it/he/she has distributed in violation of such
provisions.
This Note may not be changed or terminated orally.
Signed and sealed as of the 30th day of December, 1996.
FRED KRAVETZ AND WILLIAM LEVINE PARTNERS
BY: s/ Gary Kuskin
_____________________________________
Gary Kuskin
Chief Executive Officer
STATE OF COLORADO )
COUNTY OF EAGLE ) ss:
On this 26th day of December, 1996, before me
personally came Gary Kuskin, to me known and known to me to be
the Chief Executive Officer of FRED KRAVETZ AND WILLIAM LEVINE
PARTNERS the partnership described in, and which executed the
foregoing instrument, and who acknowledged that he executed the
foregoing Instrument for and on behalf of said partnership.
s/_____________________________
Notary Public
Notary Public State of Colorado
Qualified in Eagle County
Commission Expires 10/27, 1997
<PAGE>
MORTGAGE
This Mortgage, made as of the 30th day of December, 1996
between FRED KRAVETZ AND WILLIAM LEVINE PARTNERS, a New York
general partnership, with an office c/o Kravetz Realty, Inc., 150
Linden Oaks Drive, Suite C, Rochester, New York 14625 (herein
called the "Mortgagor"), and FIRST NATIONAL BANK OF ROCHESTER, a
national banking association with its principal office at 35
State Street, Rochester, Monroe County, New York, (herein called
the "Mortgagee").
W I T N E S S E T H, to secure the payment of an
indebtedness in the sum of FOUR HUNDRED FIFTY THOUSAND AND 00/100
DOLLARS ($450,000.00) lawful money of the United States (or so
much as may be advanced) to be paid with interest thereon to be
computed from the date hereof, to be paid according to a certain
bond, note, or obligation bearing even date herewith ("Note"),
the Mortgagor hereby mortgages to the Mortgagee the premises
described in Schedule "A" attached hereto and made a part hereof
(herein called the "Mortgaged Premises" or "Premises").
TOGETHER with all the right, title and interest of the
Mortgagor in and to any and all unearned premiums accrued,
accruing or to accrue under any and all insurance policies now or
hereafter obtained by the Mortgagor on the Mortgaged Premises,
TOGETHER with the appurtenances and all the estate and
rights of the Mortgagor in and to said Premises,
TOGETHER with all and singular the tenements, hereditaments,
and appurtenances belonging or in any way appertaining to said
Premises, and the reversion and reversions, remainder and
remainders, rents, issues and profits thereof.
TOGETHER with and including any and all strips and gores of
land adjoining or abutting said Premises,
TOGETHER with all right, title, and interest of the
Mortgagor in and to the land lying in the bed of any street,
road, avenue or alley, open or proposed, in front of, running
through or adjoining said Premises,
TOGETHER with all buildings, structures, and improvements
now or at any time hereafter erected, constructed or situated
upon the Premises, and apparatus, fixtures, chattels, and
articles of personal property now or hereafter attached to or
used in connection with said Premises, including but not limited
to furnaces, boilers, oil boilers, radiators and piping, coal
stokers, plumbing and bathroom fixtures, refrigeration, air-
conditioning and sprinkler systems, wash-tubs, sinks, gas and
electric fixtures, stoves, ranges, awnings, screens, window
shades, elevators, motors, dynamos, refrigerators, kitchen
cabinets, incinerators, plants and shrubbery and all other
equipment and machinery, appliances, fittings and fixtures of
every kind in or used in the operation of the buildings standing
on said Premises, together with any and all replacements thereof
and additions thereto,
TOGETHER with all awards heretofore and hereafter made to
the Mortgagor for taking by eminent domain the whole or any part
of said Premises or any easement therein, including any awards
for changes of grade of streets, which said awards are hereby
assigned to the Mortgagee, who is hereby authorized to collect
and receive the proceeds of such awards and to give proper
receipts and acquittances therefor, and to apply the same toward
the payment of the mortgage debt, except as otherwise provided in
this Mortgage, notwithstanding the fact that the amount owing
thereof may not then be due and payable; and the Mortgagor hereby
agrees, upon request, to make, execute and deliver any and all
assignments and other instruments sufficient for the purpose or
assigning said awards to the Mortgagee, free, clear, and
discharged of any encumbrances of any kind or nature whatsoever,
The Mortgagor covenants with the Mortgagee that:
PAY INDEBTEDNESS. The Mortgagor will pay the indebtedness
secured hereby with interest thereon as herein provided and
according to the Note, and if default shall be made in the
payment of part thereof, the Mortgagee shall have power to sell
the Mortgaged Premises according to law.
INSURANCE. The Mortgagor will keep the buildings on the
Premises and the fixtures and articles of personal property
covered by the Mortgage insured against loss by fire and other
hazards, casualties and contingencies, including flood insurance
if required by law, regulation or Mortgagee, for the benefit of
the Mortgagee in an amount not less than the unpaid principal
balance due hereunder. The fire insurance policy as required
hereby shall contain the usual extended coverage endorsement and
shall provide for twenty (20) days written notice to Mortgagee
prior to cancellation. Mortgagor will maintain liability
insurance in minimum amounts of $1,000,000.00 per occurrence for
bodily injury and $100,000.00 for property damage. In addition
thereto the Mortgagor within thirty (30) days after notice and
demand will keep the Premises insured against any other hazard
that may reasonably be required by law, regulation or Mortgagee.
The Mortgagor will assign and deliver said policies to the
Mortgagee and the Mortgagor will reimburse the Mortgagee for any
premiums paid for the insurance made by the Mortgagee on the
Mortgagor's default in so insuring the buildings or in so
assigning and delivering the policies. All the provisions of
this paragraph or of any other provisions of the Mortgage
pertaining to fire insurance or any other additional insurance
which may be required hereunder shall be construed in accordance
with Section 254 Subdivision 4 of the New York Real Property Law.
Notwithstanding the provisions of the aforesaid Section 254,
Subdivision 4, the Mortgagor consents that the Mortgagee may
without qualification or limitation by virtue of said section,
retain and apply the proceeds of any such insurance in
satisfaction or reduction of the Mortgage, or it may at its
election pay the same, either in whole or in part, to the
Mortgagor or its successors or assigns for the repair or
replacement of the buildings or of the insured articles of
personal property or for any other purpose or object reasonably
satisfactory to the holder of the Mortgage, and if the Mortgagee
shall receive and retain such insurance money, the lien of the
Mortgage shall be affected only by a reduction of the amount of
such lien by the amount of such insurance money received and
retained by the Mortgagee.
Notwithstanding the foregoing election available to
Mortgagee, the proceeds of such insurance shall be made available
to Mortgagor if, at the time such proceeds are delivered to
Mortgagee, there is no uncured default under the Note or this
Mortgage and the loan to value ratio (i.e. the then unpaid
principal balance pursuant to the Note divided by the value of
the Premises as reasonably determined by Mortgagee) shall not be
more than 75%. Mortgagee shall disburse such proceeds to
Mortgagor upon completion of work and invoices therefor approved
by Mortgagee, and any excess proceeds shall be utilized to reduce
the unpaid principal sum secured by this Mortgage.
ALTERATIONS, DEMOLITION OR REMOVAL. No building, fixtures
or personal property covered by the Mortgage shall be removed,
demolished, or substantially altered without the prior written
consent of the Mortgagee.
WASTE, MAINTENANCE AND REPAIRS. The Mortgagor will not
commit any waste on the Premises or make any change in the use of
the Premises which will in any way increase any ordinary fire or
other hazard arising out of construction or operation. The
Mortgagor will keep and maintain or cause to be kept and
maintained all buildings and other improvements now or at any
time hereafter erected upon or constituting any portion of the
Mortgaged Premises, and the sidewalks and curbs abutting the
same, in good order and condition and in a rentable and
tenantable state or repair, and will make or cause to be made, as
and when the same shall become necessary, all structural and non-
structural exterior and interior, ordinary and extraordinary,
foreseen and unforeseen repairs, renewals, and replacements
necessary to that end. In the event that the Mortgaged Premises
shall be damaged or destroyed in whole or in part, by fire or any
other casualty, or in the event of a taking of a portion of the
Mortgaged Premises as a result of any exercise of the power of
eminent domain, the Mortgagor shall promptly restore, replace,
rebuild or alter the same as nearly as possible to the condition
they were in immediately prior to such fire, other casualty or
taking, provided the proceeds of the condemnation or any
insurance policy are made available to Mortgagor. Although
damage to or destruction of the Mortgaged Premises, or any
portion thereof, shall not of itself constitute a default
hereunder, the failure of the Mortgagor to restore, replace,
rebuild, or alter the same, as hereinabove provided, shall
constitute a default hereunder. The Mortgagor covenants that it
will give to the Mortgagee prompt written notice of any damage or
injury to the Mortgaged Premises and will give like notice to the
Mortgagee of the commencement of any condemnation proceeding
affecting the whole or any portion of Mortgaged Premises. The
Mortgagor shall have the right, at any time and from time to
time, to remove and dispose of building service equipment which
may have become obsolete or unfit for use or which is no longer
useful in the operation of the building now or hereafter
constituting a portion of the Mortgaged Premises. The Mortgagor
agrees promptly to replace with other building service equipment,
free of superior title, liens or claims, not necessarily of the
same character but of at least equal usefulness and quality, any
such building service equipment so removed or disposed of, except
that, if by reason of technological or other developments in the
operation and maintenance of buildings of the general character
of the building constituting a portion of the Mortgaged Premises,
no replacement of the building service equipment so removed or
disposed of is necessary or desirable in the proper operation or
maintenance of said building, the Mortgagor shall not be required
to replace the same.
TAXES, ASSESSMENTS, ETC. The Mortgagor will pay all taxes,
assessments, insurance premiums, sewer rents, or water rates, and
in default thereof, the Mortgagee may pay the same. Any sums so
advanced by the Mortgagee shall bear interest at the maximum
legal rate of interest at the time of such advance or at the
highest rate of interest set forth herein or in the Note,
whichever is greater, and any such sum and the interest thereon
shall be a lien on said Premises, prior to any right, or title
to, interest in or claim upon said Premises, or accruing
subsequent to the lien of the Mortgage and shall be deemed
secured hereby. Upon written request from Mortgagee, Mortgagor
shall deliver to Mortgagee receipted tax bills showing payment of
all taxes on the Premises within the applicable grace period.
ESTOPPEL STATEMENT. The Mortgagor within ten (10) days upon
request in person or within twenty (20) days upon request by mail
will furnish a written statement duly acknowledged of the amount
due on the Mortgage and whether any offsets or defenses exist
against the Note and Mortgage.
MORTGAGEE MAY CURE MORTGAGOR'S DEFAULTS. The Mortgagor
covenants and agrees with the Mortgagee that the holder of the
Mortgage may cure any default of Mortgagor on the Mortgage or any
prior or subsequent mortgage, including payment of any
installments of principal and interest or part thereof, and that
all costs and expenses, including reasonable attorneys' fees
together with interest thereon at the highest legal rate of
interest at the time of such default or at the highest rate of
interest set forth herein or in the Note secured by the Mortgage,
whichever is the greater, paid by the Mortgagee in so curing said
default, shall be repaid by the Mortgagor to the Mortgagee on
demand and the same shall be deemed to be secured by the Mortgage
and to be collectible in like manner as the principal sum.
WARRANTY OF TITLE. The Mortgagor warrants the title to the
Premises and will execute any further assurance of the title to
the Premises as Mortgagee may require.
LIEN LAW COVENANT. The Mortgagor will, in compliance with
Section 13 of the New York Lien Law, receive the advances secured
hereby and will hold the right to receive such advances as a
trust fund to be applied first for the purpose of paying the cost
of the improvement and will apply the same first to the payment
of the cost of the improvements before using any part of the
total of the same for any other purpose.
ESCROW FOR TAXES/INSURANCE. The Mortgagee may request at
any time after a default by Mortgagor in payment when due of
property taxes and/or insurance premiums on the Mortgaged
Premises that, in addition to the monthly payments of principal
and interest, the Mortgagor will pay monthly to the Mortgagee on
or before the first day of each and every calendar month, until
the Note is fully paid, a sum equal to one-twelfth of the known
or estimated yearly taxes, assessments, liens and charges levied
or to be levied against the Mortgaged Premises and/or premiums
for insurance held or required by Mortgagee. The Mortgagee shall
hold such payments in trust without obligation to pay interest
thereon, except such interest as may be made mandatory by law or
regulation, to pay such taxes, assessments, liens, charges and
insurance premiums within a reasonable time after they become
due. If the total of payments made by the Mortgagor for taxes,
assessments, liens, charges and insurance premiums shall exceed
the amount of payments actually made by the Mortgagee, such
excess shall be credited by the Mortgagee on subsequent payments
to be made by the Mortgagor or refunded upon payment in full of
the Note. If the total of payments made by the Mortgagor for
taxes, assessments, liens, charges and insurance premiums shall
not be sufficient to pay therefor, then the Mortgagor shall pay
to the Mortgagee any amount necessary to make up the deficiency
on or before the date when such amounts shall be due.
LATE CHARGES. If any payment required to be made under the
Mortgage or the note or the obligations secured by the Mortgage
shall be overdue in excess of 10 days, a late charge of $.06 of
each $1.00 so overdue or $50.00, whichever is greater, will be
paid by the Mortgagor for the purpose of defraying the expenses
incident to handling such delinquent payments.
LEASES. Pursuant to the provisions of Section 291-f of the
New York Real Property Law, the Mortgagor, except for residential
leases with a term not exceeding one (1) year, shall not (a)
amend, cancel, abridge, terminate, or otherwise modify any lease
of said Premises or of any part thereof, or (b) accept prepayment
of rent or installments of rent for more than one month in
advance, without the written consent of the Mortgagee and in the
event of any default under the terms of this paragraph the whole
of said principal sum shall become due immediately upon the
happening thereof at the option of the Mortgagee.
In addition thereto, except for residential leases with
a term not exceeding one (1) year, (a) the Mortgagor shall not
make any new lease or lease renewal or extension (other than
those the Mortgagor as landlord may be required to grant by the
terms of an existing lease) without the prior written consent of
the Mortgagee and (b) the Mortgagor shall furnish to the
Mortgagee, within thirty (30) days after a request by the
Mortgagee to do so, a written statement containing the names of
all lessees of the Premises, the terms of their respective
leases, the space occupied and the rentals payable thereunder.
FINANCIAL STATEMENTS. The Mortgagor will furnish the
Mortgagee annually with financial statements compiled by a
certified Public Accountant acceptable to Mortgagee not later
than 120 days after the end of Mortgagor's fiscal year.
The Mortgagee shall have the right to examine the financial
records covering the operation of the Premises at least once a
year or as often as the Mortgagee may require if the Mortgagor be
in default.
PREPAYMENT FEE. If for any reason whatsoever the
indebtedness secured by the Mortgage is prepaid in part or in
full within one (1) year from the date hereof, a prepayment fee
of five percent (5.0%) of the original amount of the consolidated
principal sum will be charged. Beginning with the second loan
year, the prepayment fee shall be reduced by one percent (1.0%)
each year. A loan year begins on the date the Mortgage is
executed and on each anniversary thereof. The amount of such
prepayment consideration shall be added to and secured by the
Note and Mortgage and shall be recoverable by the Mortgagee in
the same manner as the principal balance hereof, and in addition
thereto, in any action brought either on the Note or for the
foreclosure of the Mortgage.
ACCELERATION OF PRINCIPAL ON TRANSFER, ETC. The principal
sum with interest thereon shall become immediately due and
payable, upon the voluntary or involuntary conveyance or transfer
by operation of law or otherwise of all or any part of the
Mortgaged Premises, or any interest or estate therein, including
testate or intestate succession and conveyance by land contract.
Acceptance of payments by the Mortgagee subsequent to any such
conveyance, transfer, or encumbering shall not be deemed a waiver
of any of the Mortgagee's rights.
If the Mortgagor is a corporation, the sale, assignment,
transfer, or other disposition of any stock by any party owning
ten (10%) percent or more of the stock, of any corporation owning
all or any part of the Mortgaged Premises or any other similar
significant change in ownership of such stock or in the relative
distribution thereof, by any method or means, whether by
increased capitalization, merger with another corporation,
corporate or other amendments, issuance of additional or new
stock, reclassification of stock or otherwise shall be deemed a
conveyance or transfer within the meaning of this provision.
If the Mortgagor is a partnership, a sale or transfer by
operation of law or otherwise of any partners' interest in the
partnership or a change in the identity or composition of the
partners of the Mortgagor shall be deemed a conveyance or
transfer within the meaning of this provision.
Notwithstanding the foregoing, the following conveyances
shall be permitted:
A. Conveyance of the Premises to (1) an entity that is
beneficially owned by any lineal descendant of Fred B.
Kravetz and/or William Levine; or (2) a spouse of such
lineal descendant; or (3) a trust or other entity in
which one or more of the foregoing persons owns the
entire beneficial interest provided the new owner
executes the deed to assume the obligations of the
Mortgagor under the Note and this Mortgage.
B. Conversion of the Mortgagor from a New York General
Partnership to a New York Limited Liability Company
and/or conveyance of the Premises to such Limited
Liability Company, provided such Limited Liability
Company executes an Assumption Agreement and/or the
deed whereby the Limited Liability Company assumes the
obligations of the Mortgagor under the Note and this
Mortgage.
ACCELERATION OF PRINCIPAL ON DEFAULT, ETC. The whole of the
principal sum and interest shall become due at the option of the
Mortgagee, after (a) default in the payment of any installment of
principal or of interest for thirty (30) days; or, (b) default in
the payment of any tax, water rate, assessment, insurance
premiums, or sewer rent for thirty (30) days after notice and
demand or default after notice and demand either in assigning and
delivering the policies insuring the buildings against any
casualty or in reimbursing the Mortgagee for premiums paid on
such insurance, as herein provided; or (c) default upon request
in furnishing a statement of the amount due and whether any
offsets or defenses exist against the mortgage debt, as provided
herein in the Section entitled "Estoppel Statement"; or (d)
failure to exhibit to the Mortgagee, within ten (10) days after
demand, receipts showing payment of all taxes, water rates, sewer
rents and assessments; or (e) the actual or alteration,
demolition or removal of any building on the Premises without the
written consent of the Mortgagee; or (f) the assignment of the
rents of the Premises or any part thereof without the written
consent of the Mortgagee; or (g) the buildings on said Premises
are not maintained in reasonably good repair; or (h) failure to
comply with any requirement or order or notice of violation of
law or ordinance issued by any governmental department claiming
jurisdiction over the Premises within two (2) months from the
issuance thereof unless such requirement, order or notice is
being lawfully challenged by Mortgagor and there is no risk of
forfeiture of any of Mortgagor's rights in the Premises; or (i)
refusal of two or more fire insurance companies lawfully doing
business in the State of New York to issue policies insuring the
buildings on the premises; or (j) the removal, demolition or
destruction in whole or in part of any of the fixtures, chattels
or articles of personal property covered hereby, unless the same
are promptly replaced by similar fixtures, chattels and articles
of personal property at least in quality and condition to those
replaced, free from security interests or other encumbrances
thereon and free from any reservation of title thereof; or (k)
thirty (30) days notice to the Mortgagor, in the event of the
passage of any law deducting from the value of land for the
purposes of taxation any lien thereon, or changing in any way the
laws for the taxation of mortgages or debts secured thereby for
state or local purposes; or (1) the Mortgagor fails to keep,
observe and perform any of the other covenants, conditions or
agreements contained in the Mortgage; or (m) use of said Premises
for any unlawful purpose or public or private nuisance; or (n)
the Mortgagor commits or permits waste; or (o) any default under
any mortgage or other lien on the Premises or any default under
any other note, loan agreement or other instrument evidencing
Mortgagor's indebtedness to Mortgagee; or (p) the Note becomes
non-recourse to the Mortgagor.
NOTICES. Notice and demand to or request upon the Mortgagor
may be oral or in writing and, if in writing, may be served in
person or by mail.
APPOINTMENT OF RECEIVER. The Mortgagee, in any action to
foreclose the Mortgage, shall be entitled, without notice or
demand and without regard to the adequacy of any security for the
indebtedness hereby or the solvency or insolvency of any person
liable for the payment thereof, to the appointment of a receiver
of the rents, issues and profits of the Mortgaged Premises.
SALE IN ONE PARCEL. In case of a foreclosure sale, said
Premises, or so much thereof as may be affected by the Mortgage,
may be sold in one parcel, any provision of law to the contrary
notwithstanding.
