-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R6PGoHa9668RQDl+pFWXqF5UOGM0702cYUx7DA9MMIRcSQgvpiqnwEQqqEtxp7g0 IV6GEFjh/U3RlXVLayPPKQ== 0000941157-95-000014.txt : 19951121 0000941157-95-000014.hdr.sgml : 19951121 ACCESSION NUMBER: 0000941157-95-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FNB ROCHESTER CORP CENTRAL INDEX KEY: 0000745087 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 161231984 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13423 FILM NUMBER: 95589415 BUSINESS ADDRESS: STREET 1: 35 STATE ST CITY: ROCHESTER STATE: NY ZIP: 14614 BUSINESS PHONE: 7165463300 MAIL ADDRESS: STREET 1: 35 STATE STREET CITY: ROCHESTER STATE: NY ZIP: 14614 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended September 30, 1995 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 FNB Rochester Corp. (Exact name of registrant as specified in its charter) New York 16-1231984 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 35 State St., Rochester, New York 14614 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (716) 546-3300 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 shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of Shares Outstanding at Class October 31, 1995 Common stock, $1.00 par value 3,568,963 INDEX Page No. Part I Financial Information Condensed consolidated statements of financial condition - September 30, 1995 and December 31, 1994 -- Condensed consolidated statements of operations for the three months and nine months ended September 30, 1995 and 1994 -- Condensed consolidated statements of cash flows for the nine months ended September 30, 1995 and 1994 -- Notes to condensed consolidated financial statements -- Management's discussion and analysis of financial condition and results of operations -- Part II Other information -- Index of Exhibits -- PART I - FINANCIAL INFORMATION FNB ROCHESTER CORP. AND SUBSIDIARIES Condensed Consolidated Statements of Financial Condition (unaudited) (In thousands, except per share data)
September 30, December 31, 1995 1994 _____________ ____________ Assets Cash and due from banks $16,856 $17,281 Interest-bearing deposits with other banks 1,038 1,077 Federal funds sold 4,300 2,000 Securities available-for-sale 47,180 49,284 Securities held-to-maturity, at amortized cost (fair value of $57,958 in 1995 and $50,227 in 1994) 57,799 52,997 Loans: Commercial 159,921 134,529 Mortgage 45,442 31,080 Home Equity 19,478 20,586 Consumer 20,291 16,443 ______ ______ Total loans 245,132 202,638 Net deferred loan fees (76) (201) Allowance for loan losses (6,125) (6,452) _______ _______ Net loans 238,931 195,985 Premises and equipment, net 6,561 4,918 Accrued interest receivable 3,434 3,159 Other real estate 0 100 Other assets 2,204 2,461 _____ _____ Total assets $378,303 $329,262 ======= ======= Liabilities and shareholders' equity Deposits: Demand: Non-interest bearing $ 40,877 $ 37,887 Interest bearing - NOW 63,355 70,690 Savings and money market 80,029 75,774 Certificates of deposit: Under $100,000 105,968 88,674 $100,000 and over 51,108 22,356 ______ ______ Total deposits 341,337 295,381 Securities sold under agreement to repurchase and short-term borrowing 8,800 9,875 Accrued interest payable and other 3,632 2,646 liabilities _____ _____ Total liabilities 353,769 307,902 _______ _______ Shareholders' equity: Common stock, $1 par value; authorized 5,000,000 shares; issued and outstanding 3,568,713 in 1995 and 1994 3,569 3,569 Additional paid in capital 13,023 13,023 Unrealized net holding gain (loss) on securities available-for-sale 284 (781) Undivided profits 7,658 5,549 _____ _____ Total shareholders' equity 24,534 21,360 ______ ______ Total liabilities and shareholders' equity $ 378,303 $ 329,262 ======= ======= See accompanying notes to condensed consolidated financial statements
FNB ROCHESTER CORP. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (unaudited) (In thousands, except for share data)
Nine months ended Three months ended September 30, September 30, 1995 1994 1995 1994 ____ ____ ____ ____ Interest income: Commercial $ 11,081 $ 8,016 $ 3,967 $ 2,941 Mortgage 2,108 1,689 805 570 Home equity 1,509 1,213 496 426 Consumer 1,186 901 436 328 _____ ___ ___ ___ Total interest and fees on loans 15,884 11,819 5,704 4,265 Federal funds sold and time deposits 478 310 128 128 Securities 5,139 4,498 1,720 1,502 _____ _____ _____ _____ Total interest income 21,501 16,627 7,552 5,895 ______ ______ _____ _____ Interest expense: Savings, NOW and money market accounts 2,564 2,412 858 786 Certificates of deposit 6,101 3,090 2,221 1,198 Short-term borrowing 305 58 123 10 Long-term debt - 123 - - ____ ___ ___ ___ Total interest expense 8,970 5,683 3,202 1,994 _____ _____ _____ _____ Net interest income 12,531 10,944 4,350 3,901 Provision for loan losses (recovery) - (43) - - ______ ____ _____ _____ Net interest income after recovery for loan losses 12,531 10,987 4,350 3,901 ______ ______ _____ _____ Other income: Service charges on deposit accounts 896 909 307 286 Credit card fees 477 383 166 124 Gain on sale of securities available-for-sale 53 - - - Loan servicing fees 218 242 70 78 Gain on sale of subsidiary 0 191 0 100 Other operating income 319 262 128 154 ___ ___ ___ ___ Total other income 1,963 1,987 671 742 _____ _____ ___ ___ Other expenses: Salaries and employee benefits 6,047 5,884 2,065 2,062 Occupancy 1,946 1,786 668 681 Marketing and public relations 442 657 144 221 Office supplies, printing and postage 406 395 124 125 Processing fees 726 673 250 219 F.D.I.C. assessments 317 504 (14) 156 Net cost of operation of other real estate (14) 241 1 71 Legal 235 316 77 106 Other 1,325 1,184 538 380 _____ _____ ___ ___ Total other expenses 11,430 11,640 3,853 4,021 ______ ______ _____ _____ Income before income 3,064 1,334 1,168 622 Income tax expense 955 441 352 189 ___ ___ ___ ___ Net income $ 2,109 $ 893 $ 816 $ 433 ===== === === === Weighted average shares outstanding - primary 3,568,713 3,224,465 3,568,713 3,568,712 ========= ========= ========= ========= Net income per common share - primary $ .59 $ .28 $ .23 $ .12 === === === === See accompanying notes to condensed consolidated financial statements.
FNB ROCHESTER CORP. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (unaudited) (In thousands)
Nine months ended September 30, 1995 1994 ____ ____ Cash flows from operating activities: Net income $ 2,109 $ 893 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses (recovery) - (43) Depreciation and amortization 818 740 Amortization of goodwill 178 188 Gain on sales of securities available-for -sale (53) - (Increase) decrease in mortgage loans held -for-sale (416) 2,979 Increase in accrued interest receivable (275) (179) Decrease in other assets 179 595 Increase (decrease) in accrued interest payable and other liabilities 793 (116) ___ _____ Net cash provided by operating activities 3,333 5,057 _____ _____ Cash flows from investing activities: Decrease in interest bearing deposits 39 - Securities available-for-sale: Purchase of securities (12,159) (7,988) Proceeds from maturities 8,541 10,896 Proceeds from sales 7,033 5,815 Securities held-to-maturity: Purchase of securities (6,599) (5,450) Proceeds from maturities 1,797 6,113 Loan origination and principal collection, net (42,530) (30,629) Capital expenditures, net (2,461) (1,446) ______ ______ Net cash used by investing activities (46,339) (22,689) Cash flows from financing activities: Net decrease in demand, savings, NOW and money market accounts (90) (13,846) Certificates of deposit accepted and repaid, net 46,046 26,279 Increase (decrease) in short-term borrowings and securities sold under agreement to repurchase (1,075) 800 _____ ___ Net cash provided by financing 44,881 13,233 activities ______ ______ Increase (decrease) in cash and cash equivalents 1,875 (4,399) Cash and cash equivalents at beginning of year 19,281 28,583 ______ ______ Cash and cash equivalents at end of period $ 21,156 $ 24,184 ====== ====== Supplemental disclosure of non-cash investing and financing activities Transfer of loan from in-substance foreclosure to commercial loans 1,160 - Conversion of subordinated notes to common stock - 7,249 The Company paid cash during the nine months ended September 30, 1995 and 1994 as follows: Cash paid for interest $ 8,743 $ 5,846 Cash paid for taxes 650 330 See accompanying notes to condensed consolidated financial statements.
FNB ROCHESTER CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited) (1) Summary of Significant Accounting Policies Basis of Presentation FNB Rochester Corp. (the Company) operates as a bank holding company. At September 30, 1995, its only subsidiary is First National Bank of Rochester (the Bank). 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, the Bank and Atlanta (through its sale date). All material intercompany accounts and transactions have been eliminated in the consolidation. The financial information is prepared in conformity with generally accepted accounting principles and such principles are applied on a basis consistent with those reflected in the December 31, 1994 Form 10-K Report of the Company filed with the Securities and Exchange Commission. The financial information included herein has been prepared by management without audit by independent certified public accountants. The information furnished includes all adjustments and accruals, solely of a normal recurring nature, that are in the opinion of management necessary for a fair presentation of results for the interim period ended September 30, 1995. Amounts in prior periods' financial statements are reclassified whenever necessary to conform with current presentation. (2) Allowance for Loan Losses The Financial Accounting Standards Board issued Statement 114 Accounting by Creditors for Impairment of a Loan as amended by Statement 118, Accounting by Creditors for Impairment of a Loan - Income and Disclosure. These statements prescribe recognition criteria for loan impairment, generally related to commercial type loans, and measurement methods for certain impaired loans and all loans whose terms are modified in troubled debt restructuring subsequent to the adoption of these statements. A loan is considered impaired when it is probable that the borrower will be unable to repay the loan according to the original contractual terms of the loan agreement. As of January 1, 1995, the Company has adopted the provisions of SFAS No. 114 and SFAS 118 and has provided the required disclosures. The effect of adoption was not material to the consolidated financial statements. As of January 1, 1995, all of the Company's in substance foreclosed assets were reclassified into impaired loan status as required by SFAS No. 114. For all prior periods presented, all amounts related to in substance foreclosures have also been reclassified. These reclassifications did not impact the Company's consolidated financial condition or results of operations. As a result of the adoption of SFAS No. 114, the allowance for possible loan losses related to impaired loans that are identified for evaluation in accordance with SFAS No. 114 is based on the present value of expected cash flows discounted at the loan's initial effective interest rate, except that as a practical expedient, impairment may be measured at the loan's observable market price, or the fair value of the collateral for certain loans where repayment of the loan is expected to be provided solely by the underlying collateral (collateral dependent loans). The Company's impaired loans are generally collateral dependent. The Company considers estimated costs to sell, on a discounted basis, when determining the fair value of collateral in the measurement of impairment if those costs are expected to reduce the cash flows available to repay or otherwise satisfy the loans. Prior to the adoption of SFAS No. 114 and 118, the allowance for possible loan losses related to these loans was based on estimated undiscounted cash flows or the fair value of the collateral, less estimated costs to sell for collateral dependent loans. Other real estate owned included both formally foreclosed and in-substance foreclosed real properties. In accordance with SFAS No. 114, a loan is classified as an in-substance foreclosure when the Company has taken possession of the collateral regardless of whether formal foreclosure proceedings have taken place. Prior to the adoption of SFAS No. 114 and SFAS No. 118, in-substance foreclosed properties included those properties where the borrower has little or no remaining equity in the property considering its fair value, where repayment was only expected to come from the operation or sale of the property; and where the borrower had effectively abandoned control of the property or it was doubtful that the borrower would be able to rebuild equity in the property. Changes in the allowance for possible loan losses for the nine months ended September 30, 1995 and 1994 are as follows: 1995 1994 ____ ____ Balance at beginning of $6,452 $6,823 period Provisions (recovery) for - (43) possible loan losses Allowance of subsidiary - (177) sold Loans charged off (512) (178) Recoveries on loans previously charged-off 185 927 ___ ___ Balance at end of period $6,125 $7,352 At September 30, 1995, the recorded investment in loans that are considered to be impaired under SFAS No. 114 totaled $547,000. The average recorded investments in impaired loans during the nine months ended September 30, 1995 was approximately $1,319,000. Impaired loans are included in non-performing loans, generally as non-accrual loans. Commercial type loans past due greater than 90 days and still accruing are generally not considered to be impaired as the Company expects to collect all amounts due, including interest accrued at the contractual interest rate for the delinquent period. 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. For the nine months ended September 30, 1995, the Company recognized $26,000 interest income on the impaired loans. (3) Income per Common Share Per share data is based upon the weighted average number of common shares outstanding during the year. Common share equivalents (stock options) are not used in the income per share calculation as they dilute earnings per share by less than 3 percent. Fully diluted per share data is not presented as potentially dilutive securities dilute earnings per share by less than 3 percent or are antidilutive. (4) Subordinated Capital Notes The Company issued 10% Subordinated Capital Notes in 1990 and 1989. On March 2, 1994 the notes were converted to common stock of the Company. The conversion increased the Company's common shares by 1,566,325 and equity by $7,249,000. Interest expense for the subordinated capital notes amounted to $123,000 for the period ended September 30, 1994. (5) Stock Option Plan The Company has an incentive stock option plan under which options to acquire 225,000 shares of its common stock were available to grant to key employees. At September 30, 1995, options to purchase 223,350 shares were held by grantees under the plan. The range of exercise prices of the options is $5.63 to $7.75 per share with an average exercise price of $6.59 per share. At September 30, 1995, options to acquire 167,400 shares were exercisable. The remaining options become exercisable at various times through June 1997. As of September 30, 1995, no options granted under the plan have been exercised. (6) Dividends At the March 1992 Board of Director's meeting, the Board approved the suspension of the dividend on common stock as part of its plan to preserve capital. No dividends have been paid since 1991. FNB ROCHESTER CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors which have affected the Company's financial position and operating results during the periods included in the accompanying condensed consolidated financial statements. Management's discussion and analysis supplements management's discussion and analysis for the year ended December 31, 1994 contained in Company's Form 10-K for the period then ended and includes certain known trends, events and uncertainties that are reasonably expected to have a material effect on the Company's Financial position or operating results. Overview Average loans and deposits have continued to grow. Loans have increased $42.6 million from December 31, 1994 and deposits have increased $46 million. The deposit increase has primarily been in certificates of deposit of which $28.8 million is in certificates of $100,000 or more. A large increase in the number of public fund banking relationships in the Company's banking offices has contributed to this increase. Total non-performing assets have declined $674,000, or 20% from December 31, 1994 to a level of $2.7 million and declined as a percent of total loans and real estate acquired by foreclosure to 1.10% from 1.67% at year end. Net income for the nine months ended September 30, 1995 increased $1,216,000, or 136.2%, to $2,109,000 from $893,000 for the same period in 1994. Income per share increased to $.59, up $.31 in comparison to $.28 for the nine months ended September 30, 1994. The increase in income was primarily due to an increase in net interest income of $1,587,000. Other operating income decreased $24,000, or 1.2%, and other expense decreased $210,000, or 1.8%. 