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Manually signed, sequentially numbered
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission File Number 33-16366
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SUMMIT BANK CORPORATION
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(Exact name of registrant as specified in its charter)
GEORGIA 58-1722476
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4360 CHAMBLEE-DUNWOODY ROAD, ATLANTA, GEORGIA 30341
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 454-0400
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X or No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 1, 1996, the aggregate market value of the Common Stock held by
persons other than directors and executive officers of the registrant was
$10,242,320 as determined by the most recent trades of registrant's Common
Stock known to the registrant. There is no established trading market for the
Common Stock of the registrant and these sporadic sales are not a reliable
indication of market value.
The exclusion of all directors and executive officers of the registrant for
purposes of this calculation should not be construed as a determination that
any particular director or executive officer is an affiliate of the registrant.
As of March 1, 1996, there were 1,407,688 shares of the Registrant's Common
Stock outstanding.
Page 1 of 168 sequentially numbered pages
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SUMMIT BANK CORPORATION
INDEX TO
ANNUAL REPORT ON FORM 10-K
<TABLE>
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PART 1.
PAGE
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<S> <C> <C>
ITEM 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Banking Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Location and Service Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) Asian-American Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) International Services Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(f) Vinings Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(g) Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(h) Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(i) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . 14
PART II.
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . . 14
ITEM 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
PART III.
ITEM 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ITEM 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ITEM 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . 69
ITEM 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
PART IV.
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 73
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
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PART 1.
ITEM 1. BUSINESS
OVERVIEW
Summit Bank Corporation ("Summit" or the "Company") was organized as a Georgia
corporation on October 15, 1986, primarily to become a bank holding company by
acquiring all the common stock of The Summit National Bank (the "Bank") upon
its formation. The Bank commenced business on March 10, 1988, and the primary
activity of the Company since then has been the ownership and operation of the
Bank. The Company had been conducting certain merchant banking related
activities since the early stages of its formation, and on July 1, 1989,
established a merchant banking subsidiary. This subsidiary, The Summit
Merchant Banking Corporation (the "Merchant Bank"), was deactivated effective
January 31, 1991. On December 31, 1993, the Bank acquired Vinings Bank &
Trust, N.A. ("Vinings"), a Cobb County, Georgia-based community national bank
formed in 1987. Vinings operated from one location which the Bank retained as
a branch office location. The Vinings acquisition provided further
opportunities for the Bank to pursue its identified markets in Cobb County in
addition to DeKalb and Fulton Counties. The acquisition was accounted for as a
purchase.
The Bank was organized as a banking association under the laws of the United
States. The Bank is engaged in the commercial banking business from its main
office and two branch offices, which are located in its primary service area in
northern metropolitan Atlanta, Georgia. The Bank seeks to serve four principal
markets: (i) individuals, professionals, and small to medium-sized businesses
in the Bank's primary service area; (ii) ethnic communities, principally
Asian-Americans, located in the Atlanta metropolitan area, including businesses
operated by members of such communities; (iii) individuals, professionals, and
businesses in the Atlanta metropolitan area requiring the international
financial transaction services offered by the Bank; and (iv) foreign
corporations and individuals requiring specialized banking services
(international private banking) in the Atlanta metropolitan area.
Management believes the identified markets are not now adequately served and an
opportunity exists for the Bank to further penetrate these markets by offering
a variety of traditional and specialized banking services emphasizing personal
service, cultural sensitivity and accessibility of management.
BANKING SERVICES
The Bank offers a full range of deposit services that are typically available
at most banks and savings and loan associations, including checking accounts,
NOW accounts, savings accounts and other time deposits of various types,
ranging from daily money market accounts to longer-term certificates of
deposits. The transaction accounts and time certificates are tailored to the
principal market areas at rates competitive to those offered in the area. In
addition, retirement accounts such as Individual Retirement Accounts ("IRAs")
are available. All deposit accounts are insured by the Federal Deposit
Insurance Corporation (the "FDIC") up to the maximum amount ($100,000 per
depositor). The Bank solicits these accounts from individuals, businesses,
associations, and governmental authorities.
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The Bank offers a full range of short to medium-term commercial and personal
loans. Commercial loans include both secured and unsecured loans for working
capital (including inventory and receivables), business expansion (including
acquisition of real estate and improvements), and purchase of equipment and
machinery. The Bank offers government guaranteed loans under the Small
Business Administration ("SBA") loan program. After origination of these
loans, the Bank usually sells the guaranteed portion of the loan (approximately
75%) resulting in gains on the sale. In addition, the Bank retains the
servicing rights to these loans which generate servicing income on the portion
sold. Personal (or consumer) loans include secured and unsecured loans for
financing automobiles, home improvements, education, and personal investments.
The Bank also offers, through an alliance with Independent Mortgage Associates,
Inc. ("IMA"), permanent mortgage loans. IMA pays a referral fee to the Bank
for each mortgage loan closed.
In addition to deposit and loan services, the Bank's other domestic services
include cash management services, safe deposit boxes, travelers checks, direct
deposit of payroll and social security checks, as well as automatic drafts for
various accounts. The Bank is a member of the HONOR and CIRRUS networks of
automated teller machines that may be used by Bank customers in major cities
throughout Georgia, the United States, and in various cities worldwide. The
Bank also offers both VISA and MasterCard credit cards to its customers through
a third party vendor. Merchant credit card processing is also available to the
Bank's customers through an alliance with Lynk Systems, Inc.
The Bank's international banking services include inbound and outbound
international funds transfers, inbound and outbound foreign collections, and
import and export letters of credit. The Bank is also actively involved in the
issuance of bankers acceptances. These drafts or bills of exchange facilitate
international trade and are available upon completion of a diligent credit
review process. In addition, the Bank offers private banking services to
foreign individuals and corporations in the establishment of business
operations in Atlanta. Specialized private banking services include bill
paying, statement and mail holding, currency exchange, international funds
transfers and arranging personal lines of credit (including credit card
services) for qualified foreign nationals conducting business in the United
States.
In addition, the Bank's private banking group assists U.S. domiciled executives
with a variety of personal banking services designed to support international
business objectives. These services include introductions to correspondent
financial services as well as to general business contacts maintained by the
Company in international trade markets.
The Bank does not presently offer personal or corporate trust services (other
than retirement custodial services for IRAs and similar plans).
LOCATION AND SERVICE AREA
The Bank leases its main office at 4360 Chamblee-Dunwoody Road, Atlanta,
Georgia 30341, which is in a five-story office building near the intersection
of Interstate 285 and Chamblee-Dunwoody Road, in DeKalb County. The Bank has a
branch facility situated within an 18,000 square foot office building owned by
the Company which was completed in August 1994 located at 3490 Shallowford Road
in Dekalb County, Chamblee, Georgia. The Bank relocated it's Atlanta,
Chinatown Square Shopping Center branch there in September 1994 and occupies
6,000 square feet of space which it leases from the Company. The Bank has also
leased a branch facility at One Paces West, Suite 150, 2727 Paces Ferry Road in
Vinings which it acquired in
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December 1993 through the purchase of Vinings. In January 1996 the Bank
purchased a 4500 square foot building situated on approximately 1.2 acres
located at 595 Franklin Road, Marietta, Georgia to serve as its fourth office.
There were no deposits acquired with the branch. Management expects to open
this office in second quarter 1996.
The Bank's primary service area ("PSA") is comprised of a section of North
Atlanta, Georgia located in the corridor bound by the growing Lenox and
Perimeter Center and Galleria retail and office complexes. The PSA includes
the city of Chamblee, portions of the city of Doraville, the DeKalb-Peachtree
Airport, the Perimeter Mall, Cumberland Mall in East Cobb County and the
Perimeter Business Park. The PSA is traversed by major thoroughfares such as
Interstate 285 to the North, Buford Highway and Peachtree Industrial Boulevard
in the South, Clairmont and Shallowford Roads in the East, and Interstate 75 in
the West.
ASIAN-AMERICAN MARKET
The Atlanta Asian-American population, one of the Bank's principal target
markets, consists of members of the Korean, Chinese, Japanese, Indian, and
Southeast Asian communities. The 1990 United States census indicates that the
Atlanta Asian-American population exceeds 75,000 people, with the majority of
this population located in north Atlanta including parts of DeKalb, Fulton, and
Cobb counties.
Management believes the Bank's main and branch offices are convenient to a
large number of Atlanta's Asian-Americans. At year-end 1995, approximately 50%
of the Bank's customers were Asian-American. The oldest and largest church
serving the Korean community is also located within the Bank's PSA.
Management believes the Atlanta Asian-American community can be characterized
as generally having a high savings rate, low unemployment, and a commitment to
economic advancement through education and hard work. A significant percentage
of the Atlanta Asian-American population consists of first generation U.S.
immigrants, many of whom management believes are constrained in their current
use of banking services at other institutions by language and other cultural
barriers.
The Bank has employed, and will continue to employ, personnel with Asian
language skills and first-hand knowledge of the communities to be served.
Management believes language ability and cultural sensitivity combined with
accessibility to senior management enhances the Bank's competitive position in
this market.
INTERNATIONAL SERVICES MARKET
Management believes a growing number of domestic businesses in the Atlanta
metropolitan area (and, in particular, a growing number of small to
medium-sized businesses) require the international services provided by the
Bank. While a number of financial institutions operating in the Bank's markets
offer such services, they are typically offered from international banking
departments located in downtown office facilities or an out-of-state location;
personnel in branch facilities closer to smaller businesses generally are not
trained to address these specialized needs. Management believes the Bank has
penetrated, and will be able to further penetrate, this market by providing
those businesses with convenient access to personnel specially trained to
provide such services.
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In addition to domestic businesses requiring international banking services,
management believes a growing number of foreign businesses operating in Atlanta
along with their executives and employees, frequently require the type of
international banking services provided by the Bank. Foreign nationals
associated with such businesses are often unfamiliar with United States banking
practices. The Bank has personnel with the requisite language and cultural
skills suited to serve this clientele. Management further believes the
international banking experience of management of the Bank, along with the
contacts of the directors of the Company and the Bank in the international and
domestic business communities, enhances the Bank's ability to compete in this
target market.
VININGS ACQUISITION
On December 31, 1993, the Bank acquired Vinings Bank & Trust, N.A., a Cobb
County-based community bank formed in 1987. In the acquisition, Vinings was
merged into the Bank and the Bank acquired all the assets of Vinings and
assumed all of its liabilities. As of the acquisition date, Vinings had
approximately $13 million in loans, $3 million in investment securities and $2
million in non-earning assets (including furniture, fixtures and equipment and
real estate owned) and it had approximately $16 million in deposits. The Bank
paid $.34 in cash for each outstanding share of Vinings common stock, for a
total purchase price of $255,000.
The acquisition of Vinings allowed the Bank to enter the Cobb County market at
a price considered by the Board of Directors to be attractive. Management
believes that Cobb County offers the opportunity to expand geographically the
provision of services in the Bank's traditional markets. According to the 1990
United States Census, Cobb County had the next largest Asian-American
population in Georgia (behind Fulton and DeKalb Counties), and Cobb County is
the home of numerous small to medium-sized businesses serving this important
suburban area of Atlanta.
SUPERVISION AND REGULATION
The Company and the Bank are subject to state and federal banking laws and
regulations which impose specific requirements or restrictions and provide for
general regulatory oversight with respect to virtually all aspects of
operations. These laws and regulations are generally intended to protect
depositors, not stockholders. To the extent that the following summary
describes statutory or regulatory provisions, it is qualified in its entirety
by reference to the particular statutory and regulatory provisions. Any change
in applicable laws or regulations may have a material effect on the business
and prospects of the Company. Beginning with the enactment of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and
following with the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), numerous additional regulatory requirements have been placed
on the banking industry in the past five years, and additional changes have
been proposed. The operations of the Company and the Bank may be affected by
legislative changes and the policies of various regulatory authorities. The
Company is unable to predict the nature or the extent of the effect on its
business and earnings that fiscal or monetary policies, economic control, or
new federal or state legislation may have in the future.
Federal Bank Holding Company Regulation
The Company is a bank holding company within the meaning of the Bank Holding
Company Act
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of 1956 (the "BHCA"). Under the BHCA, the Company is subject to periodic
examination by the Federal Reserve and is required to file periodic reports of
its operations and such additional information as the Federal Reserve may
require. The Company's and the Bank's activities are limited to banking,
managing or controlling banks, furnishing services to or performing services
for its subsidiaries, or engaging in any other activity that the Federal
Reserve determines to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto.
Investments, Control, and Activities. With certain limited exceptions, the
BHCA requires every bank holding company to obtain the prior approval of the
Federal Reserve before (i) acquiring substantially all the assets of any bank,
(ii) acquiring direct or indirect ownership or control of any voting shares of
any bank if after such acquisition it would own or control more than 5% of the
voting shares of such bank (unless it already owns or controls the majority of
such shares), or (iii) merging or consolidating with another bank holding
company.
In addition, and subject to certain exceptions, the BHCA and the Change in Bank
Control Act, together with regulations thereunder, require Federal Reserve
approval (or, depending on the circumstances, no notice of disapproval) prior
to any person or company acquiring "control" of a bank holding company, such as
the Company. Control is conclusively presumed to exist if an individual or
company acquires 25% or more of any class of voting securities of the bank
holding company. In the case of the Company, under Federal Reserve regulations
control will be rebuttably presumed to exist if a person acquires at least 10%
of the outstanding shares of any class of voting securities once the Company
registers the Common Stock under the Exchange Act. The regulations provide a
procedure for challenge of the rebuttable control presumption.
Under the BHCA, the Company is generally prohibited from engaging in, or
acquiring direct or indirect control of more than 5% of the voting shares of
any company engaged in, nonbanking activities, unless the Federal Reserve, by
order or regulation, has found those activities to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto.
Some of the activities that the Federal Reserve has determined by regulation to
be proper incidents to the business of banking include making or servicing
loans and certain types of leases, engaging in certain insurance and discount
brokerage activities, performing certain data processing services, acting in
certain circumstances as a fiduciary or investment or financial advisor, owning
savings associations, and making investments in certain corporations or
projects designed primarily to promote community welfare.
Source of Strength; Cross-Guarantee. In accordance with Federal Reserve
policy, the Company is expected to act as a source of financial strength to the
Bank and to commit resources to support the Bank in circumstances in which the
Company might not otherwise do so. Under the BHCA, the Federal Reserve may
require a bank holding company to terminate any activity or relinquish control
of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the
Federal Reserve's determination that such activity or control constitutes a
serious risk to the financial soundness or stability of any subsidiary
depository institution of the bank holding company. Further, federal bank
regulatory authorities have additional discretion to require a bank holding
company to divest itself of any bank or nonbank subsidiary if the agency
determines that divestiture may aid the depository institution's financial
condition. The Bank may be required to indemnify, or cross-guarantee, the FDIC
against losses it incurs with respect to any other bank controlled by the
Company, which in effect makes the Company's equity investments in healthy bank
subsidiaries available to the FDIC to assist any failing or failed bank
subsidiary of the Company.
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The Bank
General. The Bank is a national banking association and member of the Federal
Reserve System. The Office of Comptroller of the Currency (the "OCC") is the
primary regulator for the Bank. The OCC regulates or monitors all areas of the
Bank's operations, including security devices and procedures, adequacy of
capitalization and loss reserves, loans, investments, borrowings, deposits,
mergers, issuances of securities, payment of dividends, interest rates payable
on deposits, interest rates or fees chargeable on loans, establishment of
branches, corporate reorganizations, maintenance of books and records, and
adequacy of staff training to carry on safe lending and deposit gathering
practices. The Bank must maintain certain capital ratios and is subject to
limitations on aggregate investments in real estate, bank premises, and
furniture and fixtures.
Under FDICIA, all insured institutions must undergo regular on-site examination
by their appropriate banking agency. The cost of examinations of insured
depository institutions and any affiliates may be assessed by the appropriate
agency against each institution or affiliate as it deems necessary or
appropriate. Insured institutions are required to submit annual reports to the
FDIC and the appropriate agency (and state supervisor when applicable). FDICIA
also directs the FDIC to develop with other appropriate agencies a method for
insured depository institutions to provide supplemental disclosure of the
estimated fair market value of assets and liabilities, to the extent feasible
and practicable, in any balance sheet, financial statement, report of condition
or any other report of any insured depository institution. FDICIA also
requires the federal banking regulatory agencies to prescribe, by regulation,
standards for all insured depository institutions and depository institution
holding companies relating, among other things, to: (i) internal controls,
information systems, and audit systems; (ii) loan documentation; (iii) credit
underwriting; (iv) interest rate risk exposure; and (v) asset quality.
Transactions With Affiliates and Insiders. The Bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which place limits on the
amount of loans or extensions of credit to, or investments in, or certain other
transactions with, affiliates and on the amount of advances to third parties
collateralized by the securities or obligations of affiliates. In addition,
most of these loans and certain other transactions must be secured in
prescribed amounts. The Bank is also subject to the provisions of Section 23B
of the Federal Reserve Act that, among other things, prohibit an institution
from engaging in certain transactions with certain affiliates unless the
transactions are on terms substantially the same, or at least as favorable to
such institution or its subsidiaries, as those prevailing at the time for
comparable transactions with non-affiliated companies. The Bank is subject to
certain restrictions on extensions of credit to executive officers, directors,
certain principal stockholders, and their related interests. Such extensions
of credit (i) must be made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with third parties and (ii) must not involve more than the normal
risk of repayment or present other unfavorable features.
Branching. Georgia law presently limits the establishment of branches by a
state or national bank located in Georgia to the county in which the bank's
main office is located, but provides an exception for branches established
through the acquisition of certain existing institutions. DeKalb and Fulton
counties are considered one county under these rules. Under these rules, the
Bank can currently establish branches in DeKalb, Fulton and Cobb counties.
In February 1996 the State Legislature passed a bill allowing banks in the
State of Georgia to establish branches in any three additional counties after
July 1, 1996. Additionally, the bill
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allows banks to establish branches in any county after July 1, 1998. The bill
is expected to be signed into law.
On September 29, 1994, the Federal Interstate Banking Efficiency Act (the
"Interstate Act"), which expanded the ability of banks to compete interstate,
was enacted. The Interstate Act permits nationwide interstate acquisitions of
banks by bank holding companies and permits nationwide interstate mergers of
banks beginning June 1, 1997. States can legislatively opt not to permit
interstate bank mergers or can legislatively opt to permit interstate bank
mergers before the June 1, 1997, effective date. The Georgia General Assembly
adopted legislation which opted to permit nationwide interstate bank mergers
effective July 1, 1995.
Community Reinvestment Act. The Community Reinvestment Act requires that each
insured depository institution shall be evaluated by its primary federal
regulator with respect to its record in meeting the credit needs of its local
community, including low and moderate income neighborhoods, consistent with the
safe and sound operation of those institutions. These factors are also
considered in evaluating mergers, acquisitions, and applications to open a
branch or facility. The Bank received a satisfactory rating in its most recent
evaluation.
Other Regulations. Interest and certain other charges collected or contracted
for by the Bank is subject to state usury laws and certain federal laws
concerning interest rates. The Bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act governing disclosures of credit terms to consumer
borrowers, the Home Mortgage Disclosure Act of 1975 requiring financial
institutions to provide information to enable the public and public officials
to determine whether a financial institution is fulfilling its obligation to
help meet the housing needs of the community it serves, the Equal Credit
Opportunity Act prohibiting discrimination on the basis of race, creed or other
prohibited factors in extending credit, the Fair Credit Reporting Act of 1978
governing the use and provision of information to credit reporting agencies,
the Fair Debt Collection Act governing the manner in which consumer debts may
be collected by collection agencies, and the rules and regulations of the
various federal agencies charged with the responsibility of implementing such
federal laws. The deposit operations of the Bank also are subject to the Right
to Financial Privacy Act, which imposes a duty to maintain confidentiality of
consumer financial records and prescribes procedures for complying with
administrative subpoenas of financial records, and the Electronic Funds
Transfer Act and Regulation E issued by the Federal Reserve Board to implement
that act, which governs automatic deposits to and withdrawals from deposit
accounts and customers' rights and liabilities arising from the use of
automated teller machines and other electronic banking services.
Deposit Insurance
The deposits of the Bank are currently insured to a maximum of $100,000 per
depositor, subject to certain aggregation rules. The FDIC establishes rates
for the payment of premiums by federally insured bank and thrifts for deposit
insurance. Separate insurance funds (BIF, the Bank Insurance Funds, and SAIF,
the Savings Association Insurance Fund) are maintained for commercial banks and
thrifts, with insurance premiums from the industry used to offset losses from
insurance payouts when banks and thrifts fail. Due to the high rate of
failures in recent years, the fees that commercial banks and thrifts pay to BIF
and SAIF increased, and the FDIC has adopted a risk-based deposit insurance
premium system for all insured depository institutions, including the Bank,
which requires that a depository institution pay to BIF or SAIF from $.04
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to $.31 per $100 of insured deposits depending on its capital levels and risk
profile, as determined by its primary federal regulator on a semiannual basis.
In May 1995, the FDIC reduced the Bank's assessment rate to $.04 per $100 of
insured deposits. Also in 1995, the FDIC declared the BIF fully funded and
suspended assessments on certain financial institutions until further notice.
The assessment for the Bank was suspended under this ruling, however, there can
be no assurance that the FDIC will not reinstate an insurance assessment rate.