ASSIGNMENT OF RENTS. The Mortgagor hereby absolutely and
unconditionally assigns, transfers and conveys to the Mortgagee
the rents, issues, and profits of the Premises as further
security for the payment of the Note, it being the intention of
Mortgagor and Mortgagee that this assignment be treated and
construed as an absolute assignment and not an assignment for
additional security only. The Mortgagor further grants to the
Mortgagee the right to enter upon and to take possession of the
Premises for the purpose of collecting the same and to let the
Premises or any part thereof, and to apply the rents, issues and
profits, after payment of all necessary charges and expenses, on
account of the Note. This assignment and grant shall continue in
effect until the Note is paid. The Mortgagee hereby waives the
right to enter upon and to take possession of the Premises for
the purpose of collecting the rents, issues, and profits, and the
Mortgagor shall be entitled to collect and receive the rents,
issues and profits as trustee for the benefit of Mortgagee and
Mortgagor until default under any of the covenants, conditions,
or agreements contained in the Mortgage; Mortgagor agrees to use
such rents, issues and profits in payment of principal and
interest and in payment of taxes, assessments, sewer rents, water
rates, and carrying charges against the Premises, but such right
of the Mortgagor may be revoked by the Mortgagee upon any
default, on five (5) days written notice. The Mortgagor will
not, without the written consent of the Mortgagee, receive or
collect rent from any tenant of the Premises or any part thereof
for a period of more than one month in advance, and in the event
of any default under the Mortgage will pay monthly in advance to
the Mortgagee, or to any receiver appointed to collect the rents,
issues and profits, the fair and reasonable rental value for the
use and occupation of the Premises or of such part thereof as may
be in the possession of the Mortgagor, and upon default in any
such payment will vacate and surrender the possession of the
Premises to the Mortgagee or to such receiver, and in default
thereof may be evicted by summary proceedings. Mortgagor shall
and does hereby agree to indemnify and hold Mortgagee and its
representatives harmless of and from any and all liability, loss
of damage which Mortgagor or its representatives may or might
incur under or by reason of (a) any tenant of the Premises, (b)
this Mortgage, (c) any action taken by Mortgagee or its
representatives hereunder, unless constituting willful
misconduct, or (d) claims and demands which may be asserted
against Mortgagee or its representatives by reason of any alleged
obligations or undertakings on its or their part to perform or
discharge any of the terms, covenants or agreements contained in
any lease affecting the Premises. This Mortgage shall not
operate to place upon Mortgagee any responsibility for the
management, operation or maintenance of the Premises, and the
execution of this Mortgage by Mortgagor shall constitute
conclusive evidence that all responsibility for the management,
operation and maintenance of the Premises is, shall be and shall
remain that of Mortgagor, in the absence of the taking of actual
possession of the Premises by Mortgagee. The provisions of the
foregoing indemnification obligation shall survive the assignment
or repayment of the Note, the assignment, satisfaction,
foreclosure or other termination of this Mortgage and the sale or
other transfer or conveyance of the Premises.
SECURITY AGREEMENT. The Mortgage constitutes a security
agreement under the Uniform Commercial Code and creates a
security interest in all fixtures and equipment and other
personal property (and the proceeds thereof) now or hereafter
affixed to or constituting a portion of the Premises. Mortgagor
shall execute, deliver, file and refile any financing statement,
continuation statements, or other security agreements Mortgagee
may require from time to time to confirm the lien of the Mortgage
with respect to such property.
ANTI-MARSHALLING. The Mortgagee may resort for the payment
of any indebtedness, liability, or obligation secured hereby to
its several securities therefor, in such order and manner as it
may see fit, and the Mortgagee may maintain an action to
foreclose the Mortgage notwithstanding the pendency of any action
to recover any part of the indebtedness secured hereby, or the
recovery of any judgment in such action. The Mortgagee shall not
be required during the pendency of any action to foreclose the
Mortgage, to obtain leave of any court in order to commence or
maintain any other action to recover any part of the indebtedness
secured hereby.
The Mortgagee shall also have the right in the event of
default under the Mortgage or the obligation secured hereby to
proceed against any or all interests of the Mortgagor and the
Mortgagor agrees that the Mortgagee shall have the right to elect
in writing not to cut off any interest that any Mortgagor might
have and in the event that Mortgagee shall so elect, Mortgagor
agrees that all of its duties and obligations as to such interest
shall continue.
COMPLIANCE WITH LAWS, ETC. The Mortgagor will comply with,
or cause compliance with, all present and future laws,
ordinances, rules, regulations, zoning and other requirements of
all governmental authorities whatsoever having jurisdiction of or
with respect to the Mortgaged Premises or any portion thereof or
the use or occupation thereof; provided, however, that the
Mortgagor may postpone such compliance if and so long as the
validity or legality of any such governmental requirement shall
be contested by the Mortgagor, with diligence and in good faith,
by appropriate legal proceedings.
COMPLIANCE WITH ZONING, ETC. The Mortgagor covenants: (a)
that the buildings and improvements now on the Mortgaged Premises
are in full compliance with all applicable zoning codes,
ordinances and regulations and deed restrictions, if any; and (b)
that such compliance is based solely upon Mortgagor's ownership
of such Premises, and not upon title to or interest in any other
Premises; and (c) buildings or improvements hereafter constructed
on such Premises shall be in compliance as in (a) and (b) hereof
provided, shall lie wholly within the boundaries of such Premises
and, shall be independent and self-contained operating units
(except for utility lines and conduits coming directly to the
Premises from a public road or from a private road an easement
over which for the maintenance of such utilities is covered by
the lien hereof.)
LEGAL EXPENSES. If any action or proceeding be commenced
(except an action to foreclose the Mortgage or to collect the
debt secured thereby), to which action or proceeding the
Mortgagee is made a party, or in which it becomes necessary to
defend or uphold the lien of the Mortgage, all sums paid by the
Mortgagee for the expense of any litigation to prosecute or
defend the rights and lien created by the Mortgage (including
counsel fees), shall be paid by the Mortgagor, together with
interest thereon at the legal rate of interest at the time of
said payment or at the highest rate of interest set forth herein
or in the Note secured by the Mortgage, whichever is greater, and
any such sum and interest thereon shall be a lien on said
Premises, prior to any right, or title to, interest in or claim
upon said Premises attaching or accruing subsequent to the lien
of the Mortgage, and shall be deemed to be secured by the
Mortgage.
If the Mortgage is referred to attorneys for collection or
foreclosure, the Mortgagor shall pay all sums, including
attorneys' fees, incurred by the Mortgagee, together with all
statutory costs, disbursements, and allowances, with or without
the institution of an action or proceeding. All such sums with
interest thereon at the rate set forth herein shall be deemed to
be secured by the Mortgage and collectible out of the Mortgaged
Premises.
CONDEMNATION AWARD. In the event of a condemnation award
for a portion of the Premises payable to Mortgagee and Mortgagor,
Mortgagee shall make the proceeds of such award available to
Mortgagor if, at the time such proceeds are delivered to
Mortgagee, there is no uncured default under the Note or this
Mortgage and the loan to value ratio (i.e. the then unpaid
principal balance pursuant to the Note divided by the value of
the Premises as reasonably determined by Mortgagee) shall not be
more than 75%. Mortgagee shall disburse such proceeds to
Mortgagor upon completion of work and invoices therefor approved
by Mortgagee, and any excess proceeds shall be utilized to reduce
the unpaid principal sum secured by this Mortgage.
INTEREST ON CONDEMNATION AWARD. In the event of
condemnation, or taking by eminent domain, the Mortgagee shall
not be limited to the interest paid on the award by the
condemning authority but shall be entitled to receive out of the
award interest on the entire unpaid principal sum at the rate
herein provided; the Mortgagor does hereby assign to the
Mortgagee so much of the balance of the award payable by the
condemning authority as is required to pay such total interest.
INTEREST IN THE EVENT OF DEFAULT. If default be made in the
payment of the said indebtedness when due, pursuant to the terms
hereof, the Mortgagee shall be entitled to receive interest on
the entire unpaid principal sum at the legal rate of interest at
the time of such default or at the highest rate of interest set
forth herein or in the Note secured by the Mortgage, whichever is
the greater, to be computed from the due date and until the
actual receipt and collection of the entire indebtedness. This
charge shall be added to and shall be deemed secured by the
Mortgage. The within clause, however, shall not be construed as
an agreement or privilege to extend the Mortgage, nor as a waiver
of any other right or remedy accruing to the Mortgagee by reason
of any such default.
RENT/BUSINESS INTERRUPTION INSURANCE. The Mortgagor will
keep the buildings and improvements now erected or hereafter to
be erected on the Mortgaged Premises and all personal property
and fixtures covered by the Mortgage insured for the benefit of
the Mortgagee against loss of rents or business income, as the
case may be, by reason of fire or other casualties and in such
amounts as may from time to time be reasonably required by the
Mortgagee and in companies reasonably satisfactory to the
Mortgagee, and will assign and deliver to the Mortgagee such
policies of insurance.
NO SECONDARY FINANCING. The Mortgagor will not, without the
Mortgagee's prior written consent, mortgage (including the so-
called "wrap-around mortgage"), pledge, assign, grant a security
interest in, cause any lien or encumbrance to attach to or any
levy to be made on the Mortgaged Premises except for (a) taxes
and assessments not yet delinquent and (b) any mortgage, pledge,
security interest, assignment or other encumbrance to the
Mortgagee.
ADDITIONAL INDEBTEDNESS. The Mortgagor may not incur or
become legally obligated to pay additional indebtedness in excess
of $1,000,000.00 above the total of (1) the indebtedness secured
by this Mortgage and (2) any other indebtedness existing on the
date of this Mortgage and previously disclosed to the Mortgagee.
BANKRUPTCY. Upon the making of an assignment for the
benefit of creditors by, or upon the filing of a petition in
bankruptcy by or against the Mortgagor, or any person or
corporation who is the guarantor hereof or whose indebtedness is
secured hereby, or upon the application for the appointment of a
receiver of the property of the Mortgagor or any such person or
corporation, or of the property of any person or corporation
which may become and be owner of the Mortgaged Premises, or upon
any act of insolvency or bankruptcy of the Mortgagor or any such
person or corporation or of any such subsequent owner, or upon
the legal incapacity of the Mortgagor or any such person or
corporation or owner, or any of them, the whole of said
indebtedness of every kind or nature held by the Mortgagee and
now or hereafter secured hereby shall immediately become due and
payable with interest thereon, and Mortgagor and any guarantor(s)
hereby waive presentment, demand of payment, protest, notice of
non-payment, and/or protest of any instrument on which the
Mortgagor or such guarantors are or may become liable now or
hereafter secured hereby, and the Mortgagor expressly agrees that
the Mortgagee may release or extend the time of any party liable
on any such obligation without notice and without affecting his
obligation thereon or under this instrument.
LIENS. The Premises shall be kept free and clear from any
liens and/or encumbrances of any type and description after the
date hereof. Upon the recording of any lien or encumbrance, and
the same not having been cleared or bonded of record within
thirty (30) days after filing thereof, the entire debt secured
hereby shall immediately become due and payable.
RIGHT TO INSPECT. The Mortgagee and any persons authorized
by Mortgagee shall have the right to enter and inspect the
Mortgaged Premises at all reasonable times during usual business
hours.
WAIVER. No waiver by the Mortgagee of the breach of any of
the covenants contained in the Note, the Mortgage, or other loan
document, or failure of the Mortgagee to exercise any option
given to it, shall be deemed to be a waiver of any other breach
of the same or any other covenant, or of its rights thereafter to
exercise any such option.
MODIFICATION. No change, amendment, modification,
cancellation or discharge hereof, or any part hereof, shall be
valid unless in writing and signed by the parties hereto or their
respective successors and assigns.
COVENANTS SHALL RUN WITH THE LAND, ETC. The covenants
contained in the Mortgage shall run with the land and bind the
Mortgagor, the heirs, personal representatives, successors and
assigns of the Mortgagor and all subsequent owners,
encumbrancers, tenants and subtenants of the Premises, and shall
enure to the benefit of the Mortgagee, the personal
representatives, successors and assigns of the Mortgagee and all
subsequent holders of the Mortgage.
PARTNERSHIP MORTGAGOR. The Mortgagor, if a partnership,
covenants that it is duly formed and validly existing under the
laws of the State of New York, and that execution of the Mortgage
and related instruments is authorized by the partnership
agreement and/or all partners.
ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND COVENANTS.
1. Except as otherwise disclosed in the Phase I Assessment
referenced in the Indemnification Agreement (as hereinafter
defined), Mortgagor makes the following representations and
warranties which shall survive the closing of this loan:
A. Mortgagor is in compliance in all respects with
all applicable federal, state and local laws, including, without
limitation, those relating to toxic and hazardous substances and
other environmental matters.
B. No portion of the Premises is being used or has
been used at any previous time, for the disposal, storage,
treatment, processing or other handling of any hazardous or toxic
substances.
2. Mortgagor agrees that Mortgagee or its agents or
representatives may, at any reasonable time and at Mortgagor's
expenses inspect Mortgagor's books and records and inspect and
conduct any tests on the Property including taking soil samples
in order to determine whether Mortgagor is in continuing
compliance with all environmental laws and regulations.
3. If any environmental contamination is found on the
property for which any removal or remedial action is required
pursuant to law, ordinance, order, rule, regulation or
governmental action, Mortgagor agrees that it will at its sole
cost and expense remove or take such remedial action promptly and
to Mortgagee's satisfaction.
4. Mortgagor agrees to defend, indemnify and hold harmless
Mortgagee, its employees, agents, officers and directors from and
against any claims, actions, demands, penalties, fines,
liabilities, settlements, damages, costs or expenses (including,
without limitation, attorney and consultant fees, investigation
and laboratory fees, court costs and litigation expenses) of
whatever kind or nature known or unknown contingent or otherwise
arising out of or in any way related to:
A. The past or present disposal, release or
threatened release of any hazardous or toxic substances on the
Premises;
B. Any personal injury (including wrongful death or
property damage, real or personal) arising out of or related to
such hazardous or toxic substances;
C. Any lawsuit brought or threatened, settlement
reached or government order given relating to such hazardous or
toxic substances; and/or
D. Any violation of any law, order, regulation,
requirement, or demand of any government authority, or any
policies or requirements of Mortgagee, which are based upon or in
any way related to such hazardous or toxic substances.
5. Mortgagor knows of no on-site or off-site locations
where hazardous or toxic substances from the operation of the
facility on the Premises have been stored, treated, recycled or
disposed of.
6. Mortgagor agrees that it will conduct no excavations at
the Premises unless it gives Mortgagee ten days' notice of its
intention to do so. Mortgagor further agrees that it will not
commence such excavation until Mortgagee has had the opportunity
to sample and test at the excavation location if Mortgagee so
desires. Should the testing results disclose the presence of
hazardous or toxic substances which require removal and/or remedy
under any environmental laws or regulations, the suspension of
excavation activity at such location shall continue until the
hazardous or toxic substances are removed and/or remedied to
Mortgagee's reasonable satisfaction. Mortgagor shall pay for any
and all reasonable costs for any such testing and removal and/or
remedy conducted pursuant to this paragraph.
7. Unless waived in writing by Mortgagee, the breach of
any of the covenants and warranties contained in this section
shall be an event of default under the Mortgage.
8. For purposes of this section, "hazardous and toxic
substances" includes, without limit, any flammable explosives,
radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials defined in the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, the Hazardous Materials Transportation
Act, as amended, the New York State Environmental Conservation
Law, the Resource Conservation and Recovery Act, as amended, and
in the regulations adopted and publications promulgated pursuant
thereto. The provisions of this section shall be in addition to
any other obligations and liabilities Mortgagor may have to
Mortgagee at common law, and shall survive the transactions
contemplated herein. Mortgagee may, at its option, require
Mortgagor to carry adequate insurance, if available at a
reasonable cost, to fulfill Mortgagor's obligations under this
paragraph. Mortgagor's failure to obtain insurance within 30
days after being requested to do so by Mortgagee, shall
constitute an event of default hereunder.
9. When the terms and provisions contained in the
foregoing Paragraphs 1-8 in any way conflict with the terms and
provisions contained in a certain Environmental Compliance and
Indemnification Agreement of even date herewith ("Indemnification
Agreement"), the terms and provisions contained in the
Indemnification Agreement shall prevail, and, in the event of any
overlapping terms, covenants and conditions, insofar as possible,
the terms, covenants and conditions contained herein and in the
Indemnification Agreement shall both be applicable.
TAX ON NOTE. That in the event that hereafter it is claimed
by any governmental agency that any tax or other governmental
charge or imposition is due, unpaid and payable by the Mortgagor
or the Mortgagee upon the Note (other than a tax on the interest
receivable by the Mortgagee thereunder), the Mortgagor will upon
sixty (60) days prior written notice either (a) pay such tax and
within a reasonable time thereafter deliver to the Mortgagee
satisfactory proof of payment thereof or (b) deposit with the
Mortgagee the amount of such claimed tax, together with interest
and penalties thereon, pending an application for a review of the
claim for such tax, and within a reasonable time, deliver to the
Mortgagee either (i) evidence satisfactory to the Mortgagee that
such claim of taxability has been withdrawn or defeated in which
event any such deposit shall be returned to the Mortgagor or (ii)
a direction from the Mortgagor to the Mortgagee to pay the same
out of the deposit above mentioned, any excess due over the
amount of said deposit to be paid by the Mortgagor directly to
the taxing authority and any excess of such deposit over such
payment by the Mortgagee to be returned promptly to the
Mortgagor. Upon the failure of the Mortgagor to comply with the
provisions of this Article, the whole of said principal sum and
interest secured by the Mortgage shall at the option of the
Mortgagee become due and payable. If liability for such tax is
asserted against the Mortgagee, the Mortgagee will give to the
Mortgagor prompt notice of such claim, and the Mortgagor, upon
complying with the provisions of this Article, shall have full
right and authority to contest such claim of taxability.
COMPLIANCE WITH ARTICLE 31-B OF NEW YORK STATE TAX LAW.
The Mortgagor will keep true and complete records pertaining to
its acquisition of title to the Premises, all subsequent
transfers of any interests in the Premises or any part thereof
and all changes in the controlling interest (by way of changes in
stock ownership, capital, profits, beneficial interest or
otherwise) in the Mortgagor or any related entity which may
hereafter own the Premises, including, but not limited to, a copy
of the contract of sale, title report, deed, closing statement,
transferor's affidavit, questionnaire or return, statement of
tentative assessment and any other notices or determinations of
tax received from the New York State Department of Taxation and
Finance, transferor's supplemental return, the date and cost of
all "capital improvements" made to the Premises or any part
thereof and evidence of the payment of any real property transfer
gains tax imposed by reason of Article 31-B of the New York State
Tax Law and the filing of all reports and any other information
or documentation required by the New York State Department of
Taxation and Finance by reason of said Article or any regulations
promulgated thereunder. All such records shall be made available
to Mortgagee for inspection from time to time upon its request.
If any real property transfer gains tax shall be due and
payable upon the conveyance of the Premises pursuant to a
judicial sale in any action, suit or proceeding brought to
foreclose the Mortgage or deed in lieu of foreclosure, the
Mortgagor will, at Mortgagee's request, (a) provide Mortgagee
with a copy of all such records and will prepare, execute,
deliver and file any affidavits, records questionnaires, returns
or supplemental returns required of the Mortgagor, as transferor,
including, but not limited to, a statement in affidavit form as
to the "original purchase price" of the Premises and the cost of
all "capital improvements" made to the Premises or any part
thereof by the Mortgagor or any related entity and the date or
dates on which such improvements were made and (b) pay or cause
to be paid any real property transfer gains tax, together with
interest and penalties thereon, which may be due and payable by
reason of such conveyance. The Mortgagor hereby irrevocably
appoints Mortgagee its agent and attorney-in-fact (which
appointment shall be deemed to be an agency coupled with an
interest), with full power of substitution in the Premises, to
prepare, execute, deliver and file on its behalf any and all
affidavits, questionnaires, returns and supplemental returns
which the Mortgagor, as transferor, has failed or refused to
execute and deliver to Mortgagee within 10 days after notice and
request therefor by Mortgagee. In the event that the Mortgagor
fails to pay any such tax, interest and penalties within 20 days
after notice and demand for payment is given by Mortgagee,
Mortgagee is hereby authorized to pay the same, and the amount
thereof so paid by Mortgagee, together with all costs and
expenses incurred by Mortgagee in connection with such payment,
including, but not limited to, reasonable attorneys' fees and
disbursements and interest on all such amounts, costs and
expenses at the rate of one percent (1%) in excess of the rate
specified in the Note, but in no event in excess of the maximum
interest rate permitted by law, shall be paid by the Mortgagor to
Mortgagee on demand. Until paid by the Mortgagor, all such
amounts, costs and expenses, together with interest thereon,
shall be secured by the Mortgage and may be added to the judgment
in any suit brought by Mortgagee against the Mortgagor hereon.