1994 other operating income included a $191,000 gain for the sale of Atlanta National Bank. 1995 other expense showed reductions in Federal Deposit Insurance assessments, net cost in operation of other real estate, and marketing with some offsetting increases in salaries and benefits and occupancy expense. For the quarter net income increased $383,000 primarily due to an increase in net interest income of $449,000 and a decline in Federal Deposit Insurance assessment of $170,000, offset by an increase in other operating expense of $158,000. $100,000 of the gain for the sale of Atlanta was recognized in September 1994. Net Interest Income Net interest income for the nine-month period increased $1,587,000, or 14.5%, as compared to the period ended September 30, 1994 and increased $449,000, or 11.5%, for the three-month period. As in the first and second quarters, increased lending activity, the conversion of the subordinated notes, declines in non-performing assets, and increased yields on earning assets have contributed to this trend. As in 1994 the focus in 1995 continues to be increased lending activity funded primarily with deposit growth. Net interest margin, which was 5.10% for the year ended December 31, 1994, has generally trended downward during 1995 going to 5.02%, 4.83% and 4.9% for the quarters ended March, June and September, respectively. Interest margins may continue to decline in future months as much of the deposit growth continues to be in higher-yielding certificates of deposit. While margins may decline, net interest income may continue to increase because of loan and other earning asset growth. Increased loan volume continues to have a positive effect on interest income. Interest and fees on loans increased $4,065,000, or 34.4% for the nine-month period ended September 30, 1995 and $1,439,000, or 33.7% for the three- month period, as compared to the same periods in 1994. The increases were caused by both increased volumes and increased rates. Average commercial loans increased $26.1 million, or 21.7%, from the period ended September 30, 1994 to the period ended September 30, 1995. The increased volume contributed $1,977,000 to income while increasing rates provided $1,088,000 of additional income. Average mortgage loans increased $9.9 million, or 36.9%. The increase in the mortgage portfolio was primarily made up of 15 year fixed rate mortgages and variable rate mortgages. If mortgage rates continue at current levels, or decline, more of the new mortgages originated for portfolio are likely to be fixed than variable. The lower rates for mortgages being placed in the portfolio in 1995 have caused some decline in average yield and as a result income declined $149,000 because of the lower rates and increased $568,000 because of the additional volume. Average home equity loans increased $106,000, or .5%, and increasing prime lending rate was the primary reason for the increase in income. Average consumer loans increased $4 million, or 27.5% and the result for the period was an increase in interest income of $256,000 from volume and $29,000 from higher rates. Income from securities increased $641,000 when comparing the nine-month period ended September 30, 1995 to the September 30, 1994 period. During the period ended September 30, 1995, the average amount of portfolio securities was $8.4 million larger than for the same period in 1994. In comparing the period ended September 1995 to the same period in 1994, income increased $404,000 due to the additional volume and increased $237,000 because of higher rates. Most of the Banks' securities are taxable, and average yields on those securities have increased from 6.23% for the period ended September 1994 to 6.51% for the period ended September 30, 1995. Interest expense increased $3,287,000, or 57.8%, for the nine-month period ended September 30, 1995 as compared to the period ended September 30, 1994. The savings, NOW, and money market categories of deposits have shown increased interest expense of $317,000 from increased rates and a decrease of $165,000 from volume as deposit balances declined from September 1994 levels. From September 30, 1994 to September 30, 1995 average savings, NOW, and money market deposits declined $9.2 million, or 6.1% while certificates of deposit increased $45.9 million, or 47.6%. The Bank's deposit growth in certificates of deposit resulted in $1,968,000 additional interest expense because of increased balances and $1,043,000 because of increased rates. Average total interest bearing deposits have increased $36.7 million from September 30, 1994 to September 30, 1995. Securities sold under agreement to repurchase increased interest expense for short-term borrowing by approximately $247,000, and a savings of $123,000 in interest expense was realized in the period ended September 30, 1995 as compared to 1994 because of the conversion of the Subordinated Capital Notes. Provision for Loan Losses The Bank provides for loan losses by a charge to current operations. The provision is based upon discretionary adjustments which, in the opinion of management, are necessary to bring the allowance to an appropriate level considering the character of the loan portfolio, current economic conditions, analyses of specific loans, and historical loss experience. The Bank had net charge-offs of $327,000 for the nine-month period ended September 30, 1995 as compared to net recoveries of $749,000 for the same period in 1994. The Bank sold a $1.2 million nonperforming loan in September 1995 and a $360,000 charge-off was recognized as a result of that sale. Net charge-offs (recoveries) (annualized) as a percent of average loans were .20% and (.55)%, respectively, for the nine months ended September 30, 1995 and 1994. The ratios of the allowance for possible loan losses as a percent of period end loans for the comparable period were 2.50% and 3.75% respectively. Non performing assets declined in the nine months ended September 30, 1995 to $2.7 million from $3.4 million. 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 September 30, 1995 to absorb anticipated losses. It is anticipated that further additions to the allowance will not be necessary in 1995 unless there are significant changes in the local economy or higher than anticipated loan growth. Non-Interest Income and Non-Interest Expense Non-interest income of $1,963,000 for the first nine months of 1995 represents a decline of $24,000, or 1.2%, from $1,987,000 for the comparable period in 1994. A $191,000 gain was recognized in 1994 for the sale of Company's bank subsidiary Atlanta National Bank. 1995 income shows increases in credit card fees of $94,000 and gains on the sale of securities available for sale of $53,000. Non-interest expense was $11,430,000 for the first nine months of 1995 as compared to $11,640,000 for the comparable period in 1994, a decline of $210,000, or 1.8%. The largest components of non-interest expense for the nine-month period ended September 30, 1995 were salaries and employee benefits of $6,047,000 which increased $163,000, or 2.8%, from $5,884,000 for the same period in 1994. For the nine-month period ended September 30, 1995 as compared to the period ended September 30, 1994, occupancy expense increased $160,000, or 9.%. The primary reason for the increase is the leasehold costs associated with the move to the Powers Building, depreciation costs for the computer network and computer system upgrades installed in 1994, and costs associated with the planned relocation of the Henrietta office. Other operating expense increased $141,000, of which $120,000 was related to various non-loan related charge-offs, including a defalcation by a former employee. Offsetting these increases were declines in marketing and public relations of $215,000, net cost of operation of other real estate of $255,000, and $187,000 decrease in Federal Deposit Insurance assessments. Federal Deposit Insurance rates were decreased retroactive to May 1995. The Bank is expected to realize future benefits from this decrease in rates. With continued focus on sales, deposit and loan growth, and customer service, the Bank's operating expenses are expected to increase. As part of this focus the Bank is expanding its community banking office network in the Rochester area. In March of 1995 the Bank opened a banking office in the community of East Rochester, a banking office in the Town of Chili was opened in September of 1995, and a third new banking office in the Town of Penfield was opened in October 1995. Currently under construction is a new office in the Town of Perinton and a new facility for the relocation of the existing Henrietta office. Provision for Income Taxes The provision for income tax increased $514,000, to $955,000 for the period ended September 30, 1995. The Company's effective tax rates for the periods were 31.2% and 33.1% for 1995 and 1994 respectively. The increased provision was caused by the increase in pretax income. Capital Adequacy Total shareholders' equity was $24,534,000 at September 30, 1995, which represents an increase of $3,174,000, or 14.9% from $21,360,000 at December 31, 1994. Capital was increased by $1,065,000 from increases in the market value of the available-for-sale securities portfolio and $2,109,000 from earnings. At September 30, 1995, the Company and its banking subsidiary exceeded the minimum guidelines for Tier 1 and Total Risk-Based Capital of 4% and 8%, respectively. The Company's ratios were 9.78% and 11.05% respectively, at September 30, 1995. Banking organizations must also maintain a minimum Tier 1 Leverage Ratio of 3% of assets. Banking organizations that are not top-rated according to regulators' "Camel" ratings, however must meet leverage ratios of at least 100 basis points above the 3% standard. The Company's Tier 1 Leverage Ratio at September 30, 1995 was 6.38%. 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 are well over minimum levels established by the Bank. The fundamental source of liquidity will continue to be deposits. Available sources of asset liquidity include short-term investments, loan repayments, and securities held in the available-for-sale portfolio. Additionally, the Bank has the ability to pledge securities to secure short-term borrowing. The Bank is a member of the Federal Home Loan Bank which provides an additional source of funding. The vast majority of the assets of the Company are held by the Bank. Dividends and cash advances to the Company from the Bank are subject to standard bank regulatory constraints. An analysis of projected expenses and cash flows indicates that the Company has sufficient cash to meet its anticipated cash obligations through 1996. PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a) 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 as Registration Statement amended, of the No. 33-7244, filed July Registrant 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) Residential Page -- Mortgage Loan Agreements between Russell Family Associates, related to H. Bruce Russell, and First National Bank of Rochester (10.2) Commercial Loan Page -- Agreements between Estate of Fred B. Kravetz and First National Bank of Rochester (10.3) Commercial Line Page -- of Credit Agreement between GLC Outsourcing Services, Inc., related to James D. Ryan, and First National Bank of Rochester (27) Financial Data Page -- Schedule (b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FNB ROCHESTER CORP. Date November 10, 1995 s\s Stacy C. Campbell Stacy C. Campbell Senior Vice President and Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer) EX-10.1 2 RESIDENTIAL MORTGAGE LOAN AGREEMENT 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 as amended, of Registration Statement the Registrant. No. 33-7244, filed July 22, 1986 (3.2) Amendment to Exhibit 3 to Form 10-Q Certificate of Incorporation for period ended June 30, of Registrant dated August 1992 6, 1992 (3.3) By-laws of the Exhibit 3.3 to Annual Registrant, as amended. Report on Form 10-K for the year ended December 31, 1992 (10.1) Residential Mortgage Page -- Loan Agreements between Russell Family Associates, related to H. Bruce Russell, and First National Bank of Rochester (10.2) Commercial Loan Page -- Agreements between Estate of Fred B. Kravetz and First National Bank of Rochester (10.3) Commercial Line of Page -- Credit Agreement between GLC Outsourcing Services, Inc., related to James D. Ryan, and First National Bank of Rochester (27) Financial Data Schedule Page -- PLEASE RECORD & RETURN TO: Hodgson, Russ, Andrews, Woods & Goodyear 400 East Avenue Rochester, New York 14607 Attn: Leeann Luty ----------[Space Above This Line For Recording Data]------------ MORTGAGE WORDS USED OFTEN IN THIS DOCUMENT (A) "Security Instrument". This document, which is dated SEPTEMBER 1, 1995, will be called the "Security Instrument". (B) "Borrower". RUSSELL FAMILY ASSOCIATES, A LIMITED PARTNERSHIP sometimes will be called "Borrower" and sometimes simply "I" or "me". (C) "Lender". First National Bank of Rochester will be called "Lender". Lender is a corporation or association which exists under the laws of the United States of America. Lender's address is 35 State Street, Rochester, New York 14614 (D) "Note". The note signed by Borrower and dated SEPTEMBER 1, 1995, will be called the "Note". The Note shows that I owe Lender ONE HUNDRED FIFTY THOUSAND Dollars (U.S. $150,000.00) plus interest. I have promised to pay this debt in monthly payments and to pay the debt in full by AUGUST 1, 2010 (E) "Property". The property that is described below in the section titled "Description of the Property", will be called the "Property". (F) "Sums Secured". The amounts described below in the section titled "Borrower's Transfer to Lender of Rights in the Property" sometimes will be called the "Sums Secured". BORROWER'S TRANSFER TO LENDER OF RIGHTS IN THE PROPERTY I mortgage, grant and convey the Property to Lender subject to the terms of this Security Instrument. This means that, by signing this Security Instrument, I am giving Lender those rights that are stated in this Security Instrument and also those rights that the law gives to lenders who hold mortgages on real property. I am giving Lender these rights to protect Lender from possible losses that might result if I fail to: (A) Pay all the amounts that I owe Lender as stated in the Note; (B) Pay, with interest, any amounts that Lender spends under Paragraphs 2 and 7 of this Security Instrument to protect the value of the Property and Lender's rights in the Property; and (C) Keep all of my other promises and agreements under this Security Instrument. NEW YORK--Single Family--Fannie Mae/Freddie Mac UNIFORM INSTRUMENT DESCRIPTION OF PROPERTY I give Lender rights in the Property described in (A) through (G) below: (A) The Property which is located at 5170 COUNTY ROAD 11, TOWN of GORHAM, [Street] GORHAM, NEW YORK [City] 14461 [Zip Code]. This Property is in ONTARIO County. It has the following legal description: SEE SCHEDULE "A" ATTACHED HERETO AND MADE A PART HEREOF. Mortgagors covenant that the within described premises is a dwelling or residence for not more than two families. (B) All buildings and other improvements that are located on the Property described in subparagraph (A) of this section; (C) All rights in other property that I have as owner of the Property described in subparagraph (A) of this section. These rights are known as "easements and appurtenances attached to the Property"; (D) All rights that I have in the land which lies in the streets or roads in front of, or next to, the Property described in subparagraph (A) of this section; (E) All fixtures that are now or in the future will be on the Property described in subparagraphs (A) and (B) of this section; (F) All of the rights and property described in subparagraphs (B) through (E) of this section that I acquire in the future; and (G) All replacements of or additions to the Property described in subparagraphs (B) through (F) of this section. BORROWER'S RIGHT TO MORTGAGE THE PROPERTY AND BORROWER'S OBLIGATION TO DEFEND OWNERSHIP OF THE PROPERTY I promise that: (A) I lawfully own the Property; (B) I have the right to mortgage, grant and convey the Property to Lender; and (C) there are no outstanding claims or charges against the Property, except for those which are of public record. I give a general warranty of title to Lender. This means that I will be fully responsible for any losses which Lender suffers because someone other than myself has some of the rights in the Property which I promise that I have. I promise that I will defend my ownership of the Property against any claims of such rights. PLAIN LANGUAGE SECURITY INSTRUMENT This Security Instrument contains promises and agreements that are used in real property security instruments all over the country. It also contains other promises and agreements that vary, to a limited extent, in different parts of the country. My promises and agreements are stated in "plain language". COVENANTS I promise and I agree with Lender as follows: 1. BORROWER'S PROMISE TO PAY I will pay to Lender on time principal and interest due under the Note and any prepayment and late charges due under the Note. 2. MONTHLY PAYMENTS FOR TAXES AND INSURANCE (A) Borrower's Obligations I will pay to Lender all amounts necessary to pay for taxes, assessments, water frontage charges and other similar charges, sewer rents, leasehold payments or ground rents (if any), hazard or property insurance covering the Property, and flood insurance (if any). If Lender required mortgage insurance as a condition of making the loan that I promise to pay under the Note, (i) I also will pay to Lender all amounts necessary to pay for mortgage insurance, and (ii) if, under Paragraph 8 below, instead of paying for mortgage insurance I am required to pay Lender an amount equal to the cost of mortgage insurance, I will pay this amount to Lender I will pay all of these amounts to Lender unless Lender tells me, in writing, that I do not have to do so, or unless the law requires otherwise. I will make these payments on the same day that my monthly payments of principal and interest are due under the Note. My payments under this Paragraph 2 will be for the items listed in (i) through (vi) below, which are called "Escrow Items": (i) The estimated yearly taxes, assessments, water frontage charges and other similar charges, as a sewer rents on the Property which under the law may be superior to this Security Instrument as a lien on the Property. Any claim, demand or charge that is made against Property because an obligation has not been fulfilled is known as a "lien"; (ii) The estimated yearly leasehold payments or ground rents on the Property (if any); (iii) The estimated yearly premium for hazard or property insurance covering the Property; (iv) The estimated yearly premium for flood insurance covering the Property (if any); (v) The estimated yearly premium for mortgage insurance (if any); and (vi) The estimated yearly amount I may be required to pay Lender under Paragraph 8 below instead of the payment of the estimated yearly premium for mortgage insurance (if any). Lender will estimate from time to time the amount I will have to pay for Escrow Items by using existing assessments and bills and reasonable estimates of the amount I will have to pay for Escrow Items in the future, unless the law requires Lender to use another method for determining the amount I am to pay. The amounts that I pay to Lender for Escrow Items under this Paragraph 2 will be called the "Funds". The Funds are pledged as additional security for all Sums Secured. The law puts limits on the total amount of Funds Lender can at any time collect and hold. This total amount cannot be more than the maximum amount a lender for a "federally related mortgage loan" could require me to place in an "escrow account" under the federal law called the "Real Estate Settlement Procedures Act of 1974", as that law may be amended from time to time. If there is another law that imposes a lower limit on the total amount of Funds Lender can collect and hold, Lender will be limited to the lower amount. (B) Lender's Obligations Lender will keep the Funds in a savings or banking institution which has its deposits insured by a federal agency, instrumentality, or entity, or in any Federal Home Loan Bank. If Lender is such a savings or banking institution, Lender may hold the Funds Except as described in this Paragraph 2, Lender will use the Funds to pay the Escrow Items. Lender will give to me, without charge, an annual accounting of the Funds. That accounting must show all additions to and deductions from the Funds and the reason for each deduction. Lender may not charge me for holding or keeping the Funds, for using the Funds to pay Escrow Items, for making a yearly analysis of my payment of Funds or for receiving, verifying and totaling assessments and bills. However, Lender may charge me for the services if Lender pays me interest on the Funds and if the law permits Lender to make such a charge. Lender also may require me to pay a one-time charge for an independent real estate tax reporting service used by Lender in connection with my loan, unless the law does not permit Lender to make such a charge. Lender will not be required to pay me any interest or earnings on the Funds unless either (i) Lender and I agree in writing, at the time I sign this Security Instrument, that Lender will pay interest on the Funds; or (ii) the law requires Lender to pay interest on the Funds. (C) Adjustments to the Funds Under the law, there is a limit on the amount of Funds Lender may hold. If the amount of Funds held by Lender exceeds this limit, then the law requires Lender to account to me in a special manner for the excess amount of Funds. There will be an excess amount if, at any time, the amount of Funds which Lender is holding or keeping is greater than the amount of Funds Lender is allowed to hold under the law. If, at any time, Lender has not received enough Funds to make the payments of Escrow Items when the payments are due, Lender may tell me in writing that an additional amount is necessary. I will pay to Lender whatever additional amount is necessary to pay the Escrow Items in full. Lender will determine the number of monthly payments I have in which to pay that additional amount, but the number of payments will not be more than twelve. When I have paid all of the Sums Secured, Lender will promptly refund to me any Funds that are the being held by Lender. If under Paragraph 21 below, Lender either acquires or sells the Property then before the acquisition or sale, Lender will use any Funds which Lender is holding at the time of the acquisition or sale to reduce the Sums Secured. 3. APPLICATION OF BORROWER'S PAYMENTS Unless the law requires otherwise, Lender will apply each of my payments under the Note and under Paragraphs 1 and 2 above in the following order and for the following purposes: First, to pay any prepayment charges due under the Note; Next, to pay amounts due to Lender under Paragraph 2 above; Next, to pay interest due; Next, to pay principal due; and Last, to pay any late charges due under the Note. 4. BORROWER"S OBLIGATION TO PAY CHARGES, ASSESSMENTS AND CLAIMS I will pay taxes, assessments, water frontage charges and other similar charges, sewer rents, and any other charges and fines that may be imposed on the Property and that may be superior to this Security Instrument. I will also make payments due under my lease if I am a tenant on the Property and I will pay ground rents (if any) due on the Property. I will do this either by making the payments to Lender that are described in Paragraph 2 above or, if I am not required to make payments under Paragraph 2, by making the payments on time to the person owed them. (In this Security Instrument, the word "person" means any person, organization, governmental authority or other party). If I make direct payments, then promptly after making any of those payments I will give Lender a receipt which shows that I have done so. If I make payment to Lender under Paragraph 2, I will give Lender all notices or bills that I receive for the amounts due under this Paragraph 4. I will promptly pay or satisfy all liens against the Property that may be superior to this Security Instrument. However, this Security Instrument does not require me to satisfy a superior lien if: (A) I agree, in writing, to pay the obligation which gave rise to the superior lien and Lender approves the way in which I agree to pay that obligations; or (B) in good faith, I argue or defend against the superior lien in a lawsuit 80 that, during the lawsuit, the superior lien may not be enforced; or (C) I secure from the holder of that other lien an agreement, approved in writing by Lender, that the lien of this Security Instrument is superior to the lien held by that person. If Lender determines that any part of the Property is subject to a superior lien, Lender may give Borrower a notice identifying the superior lien Borrower shall pay or satisfy the superior lien or take one or more of the actions set forth above within 10 days of the giving of notice. 5. BORROWER'S OBLIGATION TO MAINTAIN HAZARD INSURANCE OR PROPERTY INSURANCE I will obtain hazard or property insurance to cover all buildings and other improvements that now are or in the future will be located on the Property. The insurance must cover loss or damage caused by fire, hazards normally covered by "extended coverage" hazard insurance policies and other hazards for which Lender requires coverage, including floods and flooding. The insurance must be in the amounts and for the periods of time required by Lender. I may choose the insurance company, but my choice is subject to Lender's approval. Lender may not refuse to approve my choice unless the refusal is reasonable. If I do not maintain the insurance coverage described above, Lender may obtain insurance coverage to protect Lender's rights in the property in accordance with paragraph 7 below. All of the insurance policies and renewals of those policies must include what is known as a "standard mortgage clause" to protect Lender. The form of all policies and renewals must be acceptable to Lender. Lender will have the right to hold the policies and renewals. If Lender requires, I will promptly give Lender all receipts of paid premiums and renewal notices that I receive. If there is a loss or damage to the Property, I will promptly notify the insurance company and Lender. If I do not promptly prove to the insurance company that the loss or damage occurred, then Lender may do so. The amount paid by the insurance company is called "proceeds". The proceeds will be used to repair or to restore the damaged Property unless: (A) it is not economically feasible to make the repairs or restoration; or (B) the use of the proceeds for that purpose would lessen the protection given to Lender by this Security Instrument; or (C) Lender and I have agreed in writing not to use the proceeds for that purpose If the repair or restoration is not economically feasible or if it would lessen Lender's protection under this Security Instrument, then the proceeds will be used to reduce the amount that I owe to Lender under the Note and under this Security Instrument. If any of the proceeds remain after the amount that I owe to Lender has been paid in full, the remaining proceeds will be paid to me. If I abandon the Property, or if I do not answer, within 30 days, notice from Lender stating that the insurance company has offered to settle a claim, Lender may collect the proceeds. Lender may use the proceeds to repair or restore the Property or to pay the Sums Secured. The 30-day period will begin when the notice is given. If any proceeds are used to reduce the amount of principal which I owe to Lender under the Note that use will not delay the due date or change the amount of any of my monthly payments under the Note and under Paragraphs 1 and 2 above. However, Lender and I may agree in writing to those delays or changes. If Lender acquires the Property under Paragraph 21 below, all of my rights in the insurance policies will belong to Lender. Also, all of my rights in any proceeds which are paid because of damage that occurred before the property is acquired by Lender or sold will belong to Lender. However, Lender's rights in those proceeds will not be greater than the Sums Secured immediately before the Property is acquired by Lender or sold. 6. BORROWER"S OBLIGATIONS TO OCCUPY THE PROPERTY, TO MAINTAIN AND PROTECT THE PROPERTY, AND TO FULFILL ANY LEASE OBLIGATIONS; BORROWER'S LOAN APPLICATION (A) Borrower's Obligations to Occupy the Property I will occupy the Property and use the Property as my principal residence within sixty days after I sign this Security Instrument. I will continue to occupy the Property and to use the Property as my principal residence for at least one year. The one-year period will begin when I first occupy the Property. However, I will not have to occupy the Property and use the Property as my principal residence within the time frames set forth above if Lender agrees in writing that I dc not have to do so. Lender may not refuse to agree unless the refusal is reasonable. I also will not have to occupy the Property and use the Property as my principal residence within the time frames set forth above if extenuating circumstances exist which are beyond my control. (B) Borrower's Obligations to Maintain And Protect the Property I will keep the Property ln good repair I will not destroy, damage or harm the Property, and I will not allow the Property to deteriorate. I will be "in default" under this Security Instrument if I fail to keep any promise or agreement made in this Security Instrument. I also will be in default under this Security Instrument if any civil or criminal action or proceeding for "forfeiture" (that is, a legal action or proceeding to require the Property, or any part of the Property, to be given up) is begun and Lender determines, in good faith, that this action or proceeding could result in a court ruling (i) that would require forfeiture of the Property or (ii) that would materially impair the lien of the Security Instrument or Lender's rights in the Property. I may correct the default by obtaining a court ruling that dismisses the legal action or proceeding, if Lender determines, in good faith, that this court ruling prevents forfeiture of my interests in the Property and also prevents any material impairment of (i) the lien created by this Security Instrument or (ii) Lender's rights in the Property. If I correct the default, I will have the right to have enforcement of this Security Instrument discontinued, as provided in Paragraph 18 below, even if Lender has required immediate payment in full. (C) Borrower's Obligations to Fulfill Any Lease Obligations If I do not own but am a tenant on the Property, I will fulfill all my obligations under my lease. I also agree that, if I acquire the fee title to the Property, my lease interest and the fee title will not merge unless Lender agrees to the merger in writing. (D) Borrower's Loan Application If, during the application process for the loan that I promise to pay under the Note, I made false or inaccurate statements to Lender about information important to Lender in determining my eligibility for the loan, Lender will treat my actions as a default under this Security Instrument. False or inaccurate statements about information important to the Lender would include a misrepresentation of my intentions to occupy the Property as a principal residence. This is just one example of a false or inaccurate statement of important information. Also, if during the loan application process I failed to provide Lender with information important to Lender in determining my eligibility for the loan, Lender will treat this as a default under this Security Instrument. 