Any increase in deposit insurance premiums for the Bank will increase its cost
of funds, and there can be no assurance that such cost can be passed on to the
Bank's customers.
Dividends
The principal source of the Company's cash revenues comes from dividends
received from the Bank. The amount of dividends that may be paid by the Bank
to the Company depends on the Bank's earnings and capital position and is
limited by federal and state law, regulations, and policies. In addition, the
Board of Governors of the Federal Reserve Bank has stated that bank holding
companies should refrain from or limit dividend increases or reduce or
eliminate dividends under circumstances in which the bank holding company fails
to meet minimum capital requirements or in which its earnings are impaired.
As a national bank, the Bank may not pay dividends from its paid-in-capital.
All dividends must be paid out of undivided profits then on hand, after
deducting expenses, including reserves for losses and bad debts. In addition,
a national bank is prohibited from declaring a dividend on its shares of common
stock until its surplus equals its stated capital, unless there has been
transferred to surplus no less than one-tenth of the bank's net profits of the
preceding two consecutive half-year periods (in the case of an annual
dividend). The approval of the OCC is required if the total of all dividends
declared by a national bank in any calendar year exceeds the total of its net
profits for that year combined with its retained net profits for the preceding
two years, less any required transfers to surplus.
Under FDICIA, the Bank may not pay a dividend if, after paying the dividend,
the Bank would be undercapitalized. See "Capital Regulations" below.
Capital Regulations
The federal bank regulatory authorities have adopted risk-based capital
guidelines for banks and bank holding companies that are designed to make
regulatory capital requirements more sensitive to differences in risk profile
among banks and bank holding companies, account for off-balance sheet exposure,
and minimize disincentives for holding liquid assets. The resulting capital
ratios represent qualifying capital as a percentage of total risk-weighted
assets and off-balance sheet items. The guidelines are minimums, and the
federal regulators have noted that banks and bank holding companies
contemplating significant expansion programs should not allow expansion to
diminish their capital ratios and should maintain ratios well in excess of the
minimums. The current guidelines require all bank holding companies and
federally-regulated banks to maintain a minimum risk-based total capital ratio
equal to 8%, of which at least 4% must be Tier 1 capital. Tier 1 capital
includes stockholders' equity, qualifying perpetual preferred stock, and
minority interests in equity accounts of consolidated subsidiaries, but
excludes goodwill and most other intangibles and excludes the allowance for
loan and lease losses. Tier 2 capital includes the excess of any preferred
stock not included in Tier 1 capital, mandatory convertible securities,
10
<PAGE> 11
hybrid capital instruments, subordinated debt and intermediate-term preferred
stock, and general reserves for loan and lease losses up to 1.25% of
risk-weighted assets.
Under these guidelines, banks' and bank holding companies' assets are given
risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance sheet
items are given credit conversion factors to convert them to asset equivalent
amounts to which an appropriate risk-weight will apply. These computations
result in the total risk-weighted assets. Most loans are assigned to the 100%
risk category, except for first mortgage loans fully secured by residential
property and, under certain circumstances, residential construction loans, both
of which carry a 50% rating. Most investment securities are assigned to the
20% category, except for municipal or state revenue bonds, which have a 50%
rating, and direct obligations of or obligations guaranteed by the United
States Treasury or United States Government agencies, which have a 0% rating.
The federal bank regulatory authorities have also implemented a leverage ratio,
which is Tier 1 capital as a percentage of average total assets less
intangibles, to be used as a supplement to the risk-based guidelines. The
principal objective of the leverage ratio is to place a constraint on the
maximum degree to which a bank holding company may leverage its equity capital
base. The minimum required leverage ratio for top-rated institutions is 3%,
but most institutions are required to maintain an additional cushion of at
least 100 to 200 basis points.
FDICIA established a capital-based regulatory plan designed to promote early
intervention for troubled banks and requires the FDIC to choose the least
expensive resolution of bank failures. The capital-based regulatory framework
contains five categories of compliance with regulatory capital requirements,
including "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," and "critically undercapitalized." To qualify
as a "well capitalized" institution, a bank must have a leverage ratio of no
less than 5%, a Tier 1 risk-based ratio of no less than 6%, and a total
risk-based capital ratio of no less than 10%, and the bank must not be under
any order or directive from the appropriate regulatory agency to meet and
maintain a specific capital level. As of December 31, 1995, the Company and
the Bank were qualified as "well-capitalized." See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Under the FDICIA regulations, the applicable agency can treat an institution as
if it were in the next lower category if the agency determines (after notice
and an opportunity for hearing) that the institution is in an unsafe or unsound
condition or is engaging in an unsafe or unsound practice. The degree of
regulatory scrutiny of a financial institution will increase, and the
permissible activities of the institution will decrease, as it moves downward
through the capital categories. Institutions that fall into one of the three
undercapitalized categories may be required to (i) submit a capital restoration
plan; (ii) raise additional capital; (iii) restrict their growth, deposit
interest rates, and other activities; (iv) improve their management; (v)
eliminate management fees; or (vi) divest themselves of all or a part of their
operations. Bank holding companies controlling financial institutions can be
called upon to boost the institutions' capital and to partially guarantee the
institutions' performance under their capital restoration plans.
These capital guidelines can affect the Company in several ways. Rapid growth,
poor loan portfolio performance, or poor earnings performance, or a combination
of these factors, could change the Company's capital position in a relatively
short period of time, making an additional capital infusion necessary.
11
<PAGE> 12
FDICIA requires the federal banking regulators to revise the risk-based capital
standards to provide for explicit consideration of interest-rate risk,
concentration of credit risk, and the risks of non-traditional activities. It
is uncertain what affect these regulations, when implemented, would have on the
Company and the Bank.
The following table shows the leverage and risk-based regulatory capital ratios
at December 31, 1995, and December 31, 1994, for the Bank.
<TABLE>
<CAPTION>
ANALYSIS OF CAPITAL
REQUIRED ACTUAL EXCESS
-------- ------ ------
AMOUNT % AMOUNT % AMOUNT %
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
December 31, 1995:
Risk-based capital
Tier 1 capital $ 3,551 4.0% $12,468 14.2% $9,017 10.2%
Total capital $ 7,102 8.0% $13,678 15.4% $6,576 7.4%
Tier 1 leverage ratio $ 3,552 3.0% $12,568 10.6% $9,016 7.6%
December 31, 1994:
Risk-based capital
Tier 1 capital $ 3,220 4.0% $10,940 13.6% $7,720 9.6%
Total capital $ 6,440 8.0% $11,946 14.8% $5,506 6.8%
Tier 1 leverage ratio $ 3,197 3.0% $10,940 10.3% $7,743 7.3%
</TABLE>
Recent Legislative Developments
From time to time, various bills are introduced in the United States Congress
with respect to the regulation of financial institutions. Certain of these
proposals, if adopted, could significantly change the regulation of banks and
the financial services industry. The Company cannot predict whether any of
these proposals will be adopted or, if adopted, how these proposals would
affect the Company.
COMPETITION
The banking business is highly competitive. In one or more aspects of their
businesses, the Company and the Bank compete with other commercial banks,
savings and loan associations, credit unions, finance companies, mutual funds,
insurance companies, and brokerage and investment banking companies operating
in the metropolitan Atlanta area and elsewhere. Many of these competitors have
substantially greater resources and lending limits than the Bank and may offer
certain services, such as trust services, the Company and the Bank do not
provide. The Bank has several employees who are fluent in foreign languages
including Mandarin, Cantonese, Korean, German, French, Spanish and others which
further enhances the Bank's ability to compete in target markets. A competing
new bank was opened in August 1995 which targets the same Asian-American
customer base as the Bank. Management believes that the
12
<PAGE> 13
Company and the Bank will be able to continue to compete effectively with these
financial institutions, but no assurances can be given in this regard.
EMPLOYEES
As of March 1, 1996, the Bank had 75 full-time equivalent employees. Except to
support normal growth of business, additional hiring is not anticipated in
1996. The employees are not part of any collective bargaining agreement and
employee relations with the Company are considered good.
ITEM 2. PROPERTIES
The Bank's main office is at 4360 Chamblee-Dunwoody Road, Atlanta, DeKalb
County, Georgia 30341, on the ground floor of a five-story 100,000 square foot
office building near the intersection of Interstate 285 and Chamblee-Dunwoody
Road. The Bank has signed a lease for 18,247 square feet on the main and third
floors of the building, which lease provides base rental at $14.25 per square
foot per annum during the term of the lease and rights to extend its occupancy
of the leased space twice, for one additional year each, at a base rate of
$14.50 per square foot per annum. The initial term of the lease expires in
December 1998. The main office on the first floor contains 8,897 square feet
of space which includes six teller stations, two customer services stations,
the loan operations department, offices for loan officers, and the main
conference room. The Bank has an ATM attached to the building. The third
floor of the main office houses the international department, personnel
department, the operations department, and the executive offices.
The Company completed construction of its 18,000 square foot office building
located on 2.77 acres of land in Atlanta's Asian-American business district on
Shallowford Road near Buford Highway in August 1994. The Company leased 6,000
square feet of space to the Bank in September 1994 at a cost of $12.00 per
square foot for a branch office which was formerly located in the Atlanta
Chinatown Square Shopping Center. The Bank also leases 760 square feet on the
third floor which is provided for Independent Mortgage Associates. The Company
currently has leased 4,806 square feet to three other tenants which leases
provide base rental rates from $12.75 to $13.50 per square foot per annum. It
is the Company's intention to lease the remaining space to other professional
and commercial tenants. The Company incurred a total cost of $2.1 million for
the land and building including improvements and tenant finishes. In addition,
the branch has approximately $200,000 in furniture, fixtures and equipment at
this site. This branch office provides six teller stations, five customer
service stations, and five offices for lending officers and management. In
addition, the Bank has installed a drive-thru ATM and drive-thru teller window.
The Bank's branch office in the Vinings area of Cobb County is located at One
Paces West, Suite 150, 2727 Paces Ferry Road, N.W., Atlanta, Georgia 30339.
The office building contains 246,515 square feet of leasable space near the
intersection of Interstate 285 and Paces Ferry Road. The Vinings branch office
contains 5,266 square feet of space which the Bank has leased at a base rate of
$17.25 per square foot per annum. This space consists of four teller stations,
two drive-in windows, four customer service stations, five offices for
management and lending officers and a conference room. The Bank also has a
walk-up ATM at this location. The initial term of the lease expires June 2002.
13
<PAGE> 14
In January 1996, the Bank acquired a 4,560 square foot building situated on 1.2
acres located at 595 Franklin Road, Marietta, Georgia. This office contains
six teller stations, one drive-up window, three drive-in lanes, three offices
for lending officers and management and will also have a walk-up ATM. This
location will serve as the Bank's fourth office and is expected to open in
second quarter 1996.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine litigation
incidental to their business, pending against or involving assets of the
Company or the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matter was submitted during the fourth quarter of the fiscal year covered by
this report to a vote of security-holders, through the solicitation of
properties or otherwise.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
In October 1994, The Robinson Humphrey, Inc. became a market maker in the
Common Stock of the Company. The Company's shares are listed on the NASDAQ
Bulletin Board under the symbol "SBGA". All transactions involving the sale
and purchase of shares of the Common Stock known to the Company were
facilitated through The Robinson Humphrey, Inc. As of March 1, 1996 the quoted
purchase price for the Company's shares was $11.00 per share. There were 421
holders of record of the Company's Common Stock at March 1, 1996.
In 1994, the Company became cumulatively profitable and subsequently declared
its first cash dividend of $.07 per share on January 23, 1995. The Company
paid a total of $.28 per share in cash dividends during 1995. The Company
anticipates continuing the payment of cash dividends on a quarterly basis;
however the ability to pay dividends in the future would depend, in part, on
the earnings of the Bank and its ability to pay dividends to the Company, as to
which there can be no assurance.
The Bank may only pay dividends out of its net profits then on hand, after
deducting expenses, including losses and bad debts. In addition, the Bank is
prohibited from declaring a dividend on its shares of common stock until its
surplus equals its stated capital, unless there has been transferred to surplus
no less than one-tenth of the Bank's net profits of the preceding two
consecutive half-year periods (in the case of an annual dividend). The
approval of the OCC will be required if the total of all dividends declared in
any calendar year by the Bank exceeds the Bank's net profits to date, as
defined, for that year combined with its retained net profits for the preceding
two years less any required transfers to surplus. The Bank declared and paid
cash dividends of $300,000 to the Company in 1995. As of December 31, 1995,
the Bank had cumulative profits of $3,358,421, which is entirely available for
dividends to the Company in 1996 plus 1996 net earnings, if any, of the Bank,
provided that the necessary transfers of net profits to surplus were made. The
OCC also has the authority under federal law to enjoin a national bank from
engaging in what in its opinion constitutes an unsafe or unsound practice in
conducting its business, including the payment of a dividend under certain
circumstances.
14
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data presented below as of and for the
years ended December 31, 1995, 1994, 1993, 1992, and 1991 is unaudited and has
been derived from the Consolidated Financial Statements of the Company and its
subsidiaries, and from records of the Company. The information presented below
should be read in conjunction with the Consolidated Financial Statements, the
Notes to Consolidated Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Averages are
derived from daily balances.
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data) As of December 31,
- -------------------------------------------------------------------------------------------------------------
Balance Sheet Data 1995 1994 1993 1992 1991
- ------------------ --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Total assets $ 130,076 $ 108,146 $ 104,526 $ 78,119 $ 70,520
Investment securities 32,702 19,274 19,970 9,575 4,625
Loans 78,177 73,801 73,190 57,661 53,420
Allowance for loan losses 1,686 1,603 1,774 858 812
Deposits 109,816 90,639 88,376 65,275 59,370
Obligations under capital lease 152 166 -- 24 148
Stockholders' equity 15,413 13,273 11,441 9,783 8,762
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
- --------------------------------------------------------------------------------------------------------------
Statement of Income Data 1995 1994 1993 1992 1991
- ------------------------ -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Interest income $ 10,539 $ 8,545 $ 6,453 $ 6,175 $ 6,420
Interest expense 4,070 2,800 2,354 2,610 3,259
---------- ---------- ---------- ---------- ----------
Net interest income 6,469 5,745 4,099 3,565 3,161
Provision for loan losses 397 430 611 711 876
---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 6,072 5,315 3,488 2,854 2,285
Non-interest income 2,873 2,660 2,299 2,717 1,411
Non-interest expenses 5,802 5,209 4,211 4,525 3,802
Income tax expense (benefit) 1,042 838 (82) 25 --
---------- ---------- ---------- ---------- ----------
Net Income (loss) $ 2,101 $ 1,928 $ 1,658 $ 1,021 $ (106)
========== ========== ========== ========== ==========
Per Share Data
- --------------
Book value per share at year end $ 10.95 $ 9.43 $ 8.13 $ 6.95 $ 6.22
Net income (loss) per share 1.33 1.37 1.18 .73 (.08)
Weighted-average common equivalent
shares outstanding 1,630,610 1,407,688 1,407,688 1,407,688 1,407,438
Dividends declared $ .28 $ -- $ -- $ -- $ --
Ratios
- ------
Return on average assets 1.74% 1.78% 1.95% 1.38% (0.16%)
Return on average equity 15.09% 15.65% 16.02% 11.16% (1.18%)
Average equity/average assets 11.51% 11.37% 12.21% 12.37% 13.69%
Net interest margin 5.90% 5.79% 5.25% 5.26% 5.13%
Non-performing assets/total loans
and other real estate .14% .37% 2.67% 3.70% 3.67%
Allowance for loan losses/total loans 2.16% 2.17% 2.42% 1.49% 1.52%
Non-interest expense/net
interest income and non-interest income 62.11% 61.98% 65.82% 72.03% 83.16%
</TABLE>
15
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Performance Overview for 1995
Summit Bank Corporation ("Company") reported record net income of $2,101,000 in
1995 representing an increase of 9% over the prior year. Management attributes
the improvement to a stronger interest margin coupled with an 11% increase in
average earning assets. Net income for 1994 increased 16% to $1,928,000 as
compared to $1,658,000 in 1993.
Reported net income per share for 1995 was $1.33 compared to $1.37 in 1994.
The decline in earnings per share is attributed to the dilutive effect of
outstanding stock warrants and options which, prior to 1995, were antidilutive.
Weighted-average common equivalent shares outstanding in 1995 were 1,630,610
compared to 1,407,688 in 1994. Earnings per share in 1994 of $1.37 represented
an increase of 16% over 1993.
The return on average assets was 1.74% in 1995 as compared to 1.78% in the
previous year. This compares favorably to the Company's peer group which
posted an average return of 1.20% of average assets. During 1995, the
Company's average assets increased by $12.5 million, or 12%, to $121 million
compared to $108 million in 1994. In 1993, the Company posted a return on
average assets of 1.95% which reflected a year of very strong earnings further
benefited by a reduced effective tax rate from utilization of net operating
loss carryforwards from prior years. The return on average equity was 15.1% in
1995 compared to 15.7% in 1994. For 1993, return on average equity was 16.0%.
Stockholders' equity rose to $15.4 million at year end 1995, an increase of
over 16% as compared to year end 1994.
The Company began paying quarterly cash dividends in February 1995 at an
annualized rate of $.28 per share. In late 1994 the Company engaged an
investment brokerage firm to help establish a market for trading the stock. At
December 31, 1995, the most recent trade of the Company's stock was $10.25 per
share. Common stock of the Company is listed as "SBGA" on the NASDAQ Bulletin
Board.
Net interest income increased 13%, or $724,000, to $6.5 million from $5.7
million reported in 1994. The Company's interest margin increased to 5.9% in
1995, the fifth consecutive year of an increase. Improved loan quality
resulted in a significant reduction in net loan charge-offs thus reducing the
provision for loan losses by $33,000 from 1994. Non-interest income increased
$213,000 to $2,873,000 in 1995 led by increases in international fees,
overdraft and NSF charges on deposit accounts and a reduction in losses on
sales of securities. Offsetting these improvements were lower gains from the
sale of loans which declined $311,000 in 1995 as compared to 1994 due to lower
origination volumes of government guaranteed Small Business Administration
("SBA") loans. Despite the decline in gains, the Company was once again
recognized by SBA as the most active lending institution in the State of
Georgia, a distinction held by Summit for the last four consecutive years.
Non-interest income rose $361,000 in 1994 to $2,660,000 representing an
increase of 16% over $2,299,000 in 1993.
The Company experienced an increase in non-interest expenses of $593,000 in
1995, or 11.4%, over 1994. Most of this increase, $374,000, was attributed to
additional staff expenses to support business expansion experienced in 1995.
Other operating expenses accounted for $142,000 of the increase in total
non-interest expenses due largely to implementation of a new data processing
16
<PAGE> 17
system in April 1995. Additionally, the Company made a decision to outsource
all check processing functions to improve operating efficiencies of the
organization. Despite the increase in non-interest expenses, the Company's
efficiency ratio (operating expenses as a percentage of net interest income and
non-interest income) remained constant at 62% for 1995 and 1994. Non-interest
expenses increased in 1994 by 24%, or $998,000, as compared to 1993. This
sharp increase was attributed to additional staffing associated with the
acquisition of Vinings Bank & Trust, N.A. on December 31, 1993.
The Company reported 1995 year-end total assets of $130 million, an increase of
20% above 1994 year-end assets of $108 million. Asset growth was fueled by
deposits which increased 21%, or $19 million, from 1994 to 1995, as a result of
the opening of the Asian Banking Center in September 1994. Net loans increased
6%, absorbing over $4 million of the deposit growth and resulting in total
loans of over $78 million at December 31, 1995. As deposit growth
substantially outpaced loan growth, the Company placed the majority of the
additional funds in adjustable-rate investment securities to obtain a higher
short-term yield and maintain a strong liquidity position. Total asset growth
was over 3% in 1994 as compared to 1993 total year-end assets of $105 million.
Fourth Quarter 1995 Results
Net income for the fourth quarter of 1995 was $894,000, an increase of 96% over
$456,000 for the same period in 1994. The sharp increase was the result of
significantly higher gains from sales of SBA loans, lower provision for loan
losses and fewer losses from sales of investment securities. SBA gains
increased $141,000 from the comparable quarter in 1994 while provision for loan
losses and losses from sales of securities reduced $150,000 and $176,000,
respectively. The Bank frequently experiences fluctuations in quarterly SBA
loan volumes which are the result of construction lending cycles and year-end
business sales of customers.
Net Interest Income
Net interest income, the primary source of revenue for the Company, is a
function of the yield earned on average interest-earning assets and the rate
paid on average interest-earning liabilities. Changes in net interest income
from period to period reflect the increases or decreases in average
interest-earning assets, average interest-bearing liabilities and the interest
rate spread which is affected by the degree of mismatch in maturity and
repricing characteristics of the Company's interest-earning assets and
interest-bearing liabilities.
Net interest income increased 13% in 1995 to $6.5 million, as compared to last
year, resulting in a net interest margin of 5.90%. Average interest-earning
assets increased 11%, or $10.4 million. Investment securities represented the
majority of the change in average earning assets, increasing $11.1 million
while average loan volumes decreased $2 million. Average interest-bearing
liabilities increased 8%, or $6.3 million, over 1994. Average time deposits
accounted for the majority of this increase, $6.7 million, while money market
accounts also increased $3.0 million. Slight declines were noted in average
NOW accounts and savings deposits of $1.5 million and $1.4 million,
respectively.