The foregoing shall not be applicable if the aforesaid
Article 31-B does not pertain to the Premises.
CONSTRUCTION. The word "Mortgagor" shall be construed as if
it read "Mortgagors" and the "Mortgagee" shall be construed as if
it read "Mortgagees" whenever the sense of the Mortgage so
requires. This Mortgage shall be governed by and construed in
accordance with the laws of the State of New York.
CONFLICT WITH OTHER LOAN AGREEMENTS. Mortgagor represents
and warrants to Mortgagee that the execution and delivery of this
Mortgage and all related documents and the performance of any
term, covenant, or condition herein provided in any agreement or
instrument executed in connection therewith, have been duly
authorized on behalf of the Mortgagor by all proper and necessary
action, and are not in conflict with, or result in any breach of,
or constitute a default under or violate:
A. Any of the terms, conditions, or provisions of any
agreement, lease or other instrument to which Mortgagor
is a party or subject to; or,
B. Any law, regulation, order, writ, injunction or decree
to which Mortgagor is subject or any rules or
regulations of any administrative agency which have
jurisdiction over Mortgagor or over any property of
Mortgagor that would have a material adverse affect on
Mortgagor's business or financial condition; or
C. Mortgagor's Partnership Agreement.
SEVERABILITY. In the event any one or more of the
provisions of the Mortgage or the Note shall for any reason be
invalid, illegal or unenforceable in whole or in part, then only
such provision or provisions shall be deemed to be null and void
and of no force or effect, but shall not affect any other
provision of the Mortgage or the Note.
ASSIGNMENT OF MORTGAGE. Upon Mortgagee's receipt of payment
in full of the indebtedness evidenced by the Note and Mortgage
and receipt of a $200.00 assignment processing fee to Mortgagee,
Mortgagee covenants to assign the Mortgage to any new lender
selected by Mortgagor on the following conditions:
A. The Assignment shall be in accordance with Section 275
of the Real Property Law and in a form reasonably acceptable to
Mortgagee and such new lender, suitable for recording in the
Monroe County Clerk's Office, but without any representation or
warranty by, or recourse to, Mortgagee.
B. The Note shall be endorsed, without recourse, as
reasonably requested by such new lender.
C. The Note, Mortgage and Assignment shall be delivered to
such new lender.
NON-RECOURSE. Neither the Mortgagee nor its successors, or
assigns, nor any other person, shall have any claim to proceed
personally against the partners of the Mortgagor, or any
assignee, successor, heir or representative of any of the
partners, for any deficiency or any other sum owing by virtue of
the Mortgage, or the Note secured hereby and the Mortgagee will
waive and release such personal liability and agrees to look
solely to the Mortgagor's partnership assets including, without
limitation, the Mortgaged Premises (but excluding the assets of
any partner of Mortgagor separate and apart from such partner's
interest in Mortgagor) for any sums due with respect to the
Mortgage and the Note; provided, however, that nothing herein
shall be deemed to be a release or impairment of the debt or of
the lien therefor upon the Mortgaged Premises or shall preclude
Mortgagee from foreclosing the lien of the Mortgage or otherwise
enforcing any and all of its rights under and by virtue of the
Mortgage, and provided further, that Mortgagor, and any assignee,
successor, heir or representative or any of the foregoing, shall
remain liable with respect to funds or property constituting part
of the Mortgaged Premises coming into its/his/her possession or
control which, by the provisions hereof or of the Note it/he/she
has not entitled to receive or retain or which it/he/she has
distributed in violation of such provisions.
IN WITNESS WHEREOF, the Mortgage has been duly executed by
the Mortgagor, the day and year first above written.
FRED KRAVETZ AND WILLIAM LEVINE PARTNERS
By: s/Gary Kuskin
___________________________________
Gary Kuskin
Chief Executive Officer
STATE OF COLORADO )
COUNTY OF EAGLE ) ss:
On this 26th day of December, 1996, before me
personally came Gary Kuskin, to me known and known to me to be
the Chief Executive Officer of FRED KRAVETZ AND WILLIAM LEVINE
PARTNERS the partnership described in, and which executed the
foregoing instrument, and who acknowledged that he executed the
foregoing Instrument for and on behalf of said partnership.
s/
___________________________________
Notary Public
Notary Public State of Colorado
Qualified in Eagle County
Commission Expires 10/27, 1997
<PAGE>
SCHEDULE A
Description of Mortgaged Premises omitted in this Exhibit.
[EXHIBIT 11]
FNB Rochester Corp.
Computations of Earnings Per Common Share
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994
(in thousands except per share amounts)
<S> <C> <C> <C>
Net income $4,133 $2,854 $1,937
Net income applicable to common stock $4,133 $2,854 $1,937
Weighted average common shares and
equivalents outstanding
Primary 3,570 3,569 3,311
Net income per common share
Primary $ 1.16 $ 0.80 $ 0.58
_____ _____ _____
</TABLE>
<PAGE>
[EXHIBIT 13]
FNB Rochester Corp. and Subsidiaries
The 1996 Annual Report
<PAGE>
Contents of the 1996 Annual Report
Company Profile . . . . . . . . . . . . . . . . . . . . . . . __
Financial Highlights . . . . . . . . . . . . . . . . . . . . __
Five-Year Summary of Selected Financial Information . . . . . __
Quarterly Financial Information (unaudited) . . . . . . . . . __
Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . __
Independent Auditors' Report . . . . . . . . . . . . . . . . __
Consolidated Financial Statements . . . . . . . . . . . . . . __
Notes to Consolidated Financial Statements . . . . . . . . . __
Corporate Directory . . . . . . . . . . . . . . . . . . . . . ___
<PAGE>
THE COMPANY
FNB Rochester Corp. (the "Company") is a bank holding company.
First National Bank of Rochester ("First National" or the "Bank")
is its only subsidiary. The Company was organized under the New
York Business Corporation Law and commenced operations on
September 10, 1984. The Bank was established in 1965, in
Rochester, New York as a national bank. The Bank comprises the
most significant portion of the Company at year-end 1996. Until
April 1, 1994, the Company also owned Atlanta National Bank
("Atlanta") in Atlanta, NY.
The Company's principal sources of income are dividends from the
Bank and interest from deposits. The Bank is a full-service,
community oriented, commercial bank offering a wide range of
commercial and consumer loans, deposit and other banking services
to individuals, businesses, and municipalities. In 1993, the
Bank expanded its Trust & Investment Division. The Trust &
Investment Division's product offerings include 401(k) plans,
investment management, corporate and cash management services,
mutual funds, annuities, and traditional trust and record-keeping
services.
The Company's business is conducted from its corporate
headquarters located in the Powers Building at the corner of
State and Main Streets in downtown Rochester, New York. The
Bank's fifteen banking offices are located in Monroe, Chemung,
Erie, and Onondaga counties in New York State. The Bank
considers its primary service and marketing area to be the City
of Rochester and surrounding towns which have a total population
of approximately one million. Rochester, located in the western
part of New York State on the south shore of Lake Ontario, is the
third largest city in New York State and is a significant
operating location for a number of major corporations, including
Eastman Kodak Company, Bausch & Lomb Inc., General Motors
Corporation, and Xerox Corporation.
First National's services are provided through thirteen full-
service community banking offices, twelve of which have drive-up
facilities, plus the Buffalo and Syracuse offices which primarily
provide services to business and professional customers.
Automated teller machines (ATM's) are located at the eleven
Monroe County banking offices and customers may use ATM's
throughout the United States and abroad through ATM networks.
The Bank is the only locally owned and managed commercial bank
operating in Monroe County. It is subject to intense competition
from international and super-regional commercial banks, savings
institutions, credit unions, and other financial institutions
(including brokerage and investment advisory firms) for all types
of deposits, loans, investment, and trust accounts.
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARIES
Financial Highlights
<TABLE>
<CAPTION>
1996 1995
(in thousands, except share data and ratios)
<S> <C> <C>
For the Year
Net interest income $ 18,686 $ 16,985
Provision for loan losses - -
Non-interest income 3,807 2,640
Non-interest expenses 16,650 15,577
Income tax expense 1,710 1,194
Net income 4,133 2,854
Net income per common share $ 1.16 $ 0.80
At year end
Total assets $437,898 $391,320
Total loans, net of deferred loan costs
(fees) 303,660 254,003
Allowance for loan losses 5,696 5,776
Securities held-to-maturity 29,532 31,780
Securities available-for-sale, at fair
value 72,318 73,527
Total deposits 404,771 357,875
Total shareholders' equity $ 29,231 $ 25,846
Operating ratios
Net income as a percent of:
Average total assets 1.00 0.78
Average common shareholders' equity 15.21 12.17
Net interest margin (as a percent) 4.79 4.92
Allowance for loan losses as a percent
of year-end loans 1.88 2.27
Net charge-offs as a percent
of average loans outstanding
during the year 0.03 0.29
</TABLE>
<PAGE>
Five-Year Summary of Selected Financial Information
This table represents a summary of selected components of the
Company's consolidated statements of financial condition and
consolidated statements of operations for each of the years in
the five-year period ended December 31, 1996. All information
concerning the Company should be read in conjunction with
consolidated financial statements and related notes included
elsewhere herein.
<TABLE>
<CAPTION>
(In thousands, except share data and ratios)
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Statement of operations
information
Interest income $32,245 $29,235 $23,012 $21,278 $22,770
Interest expense 13,559 12,250 7,950 8,326 10,252
_______ _______ _______ _______ _______
Net interest income 18,686 16,985 15,062 12,952 12,518
Provision for loan losses
(recovery) - - (43) 74 3,244
Non- interest income 3,807 2,640 2,785 3,313 3,101
Non-interest expenses 16,650 15,577 16,236 15,296 13,738
_______ _______ _______ _______ _______
Income (loss) before income
taxes 5,843 4,048 1,654 895 (1,363)
Income tax expense (benefit) 1,710 1,194 (283) 330 1,311
_______ _______ _______ _______ _______
Net income (loss) $ 4,133 $ 2,854 $ 1,937 $ 565 $(2,674)
======= ======= ======= ======= =======
Period end balance sheet
information
Securities held-to-
maturity $29,532 $31,780 $52,997 $53,691 $68,265
Securities
available-for-sale at
fair value 72,318 73,527 48,942 50,427 18,165
Total loans, net of
deferred loan costs
(fees) 303,660 254,003 202,437 170,513 161,915
Allowance for loan losses 5,696 5,776 6,452 6,823 6,560
Total assets 437,898 391,320 329,262 306,480 295,661
Deposits:
Non-interest bearing
demand 56,111 46,061 37,887 35,269 34,493
Savings, NOW, and money
market 144,720 144,326 146,464 162,925 170,305
Certificates of deposit 203,940 167,488 111,030 85,100 68,736
Total deposits 404,771 357,875 295,381 283,294 273,534
Short-term borrowing 786 4,986 9,875 - 1,148
Long-term debt 210 - - 7,185 7,150
Total shareholders' equity 29,231 25,846 21,360 13,678 12,390
Per common share data
Net income (loss):
Primary $ 1.16 $ 0.80 $ 0.58 $ 0.28 $ (1.34)
Fully diluted 1.16 0.80 0.58 0.28 (1.34)
Cash dividends 0.05 - - - -
Book value 8.19 7.24 5.99 6.83 6.19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Operating ratios: 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net income (loss) as a
percent of:
Average total assets 1.00% 0.78% .62% .19% (.89)%
Average common shareholders'
equity 15.21 12.17 10.15 4.36 (18.48)
Net interest margin 4.79 4.92 5.10 4.57 4.53
Interest rate spread 4.19 4.34 4.69 4.23 4.13
Non-performing assets
ratio (1) .69 .67 1.77 5.60 9.23
Allowance for loan losses
as a percent of period-end
loans 1.88 2.27 3.19 4.00 4.05
Net (charge-offs) recoveries
as a percent of average
loans (0.03) (0.29) (0.19) .11 (1.65)
Total equity as a percent
of total assets at
period end 8.19 6.60 6.49 4.46 4.19
Cash dividend on common
stock payout ratio .05 - - - -
</TABLE>
Notes:
(1) Non-performing assets (non-accrual loans, loans past due
90 days or more, and real estate acquired by foreclosure)
divided by total loans and real estate acquired by
foreclosure.
<TABLE>
<CAPTION>
Quarterly Financial Information (Unaudited)
(In thousands, except share data)
Provi-
sion Income Income
Net for Before per
Interest Interest Loan Income Net Common
Income Income Losses Taxes Income Share
________ ________ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
1996
____
First quarter $7,587 $4,451 - $1,067 $ 768 $0.21
Second quarter 7,937 4,657 - 1,393 1,003 0.28
Third quarter 8,316 4,837 - 1,575 1,115 0.31
Fourth quarter $8,405 $4,741 - $1,808 $1,247 $0.34
1995
____
First quarter $6,684 $4,014 - $ 800 $ 501 $0.14
Second quarter 7,265 4,167 - 1,096 792 0.22
Third quarter 7,552 4,350 - 1,168 816 0.23
Fourth quarter $7,734 $4,454 - $ 984 $ 745 $0.21
</TABLE>
Included in the fourth quarter of 1996 is a pretax gain of
$621,000 from the sale of the Odessa Office.
Because common share equivalents (stock options) were used in the
calculation of the first quarter 1996 earnings, the sum of the
quarterly amounts does not equal the full year amount.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
Statements included in this Management's Discussion and Analysis
of Financial Condition and Results of Operations and elsewhere in
this document that do not relate to present or historical
conditions are "forward looking statements" within the meaning of
that term in Section 27A of the Securities Act of 1933, as
amended, and of Section 21F of the Securities Exchange Act of
1934, as amended. Additional oral or written forward looking
statements may be made by the Company from time to time, and such
statements may be included in documents that are filed with the
Securities Exchange Commission. Such forward looking statements
involve risks and uncertainties which could cause results or
outcomes to differ materially from those expressed in such
forward looking statements. Among the important factors on which
such statements are based are assumptions concerning the business
environment in those counties in New York State where the Bank
operates, changes in interest rates, changes in the banking
industry in general and particularly in the competitive
environment in which the Bank operates, and changes in inflation.
Overview
The Company's growth and expansion continued in 1996. Much of the
growth has been as a result of the four new banking offices that
were opened in Monroe County in 1995 and 1996. Two existing
facilities were also replaced with new "customer friendly"
facilities. The Company continues to emphasize a high level of
customer service, establishing total financial service
relationships with customers, and providing convenience through
extended hours and location. The new banking offices were opened
with modern technology, on-line teller automation, as well as new
automated teller machines. On-line teller systems have been
installed in all other banking offices during 1996 as well. With
the use of new technology and more efficient systems, the Company
has been able to continue to expand with only a minimal increase
in the number of employees.
Net income increased $1,279,000, or 44.8%, in 1996. While the
net interest margin declined somewhat in 1996, it still compares
favorably with the Company's peer group. Net income was also
enhanced by a gain on the sale of the Odessa banking office,
reduction in Federal Deposit Insurance expense and an increase in
service charges on deposit accounts. The Company funded its
increased loan demand primarily through its deposit base. This
was accomplished by the Company increasing its market share of
deposits in Monroe County. To help increase loan volume the
Company originated more fixed rate commercial loans than in
previous years and, because commercial loan demand was not
sufficient to offset the increases in the deposit base, a larger
portion of 15 year residential mortgages originated by the
Company were retained in the portfolio rather than being sold.
This provided a better return than investment portfolio
alternatives.
Growth objectives are expected to be achieved in 1997 by
continuing to increase the Company's deposit base, continuing
to make high-quality loans, and using the available-for-sale
securities portfolio and short term borrowings to provide
liquidity or improve margins. In order to accomplish its growth
objectives, the Company must continue to increase its market
share. The addition of the four new banking offices 1995 and
1996 should help the Company attain its goals, and the Company
continues to explore new banking office opportunities. As
anticipated, much of the growth in deposits in 1996 has been in
certificates of deposit. Demand deposits have also experienced
significant growth in 1996 while savings and money market
accounts have only experienced minor growth and NOW deposits have
declined. With a lower rate environment depositors are placing
their funds in certificates of deposit or other investments
rather than leaving them in interest bearing demand or money
market accounts, which may make it increasingly difficult to
maintain the current net interest margin. Increases in net income
are expected to come through increased loan volume and by
controlling overhead expenses.
<PAGE>
RESULTS OF OPERATIONS
Net Interest Income
The following table reflects the net interest margin and interest
rate spread for the years shown. Average amounts are based upon
average daily balances. No tax equivalent adjustments have been
made because they are not considered material.
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET AND ANALYSIS OF NET INTEREST
MARGIN
Years Ended December 31,
(in thousands)
1996
Assets:
Amount
Paid or Aver-
Average Earned age
Amount (1) Rate
_______ _______ ______
<S> <C> <C> <C>
Interest-earning
assets:
Interest-bearing 1,090 59 5.41
deposits
with other
financial
institutions
Federal funds
sold 4,773 254 5.32
Securities: (2)
Taxable 97,835 6,420 6.56
Tax Exempt 2,730 122 4.47
Net loans (1) 283,958 25,390 8.94
Non-interest earning 23,930
assets -----
Total assets 414,316
=======
Total earning $390,386 $32,245 8.26%
assets ======= ====== =====
Liabilities and
Shareholders'
Equity:
Interest bearing $143,890 3,093 2.15
liabilities
Savings, NOW, and
money market
deposits
Certificates of
deposit 187,426 10,348 5.52
Long-term debt 193 19 10.00
Other interest
bearing
liabilities 1,790 99 5.53
Non-interest
bearing
liabilities and
shareholders' 81,017
equity ______
Total
liabilities and
Shareholders'
equity 414,316
_______
Total interest
bearing
liabilities 333,299 13,559 4.07%
======= ====== =====
Interest rate
spread 4.19%
=====
Total earning-
assets/ Net interest $390,386 $18,686 4.79%
margin ======== ======= =====
Assets
1995
Amount
Paid or Aver-
Average Earned age
Amount (1) Rate
_______ ______ ____
<S> <C> <C> <C>
Interest-earning
assets:
Interest-bearing 1,086 60 5.52
deposits
with other
financial
institutions
Federal funds
sold 8,820 515 5.84
Securities: (2)
Taxable 103,753 6,751 6.51
Tax Exempt 2,104 99 4.71
Net loans (1) 229,331 21,810 9.51
Non-interest earning 18,992 - -
assets _____
Total assets 364,086
=======
Total earning $345,094 $29,235 8.47%
assets ====== ====== =====
Liabilities and
Shareholders'
Equity:
Interest bearing 142,807 3,379 2.37
liabilities
Savings, NOW, and
money market
deposits
Certificates of
deposit 147,401 8,473 5.75
Long-term debt - - -
Other interest
bearing
liabilities 6,476 398 6.15
Non-interest
bearing
liabilities and
shareholders' 67,402
equity ______
Total
liabilities and 364,086
Shareholders' _______
equity
Total interest 296,684 12,20 4.13%
bearing ======= ===== =====
liabilities
Interest rate
spread 4.34%
=====
Total earning-
assets/ Net interest $345,094 $16,985 4.92%
margin ======= ======= =====
Assets
1994
Amount
Paid or Aver-
Average Earned age
Amount (1) Rate
_______ ______ ____
<S> <C> <C> <C>
Interest-earning
assets:
Interest-bearing 1,075 43 4.00
deposits
with other
financial
institutions
Federal funds
sold 10,942 478 4.37
Securities: (2)
Taxable 95,362 5,835 6.12
Tax Exempt 1,653 98 5.93
Net loans (1) 186,229 16,558 8.89
Non-interest earning 17,894 - -
assets ___ _ _
Total assets 313,155
=======
Total earning $295,261 $23,012 7.79%
assets ====== ====== =====
Liabilities and
Shareholders'
Equity:
Interest bearing 151,664 3,216 2.12
liabilities
Savings, NOW, and
money market
deposits
Certificates of
deposit 101,441 4,531 4.47
Long-term debt 1,192 123 10.00
Other interest
bearing
liabilities 1,735 80 4.61
Non-interest
bearing
liabilities and
shareholders' 57,123
equity ______
Total
liabilities and
Shareholders' 313,155
equity -------
Total interest
bearing
liabilities 256,032 7,950 3.10%
======= ===== =====
Interest rate 4.69%
spread =====
Total earning-
assets/ Net interest 295,261 $15,062 5.10%
margin ======= ====== =====
</TABLE>
Notes:
(1) Non-accrual loans have been included in the average
balances.