7. LENDER'S RIGHT TO PROTECT ITS RIGHTS IN THE PROPERTY If: (A) I do not keep my promises and agreements made in this Security Instrument, or (B) someone, including me, brings a legal proceeding that may significantly affect Lender's rights in the Property (such as a legal proceeding in bankruptcy, in probate, for condemnation or forfeiture, or to enforce laws or regulations), Lender may do and pay for whatever is necessary to protect the value of the Property and Lender's rights in the Property. Lender's actions may include appearing in court, paying reasonable attorneys' fees and entering on the Property to make repairs. Although Lender may take action under this Paragraph 7, Lender does not have to do so. I will pay to Lender any amounts, with interest, which Lender spends under this Paragraph 7. I will pay those amounts to Lender when Lender sends me a notice requesting that I do so. I will also pay interest on those amounts at the Note rate Interest on each amount will begin on the date that the amount is spent by Lender. However, Lender and I may agree in writing to terms of payment that are different from those in this paragraph. This Security Instrument will protect Lender in case I do not keep this promise to pay those amounts with interest. 8. MORTGAGE INSURANCE If Lender required mortgage insurance as a condition of making the loan that I promise to pay under the Note, I will pay the premiums for the mortgage insurance If, for any reason, the mortgage insurance coverage lapses or ceases to be in effect, I will pay the premiums for substantially equivalent mortgage insurance coverage. However, the cost of this mortgage insurance coverage must be substantially equivalent to the cost to me of the previous mortgage insurance coverage, and the alternate mortgage insurer must be approved by Lender. If substantially equivalent mortgage insurance coverage is not available, Lender will establish a "loss reserve" as a substitute for the mortgage insurance coverage. I will pay to Lender each month an amount equal to one-twelfth of the yearly mortgage insurance premium (as of the time the coverage lapsed or ceased to be in effect.) Lender will retain these payments, and will use these payments to pay for losses that the mortgage insurance would have covered Lender may choose to no longer require loss reserve payments, if mortgage insurance coverage again becomes available and is obtained. The mortgage insurance coverage must be in the amount and for the period of time required by Lender. The Lender must approve the insurance company providing coverage. I will pay the mortgage insurance premiums, or the loss reserve payments, until the requirement for mortgage insurance ends according to my written agreement with Lender or according to law. Lender may require me to pay the premiums, or the loss reserve payments, in the manner described in Paragraph 2 above. 9. LENDER'S RIGHT TO INSPECT THE PROPERTY Lender, and others authorized by Lender, may enter on and inspect the Property. They must do so in a reasonable manner and at reasonable times. Before or at the time an inspection is made, Lender must give me notice stating a reasonable purpose for the inspection. 10. AGREEMENTS ABOUT CONDEMNATION OF THE PROPERTY A taking of property by any governmental authority by eminent domain is known as "condemnation". I give to Lender my right: (A) to proceeds of all awards or claims for damages resulting from condemnation or other governmental taking of the Property; and (B) to proceeds from a sale of the Property that is made to avoid condemnation. All of those proceeds will be paid to Lender. If all of the Property is taken, the proceeds will be used to reduce the Sums Secured. If any of the proceeds remain after the amount that I owe to Lender has been paid in full, the remaining proceeds will be paid to me. Unless Lender and I agree otherwise in writing, if only a part of the Property is taken, and the fair market value of the Property immediately before the taking either is equal to, or greater than, the amount of the Sums Secured immediately before the taking, the amount that I owe to Lender will be reduced only by the amount of proceeds multiplied by a fraction. That fraction is as follows: (A) the total amount of the Sums Secured immediately before the taking, divided by (B) the fair market value of the Property immediately before the taking. The remainder of the proceeds will be paid to me. Unless Lender and I agree otherwise in writing or unless the law requires otherwise, if only a part of the Property is taken, and the fair market value of the Property immediately before the taking is less than the amount of the Sums Secured immediately before the taking, the proceeds will be used to reduce the Sums Secured. If I abandon the Property, or if I do not answer, within 30 days, a notice from Lender stating that a governmental authority has offered to make a payment or to settle a claim for damages, Lender has the authority to collect the proceeds. Lender may then use the proceeds to repair or restore the Property or to reduce the Sums Secured . The 30-day period will begin when the notice is given. If any proceeds are used to reduce the amount of principal which I owe to Lender under the Note, that use will not delay the due date or change the amount of any of my monthly payments under the Note and under Paragraphs 1 and 2 above. However, Lender and I may agree in writing to those delays or changes. 11. CONTINUATION OF BORROWER'S OBLIGATIONS AND OF LENDER'S RIGHTS (A) Borrower's Obligations Lender may allow a person who take over my rights and obligations to delay or to change the amount of the monthly payments of principal and interest due under the Note or under this security Instrument. Even if Lender does this, however, that person and I will both still be fully obligated under the Note and under this Security Instrument. Lender may allow those delays or changes for a person who takes over my rights and obligations, even if Lender is requested not to do so. Lender will not be required to bring a lawsuit against such a person for not fulfilling obligations under the Note or under this Security Instrument, ever if Lender is requested to do so. (B) Lender's Rights Even if Lender does not exercise or enforce any right of Lender under this Security Instrument or under the law, Lender will still have all those rights and may exercise and enforce them in the future. Even if Lender obtains insurance, pays taxes, or pays other claims, charges or liens against the Property, Lender will have the right under Paragraph 21 below to demand that I make immediate payment in full of the amount that I owe to Lender under the Note and under this Security Instrument. 12. OBLIGATIONS OF BORROWER AND OF PERSONS TAKING OVER BORROWER'S RIGHTS OR OBLIGATIONS Any person who takes over my rights or obligations under this Security Instrument will have all of my rights and will be obligated to keep all of my promises and agreements made in this security Instrument. Similarly, any person who takes over Lender's rights or obligations under this Security Instrument will have all of Lender's rights and will be obligated to keep all of Lender's agreements made in this Security Instrument. If more than one person signs this Security Instrument as Borrower, each of us is fully obligated to keep all of Borrower's promises and obligations contained in this Security Instrument. Lender may enforce Lender's rights under this Security Instrument against each of us individually or against all of us together. This means that any one of us may be required to pay all of the Sums Secured. However, if one of us does not sign the Note: (A) that person is signing this Security Instrument only to give that person's rights in the Property to Lender under the terms of this Security Instrument; and (B) that person is not personally obligated to pay the sums Secured; and (C) that person agrees that Lender may agree with the other Borrowers to delay enforcing any of Lender's rights or to modify or make any accommodations with regard to the terms of this security Instrument or the Note without that person's consent. 13. LOAN CHARGES If the loan secured by this Security Instrument is subject to a law which sets maximum loan charges, and that law is finally interpreted so that the interest or other loan charges collected or to be collected in connection with the loan exceed permitted limits: (A} any such loan charge shall be reduced by the amount necessary to reduce the charge to the permitted limit; and (B) any sums already collected from Borrower which exceeded permitted limits will be refunded to Borrower. Lender may choose to make this refund by reducing the principal owed under the Note or by making a direct payment to Borrower. If a refund reduces principal, the reduction will be treated as a partial prepayment without any prepayment charge under the Note. 14. NOTICES REQUIRED UNDER THIS SECURITY INSTRUMENT Any notice that must be given to me under this Security Instrument will be given by delivering it or by mailing it by first class mail unless applicable law requires use of another method. The notice will be addressed to me at the address stated in the section above titled "Description of Property". A notice will be given to me at a different address if I give Lender a notice of my different address. Any notice that must be given to Lender under this Security Instrument will be given by mailing it to Lender's address stated in subparagraph (C) of the section above titled "Words Used Often In This Document". A notice will be mailed to Lender at a different address if Lender gives me a notice of a different address. A notice required by this Security Instrument is given when it is mailed or when it is delivered according to the requirements of this Paragraph 14 or of applicable law. 15. LAW THAT GOVERNS THIS SECURITY INSTRUMENT This Security Instrument is governed by federal law and the law that applies in the place where the Property is located. If any term of this Security Instrument or of the Note conflicts with the law, all other terms of this Security Instrument and of the Note will still remain in effect if they can be given effect without the conflicting term. This means that any terms of this Security Instrument and of the Note which conflict with the law can be separated from the remaining terms, and the remaining terms will still be enforced. 16. BORROWER'S COPY I will be given one conformed copy of the Note and of this Security Instrument. 17. AGREEMENTS ABOUT LENDER'S RIGHTS IF THE PROPERTY IS SOLD OR TRANSFERRED Lender may require immediate payment in full of all Sums Secured by this Security Instrument if all or any part of the Property, or if any right in the Property, is sold or transferred without Lender's prior written permission Lender also may require immediate payment in full if beneficial interest in Borrower is sold or transferred and Borrower is not a natural person. However, Lender shall not require immediate payment in full if this is prohibited by federal law on the date of this Security Instrument. If Lender requires immediate payment in full under this Paragraph 17, Lender will give me a notice which states this requirement. The notice will give me at least 30 days to make the require payment. The 30-day period will begin on the date the notice is mailed or delivered. If I do no make the required payment during that period, Lender may act to enforce its rights under the security Instrument without giving me any further notice or demand for payment. 18. BORROWER'S RIGHT TO HAVE LENDER'S ENFORCEMENT OF THIS SECURITY INSTRUMENT DISCONTINUED Even if Lender has required immediate payment in full, I may have the right to have enforcement of this Security Instrument discontinued. I will have this right at any time before sale of the Property under any power of sale granted by this Security Instrument or at any time before judgement has been entered enforcing this Security Instrument if I meet the following conditions: (A) I pay to Lender the full amount that then would be due under this Security Instrument and the Note as if immediate payment in full had never been required; and (B) I correct my failure to keep any of my other promises or agreements made in this Security Instrument; and (C) I pay all of Lender's reasonable expenses in enforcing this Security Instrument including, for example, reasonable attorneys' fees; and (D) I do whatever Lender reasonably requires to assure that Lender's rights in the Property, Lender's rights under this Security Instrument, and my obligations under the Note and under this Security Instrument continue unchanged. If I fulfill all of the conditions in this Paragraph 18, then the Note and this Security Instrument will remain in full effect as if immediate payment in full had never been required. However, I will not have the right to have Lender's enforcement of this Security Instrument discontinued if Lender has required immediate payment in full under Paragraph 17 above. 