Net interest income for 1994 increased 40% to $5.7 million from $4.1 million in
1993. This substantial increase was largely attributed to the acquisition of
Vinings Bank & Trust, N.A. on December 31, 1993, which included approximately
$13 million in loans and $3 million in
17
<PAGE> 18
investment securities. Average earning assets increased over $21 million from
1993 to 1994 while average interest-bearing liabilities increased only $14
million. An increasing interest rate environment in 1994 was also a positive
contributing factor to the increase in net interest income due to the Company's
asset sensitive interest risk profile. Summit posted an interest margin in
1994 of 5.79%, an improvement of 54 basis points over the 5.25% interest margin
for 1993.
18
<PAGE> 19
The following table sets forth information with respect to the average
balances, interest income and average yield by major categories of assets; the
average balances, interest expense and average rate by major categories of
liabilities; the average balances of noninterest-earning assets,
noninterest-bearing liabilities and stockholders' equity; and net interest
income, interest rate spread, and net interest margin for the years ended
December 31, 1995 and 1994.
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEETS 1995 1994
--------------------------------- ------------------------------
AVERAGE INCOME/ YIELDS/ Average Income/ Yields/
(Dollars in thousands) BALANCES EXPENSE RATES Balances Expense Rates
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Loans (1) $ 73,647 $8,142 11.06% $ 75,589 $7,385 9.77%
Investment securities - taxable 30,970 2,100 6.78% 19,532 994 5.09%
Investment securities - tax exempt (2) -- -- -- 336 18 5.36%
Federal funds sold 4,998 294 5.88% 3,764 152 4.04%
Interest-bearing deposits in other banks 81 3 3.70% 41 2 4.88%
- -------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 109,696 10,539 9.61% 99,262 8,551 8.61%
- -------------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets:
Cash and due from banks 5,736 5,318
Premises and equipment, net 2,809 1,758
Allowance for loan losses (1,777) (1,786)
Other assets 4,446 3,824
- -------------------------------------------------------------------------------------------------------------------------
Total noninterest-earning assets 11,214 9,114
- -------------------------------------------------------------------------------------------------------------------------
Total assets $120,910 $108,376
=========================================================================================================================
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts $ 6,618 171 2.58% $ 8,135 206 2.53%
Money market 20,806 890 4.28% 17,830 578 3.24%
Savings deposits 8,459 278 3.29% 9,885 248 2.51%
Other time deposits 45,002 2,711 6.02% 38,321 1,744 4.55%
- -------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 80,885 4,050 5.01% 74,171 2,776 3.74%
- -------------------------------------------------------------------------------------------------------------------------
Other interest-bearing liabilities:
Federal funds purchased 19 1 5.26% 24 -- --
Short-term borrowings and obligations
under capital lease 167 19 11.38% 555 24 4.32%
- -------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 81,071 4,070 5.02% 74,750 2,800 3.75%
- -------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities
and stockholders' equity:
Demand deposits 21,086 17,694
Other liabilities 4,831 3,613
Stockholders' equity 13,922 12,319
- -------------------------------------------------------------------------------------------------------------------------
Total noninterest-bearing
liabilities and stockholders' equity 39,839 33,626
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $120,910 $108,376
=========================================================================================================================
Interest rate spread 4.59% 4.86%
Net interest income $6,469 $5,751
====== ======
Net interest margin (3) 5.90% 5.79%
</TABLE>
(1) Average loans include non-performing loans. Interest on loans
includes loan fees of $258,000 in 1995 and $319,000 in 1994.
(2) Interest income and rates include the effects of a tax equivalent
adjustment using a tax rate of 34%, in adjusting tax-exempt interest
on tax exempt investment securities to a fully taxable basis.
(3) Net interest margin is net interest income divided by average total
interest-earning assets.
19
<PAGE> 20
Changes in Net Interest Income
The table below details the components of the changes in net interest income
for the last two years. For each major category of interest-earning assets and
interest-bearing liabilities, information is provided with respect to changes
due to average volumes, changes due to rates, and the proportionate allocation
of changes in both volumes and rates to the changes due to volumes and the
changes due to rates.
<TABLE>
<CAPTION>
1995 COMPARED WITH 1994(1) 1994 Compared with 1993(1)
DUE TO CHANGES IN Dues to changes in
-------------------------------------- ----------------------------------
(In thousands) NET Net
AVERAGE AVERAGE INCREASE Average Average Increase
Interest Income VOLUME RATE (DECREASE) Volume Rate (Decrease)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans $(194) $951 $757 $1,598 $190 $1,788
Investment securities 683 405 1,088 355 (20) 335
Federal funds sold 60 82 142 (74) 49 (25)
Interest-bearing deposits in other banks 1 0 1 (1) 1 --
- --------------------------------------------------------------------------------------------------------------
Total interest income 550 1,438 1,988 1,878 220 2,098
Interest expense
- ---------------------------------------------------------------------------------------------------------------
NOW accounts (39) 4 (35) 115 4 119
Money market 107 205 312 178 24 202
Savings deposits (40) 70 30 (11) (49) (60)
Other time deposits 338 629 967 211 (26) 185
Federal funds purchased -- 1 1 -- -- --
Short-term borrowings and
obligations under capital lease (25) 20 (5) (6) 6 --
- --------------------------------------------------------------------------------------------------------------
Total interest expense 341 929 1,270 487 (41) 446
- --------------------------------------------------------------------------------------------------------------
Change in net
interest income $209 $509 $718 $1,391 $261 $1,652
==============================================================================================================
</TABLE>
(1) The change in interest due to both rate and volume has been allocated to
the volume and rate components in proportion to the relationship of the
dollar amounts of the absolute change in each.
20
<PAGE> 21
Non-interest Income
The following table presents the principal components of non-interest income
for the years ended December 31, 1995, 1994, and 1993.
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fees for international banking services $1,145 $ 932 $ 675
Gains on sales of loans 713 1,024 1,197
Overdraft and NSF charges 362 222 166
Service charge income 216 227 160
Net Losses on sales of investment securities (2) (121) --
Gains on sales of other real estate -- 77 --
Other 439 299 101
- -------------------------------------------------------------------------------------------------------------
Total non-interest income $2,873 $2,660 $2,299
=============================================================================================================
</TABLE>
The Company's continuing emphasis on expansion of noninterest income resulted
in an increase of 8% in 1995 to $2.9 million. Fees from international trade
activities led the improvement in other income for 1995, increasing $213,000 as
a result of increased business volume. Total international fees for 1995 were
$1.1 million, representing a 23% increase over 1994. An increase in the volume
of insufficient and overdraft charges, coupled with more stringent guidelines
for assessing these fees, generated an additional $140,000 over the prior year,
increasing 63% to $362,000. The Company recognized $2,000 of net losses from
sales of investment securities in 1995, compared to net losses of $121,000 in
1994, thus increasing non-interest income by $119,000.
Offsetting these improvements, the Company experienced a reduction in gains
from sales of SBA loans of $311,000 from 1994 to 1995. During 1995 the Bank
originated $9.8 million of new SBA loans as compared to $20.6 million in 1994.
Total guaranteed amounts sold for the two comparable years were $7.6 million
and $14.0 million, respectively. Management attributes the decline in new
originations to both competitive factors and SBA lending program limitations.
Effective January 1, 1995 the SBA reduced the maximum loan guarantee amount on
the program to $500,000, from $750,000. Also, during the last two years the
Atlanta SBA lending market has seen several new participating financial
institutions enter this line of business. Despite these issues, according to
information provided by the SBA, the Bank produced the most SBA loans of any
financial institution in the State of Georgia for the fourth consecutive year.
Also, according to that same source, the Bank originated one of every six SBA
loans originated by the top ten lenders in Georgia. The Bank's loan servicing
portfolio for third parties increased to $49 million at year end 1995 compared
to $47 million at year end 1994.
Non-interest income increased $361,000 from 1993 to 1994 despite $121,000 of
losses from sales of investment securities. This improvement was the result of
an increase of $257,000 in international fees and gains recorded from the sale
of foreclosed properties of $77,000. Additionally in 1994, the Company
recorded a $32,000 recovery of interest and legal fees on a loan previously
charged-off and amortized $75,000 in negative goodwill. Gains from the sale of
SBA loans declined $173,000 from 1993 to 1994.
21
<PAGE> 22
The decline in gains from the sale of SBA loans in 1994 versus 1993 was
attributed to lower loan origination volume.
Non-interest Expenses
The following table presents the principal components of non-interest expenses
for the years ended December 31, 1995, 1994, and 1993.
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries and employee benefits $3,046 $2,672 $2,039
Net occupancy 452 403 355
Equipment 408 380 377
Accounting, legal, and other professional 286 318 179
Data/item processing 218 110 66
Insurance 181 277 214
Postage and courier 168 133 92
Marketing and community relations 157 137 108
Other losses 137 111 51
Telephone 132 103 92
Office supplies 130 136 80
Directors fees 64 25 7
Dues and memberships 58 53 39
SBA origination commissions -- 4 104
Provision for losses on sales of other real estate -- 62 96
Expenses on other real estate -- 5 35
Other operating expenses 365 280 277
- -------------------------------------------------------------------------------------------------------------
Total non-interest expenses $5,802 $5,209 $4,211
=============================================================================================================
</TABLE>
Non-interest expenses increased 11% in 1995 largely due to expansion of
personnel expenses and costs associated with the implementation of a new data
processing system. Staffing levels were increased to 75 employees to support
the business growth experienced during the year. Total assets increased to
$1.73 million per employee compared to $1.66 million at year-end 1994, an
improvement of over 4%. Total salaries and employee benefits costs increased
$374,000, from $2.7 million last year, an increase of 14%. Increases in
personnel costs in 1995 were largely attributed to temporary and overtime
staffing requirements to successfully implement the new data processing system
in April 1995.
In 1994 the Company completed construction of a three-story 18,000 square foot
office building on Shallowford Road in Chamblee, Georgia. The Bank occupies
the first floor of this building with the remaining two floors being leased to
non-related tenants until such time as the Company needs to utilize additional
space. The Company has placed the building with a professional property
manager and at year end 1995 had obtained lease agreements on 76% of the
building, including the main floor. These leases range from two to five years
in length with options to extend.
The Company's decision to implement a new data processing system was driven by
the need to remain technologically competitive and improve operating
efficiencies. The result was a fully automated computer system encompassing
all functions of the Bank. The impact on equipment expenses was a net increase
$28,000 over 1994. This consisted of an increase in equipment
22
<PAGE> 23
depreciation of $93,000 offset by a reduction in maintenance and equipment
rental expenses of $65,000 resulting from the replacement of dated equipment.
To further improve long-term operating efficiency without incurring significant
technology dependent capital expenditures, the Company decided to outsource all
check processing functions to a third party. This resulted in avoidance of
significant investment in additional hardware and software and additional
personnel needed to support this function. The new data processing service
provider, Bisys, Inc., allows the Bank to offer more advanced products
including automated cash management, 24-hour telephone banking, origination of
electronic funds transfers, and multi-lingual automated teller machines,
further positioning the Company to be able to address debit cards, overnight
investment accounts and home banking. Additionally, the new system will
provide management with more complete reporting and customer profitability
analyses. The total impact of this new system on 1995 expenses was $108,000 in
additional costs; however, management considers the increase necessary to
remain competitive in an ever-advancing technological industry.
The Company began paying fees to its directors of the Company in 1995 resulting
in an increase of $39,000 over 1994 to $64,000. Prior to 1995, only directors
of the Bank were paid for their services. Postage and courier expenses
increased $35,000 to $168,000 in 1995. Approximately half of this increase was
attributed to increased business volumes in international banking services
which require overnight delivery of documents. In April 1995, the Bank
extended the deposit processing day from 2:00 p.m. to 4:00 p.m. to better meet
its customers' needs. This also resulted in additional courier services for
all three branches. The Company reduced accounting, legal and professional
fees in 1995 by $32,000, or 10%. There were no foreclosures in 1995 which
created a reduction in the provision for losses on sales of other real estate
by $62,000 from 1994. In July 1995, the Federal Deposit Insurance Corporation
("FDIC") reduced the Bank's deposit insurance rate for insured deposits to $.04
per $100, from $.23 per $100, effective retroactively to May 1995. As a result
of the reduced premiums, the Company's FDIC insurance expense decreased $87,000
from 1994. Additionally, the FDIC has suspended payment of insurance premiums
of certain "well-capitalized" financial institutions, with the exception of a
minimum $2,000 premium, until further notice. Summit's "well-capitalized"
position enables it to benefit from this suspension of premiums. However,
there can be no assurance that the FDIC will not begin assessing insurance
premiums in the future thereby resulting in additional expense for the Company.
Non-interest expenses increased $998,000 in 1994 compared to 1993. This
increase was substantially the result of the additional personnel costs
associated with the acquisition of Vinings Bank and Trust, N.A. which became
the Bank's third office. Incentive compensation also increased during 1994 as
a result of the significant increase in pre-tax earnings of the Company.
Occupancy expenses also increased $48,000 in 1994 due to the new Vinings
location. Accounting, legal and other professional fees increased $139,000 due
mostly to legal costs associated with charge-offs and recoveries of loans
related to the acquisition of Vinings. Other losses increased $60,000 from
1993 to 1994 due to certain recourse credit card losses. During 1994, the
Company embarked on a strategy of increasing the volume of in-house generated
SBA loans thus lessening reliance on third-party SBA loan originators and
significantly reducing SBA commissions to third-party originators.
23
<PAGE> 24
Loan Portfolio
Loans are expected to produce higher yields than investment securities and
other interest earning assets (assuming that credit losses are not excessive).
Thus the absolute volume of loans and the volume as a percentage of total
earning assets are important determinants of the net interest margin. The
Company experienced a decline in average loan volumes in 1995 by $1.9 million,
however, the third and fourth quarters reflected a positive change to this
trend. Net loan outstandings increased to $76 million as compared to $72
million at year end 1994, an increase of 6%. Commercial loans secured by real
estate accounted for most of this increase, growing from $47 million to $50
million at the comparable year ends. Consumer loans increased $437,000 to $4.8
million at December 31, 1995. At both year end 1995 and 1994, the Company had
loans held for sale of $1.5 million. The Company maintains a posture of
originating loans with rates that fluctuate with the prime lending rate. At
December 31, 1995, 64% of the total loan portfolio had floating or adjustable
rates.
The following table presents the composition of the Company's loan portfolio at
December 31, 1995 and 1994.
<TABLE>
<CAPTION>
(In thousands) 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial, financial, and agricultural $22,615 $21,752
Real estate - construction 269 --
Real estate - mortgage 50,174 47,049
Installment loans to individuals 4,816 4,379
Less: unearned income (1,179) (883)
- -----------------------------------------------------------------------------------------------------------
Loans, net of unearned income 76,695 72,297
Loans held for sale - SBA 1,482 1,504
Less: allowance for loan losses (1,686) (1,603)
- -----------------------------------------------------------------------------------------------------------
Net loans $76,491 $72,198
===========================================================================================================
</TABLE>
The following table presents a maturity analysis of the Company's loan
portfolio segregated between loans with predetermined interest rates and loans
with floating or adjustable rates at December 31, 1995.
<TABLE>
<CAPTION>
Loans Maturing
------------------------------------------------------
Within 1-5 After 5
(In thousands) 1 Year Years Years Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loans with:
Predetermined interest rates $16,104 $10,288 $ 2,021 $28,413
Floating or adjustable rates 12,759 11,664 25,341 49,764
- -----------------------------------------------------------------------------------------------------------
Total loans $28,863 $21,952 $27,362 $78,177
===========================================================================================================
</TABLE>
Allowance and Provision for Loan Losses
The allowance for loan losses represents a reserve for potential losses in the
loan portfolio. The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans, with particular
emphasis on non-accruing, past due, and other loans that management believes
require special attention.
24
<PAGE> 25
For significant problem loans, management's review consists of evaluation of
the financial strengths of the borrower, the related collateral, and the
effects of economic conditions. General unallocated reserves against the
remaining loan portfolio are based on analysis of historical loan loss ratios,
loan charge-offs, delinquency trends, and previous collection experience, along
with an assessment of the effects of external economic conditions. The Company
also utilizes an independent loan review process in assessing the overall
adequacy of the allowance for loan losses.
The provision for loan losses is a charge to income in the current period to
replenish the allowance and maintain it at a level that management has
determined to be adequate. The Company's provision for loan losses for 1995
was $397,000 as compared to $430,000 in 1994, reflecting the Company's
continued reduction in net charge-off experience and the improvement in the
Company's asset quality during the year.
Net loan charge-offs in 1995 dropped significantly to .43% of average net loans
outstanding from .80% in 1994. Most of this improvement was a reduction in
gross charge-offs of $235,000 from the previous year, a decline of 21%, while
recoveries increased $52,000 over 1994.
Net loan charge-offs for 1994 represented .80% of average loans outstanding, or
$601,000, compared to 1.00% of average loans, or $587,000, for 1993. Net
charge-offs for 1994 remained basically unchanged from 1993 as management
aggressively addressed certain problem loans acquired from Vinings in the first
quarter of 1994. These loans were adequately covered by reserves established
at the time of the acquisition.
The allowance for loan losses represented 2.16% of total loans at December 31,
1995 compared to 2.17% at year end 1994. The determination of the allowance
for loan losses rests upon management's judgment about factors affecting loan
quality and assumptions about the economy. Management considers the year end
allowance appropriate and adequate to cover possible losses in the loan
portfolio; however, management's judgment is based upon a number of assumptions
about future events, which are believed to be reasonable, but which may or may
not prove valid. Thus, there can be no assurance that charge-offs in future
periods will not exceed the allowance for loan losses or that additional
increases in the allowance for loan losses will not be required. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses. Such agencies may
require the Company to recognize additions to the allowance based on their
judgments about information available to them at the time of their examination.
25
<PAGE> 26
The following table represents an analysis of the Company's allowance for loan
losses including the provision for loan losses and net loan charge-offs for the
years ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Allowance for loan losses at beginning of year $1,603 $1,774
- -------------------------------------------------------------------------------------------------------------
Charge-offs:
Commercial, financial, and agricultural 364 645
Real estate 453 416
Installment loans to individuals 79 70
- -------------------------------------------------------------------------------------------------------------
Total 896 1,131
- -------------------------------------------------------------------------------------------------------------
Recoveries:
Commercial, financial, and agricultural 500 252
Real estate 6 230
Installment loans to individuals 76 48
- -------------------------------------------------------------------------------------------------------------
Total 582 530
- -------------------------------------------------------------------------------------------------------------
Net charge-offs 314 601
Provision for loan losses 397 430
- -------------------------------------------------------------------------------------------------------------
Allowance for loan losses at end of year $1,686 $1,603
=============================================================================================================
</TABLE>
The amounts and percentages of such components of the allowance for loan losses
at December 31, 1995 and 1994, and the percentage of loans in each category to
total loans are presented in the table below.
<TABLE>
<CAPTION>
1995 1994
-------------------------- ------------------------
ALLOWANCE % OF Allowance % of
(Dollars in thousands) $ (%) LOANS $ (%) Loans
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial, and agricultural $1,051 62% 29% $1,042 65% 30%
Real estate 525 31% 65% 497 31% 64%
Installment loans to individuals 110 7% 6% 64 4% 6%
- -------------------------------------------------------------------------------------------------------------
Total $1,686 100% 100% $1,603 100% 100%
=============================================================================================================
</TABLE>
Non-Performing Assets
As a result of management's ongoing review of the loan portfolio, loans are
classified as non-accrual when it is not reasonable to expect collection of
principal or interest under the original terms. These loans are classified as
non-accrual, even though the presence of collateral or the borrower's
financial strength may be sufficient to provide for ultimate repayment. Where
appropriate, when a loan is placed on non-accrual status, all interest
previously accrued but not collected is reversed against current period
interest income. Interest on non-accrual loans is recognized only when
received. The amount of interest that would have been recorded during 1995 and
1994, had such loans classified as non-accrual been current in accordance with
their
26
<PAGE> 27
original terms, amounted to $8,200 and $22,000 respectively. During 1995 and
1994, no interest was recognized on nonaccrual loans.
Non-performing assets are defined as non-accrual and renegotiated loans and
other real estate acquired by foreclosure. The Company's non-performing assets
as a percentage of total loans and other real estate was .14% at December 31,
1995 as compared to .37% in the prior year. Non-accrual loans decreased from
$244,000 in 1994 to $111,000 in 1995. Additionally, the Company had
restructured loans of $30,000 at year-end 1994 compared to none at December 31,
1995. There were no loans past due 90 days or more as to principal or interest
payments at either December 31, 1995 or 1994.
The following table presents an analysis of the Company's non-performing assets
as of December 31, 1995 and 1994.
<TABLE>
<CAPTION>
December 31,
(Dollars in thousands) 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loans on nonaccrual $111 $244
Restructured loans -- 30
- -------------------------------------------------------------------------------------------------------------
Total non-performing assets $111 $274
=============================================================================================================
Loans 90 days past due -- --
Total non-performing assets
as a percentage of total loans and other real estate .14% .37%
Loans 90 days past due
as a percentage of total loans -- --
</TABLE>
Impaired loans are defined as those loans which management believes may be
doubtful as to full repayment of all principal or interest according to the
contractural rate and term. At year-end 1995, the Company had loans totaling
$1,344,000 which were considered impaired. For these loans, the Bank allocated
$363,000 as a valuation allowance.