(2) Securities available-for-sale are included at fair
value.
Net interest income, the difference between interest income and
interest expense increased $1,701,000, or 10%, from 1995 which
had an increase of $1,923,000, or 12.8%, over 1994's net interest
income. Average earning assets increased $45,292,000, or 13.1%,
from 1995 to 1996 and increased $49,883,000, or 16.9%, from 1994
to 1995.
Loans represent the majority of the Company's interest-earning
assets. The significant increases in interest income noted in
both 1996 and 1995 were primarily due to loan volume increases,
particularly in commercial real estate, conventional commercial
loans, and residential mortgage loans as well as some increase
from interest rate increases. Average net loan balances
increased $54,627,000 from 1995 to 1996, while they increased
$43,102,000 from 1994 to 1995. The loan volume increases in 1995
and 1996 are related to increased sales efforts and emphasis on
making new loans. The average rate earned on loans in 1996 was
8.94% compared to 9.51% in 1995 and 8.89% in 1994.
Average Federal Funds Sold decreased $4,047,000 and average
securities declined $5,918,000 from 1995 to 1996. These funds
were used to fund higher-yielding loans which helped to lessen
the decline in net interest margin.
Interest expense is a function of the volume of, and rates paid
for, interest-bearing liabilities. Interest expense increased in
1996 primarily because of an increase in average interest bearing
liabilities. While rates have declined somewhat since 1995, the
deposit increases have been primarily in the higher rate
certificates of deposit.
The interest spread is the difference between average rates
earned on assets and paid on interest-bearing sources of funds.
Interest spread declined in 1996 to 4.19% from 4.34% in 1995 and
4.69% in 1994. The interest margin, which is the difference
between interest income and interest expense divided by average
interest-earning assets was 4.79% in 1996, 4.92% in 1995, and
5.10% in 1994. The decline in both the spread and the margin
from 1995 is primarily due to the deposit mix with its greater
emphasis on higher interest rate certificates of deposit and the
increase in the residential mortgage portfolio. Residential
mortgages typically have a much lower interest rate than other
types of loans. In order to maintain interest spreads, during
1996 the Bank adjusted its portfolios of loans and securities
available-for-sale toward longer maturities.
Loan volume is expected to continue to increase, with funding
provided by an increase in deposits, short term borrowings, and
run-off of the securities portfolio. However, in order to
attract the additional deposits to fund loan activity in a highly
competitive environment, it is anticipated that, as in 1996, the
increase in deposits will come primarily from higher interest-
bearing accounts. This may cause further declines in both the
net interest spread and margin.
<PAGE>
The following table sets forth the dollar volume of increase
(decrease) in interest income and interest expense resulting from
changes in the volume of earning assets and interest-bearing
liabilities, and from changes in rates. Volume changes are
computed by multiplying the volume difference by the prior year's
rate. Rate changes are computed by multiplying the rate
difference by the prior year's balance. The change in interest
due to both rate and volume has been allocated to rate and volume
changes in proportion to the dollar amounts of the change in
each.
VOLUME AND RATE VARIANCES
<TABLE>
<CAPTION>
1996 Compared to 1995
_____________________
Increase/Decrease
Due to Change In
Total
Average Average Increase
Balance Rate (Decrease)
_______ ____ __________
(in thousands) thousands)
<S> <C> <C> <C>
Federal fund $(219) $(43) $(262)
sold and
interest-bearing
deposits
Taxable (383) 52 (331)
securities
Tax-exempt 28 (5) 23
securities
Loans, net 4,783 (1,203) 3,580
_____ _____ _____
Interest income 4,209 (1,199) 3,010
_____ ______ _____
Savings, NOW,
and money market 26 (312) (286)
Certificates of 2,199 (324) 1,875
deposit
Other interest-
bearing
liabilities and (115) (165) (280)
long-term debt ____ ____ ____
Interest expense 2,110 (801) 1,309
_____ _____ _____
Net interest $2,099 $(398) $1,701
income ===== ===== =====
1995 Compared to 1994
_____________________
Increase/Decrease
Due to Change In
Total
Average Average Increase
Balance Rate (Decrease)
_______ ____ __________
<S> <C> <C> <C>
Federal fund $ (58) $112 $54
sold and
interest-bearing
deposits
Taxable 532 384 916
securities
Tax-exempt 4 (3) 1
securities
Loans, net 4,037 1,215 5,252
_____ _____ _____
Interest income 4,515 1,708 6,223
_____ _____ _____
Savings, NOW,
and money market (166) 329 163
Certificates of 2,414 1,528 3,942
deposit
Other interest-
bearing
liabilities and 222 (27) 195
long-term debt ___ ___ ___
Interest expense 2,470 1,830 4,300
----- ----- ----
Net interest 2,045 $(122) $1,923
income ===== ===== =====
</TABLE>
<PAGE>
Non-interest Income
Non-interest income is comprised of service charges, trust fees,
credit card fees, loan servicing fees, and gains on sales of
securities, mortgages, and other assets. The following table
sets forth certain information on non-interest income for the
years indicated:
NON-INTEREST INCOME
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Service charges on deposit $1,547 $1,209 $1,219
accounts
Credit card fees 740 648 532
Gain on sale of 65 40 11
mortgages
Gain (loss) on sale of (45) 33 -
securities available-for-sale
Loan servicing fees 263 283 319
Gains on sale of subsidiary & 621 - 380
banking offices
Other operating 616 427 324
income
Total operating $3,807 $2,640 $2,785
income
</TABLE>
Non-interest income increased $1,167,000, or 44.2%, from 1996 to
1995, while 1995 non-interest income decreased 5.2% from 1994.
1996 non-interest income included a $621,000 gain on the sale of
the Odessa banking office. Without the gain, 1996 would have
reflected an increase of $546,000, or 20.7%, in non-interest
income. Service charges on deposit accounts showed considerable
improvement in 1996 with an increase of $338,000, or 28%, over
1995 resulting primarily from increased volumes and a change in
the method in which some service charges are assessed. Credit
card fees increased 14.2% in 1996 and 21.8% in 1995 due to larger
volume in merchant accounts. A large portion of fifteen year
mortgages originated in both 1996 and 1995 were retained in
portfolio, resulting in a decline in loan servicing fees as loans
in the servicing portfolio were prepaid and not replaced with new
loans. The $189,000, or 44.3%, increase in other operating
income was the result of an increase in trust commissions and
fees and various other miscellaneous income and fees.
The Company continues to explore new ways to increase non-
interest income and to monitor fees and service charges.
<PAGE>
Non-interest Expense
Non-interest expense, or overhead, consists of salaries and
benefits, occupancy, insurance, and other operating costs. The
following table sets forth certain information on operating
expenses for the years indicated:
<TABLE>
<CAPTION>
NON-INTEREST EXPENSE
Year Ended December 31,
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Occupancy 3,448 2,812 2,871
Marketing and public 489 624 776
Office supplies, postage 637 576 542
Processing fees 1,018 979 902
FDIC assessments 2 350 657
Net cost of operation of 2 (14) 311
Legal 190 267 397
Other 1,637 1,745 1,805
Total operating (non- $16,650 $15,577 $16,236
</TABLE>
Non-interest expense for 1996 increased $1,073,000, or 6.9%, from
1995 when it decreased $659,000, or 4.1%, from 1994. Both years
benefited from significant declines in FDIC assessments. The
increase in 1996 is primarily due to the growth of the Company.
Much of the increase has been attributable to the salaries and
benefit and occupancy expenses associated with the new banking
offices. The decrease in non-interest expense in 1995 resulted
primarily from decreases in net cost of operation of other real
estate, FDIC assessments, marketing and public relations
expenses, and legal costs.
Salaries and benefits are the largest component of non-interest
expense. The Bank operates in a metropolitan market unlike most
community banks of similar size, and its cost for personnel tends
to exceed that of typical community banks. Salaries and benefits
increased $989,000, or 12%, from 1995, and $263,000, or 3.3%,
from 1994 to 1995. The increases in 1996 and 1995 were in both
salaries and benefits. The Company opened three new offices in
1995 and was able to lessen the impact to salary and benefit
expense by a redeployment of personnel. A portion of each of the
1996 and 1995 increases were caused by the cost associated with
extended banking hours. The 1996 increase also resulted from the
addition of personnel in both the trust and lending divisions,
staff required for the new banking office opened in March 1996
and normal salary increases and promotions. Benefits increased
primarily because of additional pension, profit sharing and
education costs.
Occupancy expense, the other significant non-interest expense,
increased $636,000, or 22.6%, from 1995 as the Company began to
realize the full expense effect of the new offices. Occupancy
expense is expected to continue to increase as the Bank expands
its service delivery network with new community banking offices
and additional technology to increase productivity and customer
service. An eight-year building lease for the new Community
Banking Office in East Rochester was signed in March 1995 and 20-
year ground leases for the new Chili and Penfield Offices were
also signed in 1995. The Perinton Office, which opened in March
1996, has a ground lease of 20 years. In addition, a 20 year
building lease was signed for a replacement location for the
Henrietta Community Banking Office. This office was opened at
the new location in January of 1996. The total annual lease cost
for all of these locations is approximately $313,000. Building
and equipment depreciation expense has increased due to these new
offices. The Chili and Penfield Offices were not opened until
the latter part of 1995, the Perinton Office was opened in early
1996 and the Greece Office was razed and a new banking office
constructed on the site in 1996. The full annual expense effect
of the offices constructed in 1996 will not be realized until
1997 and beyond.
As in 1995, technological improvements continued in 1996. All
banking offices are now upgraded to new teller automation, a
cash management system is in place, and the Bank is in the
process of evaluating information technology processing
alternatives.
Marketing expense declined $135,000, or 21.6%, from 1995 to 1996
and $152,000, or 19.6%, from 1994 to 1995. The Bank continued
radio, television, and newspaper advertising in 1996. Marketing
efforts were focused on the annual "Money Sale" and image
enhancement and customer awareness of the Bank as well as
extended business hours. Also, as part of its sales efforts, the
Company has continued with its interdivisional sales teams which
conduct sales "blitzes" throughout the year.
Federal Deposit Insurance Corporation (FDIC) assessment fees
dropped significantly in 1996 resulting in a decline of $348,000,
or 99.4%, from 1995 and it is anticipated that assessment fees
will be somewhat higher in 1997. FDIC assessment fees decreased
due to a decline in the assessment rate. These fees are a
function of the insurance rate and the deposit base.
Income Taxes
The Company and the Bank file a consolidated tax return. The
provision for 1996 income taxes was $1,710,000, compared to
$1,194,000 in 1995 and a benefit of $283,000 in 1994. The
Company's effective tax rates were 29%, 29% and (17)% for 1996,
1995 and 1994 respectively. The 1994 benefit was primarily the
result of the tax effect of the disposition of certain
nonperforming loans and other real estate.
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis and operating loss and
tax credit carry forwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The realization of deductible temporary differences depends on
the Company having sufficient taxable income within the carryback
period permitted by the tax law to allow for utilization of the
deductible amounts. A valuation allowance has been established
for the portion of the Company's net deductible temporary
differences which are not expected to be realized within a twelve
month carryforward period. Income tax expense was affected in
1996 and 1995 by reductions in the valuation allowance of
$660,000 and $412,000 respectively due to the generation of
sufficient taxable income to provide for the deduction of
temporary differences.
At December 31, 1996, the Company had a net deferred tax asset of
$423,000 as compared to a net deferred tax liability of $52,000
at December 31, 1995. The 1996 deferred tax asset is attributable
principally to the difference between book and tax allowance for
loan losses.
ANALYSIS OF FINANCIAL CONDITION
Securities Portfolio
The primary purposes of the securities portfolio are to produce
interest income and provide liquidity. Investments in securities
are made to maintain liquidity through structured maturities, to
provide collateral to secure local municipal deposits, to manage
risk by diversifying credit risk and positioning the balance
sheet for interest rate sensitivity, to support local
communities, and to meet tax planning strategies. The total
securities portfolio decreased $3,457,000, or 3.3% from December
31, 1995 to December 31, 1996 and increased $3,368,000 in 1995
from 1994.
On November 15, 1995, the Financial Accounting Standards Board
(FASB) published a special report, A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and
Equity Securities. This guidance included a provision that
allowed institutions a one-time opportunity to reclassify (at
fair value) held-to-maturity securities without calling into
question their intent to hold other debt securities to maturity
in the future. Under this provision the Bank transferred
securities with an amortized cost of $34,539,000 (fair value
$35,312,000) from held-to-maturity to available-for-sale. This
reclassification will allow the Bank to better respond to changes
in market interest rates and manage interest rate risk or provide
liquidity for increases in loan demand or deposit withdrawals.
The available-for-sale portfolio includes short-term Treasuries,
equities, and other mortgage-backed securities not classified as
held-to-maturity. During 1996 the Bank continued to classify most
of its purchases of securities as available-for-sale.
Unrealized gains on available-for-sale securities reported in
equity at December 31, 1996 amounted to $268,000, net of taxes,
as compared to unrealized gains of $850,000, net of taxes, at
December 31, 1995.
At December 31, 1996, 50.6% of the Bank's securities had
maturities of five years or less, while 66.3% had maturities of
five years or less at the end of 1995. The decline in maturities
of five years or less was caused by the Bank increasing its
mortgage backed securities by approximately $12.3 million. The
average life of the Bank's amortizing securities such as mortgage
pools and SBA pools at December 31, 1996 is five years. The
majority of the securities portfolio consists of U.S. Treasury
Notes and sequential pay mortgage-backed securities issued by
U.S. government agencies. Since 1994 the Company has been
decreasing its available-for-sale holdings of short-term
treasuries and replacing them with medium term U.S. government
agencies and longer-term variable and fixed rate mortgage-backed
securities. This has helped the Company to maintain its interest
margin while incurring only moderate additional interest rate
risk.
The following tables summarize the Company's carrying value of
securities available-for-sale and the carrying value of
securities held-to-maturity, and their maturities and weighted
average yields at December 31, 1996, 1995, and 1994.
CARRYING VALUE OF SECURITIES AVAILABLE-FOR-SALE
December 31,
1996 1995 1994
(in thousands)
U.S. Treasury $23,576 $44,123 $31,852
U.S. Government agency 9,967 5,698 2,889
Mortgage-backed 38,775 23,706 14,151
Other securities - - 50
Total $72,318 $73,527 $48,942
Notes:
(1) The above figures are stated at fair value. At December 31,
1996, the available-for-sale portfolio had net unrealized
gains of $447,000, at December 31, 1995, net unrealized
gains of $1,426,000, and at December 31, 1994, net
unrealized losses of $781,000. Totals exclude Federal
Reserve Bank stock and Federal Home Loan Bank stock of
$1,516,000, $1,299,000 and $342,000 at December 31, 1996,
1996 and 1994, respectively.
<PAGE>
Carrying Value of Securities Held-to-Maturity
December 31,
____________
1996 1995 1994
____ ____ ____
(in thousands)
U.S. Treasury $8,108 $7,145 $23,895
U.S. Government agency 5,293 6,359 6,996
Mortgage-backed 12,909 15,509 20,047
securities
Obligations of state and
2,872 2,417 1,734
municipal subdivisions
Other 350 350 325
_____ _____ _____
Total $29,532 $31,780 $52,997
======= ======= =======
<TABLE>
<CAPTION>
MATURITIES AND WEIGHTED YIELD OF SECURITIES AVAILABLE-FOR-SALE
(in thousands)
After One Year
Within But Within
One Year Five Years
________ __________
Amount Yield Amount Yield
______ _____ ______ _____
<S> <C> <C> <C> <C>
U.S. Treasury $8,114 6.47% $15,462 6.86%
U.S. Government - - 2,245 6.18
agency
Mortgage-backed 268 7.00 - -
securities (1) ____ _____ _____ ______
Total $8,382 6.54% $17,707 6.85%
====== ===== ====== =====
After Five
Years
But Within After
Ten Years Ten Years
_________ _________
Amount Yield Amount Yield Total
______ _____ ______ _____ -----
<S> <C> <C> <C> <C> <C>
U.S. Treasury - -% - -% $23,576
U.S. Government 5,003 7.60 2,719 7.48 9,967
agency
Mortgage-backed 116 7.00 38,391 7.58 38,775
securities (1) --- ---- ------ ---- ------
Total $5,119 7.57% $41,110 7.20% $72,318
===== ===== ====== ===== ======
</TABLE>
Notes:
(1) Mortgage-backed securities are reported at
final maturity notwithstanding the fact that
amortization is received regularly on some
securities substantially reducing the
effective maturities.
<TABLE>
<CAPTION>
MATURITIES AND WEIGHTED YIELD OF SECURITIES HELD-TO-MATURITY
(in thousands)
After Five
After One Year Years
But Within But Within After Within
Five Years Ten Years Ten Years One Year
__________ __________ _________ ________
Amount Yield Amount Yield Amount Yield Amount Yield Total
______ _____ ______ _____ ______ _____ ______ _____ _____
<S> <C> <C> <C> <C> <C> <C> <<C> <C> <C>
U.S.Treasury $ - -% $8,108 5.72% $ -% - -% $8,108
-
U.S. Government - - 5,000 5.63 - - 293 6.38 5,293
agency
Mortgage-backed
- - 9,586 8.59 - - 3,323 7.54 12,909 securities (1)
Obligations of 2,048 3.96 426 5.30 83 4.46 315 5.77
state and
municipal
subdivisions
Other - - 300 8.33 50 7.93 - - 350
_____ ____ ____ _____ ____ _____ ____ _____ _____
Total $2,048 3.96% $23,420 6.94% $133 5.69% $3,931 7.38% $29,532
====== ===== ======= ===== ==== ===== ====== ===== ======
Notes:
(1) See note (1) above.
</TABLE>
Loan Portfolio
The loan portfolio increased $49,657,000, or 19.5%, from 1995 to
1996. This compares to an increase from 1994 to 1995 of
$51,566,000, or 25.5%. The growth in both 1996 and 1995 was the
result of a planned business development program soliciting small
businesses and professionals. Of the total 1996 year-end loan
portfolio, $212,267,000, or 70%, is secured by either commercial
or residential real estate. Loans totaling $1.1 million were
sold with the Odessa Banking Office in November 1996.
The majority of the Company's loans continue to be commercial.
These loans increased $22,076,000, or 13.3%, from 1995. The
largest portion of the increase is in commercial real estate
loans. At year-end 1996, 57.3% of commercial loans were secured
by commercial real estate. Of the commercial real estate securing
those loans, 57.2% was owner occupied. Through expanded sales
efforts, the Bank expects to continue to grow commercial loans,
although at a somewhat slower rate. Competition for high quality
loans is intense. The Bank is establishing itself in the small
to medium-size business and professional markets which appear to
be under served. While its primary market is Monroe County, the
Business and Professional Banking Division has established a
presence in the Syracuse and Buffalo markets with offices in
Downtown Syracuse and in metropolitan Buffalo. Furthermore, the
Bank has access to the Elmira area through its two community
banking offices.
Residential mortgage loans increased $21,374,000, or 42.8%, from
1995 to 1996. This increase is primarily attributable to the
Bank's decision to hold 15-year mortgages in its portfolio,
rather than sell them to the Federal Home Loan Mortgage Corp
(FHLMC). With lower interest rates in the early part of 1996,
the Bank experienced increased refinancing activity, and much of
that was directed into 15-year fixed rate mortgages. It is
expected that the Bank may continue to hold a portion of its 15-
year originations in portfolio rather than selling them. When
commercial and consumer loan demand is not sufficient to offset
deposit increases management looks to the shorter term maturity
and variable rate residential mortgages to fill that need.
Consumer loans increased 17.5% from $19,711,000 in 1995 to
$23,153,000 in 1996. Much of the growth in consumer loans is
attributable to an annual "money sale" which was held late in the
first quarter and early second quarter. Consumer loans increased
$3,268,000 from 1994 to 1995 as the result of a similar "money
sale".