19. NOTE HOLDER'S RIGHT TO SELL THE NOTE OR AN INTEREST IN THE NOTE; BORROWER'S RIGHT TO NOTICE OF CHANGE OF LOAN SERVICER The Note, or an interest in the Note, together with this Security Instrument, may be sold one or more times I may not receive any prior notice of these sales. The entity that collects my monthly payments due under the Note and this Security Instrument is called the "Loan Servicer". There may be a change of the Loan Servicer as a result of the sale of the Note; there also may be one or more changes of the Loan Servicer unrelated to a sale of the Note. The law requires that I be given written notice of any change of the Loan Servicer. The written notice must be given ln the manner required under Paragraph 14 above and under applicable law. The notice will state the name and address of the new Loan Servicer, and also tell me the address to which I should make my payments. The notice also will contain any other information required by the law. 20. CONTINUATION OF BORROWER"S OBLIGATIONS TO MAINTAIN AND PROTECT TEE PROPERTY The federal law and the laws of the jurisdiction where the Property is located that relate to health, safety or environmental protection are called "Environmental Laws". I will not do anything affecting the Property that violates Environmental Laws, and I will not allow anyone else to do so. Environmental Laws classify certain substances as toxic or hazardous. There are other substances that are considered hazardous for purposes of this Paragraph 20. These are gasoline, kerosene, other flammable or toxic petroleum products, toxic pesticides and herbicides, volatile solvents, materials containing asbestos or formaldehyde, and radioactive materials. The substances defined as toxic or hazardous by Environmental Laws and the substances considered hazardous for purposes of this Paragraph 20 are called "Hazardous Substances". I will not permit Hazardous Substances to be present on the Property. I will not use or store Hazardous Substances on the Property, and I will not allow anyone else to do so. I also will not dispose of Hazardous Substances on the Property, or release any Hazardous Substance on the Property, and I will not allow anyone else to do so. However, I may permit the presence on the Property of small quantities of Hazardous Substances that are generally recognized as appropriate for normal residential use and maintenance of the Property, and I may use or store these small quantities on the Property. In addition, unless law requires removal or other action, the buildings, the improvements and the fixtures on the Property are permitted to contain asbestos and asbestos containing materials if the asbestos and asbestos containing materials are undisturbed and "non-friable" (that is, not easily crumbled by hand pressure). If I know of any investigation, claim, demand, lawsuit or other action by the government or by a private party involving the Property and any Hazardous Substance or Environmental Laws, I will promptly notify the Lender in writing. If the government notifies me (or I otherwise learn) that it is necessary to remove a Hazardous Substance affecting the Property or to take other remedial actions, I will promptly take all necessary remedial actions as required by Environmental Laws. 21. LENDER'S RIGHTS IF BORROWER FAILS TO KEEP PROMISES AND AGREEMENTS Except as provide in Paragraph 17 above, if all of the conditions stated in subparagraphs (A), (B) and (c) of this Paragraph 21 are met, Lender say require that I pay immediately the entire amount remaining unpaid under the Note and under this Security Instrument Lender may do this without asking any further demand for payment. This requirement is called "immediate payment in full". If Lender requires immediate payment in full, Lender may bring a lawsuit to take away all of my remaining rights in the Property and have the Property sold. At this sale Lender or another person may acquire the Property. This is known as "foreclosure and sale". In any lawsuit for foreclosure and sale, Lender will have the right to collect all costs and disbursements and additional allowances allowed by law and will have the right to add all reasonable attorneys' fees to the amount I owe Lender, which fees shall become part of the Sums Secured. Lender may require immediate payment in full under this Paragraph 21 only if all of the following conditions are met: (A) I fail to keep any promise or agreement made in this security Instrument, including the promises to pay when due the Sums Secured. (B) Lender sends to me in the manner described in Paragraph 14 above, a notice that states: (i) The promise or agreement that I failed to keep; (ii) The action that I must take to correct that default; (iii) A date by which I must correct the default. That date must be at least 30 days from the date on which the notice is given; (iv) That if I do not correct the default by the date stated in the notice, Lender may require immediate payment in full, and Lender or another person may acquire the Property by means of foreclosure and sale; (v) That if I meet the conditions stated in Paragraph 18 above, I will have the right to have Lender's enforcement of this Security Instrument discontinued and to have the Note and Security Instrument remain fully effective as if immediate payment in full had never been required; and (vi) That I have the right in any lawsuit for foreclosure and sale to argue that I did keep my promises and agreements under the Note and under this Security Instrument, and to present any other defenses that I may have. (C) I do not correct the default stated in the notice from Lender by the date stated in that notice. 22. LENDER'S OBLIGATION TO DISCHARGE THIS SECURITY INSTRUMENT When Lender has been paid all amounts due under the Note And Under this Security Instrument, Lender will discharge this Security Instrument by delivering a certificate stating that this Security Instrument has been satisfied I will not be required to pay Lender for the discharge, but I will pay all costs of recording the discharge in the proper official records. 23. AGREEMENTS ABOUT NEW YORK LIEN LAW I will receive all amounts lent to me by Lender subject to the trust fund provisions of Section 13 of the New York Lien Law. This means that if, on the date this Security Instrument is recorded, construction or other work on any building or other improvement located on the Property has not been completed for at least four months, I will: (A) hold all amounts which I receive and which I have a right to receive from Lender under the Note as a "trust fund"; and (B) use those amounts to pay for that construction or work before I use them for any other purpose. The fact that I am holding those amounts as a "trust fund" means that for any building or other improvement located on the Property I have a special responsibility under the law to use the amount in the manner described in this Paragraph 23. 24. RIDERS TO THIS SECURITY INSTRUMENT If one or more riders are signed by Borrower and recorded together with this Security Instrument, the promises and agreements of each rider are incorporated as a part of this Security Instrument. [Check applicable box(es)] __ Adjustable Rate Rider __ Condominium Rider __ 1-4 Family Rider __ Graduated Payment Rider __ Planned Unit Development Rider __ Biweekly Payment Rider __ Balloon Rider __ Rate Improvement Rider x Second Home Rider X Other(s) [specify] __ VA Rider X Due-On Transfer X Mortgage Rider Schedule "A" BY SIGNING BELOW, I accept and agree to the promises and agreements contained in pages 1 through 10 of this Security Instrument and in any rider(s) signed by me and recorded with it. Witnesses: s/ H. Bruce Russell (Seal) RUSSELL FAMILY ASSOCIATES, A LIMITED PARTNERSHIP BY: H. BRUCE RUSSELL, GENERAL PARTNER, Borrower MORTGAGE RIDER I further agree with the Lender as follows: 1. RIDER NOT APPLICABLE IF MORTGAGE IS ASSIGNED TO GOVERNMENT AGENCY That this Rider shall replace those clauses in the Note and in the Mortgage executed by me which are inconsistent with this Rider unless the Mortgage is assigned to the Federal Home Loan Mortgage Corporation, the Government National Mortgage Association or the Federal National Mortgage Association, or any other federal or state governmental agency, in which event this Rider shall be inapplicable and unenforceable. 2. REIMBURSEMENT FOR UNPAID INSURANCE PREMIUMS That I will reimburse the Lender for any premiums paid for insurance by the Lender after my failure to do so. 3. ADDITIONAL EVENTS CAUSING POSSIBLE IMMEDIATE PAYMENT IN FULL That the Lender may require Immediate Payment in Full, at the option of the Lender, a. upon my failure to pay any installment of principal or of interest for thirty (30) days, or b. upon my failure to pay any tax, water rate, or assessment for thirty (30) days after a notice and demand has been mailed or delivered to me by the Lender, or c. after my failure to reimburse the Lender for premiums paid for fire or flood insurance, or d. after my failure, when requested by the Lender, to furnish a statement of the amount due on the mortgage and whether I have any offsets or defenses against the amounts that I owe the Lender under the Note, Mortgage, or this Rider. 4. INTEREST RATE AFTER FORECLOSURE IS BEGUN That in the event the Lender requires Immediate Payment in Full and then commences an action to foreclose the Mortgage, I shall pay interest thereafter at the rate set forth in the Note or at the highest legal rate permitted by law, whichever is higher. 5. AMOUNT OF "FUNDS" NEEDED AND REPAID ON DEMAND That I will pay to the Lender at the time I sign this Mortgage a lump sum in the amount of "Funds" due each month for taxes and insurance times the number of months that have gone by since the last due date of the taxes or insurance premiums; that I also agree that any excess amount of "Funds" on deposit that shall be repaid or credited to me on demand shall be that amount shown as an excess as of the last annual accounting of the "Funds". 6. ATTORNEY FEES AFTER FORECLOSURE IS BEGUN That if the Lender commences an action to foreclose the Mortgage, the Lender may recover reasonable attorney fees in the amount up to five percent (5%) of the balance due on the Mortgage, and these fees shall be secured by the Mortgage. 7. ADDITIONAL EVENTS CAUSING POSSIBLE IMMEDIATE PAYMENT IN FULL AFTER NOTICE That the Lender may require Immediate Payment in Full, at the option of the Lender upon thirty (30) days notice to me, a. if any structure or fixture on the Property shall be removed, demolished, or substantially altered; b. if I shall convey the Property or any part thereof; c. if I fail to comply with any requirement of federal, state or municipal authorities (the Lender, however, may comply and add the expense to the mortgage debt); or d. if the Property becomes vacant or non-owner occupied. 8. RETENTION OF INSURANCE PROCEEDS That the Lender may retain proceeds received from an insurance company following a loss or damage to the Property and may apply them to reduce the mortgage debt, or, at the Lender's option, it may pay the proceeds, in whole or part, to me for the repair or replacement of the loss or damage. 9. APPOINTMENT OF A RECEIVER That the Lender shall be entitled to the appointment of a court-appointed receiver without notice to me and without regard to whether the Property itself is adequate security for the mortgage debt. 10. OPTIONAL DISCONTINUANCE OF FORECLOSURE AFTER PAYMENT OF AMOUNT DUE That in the event the Lender requires Immediate Payment in Full, the Lender may discontinue any lawsuit brought for foreclosure and sale, but it does not have to do so. The Lender may elect to continue to judgment despite an offer on my part to pay the full amount that would have been due (any attempted payment by me would be returned) and despite my correction of a failure to keep any of my other promises or agreements made in the Mortgage. 11. LATE CHARGE ON TOTAL MONTHLY PAYMENT Any late charge owing under the terms of the Note and Mortgage shall be computed at the rate of two cents ($.02) for each dollar ($1.00) of the total monthly payment that is overdue. Date: SEPTEMBER 1, 1995 s/ H. Bruce Russell RUSSELL FAMILY ASSOCIATES, A LIMITED PARTNERSHIP BY: H. BRUCE RUSSELL, GENERAL PARTNER DUE-ON TRANSFER RIDER This rider, is dated SEPTEMBER 1, 1995, and is a part of and changes the Mortgage of the same date which I have given to secure my Note of this date (the "Note") to FIRST NATIONAL BANK OF ROCHESTER (the "Lender"). The Mortgage covers the property described in the Mortgage and located at: 5170 COUNTY ROAD 11 GORHAM, NEW YORK 14461 NOTICE: This Rider adds a provision to the Mortgage allowing the Lender to require repayment of the Note in full upon the sale or transfer of the property. AMENDED PROMISE. I and Lender agree that Uniform Promise 17 of the Mortgage is changed to read as follows: 17. AGREEMENTS ABOUT LENDER'S RIGHTS IF THE PROPERTY IS SOLD OR TRANSFERRED. Lender may require Immediate Payment in Full, as that phrase is defined in Paragraph 18 below, if all or any part of the Property, or if any right in the property, is sold or transferred without Lender's prior written permission. Lender also may require Immediate Payment in Full if a beneficial interest in Borrower is sold or transferred and Borrower is not a natural person. However, Lender shall not require Payment in Full if it is not authorized by Federal Law to do so. If Lender chooses to require immediate Payment in Full under this Paragraph 17, Lender will send me a notice, in the manner described in Paragraph 14 above, which states this requirement. The notice will give me at least 30 days to make the required payment. The 30 day grace period will begin on the date the notice is mailed or delivered. If I do not make the payment during that period, Lender may bring a lawsuit for "foreclosure and sale" under Paragraph 19 below without giving me any further notice or demand for payment. I will continue to be responsible for all of my promises and agreements under the Note and Mortgage even if I sell or transfer the Property to someone else, unless the Lender releases me in writing from my promises and agreements. By signing this Rider, I agree to all of the above. s\ H. Bruce Russell RUSSELL FAMILY ASSOCIATES, A LIMITED PARTNERSHIP BY: H. BRUCE RUSSELL, GENERAL PARTNER DUE-ON-TRANSFER RIDER - New York - 1-4 Family - 3/83 FNMA/FHLMC Plain Language Instrument SECOND HOME RIDER THIS SECOND HOME RIDER is made on this 1st day of September, 1995, and is incorporated into and shall be deemed to amend and supplement the Mortgage, Deed of Trust, or security Deed (the "Security Instrument") of the same date given by the undersigned (the "Borrower," whether there are one or more persons undersigned) to secure Borrower's Note to First National Bank of Rochester (the "Lender") of the same date and covering the property described in the security Instrument (the "Property"), which is located at: 5170 County Road 11, Gorham, New York 14461 [Property Address] In addition to the covenants and agreements made in the Security Instrument, Borrower and Lender further covenant and agree that Uniform Covenant 6 of the Security Instrument is deleted and is replaced by the following: 6. Occupancy and Use; Preservation, Maintenance and Protection of the Property; Borrower's Loan Application; Leaseholds. Borrower shall occupy, and shall only use, the Property as Borrower's second home. Borrower shall keep the property available for Borrower's exclusive use and enjoyment at all times, and shall not subject the Property to any timesharing or other shared ownership arrangement or to any rental pool or agreement that requires Borrower either to rent the Property or give a management firm or any other person any control over the occupancy or use of the Property. Borrower shall not destroy, damage or impair the Property, allow the Property to deteriorate, or commit waste on the Property. Borrower shall be in default if any forfeiture action or proceeding, whether civil or criminal, is begun that in Lender's good faith judgement could result in forfeiture of the Property or otherwise materially impair the lien created by this Security Instrument or Lender's security interest. Borrower may cure such a default and reinstate, as provided in paragraph 18, by causing the action or proceeding to be dismissed with a ruling that, in Lender's good faith determination, precludes forfeiture of the Borrower's interest in the Property or other material impairment of the lien created by this Security Instrument or Lender's security interest. Borrower shall also be in default if Borrower, during the loan application process, gave materially false or inaccurate information or statements to Lender (or failed to provide Lender with any material information) in connection with the loan evidenced by the Note, including, but not limited to , representations concerning Borrower's occupancy and use of the Property as a second home. If this Security Instrument is on a leasehold, Borrower shall comply with all the provisions of the lease. If Borrower acquires fee title to the Property, the leasehold and the fee title shall not merge unless Lender agrees to the merger in writing. BY SIGNING BELOW, Borrower accepts and agrees to the terms and provisions contained in this Second Home Rider. s\ H. Bruce Russell (Seal) __________________________ (Seal) Russell Family Associates, Borrower A Limited Partnership By: H. Bruce Russell, General Partner MULTISTATE SECOND HOME RIDER -- Single Family -- Freddie Mac UNIFORM INSTRUMENT Form 3890/9/90 item 7099 (9102) NOTE _________________________________________________________________ SEPTEMBER 1, 1995 Rochester, New York [City] [State] 5170 COUNTY ROAD 11, GORHAM, NEW YORK 14461 (TOWN of GORHAM) [Property Address] 1. BORROWER'S PROMISE TO PAY In return for a loan that I have received, I promise to pay U.S. $ 150,000.00 (this amount is called "principal"), plus interest, to the order of the Lender. The Lender is First National Bank of Rochester. I understand that the Lender may transfer this Note. The Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the "Note Holder". 