Liquidity and Interest Rate Sensitivity
Liquidity represents the ability to provide steady sources of funds for loan
commitments and investment activities, as well as to provide sufficient funds
to cover deposit withdrawals and payment of debt, off-balance sheet obligations
and operating obligations. These funds can be obtained by converting assets to
cash or by attracting new deposits. The Bank also has lines of credit
available from other funding sources to provide additional funds as needed.
These sources include the Federal Home Loan Bank and other correspondent
financial institutions.
At December 31, 1995, the Bank's net loans to deposit ratio was 70% compared to
a ratio of 80% at December 31, 1994. Management monitors and assesses the
adequacy of the Company's liquidity position on a monthly basis to ensure that
sufficient sources of liquidity are maintained and available.
Interest rate sensitivity refers to the responsiveness of interest-bearing
assets and liabilities to changes in market interest rates. The rate-sensitive
position, or gap, is the difference in the
27
<PAGE> 28
volume of rate-sensitive assets and liabilities, at a given interval. The
general objective of gap management is to actively manage rate-sensitive assets
and liabilities to reduce the impact of interest rate fluctuations on the net
interest margin. Management and the Asset/Liability Committee generally
attempt to maintain a balance between rate- sensitive assets and liabilities as
the exposure period is lengthened to minimize the overall interest rate risk to
the Company. The asset mix of the balance sheet is continually evaluated in
terms of several variables: yield, credit quality, appropriate funding
sources, and liquidity. Management of the liability mix of the balance sheet
focuses on expanding the various funding sources.
The Company's interest rate sensitivity position at December 31, 1995 is
presented in the table below.
<TABLE>
<CAPTION>
(Dollars in thousands) Assets and liabilities repricing within
- --------------------------------------------------------------------------------------------------------------
3 Months 4 to 6 7 to 12 1-5 Over 5
or less Months Months Years Years Total
-------- ------ ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $58,084 $ 3,573 $ 4,211 $10,288 $ 2,021 $78,177
Investment securities 11,396 900 5,423 5,156 9,235 32,110
Interest-bearing deposits
in other banks 60 -- -- -- -- 60
Federal funds sold 3,525 -- -- -- -- 3,525
- -------------------------------------------------------------------------------------------------------------
Total interest-earning assets 73,065 4,473 9,634 15,444 11,256 113,872
- -------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Deposits 52,778 15,793 11,312 5,853 -- 85,736
- -------------------------------------------------------------------------------------------------------------
Interest sensitivity gap $ 20,287 $(11,320) $(1,678) $ 9,591 $11,256 $28,136
- -------------------------------------------------------------------------------------------------------------
Cumulative interest
sensitivity gap $ 20,287 $8,967 $7,289 $16,880 $28,136 $28,136
=============================================================================================================
Cumulative sensitivity ratio 1.38 1.13 1.09 1.20 1.33 1.33
(Cumulative interest-earning assets/
cumulative interest-bearing liabilities.)
=============================================================================================================
</TABLE>
The Company is asset sensitive through the next twelve months. This suggests
that if interest rates should decrease over the twelve-month period, the net
interest margin should decrease. Conversely, if rates increase the net
interest margin would increase. Since all interest rates and yields do not
adjust at the same velocity, the gap is only a general indicator of rate
sensitivity. For purposes of the above repricing presentation, all demand and
savings deposits are considered repricable within the shortest time period, 3
months or less, while time deposits are presented based on their contractural
terms. It is the Company's policy to maintain its one year gap position in the
.8 to 1.2 range. The one year gap reflected by the interest rate sensitivity
table is 1.09, clearly indicating adherence to Company policy. With a lower
rate environment projected for the coming months, management is closely
monitoring the Company's position, and if rates continue to decline, will take
steps to reposition itself to minimize the impact of a gap exposure.
28
<PAGE> 29
Investment Portfolio
Maturity Distribution and Yields of Investment securities available for sale.
<TABLE>
<CAPTION>
DECEMBER 31, 1995 December 31, 1994
FAIR YEAR-END Fair
(Dollars in thousands) COST VALUE YIELD Cost Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY
One year or less $ 500 $ 506 6.86% $ 748 $ 741
Over one through five years 1,012 1,027 6.80% 2,522 2,448
- -------------------------------------------------------------------------------------------------------------
Total U.S. Treasury 1,512 1,533 6.82% 3,270 3,189
- -------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES
One year or less 250 254 7.22% 238 238
Over one through five years 3,837 3,923 7.26% 1,756 1,681
- -------------------------------------------------------------------------------------------------------------
Total U.S. Government Agencies 4,087 4,177 7.25% 1,994 1,919
- -------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES
Over one through five years 2,656 2,690 7.09% -- --
Over five through ten years 2,321 2,352 5.58% -- --
Over ten years 20,992 21,356 7.06% -- --
- -------------------------------------------------------------------------------------------------------------
Total mortgage-backed securities 25,969 26,398 6.93% -- --
- -------------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS
Over ten years 2 2 -- 2 2
- -------------------------------------------------------------------------------------------------------------
Total other investments 2 2 -- 2 2
- -------------------------------------------------------------------------------------------------------------
Total investment securities
available for sale $31,570 $32,110 6.97% $5,266 $5,110
=============================================================================================================
</TABLE>
Maturity Distribution and Yields of Investment Securities held to maturity.
<TABLE>
<CAPTION>
DECEMBER 31, 1995 December 31, 1994
FAIR YEAR-END Fair
(Dollars in thousands) COST VALUE YIELD Cost Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCIES
One year or less $-- $-- $-- $ 499 $ 497
Over one through five years -- -- -- 2,486 2,455
- -------------------------------------------------------------------------------------------------------------
Total U.S. Government Agencies -- -- -- 2,985 2,952
- -------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES
Over one through five years -- -- -- 429 423
Over five years through ten years -- -- -- 1,758 1,724
Over ten years -- -- -- 8,422 8,140
- -------------------------------------------------------------------------------------------------------------
Total mortgage-backed securities -- -- -- 10,609 10,287
- -------------------------------------------------------------------------------------------------------------
Total investment securities
held to maturity $-- $-- $-- $13,594 $13,239
=============================================================================================================
</TABLE>
29
<PAGE> 30
Deposits
The following table presents the average amount outstanding and the average
rate paid on deposits by the Company for the years ended December 31, 1995 and
1994.
<TABLE>
<CAPTION>
1995 1994
AVERAGE AVERAGE Average Average
(Dollars in thousands) AMOUNT RATE Amount Rate
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Noninterest-bearing deposits $21,086 --% $17,694 --%
Interest-bearing deposits:
NOW Accounts 6,618 2.58% 8,135 2.53%
Money market 20,806 4.28% 17,830 3.24%
Savings deposits 8,459 3.29% 9,885 2.51%
Other time deposits 45,002 6.02% 38,321 4.55%
- -------------------------------------------------------------------------------------------------------------
Total $101,971 3.98% $91,865 3.02%
=============================================================================================================
</TABLE>
The following table presents the maturity of the Company's time deposits at
December 31, 1995.
<TABLE>
<CAPTION>
Other Time Other Time
Deposits Deposits
$100,000 Less Than
(Dollars in thousands) and Greater $100,000 Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Months to Maturity:
3 or less $ 7,496 $ 8,355 $15,851
Over 3 through 6 9,295 6,498 15,793
Over 6 through 12 5,075 6,237 11,312
Over 12 900 4,953 5,853
- -------------------------------------------------------------------------------------------------------------
Total $22,766 $26,043 $48,809
=============================================================================================================
</TABLE>
Capital Adequacy
There are various primary measures of capital adequacy for banks and bank
holding companies such as risk-based capital guidelines and the leverage
capital ratio. See "Business - Supervision and Regulation - Capital
Regulations."
As of December 31, 1995, the Bank exceeded its required levels of capital. The
Bank's risk- based capital ratio of Tier 1 capital to risk-weighted assets was
13.6%; its risk-based ratio of total capital to risk-weighted assets was 14.8%;
and its leverage ratio was 10.3%.
Inflation
Inflation has an important impact on the growth of total assets in the banking
industry and causes a need to increase equity capital at higher than normal
rates in order to maintain an appropriate equity to assets ratio. The Company
has been able to maintain an adequate level of equity, as previously mentioned
and copes with the effects of inflation by managing its interest rate
sensitivity gap position through its asset/liability management program, and by
periodically adjusting its pricing of services and banking products to take
into consideration current costs.
30
<PAGE> 31
Line of Business Information
During the past three years, the consolidated income of the Company and its
subsidiaries has been provided through banking activities.
31
<PAGE> 32
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report - KPMG Peat Marwick LLP 33
Consolidated Balance Sheets 34
Consolidated Statements of Income 35
Consolidated Statements of Stockholders' Equity 36
Consolidated Statements of Cash Flows 37
Notes to Consolidated Financial Statements 38
</TABLE>
32
<PAGE> 33
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Summit Bank Corporation:
We have audited the accompanying consolidated balance sheets of Summit Bank
Corporation and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Summit Bank
Corporation and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 1, the Company changed its method of accounting for
impairment of loans to adopt the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards (SFAS) No. 114,
"Accounting by Creditors for Impairment of a Loan," as amended by SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures," on January 1, 1995.
/s/ KPMG PEAT MARWICK LLP
Atlanta, Georgia
February 2, 1996
33
<PAGE> 34
CONSOLIDATED BALANCE SHEETS
SUMMIT BANK CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
(Dollars in thousands, except per share amounts) 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
- ------
Cash and due from banks (Notes 7 and 8) $ 7,220 $ 6,458
Federal funds sold 3,525 3,370
Interest-bearing deposits in other banks 60 44
Investment securities available for sale (Note 3) 32,110 5,110
Investment securities held to maturity, fair value of $13,239 (Note 3) -- 13,594
Other investments (Note 4) 592 570
Loans, net of unearned income of $1,179 and $883 in 1995
and 1994, respectively 76,695 72,297
Loans held for sale 1,482 1,504
Less: allowance for loan losses (1,686) (1,603)
- ------------------------------------------------------------------------------------------------------------
Net loans (Note 5) 76,491 72,198
- ------------------------------------------------------------------------------------------------------------
Premises and equipment, net (Notes 6 and 9) 2,932 2,500
Customers' acceptance liability 1,907 1,952
Deferred income tax (Note 10) 205 429
Other assets 5,034 1,921
- ------------------------------------------------------------------------------------------------------------
Total assets $130,076 $108,146
============================================================================================================
Liabilities and stockholders' equity
- ------------------------------------
Liabilities:
Deposits:
Noninterest-bearing demand $ 24,080 $ 20,057
Interest-bearing:
Demand 29,193 21,799
Savings 7,734 7,768
Time, $100,000 and over 22,766 21,512
Other time 26,043 19,503
- ------------------------------------------------------------------------------------------------------------
Total deposits 109,816 90,639
- ------------------------------------------------------------------------------------------------------------
Acceptances outstanding 1,907 1,952
Obligation under capital lease (Note 9) 152 166
Other liabilities 2,788 2,116
- ------------------------------------------------------------------------------------------------------------
Total liabilities 114,663 94,873
- -------------------------------------------------------------------------------------------------------------
Stockholders' equity (Notes 12, 13 and 14):
Common stock, $0.01 par value; 100,000,000 shares
authorized; 1,407,688 shares issued and outstanding 14 14
Additional paid-in capital 12,123 12,123
Net unrealized holding gains(losses) on investment securities
available for sale, net of income taxes 337 (96)
Retained earnings 2,939 1,232
- ------------------------------------------------------------------------------------------------------------
Total stockholders' equity 15,413 13,273
- ------------------------------------------------------------------------------------------------------------
Commitments (Note 11)
Total liabilities and stockholders' equity $130,076 $108,146
============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE> 35
CONSOLIDATED STATEMENTS OF INCOME
SUMMIT BANK CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the years ended December 31,
(Dollars in thousands, except per share amounts) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans, including fees $ 8,142 $7,385 $5,597
Interest-bearing deposits in other banks 3 2 2
Federal funds sold 294 152 177
Investment securities-taxable 946 561 457
Investment securities - tax-exempt -- 12 --
Mortgage-backed securities 1,154 433 220
- -------------------------------------------------------------------------------------------------------------
Total interest income 10,539 8,545 6,453
- -------------------------------------------------------------------------------------------------------------
Interest expense:
Time deposits, $100 and over 661 692 685
Other deposits 3,389 2,084 1,645
Short-term borrowings and obligation under capital lease 20 24 24
- -------------------------------------------------------------------------------------------------------------
Total interest expense 4,070 2,800 2,354
- -------------------------------------------------------------------------------------------------------------
Net interest income 6,469 5,745 4,099
Provision for loan losses (Note 5) 397 430 611
- -------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 6,072 5,315 3,488
- -------------------------------------------------------------------------------------------------------------
Non-interest income:
Gains on sales of loans (Note 5) 713 1,024 1,197
Fees for international banking services 1,145 932 675
Overdraft and NSF charges 362 222 166
Service charge income 216 227 160
Net losses on sales of investment securities (Note 3) (2) (121) --
Other 439 376 101
- -------------------------------------------------------------------------------------------------------------
Total non-interest income 2,873 2,660 2,299
- -------------------------------------------------------------------------------------------------------------
Non-interest expenses:
Salaries and employee benefits (Note 13) 3,046 2,672 2,039
Equipment 408 380 377
Net occupancy 452 403 355
Other (Note 17) 1,896 1,754 1,440
- -------------------------------------------------------------------------------------------------------------
Total non-interest expenses 5,802 5,209 4,211
- -------------------------------------------------------------------------------------------------------------
Income before income taxes 3,143 2,766 1,576
Income tax expense (benefit) (Note 10) 1,042 838 (82)
- -------------------------------------------------------------------------------------------------------------
Net income $ 2,101 $1,928 $1,658
=============================================================================================================
Net income per common share and common share equivalents $1.33 $1.37 $1.18
=============================================================================================================
Weighted-average common shares outstanding and
common share equivalents 1,630,610 1,407,688 1,407,688
=============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
35
<PAGE> 36
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SUMMIT BANK CORPORATION AND SUBSIDIARIES
For the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Net Unrealized
Holding
Gains(Losses)
on Investment Retained
Additional Securities Earnings
Common Stock Paid In Available (Accumulated
(Dollars in thousands, except per share amount) Shares Amount Capital for Sale Deficit) Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 1,407,688 $ 14 $12,123 -- $(2,354) $ 9,783
Net income -- -- -- -- 1,658 1,658
- -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 1,407,688 14 12,123 -- (696) 11,441
- -------------------------------------------------------------------------------------------------------------
Net unrealized holding gains on
investment securities available for sale
upon adoption of SFAS No. 115, net of
tax effect of $59 (Note 1) -- -- -- 114 -- 114
Change in unrealized holding gains (losses)
on investment securities available for sale,
net of tax effect -- -- -- (210) -- (210)
Net income -- -- -- -- 1,928 1,928
- -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 1,407,688 14 12,123 (96) 1,232 13,273
- -------------------------------------------------------------------------------------------------------------
Change in unrealized holding gains (losses)
on investment securities available for sale,
net of tax effect -- -- -- 433 -- 433
Cash dividend paid, $.28 per share -- -- -- -- (394) (394)
Net income -- -- -- -- 2,101 2,101
- -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 1,407,688 $ 14 $12,123 $337 $2,939 $15,413
==============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
36
<PAGE> 37
CONSOLIDATED STATEMENTS OF CASH FLOWS
SUMMIT BANK CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the years ended December 31,
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,101 $1,928 $1,658
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of leasehold improvements 257 137 163
Deferred tax (benefit) expense (39) 266 (106)
Amortization of organization costs -- -- 5
Net amortization of premiums/discounts on investment securities 91 249 81
Amortization of negative goodwill (109) (75) --
Provision for loan losses 397 430 611
Gains on sales of loans (713) (929) (1,110)
Proceeds from sales of loans 4,858 15,397 11,311
Net losses on sales of investment securities 2 121 --
Provision for losses on sales of other real estate -- 62 96
Recovery of losses on other real estate -- (11) --
Gains on sales of other real estate -- (77) --
Gain on sale of premises and equipment (3) -- --
Changes in other assets and liabilities:
Increase in other assets (67) (154) (148)
Increase (decrease) in other liabilities 781 (201) 96
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 7,556 17,143 12,657
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities held to maturity (19,401) (9,143) (11,824)
Principal collections on investment securities called -- -- 2,502
Proceeds from maturities of investment securities held to maturity 8,000 500 --
Principal collections on investment securities held to maturity 2,847 2,941 2,188
Proceeds from sales of investment securities available for sale 1,991 7,920 --
Purchases of investment securities available for sale (15,220) (3,298) --
Proceeds from maturities of investment securities available for sale 8,560 1,250 --
Principal collections on investment securities available for sale 398 -- --
Proceeds from sales of other real estate -- 1,025 604
Loans made to customers, net of principal collected on loans (11,881) (15,966) (13,512)
Purchases of premises and equipment and leasehold improvements (689) (1,374) (909)
Proceeds from sale of premises and equipment 3 -- --
Purchase of Vinings Bank & Trust N.A., net of cash and cash equivalents
acquired (Note 2) -- -- 1,024
- -------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (25,392) (16,145) (19,927)
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand and savings deposits 11,383 2,605 3,205
Net increase (decrease) in time deposits 7,794 (342) 3,861
Principal payments for obligation under capital lease (14) -- (24)
Net decrease in short-term borrowings -- (750) (365)
Dividends paid (394) -- --
- -------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 18,769 1,513 6,677
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 933 2,511 (593)
Cash and cash equivalents at beginning of year 9,872 7,361 7,954
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $10,805 $9,872 $ 7,361
=============================================================================================================
Supplemental disclosures of cash paid during the year:
Interest, net of amounts capitalized $ 3,979 $2,943 $ 2,343
Income taxes $ 1,376 $ 137 $ 10
Supplemental schedule of noncash investing and financing activities:
Investment securities transferred from held to maturity to available
for sale $22,059 $ -- $ --
Real estate acquired through foreclosure $ -- $ 28 $ 599
Real estate sold and financed by the Company $ -- $ 146 $ --
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
37
<PAGE> 38
SUMMIT BANK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994, AND 1993
1. Summary of Significant Accounting Policies
(a) General
Summit Bank Corporation (the "Company") was organized on October 15, 1986 for
the purpose of becoming a bank holding company. The Company was approved to
become a bank holding company by the Federal Reserve Bank of Atlanta on
September 11, 1987. On March 4, 1988, the Company acquired 100% of the stock
of The Summit National Bank (the "Bank"). The organizers received final
approval for the charter of the Bank from the office of Comptroller of the
Currency on March 10, 1988, and the Bank began operations on that date. On
July 1, 1989, the Company incorporated as a wholly-owned subsidiary, The Summit
Merchant Banking Corporation (the "Merchant Bank") with an initial investment
of $250,000.
On January 21, 1991, the Company's Board of Directors approved a resolution
deactivating the Merchant Bank effective January 31, 1991. If the economic
environment should change and merchant banking opportunities arise, the
Merchant Bank may be reactivated; until then, no further funding will be
provided to this inactive subsidiary.
(b) Business
The Company provides a full range of banking services to individual and
corporate customers through its subsidiary bank located in Atlanta, Georgia.
The Company is subject to competition from other financial institutions. The
Company is subject to the regulations of certain state and Federal agencies and
undergoes periodic examinations by those regulatory authorities.
(c) Basis of Presentation
The consolidated financial statements include the accounts of Summit Bank
Corporation and its subsidiaries, the Bank and the Merchant Bank, after
elimination of all significant intercompany balances and transactions.
In preparing the consolidated financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities as of the date of the balance
sheet and revenues and expenses for the period. Actual results could differ
significantly from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the determination
of the allowance for loan losses and the valuation of real estate acquired in
connection with foreclosures or in satisfaction of
38
<PAGE> 39
loans. In connection with the determination of the allowance for loan losses
and the valuation of other real estate, management obtains independent
appraisals for significant properties.
A substantial portion of the Company's loans are secured by real estate in the
northeast metropolitan Atlanta area. Accordingly, the ultimate collectibility
of a substantial portion of the Company's loan portfolio is susceptible to
changes in the real estate market conditions of this market area.
(d) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash
and due from banks, interest-bearing deposits in other banks with maturities
less than 90 days, and federal funds sold. Federal funds are generally sold
for one-day periods.
(e) Investment Securities
Investment securities at December 31, 1995 and 1994 consist of U.S. Treasury
securities, obligations of U.S. Government agencies, mortgage-backed
securities, and equity securities. Effective January 1, 1994 the Company
adopted the provisions of Statement of Financial Accounting Standards ("SFAS")
No. 115, "Accounting for Certain Investments in Debt and Equity Securities."
Under SFAS No. 115, investments are classified into three categories: trading
securities, available for sale securities, or held to maturity securities.