Home equity loans increased from 1995 to 1996 by $2,524,000 and
decreased by $1,813,000 from 1994 to 1995. While home equity
loans are attractive to borrowers who have equity in their homes,
demand for them is influenced by the refinance market. In the
lower rate environment, many homeowners are choosing to refinance
their mortgages causing the repayment of home equity lines.
Types of Loans
<TABLE>
<CAPTION>
December 31,
1996 1995 1994 1993 1992
____ ____ ____ ____ ____
(in thousands)
<S> <C> <C> <C> <C> <C>
Commercial $187,721 $165,645 $134,529 $111,444 $102,533
Residential 71,263 49,889 31,080 26,769 23,770
mortgage
Home equity 21,297 18,773 20,586 21,559 23,743
Other consumer 23,153 19,711 16,443 10,695 11,893
______ _______ _______ ______ ______
Total 303,434 254,018 202,638 170,467 161,939
Net deferred loan 226 (15) (201) 46 (24)
costs (fees)
Allowance for loan (5,696) (5,776) (6,452) (6,823) (6,560)
losses _______ _______ _______ _______ _______
Loans, net $297,964 $248,227 $195,985 $163,690 $155,355
======= ======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
MATURITY DISTRIBUTION OF LOANS AT DECEMBER 31, 1996
Maturity
One Year
or Less One to Five Years
Five Years Five Years or more Total
__________ __________ __________ ______
(in thousands)
<S> <C> <C> <C> <C>
Commercial $21,855 $74,890 $90,884 $187,629
Residential mortgage 3,514 13,454 54,265 71,233
Home equity 820 5,052 15,535 21,407
Consumer, net 1,338 18,301 3,752 23,391
_____ ______ ______ _______
Total loans $27,527 $111,697 $164,436 $303,660
======= ======== ======== =======
Floating/adjustable
Interest rate 64,577 89,317
Fixed or predetermined
Interest rates 47,120 75,119
______ ______
$111,697 $164,436
======= =======
</TABLE>
It is the policy of the Bank to place loans, except consumer and
residential mortgage loans, on non-accrual status when payment of
principal or interest becomes 90 days delinquent or when, in
management's judgment, the collection of principal or interest
appears uncertain. Any interest income accrued during the
reporting period, but not received at the time the loan is placed
on non-accrual status, is reversed in the reporting period to the
extent considered uncollectible. Interest accrued in prior
years, the collection of which appears uncertain, is charged off.
Interest on loans categorized as non-accrual may be recognized as
income when the payments are received or applied as a reduction
to principal.
Installment loans are not ordinarily placed on non-accrual
status. Installment loans past due 120 days are generally
charged off. At that time, all previously accrued or
uncollected interest is reversed and charged against current
earnings. Residential mortgage and home equity loans are placed
on non-accrual status when they become 180 days past-due.
The following table summarizes the Company's non-performing
assets at the dates indicated:
NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
December 31,
1996 1995 1994 1993 1992
____ ____ ____ ____ ____
(in thousands)
<S> <C> <C> <C> <C> <C>
Loans in non-accrual $1,419 $1,665 $3,290 $7,929 $11,753
status
Loans past due 90 days 645 45 196 1,295 848
or more and still _____ _____ _____ _____ ______
accruing
Total non-performing 2,064 1,710 3,486 9,224 12,601
loans
Real estate acquired by 45 - 100 345 2,576
foreclosure _____ _____ ______ _____ ______
Total non-performing $2,109 $1,710 $3,586 $9,569 $15,177
assets ====== ====== ====== ====== =======
Non-performing assets 0.69% 0.67% 1.77% 5.60% 9.23%
as a % of total ====== ====== ====== ====== ======
loans and real
estate acquired by
foreclosure
</TABLE>
Total non-performing assets increased slightly in 1996 after
decreasing each year since their peak in September 1992. The
long term decrease was the result of management's efforts to
reduce these assets. Non-performing assets increased $399,000,
or 23.3%, from 1995 to 1996 with the increase being primarily in
residential mortgage loans. Of the $6.0 million decrease from
1993 to 1994, $2.5 million was the result of the sale and
liquidation of non-performing assets during the fourth quarter of
1994.
Loans in non-accrual status decreased $246,000 from 1995 to 1996,
and $1,625,000 from 1994 to 1995, declines of 14.8% and 49.4%,
respectively. Of the $1,419,000 in non-accrual loans, $1,363,000
are secured by real estate. Non-performing assets represent
.69% of total loans and real estate acquired by foreclosure at
the end of 1996 compared to .67% in 1995 and 1.77% in 1994.
Provision and Allowance for Loan Losses
The allowance for loan loss is available to absorb charge-offs
from any loan category and is restored by charges to income or
recoveries of loans previously charged off. Management
undertakes a quarterly analysis to assess the adequacy of the
allowance taking into account non-performing and delinquent
loans, internally criticized loans, historical trends, economic
factors, and overall credit administration. Based on this
analysis, the allowance is considered adequate at December 31,
1996 to absorb anticipated losses. Management believes that the
inherent risk in the current portfolio has already been provided
for, and because of credit standards that First National has
implemented, new loans are expected to be of high quality.
However, should the market or the economy change significantly,
some provision could be required in 1997.
<PAGE>
The following table summarizes the changes in the allowance for
loan losses for 1992 through 1996:
<TABLE>
<CAPTION>
SUMMARY OF LOAN LOSS ALLOWANCE
December 31
1996 1995 1994 1993 1992
____ ____ ____ ____ ____
(in thousands)
<S> <C> <C> <C> <C> <C>
Total Loans $303,660 $254,003 $202,437 $168,619 $161,846
outstanding at ======== ======== ======== ======== ========
year-end, net of
costs (fees) and
unearned
discounts
Daily average 283,958 229,331 186,229 167,234 187,501
amount of net ======== ======= ======== ======= =======
loans outstanding
Balance at 5,776 6,452 6,823 6,560 6,412
beginning of year
Provisions - - (43) 74 3,244
charged to
operating expense
(recovery)
Reclassification - - 210
of impairment
reserves
Allowance of - - (177) - -
subsidiary sold
5,776 6,452 6,813 6,634 9,656
_____ ______ _____ _____ ______
Loans charged off:
Commercial, (407) (840) (990) (346) (3,024)
financial and
agricultural
Real estate (14) (46) (124) (40) (188)
mortgage
Installment (137) (147) (244) (309) (451)
_____ _____ _____ _____ _____
Total charge- (558) (1,033) (1,358) (695) (3,663)
offs _____ ______ ______ _____ ______
Recoveries of loans
previously charged off:
Commercial, 407 267 867 610 356
financial and
agricultural
Real estate - - - 85 -
mortgage
Installment 71 90 130 189 211
___ ___ ___ ___ ___
478 357 997 884 567
___ ___ ___ ___ ___
Net (charge-offs) (80) (676) (361) 189 (3,096)
recoveries ____ _____ _____ ___ ______
Balance at end of $5,696 $5,776 $6,452 $6,823 $6,560
year ===== ===== ===== ===== =====
Net (charge-offs) (0.03)% (0.29)% (0.19)% .11% (1.65)%
recoveries as a
percent of
average loans
outstanding
during the year
Allowance for 1.88% 2.27% 3.19% 4.05% 4.05%
loan losses as a
percent of year-
end loans
</TABLE>
The lack of provision in 1996 and 1995 as well as the decrease in
provision in 1994 and 1993 is the result of reductions in the
level of criticized and non-performing loans, and increased
collection efforts resulting in significant recoveries. The
recovery of provision recorded in 1994 was the result of
reversing an excess allowance at Atlanta just prior to the time
of its sale.
At December 31, 1996, the Bank's internally criticized loans were
$14,084,000 as compared to $19,055,000 at December 31, 1995 and
$17,022,000 at December 31, 1994. Internally criticized loans
declined $4,971,000, or 26.1% from 1995 and while 1995 internally
criticized loans increased somewhat over 1994, as a percent of
total loans there was a decline. Internally criticized loans as
a percent of total loans were 4.6%, 7.5%, and 8.4% for the years
ended 1996, 1995 and 1994, respectively.
Below is an allocation of the allowance for loan losses and the
percentage of loans in each category to total loans. In addition
to an allocation for specific problem loans, each category
includes a portion of the unallocated allowance for loan losses
based on loans outstanding, credit risks, and historical charge-
offs. Notwithstanding the following allocation, the entire
allowance for loan losses is available to absorb charge-offs in
any category of loans.
<TABLE>
<CAPTION>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
December 31,
1996 1995 1994
____ ____ ____
Allowance % (1) Allowance %(1) Allowance % (1)
_________ _____ _________ ____ _________ _____
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, $3,925 61.9% $4,275 5.2% $5,384 66.4%
financial &
agricultural
Real estate, 998 23.5 706 19.6 294 15.3
residental
mortgage
Home equity 79 7.0 208 7.4 220 10.2
Installment, 694 7.6 587 7.8 554 8.1
net
Total $5,696 100.0% $5,776 100.0% $6,452 100.0%
====== ====== ====== ====== ====== ======
1993 1992
____ ____
Allowance % (1) Allowance % (1)
_________ _____ _________ _____
(in thousands)
Commercial, financial
& agricultural $5,957 65.4 $5,616 63.3%
Real estate, residential
mortgage 153 15.7 162 14.7
Home equity 180 12.6 219 14.7
Installment, net 533 6.3 563 7.3
____ ____ ____ ____
Total $6,823 100.0% $6,560 100.0%
===== ====== ====== ======
</TABLE>
Notes:
(1) Percentage of loans in each category to total loans
Deposits
The fundamental source of funds to support lending activities
continues to be the Company's deposit base, which consists of
demand deposits, certificates of deposit, savings, and money
market accounts. The ability of management to attract and retain
depositors is key to sustaining the Company's growth. The
emphasis continues to be on a high level of customer service and
cross-selling of products and services. Total deposits
increased $46,896,000, or 13.1%, from 1995, while average
deposits per banking office have increased from $22,879,000 at
December 31, 1994 to $23,609,000 at December 31, 1995 and to
$26,574,000 at December 31, 1996. The December 31, 1996 average
includes the four new Banking Offices that were opened in 1995
and 1996. Total deposits increased $62,494,000, or 21.2%, from
1994 to 1995. These increases occurred in spite of a generally
declining deposit base in the Monroe County area. The Odessa
Banking Office which was sold in November 1996 had a deposit base
of $9.6 million at time of sale.
Most of the deposit growth occurred in certificates of deposit,
which increased $36,452,000 from $167,488,000 in 1995 to
$203,940,000 in 1996. Certificates of deposit over $100,000
increased $877,000, or 1.4%, while certificates under $100,000
increased $35,575,000, or 33.6%, from 1995 to 1996.
The Bank has experienced increases in non-interest bearing demand
deposits due in large part to accounts established with new loan
relationships, accounts associated with the new banking offices,
and increased public fund relationships. Non-interest bearing
accounts increased $10.1 million, or 21.8%, over 1995 and for the
period ended December 31, 1995 the increase was $8.2 million, or
21.6%, over 1994.
The Company has been taking a number of steps to better position
itself to compete in a market which is experiencing
disintermediation and movement from low-interest bearing accounts
into certificates of deposit. The addition of the three new
community banking offices in 1995 and the fourth in 1996 and
replacement of two existing offices has significantly improved
the Company's retail outlets and has extended services to areas
that it previously could not service effectively. Furthermore,
the extension of automation to the banking office network has
also helped to improve service delivery. The sale of the Odessa
banking office has helped the Company to better allocate its
resources in its primary marketing areas.
The following tables summarize the daily average deposits of the
Company for the years 1996, 1995, and 1994, categories in which
those deposits were held in 1996 and 1995, and the maturity
distribution of certificates of deposit and public funds of
$100,000 or more for the year-end December 31, 1996.
<TABLE>
<CAPTION>
DAILY AVERAGE DEPOSITS
For Years
_________
1996 1995 1994
____ ____ ____
Amount Rate Amount Rate Amount Rate
______ ____ ______ ____ ______ ____
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing $50,114 $40,647 $36,094
demand
Interest-bearing demand 62,820 1.14% 64,452 1.50% 69,810 1.67%
Savings, and money 81,070 2.93% 78,863 3.06% 81,854 2.51%
market
Certificates of deposit 187,426 5.52% 147,401 5.75% 101,441 4.47%
_______ _____ _______ _____ _______ _____
Total deposits $381,430 3.52% $330,855 3.58% $289,199 2.68%
======== ===== ======== ===== ======= =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERIOD END DEPOSITS
For Years
1996 1995
____ ____
(in thousands)
Deposit category:
<S> <C> <C>
Non-interest-bearing $56,111 $46,061
demand
Interest-bearing demand 63,702 67,639
Savings 37,900 38,929
Money market 43,118 37,758
CDs less than $100,000 140,105 105,392
CDs greater than $100,000 33,152 26,105
Public funds less than 1,399 537
$100,000
Public funds greater than 29,284 35,454
$100,000 ______ ______
Total $404,771 $357,875
======= ========
</TABLE>
MATURITY DISTRIBUTION OF CERTIFICATES OF DEPOSITS AND
PUBLIC FUNDS GREATER THAN $100,000
December 31, 1996
Maturity range (in thousands)
less than 3 months $28,682
3 to 6 months 6,734
6 to 12 months 22,218
12 months or more 4,802
Total $62,436
Securities with an amortized cost of $52,427,000 at December 31,
1996 were pledged as collateral for municipal deposits and short-
term borrowing.
Short-Term Borrowings
The following table describes the Company's short-term borrowings
at the dates indicated:
December 31,
1996 1995 1994
____ ____ ____
(In thousands)
Securities sold under
agreements to
repurchase - $4,538 $9,075
Other short-term 786 448 800
borrowing ___ ____ _____
$786 $4,986 $9,875
Total ==== ===== =====
The Bank had no securities sold under agreements to repurchase at
December 31, 1996. The maximum amount outstanding at any one
month-end and average amount for securities sold under agreements
to repurchase were $4,348,000 and $704,000, respectively for 1996
and $9,075,000 and $5,817,000, respectively for 1995 and
$9,075,000 and $1,169,000, respectively for 1994. Interest
expense averaged 5.82% for 1996, 6.17% for 1995 and 4.79% for
1994. An increasing deposit base has lessened the need for
short-term borrowing.
The other short-term borrowing represents the Bank's Note Option
as a Treasury, Tax, and Loan Depository for Federal Tax Deposits.
Securities with a carrying value of $1,970,000 at December 31,
1996 are held under the control of the Federal Reserve Bank of
New York to secure Federal Tax Deposits in amounts in excess of
FDIC insurance limits.
Capital Resources
Total shareholders' equity increased $3,385,000 from 1995. This
increase is primarily due to the net income for 1995 of
$4,133,000 less dividends paid on common stock of $179,000. The
fair value of securities available-for-sale declined $582,000
from 1995. Under SFAS 115, which was adopted in 1993, the net
unrealized gain or loss on securities held in the available-for-
sale portfolio is recorded in equity, net of taxes. In 1995,
this resulted in an increase in shareholder's equity of
$1,631,000 from the period ended December 31, 1994. The SFAS 115
adjustment is not considered in computing regulatory capital.
Both the Federal Reserve Board and the Office of the Comptroller
of the Currency have issued risk-based capital guidelines which
went into full effect December 31, 1992. The Company presently
is deemed well-capitalized under these guidelines.
The numerator of risk-based capital ratios for bank holding
companies includes Tier I capital, consisting of common
shareholders' equity and qualifying cumulative and noncumulative
preferred stock; and Tier II capital, consisting of a menu of
internationally accepted items, including preferred stock,
reserve for loan losses, and certain subordinated and term-debt
capital. The denominator, or asset portion, of the risk-based
ratio aggregates generic classes of balance sheet and off-balance
sheet exposures, each weighted by one of four factors ranging
from 0% to 100%, based on relative risk of the exposure class.
This ratio assesses both the capital adequacy of the Company and
the risk profiles of the Bank.
The prompt corrective action regulations of the Federal Deposit
Insurance Corporation Improvement Act of 1991 (FDICIA)
established specific capital categories based on an institution's
capital ratios. To be considered "adequately capitalized" a bank
must generally have a Leverage Ratio of at least 4%, a Tier I
Risk-Based Capital Ratio of at least 4%, and a total Risk-Based
Capital Ratio of 8%. At December 31, 1996, the Leverage, Tier-I
Risk-Based Capital, and Total Risk-Based Capital Ratios of the
Company and the Bank were as follows:
<TABLE>
<CAPTION>
CAPITAL RATIOS
Tier-I Total
Leverage Risk-Based Risk-Based
Capital Capital Capital
Ratio Ratio Ratio
________ _______ _______
<S> <C> <C> <C>
FNB Rochester Corp. 6.7% 10.0% 11.2%
First National Bank of Rochester 6.6% 9.8% 11.0%
Regulatory guidelines:
Well capitalized 5.0% 6.0% 10.0%
Adequately capitalized 4.0% 4.0% 8.0%
</TABLE>
Maintaining adequate capital ratios is a clearly defined
objective of management. A number of steps have been taken by
management to monitor capital adequacy. This effort becomes
particularly important in light of the growth expectations for
the Bank. An early warning system is part of the Company's
business planning process. In addition to carefully monitoring
performance and its impact on capital ratios, management re-
forecasts the Company's balance sheet, income statement, and
measures of capital adequacy at least quarterly. Furthermore,
each year the entire business plan is revised to reflect actual
results and project another year into the future. These measures
serve to alert management to potential capital adequacy problems
so that appropriate action could be formulated and addressed in
advance.
After a four year suspension, the Company declared a common stock
cash dividend in December 1996. The suspension was based on the
belief of the Company's Board of Directors that until capital was
sufficient to sustain the anticipated growth, earnings should be
retained in the Company to support that growth.
Liquidity
Liquidity measures the ability to meet maturing obligations and
existing commitments, to withstand fluctuations in deposit
levels, to fund operations, and to provide for customers' credit
needs. Management carefully monitors its liquidity position and
seeks to maintain adequate liquidity to meet its needs. All
internal liquidity measures exceed minimum levels established by
the Bank. The fundamental source of liquidity will continue to
be core deposits. Available sources of asset liquidity include
short-term investments, loan repayments, and securities held in
the available-for-sale portfolio. Additionally, the Company has
the ability to pledge securities to secure short-term borrowings.
In the first quarter of 1995, it became a member of the Federal
Home Loan Bank which provides additional source of funding if
needed. At December 31, 1996, the Bank had an available line of
$39.1 million secured by residential mortgages.
The Bank entered into agreements in 1994 through which it could
obtain funds for short-term liquidity needs by selling securities
under agreements to repurchase. These agreements have allowed
the bank to keep a smaller portion of its assets in Federal Funds
Sold and provide a higher return without the necessity of selling
securities from the available-for-sale portfolio in times of
liquidity need. Securities under agreements to repurchase were
only used in the first two months of 1996.
The majority of the Company's assets are held by the Bank.
Dividends and cash advances to the Company from the Bank are
subject to standard regulatory constraints. Based on an analysis
of projected expenses and cash flows, management believes that
the Company has sufficient cash to meet its anticipated cash
obligations.
Asset Liability Management
An objective of the Company's asset/liability management policy
is to maximize current and future net interest income within
acceptable levels of interest rate risk while satisfying
liquidity and capital requirements. The Asset/Liability
Management Committee is responsible for managing interest rate
risks.
The Company uses a variety of methods to manage its interest rate
risk and does not rely solely on one method. One such method
used to manage interest rate risk involves the measurement of
interest rate gap. Interest rate gap is the amount by which a
bank's rate sensitive assets differ from its rate sensitive
liabilities. A positive gap exists when rate sensitive assets
exceed rate sensitive liabilities, indicating that a greater
volume of assets than liabilities will reprice during a given
period. Theoretically, this mismatch will enhance earnings in a
rising rate environment and inhibit earnings when rates decline.
Conversely, when rate sensitive liabilities exceed rate sensitive
assets, the gap is negative, indicating that a greater volume of
liabilities than assets will reprice during the period.
Theoretically, in this case, a rising rate environment will
inhibit earnings and declining rates will enhance earnings. The
Rate Sensitivity Schedule that follows illustrates the
measurement of interest rate gap at December 31, 1996.