2. INTEREST Interest will be charged on unpaid principal until the full amount has been paid. I will pay interest at a yearly rate of 7.25%. The interest rate required by this Section 2 is the rate I will pay both before and after any default described in Section 6(B) of this Note. 3. PAYMENTS (A) Time and Place of Payments I will pay principal and interest by making payments every month. I will make my monthly payments on the 1st day of each month beginning on OCTOBER 1, 1995 I will make these payments every month until I have paid all of the principal and interest and any other charges described below that I may owe under this Note. My monthly payments will be applied to interest before principal. If, on September 1, 2010, I still owe amounts under this Note, I will pay those amounts in full on that date, which is called the "Maturity Date". I will make my monthly payments at 35 State Street, Rochester, New York 14614 or at a different place if required by the Note Holder. (B) Amount of Monthly Payments My monthly payment will be in the amount of U.S. $ 1,369.29 4. BORROWER'S RIGHT TO PREPAY I have the right to make payments of principal at any time before they are due. A payment of principal only is known as a "prepayment". When I make prepayment, I will tell the Note Holder in writing that I am doing so. I may make a full prepayment or partial prepayments without paying any prepayment charge. The Note Holder will use all of my prepayments to reduce the amount of principal that I owe under this Note. If I make a partial prepayment, there will be no changes in the due date or in the amount of my monthly payment unless the Note Holder agrees in writing to those changes. 5. LOAN CHARGES If a law, which applies to this loan and which sets maximum loan charges, is finally interpreted so that the interest or other loan charges collected or to be collected in connection with this loan exceed the permitted limits, then: (i) any such loan charge shall be reduced by the amount necessary to reduce the charge to the permitted limit; and (ii) any sums already collected from me which exceeded permitted limits will be refunded to me. The Note Holder may choose to make this refund by reducing the principal I owe under this Note or by making a direct payment to me. If a refund reduces principal, the reduction will be treated as a partial prepayment. 6. BORROWER'S FAILURE TO PAY AS REQUIRED (A) Late Charge for Overdue Payments If the Note Holder has not received the full amount of any monthly payment by the end of 15 calendar days after the date it is due, I will pay a late charge to the Note Holder. The amount of the charge will be 2.0% of my overdue payment of principal and interest. I will pay this late charge promptly but only once on each late payment. (B) Default If I do not pay the full amount of each monthly payment on the date it is due, I will be in default. (C) Notice of Default If I am in default, the Note Holder may send me a written notice telling me that if I do not pay the overdue amount by a certain date, the Note Holder may require me to pay immediately the full amount of principal which has not been paid and all the interest that I owe on that amount. That date must be at least 30 days after the date on which the notice is delivered or mailed to me. (D) No Waiver By Note Holder Even if, at a time when I am in default, the Note Holder does not require me to pay immediately in full as described above, the Note Holder will still have the right to do so if I am in default at a later time. (E) Payment of Note Holder's Costs and Expenses If the Note Holder has required me to pay immediately in full as described above, the Note Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note, whether or not a lawsuit is brought, to the extent not prohibited by applicable law. Those expenses include, for example, reasonable attorneys' fees. 7. GIVING OF NOTICES Unless applicable law requires a different method, any notice that must be given to me under this Note will be given by delivering it or by mailing it by first class mail to me at the Property Address above or at a different address if I give the Note Holder a notice of my different address. Any notice that must be given to the Note Holder under this Note will be given by mailing it by first class mail to the Note Holder at the address stated in Section 3(A) above or at a different address if I am given a notice of that different address. 8. OBLIGATIONS OF PERSONS UNDER THIS NOTE If more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed. Any person who is a guarantor, surety or endorser of this Note is also obligated to do these things. Any person who takes over these obligations, including the obligations of a guarantor, surety or endorser of this Note, is also obligated to keep all of the promises made in this Note. The Note Holder may enforce its rights under this Note against each person individually or against all of us together. This means that any one of us may be required to pay all of the amounts owed under this Note. 9. WAIVERS I and any other person who has obligations under this Note waive the rights of presentment and notice of dishonor. "Presentment" means the right to require the Note Holder to demand payment of amounts due. "Notice of dishonor" means the right to require the Note Holder to give notice to other persons that amounts due have not been paid. 10. UNIFORM SECURED NOTE This Note is a uniform instrument with limited variations in some jurisdictions. In addition to the protections given to the Note Holder under this Note, a Mortgage, Deed of Trust or Security Deed (the "Security Instrument"), dated the same date as this Note, protects the Note Holder from possible losses which might result if I do not keep the promises which I make in this Note. That Security Instrument describes how and under what conditions I may be required to make immediate payment in full of all amounts I owe under this Note. Some of those conditions are described as follows: AGREEMENTS ABOUT LENDER'S RIGHTS IF THE PROPERTY IS SOLD OR TRANSFERRED Lender may require immediate payment in full of all Sums Secured by this Security Instrument if all or any part of the Property, or if any right in the Property, is sold or transferred without Lender's prior written permission. Lender also may require immediate payment in full if a beneficial interest in Borrower is sold or transferred and Borrower is not a natural person. However, Lender shall not require immediate payment in full if this is prohibited by federal law on the date of this Security Instrument. If Lender requires immediate payment in full under this Paragraph 17, Lender will give me a notice which state this requirement. The notice will give me at least 30 days to make the required payment. The 30-day period will begin on the date the notice is mailed or delivered. If I do not make the required payment during that period, Lender may act to enforce its rights under this Security Instrument without giving me any further notice or demand for payment. Borrower has executed and acknowledges receipt of pages 1 and 2 of this Fixed Rate Note. WITNESS THE HAND(S) AND SEAL(S) OF THE UNDERSIGNED. s/ H. Bruce Russell (Seal) __________________________ (Seal) RUSSELL FAMILY ASSOCIATES, A LIMITED PARTNERSHIP BY: H. BRUCE RUSSELL, GENERAL PARTNER-Borrower -Borrower SS#____________________ SS# _______________________ Form 3233 10/91 EX-10.2 3 COMMERCIAL LOAN AGREEMENT FIRST NATIONAL BANK OF ROCHESTER 35 State Street COMMERCIAL TERM NOTE Rochester, New York 14614 _____________________________________________________________ Account Name: ESTATE OF FRED B. KRAVETZ Dated: August 22, 1995 Note Amount: ONE MILLION TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($1,200,000.00) 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 Bank, in lawful money of the United States and in immediately available funds, the principal sum of the Note Amount indicated above plus interest on the outstanding portion of such principal sum in accordance with the terms and conditions set forth in the following paragraphs. 1. Interest. Borrower shall pay interest on the outstanding principal sum 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% 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 Note Amount, whether such maturity is because of acceleration or otherwise, shall on each day be 3% per year above the rate described in the preceding sentence. 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. 2. Installment Payments. Borrower shall pay (a) the Note Amount in 60 installments of principal consisting of 59 installments of principal in the amount of $10,000.00 each and a final installment of principal in the amount of $610,000.00, with the first of such installments of principal to become due on October 1, 1995 and one of such installments of principal to become due on the same day of each succeeding month through September 1, 2000, when Borrower shall pay all amounts owing pursuant to this Note but not yet paid, and (b) interest in 60 installments of interest the amounts of which may vary and that are to become due on the same dates as the installments of principal are to become due. 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. Notwithstanding the foregoing, all amounts owing hereunder shall be immediately due and payable to the extent that any prepayment of the mortgage loan in the original principal amount of $4,250,000 being collaterally assigned as security for amounts owing under this Note results in the outstanding amount of such mortgage loan being less than the outstanding balance owing under this Note. 3. Late Charges. Borrower shall pay a late charge equal to 5% of the amount of any scheduled installment payment not received by Bank on or before the 10th day after it is due. 4. Charging Deposit Accounts for Payments. 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. 5. Prepayments. Borrower shall have the option of repaying the Note Amount to Bank in advance in full or in part at any time and from time to time; provided, however, that the amount of any repayment in part shall be an integral multiple of $1,000.00 and upon making any repayment in full Borrower shall pay to Bank all interest and other amounts owing pursuant to this Note and remaining unpaid. Each such repayment in part shall be applied to the installments of principal in the inverse order of such installments becoming due. 6. Use of Loan Proceeds. Borrower represents and warrants to Bank that the loan evidenced hereby shall be used solely for business or commercial purposes. 7. 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. 8. Defaults and Acceleration. 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. 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), 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. 9. 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). 10. New York Law; Consent to Jurisdiction and Venue. 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. ESTATE OF FRED B. KRAVETZ By: s\ Laurie Kuskin, Executrix Laurie Kuskin, Executrix Collateral Assignment of Partial Interest In Note and Mortgage KNOW THAT ESTATE OF FRED B. KRAVETZ, having an office at 150 Linden Oaks Drive, Suite C, Rochester, New York 14625 ("Assignor"), in consideration of One Dollar ($1.00) and other good and valuable consideration paid by FIRST NATIONAL BANK OF ROCHESTER, a national banking association having its chief executive office at 35 State Street, Rochester, New York 14614 ("Assignee"), the payment and receipt of which is hereby acknowledged, hereby assigns unto the Assignee, a Partial Interest (as defined herein) in and to: That certain Restated Mortgage Note ("Note") in the principal sum of Four Million Two Hundred Fifty Thousand and 00/100 Dollars ($4,250,000.00) dated May 31, 1995 made and delivered to Assignor by Nathan Benderson, Ronald Benderson and David H. Baldauf, as Trustees under a Trust Agreement dated September 22, 1993 known as the Randall Benderson 1993-1 Trust, together with interest thereon as provided therein, which Note is secured by the following: Mortgage made by Fred B. Kravetz to Rochester Savings Bank in the amount of One Million Eight Hundred Thousand and 00/100 Dollars ($1,800,000.00) dated March 31, 1981 and recorded in the Monroe County Clerk's Office on April 1, 1981 in Liber 5199 of Mortgages, page 245, which mortgage was assigned to Security Trust Company by Assignment dated June 14, 1983 and recorded on June 15, 1983 in Liber 470 of Assignments of Mortgages, page 218, which Mortgage was further assigned by Fleet Bank, successor to Security Trust Company, to Assignor, by assignment dated May 26, 1995 and recorded June 1, 1995 in Liber 1072 of Assignments of Mortgages, page 85, which Mortgage and the indebtedness secured thereby was assumed pursuant to the terms of an Executor's Deed from Laurie A. Kuskin, as Executrix of the Last Will and Testament of Fred B. Kravetz to Nathan Benderson, Ronald Benderson and David H. Baldauf, as Trustees under a Trust Agreement dated September 22, 1993 known as the Randall Benderson 1993-1 Trust, which deed was dated May 31, 1995 and recorded in the Monroe County Clerk's Office on June 1, 1995 in Liber 8613 of Deeds, at page 517. Mortgage made by Nathan Benderson, Ronald Benderson and David H. Baldauf, as Trustees under a Trust Agreement dated September 22, 1993 known as the Randall Benderson 1993-1 Trust to Assignor in the amount of Three Million Four Hundred Seventy-two Thousand Five Hundred and 00/100 Dollars ($3,472,500.00) dated May 31, 1995 and recorded June 1, 1995 in the Monroe County Clerk's Office in Liber 12579 of Mortgages at page 135, which mortgage was consolidated with the mortgage first above described to form a single lien in the amount of Four Million Two Hundred Fifty Thousand and 00/100 Dollars ($4,250,000.00) pursuant to the terms of a Mortgage Modification, Extension and Consolidation Agreement (hereafter the "Mortgage") by and between Nathan Benderson, Ronald Benderson and David H. Baldauf, as Trustees under a Trust Agreement dated September 22, 1993 known as the Randall Benderson 1993-1 Trust and Assignor dated May 31, 1995 and recorded in the Monroe County Clerk's Office on June 1, 1995 in Liber 12579 of Mortgages, page 147. TO HAVE AND TO HOLD the same unto the Assignee and to the successors, legal representatives and assigns of the Assignee forever. AND the Assignor covenants that there is now due and owing upon said Note and Mortgage without offset or defense of any kind, the principal sum of Four Million Two Hundred Twenty- Eight Thousand Four Hundred Forty-Seven and 59/100 Dollars ($4,228,447.59), with interest thereon at nine and one-half percent (9-1/2%) per annum from the first (1st) day of August, 1995. The Partial Interest in the Note and Mortgage assigned hereby shall be in an amount equal to the principal, interest and collection expenses due to Assignee following a default by Assignor in the payment of any and all indebtedness, liabilities or obligations for the payment or money which hereafter arise or accrue in favor of Assignee against Assignor in connection with that certain Commercial Term Note dated August 22, 1995 from Assignor to Assignee in the principal amount of One Million Two Hundred Thousand and 00/100 Dollars ($1,200,000.00), and this Collateral Assignment of Partial Interest in Note and Mortgage is given as collateral security for the payment of any and all indebtedness, liabilities or obligations for the payment or money which hereafter arise or accrue in favor of Assignee against Assignor in connection with said Commercial Term Note. This Collateral Assignment of Partial Interest in Note and Mortgage is executed and delivered by Assignor to Assignee upon the following terms and conditions, and Assignor and Assignee hereby agree as follows: 1. Upon payment in full of any and all indebtedness, liabilities or obligations for the payment or money which hereafter arise or accrue in favor of Assignee against Assignor in connection with said Commercial Term Note, Assignee shall upon demand execute and deliver to the Assignor a re-assignment of this Collateral Assignment of Partial Interest in the Note and Mortgage. 2. So long as there exists no default by Assignor in the payment to Assignee of all sums due under the Commercial Term Note or in the performance of any other obligations of Assignor under the said Commercial Term Note, Assignor shall have full power and authority to enforce and collect said Note and Mortgage according to the terms thereof. 