Investment securities in the held to maturity category are stated at cost,
adjusted for accretion of discounts and amortization of premiums, because it is
management's intention and ability to hold these securities to maturity. All
other securities not included in the held to maturity category are classified
as available for sale and are reported at fair value. Unrealized holding gains
or losses, net of the related tax effect, on available for sale securities are
excluded from income and are reported as a separate component of stockholders'
equity until realized. The Company does not hold any trading securities nor
does the Company engage in the trading or holding of financial derivatives.
Purchase premiums and discounts on investment securities are amortized and
accreted to interest income using the level yield method on the outstanding
principal balances. In establishing the accretion of discounts and
amortization of premiums, the Company utilizes market based prepayment
assumptions. Interest and dividend income are recognized when earned.
Realized gains and losses for securities sold are included in income and are
derived using the specific identification method for determining the costs of
securities sold.
A decline in the fair value of any available for sale or held to maturity
security below cost that is deemed other than temporary is charged to income
resulting in the establishment of a new cost basis for the security.
39
<PAGE> 40
(f) Loans
Loans are stated at the amount of unpaid principal, reduced by unearned income
and the allowance for loan losses. Unearned income, primarily arising from
discount basis installment loans and deferred gains on the sale of the SBA
guaranteed portion of loans, is recognized as interest income over the terms of
the loans by the interest method. Interest on loans is recorded by using the
simple interest method on the daily balance of the principal amount
outstanding.
Loans held for sale are stated at the lower of aggregate cost or market value
with market determined on the basis of open purchase commitments from
independent buyers. Gains or losses on disposition are recorded in other
income, based on the net proceeds received and the recorded investment in the
loan sold. For sales of the SBA guaranteed portion of loans, the basis in the
portion of the loan sold is determined by allocating the loan carrying value to
the portion sold and portion retained based on the relative fair values of the
portion sold and portion retained. Such gains or losses are adjusted by the
amount of any excess servicing fee receivables resulting from the transactions.
Accrual of interest on loans is discontinued either when reasonable doubt
exists as to the full, timely collection of interest or principal or when a
loan becomes contractually past due by 90 days or more with respect to interest
or principal. When a loan is placed on nonaccrual status, all interest
previously accrued but not collected is reversed against current period
interest income. Income on such loans is then recognized only to the extent
that cash is received and where the future collection of principal is probable.
Loans are returned to accruing status only when they are brought fully current
with respect to interest and principal and when, in the judgement of
management, the loans are estimated to be fully collectible as to both
principal and interest. Such interest ultimately collected is credited to
income in the period received.
Loan fees, net of certain origination costs, are deferred and amortized over
the lives of the underlying loans using a method which approximates a level
yield.
In May 1993, the Financial Accounting Standards Board ("FASB") issued SFAS No.
114, "Accounting by Creditors for Impairment of a Loan." SFAS No. 114 requires
impaired loans to be measured based on the present value of expected future
cash flows, discounted at the loan's effective interest rate, or at the loan's
observable market price, or the fair value of the collateral if the loan is
collateral dependent, beginning in 1995. Loans that are determined to be
impaired require a valuation allowance equivalent to the amount of the
impairment. The valuation allowance is to be established by a charge to the
provision for loan losses. In October 1994, the FASB issued SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures," which amends the requirements of SFAS No. 114 regarding interest
income recognition and related disclosure requirements. The Company adopted
SFAS No. 114 and SFAS No. 118 prospectively on January 1, 1995. The initial
adoption required no increase to the allowance for loan losses.
A loan is considered impaired when, based on current information and events, it
is probable that
40
<PAGE> 41
the Company will be unable to collect all amounts due according to the
contractual terms of the note agreement. Cash receipts on impaired loans which
are accruing interest are applied to principal and interest under the
contractual terms of the loan agreement. Cash receipts on impaired loans which
the accrual of interest has been discontinued are applied to reduce the
principal amount of such loans until the principal has been recovered and are
recognized as interest income thereafter.
(g) Allowance For Loan Losses
The allowance for loan losses is established through provisions for loan losses
charged to operations. Loans are charged against the allowance for loan losses
when management believes that the collection of the principal is not probable.
Subsequent recoveries are added to the allowance. The allowance is an amount
that management believes will be adequate, determined through use of its
allowance for loan losses methodology, to absorb possible losses on existing
loans and commitments to extend credit. The allowance is established through
consideration of such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem loans, the
underlying value of the collateral, and current economic conditions that may
affect the borrowers' ability to pay.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions, the financial condition of borrowers and other factors. In
addition, various regulatory agencies, as an integral part of their examination
process, periodically review the Company's allowance for loan losses. Such
agencies may require the Company to recognize additions to the allowance based
on their judgments about information available to them at the time of their
examination.
(h) Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation is computed on a straight-line basis over the
estimated useful lives of the assets, which are from three to forty years.
Leasehold improvements are amortized over the estimated useful lives of the
improvements or the term of the related lease, including expected renewal
periods for which there are renewal options, using the straight-line method.
(i) Other Real Estate
Other real estate, consisting of properties obtained through foreclosure
proceedings or acceptance of a deed in lieu of foreclosure, is reported on an
individual asset basis at the lower of cost (fair value at date of foreclosure)
or fair value less disposal costs. Fair value is determined on the basis of
current appraisals, comparable sales, and other estimates of value obtained
principally from independent sources. When properties are acquired through
foreclosure, any excess of the loan balance at the time of foreclosure over the
fair value of the real estate held as collateral is recognized as a loss and
charged to the allowance for loan losses. Subsequent write-downs are
41
<PAGE> 42
charged to a separate allowance for losses pertaining to other real estate,
established through provisions for estimated losses on other real estate
charged to operations. Based upon management's evaluation of the other real
estate, additional expense is recorded when necessary in an amount sufficient
to restore the allowance to an adequate level. Gains recognized on the
disposition of the properties are recorded in non-interest income.
Costs of improvements to other real estate are capitalized, while costs
associated with holding other real estate are charged to operations.
(j) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
(k) Net Income Per Share
Net income per common share and common share equivalents is based on the
weighted average number of shares outstanding during each period, including
consideration of common stock equivalents, derived from dilutive stock options
and warrants. During 1995 such stock options and warrants became dilutive
because the market price of the Company's common stock exceeded the exercise
price of the stock options and warrants. During 1994 and 1993 the market price
of the Company's stock did not exceed the exercise price of the stock options
and warrants, therefore, the stock options and warrants were antidilutive.
(l) Reclassifications
Certain 1994 and 1993 amounts have been reclassified for comparative purposes
in order to conform the prior periods to the 1995 presentation. Such
reclassifications had no impact on net income or stockholders' equity.
(m) Recent Accounting Pronouncements
In October 1995, the FASB issued SFAS No.123, "Accounting for Stock-Based
Compensation." SFAS No. 123 established financial accounting and reporting
standards for stock-based employee compensation plans. Those plans include all
arrangements by which employees receive shares of stock or other equity
instruments of the employer or the employer incurs liabilities to employees in
amounts based on the price of the employer's stock. Such instruments include
stock purchase plans, stock options, restricted stock, and stock appreciation
rights. SFAS No. 123 also applies to transactions in which an entity issues
its equity instruments to acquire goods
42
<PAGE> 43
or services from nonemployees.
A new method of accounting for stock-based compensation arrangements with
employees is established by SFAS No. 123. The new method is a fair value based
method rather than the intrinsic value based method. However, SFAS No. 123
does not require an entity to adopt the new fair value based method for
purposes of preparing its basic financial statements. Entities are allowed (1)
to continue to use their existing method or (2) adopt the SFAS No. 123 fair
value based method. The selected method would apply to all of an entity's
compensation plans and transactions.
SFAS No. 123 requires that an employer's financial statements include certain
disclosures about stock-based employee compensation arrangements regardless of
the method used to account for them. The accounting requirements of this
statement are effective for transactions entered into in fiscal years that
begin after December 15, 1995. The disclosure requirements are effective for
financial statements for fiscal years beginning after December 15, 1995. The
Company has not determined the impact of adopting SFAS No. 123.
2. Business Combination
On December 31, 1993, the Bank completed its acquisition of Vinings Bank &
Trust, N.A. (Vinings), of Cobb County, Georgia. The purchase price was
$255,000 payable in cash for all of the issued and outstanding shares of
Vinings. The fair value of the assets acquired was approximately $18,120,000
and the fair value of the liabilities assumed was approximately $17,114,000.
The transaction has been accounted for as a purchase. The excess of the fair
value of the net assets acquired over the purchase price and costs incurred to
complete the acquisition, was allocated against the fair value of the Vinings
equipment acquired, with the remainder of approximately $515,000 being recorded
as negative goodwill. The negative goodwill is being amortized into income
using the straight-line method over a five-year period.
3. Investment Securities
Investment securities available for sale at December 31, 1995 are summarized as
follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
Obligations of U.S. Government Agencies $ 5,599 $ 111 $ -- $ 5,710
Other investments 2 -- -- 2
Mortgage-backed securities 25,969 452 23 26,398
- --------------------------------------------------------------------------------------------------------------
Total $31,570 $ 563 $ 23 $32,110
==============================================================================================================
</TABLE>
43
<PAGE> 44
Investment securities available for sale at December 31, 1994 are summarized as
follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
Obligations of U.S. Government Agencies $5,264 $-- $156 $5,108
Other investments 2 -- -- 2
- ---------------------------------------------------------------------------------------------------------------
Total $5,266 $-- $156 $5,110
===============================================================================================================
</TABLE>
Investment securities held to maturity at December 31, 1994 are summarized as
follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage-backed securities $10,609 $8 $330 $10,287
Obligations of U.S. Government Agencies 2,985 1 34 2,952
- ---------------------------------------------------------------------------------------------------------------
Total $13,594 $9 $364 $13,239
===============================================================================================================
</TABLE>
During 1995, the Company transferred investment securities with an amortized
cost of $22,059,000 from held to maturity to available for sale. The fair
market value of the investment securities on the date of transfer was
$22,470,000 resulting in an increase in the unrealized gain on investment
securities available for sale of $411,000. The investment securities were
transferred as a result of the reassessment of the appropriateness of the
classification of all securities following the issuance of the FASB Special
Report, "A Guide to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities."
The amortized costs and estimated fair values of investment securities at
December 31, 1995, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because issuers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
(In thousands) Cost Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 750 $ 759
Due after one year through five years 4,849 4,950
Due after five years through ten years -- --
Due after ten years 2 2
Mortgage-backed securities 25,969 26,399
- ---------------------------------------------------------------------------------------------------------------
Total $31,570 $32,110
===============================================================================================================
</TABLE>
Proceeds from the sales of investment securities available for sale during 1995
and 1994 were $1,991,000 and $7,920,000, respectively. Gross gains of $24,000
and $50,000 and gross losses of $26,000 and $171,000 were realized on those
sales in 1995 and 1994, respectively. There were no sales of investment
securities in 1993.
44
<PAGE> 45
Investment securities with aggregate carrying amounts of approximately
$5,604,000 and $5,810,000 at December 31, 1995 and 1994, respectively, were
pledged to secure public deposits and for other purposes required or permitted
by law.
4. Other Investments
Other investments consist of Federal Home Loan Bank of Atlanta stock and
Federal Reserve Bank of Atlanta stock. Investment in stock of the Federal Home
Loan Bank of Atlanta is required for membership. Investment in stock of the
Federal Reserve Bank of Atlanta is required for national banks. No ready
market exists for either stock, and neither stock has a quoted market value.
Accordingly, both Federal Home Loan Bank and Federal Reserve Bank stock are
reported in the financial statements at cost.
5. Loans
Classifications of loans at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial, financial, and agricultural $22,615 $21,752
Real estate - construction 269 --
Real estate - mortgage 50,174 47,049
Installment loans to individuals 4,816 4,379
Less: unearned income (1,179) (883)
- -------------------------------------------------------------------------------------------------------------
Loans, net of unearned income 76,695 72,297
Loans held for sale - SBA 1,482 1,504
Less: allowance for loan losses (1,686) (1,603)
- -------------------------------------------------------------------------------------------------------------
Net loans $76,491 $72,198
=============================================================================================================
</TABLE>
In 1990, the Bank entered into an agreement with a company in which a director
of the Company is sole shareholder. The agreement governs the referral and
presentation of completed SBA loan applications to the Bank by this company on
behalf of certain prospective borrowers. The agreement includes certain
conditions designed to safeguard the Bank from prospective losses, including
the requirements that all referred loans be subjected to full review by a Bank
loan committee and that any income derived by this company from an approved
referred loan is subject to recourse by the Bank in the event of any loss
within 24 months of such specific loan approval. There were no sales of loans
generated under this agreement in 1995. The Bank sold into the secondary market
$133,172 and $1,461,732 and $7,818,504 in 1994, 1993 and 1992, respectively, of
loans generated under this agreement, and recognized $8,000, $171,000 and
$992,000, respectively, as gains on the sale of the loans. The Bank paid the
referring company $4,000, $104,000 and $492,000 in 1994, 1993 and 1992,
respectively, of the sales premiums as commissions in accordance with the
agreement. In 1995, the Bank realized a loss of $59,349 for a loan generated
under this agreement in 1992. No other losses from this arrangement have been
realized or are anticipated by management.
45
<PAGE> 46
In the ordinary course of business the Company extends loans to its directors,
executive officers, and principal stockholders and their affiliates at terms
and rates comparable to those prevailing at the time for comparable
transactions with other customers. In the opinion of management, these loans
do not involve more than the normal credit risk nor present other unfavorable
features. The following is a summary of activity during 1995 with respect to
such aggregate loans to these individuals and their associates:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
(In thousands)
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Balance at December 31, 1994 $1,337
New loans 157
Repayments (638)
- -------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 $ 856
=============================================================================================================
</TABLE>
Activity in the allowance for loan losses for the years ended December 31,
1995, 1994, and 1993 was as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $1,603 $1,774 $858
Provision for loan losses 397 430 611
Loans charged off (896) (1,131) (663)
Recoveries 582 530 76
Allowance of Vinings Bank and Trust, N.A., acquired -- -- 892
- -------------------------------------------------------------------------------------------------------------
Balance, end of year $1,686 $1,603 $1,774
=============================================================================================================
</TABLE>
As discussed in note 1, the Company adopted SFAS 114 and SFAS 118 on January 1,
1995. The adoption required no increase to the allowance for loan losses and
had no impact on net income for the year ended December 31, 1995.
Impaired loans and related amounts included in the allowance for loan losses at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
(Amounts in thousands) Balance Allowance
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Impaired loans, with a related allowance $1,233 $363
Impaired loans, without allowance 111 --
</TABLE>
Impaired loans were primarily valued based on the fair value of the loans'
collaterals. The impairment valuation allowance is included in the allowance
for loan losses at December 31, 1995. The average recorded investment in
impaired loans for the year ended December 31, 1995 was $1,079.00. Interest
income recognized on impaired loans for the year ended December 31, 1995, was
approximately $384,000.
46
<PAGE> 47
Nonaccrual loans amounted to approximately $111,000 and $244,000 at December
31, 1995 and 1994, respectively. Interest income on nonaccrual loans, at
December 31, 1995 and 1994, which would have been reported on an accrual basis
in 1995 and 1994, amounted to approximately $8,200 and $22,000, respectively.
During 1995 and 1994, no interest income was recognized on nonaccrual loans at
December 31, 1995 and 1994.
During 1994 and 1993, approximately $28,000 and $599,000, respectively were
transferred from loans to other real estate upon foreclosure of the collateral
properties. During 1994, the Company financed the sale of approximately
$146,000 of other real estate. No sales of other real estate were financed by
the Company during 1993.
At December 31, 1995, 1994, and 1993, the Company was servicing loans for
others with aggregate principal balances of approximately $49,190,000,
$47,214,000 and $37,398,000, respectively.
6. Premises and Equipment
Premises and equipment at December 31, 1995 and 1994 consisted of the
following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 685 $ 685
Building 1,474 1,233
Furniture and equipment under capital lease 183 166
Other furniture and equipment 1,053 859
Leasehold improvements 466 448
- -------------------------------------------------------------------------------------------------------------
3,861 3,391
Less: accumulated depreciation and amortization (929) (891)
- -------------------------------------------------------------------------------------------------------------
Premises and equipment, net $2,932 $2,500
=============================================================================================================
</TABLE>
During 1994, the Company capitalized approximately $13,000 of interest related
to the construction of a building.
7. Reserve Requirements
At December 31, 1995 and 1994, the Federal Reserve Bank required that the Bank
maintain an average reserve balance of $628,000 and $595,000, respectively.
8. Line of Credit
The Bank has available under a line of credit with the Federal Home Loan Bank
of Atlanta approximately $16,000,000.
9. Obligation Under Capital Lease
On December 30, 1994, the Company obtained approximately $166,000 of furniture
and equipment under a capital lease agreement. An additional $17,000 of
furniture and equipment were acquired under a capital lease agreement in
January 1995. The obligation under the capital lease represents the present
value of the net future minimum payments. The leases expire in
47
<PAGE> 48
2000 but provide for $6,500 in quarterly rental payments for one additional
year at the Company's option.
Future minimum capital lease payments as of December 31, 1995 are:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(In thousands)
Year Ending December 31,
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
1996 $ 49
1997 49
1998 49
1999 49
2000 1
- ------------------------------------------------------------------------------------------------------------------------
Total minimum lease payments 197
Less: amount representing interest at 10.5% (45)
- ------------------------------------------------------------------------------------------------------------------------
Present value of net minimum lease payments $152
========================================================================================================================
</TABLE>
10. Income Taxes
Income tax expense (benefit) attributable to income from continuing operations
for the years ended December 31, 1995, 1994 and 1993 consists of:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal - current $1,032 $572 $ 24
State - current 49 -- --
Federal - deferred (39) 266 (106)
- --------------------------------------------------------------------------------------------------------------
Total $1,042 $838 $ (82)
==============================================================================================================
</TABLE>
Income tax expense (benefit) attributable to income from continuing operations
for the years ended December 31, 1995, 1994, and 1993 differed from the amount
computed by applying the U.S. Federal income tax rate of 34% to income before
income taxes as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected" income tax expense $1,069 $941 $536
Increase (decrease) resulting from:
Utilization of Federal net operating loss carryforwards (4) -- (453)
State income taxes, net of Federal tax benefit 33 -- --
Change in the beginning-of-the-year balance
of the valuation allowance for deferred tax assets
allocated to income tax expense (104) (79) (189)
Amortization of negative goodwill (37) (26) --
Alternative minimum tax -- -- 24
Meals and entertainment expenses 3 2 --
Other 82 -- --
- --------------------------------------------------------------------------------------------------------------
Total $1,042 $838 $ (82)
==============================================================================================================
</TABLE>
48
<PAGE> 49
The tax effects of temporary differences that give rise to significant portions
of deferred tax assets and liabilities at December 31, 1995 and 1994 are
presented below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
(In thousands)
- --------------------------------------------------------------------------------------------------------------
Deferred tax assets (liabilities) 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loans, principally due to allowance for loan losses $206 $213
Merger costs amortization 37 --
Premises and equipment, principally due to differences in depreciation 28 81
Accrued liabilities 74 101
Net Federal and State operating loss carryforwards 2,441 2,481
State gross receipts tax credit carryforwards -- 14
Net unrealized holding (gains)losses on investment securities available for sale (203) 60
Prepaid expenses -- (39)
- -------------------------------------------------------------------------------------------------------------
Total deferred tax assets 2,583 2,911
Less valuation allowance (2,378) (2,482)
- -------------------------------------------------------------------------------------------------------------
Deferred tax assets, net of valuation allowance $205 $429
=============================================================================================================
</TABLE>
The net change in the valuation allowance for the years ended December 31, 1995
and 1994 was a decrease of $104,000 and $79,000, respectively, due primarily to
Federal and State net operating loss carryforwards related to Vinings. In
assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment. Based upon the
level of historical taxable income and projection for future taxable income
over the periods which the temporary differences resulting in the deferred tax
assets are deductible, management believes it is more likely than not that the
Company will realize the benefits of these deductible differences, net of the
existing valuation allowance at December 31, 1995.
At December 31, 1995, the Company has net operating loss carryforwards for
Federal and State income tax purposes of approximately $6,343,000 and
$7,654,000, respectively, which are available to offset future Federal and
state taxable income, subject to certain annual maximum limitations. The net
operating loss carryforwards expire at various amounts through 2008.
11. Commitments
In August 1995, the Board entered into severence agreements with each of the
four (4) executive officers of the Bank. The agreements basically provide that
in the event of involuntary termination or a change in the executive's position
or compensation resulting from a change in the control of the Company due to a
merger, consolidation or reorganization, each executive
49
<PAGE> 50
would be entitled to receive an amount equal to 100% of the executive's
base salary. The agreements also provide for awarding of certain ungranted
long term stock option incentives to be allocated to the executives in the
event of an involuntary termination. At December 31, 1995, there were 16,000
ungranted long-term stock options available to executives. These agreements are
continuing three (3) year terms.
The Bank is a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. These instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the consolidated
balance sheets.