<PAGE>
<TABLE>
<CAPTION>
RATE SENSITIVITY SCHEDULE
Over One
One Day Over Three Over Six Year to Over
to Three Months to Months to Five Five
Months Six Months One Year Years Years Total
________ ________ _________ _________ _____ _____
(in thousands)
Interest Earning Assets:
_______________________
<S> <C> <C> <C> <C> <C> <C>
Loans:
Commercial $120,183 $3,258 $6,046 $46,720 $11,916 $188,123
Residential 2,475 1,350 3,665 25,709 41,572 74,771
mortgage
Home equity 21,407 - - - 157 21,564
Consumer 1,931 1,812 3,305 11,990 164 19,202
Total loans 145,996 6,420 13,016 84,419 53,809 303,660
Investment 10,283 7,701 22,291 45,383 17,708 103,366
securities
Interest 2,571 - - 50 - 2,621
bearing
deposits in
Banks and
federal funds
sold
Total interest- $158,850 $14,121 $35,307 $129,852 $71,517 $409,647
earning assets ======== ======= ======= ======== ======= ========
Interest-bearing liabilities:
Savings $144,720 $ $ $ $ $144,720
deposits - - - -
Time deposits 28,682 6,734 22,218 4,802 - 62,436
$100M & over
Other time 11,210 22,018 70,347 37,724 205 141,504
deposits
Short-term
borrowings and 786 - - 210 - 996
long-term debt
Total interest-bearing
Liabilities $185,398 $28,752 $92,565 $42,736 $205 $349,656
======= ====== ====== ====== ==== ========
Net interest $(26,548) $(14,631) $(57,258) $87,116 $71,312 $59,991
rate ========= ======== ========= ======= ====== =======
sensitivity gap
Cumulative gap $(26,548) $(41,179) $(98,437) $(11,321) $59,991
========= ========= ========= ========= =======
Cumulative gap 0.86 0.81 0.68 0.97 1.17
ratio (1) ==== ==== ==== ==== ====
Cumulative gap as
a % of
Total assets (6.06)% (9.40)% (22.48)% (2.59)% 13.70%
======= ======= ======== ======= ======
</TABLE>
Notes:
(1) Cumulative total interest-earning assets divided by
cumulative total interest-bearing liabilities.
As measured by the cumulative sensitivity gap at December 31,
1996, the maturity and repricing of the Company's interest
earning assets and interest bearing liabilities showed a negative
gap in the one year period. NOW, savings and money market
deposits are assigned to one day to three months repricing and
while these deposits can be repriced in that time period they may
react very differently to various interest rate scenarios.
Management does not believe this rate sensitivity schedule
accurately reflects the true interest rate risk of the Company
because changes in interest rates do not affect all categories of
assets and liabilities equally as implied by this schedule. On a
quarterly basis, sensitivity to changes in interest rates is also
measured using a simulation model. The model estimates changes
in net interest income and net income under a variety of possible
interest rate scenarios. By performing these simulations and
comparing them to established policy limits, management has an
opportunity to plan for changes in the asset/liability mix, or to
take other steps that may be necessary to lessen interest rate
risk. Based on management's assumptions built into the
simulation model and the current mix of the Company's assets and
liabilities, managements's assessment is that the Company's net
interest income would not be largely affected by changes in
interest rates, but should a prolonged decline in rates occur,
there would most likely be a decline in net interest income.
These simulations are based on numerous assumptions regarding the
timing and extent of repricing characteristics. Actual results
may differ significantly.
Impact of Inflation
The consolidated financial statements and related consolidated
financial data presented herein have been prepared in accordance
with generally accepted accounting principles, consistently
applied. These principles require the measurement of financial
position and operating results in terms of historical dollars
without considering changes in the relative purchasing power of
money over time due to inflation. The primary impact of
inflation on operations is reflected in increased operating
costs. Unlike most industrial companies, virtually all of the
assets and liabilities of a financial institution are monetary in
nature. As a result, interest rates have a more significant
impact on a financial institution's performance than the effect
of general levels of inflation. Interest rates do not
necessarily move in the same direction or in the same magnitude
as the price of goods and services. Management believes that it
needs to manage the rates, liquidity, and interest sensitivity of
the assets and liabilities to help generate an acceptable return.
New Accounting Pronouncements
SFAS Statement No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities (Statement)
was issued in June 1996 and is applicable to all entities, both
public and non-public. This Statement provides accounting and
reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities based on a consistent
application of a financial-components approach that focuses on
control. It distinguishes transfers of financial assets that are
sales from transfers that are secured borrowings. Under the
financial-components approach, after a transfer of financial
assets, an entity recognizes all financial and servicing assets
it controls and liabilities it has incurred and derecognizes
financial assets it no longer controls and liabilities that have
been extinguished. The financial-components approach focuses on
the assets and liabilities that exist after the transfer. Many
of these assets and liabilities are components of financial
assets that existed prior to the transfer. If a transfer does
not meet the criteria for a sale, the transfer is accounted for
as a secured borrowing with a pledge of collateral. The
Statement is effective for transfers and servicing of financial
assets and extinguishment of liabilities occurring after December
31, 1996, and is to be applied prospectively. Management has
determined that the adoption of this Statement will not have a
material impact on the Company's operating results.
Prior to January 1, 1996, the Company accounted for its stock
option plan in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations. As such,
compensation expense would be recorded on the date of an option's
grant only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, the Company
adopted SFAS No. 123, Accounting for Stock-Based Compensation,
which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of
the grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS
No. 123 had been applied. The Company has elected to continue to
apply the provisions of APB Opinion No. 25 and provide the pro
forma disclosure provisions of SFAS No. 123.
In May 1995, the FASB issued Statement No. 122 entitled
Accounting for Mortgage Servicing Rights. The statement requires
that the cost of originating mortgage loans originated or
purchased with a definite plan to sell the loans and retain the
servicing rights, be allocated between the loans and servicing
rights based on their estimated fair values at the time of the
purchase or origination. The statement also requires that
capitalized loan servicing rights be stratified based on
predominant risk characteristics of the underlying loans for the
purpose of evaluating impairment. An allowance is established in
the event the recorded value of an individual stratum exceeds the
fair value of the right. Based upon management's analysis of the
Company's salable, mortgage loan origination volume, management
has determined the right to service the loans is not material and
therefore has assigned no financial statement value.
In March 1995, the FASB issued Statement No. 121 entitled
Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of. The statement requires that
long-lived assets and certain identifiable intangibles to be held
and used by a company be reviewed for impairment whenever events
or changes in circumstances indicate the carrying amount of the
asset may not be recoverable. In performing the review for
recoverability, companies are required to estimate the future
cash flows expected to result from the use of the asset and its
eventual disposition. Under Statement 121, an impairment loss is
recognized if the sum of the undiscounted future cash flows is
less than the carrying amount of the asset. The statement also
establishes standards for recording an impairment loss for
certain assets that are subject to disposal. Excluded from the
scope of the statement are financial instruments, mortgage and
other loan servicing rights, deposit intangibles and deferred tax
assets. The impact to the Company in 1996 was not material.
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
FNB Rochester Corp.:
We have audited the consolidated statements of financial
condition of FNB Rochester Corp. and subsidiaries as of December
31, 1996 and 1995, and the related consolidated statements of
operations, changes in shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31,
1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of FNB Rochester Corp. and subsidiaries at December 31,
1996 and 1995, and the results of their operations and their cash
flows for each of the years in the three-year period ended
December 31, 1996, in conformity with generally accepted
accounting principles.
January 28, 1997
Rochester, New York
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
December 31, 1996 and 1995
(in thousands, except share data)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Assets:
Cash and due from banks $20,060 $18,662
Interest bearing deposits with 1,121 1,061
other banks
Federal funds sold 1,500 5,200
Securities available-for-sale, at 72,318 73,527
fair value
Securities held-to-maturity (fair
value of $29,305 in 1996 and
29,532 31,780 $31,952 in 1995)
Loans, net of allowance of $5,696
in 1996 and $5,776 in 1995 297,964 248,227
Premises and equipment 9,152 7,255
Accrued interest receivable 3,242 3,579
FHLB and FRB stock 1,516 1,299
Other assets 1,493 730
----- ---
Total assets $437,898 $391,320
======= =======
Liabilities and shareholders' equity
Deposits:
Demand:
Non interest bearing $56,111 $46,061
Interest bearing-NOW 63,702 67,639
Savings and money market 81,018 76,687
Certificates of deposit 203,940 167,488
------- -------
Total deposits 404,771 357,875
Securities sold under agreement to - 4,538
repurchase
Other short-term borrowing 786 448
Accrued interest payable and other
liabilities 2,900 2,613
Long-term debt 210 -
--- -
Total liabilities 408,667 365,474
------- -------
Shareholders' equity:
Common Stock, $1 par value;
authorized
5,000,000 shares; issued and
outstanding 3,571,063 in
3,571 3,569 1996 and 3,568,963 in 1995.
Additional paid in capital 13,035 13,024
Undivided profits 12,357 8,403
Net unrealized gain on securities
available-for-sale, net of taxes 268 850
--- ---
29,231 25,846
------ ------
Total liabilities and
shareholders' equity $437,898 $391,320
======= =======
</TABLE>
See accompanying notes to Consolidated Financial Statements.
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended December 31, 1996, 1995, 1994
(in thousands, except per share data)
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $25,390 $21,810 $16,558
Securities:
Taxable 6,420 6,751 5,835
Tax-exempt 122 99 98
--- -- --
6,542 6,850 5,933
Interest on federal funds sold
and deposits with banks 313 575 521
--- --- ---
Total interest income 32,245 29,235 23,012
------ ------ ------
Interest expense:
Savings, NOW and money market accounts 3,093 3,379 3,216
Certificates of deposit 10,348 8,473 4,531
Short-term borrowings 99 398 80
Long-term debt 19 - 123
-- - ---
Total interest expense 13,559 12,250 7,950
------ ------ -----
Net interest income 18,686 16,985 15,062
Provision for loan losses (recovery) - - (43)
- - ---
Net interest income after provision for
loan losses 18,686 16,985 15,105
------ ------ ------
Non-interest income:
Service charges on deposit accounts 1,547 1,209 1,219
Credit card fees 740 648 532
Gain on sale of mortgages 65 40 11
Gain (loss) on sale of securities (45) 33 -
available-for-sale
Loan servicing fees 263 283 319
Gains on sale of subsidiary & banking 621 - 380
offices
Other operating income 616 427 324
--- --- ---
Total non-interest income $3,807 $2,640 $2,785
----- ----- -----
(Continued)
</TABLE>
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARIES
Consolidated Statements of Operations continued
Years Ended December 31, 1996, 1995, and 1994
(in thousands, except for per share data)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Non-interest expense:
Salaries and employee benefits $9,227 $8,238 $7,975
Occupancy 3,448 2,812 2,871
Marketing and public relations 489 624 776
Office supplies, printing and 637 576 542
postage
Processing fees 1,018 979 902
F.D.I.C. assessments 2 350 657
Net cost of operation of other real 2 (14) 311
estate
Legal 190 267 397
Other 1,637 1,745 1,805
----- ----- -----
Total non-interest expense 16,650 15,577 16,236
------ ------ ------
Income before income taxes 5,843 4,048 1,654
Income tax expense (benefit) 1,710 1,194 (283)
----- ----- ----
Net income $4,133 $2,854 $1,937
===== ===== =====
Net income per common share - $1.16 $0.80 $0.58
primary ==== ==== ====
</TABLE>
See accompanying notes to Consolidated Financial Statements.
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity
Years Ended December 31, 1996, 1995 and 1994
(in thousands except per share data)
<TABLE>
<CAPTION>
Net
Unrealized
Gain
(Loss)
Additional Un- Securities
Common Paid in divided Available-
Stock Capital Profits For-Sale Total
------ ---------- ------- ---------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, $2,003 $7,340 $3,612 $723 $ 13,678
1993
Net income - - 1,937 - 1,937
Subordinated capital
notes converted to
1,566 5,683 - - 7,249 common stock
Change in fair value of
securities - - - (1,504) (1,504)
available-for-sale, net - - - -----
of taxes of $503 -----
Balance at December 31, $3,569 $13,023 $5,549 $(781) $21,360
1994
Net income - - 2,854 - $2,854
Option shares issued - 1 - - 1
Change in fair value of
securities available- - - - 1,631 1,631
for-sale, net of taxes - - - -----
of $576 ----
Balance at December 31, $3,569 $13,024 $8,403 $850 $25,846
1995
Net income - - 4,133 - 4,133
Common stock cash
dividend - $.05 per - - (179) - (179)
share
Option shares issued 2 11 - - 13
Change in fair value of
securities available- - - - (582) (582)
for-sale, net of taxes ---
of $397 ---
Balance at December 31, $3,571 $13,035 $12,357 $268 $29,231
1996 ===== ====== ====== === ======
</TABLE>
See accompanying notes to Consolidated Financial Statements.
<PAGE>
FNB ROCHESTER CORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $4,133 $2,854 $1,937
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses (recovery) - - (43)
Depreciation and amortization 1,449 1,208 1,004
Amortization of goodwill 79 238 248
Deferred income taxes (78) 301 (637)
(Gain) loss on sales of securities
available-for-sale 45 (33) -
Gain on sale of subsidiary and (621) - (380)
banking offices
(Increase) decrease in mortgage
loans held for sale, net 550 (880) 3,127
Increase (decrease) in accrued 331 (420)
(488) interest receivable
(Increase) decrease in other assets (465) 127 1,760
Increase in accrued interest
payable and other liabilities 175 555 300
--- --- ---
Net cash provided by operating
activities 5,598 3,950 6,828
----- ----- -----
Cash flow from investing activities:
(Increase) decrease in interest-
bearing deposits - 77 (2)
Securities available-for-sale:
Purchase of securities (29,987) (17,272) (15,464)
Proceeds from maturities 19,857 17,483 8,668
Proceeds from sales 10,097 11,027 5,815
Securities held-to-maturity:
Purchase of securities (2,891) (15,545) (10,854)
Proceeds from maturities 5,139 2,223 7,839
Loan origination and principal (51,375) (51,362) (45,252)
collection, net
Payment made for sale of subsidiary (7,855) - (16,774)
and banking offices
(3,377) (3,545) (2,238) Capital expenditures, net
- - (360) Decrease in other assets
- - ---
Net cash used by investing
$(60,392) $(56,914) $(68,622) activities
------ ------ ------
</TABLE>
<PAGE>
FNB ROCHESTER CORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
Years ended December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing
activities:
Net increase in demand, savings
NOW, and money market accounts $16,125 $6,036 $814
Certificates of deposit 40,404 56,458 41,803
accepted and repaid, net
Increase (decrease) in short- (4,200) (4,889) 9,875
term borrowings
Increase in long-term debt 210 -
Exercise of option to purchase 13 1 -
common stock -- - -
Net cash provided by financing 52,552 57,606 52,492
activities ------ ------ ------
Increase (decrease) in cash
and cash (2,242) 4,642 (9,302)
equivalents
Cash and cash equivalents at
beginning of 23,923 19,281 28,583
year ------ ------ ------
Cash and cash equivalents at $21,681 $23,923 $19,281
end of year ====== ====== ======
Supplemental disclosure of non-cash
investing and financing activities:
Additions to other real estate
acquired through foreclosure,
or deed in lieu of
foreclosure, net of loans to $45 - -
facilitate sale and writedowns
Transfer of securities from
held-to- maturity to
- $34,539 - securities available-for-sale
Conversion of subordinated
notes to common stock - - $7,249
</TABLE>
The Company paid cash during 1996, 1995, and 1994 for income
taxes and interest as follows (in thousands):
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<C> <C> <C>
Interest $13,553 $11,949 $8,036
Income 1,335 910 555
taxes
</TABLE>
See accompanying notes to Consolidated Financial Statements
<PAGE>
FNB Rochester Corp. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996, 1995, and 1994
(1) Summary of Significant Accounting Policies
Business
FNB Rochester Corp. (the Company) provides a full range of
banking and trust services to individual and corporate customers.
The Company generates interest income by accepting deposits and
investing those deposits, together with funds from borrowings and
ongoing operations in a variety of loans and investment
securities. The most significant source of revenue for the
Company is net interest income - the difference between interest
income earned on loans and investments and interest expense
incurred on deposits and borrowings. The Company, operating
primarily in western New York, is headquartered in Rochester, New
York, the third largest city in the state. The Company is subject
to competition from other financial institutions. The Company is
subject to the regulations of certain federal agencies and
undergoes periodic examinations by those regulatory authorities.
Basis of Presentation
The Company operates as a bank holding company. In 1996 its only
subsidiary was First National Bank of Rochester (First National).
Prior to its sale on April 1, 1994, the Company also owned
Atlanta National Bank (Atlanta). The consolidated financial
statements include the accounts of the Company and its wholly-
owned subsidiaries, First National and Atlanta (through its sale
date), (the Banks). All material intercompany accounts and
transactions have been eliminated. The financial statements
have been prepared in conformity with generally accepted
accounting principles and conform with predominate practices
within the banking industry. In preparing these financial
statements, management of the Company has made a number of
estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
Securities
Securities are classified into three categories: held-to-
maturity, trading and available-for-sale. The Company classifies
its debt securities as either available-for-sale or held-to-
maturity, as the Company does not hold any securities considered
to be trading. Held-to-maturity securities are those that the
Company has the ability and intent to hold until maturity.
Available-for-sale securities are recorded at fair value. Held-
to-maturity securities are recorded at amortized cost.
Unrealized holding gains and losses, net of related taxes, on
available-for-sale securities are excluded from earnings and are
reported as a separate component of shareholders' equity until
realized. Transfers of securities between categories are
recorded at fair value at the date of transfer.
A decline in the fair value of any security below cost that is
deemed other than temporary is charged to earnings resulting in
the establishment of a new basis for the security.
Premiums and discounts are amortized or accredited over the life
of the related held-to-maturity security as an adjustment to
yield using the interest method. Dividend and interest income
are recognized when earned. Realized gains and losses for
securities sold are determined using the specific identification
method.
The Company's investments in Federal Home Loan Bank (FHLB) and
Federal Reserve Bank (FRB) are required by law and are carried at
cost in the consolidated statement of condition. The Company's
disposition of these securities is restricted by agreements with
the FHLB and FRB.
<PAGE>
Loans
Loans are stated at the principal amount outstanding, net of
deferred loan origination fees and costs which are accrued to
income based on the interest method. The Company originates some
residential mortgage loans with the intent to sell. These loans
are carried at the lower of aggregate cost or fair value as
determined by outstanding commitments from investors or, in the
absence of such commitments, the current investor yield
requirements calculated on an aggregate basis.
The accrual of interest on commercial loans is discontinued and
previously accrued interest is reversed when the loans become 90
days delinquent or earlier if, in management's judgment, the
collection of principal and interest is uncertain. Recognition of
interest income on non-accrual loans does not resume until
management considers principal and interest collectible.
Installment loans are generally charged-off upon becoming 120
days past due. Residential mortgage loans are reduced to the
fair value of the underlying collateral, as applicable, upon
becoming 180 days past due. Fair value is the amount that would
reasonably be anticipated in a current sale in which the buyer
and seller are each acting prudently, knowledgeably, and under no
necessity to buy or sell.
The Company services residential mortgage loans for the Federal
Home Loan Mortgage Corporation (Freddie Mac), and earns servicing
fees, which are recognized when payments are received, based upon
the outstanding principal balance of the loans. The cost of
originating these loans is attributed to the loans and is
considered in the calculation of the gain or loss on sale of the
loans. Due to their immateriality, the right to service the
loans is assigned no financial statement value.
Allowance for Loan Losses
The Company provides for loan losses by a charge to current
operations to bring the allowance to an appropriate level
considering the character of the loan portfolio, economic
conditions, analysis of specific loans, and historical loss
experience. While management uses available information to
recognize losses on loans, future additions to the allowance may
be necessary based on changes in economic conditions. In
addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Company's
allowance for losses on loans. Such agencies may require the
Company to recognize additions to the allowance based on their
judgments about information available to them at the time of
their examination.
Impairment losses are included in the reserve for loan losses
through a charge to the provision for loan losses. Management
considers a loan to be impaired if, based on current information,
it is probable that the Company will be unable to collect all
scheduled payments of principal or interest when due according to
the contractual terms of the loan agreement. When a loan is
considered to be impaired, the amount of the impairment is
measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price of the
fair value of collateral if the loan is collateral dependent.