3. Upon and after the occurrence of any default in payment of any indebtedness under the Commercial Term Note or in the performance of any other obligations of Assignor thereunder, the Assignee shall have full power and authority to enforce and collect said Note and Mortgage according to the terms thereof, and in case the Assignee, its successors or assigns, shall collect and receive the money due on said Note and Mortgage, then and in that event, the Assignee shall, after retaining the amount of the indebtedness secured hereby, including all interest thereon and charges arising or growing out of the same, pay the balance or surplus, if any, to the Assignor, or to the successors, legal representative or assigns of the Assignor. 4. Upon the nonpayment by Assignor of any indebtedness owing by Assignor under the Commercial Term Note as and when the same is due and payable, the Assignee may, at any time in its discretion and without demand or prior notice of any kind to the Assignor, sell the Partial Interest in Note and Mortgage assigned hereby, free and clear from any right of redemption by the Assignor which right of redemption is hereby expressly waived, and may execute and deliver to the purchaser a further assignment of the Partial Interest in Note and Mortgage assigned hereby. The proceeds of such sale, after deducting the expenses of said sale, shall be applied to the payment of any of the indebtedness owing to Assignee under the Commercial Term Note and secured hereby, and the balance, if any, shall be paid to the Assignor or the Assignor's successors, legal representatives or assigns. The discretion of the Assignee as to the fair value of said Partial Interest in Note and Mortgage upon such sale, if exercised in a commercially reasonable manner, shall be binding upon the Assignor and upon Assignor's respective successors, legal representative or assigns and the Assignor shall remain liable to the Assignee for any deficiency arising upon such sale. 5. Any subsequent or further collateral assignment by Assignor of a partial interest in the Note and Mortgage shall be expressly upon the following terms and conditions: (a) Any such further collateral assignment shall, by its terms, be subject and subordinate to the within Collateral Assignment of Partial Interest in Note and Mortgage; and (b) No such further collateral assignment shall be effective if the amount secured by such collateral assignment, when added to the amounts secured by all previous collateral assignments (including the within Collateral Assignment of Partial Interest in Note and Mortgage) exceeds the then unpaid principal balance of the Note and Mortgage. The words "Assignor" and "Assignee" shall be construed as if they read "Assignors" or "Assignees" whenever the sense of this instrument so requires. IN WITNESS WHEREOF, the Assignor has duly executed this instrument on this 22nd day of August, 1995. ESTATE OF FRED B. KRAVETZ By: s\ Laurie Kuskin, Executrix LAURIE KUSKIN, EXECUTRIX STATE OF NEW YORK) COUNTY OF MONROE) SS.: On the 22nd day of August, 1995, before me personally came LAURIE KUSKIN, THE EXECUTOR OF THE LAST WILL AND TESTAMENT OF FRED B. KRAVETZ, to me known to be the individual described in, and who executed the foregoing instrument, and acknowledged that he/she executed the same as Executor as aforesaid for the purposes therein mentioned. s\ Martin W. O'Toole Notary Public EX-10.3 4 COMMERCIAL LINE OF CREDIT AGREEMENT FIRST NATIONAL BANK OF ROCHESTER 35 State Street COMMERCIAL LINE OF CREDIT NOTE Rochester, New York 14614 _________________________________________________________________ Account Name: GLC OUTSOURCING SERVICES, INC. Dated: October 20, 1995 Maximum Credit Amount: TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00) 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. 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 1.50% 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 2% 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. / / 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 5% 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. 10. 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. 11. 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. 12. 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). 13. 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. G L C OUTSOURCING SERVICES, INC. By: s\ James D. Ryan, Jr. James D. Ryan, Jr., Vice President FIRST NATIONAL BANK OF ROCHESTER 35 State Street CONTINUING UNLIMITED GUARANTY Rochester, New York 14614 _________________________________________________________________ Borrower: G L C OUTSOURCING SERVICES, INC. Dated: April 28, 1995 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\ James d. Ryan, Jr. James D. Ryan, Jr. s\ John C. Hayes John C. Hayes s\ Gerard J. Chambers Gerard J. Chambers FIRST NATIONAL BANK OF ROCHESTER 35 State Street GENERAL SECURITY AGREEMENT Rochester, New York 14614 ___________________________________________________________ Account Name: G L C OUTSOURCING SERVICES, INC. Dated: April 28, 1995 Obligor: G L C OUTSOURCING SERVICES, INC. In consideration of all loans, credit or other financial accommodations extended or continued from time to time to, or on the guaranty, endorsement or other assurance of, the undersigned ("Obligor") by FIRST NATIONAL BANK OF ROCHESTER, a banking corporation having its principal office at 35 State Street, Rochester, New York 14614 ("Bank"), Obligor hereby agrees as follows: 1. Security Interest. (a) To secure the payment and performance of all the Obligations, Obligor hereby grants to Bank a continuing security interest in, and assigns and pledges to Bank, all of the Collateral. (b) (i) "Collateral" shall mean and include, except as and to the extent specifically excluded in Schedule A hereto, ALL PERSONAL PROPERTY AND FIXTURES OF OBLIGOR or in which Obligor has an interest, whether NOW OR HEREAFTER EXISTING OR NOW OWNED OR HEREAFTER ACQUIRED and wherever located, OF EVERY KIND, NATURE AND DESCRIPTION, TANGIBLE OR INTANGIBLE, and whether or not subject to Article 8 or 9 of the Uniform Commercial Code, including, but not limited to, (A) all accounts and general intangibles (including, but not limited to, in each case, contract rights and, in the case of general intangibles, tax refunds), instruments, investment securities, chattel paper and documents, (B) all inventory, (C) all equipment (including, but not limited to, machinery, furniture and vehicles), (D) all farm products, (E) to the extent not otherwise included, all claims, demands and rights (including, but not limited to, claims to insurance proceeds, tort claims, judgment claims, rights of set- off, rights to payment under letters and advices of credit and rights to any balance in any deposit account maintained with any bank, including Bank, or similar organization), (F) to the extent not otherwise included, all money, other goods and other rights in personal property and fixtures, (G) the proceeds, products and accessions of and to any of the foregoing, and (H) to the extent not otherwise included, all records (including, but not limited to, records maintained on computer software) of Obligor evidencing or otherwise relating to the things referred to in this sentence. (ii) "Obligations" shall mean and include all indebtedness, liabilities, obligations, covenants and duties of Obligor to Bank (including those which Bank may have acquired from others) of every kind, nature and description, direct or indirect, absolute or contingent, due or not due, contractual or tortious, liquidated or unliquidated, arising by operation of law or otherwise, now existing or hereafter arising and whether or not evidenced by any note or other instrument or agreement and whether or not for the payment of money, including, but not limited to, indebtedness, obligations and liabilities to Bank of Obligor as a member of any partnership, syndicate, association or other group. (iii) Certain other terms used herein are defined in Section 13 hereof. 2. Rank and Perfection of Security Interest. (a) Obligor will not create or permit to exist, nor shall there exist, any security interest in, lien, attachment, levy or encumbrance upon, or assignment and pledge as security of, any of the Collateral, except the security interest of and assignment and pledge to Bank hereunder and Permitted Liens. (b) Obligor will take all action requested by Bank, or which may be necessary or desirable, to perfect, continue, evidence, preserve, protect or validate the security interest of and assignment and pledge to Bank hereunder or to enable Bank to exercise and enforce its rights hereunder, including, but not limited to, (i) executing and delivering one or more notices, statements, agreements or other writings, and (ii) delivering to Bank, endorsed or accompanied by such instruments of assignment as Bank may specify, and stamping or otherwise marking, in such manner as Bank may specify, any and all chattel paper, instruments, letters and advices of credit and documents. (c) Obligor hereby authorizes Bank, at its option but without any obligation so to do, to file financing and continuation statements and amendments to financing statements, naming Obligor as debtor, with respect to any of the Collateral without the signature of Obligor, and agrees that a carbon, photographic or other reproduction of the Agreement or of a financing statement is sufficient as a financing statement. 3. Covenants Relating to Collateral. Obligor covenants that: (a) It shall at all times: (i) be the sole owner of each and every item of Collateral, (ii) defend the Collateral against the claims and demands of all persons, (iii) in the case of tangible property constituting part of the Collateral, (A) properly maintain and keep in good order and repair such property and (B) keep such property fully insured with responsible companies acceptable to Bank against such risks as such Collateral may be subject to, or as Bank may request, under policies containing loss payable clauses naming Bank as loss payee as its interests may appear and otherwise in form and substance satisfactory to Bank, and providing that: (1) all proceeds thereof shall be payable to Bank; (2) such insurance shall not be affected by any act or neglect of Obligor or other owner of the property described in such policy; and (3) such policy and loss payable clause may not be cancelled or amended except upon twenty days' prior written notice to Bank; (b) It will comply with the requirements of all leases, mortgages and other instruments relating to premises where any Collateral is located; (c) It will not sell or otherwise dispose of (i) any of its accounts included in the Collateral, except for purposes of collection in the ordinary course of business, (ii) any of its inventory included in the Collateral except in the ordinary course of business, (iii) any of its equipment included in the Collateral, except equipment that is obsolete or worn-out or equipment that is contemporaneously replaced with equipment of at least the same value and that is not subject to any lien except for Permitted Liens, (iv) any of its farm products included in the Collateral except in accordance with any Agricultural Financing Rider attached hereto or (v) any other Collateral without Bank's written consent; (d) It will give Bank prompt notice of (i) any change in (A) its name, identity or corporate structure, (B) the location of its chief executive office or any other place of business, or (C) the location of any of the Collateral or its books and records concerning any accounts, (ii) the location of each new place of business opened by Obligor, (iii) each new location of any Collateral, and (iv) any substantial loss or depreciation in the value of any of the Collateral, and will provide Bank with such other information as to the Collateral as Bank may request; and (e) If any account or general intangible included in the Collateral represents money owing pursuant to any contract for the improvement of real property or for a public improvement for purposes of the Lien Law of the State of New York (the "Lien Law"), Obligor shall (i) give Bank notice of such fact, (ii) receive and hold any money advance by Bank with respect to such account or general intangible as a trust fund to be first applied to the payment of trust claims as such term is defined in the Lien Law (Section 71 or otherwise), (iii) until such trust claim is paid, not use or permit the use of any such money for any purpose other than the payment of such trust claims and (iv) promptly upon the request of Bank, execute and deliver each agreement or other document, and take each other action, that Bank shall deem necessary or desirable at the sole option of Bank to give or file notice of Bank's interest in such account or general intangible pursuant to the Lien Law. 4. Certain Rights of Bank. (a) At any time and from time to time: (i) Bank may and is hereby authorized to transfer into or register in the name of itself or its nominee any instruments or documents that constitute a part of the Collateral without notice to Obligor; and (ii) Obligor will: (A) permit representatives of Bank during normal business hours to inspect its premises and books and records pertaining to the Collateral and make extracts from such books and records; and (B) upon request, enter into warehousing, lock box or other custodial arrangements satisfactory to Bank. (b) Should Bank at any time and for any reason deem itself to be insecure or the risk of non-payment or non-performance of any of the Obligations increased: (i) Bank may, without notice to Obligor: (A) notify account debtors and all other persons against whom Obligor has claims or rights of Bank's rights hereunder, collect all amounts payable with respect to such accounts, claims and rights directly and apply such collections to the repayment of the Obligations in such order as it may elect; (B) in its own or Obligor's name, demand, sue for, collect or receive any money or property payable or receivable on account of or in exchange for, make any compromise or settlement with respect to, or modify any of the terms of any of, the Collateral as Bank may in its sole discretion elect; (C) receive and open mail addressed to Obligor which bank reasonably believes relates to or is included in the Collateral and change the address for delivery of such mail to an address designated by Bank and notify the postal authorities of any such change; (D) in the name and on behalf of Obligor, endorse instruments and other evidences of payment that relate to or are a part of the Collateral; (E) appropriate and hold, or apply (directly or by way of set-off) to the payment of the Obligations (whether or not then due), all money of Obligor then or thereafter in possession of Bank, the balance of every deposit account (demand or time, matured or unmatured) of Obligor then or thereafter with Bank and every other claim of Obligor then or thereafter against Bank; and (F) with respect to any securities constituting part of the Collateral, in its own or Obligor's name, exercise any and all powers with respect thereto with the same force and effect as could Obligor; and (ii) Obligor will, upon request of Bank: (A) receive and hold all proceeds of Collateral in trust for Bank and not commingle any collections with any of its other funds; (B) immediately deliver such collections to Bank in the identical form received; and (C) deliver to Bank additional property as security for, or make one or more extra payments on account of, the Obligations in an amount satisfactory to Bank. (c) Bank may obtain the appointment of a receiver of any or all of the Collateral and Obligor consents to and waives any right to prior notice of such appointment. 