The Bank's exposure to credit loss in the event of nonperformance by the
counterparty to the financial instrument for commitments to extend credit is
represented by the contractual amount of these instruments. The Bank uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance sheet instruments. The Bank does not anticipate any
material losses as a result of these commitments and conditional obligations.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being funded, the total commitment amounts do not necessarily
represent future liquidity requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Bank upon extension of credit is based on management's
credit evaluation of the counterparty. Collateral held varies, but may include
accounts receivable, inventory, property, plant, and equipment, residential
real estate, income producing properties, and cash on deposit. At December 31,
1995, the Bank had outstanding loan commitments totaling $12,441,000 primarily
at floating rates of interest with terms of less than one year.
Standby and commercial letters of credit are conditional commitments issued by
the Bank guaranteeing the performance of a customer to a third party. These
guarantees are primarily issued to support public and private borrowing
arrangements. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The Bank holds collateral supporting these commitments as deemed
necessary. At December 31, 1995 commitments under standby and commercial
letters of credit and guarantees aggregated $6,528,000.
The Company has several noncancelable operating leases, primarily for banking
offices, that expire over the next five years. One of these leases contains
rights to extend the Company's occupancy of the leased space twice, for one
additional year each. Rental expense for operating leases (except those with
lease terms of a month or less that were not renewed) during 1995, 1994, and
1993, was, $451,000, $460,000 and $418,000, respectively.
50
<PAGE> 51
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1995
are:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
(In thousands)
Year ending December 31,
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
1996 $ 380
1997 394
1998 409
1999 110
2000 115
Thereafter 181
- -------------------------------------------------------------------------------------------------------------------------
Total minimum lease payments $1,589
=========================================================================================================================
</TABLE>
12. Stockholders' Equity
The organizers of the Company were issued warrants to purchase one share of
common stock for each share purchased by them in connection with the initial
public offering of the Company's common stock. Subject to certain limitations,
these warrants are exercisable at any time through March 10, 1998, at a per
share exercise price of $10. At December 31, 1995 warrants to purchase 463,235
shares at $10 per share were outstanding and exercisable. As of December 31,
1995, no warrants had been exercised.
The Company is authorized to issue up to 20,000,000 shares of special stock,
with no par value. Liquidation preferences and other such items are subject to
future determination by the board of directors. At December 31, 1995, no
special stock had been issued.
51
<PAGE> 52
13. Employee Benefit Plans
The Company has a Key Employee Incentive Stock Option Plan (the "Plan"). The
exercise price for incentive options issued under the Plan may not be less than
the fair market value of the stock as of the date the option is granted. The
period for the exercise of options shall not exceed ten years from the date of
grant. The Company has reserved 150,000 shares of common stock for the Plan.
As of December 31, 1995, no options have been exercised. The following is a
summary of the options outstanding at December 31, 1995:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Option Price
Shares Per Share Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at
December 31, 1992 54,125 $10.00 $541,250
Granted 10,000 10.00 100,000
Expired (25,700) 10.00 (257,000)
- -------------------------------------------------------------------------------------------------------------
Options outstanding at
December 31, 1993 38,425 10.00 384,250
Granted 4,000 10.00 40,000
- -------------------------------------------------------------------------------------------------------------
Options outstanding at
December 31, 1994 42,425 10.00 424,250
Expired (1,200) 10.00 (12,000)
- -------------------------------------------------------------------------------------------------------------
Options outstanding and exercisable at
December 31, 1995 41,225 $10.00 $412,250
=============================================================================================================
</TABLE>
The Company has a savings plan (the "Savings Plan") administered under the
provisions of the Internal Revenue Code Section 401(k). During 1995, 1994, and
1993, the Company and Bank made contributions totaling $33,438, $4,215, and
$4,873, respectively, to the Savings Plan.
14. Regulatory Matters
The Federal Deposit Insurance Corporation Improvement Act ("FDICIA") was signed
into law on December 19, 1991. Regulations implementing the prompt corrective
action provisions of FDICIA became effective on December 19, 1992. In addition
to the prompt corrective action requirements, FDICIA included significant
changes to the legal and regulatory environment for insured depository
institutions, including reductions in insurance coverage for certain kinds of
deposits, increased supervision by the Federal regulatory agencies, increased
reporting requirements for insured institutions, and regulations concerning
internal controls, accounting, and operations.
The prompt corrective action regulations define specific capital categories
based on an institution's capital ratios. The capital categories, in declining
order, are "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," and "critically
52
<PAGE> 53
undercapitalized." Institutions categorized as "undercapitalized" or worse are
subject to certain restrictions, including the requirement to file a capital
plan with its primary Federal regulator, prohibitions on the payment of
dividends and management fees, restrictions on executive compensation, and
increased supervisory monitoring, among other things. Other restrictions may
be imposed on the institution either by its primary Federal regulator or by the
FDIC, including requirements to raise additional capital, sell assets, or sell
the entire institution. Once an institution becomes "critically
undercapitalized," it must generally be placed in receivership or
conservatorship within 90 days.
To be considered "well capitalized," an institution must generally have a
leverage ratio of at least 5%, a Tier 1 risk-based capital ratio of at least
6%, and a total risk-based capital ratio of at least 10%. An institution is
deemed to be "critically undercapitalized" if it has a tangible equity ratio of
2% or less.
At December 31, 1995, the Bank was in compliance with the aforementioned
minimum regulatory capital requirements and is considered "well capitalized" as
defined by FDICIA.
15. Fair Values of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosure of fair value information about financial instruments, whether or
not recognized in the balance sheet, for which it is practicable to estimate
that value. In cases where quoted market prices are not available, fair values
are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and, therefore,
cannot be determined with precision. Changes in assumptions would
significantly affect the estimates. SFAS No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Fair value estimates are based on existing on- and off-balance-sheet financial
instruments and other recorded assets and liabilities without attempting to
estimate the value of anticipated future business. In addition, tax
ramifications related to the realization of unrealized gains and losses can
have a significant effect on fair value estimates and have not been considered
in any of the estimates. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments and certain other assets
and liabilities:
CASH AND DUE FROM BANKS: The carrying amounts of cash and due from banks
approximate those assets' fair values.
FEDERAL FUNDS SOLD: The carrying amounts of federal funds sold approximate
their fair value.
INTEREST-BEARING DEPOSITS IN OTHER BANKS: The carrying amounts of
interest-bearing deposits in other banks approximate their fair value.
53
<PAGE> 54
INVESTMENT SECURITIES: Fair values for investment securities are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments.
OTHER INVESTMENTS: The carrying amounts of other investments approximate their
fair value.
LOANS: For variable-rate loans that reprice frequently and with no significant
change in credit risk, fair values are based on carrying values. The fair
values for all other loans are estimated based upon a discounted cash flow
analysis, using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality.
OFF-BALANCE-SHEET INSTRUMENTS: Fair values for the Company's off-balance-sheet
instruments are based on a comparison with terms, including interest rate and
commitment period currently prevailing to enter into similar agreements, taking
into account credit standings. The carrying and fair values of
off-balance-sheet instruments at December 31, 1995 and 1994, were not material.
DEPOSITS: Fair values for fixed-rate time deposits are estimated using a
discounted cash flow analysis that applies interest rates currently being
offered on deposits of similar terms of maturity. The carrying amounts of all
other deposits, due to their short-term nature, approximate their fair values.
OBLIGATION UNDER CAPITAL LEASE: The carrying amount of the obligation under
capital lease approximates its fair value.
The estimated fair value of the Bank's financial instruments as of December 31,
1995 are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
DECEMBER 31, 1995
CARRYING FAIR
(IN THOUSANDS) VALUE VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and due from banks $ 7,220 $ 7,220
Federal funds sold 3,525 3,525
Interest-bearing deposits in other banks 60 60
Investment securities 32,110 32,110
Other investments 592 592
Loans, net 76,491 76,359
Liabilities:
Deposits:
Noninterest-bearing 24,080 24,080
Interest-bearing demand and savings 36,927 36,927
Time deposits 48,809 48,895
Obligation under capital lease 152 152
</TABLE>
54
<PAGE> 55
16. Condensed Financial Information of Summit Bank Corporation (Parent Company
Only)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
(In thousands) 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
- ------
Cash and due from Bank $ 345 $ 194
Investment in the Bank, at equity 13,422 11,076
Premises and equipment, net 2,089 1,928
Other assets 10 156
- --------------------------------------------------------------------------------------------------------------
Total assets $ 15,866 $13,354
==============================================================================================================
Liabilities and Stockholders' Equity
- ------------------------------------
Other liabilities $ 453 $ 81
Stockholders' equity:
Common stock, $0.01 par value; 100,000,000 shares
authorized; 1,407,688 shares issued and outstanding 14 14
Additional paid-in capital 12,123 12,123
Net unrealized holding gains (losses) on
investment securities available for sale, net of income taxes 337 (96)
Retained earnings 2,939 1,232
- --------------------------------------------------------------------------------------------------------------
Total stockholders' equity 15,413 13,273
- --------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $15,866 $13,354
==============================================================================================================
<CAPTION>
CONDENSED STATEMENTS OF INCOME
For the years ended December 31,
(In thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Interest on loans $ -- $ 31 $ 66
Dividend income received from Bank 300 400 --
Other income -- -- 13
- ---------------------------------------------------------------------------------------------------------------
Total income 300 431 79
Operating expenses 112 44 76
- ---------------------------------------------------------------------------------------------------------------
Income before equity in undistributed net
income of Bank 188 387 3
Equity in undistributed net income of Bank 1,913 1,541 1,655
- ---------------------------------------------------------------------------------------------------------------
Net income $2,101 $1,928 $1,658
===============================================================================================================
</TABLE>
55
<PAGE> 56
CONDENSED STATEMENTS OF CASH FLOWS (PARENT COMPANY ONLY)
<TABLE>
<CAPTION>
For the years ended December 31,
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $2,101 $ 1,928 $ 1,658
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 37 10 --
Amortization of organization costs -- -- 5
Equity in undistributed net income of Bank (1,913) (1,541) (1,655)
Decrease (increase) in other assets 146 (93) (17)
Decrease (increase) in other liabilities 372 77 (21)
- --------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 743 381 (30)
- --------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Dividend paid to shareholders (394) -- --
Loans purchased from Bank, net of principal collected -- -- (1,039)
Proceeds from sale of loans -- 827 1,095
Purchase of premises and equipment (198) (1,090) (848)
- --------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (592) (263) (792)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 151 118 (822)
Cash and cash equivalents at beginning of year 194 76 898
- --------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 345 $ 194 $ 76
==============================================================================================================
Supplemental disclosures of cash paid during the year:
Interest $ -- $ -- $ --
Income taxes $1,376 $ 137 $ 10
</TABLE>
The primary source of funds available to the Parent Company to pay shareholder
dividends and other expenses is from the Bank. Bank regulatory authorities
impose restrictions on the amounts of dividends that may be declared by the
Bank. Further restrictions could result from a review by regulatory
authorities of the Bank's capital adequacy, which is the relationship between a
bank's capital and its assets and deposits and other such ratios. The amount
of cash dividends available from the Bank for payment in 1996 is $3,358,000
plus 1996 net earnings of the Bank. At December 31, 1995, $10,063,000 of the
Parent Company's investment in the Bank is restricted as to dividend payments
from the Bank to the Parent Company.
56
<PAGE> 57
17. Supplemental Financial Data
Components of other non-interest expenses in excess of 1% of total interest and
other income for any of the respective years are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accounting, legal, and other professional $286 $318 $179
Data/item processing 218 110 66
Insurance 181 277 214
Postage and courier 168 133 92
Marketing and community relations 157 137 108
Other losses 137 111 51
Telephone 132 103 92
Office Supplies 130 136 80
SBA origination commissions -- 4 104
Provision for losses on sales of other real estate -- 62 96
</TABLE>
57
<PAGE> 58
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
58
<PAGE> 59
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the directors and executive officers of the
Company and the Bank, and the position each holds with the Bank:
<TABLE>
<CAPTION>
Position Position
Name Age with the Company with the Bank
- ---- --- ---------------- -------------
<S> <C> <C> <C>
W. Clayton Sparrow, Jr. 50 Chairman of the Director
Board of Directors
Shafik H. Ladha 49 Vice Chairman of --
the Board of
Directors
David Yu 46 Director, President Chairman of
and Chief Executive the Board of
Officer Directors
Pin Pin Chau 56 Director, Executive Director,
Vice President President and
Chief Executive
Officer
H.A. Dudley, Jr. 47 Executive Vice Executive Vice
President President,
Senior Lending
Officer
Gary K. McClung 40 Executive Vice Executive Vice
President, Chief President, Chief
Financial Officer Financial
and Secretary Officer and
Secretary
Aaron I. Alembik 65 Director --
Gerald L. Allison 58 Director Director
Albert P. Behler 44 Director --
Bruno C. Bucari 54 Director Director
Paul C. Y. Chu 46 Director --
Peter M. Cohen 48 Director --
Jack N. Halpern 47 Director --
</TABLE>
59
<PAGE> 60
<TABLE>
<CAPTION>
Position Position
Name Age with the Company with the Bank
--- ---------------- -------------
<S> <C> <C> <C>
Donald R. Harkleroad 52 Director --
Daniel T. Huang 47 Director --
James S. Lai 58 Director Director
Sion Nyen (Francis) Lai 42 Director Director
Roger C.C. Lin 49 Director --
Shin Chin (Raymond) Lo 50 Director --
Nack Y. Paek 54 Director Director
Carl L. Patrick, Jr. 50 Director --
Cecil M. Phillips 49 Director --
Howard H.L. Tai 64 Director --
P. Carl Unger 68 Director Vice
Chairman
of the
Board of
Directors
</TABLE>
60
<PAGE> 61
W. Clayton Sparrow, Jr., Chairman of the Board since April 1994, has been a
director of the Company since its inception in July 1987 and is a partner in
the Atlanta law firm of Glass, McCullough, Sherrill & Harrold. Mr. Sparrow's
corporate and business law practice includes the general counsel representation
of domestic and multinational sales and manufacturing businesses. His
professional activities include membership in the American and International
Bar Associations, the State Bar of Georgia, and past Chairman of the
International Transactions Section and Director of the Atlanta Bar Association.
Mr. Sparrow is a graduate of the Georgia Institute of Technology (BS Physics),
Georgia State University (MBA Finance) and the University of Georgia Law
School. He is a Director and past President of the Georgia State University
Alumni Association, and has held Director and officer positions with the Dekalb
Chamber of Commerce, the Japan-American Society, the Korea U.S. Chamber of
Commerce and the Georgia Tech Alumni Association. He retired from the Naval
Reserve in the rank of Captain.
Shafik H. Ladha, became Vice Chairman of the Company in April 1994 and has been
a director of the Company since February 1988 and served as Vice Chairman of
the Company from May 1992 to April 1994. Mr. Ladha has been the President/CEO
of Ladha Holdings, Inc. and its wholly owned subsidiaries, a closely held
business engaged in the import, export and distribution of domestic and foreign
products, in the ownership and operation of hotels, the purchase and sale of
real estate. Mr. Ladha has been President/CEO of International Realty
Properties (IRP), a closely held corporation engaged primarily in the business
of owning and operating hotels, since 1979. The assets and liabilities of
International Realty Properties, Inc. were acquired by Ladha Holdings, Inc. as
of April 2, 1989. Mr. Ladha is a nationalized American citizen and is past
chairman (1987-1990) of the Aga Khan Foundation, USA National Committee, and
past member of the Board of Governors of the International Club of Atlanta,
1994 and 1995.
David Yu is founder and organizer of the Company and the Bank. He has served
as President and CEO of the Company since July 1987 and as Chairman of the
Board of Directors of the Bank since December 1987. The Summit National Bank
was organized to serve primarily the fast growing Asian community in the metro
Atlanta area.
Before organizing the Company and the Bank, Mr. Yu was a Vice President of The
Citizens and Southern National Bank (C&S) from 1983 to 1987, where his
responsibilities included the management of trading activities and personnel
associated with C&S's $300 million Eurodollar portfolio. Before joining C&S in
1983, Mr. Yu was a Money Market Officer with the First National Bank of
Atlanta. From 1976 to 1980 Mr. Yu was employed as an Assistant National Bank
Examiner by the Office of the Comptroller of the Currency in Atlanta.
Mr. Yu is founder and Chairman of the board of the Chinese Community Center and
a founder, member of the board of directors, and past President of the Chinese
Industry and Trade Association of Georgia. In addition, Mr. Yu is a member of
the organization of Chinese Americans (OCA) and an officer in OCA's Georgia
Chapter. Mr. Yu also serves on the Advisory Board of Directors of the Atlanta
Committee for the Olympic Games (ACOG), and has been appointed to the Georgia
Human Relations Commission.
Mr. Yu received his M.B.A. degree in International Business from Georgia State
University, and his B.S. degree in Business Administration from Virginia
Commonwealth University.
Pin Pin Chau became President and CEO of the Bank in February 1993 at which
time she became a director of both the Company and the Bank. Ms. Chau was also
elected Executive
61
<PAGE> 62
Vice President of the Company in February, 1993. Before coming to Atlanta, she
was President and CEO of United Orient Bank, a $70 million bank serving New
York's Chinese community. Her previous experience at United Orient Bank
included Executive Vice President and Chief Operating Officer from July 1988 to
April 1989, and, Executive Vice President and Chief Lending Officer from
November 1987 to July 1988.
Ms. Chau began her banking career in 1970 at National Westminster Bank USA
where she remained until 1987. Her experience included international and
domestic lending and international trade finance. She is a native of Hong Kong
and holds a B.A. degree from Coe College, Cedar Rapids, Iowa, and has an M.A.
from Yale University.
H.A. Dudley, Jr. has served as Executive Vice President and Senior Lending
Officer of the Bank since January 1991 and was elected Executive Vice President
of the Company in April 1995. Prior to joining the Bank, Mr. Dudley was a Vice
President of the Wachovia Bank and Trust where he served from 1983 to 1991 as a
District Manager in the Atlanta Retail Bank. From 1977 to 1983, Mr. Dudley was
a Vice President and Branch Coordinator of the Trust Company Bank of Columbus,
Columbus, Georgia. From 1973 to 1977, Mr. Dudley served at various times as
Assistant to the President and Management Auditor with First Southern Savings
and Loan Association, Mobile Alabama. Mr. Dudley began his banking career in
1971 with C & S of Atlanta. Active in various community organizations, Mr.
Dudley previously has served on the Board of Directors of the Sandy Springs
Chamber of Commerce and the Rotary Club of Dunwoody. Mr. Dudley received his
B.S. in Business Administration from Auburn University in 1971.
Gary K. McClung has served as Executive Vice President, Chief Financial Officer
and Secretary of the Company, and Executive Vice President, Chief Financial
Officer of the Bank since April 1992. Prior to joining the Company, Mr.
McClung served as the Senior Vice President/Chief Financial Officer of Fidelity
National Bank and Fidelity Southern Corporation, its parent holding company, in
Decatur, Georgia from 1986 to 1992. Mr. McClung also served as the
Controller/Corporate Secretary of Fidelity National Bank from 1983 to 1986.
From 1978 to 1983, Mr. McClung served as Assistant Cashier of the Bank of
Sissonville in Sissonville, West Virginia. Mr. McClung began his banking
career in 1972 with One Valley Bank in Charleston, West Virginia. Mr.
McClung's activities in various community organizations have included the
Rotary Club of Stone Mountain, Art Station, Inc. a non- profit arts center, and
Stone Mountain Community Council. Mr. McClung received his Bachelors Degree in
Business Administration/Accounting from West Virginia State College.
Aaron I. Alembik, a director of the Company since its inception in July 1987,
is a partner in the Atlanta law firm of Alembik and Alembik. Since 1958 he has
been actively engaged in the practice of real estate, business and corporate
law.
In addition to his legal practice, Mr. Alembik is involved in the ownership,
management and operation of numerous real estate ventures. Mr. Alembik, who
was born in France, is a naturalized U.S. citizen, and has been a resident of
Atlanta since 1957. Mr. Alembik is a graduate of the School of Foreign
Service, Georgetown University and the National Law Center of George Washington
University. Mr. Alembik is a member of the Atlanta, Georgia, Virginia and
American Bar Associations, the Atlanta Lawyers Club, and the Southern Center
for International Studies.
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<PAGE> 63
Gerald L. Allison, became a director of the Company in April 1989, and served
as elected Vice Chairman of the Board of Directors of the Company from February
1990 to May 1992. Mr. Allison is the CEO and Chairman of AJC International,
Inc., a major Atlanta-based export and import trading company for food and
agricultural products. Mr. Allison obtained his B.A. in Economics from
Northern Illinois University and has been a resident of Atlanta since 1967.
Mr. Allison serves on the Board of Advisors for AIESEC at Emory University.
Albert P. Behler a director of the Company since its inception in July 1987,
has been Chairman since 1974 and principal stockholder since 1984 of Heinrich
Behler GMBH, a 125 year-old family owned German construction and engineering
corporation. Since 1991 he has been head of an affiliate of a German real
estate investment conglomerate headquartered in New York. In addition, Mr.
Behler is Deputy Chairman and member of the Executive Board of the Association
of Foreign Investors in U.S. Real Estate (AFIRE), as well as member of the
Advisory Committee of the Warton University Real Estate Center, the
International Council of Shopping Centers and the Urban Land Institute.