Management excludes large groups of smaller balance homogeneous
loans such as residential mortgages and consumer loans which are
collectively evaluated.
When a loan is impaired and the future repayment of the recorded
balance is doubtful, interest payments received are applied to
principal and no interest income is recognized. If the recorded
loan balance is expected to be paid, interest income is
recognized on a cash basis.
Premises and Equipment
Premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is provided on the
straight-line method over the estimated useful lives of the
assets. Amortization of leasehold improvements is provided over
the lesser of the term of the lease or the estimated useful lives
of the improvements.
The estimated useful lives of the Company's premises and
equipment are as follows:
Buildings and improvements 5 - 40 years
Furniture, fixtures, and equipment 3 - 7 years
Leasehold improvements 3 - 20 years
Vehicles 2 - 5 years
Other Real Estate Owned
Real estate acquired through foreclosure or deed in lieu of
foreclosure is carried at the lower of the cost or fair value
less estimated costs to dispose. Fair value is determined on an
asset by asset basis, primarily through independent third party
appraisals. Adjustments to the carrying values of such
properties resulting from subsequent declines in fair value are
charged to operations in the period in which the declines occur.
These adjustments, the net expense of operating other real estate
owned and gains and losses on disposition of other real estate
owned are included in net cost of operation of other real estate
expense. Other real estate owned is included in other assets on
the accompanying consolidated statements of financial condition.
Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis and operating loss and
tax credit carry forwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock
option plan in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations. As such,
compensation expense would be recorded on the date of an option's
grant only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, the Company
adopted SFAS No. 123, Accounting for Stock-Based Compensation,
which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of
the grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS
No. 123 had been applied. The Company has elected to continue to
apply the provisions of APB Opinion No. 25 and provide the pro
forma disclosure provisions of SFAS No. 123.
Pension Plan
First National sponsors a non-contributory defined benefit
pension plan covering substantially all of its employees.
Benefits are based upon years of service and the employee's
average compensation. Average compensation is determined by the
average of the highest five consecutive years of service. The
cost of this plan is being funded currently.
First National's policy is to contribute amounts to the plan
sufficient to meet the minimum funding requirements set forth in
the Employee Retirement Income Security Act of 1974, plus such
additional amounts, subject to IRS limitations, as the Bank may
determine to be appropriate from time to time.
Trust Department Income
Assets held in a fiduciary or agency capacity for customers are
not included in the accompanying consolidated statements of
financial condition, since such assets are not assets of the
Company. Fee income is recognized on the cash method. At
December 31, 1996 the market value of the assets under management
was $64,585,000.
Per Share Data
Per share data is based upon the weighted average number of
common shares and equivalents (stock options) outstanding during
each year. Fully diluted per share data is not presented as
potentially dilutive securities dilute earnings per share by less
than 3 percent or are antidilutive. The weighted average number
of shares and equivalents outstanding during 1996, 1995 and 1994
amounted to 3,570,159; 3,568,759 and 3,311,234, respectively.
Cash Equivalents
For the purpose of reporting cash flows, cash and cash
equivalents include cash on hand, unrestricted amounts due from
banks, and federal funds sold.
(2) Securities
On November 15, 1995, the Financial Accounting Standards Board
(FASB) published a special report A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and
Equity Securities. This guidance included a provision that
allowed institutions a one-time opportunity to reclassify (at
fair value) held-to-maturity securities without calling into
question their intent to hold other debt securities to maturity
in the future. Under this provision the Company transferred
securities with an amortized cost of $34,539,000 (fair value
$35,312,000) from held-to-maturity to available-for-sale in
December 1995.
The aggregate amortized cost and fair value of securities
available-for-sale and securities held-to-maturity at December
31, 1996 and 1995 follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
____ ____
Amortized Fair Amortized Fair
Cost Value Cost Value
----- ----- ------- -----
Securities available-for-sale:
<C> <C> <C> <C>
U.S. Treasury $23,286 $23,576 $43,199 $44,123
U.S. Government agency 10,003 9,967 5,690 5,698
Mortgage-backed 38,582 38,775 23,212 23,706
securities ------ ------ ------ ------
Total 71,871 72,318 72,101 73,527
====== ====== ====== ======
Securities held-to-maturity:
U.S. Treasury 8,108 8,024 7,145 7,234
U.S. Government agency 5,293 5,222 6,359 6,343
Mortgage-backed 12,909 12,834 15,509 15,591
securities
Obligations of state
and municipal 2,872 2,875 2,417 2,434
subdivisions
Other securities 350 350 350 350
Total $29,532 $29,305 $31,780 $31,952
====== ====== ====== ======
</TABLE>
Securities with an amortized cost of $52,427,000 and $77,991,000
at December 31, 1996 and 1995, respectively were pledged as
collateral for municipal deposits and to secure short term
borrowings.
<PAGE>
Gross unrealized gains and losses on securities available-for-
sale and securities held-to-maturity at December 31, 1996 and
1995 follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
____ ____
Unrealized Unrealized Unrealized Unrealized
Gains Losses Gains Losses
---- ------ ----- ------
<S> <C> <C> <C> <C>
Securities available-
for-sale:
U.S. Treasury $290 $ - $933 $9
U.S. Government 53 89 28 19
agency
Mortgage-backed 426 233 498 5
securities --- --- --- -
Total $769 $322 $1,459 $33
=== === ===== ==
Securities held-to-maturity:
U.S. Treasury $31 $115 $89 $ -
U.S. Government agency - 71 19 35
obligations
Mortgage-backed 76 151 144 62
securities
Obligations of state
and municipal
11 8 24 7 subdivisions
-- - -- -
Total $118 $345 $276 $104
=== === === ===
</TABLE>
The amortized cost of securities by contractual years to maturity
as of December 31, 1996 are as follows
(in thousands):
<TABLE>
<CAPTION>
10 Years
Under 1 1 to 5 5 to 10 and
Year Years Years Over Total
---- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
Securities available-
for-sale
U.S. Treasury $8,071 $15,215 $ - $ - $23,286
U.S. Government agency - 2,270 4,990 2,743 10,003
obligations
Mortgage-backed 269 - 116 38,197 38,582
securities --- - --- ------ ------
Total $8,340 $17,485 $5,106 $40,940 $71,871
===== ====== ===== ====== ======
Securities held-to-
maturity
U.S. Treasury $ - $8,108 $ - $ - $8,108
U.S. Government agency - 5,000 - 293 5,293
obligations
Mortgage backed - 9,586 - 3,323 12,909
securities
Obligations of state
and municipal
subdivisions 2,048 426 83 315 2,872
Other securities - 300 50 - 350
- --- -- - ---
Total $2,048 $23,420 $133 $3,931 $29,532
===== ====== === ===== ======
</TABLE>
<PAGE>
The fair value of securities by contractual years to maturity as
of December 31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
Under 1 1 to 5 5 to 10 10 Years
Year Years Years and Over Total
---- ----- ----- ------- -----
<S> <C> <C> <C> <C> <C>
Securities available-
for-sale
U.S. Treasury $8,114 $15,462 $ - $ - $23,576
U.S. Government - 2,245 5,003 2,719 9,967
agency obligations
Mortgage-backed 268 - 116 38,391 38,775
securities --- - --- ------ ------
Total $8,382 $17,707 $5,119 $41,110 $72,318
===== ====== ===== ====== ======
Securities held-to-
maturity
U.S. Treasury $ - $8,024 $ - $ - $8,024
U.S. Government - 4,929 - 293 5,222
agency obligations
Mortgage backed - 9,445 - 3,389 12,834
securities
Obligations of state
and municipal
subdivisions 2,048 432 81 314 2,875
Other securities - 300 50 - 350
- --- -- - ---
Total $2,048 $23,130 $131 $3,996 $29,305
===== ====== === ===== ======
</TABLE>
The following table presents the total proceeds from sales of
securities available-for-sale for 1996, 1995 and 1994 and the
gross realized gains and losses (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Proceeds from sales $10,097 $11,027 $5,815
------ ------ =====
Gains 2 72 5
Losses (47) (39) (5)
--- --- ---
Net $(45) $33 $ -
==== == =
</TABLE>
<PAGE>
(3) Loans
The major classifications of loans at December 31, 1996 and 1995
follow (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Commercial $187,721 $165,645
Residential 70,933 49,009
mortgage
Residential mortgage loans 330 880
held for sale
Home equity 21,297 18,773
Other consumer 23,153 19,711
------ ------
Total 303,434 254,018
Net deferred loan costs (fees) 226 (15)
Allowance for loan losses (5,696) (5,776)
------ ------
Loans, net $297,964 $248,227
======= =======
</TABLE>
Interest and fees on loans follow (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------
1996 1995 1994
----- ---- ----
<S> <C> <C> <C>
Commercial $16,988 $15,200 $11,391
Residential 4,578 3,009 2,275
mortgage
Home equity 1,887 1,976 1,667
Other consumer 1,937 1,325 1,225
----- ----- -----
$25,390 $21,810 $16,558
====== ====== ======
</TABLE>
The Company considers its primary service and marketing area to
be the New York State city of Rochester and its surrounding
towns. The Company also has two full service banking offices in
the Elmira area and offices, in both Syracuse and Buffalo, which
provide services primarily to professional and business
customers. Substantially all of the Company's outstanding loans
are with borrowers living or doing business within these areas.
The Company's concentrations of credit risk are disclosed in the
above loan classifications. Other than general economic risks,
management is not aware of any material concentrations of credit
risk to any industry or individual borrower.
Loans serviced for others amounting to $104,494,000 and
$107,642,000 at December 31, 1996 and 1995, respectively are not
included in the consolidated financial statements. Custodial
accounts held by First National for these loans amounted to
$2,182,000 and $2,309,000 at December 31, 1996 and 1995,
respectively.
The Company has an available line of credit with the FHLB of New
York, which at December 31, 1996 amounted to approximately
$39,152,000. The amount available under the line varies
according to a formula which considers the amount of FHLB stock
held by the Company, the Company's FHLB borrowings outstanding,
the Company's total assets, and the net worth of the FHLB of New
York. At December 31, 1996, the Company pledged residential
mortgages with a carrying value of $57,885,000 as collateral for
this line of credit.
<PAGE>
(4) Allowance for Loan Losses
A summary of the changes in the allowance for loan losses follows
(in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $5,776 $6,452 $6,823
Provision (recovery) charged - - (43)
to operating expense
Reclassification of impairment - - 210
reserves
Allowance of subsidiary sold - - (177)
- - ---
5,776 6,452 6,813
----- ----- -----
Loans charged off
Commercial (407) (840) (990)
Residential mortgage (14) (46) (124)
Home equity (5) - (31)
Other consumer (132) (147) (213)
---- ---- ----
Total loans charged off (558) (1,033) (1,358)
---- ------ ------
Recoveries of loans charged
off
Commercial 407 267 867
Residential mortgage - - -
Home equity 3 6 7
Other consumer 68 84 123
-- -- ---
Total recoveries of loans 478 357 997
charged off --- --- ---
Balance at end $5,696 $5,776 $6,452
of year ===== ===== =====
</TABLE>
The principal balance of loans not accruing interest totaled
$1,419,000 and $1,665,000 at December 31, 1996 and 1995
respectively. The effect of non-accrual loans on interest income
for the years ended December 31, 1996, 1995, and 1994 was
$48,000, $67,000 and $88,000 respectively. Other real estate
owned amounted to $45,000 at December 31, 1996 and there was no
other real estate owned at December 31, 1995.
At December 31, 1996 and 1995, the recorded investment in loans
that are considered to be impaired totaled $2,337,000, and
$245,000, respectively, and the impairment allowance associated
with these loans is $38,000 for 1996. There is no impairment
allowance associated with the 1995 recorded investment. The
average recorded investments in impaired loans during the twelve
months ended December 31, 1996 and 1995 was approximately
$913,000 and $1,150,000, respectively.
For the twelve months ended December 31, 1996, the Company
recognized $77,000 interest income on the impaired loans and
$35,000 was recognized on impaired loans in 1995.
<PAGE>
(5) Premises and Equipment
A summary of premises and equipment follows (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------
1996 1995
---- ----
<S> <C> <C>
Land $587 $378
Building and improvements 2,098 1,659
Furniture, fixtures, 8,739 7,242
equipment and vehicles
Leasehold 5,199 4,490
improvements ----- -----
16,623 13,769
Less accumulated depreciation 7,471 6,514
and amortization 7,471 6,514
----- -----
Premises and equipment, net $9,152 $7,255
===== =====
</TABLE>
Depreciation and amortization expense for the years ended
December 31, 1996, 1995 and 1994 was $1,449,000, $1,208,000 and
$982,000, respectively.
(6) Certificates of Deposit
Certificates of deposit of $100,000 or more amounted to
$62,436,000 at December 31, 1996 and $61,559,000 at December 31,
1995. Interest expense on certificates of deposit of $100,000 or
more was $3,225,000 in 1996, $2,457,000 in 1995 and $719,000 in
1994.
At December 31, 1996, the scheduled maturities of all
certificates of deposits are as follows (in thousands):
Year Amount
---- ------
1997 $161,209
1998 24,045
1999 9,418
2000 5,654
2001 and 3,614
thereafter
Total $203,940
=======
(7) Securities Sold Under Agreements to Repurchase
The Company had short term borrowings of $786,000 and $4,986,000
at December 31, 1996 and 1995 respectively. The December 31, 1995
balance included $4,538,000 of securities sold under agreement to
repurchase, with a maturity date of January 29, 1996 and a rate
of 5.85%. There were no securities sold under agreement to
repurchase at December 31, 1996. The maximum amount outstanding
at any one month-end and average amount for securities sold under
agreements to repurchase were $4,348,000 and $704,000
respectively for 1996 and $9,075,000 and $5,817,000 respectively
for 1995. Interest expense averaged 5.82% for 1996, 6.17% for
1995 and 4.79% for 1994.
(8) Subordinated Capital Notes
On March 2, 1994, the 10% subordinated capital notes were
converted to common stock of the Company, increasing the
Company's common shares outstanding by 1,566,325 and equity by
$7,249,000.
Interest expense on the subordinated capital notes amounted to
$123,000 for 1994.
(9) Income Taxes
Total income taxes for the years ended December 31, 1996, 1995
and 1994 were allocated as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income from operations $1,710 $1,194 $(283)
Stockholders' equity, change in
unrealized gain (loss)
on securities available-for-sale (397) 576 (503)
$1,313 $1,770 $(786)
===== ===== =====
</TABLE>
For the years ended December 31, 1996, 1993 and 1994, income tax
expense (benefit) attributable to income from operations consists
of (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $1,648 $892 $353
State 140 1 1
--- - -
1,788 893 354
----- --- ---
Deferred:
Federal (335) 301 (637)
State 257 - -
--- - -
(78) 301 (637)
--- --- ----
$1,710 $1,194 $(283)
===== ===== ====
</TABLE>
<PAGE>
The reconciliation of the statutory federal income tax rate with
the actual effective tax rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory rate 34.0% 34.0% 34.0%
Increases (decreases)
attributable to:
Change in the beginning of the year
valuation allowance for deferred
tax assets allocated
to income
tax expense (11.0) (10.0) (59.0)
State taxes, net of federal
benefit 5.0 1.0 1.0
Other items, net 1.0 4.0 7.0
--- --- ---
29.0% 29.0% (17.0)%
===== ===== ======
</TABLE>
The significant components of deferred tax expense (benefit)
attributable to income from continuing operations at December 31,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Deferred tax expense $582 $713 $354
(benefit)
Increase (decrease) in
valuation allowance for
(660) (412) (991) deferred tax assets
Net deferred tax expense $(78) $301 $(637)
(benefit) ==== === ====
</TABLE>
<PAGE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1996, and 1995 are presented below
(in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses - $2,284 $2,333
financial statements
Interest on non accrual loans 111 109
Premises and equipment-
principally due to
88 141 depreciation
Mortgage recording tax credit - 257
carry forwards
Reserve for abandoned 121 151
lease
Accrued salaries and 109 119
benefits
Other 44 151
-- ---
Gross deferred assets 2,757 3,261
Less valuation (1,245) (1,905)
allowance ------ ------
Net deferred tax 1,512 1,356
assets ---- -----
Deferred tax liabilities:
Allowance for loan (722) (750)
losses - tax
Net unrealized gain on
securities available-
(179) (576) for-sale
Bond discount (97) (82)
Net deferred loan origination (91) -
costs
Total gross deferred (1,089) (1,408)
liabilities ------ ------
Net deferred tax $423 $(52)
asset (liability) === ===
</TABLE>
The net change in the total valuation allowance for the years
ended December 31, 1996, 1995 and 1994 were decreases of
$660,000, $730,000 and $673,000 respectively.
Realization of deferred tax assets is dependent upon the
generation of future taxable income or the existence of
sufficient taxable income within the carryback period. A
valuation allowance is provided when it is more likely than not
that some portion of the deferred tax assets will not be
realized. In assessing the need for a valuation allowance,
management considers the scheduled reversal of the deferred tax
liabilities, the level of historical taxable income, and
projected future taxable income over the periods in which the
temporary differences comprising the deferred tax assets will be
deductible. Based upon the level of historical taxable income
and projections for future taxable income over the periods which
the deferred tax assets are deductible, management believes it is
more likely than not the Company will realize the benefits of
these deductible differences, net of the existing valuation
allowance of $1,245,000 at December 31, 1996.
(10) Shareholders' Equity
On December 17, 1996, the Company declared a dividend of $.05 per
share for payment January 31, 1997 to shareholders' of record
January 15, 1997. No dividends were declared or paid in 1995 or
1994 by the Company. Payment of dividends by First National to
the Company is limited or restricted in certain circumstances.
According to federal banking law, the approval of the Office of
the Comptroller of the Currency (OCC) is required for the
declaration of dividends by a bank in any year in which the
dividend declared will exceed the total of net income for that
year plus any retained income for the preceding two years.
Dividends approximating $8,757,000 are available from First
National at December 31, 1996 without the approval of the OCC.
(11) Stock Option Plans
The Company has two stock option plans. A plan adopted in 1992
(amended May 28, 1996) for employees, authorizes grants of
options to purchase up to 325,000 shares of its authorized but
unissued common stock. The second plan is a 1995 Non-employee
Director Stock Option Plan which was approved by shareholders on
May 28, 1996 and authorizes grants of options to purchase up to
25,000 shares of its authorized but unissued common stock. Stock
options are granted with an exercise price equal to the stock's
fair market value at the date of the grant. All stock options
have ten year terms and, with the exception of a 1992 grant of
options for 75,000 shares, all stock options vest at 50% per year
and become fully vested after two years. The 1992 grant vests at
20% per year and is fully vested after five years.
The Company applies APB Opinion No. 25 in accounting for its
Plans and, accordingly, no compensation cost has been recognized
for its stock options in the financial statements.
The fair value of each option grant is estimated on the date of
grant using an option-pricing model with the following weighted-
average assumptions used for grants in 1996: dividend yield of
.14 percent, risk-free interest rate of 6.1 percent, expected
volatility of 40 percent, and an expected lives of 8.8 years. For
accounting purposes there were no option grants in 1995 as the
Company's 1995 option grants were subject to shareholder approval
in 1996 and were therefore required to be included with the 1996
option grants.
Had the Company determined compensation cost based on the fair
value at the grant date for its options under SFAS No. 123, the
Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
Year ended December 31
(net income in thousands)
1996
----
Net As reported $4,133
income Pro forma 3,831
Primary As reported 1.16
Per Pro forma $1.07
share
Pro forma net income and earnings per share reflect only options
granted in 1996. Therefore, the full impact of calculating
compensation cost for stock options under SFAS No. 123 is not
reflected in the pro forma net income amounts presented above
because compensation cost is reflected over the options' vesting
period and compensation cost for options granted prior to January
1, 1996 is not considered.