5. Events of Default. (a) It shall be an Event of Default if: (i) Obligor defaults in the payment when due of any of the Obligations; (ii) Obligor otherwise defaults in the performance of any of the Obligations, (iii) any representation or warranty made by Obligor to Bank hereunder or in connection with any of the other Obligations proves to have been incorrect or misleading in any material respect when made; (iv) Obligor fails to pay when due any other indebtedness for borrowed money, the maturity of any such indebtedness is accelerated or an event occurs which, with notice or lapse of time or both, would permit acceleration of such indebtedness; (v) Obligor (if an individual) or any individual Guarantor dies or becomes incompetent, or any Guarantor challenges, or institutes any proceedings, or any proceedings are instituted, to challenge, the validity, binding effect or enforceability of its obligations with respect to any of the Obligations; (vi) Obligor challenges, or institutes any proceedings, or any proceedings are instituted, to challenge, the validity, binding effect or enforceability of this Agreement; (vii) Obligor (if a business entity) or any Guarantor (if a business entity) is dissolved or is a party to any merger or consolidation or sells or otherwise disposes of all or substantially all of its assets without the written consent of Bank; (viii) any Guarantor creates a security interest in or lien upon, or an attachment or levy is made upon, any assets of such Guarantor, or a judgment is rendered against any Guarantor or against Obligor; (ix) Obligor or any Guarantor becomes insolvent or unable to meet its debts as they mature, or is generally not paying its debts as they become due, or suspends or ceases its present business, or a custodian, as defined in Title 11 of the United States Code, of substantially all of its property shall have been appointed or taken possession; (x) a case under such Title 11, or any proceeding under any other federal or state bankruptcy, insolvency or other law relating to the relief of debtors, the readjustment, composition or extension of indebtedness or reorganization, is commenced by or against Obligor or any Guarantor; (xi) Obligor or any Guarantor makes any payment on account of any indebtedness subordinated to any of the Obligations in contravention of the terms of such subordination; or (xii) Obligor or any copartnership of which Obligor is a member is expelled from or suspended by any stock or securities exchange or other exchange. (b) The occurrence of an Event of Default shall be conclusively presumed to have increased the risk of non-payment or non-performance of the Obligations, and Bank shall be conclusively presumed, thereupon, to have deemed itself to be insecure. 6. Post-Event of Default Rights. Upon the occurrence of an Event of Default and at any time or from time to time thereafter: (a) In the case of any Event of Default, other than an Event of Default referred to in clause (ix) or (x) of paragraph (a) of Section 5, Bank may declare, by notice to Obligor, any and all of the Obligations immediately due and payable, and in the case of any Event of Default referred to in clause (ix) or (x) of paragraph (a) of Section 5, all of the Obligations shall automatically be and become due and payable, in either case without any other presentment, demand, protest or notice of any kind, anything in any other agreement to the contrary notwithstanding; (b) Bank shall have no obligation to make further loans, extensions of credit or other financial accommodations to or on behalf of Obligor, anything in any other agreement to the contrary notwithstanding; (c) Bank may exercise all other rights to which it is entitled hereunder, including but not limited to those specified in Section 4 hereof; (d) Obligor shall, upon request of Bank, assemble the Collateral and maintain or deliver it into the possession of Bank at such place or places as Bank may designate and as are reasonably convenient to both Bank and Obligor; and (e) Bank may (i) without notice, demand or other process, and without charge, enter any of Obligor's premises and, without breach of the peace, until Bank completes the enforcement of its rights in the Collateral, take possession of such premises or place custodians in exclusive control thereof, remain on such premises and use the same and any of Obligor's equipment for the purpose of completing any work-in-process, preparing any Collateral for disposition and disposing of or collecting any Collateral, and (ii) in the exercise of its rights under this Agreement, without payment of compensation of any kind, use any and all trademarks, trade styles, trade names, patents, patent applications, licenses, franchises and the like to the extent of Obligor's rights therein and Obligor hereby grants a license for that purpose. 7. General Representations, Warranties and Agreements. Obligor hereby represents, warrants and agrees that: (a) The execution, delivery and performance of this Agreement are within its powers, corporate or otherwise, have been duly authorized by all required action and do not and will not contravene any law or any agreement or undertaking to which it is a party or by which it may in any way be bound or, if Obligor is a corporation, its certificate of incorporation or by- laws; (b) Obligor will furnish Bank with all information concerning its business and financial condition as Bank may request including, but not limited to, periodic financial statements in form satisfactory to Bank and copies of federal and state income tax returns; and (c) Each of the representations and warranties contained in any Questionnaire submitted to Bank by Obligor in connection with this Agreement is true and correct on the date hereof as if made on the date hereof and all other information, including financial statements and projections, furnished to Bank at any time by or on behalf of Obligor was and will be complete and correct in all material respects to the extent necessary for the purpose of presenting the subject matter thereof fairly to Bank. 8. Expenses of Obligor's Duties; Bank's Right to Perform on Obligor's Behalf/Power of Attorney; Bank's Expenses and Indemnification. (a) Obligor's agreements and duties hereunder shall be performed by it at its sole cost and expense. (b) If Obligor shall fail to do any act or thing which it has covenanted or agreed to do hereunder, Bank may (but shall not be obligated to) do the same or cause it to be done and Obligor hereby irrevocably appoints Bank as the attorney-in-fact of Obligor, with full power of substitution and revocation, to take, in the name of Obligor or otherwise, each such action. The power of attorney given pursuant to the preceding sentence is coupled with an interest in favor of Bank and shall not be terminated or otherwise affected by the death, disability or incompetence of Obligor. (c) Obligor agrees to reimburse Bank for all costs and expenses, including attorneys' fees and disbursements, incurred, and to indemnify and hold Bank harmless from and against all losses suffered, by Bank in connection with (i) Bank's exercise of any right or remedy granted to it hereunder, (ii) any claim and the prosecution or defense thereof arising out of or in any way connected with this Agreement, and (iii) the collection or enforcement of the Obligations. (d) In connection with Bank's release or termination of all or any portion of the Collateral, whether because the Obligations are paid in full, this Agreement is being terminated or otherwise, Obligor shall pay Bank's standard Collateral Release Fee, as the same may be designated by Bank from time to time. (e) Amounts payable by Obligor under this Section 8 shall constitute Obligations which shall be payable on demand. 9. No Waivers of Rights Hereunder; Rights Cumulative. (a) No delay by Bank in exercising any right hereunder, or under any of the other Obligations, shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude other or further exercise thereof or the exercise of any other right. No waiver or amendment of any provision of this Agreement or of any of the other Obligations shall be enforceable against Bank unless in writing and signed by an officer of Bank, and unless it expressly refers to the provision affected; any such waiver shall be limited solely to the specific event waived. (b) All rights granted Bank hereunder shall be cumulative and shall be supplementary of and in addition to those granted or available to Bank with respect to the other Obligations or under applicable law and nothing herein shall be construed as limiting any such other right. (c) Bank shall not be required to take any steps necessary to preserve rights against prior parties, having or asserting liens against any part of the Collateral. 10. Assignment; Participations. (a) Bank may assign any or all of the Obligations and may transfer therewith any or all of the Collateral therefor and the transferee shall have the same rights with respect thereto as had Bank. Upon such transfer, Bank shall be released from all responsibility for the Collateral so transferred. (b) Bank may from time to time sell or otherwise grant participations in any of the Obligations and the holder of any such participation shall, subject to the terms of any agreement between Bank and such holder, be entitled to the same benefits with respect to any Collateral for the Obligations in which such holder is a participant as Bank. Obligor agrees that each such holder may exercise any and all rights of banker's lien, set-off and counterclaim with respect to its participation in the Obligations as fully as though Obligor were directly indebted to such holder in the amount of such participation. 11. Continuing Agreement: Termination. (a) This Agreement shall be a continuing agreement and shall apply to all future Obligations, notwithstanding that at any particular time all of the Obligations then outstanding shall have been paid in full. (b) This Agreement shall continue in full force and effect until written notice of termination shall have been received by Bank at its address determined in accordance with Section 14, but notwithstanding any such notice, this Agreement shall continue in full force and effect until all Obligations then outstanding (whether absolute or contingent) shall have been paid in full and all rights of Bank hereunder shall have been satisfied or other arrangements for the securing of such rights satisfactory to Bank shall have been made. Upon receipt of any such notice, Bank shall have no obligation to make further loans, extensions of credit or other financial accommodations to or on behalf of Obligor, anything in any other agreement to the contrary notwithstanding. 12. Governing Law; Consent to Jurisdiction and Venue; Waiver of Trial by Jury. This Agreement 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. Bank shall have the rights and remedies of a secured party under applicable law, including but not limited to the Uniform Commercial Code of New York. Obligor 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. Obligor 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. OBLIGOR 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 AGREEMENT, THE OBLIGATIONS OR ANY TRANSACTION CONTEMPLATED HEREBY. 13. Definitions. As used herein: (a) Each of the following terms has the meaning given it for purposes of Article 9 of the New York Uniform Commercial Code as in effect on the date of this Agreement: "account," "chattel paper," "deposit account," "document," "equipment," "farm products," "fixture," "general intangibles," "goods," "instrument," "inventory," "proceeds," and "products." (b) The following terms shall have the indicated meanings: "Guarantor" shall mean any maker, drawer, acceptor, endorser, guarantor, surety, accommodation party or other person liable upon or for any of the Obligations. "Permitted Liens" shall mean (i) the lien of any real estate mortgage in effect on the date of this Agreement to the extent that it is at any time a lien on any Collateral that constitutes a "fixture"; (ii) liens for taxes not yet due; (iii) other liens incurred in the ordinary course of business that do not (A) arise under the Employee Retirement Income Security Act of 1974 or (B) secure obligations which are due and payable or obligations for borrowed money; (iv) easements, rights-of-way and other similar encumbrances on real property which do not interfere with the ordinary conduct of the business of the Obligor; and (v) liens consented to by Bank in writing including, but not limited to,, any listed in Schedule B hereto. (c) The words "it" or "its" as used herein shall be deemed to refer to individuals and to business entities. 14. Notices; Agreement as to Reasonableness of Notice. Any notice or request hereunder may be given to Obligor or to Bank at their respective addresses set forth in this Agreement or at such other address as may hereafter be specified in a notice designated as a notice of change of address under this Section. Any notice or request hereunder may be given by mail, hand delivery or telegram, or by telephone or facsimile subsequently confirmed in a writing delivered by mail, hand delivery or telegram. Any requirement under applicable law of reasonable notice by Bank to Obligor of any event shall be met if notice is given to Obligor in the manner prescribed above at least seven days before (a) the date of such event or (b) the date after which such event will occur. 15. General. (a) If this Agreement is executed by two or more Obligors, they shall be jointly and severally liable hereunder, all provisions hereof regarding the Obligations or the Collateral shall apply to the Obligations and Collateral of any or all of them and the termination of this Agreement as to one or more of such Obligors shall not terminate this Agreement as to any remaining Obligors. (b) This Agreement shall be binding upon the heirs, executors, administrators, assigns or successors of each of the undersigned Obligors and shall inure to the benefit of and be enforceable by Bank, its successors, transferees and assigns. (c) Any provision of this Agreement 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 hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction. (d) The headings used in this Agreement are for convenience only and are not intended to be of substantive effect. This General Security Agreement is signed by each Obligor on the date first above written. G L C OUTSOURCING SERVICES, INC. By: s\ James D. Ryan, Jr. James D. Ryan, Jr., Vice President Schedule A to General Security Agreement [Exclusions from Collateral] / / The following property is specifically excluded from the definition of the term "Collateral"*: _______________________ Bank Officer's Initials ___________________ *except that: 1. Property (such as, for example, inventory) which would be excluded from the definition of "Collateral" by reason of its being set forth above shall nonetheless constitute "Collateral" if and to the extent that such property constitutes proceeds or products of or accessions to, any property (such as, for example, accounts) not so excluded; and 2. The exclusion from the definition of "Collateral" of property (such as, for example, inventory) by reason of its being set forth above shall not result in the exclusion of the proceeds (including property purchased with proceeds) or products of such property( such as, for example, accounts) if and to the extent that such proceeds or products consist of property that is not so excluded and such proceeds or products shall constitute "Collateral". If this Schedule A is not completed, no property shall be excluded from the definition of Collateral. _________________________________________________________________ Schedule B to General Security Agreement [Permitted Liens] / / Bank has consented to the liens specified below as Permitted Liens pursuant to Section 13 (b)(v) of this General Security Agreement: _______________________ Bank Officer's Initials EX-27 5 ARTICLE 9 FDS FOR 10-Q
9 1,000 3-MOS DEC-31-1995 SEP-30-1995 16,856 1,038 4,300 0 47,180 57,799 57,958 245,056 6,125 378,303 341,337 8,800 3,632 0 3,569 0 0 20,965 378,303 15,884 5,139 478 21,501 8,665 8,970 12,531 0 53 11,430 3,064 2,109 0 0 2,109 0.59 0.59 4.91 2,316 386 0 0 6,452 512 185 6,125 6,125 0 0
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