Bruno C. Bucari, a director of the Company since February 1994, and the Bank
since January 1990, served as Executive Vice President of the Company and the
President of the Merchant Bank until January 31, 1991. Mr. Bucari resigned as
an officer of the Company with the deactivation of the Merchant Bank and is
currently a private investor. Mr. Bucari was a general manager of
International Mercantile Bank in Luxembourg from 1984 (when he was hired to
establish and operate the bank) until the bank was sold in December 1986.
Mr. Bucari was a Vice President of Mercantile Bank in St. Louis, Missouri from
1974 until 1984, with responsibility for trade finance in Europe, the Middle
East and Africa. Mr. Bucari was a mathematics instructor in the St. Louis
public schools from 1967 until 1974, and served in the United States Peace
Corps in Nigeria from 1965 to 1967. He holds a degree in Physics from the
University of Illinois and an M.B.A. from the University of Missouri.
Paul C.Y. Chu, a director of the Company since May 1993, is the Chairman of the
Novax Group of computer software development companies. Novax was organized to
provide financial management software such as accounting and point of sale for
specific vertical market applicators.
Trained as an attorney at law and certified public accountant, Mr. Chu spent
three years from 1976 to 1979 with Ernst & Young as an auditor and tax
consultant. From 1980 to 1983, he worked for Amerex Trading Co. as President
in charge of its Taiwan operation. From 1983 to 1987 he served as chief of
investments for the Ministry of Economic Affairs of Taiwan responsible for
attracting foreign investments.
Mr. Chu received his Juris Doctor degree from Pace University Law School and
his MBA in finance from Columbia University Business School. He graduated from
Soochaw University in Taiwan with a B.A. in Economics.
Peter M. Cohen has been a director of the Company since its inception in July
1987, and served as Vice Chairman of the Board of Directors and Secretary of
the Company from December 1987 until February 1990. Since 1984, Mr. Cohen has
been President of Trident Corporate Services Inc., a member of the
International Trident Trust Group, which provides international corporate,
trust & mutual fund administration services to foreign and U.S. clients. He is
also the President
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<PAGE> 64
of Trident Trust Company (V.I.) Limited, located in St. Thomas, U.S. Virgin
Islands, which provides trust and management services to U.S. exporters
including various Fortune 500 companies.
Mr. Cohen has practiced as an attorney both abroad and in the U.S. He was
associated with the Atlanta-based office of the Wildman, Harrold, Allen, Dixon
& Branch law firm from 1980 until 1984 and is a member of the Atlanta, Georgia,
American and International Bar Associations. Mr. Cohen also has been a member
of the adjunct faculty of Emory Law School in the areas of international law
and international tax. Mr. Cohen, who is a naturalized citizen, holds degrees
from Rhodes University, the University of Stellenbosch Law School and
University College, University of London.
Jack N. Halpern has been a director of the Company since its inception in July
1987. Mr. Halpern is the President of Halpern Enterprises, Inc., an
Atlanta-based owner, operator and manager of various commercial real estate
ventures. His companies currently control in excess of three million square
feet of retail and office space in the Atlanta area. In his capacity as a
principal of Halpern Enterprises, Inc., Mr. Halpern has assisted numerous
Korean and Chinese immigrants in the establishment of retail businesses in the
Atlanta area. Mr. Halpern holds degrees from Harvard University and the
University of Georgia Law School. He is active in various civic organizations,
including serving as Endowment Fund Chairman of the Atlanta Jewish Federation
and as a Trustee of the Epstein School.
Donald R. Harkleroad, a director of the Company since its inception in July
1987, is the senior partner of Harkleroad & Hermance, P.C., a law firm
specializing in taxation, corporate acquisitions and financing, financial
institutions, investment law, and international practice. Mr. Harkleroad is
also president of The Bristol Company, a diversified investment and management
holding company. Mr. Harkleroad is a graduate of the University of Georgia,
and of New York University School of Law, where he was Editor-in-Chief of the
Journal of International Law & Politics. Mr. Harkleroad is past Chairman of
the International Law Section and of the Corporation and Banking Law Section of
the State Bar of Georgia, as well as Chairman of the Taxation Committee of the
American Bar Association's Business Law Section, a member and director of the
Society of International Business Fellows, and a member of the World Economic
Forum.
Daniel T. Huang, a director of the company since April 1994, is President of
Polyarn Corporation of Norcross, Georgia. Polyarn manufactures nylon
monofilament replacement line for distribution to Central and South America and
Europe in addition to the United States. Prior to establishing the United
States operations of Polyarn in 1992, Mr. Huang served as General Manager for
Polyarn in Taiwan.
Prior to 1992, Mr. Huang served as manager of export and import operation for
M/S San Yuan Industries, Ltd., of Taiwan. Prior to 1976, Mr. Huang managed the
Research and Development Division of M/S Formosa Fishing Tackle Co.
Sion Nyen (Francis) Lai, a director of the Company since December 1987, has
been President and principal shareholder of Fulton Beverage Center, Inc. since
1984. Prior to 1984, Mr. Lai worked with Hock Hua Bank Berhad in Sabah,
Malaysia. Mr. Lai earned an Associates Degree from New York State University,
and B.A. in Economics, and M.B.A. degrees from Mercer University in Atlanta.
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<PAGE> 65
James S. Lai a director of the Company since its inception in July 1987, is a
Professor of Civil Engineering at the Georgia Institute of Technology. He
taught at the University of Utah from 1967 to 1975, and has been at the Georgia
Institute of Technology since 1975. Dr. Lai is the sole owner of Pavtec
Engineering Technology, Inc. which specializes in engineering consulting.
Since 1979, Dr. Lai has served as the managing partner of several real estate
investments which currently include the ownership and management of Atlanta
Chinatown Square. Dr. Lai is a director of the Atlanta Chinese Community
Center, and was elected President of the Association of Chinese Scholars in the
Southeastern United States in 1985. Dr. Lai received his Ph.D. from Brown
University in 1967.
Roger C.C. Lin, a director of the Company since its inception in July 1987, has
been the President of Oriental Treasure Imports, Inc., an importer and
distributor of merchandise to the U.S. since 1983. From 1978 to 1982, he was
President of Li Kun Enterprises Company, Ltd., an import-export concern. Mr.
Lin is a founder and the Charter President of the Chinese-American Lions Club
of Atlanta, and a founder and vice president of the Taiwan Chamber of Commerce
in Atlanta. In addition, Mr. Lin is a honorary member of the Board of
Directors of the National Chinese-American Jewelry Association, Chairman of the
Board of Directors of the Chinese Buddhist Association in Atlanta, and is a
majority shareholder and sole general partner of Asian Square Shopping Center
in Atlanta. Mr. Lin received his degree from Tang-Kang University in Taiwan.
Shin Chin (Raymond) Lo, a director of the Company since December 1987, is the
President of Lo Brothers Associates, an exporter of lumber and importer of
woodworking machinery. Prior to that, Mr. Lo was employed by Roberts and
Company, architects, and by Portman and Associates. Mr. Lo earned a Masters
Degree in Architecture from the Georgia Institute of Technology.
Nack Y. Paek, a director of the Company since its inception in July 1987,
served as Chairman of the Board from May 1992 to April 1994. He is President
of Government Loan Service Corp., Inc. which specializes in originating and
servicing SBA loans. Mr. Paek obtained a B.S. degree from Seoul National
University and an M.B.A. from Northern Illinois University. His business
experience includes management positions with Korea Explosive Manufacturing
Co., Seoul, and Continental Insurance Co., Atlanta, where he was Director of
Regional Auditing. From 1980 to 1990, Mr. Paek was sole owner of the local
accounting firm of Nack Y. Paek, P.C. with its clientele being predominantly
members of the Korean, Chinese and Japanese immigrant communities. Mr. Paek is
a member of the American Institute of Certified Public Accountants and the
Georgia Society of Certified Public Accountants.
Carl L. Patrick, Jr., has been a director since the inception of the Company in
July 1987 and served as Chairman of the Board of Directors of the Company from
February 1990 to May 1992. Mr. Patrick is a lawyer and a certified public
accountant (CPA) with degrees from Duke University, Georgia State University
and the University of Georgia School of Law. As a CPA with Arthur Andersen &
Co. and with Arthur Young & Co. for an aggregate of approximately ten years,
Mr. Patrick had extensive exposure to the accounting and tax aspects of real
estate, banking, insurance, and manufacturing. Mr. Patrick is a member of the
American and Georgia Bar Associations, and the American Institute of Certified
Public Accountants. He is a director and principal shareholder of Carmike
Cinemas, Inc., a publicly-owned company whose shares are traded on the NYSE,
and co-Chairman of PGL Entertainment Corporation, a local motion picture
production company in Atlanta.
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<PAGE> 66
Cecil M. Phillips, has been a director of the Company since its inception in
July 1987, and was Chairman of the Board of Directors of the Company from July
1987 until December 1989. Mr. Phillips is the principal of Phillips
International L.P., a merchant banking and investment firm established in 1983
which focuses on off-shore financings, reverse investments and exporting and
importing. Mr. Phillips received his B.A. from the University of Missouri and
J.D. degree from the University of Michigan.
He began practicing law in 1971 with the Atlanta law firm of Alston & Bird.
From 1979 to 1983 he was also the Executive Assistant to Governor George
Busbee. Mr. Phillips previously served as Vice President and General Counsel
of Rock Tenn Company. Mr. Phillips is a member and past Chairman of the Board
of the International Business Council, and a past member of the Board of
Directors of Fortune Financial Group, Inc. He currently is a Director of U.K.
Capital, Inc. and Regina, PLC.
Howard H. L. Tai, a director of the Company since its inception in July 1987,
served as Executive Vice President of the Company from October 1987 until
September 1988. Mr. Tai has been an Atlanta-based real estate investor since
1981. Mr. Tai is a graduate of the College of Law of the National University
of Taiwan and holds a master of law degree from Waseda University of Tokyo,
Japan. Prior business experience includes serving as Executive Vice President
of Shin-kong Synthetic Fibers Corporation located in Taiwan, the Republic of
China.
Dr. P. Carl Unger, became Vice Chairman of the Bank in May 1992 and has been a
director of the Company since its inception in July 1987, has been
self-employed since 1985 as a consultant specializing in the field of human
resources with clients in Europe, Australia, Canada and the United States. From
1978 to 1985, he was employed by the Campbell Soup Company. Dr. Unger was
educated at Cheshunt College Cambridge, Liverpool University and Columbia
Pacific University. He is a member of the Royal Society of Health, the
Institute of Marketing, the British Marketing Association and the American
Marketing Association.
The Board of Directors of the Company is elected by its shareholders. The
officers of the Company are selected by the Company's Board of Directors. The
Company's Articles of Incorporation provide that the Board of Directors of the
Company shall be divided into three classes, with each class to be as nearly
equal in number as possible. The Articles of Incorporation also provide that
the three classes of directors are to have staggered terms, so that the terms
of only one class will expire at each annual meeting of the shareholders. The
Class I directors, who were elected to three year terms at the 1993 annual
meeting are Messrs. Alembik, Halpern, Francis Lai, Lo, Sparrow, Bucari, and Ms.
Chau. The Class II directors, who were elected to three year terms at the 1994
annual meeting, are Messrs. Cohen, Harkleroad, Huang, Ladha, Chu, Phillips,
Tai and Unger. The Class III directors, who were elected to three year terms
at the 1995 annual meeting, are Messrs. Allison, Behler, James Lai, Lin, Paek,
Patrick and Yu.
The Board of Directors of the Bank is elected by the Company as sole
shareholder of the Bank. The officers of the Bank are selected by the Bank's
Board of Directors. No family relationships exist among the Directors and
executive officers of the Company or the Directors and executive officers of
the Bank.
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<PAGE> 67
ITEM 11. EXECUTIVE COMPENSATION
The following table shows the cash compensation paid by the Company during the
years ended December 31, 1995, 1994, and 1993, to the Company's Chief Executive
Officer and each of the other executive officers of the Company who earned more
than $100,000 in compensation during the year ended December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
Annual Compensation AWARDS
------------------------------------------- ------
SECURITIES
NAME AND PRINCIPAL COMPANY OTHER ANNUAL UNDERLYING ALL OTHER
OR SUBSIDIARY POSITION YEAR SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
---------------------- ---- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
DAVID YU . . . . . . . . . . 1995 $103,100 $41,544 -- -- --
President and Chief Executive 1994 96,667 39,049 -- -- --
Officer of the Company 1993 95,000 15,500 -- -- --
PIN PIN CHAU . . . . . . . . 1995 $130,729 $83,088 $ 9,611(1) -- $4,400(4)
Executive Vice President of 1994 125,000 78,098 14,384(2) $10,000 4,400(4)
the Company; President and 1993 114,583 29,710 27,354(3) -- 4,400(4)
Chief Executive Officer of
the Bank
GARY K. MCCLUNG . . . . . . . 1995 $83,900 $41,544 -- -- --
Executive Vice President and 1994 78,575 39,049 -- 2,000 --
Chief Financial Officer 1993 73,631 17,102 -- -- --
of the Company and the Bank
H.A. DUDLEY, JR. . . . . . . 1995 $81,400 $41,544 -- -- --
Executive Vice President 1994 77,300 39,049 -- 2,000 --
of the Bank 1993 73,113 15,102 -- -- --
=========================================================================================================================
</TABLE>
(1) Non-cash compensation representing personal use of a vehicle
provided by the Company.
(2) Includes $5,000 of payments by the Company for relocation expenses
of Ms. Chau and $9,384 of non-cash compensation representing
personal use of a vehicle provided by the Company.
(3) Includes $13,329 of payments by the Company of moving and interim
living expenses of Ms. Chau, $9,025 of non-cash compensation
representing personal use of a vehicle provided by the Company and
$5,000 for miscellaneous relocation expenses.
(4) Consists of deferred compensation paid by the Company.
STOCK OPTION GRANTS
There were no stock options or stock appreciation rights granted to any
executive officers listed in the Summary Compensation Table during the fiscal
year ended December 31, 1995.
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<PAGE> 68
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the executive
officers listed in the Summary Compensation Table concerning unexercised
options held as of the end of 1995. There were no options exercised during the
year ended December 31, 1995.
1995 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT 1995 YEAR END OPTIONS AT 1995 YEAR END(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
<S> <C> <C>
David Yu 11,600/0 $2,900/0
Pin Pin Chau 10,000/0 $2,500/0
Gary K. McClung 2,000/0 $ 500/0
H.A. Dudley, Jr. 5,000/0 $1,250/0
</TABLE>
(1) Based on the quoted market value per share of the Company's common
stock on December 31, 1995 of $10.25 per share.
SEVERENCE AGREEMENTS
In August 1995 the Board entered into severence agreements with each of the
four (4) executive officers of the Bank. The agreements basically provide that
in the event of involuntary termination or a change in the executive's position
or compensation resulting from a change in the control of the Company due to a
merger, consolidation or reorganization, each executive would be entitled to
receive an amount equal to 100% of the executive's base salary. The agreements
also provide for the awarding of certain ungranted long-term stock option
incentives to the executives in the event of an involuntary termination. At
December 31, 1995, there were 16,000 ungranted long-term stock options
available to executives, 6,400 of which would be available to Bank
President/CEO Chau and 3,200 of which would be available to each of the
remaining three executives. These agreements have continuing three (3) year
terms.
DIRECTOR COMPENSATION
During 1995, the Company paid directors of the Company a fee of $300 per
meeting for their services as directors. Total fees of $33,000 were paid to
Company directors under this arrangement. The Bank pays each director who is
not an employee of the Bank a fee of $300 for each meeting of the Board of
Directors of the Bank and $50 for each board committee meeting attended.
Pursuant to this arrangement, the Bank paid $31,400 in directors' fees in 1995.
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<PAGE> 69
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's compensation committee consists of Nack Y. Paek, Roger C.C. Lin,
and P. Carl Unger. No member of the compensation committee is an employee of
the Company or the Bank.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 1, 1996, the number of shares of
common stock of the Company beneficially owned by each person known to the
Company to own more than five percent of the outstanding shares of common
stock, by each director of the Company, and by all of the Directors and
executive officers of the Company as a group. Except where otherwise
indicated, each individual has sole voting and investment power over the common
stock listed by his or her name.
<TABLE>
<CAPTION>
Number of Shares Percent of Class
Beneficial Owner Beneficially Owned Beneficially Owned(1)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
W. Clayton Sparrow, Jr. 12,268 (2) .75%
David Yu 47,719 (3) 2.93%
Pin Pin Chau 10,900 (4) .67%
Aaron I. Alembik 25,980 (5) 1.60%
Gerald L. Allison 6,602 (6) .41%
Albert P. Behler 30,000 (7) 1.84%
Bruno C. Bucari 2,800 (8) .17%
Peter M. Cohen 16,543 (9) 1.01%
Paul C.Y. Chu 131,188 (10) 8.06%
H.A. Dudley, Jr. 5,000 (11) .31%
Jack N. Halpern 35,000 (12) 2.15%
Donald R. Harkleroad 31,400 (13) 1.92%
Daniel T. Huang 110,100 (14) 6.77%
Shafik H. Ladha 20,000 (15) 1.22%
James S. Lai 20,000 (16) 1.22%
Sion Nyen (Francis) Lai 40,000 (17) 2.46%
Roger C.C. Lin 30,000 (18) 1.84%
Shin Chin (Raymond) Lo 2,708 (19) .17%
Gary K. McClung 4,000 (20) .25%
Nack Y. Paek 20,100 (21) 1.24%
Carl L. Patrick, Jr. 38,990 (22) 2.40%
Cecil M. Phillips 4,390 (23) .27%
Howard H.L. Tai 20,000 (24) 1.23%
P. Carl Unger 30,123 (25) 1.85%
All directors and executive
Officers as a group (24 people) 695,811 (26) 42.77%
</TABLE>
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<PAGE> 70
(1) Based on 1,407,688 shares outstanding as of March 1, 1996, and in the
case of beneficial owners who hold options and/or warrants for shares
exercisable within 60 days, includes as outstanding the number of shares
subject to such options and/or warrants.
(2) Includes 6,134 shares held by Mr. Sparrow and his wife and 6,134 shares
subject to warrants received for service as an organizer of the Company.
(3) Includes 36,719 shares held by Mr. Yu and his wife, and 11,000 shares
subject to options received under the Company's Key Employee Stock
Option Plan.
(4) Includes 10,000 shares subject to options received under the Company's
Key Employee Stock Option Plan.
(5) Includes 13,040 shares held by Mr. Alembik and his wife and 12,940
shares subject to warrants received for service as an organizer of the
Company.
(6) Includes 1,951 shares subject to warrants received for service as an
organizer of the Company.
(7) Includes 15,000 shares subject to warrants received for service as an
organizer of the Company.
(8) Includes 1,300 shares subject to warrants received for service as an
organizer of the Company.
(9) Includes 340 shares held by Mr. Cohen and his wife and 3,630 shares
subject to warrants received for service as an organizer of the Company.
(10) Includes 95,000 shares held by May Foong Corporation of which Mr. Chu is
President and 4,000 shares subject to warrants received for service as
an organizer of the Company.
(11) 5000 shares subject to options received under The Company's Key Employee
Stock Option Plan.
(12) Includes 10,000 shares held by Halpern Enterprises of which Mr. Halpern
is President and 17,500 shares subject to warrants received for service
as an organizer of the Company.
(13) Includes 15,000 shares held by Bristol Summit Company and 1,200 shares
held by The Bristol Company, both of which Mr. Harkleroad is President
and 15,100 shares subject to warrants received for service as an
organizer of the Company.
(14) Includes 110,100 shares held by Mr. Huang, his wife and various family
members.
(15) Includes 10,000 shares held by Ladha Holdings Inc. of which Mr. Ladha is
President and
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<PAGE> 71
10,000 shares subject to warrants received for service as an organizer
of the Company.
(16) Includes 10,000 shares subject to warrants received for service as an
organizer of the Company.
(17) Includes 20,000 shares held by U.S. Pacific Investment Group of which
Mr. Lai is President and 20,000 shares subject to warrants received for
service as an organizer of the Company.
(18) Includes 15,000 shares held by a partnership of which Mr. Lin is a
partner and 15,000 shares subject to warrants received for service as an
organizer of the Company.
(19) Includes 208 shares subject to warrants received for service as an
organizer of the Company.
(20) Represents 1,000 shares held by Mr. McClung and his wife, 1,000 shares
subject to warrants received from the purchase of an organizer's shares
of the Company and 2,000 shares subject to options received under the
Company's Key Employee Stock Option Plan.
(21) Includes 9,000 shares subject to warrants received for service as an
organizer of the Company and 1,000 shares subject to warrants received
from the purchase of an organizer's shares of the Company.
(22) Includes 19,495 shares subject to warrants received for service as an
organizer of the Company.
(23) Represents 4,390 shares subject to warrants received for service as an
organizer of the Company.
(24) Includes 10,000 shares held by Mr. Tai and his wife and 10,000 shares
subject to warrants received for service as an organizer of the Company.
(25) Includes 13,595 shares subject to warrants received for service as an
organizer of the Company.
(26) Includes 191,243 shares subject to warrants for services as organizers
of the Company, 2,000 shares subject to warrants received from the
purchase of organizers' shares of the Company and 28,000 shares subject
to stock options received under the Company's Key Employee Stock Option
Plan exercisable within 60 days.