<PAGE>
A summary of the status of the Company's two fixed stock option
plans as of December 31, 1996, 1995 and 1994 and changes during
the years ended on those dates is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding
at beginning 223,100 6.59 225,000 6.59 172,00 6.59
of year 0
Granted 98,750 8.88 - - 53,000 5.69
Exercised 2,100 6.01 250 5.69 - -
Forfeited 900 7.15 1,650 5.96 - -
--- ----- -
Outstanding 318,850 7.28 223,100 6.59 225,00 6.59
at end of ======= ======= 0
year ======
=
Options
exercisable
244,350 167,150 93,500 at year end
Weighted-
average fair
value of
options
granted
during the 5.11 - n/a
year
</TABLE>
The following table summarizes information about fixed stock
options outstanding at December 31, 1996
<TABLE>
<CAPTION>
Options Options
Outstanding Exercisable
Weighted-
Avg Weighted- Weighted-
Range of Number Remaining Avg Number Avg
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 12/31/96 Life Price at 12/31/96 Price
-------- ----------- ----------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
$5.63 - 8.32 298,100 6.8 $6.95 244,350 $6.74
9.75 - 12.75 20,750 9.9 12.39 - -
------------- ------ ----- - -
$5.63 - 12.75 318,850 7.0 $7.30 244,350 $6.74
============= ======= === ======= ====
</TABLE>
<PAGE>
(12) Leases
The Company leases certain buildings and office space under
operating lease arrangements. Rent expense under these
arrangements amounted to $1,110,000 in 1996, $776,000 in 1995 and
$1,051,000 in 1994. Included in rent expense for 1994 is an
accrual for abandoned lease property amounting to $448,000. Real
estate taxes, insurance, maintenance, and other operating
expenses associated with the buildings and office space are
generally paid by the Company. A summary of non-cancelable long-
term operating lease commitments as of December 31, 1996 follows
(in thousands):
Year Ending December 31,
Year Amount
---- ------
1997 $965
1998 965
1999 1,006
2000 1,017
2001 1,047
After 2001 10,533
------
Total $15,533
======
(13) Commitments and Contingencies
In the normal course of business there are various outstanding
commitments to extend credit which are not reflected in the
accompanying consolidated financial statements. Because many
commitments and almost all letters of credit expire without being
funded in whole or in part, the contract amounts are not
estimates of actual future cash flows. Loan commitments have
off-balance sheet credit risk, because only origination fees are
recognized in the balance sheet, until the commitments are
fulfilled or expire. The credit risk amounts are equal to the
contractual amounts, assuming that the amounts are fully advanced
and collateral or other security is of no value. The Company's
policy generally requires customers to provide collateral,
usually in the form of customers' operating assets or property,
prior to the disbursement of approved loans. The contract
amounts of these commitments at December 31, 1996 and 1995 are
set forth in the table below (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
Fixed Rate Variable Rate Fixed Rate Variable Rate
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Commercial - 3,189 - 2,503
letters of credit
Commercial lines 12,535 64,346 789 38,168
of credit
Other loan 7,546 9,313 8,226 27,484
commitments
</TABLE>
For substantially all commercial lines of credit, First National
evaluates each customer's creditworthiness annually. Since many
of the line of credit commitments are never drawn upon, the total
commitment amounts do not necessarily represent future cash
flows. Other loan commitments include lines of credit for home
equity loans, overdraft protection, and credit cards as well as
commitments to extend new loans.
First National is required to maintain average reserve balances
with the Federal Reserve Bank. The average amount of such
reserve balances for the year ended December 31, 1996 and 1995
was approximately $557,000 and $81,000. Interest bearing deposits
with other banks are substantially restricted by balance
agreements.
<PAGE>
Because the Bank's business involves the deposit, collection, and
transfer of checks and similar negotiable instruments and the
collection of loans and enforcement of security interests,
mortgages, and other liens, the Bank is plaintiff or defendant in
various legal proceedings which may be considered as arising in
the ordinary course of business. In the opinion of management,
after consultation with counsel handling all such litigation,
there are no legal proceedings now pending by or against the Bank
or the Company, the outcome of which are expected to have a
material effect on their businesses, business properties, or
financial condition.
(14) Employee Benefit Plans
The following table sets forth (in thousands) the defined benefit
plan's actuarially determined funded status and amounts
recognized in the Company's consolidated financial statements:
<TABLE>
<CAPTION>
December 31
-----------
1996 1995
---- ----
<S> <C> <C>
Actuarial present value of accumulated
benefit obligation,
including vested benefits of $416 and $558 $376
$262 === ===
Actuarial present value of projected
benefit obligation for service
1,022 726 rendered to date
Less plan assets at fair value -
primarily listed common stock,
U.S. Government and agency securities, 757 475
and collective funds --- ---
Projected benefit obligation in excess 265 251
of plan assets
Unrecognized net gain (loss) from past
experience different
from that assumed and effects of changes
(19) (120) in assumptions
Unrecognized prior service cost 5 5
- -
Accrued pension cost included in other $251 $136
liabilities === ===
</TABLE>
Net pension cost included the following components (in
thousands):
<TABLE>
<CAPTION>
Years Ended
December 31
---------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits earned $368 $250 $311
during the period
Interest cost on projected 54 24 8
benefit obligation
Actual return on plan assets (21) (9) 19
Net amortization and deferral (16) (20) (24)
--- ---- ---
Net periodic pension cost $385 $245 $314
=== === ===
</TABLE>
Assumptions used in determining pension data for 1996, 1995, and
1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate for benefit 8.00% 7.50% 8.00%
obligations
Rate of increase in 5.00% 5.00% 4.00%
compensation levels
Expected long-term rate of 8.50% 8.50% 8.50%
return on assets
</TABLE>
First National sponsors a 401(k) plan covering substantially all
employees. First National matched eligible employee
contributions to the 401(k) plan up to a maximum 1.5 percent of
eligible compensation. Expense for the 401(k) amounted to
$66,000 in 1996, $54,000 in 1995, and $52,000 in 1994.
<PAGE>
(15) Loans to Directors, Officers and Shareholders owning more
than 5% of Voting Stock
A summary of the changes in outstanding loans to members of the
Board of Directors, officers of the Company and shareholders
owning more than 5% of voting stock, or their interests, follows
(in thousands):
<TABLE>
<CAPTION>
Years ended
December 31,
------------
1996 1995
---- ----
<S> <C> <C>
Balance of loans outstanding $5,591 $3,354
at beginning of year
New loans and increases in 80 2,401
existing loans
Loan principal repayments (844) (164)
Balance at end of year $4,827 $5,591
===== =====
</TABLE>
Loans to directors, officers and shareholders owning more than 5%
of voting stock are believed to have been made on substantially
the same terms, including interest rate and collateral, as those
prevailing at the time for comparable transactions with unrelated
parties.
(16) Condensed Financial Information - Parent Company Only
The following presents the financial condition of the Parent
Company (FNB Rochester Corp.) as of December 31, 1996 and 1995
and the results of its operations and its cash flows for the
years ended December 31, 1996, 1995, and 1994:
Condensed Statements of Financial Condition (in thousands)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Assets
Cash and cash equivalents $644 $494
Investment (at equity) in 28,802 25,388
subsidiary
Other assets 1 3
- -
Total assets $29,447 $25,885
====== ======
Liabilities and shareholders' equity
Accrued interest payable and $216 $39
other liabilities
Total liabilities 216 39
--- --
Shareholders' equity 29,231 25,846
------ ------
Total liabilities and $29,447 $25,885
shareholders' equity ====== ======
</TABLE>
<PAGE>
Statement of Operations (in thousands)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income:
Dividends from subsidiary $200 $ $
- -
Gain on sale of subsidiary - - 191
Interest and other 19 20 16
-- -- --
Total income 219 20 207
Expense:
Interest on long-term debt - - 123
109 122 181
Other --- --- ---
Total expense 109 122 304
--- --- ---
(Income) loss before taxes and equity in
undistributed income of 110 (102) (97)
subsidiary
Income tax benefit (26) (40) (95)
Income (loss) before undistributed income
of subsidiary 136 (62) (2)
Equity in undistributed income
of subsidiary 3,997 2,916 1,939
Net income $4,133 $2,854 $1,937
===== ===== =====
</TABLE>
<PAGE>
Statement of Cash Flows (in thousands)
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $4,133 $2,854 $1,937
Adjustment to reconcile net income to
Cash (used) provided by operating
activities:
Equity in undistributed income
of subsidiary (3,997) (2,916) (1,939)
Depreciation and amortization - - 27
Gain on sale of subsidiary - - (191)
(Increase) decrease in other assets 3 1 (4)
Increase (decrease) in accrued
interest payable and other
liabilities (2) 4 (207)
--- - ----
Net cash (used) provided by
137 (57) (377)
operating --- --- ----
activities
Cash flows from investing activities:
Capital contributed to subsidiary - - (1,400)
------
Proceeds from sale of subsidiary - - 1,772
-----
Net cash provided by investing
activities - - 372
---
Cash flows from financing activities:
Exercise of options to purchase 13 1 -
common stock -- - -
Net cash provided by financing
activities 13 1 -
Increase (decrease) in cash and
cash equivalents 150 (56) (5)
Cash and cash equivalents at 494 550 555
beginning of year --- --- ---
Cash and cash equivalents at end of $644 $494 $550
year === === ===
</TABLE>
The Parent Company paid cash during 1996, 1995, and 1994 for
income taxes and interest as follows
(in thousands) :
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest - - 304
Income taxes 1,335 910 555
</TABLE>
(17) Federal Deposit Insurance Corporation Improvement Act of
1991 (FDICIA)
First National is subject to capital adequacy requirements of the
Federal Deposit Insurance Corporation. The FDICIA established
capital levels for which insured institutions are categorized as
(in declining order) well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, or critically
undercapitalized. Under the FDICIA, a well capitalized
institution must generally have a risk-based capital ratio of at
least 10 percent, a Tier 1 risk-based ratio of at least 6 percent
and a Tier 1 leverage ratio of at least 5 percent. As of December
31, 1996, First National is a well capitalized institution under
the definitions.
First National is subject to various regulatory capital
requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements could cause
regulators to initiate certain mandatory-and possibly additional
discretionary-actions by regulators that, if undertaken, could
have a direct material effect on First National's financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, First National must meet
specific capital guidelines that involve quantitative measures of
First National's assets, liabilities, and certain off-balance-
sheet items as calculated under regulatory accounting practices.
First National's capital amounts and classification are also
subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require First National to maintain minimum amounts and
ratios (set forth in the table below) of total and Tier I capital
(as defined in the regulations) to risk-weighted assets (as
defined). Management believes, as of December 31, 1996, that
First National meets all capital adequacy requirements to which
it is subject.
As of December 31, 1996, the most recent notification from the
Federal Deposit Insurance Corporation categorized First National
as (well capitalized) under the regulatory framework for prompt
corrective action. To be categorized as (well capitalized) First
National must maintain minimum total risk-based, Tier I risk-
based, Tier I leverage ratios set forth in the table. There are
no conditions or events since that notification that management
believes have changed First National's category.
First National's actual capital amounts and ratios are presented
in the following table (in thousands). There was no deduction
from capital for interest-rate risk.
<TABLE>
<CAPTION>
To Be Well
Capitalized
Under
Prompt
For Capital Corrective
Actual Adequacy Action
______ -------- ------
Purposes Provisions
-------- -----------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31,
1996
Total Capital
(to Risk Weighted
$32,135 11.0% $23,296 8.0% $29,120 10.0% Assets)
Tier I Capital
(to Risk Weighted
$28,469 9.8% $11,648 4.0% $11,648 6.0% Assets)
Tier I Capital
(to Average
$28,469 6.6% $17,400 4.0% $21,750 5.0% Assets)
As of December 31,
1995
Total Capital
(to Risk Weighted $27,588 10.9% $20,242 8.0% $25,302 10.0%
Assets)
Tier I Capital
(to Risk Weighted $24,393 9.6% $10,121 4.0% $15,181 6.0%
Assets)
Tier I Capital
(to average $24,393 6.4% $15,261 4.0% $19,076 5.0%
assets)
</TABLE>
The Company's capital amounts and ratios as of December 31, 1996
and 1995 were not materially different from those of First
National.
<PAGE>
(18) Fair Value of Financial Instruments
The following fair value estimates, methods, and assumptions of
each class of the Company's financial instruments were used to
estimate the fair value.
Interest Bearing Deposits with Banks and Federal Funds Sold
For these short-term instruments that generally mature in less
than 90 days or reprice on a daily basis, the carrying value
approximates fair value.
Securities
Fair values for securities are based on quoted market prices or
dealer quotes, where available. Variable rate securities that
reprice frequently and have no significant credit risk have fair
values based on carrying values.
Loans
The fair values of loans are generally estimated using discounted
cash flow analyses applying interest rates currently being
offered for loans with similar terms and credit quality and
employing prepayment assumptions based on available industry
information sources.
Delinquent and non-accrual loans are valued using the discounted
cash flow methods described above. Credit risk is a component of
the discount rate used to value the loans. Delinquent and non-
accrual loans are presumed to possess additional risk.
Therefore, the discount rates used to value these non-performing
loans reflect this additional risk.
Deposits
The fair values disclosed for demand deposits, savings accounts,
and money market accounts are equal to their carrying values
since these are liabilities that are payable on demand. The fair
value of fixed rate certificates of deposit is calculated using a
discounted cash flow analysis applying rates currently being
offered on certificates to a schedule of weighted average
expected monthly maturities on time deposits.
Short-Term Borrowings
Variable rate instruments reprice daily and therefore the
carrying value approximates fair value. Fixed rate obligations
are valued using a discounted cash flow approach employing a
discount rate currently offered for similar instruments.
Off-Balance Sheet
The fair value of commitments to extend credit approximates the
fees charged to make these commitments since rates and fees of
the contracts approximate those currently charged to originate
similar commitments. These commitments are included under loans
and loan commitments.
<PAGE>
<TABLE>
<CAPTION>
1996 1995
---- ----
(in thousands)
Estimated Estimated
Carrying Fair Carrying Fair
Financial Assets: Amount Value(1) Amount Value(1)
------------------ ------ -------- ------ --------
<S> <C> <C> <C> <C>
Cash $20,060 $20,060 $18,662 $18,662
Interest bearing deposits 1,121 1,121 1,061 1,061
with banks
Federal funds sold 1,500 1,500 5,200 5,200
Securities, including 103,366 103,139 106,606 106,778
FHLB and FRB
Net loans and loan 297,964 304,634 248,227 256,369
commitments
Financial Liabilities:
----------------------
Total deposits 404,771 406,114 357,875 358,638
Short-term
borrowings
and long-term debt 996 996 4,986 4,986
</TABLE>
(1) Fair value estimates are made at a specific point
in time, based on relevant market information and
information about the financial instrument. These
estimates are subjective in nature and involve
uncertainties and matters of significant judgment
and, therefore, cannot be determined with
precision. Changes in assumptions could
significantly affect the estimates.
(19) Dispositions
On November 18, 1996, First National sold its Odessa Office. The
Office had deposits of $9,633,000 and loans of $1,133,000, and a
gain of $621,000 was recognized as a result of the sale.
The Company, on April 1, 1994, sold all of the outstanding shares
of Atlanta (for its book value, plus a premium of $550,000). The
Company realized $1,772,000 cash from the sale and a gain of
$191,000. On December 31, 1993, Atlanta had $8,911,000 in loans,
$13,833,000 of deposits and $15,017,000 in total assets. Net
income for the year ended December 31, 1993 amounted to $222,000.
On December 1, 1994, First National sold its Shop City Office
with deposits of $16,433,000. First National recognized a gain
of $189,000 as a result.
<PAGE>
CORPORATE DIRECTORY
Directors of FNB Rochester Senior Officers of First
Corp. and First National Bank National Bank of Rochester
of Rochester
R. Carlos Carballada R. Carlos Carballada
President and Chief Executive President and Chief Executive
Officer Officer
Michael J. Falcone, Chairman Donald R. Aldred
Real Estate Developer, Pioneer Sr. Vice President, Business &
Group Professional Banking
Gayle C. Johnston
President, Thin film Robert B. Bantle
Technology Division Bausch & Sr. Vice President, Community
Lomb Banking
Joseph M. Lobozzo II Stacy C. Campbell
President & Chief Executive Sr. Vice President and Chief
Officer JML Optical Financial Officer
Industries, Inc.
Francis T. Lombardi Barbara W. Fuge
Vice President, Syracuse Tank Vice President, Risk
& Mfg. Co. Management
Carl R. Reynolds
Attorney
H. Bruce Russell Robert E. Gilbert
Vice President, Financial & Sr. Vice President, Operations
Administrative Division
Eastman Kodak Company
James D. Ryan Timothy P. Johnson
President and Owner RYCO Vice President and Counsel
Management, Inc.
Property Management and
Development
Linda Cornell Weinstein Richard J. Long
Executive Director, Vice President, Human
Cornell/Weinstein Resources
Family Foundation
Theresa B. Mazzullo
Sr. Vice President, Trust &
Investment
Officers of FNB Rochester Corp.
R. Carlos Carballada
President and Chief Executive
Officer
Stacy C. Campbell
Sr. Vice President and Chief
Financial Officer
Mariann Joyal
Corporate Secretary
Timothy P. Johnson
Assistant Corporate Secretary
Vice Presidents of First National Bank of Rochester
Bruce G. Austin William C. Lyons
Vice President, Treasury & Vice President, Business &
Planning Professional Lending - Buffalo
Jeffrey W. Barker Carl J. Martel
Vice President, Vice President, Henrietta
Business & Professional Office Manager
Banking Services
Dorian C. Chapman Richard F. Medyn
Vice President, Business & Vice President, Special Assets
Professional
Real Estate Lending
Roger L. Cormier Robert S. Moore
Vice President, Community Vice President, Business &
Banking Professional Lending
Anthony M. Costanza Thomas M. Pauly
Vice President, Business & Vice President, Loan Review
Professional Lending
Melody A. Pursel
Vice President, Residential
Mortgages
Gary L. Gayton David T. Reaske
Vice President, Chili Office Vice President, Business &
Manager Professional Lending -
Syracuse
Edward A. Slank
Vice President, Business &
Professional Lending -
Syracuse
Richard Steffen
Vice President, Honeoye Falls
Office Manager
John C. Glerum Richard A. Szabat
Vice President, Controller- Vice President, Business &
Finance Professional Lending
Dennis A. Heuser Robert Varrenti
Vice President, Vice President, Information
Business & Professional Services
Banking
James F. Jackson
Vice President, Consumer
Lending
James F. Lynd Judith L. Willis
Vice President, Penfield Vice President, Perinton
Office Manager Office Manager
Robert J. Lynough II
Vice President, Southport
Office Manager
[EXHIBIT 21]
FNB ROCHESTER CORP.
Subsidiaries of the Registrant
The Registrant has one wholly owned subsidiary:
First National Bank of Rochester
First National Bank of Rochester was formed in 1965 under the
National Bank Act.
[EXHIBIT 23]
KPMG Peat Marwick LLP
600 Clinton Square
Rochester, NY 14604
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
FNB Rochester Corp.:
We consent to incorporation by reference in the registration
statements 33-65194 and 333-15325 on Form S-8 of FNB Rochester
Corp. of our report dated January 28, 1997, relating to the
consolidated statements of financial condition of FNB Rochester
Corp. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, changes in
shareholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1996, which report has been
incorporated by reference in the December 31, 1996 annual report
on Form 10-K of FNB Rochester Corp.
s/ KPMG Peat Marwick LLP
Rochester, New York
March 24, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 18,662
<INT-BEARING-DEPOSITS> 1,061
<FED-FUNDS-SOLD> 5,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 73,527
<INVESTMENTS-CARRYING> 31,780
<INVESTMENTS-MARKET> 31,952
<LOANS> 254,003
<ALLOWANCE> 5,776
<TOTAL-ASSETS> 391,320
<DEPOSITS> 357,875
<SHORT-TERM> 4,986
<LIABILITIES-OTHER> 2,613
<LONG-TERM> 0
0
0
<COMMON> 3,569
<OTHER-SE> 22,277
<TOTAL-LIABILITIES-AND-EQUITY> 391,320
<INTEREST-LOAN> 21,810
<INTEREST-INVEST> 6,850
<INTEREST-OTHER> 575
<INTEREST-TOTAL> 29,235
<INTEREST-DEPOSIT> 11,852
<INTEREST-EXPENSE> 12,250
<INTEREST-INCOME-NET> 16,985
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 33
<EXPENSE-OTHER> 15,577
<INCOME-PRETAX> 4,048
<INCOME-PRE-EXTRAORDINARY> 2,854
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,854
<EPS-PRIMARY> 80
<EPS-DILUTED> 80
<YIELD-ACTUAL> 4.92
<LOANS-NON> 1,665
<LOANS-PAST> 45
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,452
<CHARGE-OFFS> 1,033
<RECOVERIES> 357
<ALLOWANCE-CLOSE> 5,776
<ALLOWANCE-DOMESTIC> 5,776
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