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<PAGE> 72
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain officers and directors of the Company have deposit accounts with the
Bank and may have other transactions with the Company or the Bank, including
loans in the ordinary course of business. All loans or other extensions of
credit made by the Bank or the Company to officers, directors and principal
shareholders of the Company and to affiliates of such persons have been made in
the ordinary course of business on terms, including interest rates and
collateral, deemed by the Bank or the Company to be substantially the same as
those prevailing at the time for comparable transactions with independent third
parties and do not involve more than the normal risk of collectibility or
present other unfavorable features.
During the last fiscal year, the Company retained the following law firms (as
well as others) to provide certain legal services to the Company, and may
employ each of the firms during the current fiscal year: Alembik and Alembik,
of which Mr. Alembik is a partner; Harkleroad & Hermance, P.C., of which Mr.
Harkleroad is a partner; and Glass, McCullough, Sherrill & Harrold, of which
Mr. Sparrow was a partner.
The Bank entered into an agreement in 1990 with Government Loan Service
Corporation, Inc., a company in which a Director, Mr. Nack Paek, is sole
shareholder. The agreement governs the referral and presentation of completed
SBA loan applications to the Bank by this company on behalf of certain
prospective borrowers. The agreement includes certain conditions designed to
safeguard the Bank from prospective losses, including the requirements that all
referred loans be subjected to full review by a Bank loan committee and that
any income derived by this company from an approved referred loan is subject to
recourse by the Bank in the event of any loss within 24 months of such specific
loan approval. There were no loans originated under this agreement in 1995.
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<PAGE> 73
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
1. Financial Statements - The consolidated financial statements, notes
to consolidated financial statements, and independent auditors'
report thereon, are included in Part II, Item 8 of this Report.
2. Financial Statement Schedules - These are omitted as they are not
required or are not applicable.
3. Exhibits (numbered in accordance with Item 601 of Regulation S-K).
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
<S> <C>
2.1 Agreement and plan of merger by and between the Summit National Bank
and Vinings Bank & Trust, National Association, dated November 29, 1993
(incorporated by reference to Exhibit 2.1 to the Company's current
report on Form 8-K dated November 29, 1993).
3.1 Amended and Restated Articles of Incorporation of Summit Bank
Corporation (incorporated by reference to Exhibit 3.2 of Summit Bank
Corporation's Registration Statement on Form S-1, Amendment No.3
(Registration Number 33-16366)).
3.2 Bylaws of Summit Bank Corporation, as amended (incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1987.)
4.1 The rights of security holders are defined in (i) Articles Five, Six,
Nine, Ten, Eleven, Thirteen, Fourteen, and Sixteen of the Amended and
Restated Articles of Incorporation of Summit Bank Corporation and (ii)
Articles Two, Three, Eight, Ten, and Eleven of the amended Bylaws of
Summit Bank Corporation, (incorporated by reference to Exhibits 3.1 and
3.2 respectively, to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994).
10.1* Summit Bank Corporation 1987 Key Employee Incentive Stock Option Plan,
as amended and restated as of February 28, 1989 (incorporated by
reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1991).
10.2 Form of Summit Bank Corporation Organizer's Warrant Agreement
(incorporated by reference to Exhibit 10.4 of Summit Bank Corporation's
Registration Statement on Form
</TABLE>
73
<PAGE> 74
<TABLE>
<S> <C>
S-1 (Registration Number 33-16366)).
10.3 Lease Agreement dated December 3, 1993, between Baker Dennard Co.,
Lessor, and Summit National Bank, Lessee (incorporated by reference to
Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993).
10.4 SBA Guaranteed Loan Origination Agreement dated as of August 22, 1990,
by and between The Summit National Bank and Government Loan Service
Corporation, Inc. (incorporated by reference to Exhibit 10.5 to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1991).
10.5 Lease amendment, assignment, assumption and consent Agreement by and
between the Summit National Bank, Lessee; Vinings Bank & Trust,
National Association; and Metropolitan Life Insurance Company, Lessor,
dated December 31, 1993 and lease agreement, as amended, by and between
Vinings Bank & Trust, N.A., Lessee and Paces West Associates, Lessor,
dated April 23, 1987 (incorporated by reference to Exhibit 10-8 to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1993).
10.6 Lease agreement dated June 16, 1995, between ZML-Paces Limited
Partnership, Lessor and Summit National Bank, Lessee.
10.7* Change in Control Agreement dated August 25, 1995 by and between Pin
Pin Chau, President of the Summit National Bank, and the Summit
National Bank.
10.8* Change in Control Agreement dated August 25, 1995 by and between David
Yu, Chairman of the Summit National Bank, and the Summit National Bank.
10.9* Change in Control Agreement dated August 25, 1995 by and between Alec
Dudley, Executive Vice President of the Summit National Bank, and the
Summit National Bank.
10.10* Change in Control Agreement dated August 25, 1995 by and between Gary
K. McClung, Executive Vice President of the Summit National Bank, and
the Summit National Bank.
10.11 Agreement to purchase real estate dated December 18, 1995 between SBC
Properties, L.L.C. (as agent for the Summit National Bank) and SunTrust
Bank, Atlanta.
11.1 Statement Regarding Computation of Per Share Earnings.
21.1 Subsidiaries of Summit Bank Corporation.
27.1 Financial Date Schedule (for SEC use only)
</TABLE>
* Denotes a management contract compensatory plan or arrangement.
74
<PAGE> 75
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of 1995.
75
<PAGE> 76
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SUMMIT BANK CORPORATION
By /s/ David Yu
-------------------------
David Yu, President, and
Chief Executive Officer
Date March 22, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ David Yu Director, President and Chief Dated: March 22, 1996
- -----------------------------------
David Yu Executive Officer
/s/ Pin Pin Chau Director, Executive Dated: March 22, 1996
- -----------------------------------
Pin Pin Chau Vice President
/s/ Gary K. McClung Principal Financial Officer Dated: March 22, 1996
- ---------------------------------- and Principal Accounting
Gary K. McClung Officer and Secretary
/s/ W. Clayton Sparrow, Jr. Director, Chairman Dated: March 22, 1996
- ----------------------------------- of the Board
W. Clayton Sparrow, Jr.
/s/ Shafik H. Ladha Director, Dated: March 22, 1996
- ----------------------------------- Vice Chairman
Shafik H. Ladha of the Board
/s/ Aaron I. Alembik Director Dated: March 22, 1996
- -----------------------------------
Aaron I. Alembik
Director Dated:
- ----------------------------------
Gerald L. Allison
Director Dated:
- ----------------------------------
Albert F. Behler
</TABLE>
76
<PAGE> 77
<TABLE>
<S> <C> <C>
Director Dated:
- -----------------------------------
Bruno C. Bucari
Director Dated:
- ----------------------------------
Peter M. Cohen
/s/ Daniel T. Huang Director Dated: March 22, 1996
- ----------------------------------
Daniel T. Huang
/s/ Paul C.Y. Chu Director Dated: March 22, 1996
- ----------------------------------
Paul C.Y. Chu
/s/ Jack N. Halpern Director Dated: March 22, 1996
- -----------------------------------
Jack N. Halpern
Director Dated:
- -----------------------------------
Donald R. Harkleroad
/s/ James S. Lai Director Dated: March 22, 1996
- -----------------------------------
James S. Lai
/s/ Sion Nyen Lai Director Dated: March 22, 1996
- -----------------------------------
Sion Nyen (Francis) Lai
Director Dated:
- ----------------------------------
Roger C.C. Lin
/s/ Shin Chin (Raymond) Lo Director Dated: March 22, 1996
- -----------------------------------
Shin Chin (Raymond) Lo
/s/ Nack Paek, Jr. Director Dated: March 22, 1996
- -----------------------------------
Nack Paek, Jr.
/s/ Carl L. Patrick, Jr. Director Dated: March 22, 1996
- -----------------------------------
Carl L. Patrick, Jr.
/s/ Cecil M. Phillips Director Dated: March 22, 1996
- -----------------------------------
Cecil M. Phillips
/s/ Howard H.L. Tai Director Dated: March 22, 1996
- -----------------------------------
Howard H. L. Tai
/s/ P. Carl Unger Director Dated: March 22, 1996
- -----------------------------------
P. Carl Unger
</TABLE>
77
<PAGE> 78
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT
TO SECTION 12 OF THE ACT.
At the time of this filing, the registrant has not sent any annual report or
proxy material to shareholders. Such annual report and proxy material will be
furnished to shareholders subsequent to the filing of this Form 10-K and the
registrant shall furnish copies of such material to the Commission when it is
sent to shareholders.
78
<PAGE> 79
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Pages
<S> <C>
2.1 Agreement and plan of merger by and between the Summit National
Bank and Vinings Bank & Trust, National Association, dated
November 29, 1993 (incorporated by reference to Exhibit 2.1 to
the Company's current report on Form 8-K dated November 29,
1993).
3.1 Amended and Restated Articles of Incorporation of Summit Bank
Corporation (incorporated by reference to Exhibit 3.2 of Summit
Bank Corporation's Registration Statement on Form S-1, Amendment
No. 3(Registration Number 33-16366).
3.2 Bylaws of Summit Bank Corporation, as amended (incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1987.)
4.1 The rights of security holders are defined in (i) Articles Five,
Six, Nine, Ten, Eleven, Thirteen, Fourteen, and Sixteen of the
Amended and Restated Articles of Incorporation of Summit Bank
Corporation and (ii) Articles Two, Three, Eight, Ten, and Eleven
of the amended Bylaws of Summit Bank Corporation, as provided in
Exhibits 3.1 and 3.2 respectively.
10.1 Summit Bank Corporation 1987 Key Employee Incentive Stock Option
Plan, as amended and restated as of February 28, 1989
(incorporated by reference to Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1991).
10.2 Form of Summit Bank Corporation Organizer's Warrant Agreement
(incorporated by reference to Exhibit 10.4 of Summit Bank
Corporation's Registration Statement on Form S-1 (Registration
Number 33-16366).
10.3 Lease Agreement dated December 3, 1993, between Baker Dennard
Co., Lessor, and Summit National Bank, Lessee (incorporated by
reference to Exhibit 10.4 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993).
10.4 SBA Guaranteed Loan Origination Agreement dated as of August 22,
1990, by and between The Summit National Bank and Government
Loan Service Corporation, Inc. (incorporated by reference to
Exhibit 10.5 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993).
10.5 Lease amendment, assignment, assumption and consent Agreement by
and between the Summit National Bank, Lessee; Vinings Bank &
Trust, national Association; and Metropolitan Life Insurance
Company, Lessor, dated December 31, 1993 (incorporated by
reference to Exhibit 10.8 to the Company's Annual Report on Form
10--K for the fiscal year ended December 31, 1993).
</TABLE>
79
<PAGE> 80
<TABLE>
<S> <C>
10.6 Lease agreement dated June 16, 1995, between ZML-Paces Limited
Partnership, Lessor and Summit National Bank, Lessee
10.7 Change in Control Agreement dated August 25, 1995 by and between
Pin Pin Chau, President of the Summit National Bank, and the
Summit National Bank.
10.8 Change in Control Agreement dated August 25, 1995 by and between
David Yu, Chairman of the Summit National Bank, and the Summit
National Bank.
10.9 Change in Control Agreement dated August 25, 1995 by and between
Alec Dudley, Executive Vice President of the Summit National
Bank, and the Summit National Bank.
10.10 Change in Control Agreement dated August 25, 1995 by and between
Gary K. McClung, Executive Vice President of the Summit National
Bank, and the Summit National Bank.
10.11 Agreement to purchase real estate dated December 18, 1995
between SBC Properties, L.L.C. (as agent for the Summit National
Bank) and SunTrust Bank, Atlanta.
11.1 Statement Regarding Computation of Per Share Earnings
21.1 Subsidiaries of Summit Bank Corporation
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
80
<PAGE> 1
ONE PACES WEST
STANDARD FORM OFFICE LEASE
BETWEEN
ZML - PACES LIMITED PARTNERSHIP, a Delaware limited partnership ("LANDLORD"),
by its agent, Equity Office Properties, Inc.
AND
THE SUMMIT NATIONAL BANK, a national banking association ("TENANT")
84
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
I. BASIC LEASE INFORMATION: DEFINITIONS...................................................................... 1
II. LEASE GRANT................................................................................................ 2
III. POSSESSION................................................................................................. 2
IV. USE........................................................................................................ 3
V. RENT....................................................................................................... 3
VI. SECURITY DEPOSIT........................................................................................... 3
VII. SERVICES TO BE FURNISHED BY LANDLORD....................................................................... 4
VIII. LEASEHOLD IMPROVEMENTS..................................................................................... 4
IX. GRAPHICS................................................................................................... 5
X. REPAIRS AND ALTERATIONS BY TENANT.......................................................................... 5
XI. USE OF ELECTRICAL AND HVAC SERVICES BY TENANT.............................................................. 5
XII. ENTRY BY LANDLORD.......................................................................................... 6
XIII. ASSIGNMENT AND SUBLETTING.................................................................................. 6
XIV. LIENS...................................................................................................... 7
XV. INDEMNITY AND WAIVER OF CLAIMS............................................................................. 7
XVI. TENANT'S INSURANCE......................................................................................... 8
XVII. SUBROGATION................................................................................................ 9
XVIII. LANDLORD'S INSURANCE....................................................................................... 10
XIX. CASUALTY DAMAGE............................................................................................ 10
XX. DEMOLITION................................................................................................. 11
XXI. CONDEMNATION............................................................................................... 11
XXII. EVENTS OF DEFAULT.......................................................................................... 11
XXIII. REMEDIES................................................................................................... 12
XXIV. LIMITATION OF LIABILITY.................................................................................... 13
XV. NO WAIVER.................................................................................................. 14
XXVI. EVENT OF BANKRUPTCY........................................................................................ 14
XVII. QUIET ENJOYMENT............................................................................................ 15
XXVIII. RELOCATION................................................................................................. 15
XXIX. HOLDING OVER............................................................................................... 15
XXX. SUBORDINATION TO MORTGAGES................................................................................. 15
XXXI. ATTORNEY'S FEES............................................................................................ 16
XXXII. NOTICE..................................................................................................... 16
XXXIII. LANDLORD'S LIEN .......................................................................................... 16
XXXIV. EXCEPTED RIGHTS............................................................................................ 16
</TABLE>
85
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
XXXV. SURRENDER OF PREMISES................................................................................................ 17
XXXVI. MISCELLANEOUS........................................................................................................ 17
XXXVII. ENTIRE AGREEMENT .................................................................................................... 18
</TABLE>
86
<PAGE> 4
OFFICE LEASE AGREEMENT
This Office Lease Agreement (the "Lease"), is made and entered into as of
the 16th day of June, 1995 by and between ZML-Paces Limited Partnership, a
Delaware limited partnership ("Landlord") by its Agent, Equity Office
Properties, Inc., an Illinois corporation and The Summit National Bank, a
national banking association ("Tenant").
I. BASIC LEASE INFORMATION: DEFINITIONS.
A. The following is some of the basic lease information and defined
terms used in this Lease.
1. "Broker" [INTENTIONALLY OMITTED].
2. "Building" shall mean the office building located at 2727 Paces
Ferry Road, N.W.,Atlanta, Fulton County, State of Georgia 30339, commonly
known as One Paces West.
3. The "Lease Term" shall mean a period of seven (7) years
commencing on July 1,1995 (the "Commencement Date"), and,unless sooner
terminated as provided herein, ending on June 30, 2002 (the "Termination
Date").
4. "Guarantor(s)" shall mean any party that agrees in
writing to guarantee the Lease.
5. "Landlord Work" shall mean the work, if any, that Landlord is
obligated to perform in the Premises pursuant to the Work Letter
Agreement attached hereto as Exhibit "C".
6. "Notice Addresses" shall mean the following addresses for
Tenant and Landlord, respectively:
Tenant:
Effective as of the date of this Lease, notices shall be sent to
Tenant at the Premises.
Landlord:
ZML-Paces Limited Partnership
2727 Paces Ferry Road
Suite 1-250, N.W.
Atlanta, Georgia 30339
Attention: Building Manager
With a copy to:
Equity Office Properties, Inc.
Two North Riverside Plaza
Suite 2200
Chicago, Illinois 60606
Attention: General Counsel
Payments of Rent only shall be made payable
to the order of ZML-Paces Limited Partnership
at the following address:
Equity Office Properties, Inc.
2727 Paces Ferry Road, N.W.
Suite 1-250
Atlanta, Georgia 30339
7. "Permitted Use" shall mean: the operation of a full service
banking institution and the operation of an ATM machine.
8. "Premises" shall mean the area located on the first floor of the
Building and outlined on Exhibit A attached hereto and incorporated
herein and known as Suite #150.
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<PAGE> 5
9. "Prepaid Rental": INTENTIONALLY OMITTED.
10. "Rentable Area of the Premises" shall mean the area contained
within the demising walls of the Premises and any other area designated
for the exclusive use of Tenant, without deduction for any columns or
projections necessary to the Building, plus a proportionate share of any
Common Areas located on the floor(s) on which the Premises is located and
a proportionate share of the Building's public areas, management office,
engineer's office and "Mechanical Spaces" i.e. spaces housing service
areas, equipment and/or access corridors for HVAC and communications
facilities, plumbing, fire protection and elevators. The Rentable Area
of the Premises is deemed for all purposes under this Lease to be 5,266
square feet. The "Rentable Area of the Building" is deemed for all
purposes under this Lease to be 260,496 square feet. The square footage
amounts set forth for the Rentable Area of the Premises and the Rentable
Area of the Building constitute a material part of the economic basis of
this Lease and the execution thereof by Landlord and shall not be
adjusted without the written consent of Landlord.
11. "Security Deposit" INTENTIONALLY OMITTED.
12. "Tenant's Pro Rate Share" shall mean and two and two one
hundredths percent (2.02%), which is the sum derived by dividing the
Rentable Area of the Premises by The Rentable Area of the Building and
multiplying the result thereof by one hundred (100).
B. The following are additional definitions of some of the defined terms
used in the Lease.
1. "Basic Costs" shall mean all direct and indirect costs and
expenses incurred in connection with the Property as more fully defined
in Exhibit B-2.
2. "Building Standard" shall mean the type, grade, brand, quality
and/or quantity of materials Landlord designates from time to time to be
the minimum quality and/or quantity to be used in the Building.
3. "Business Day(s)" shall mean Mondays through Fridays exclusive
of the normal business holidays ("Holidays") of New Year's Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day, and
such other days as Landlord may designate.
4. "Common Areas" shall mean those areas provided for the common
use or benefit of all tenants generally and/or the public, such as
corridors, elevator foyers, common mail rooms, restrooms, vending areas,
and lobby areas (whether at ground level or otherwise), and other similar
facilities.
5. "Maximum Rate" shall mean the greatest per annum rate of interest
permitted from time to time under applicable federal and state law.
6. "Normal Business Hours" for the Building shall mean 8:00 a.m. to
6:00 p.m. Mondays through Fridays, and 8:00 a.m. to 1:00 p.m. on
Saturdays, exclusive of Holidays, and such other hours as Landlord may
designate from time to time.
7. "Prime Rate" shall mean the per annum interest rate publicly
announced by The First National Bank of Chicago from time to time
(whether or not charged in each instance) as its prime or base rate.
8. "Property" shall mean the Building, the Building Garage, if any,
all other improvements serving the Building and the tenants thereof and
the parcel(s) of land on which they are located.
II. LEASE GRANT. Subject to and upon the terms herein set forth, Landlord
leases to Tenant and Tenant leases from Landlord the Premises.
III. POSSESSION.
A. Tenant is currently in possession of the Premises and hereby
represents, acknowledges and agrees that:
1. the Premises is in good order and satisfactory condition, with no
representation or warranty by Landlord as to the condition or suitability
of the Premises or of the Building for Tenant's use thereof; and
88
<PAGE> 6
2. Landlord has no obligation to clean, decorate, alter, remodel,
improve or repair the Premises or the Building unless said obligation is
specifically set forth in this Lease.
IV. USE. The Premises shall be used for the Permitted Use and for no
other purpose. Tenant agrees not to use or permit the use of the Premises for
any purpose which is illegal, dangerous to life, limb or property or which, in
Landlord's opinion, creates a nuisance or which would increase the cost of
insurance coverage with respect to the Building. Tenant shall conduct its
business and control its agents, servants, contractors, employees, customers,
licensees, and invitees in such a manner as not to interfere with, annoy or
disturb other tenants, or in any way interfere with Landlord in the management
and operation of the Building. Tenant will maintain the Premises in a clean
and healthful condition, and comply with all laws, ordinances, orders, rules
and regulations of any governmental entity with reference to the operation of
Tenant's business and to the use, condition, configuration or occupancy of the
Premises, including without limitation, the Americans with Disabilities Act.
Tenant will comply with the rules and regulations of the Building adopted and
altered by Landlord from time to time and will cause all of its agents,
servants, contractors, employees, customers, licensees and invitees to do so.
All changes to such rules and regulations will be sent by Landlord to Tenant in
writing. A copy of the existing rules and regulations is attached hereto as
Exhibit D and made a part hereof. Tenant agrees not to commit or allow any
waste to be committed on any portion of the Premises, and at the termination of
this Lease to deliver up the Premises to Landlord in accordance with Article
XXXV hereof.
V. RENT.
A. Tenant covenants and agrees to pay to Landlord during the Lease Term,
without any setoff or deduction whatsoever, the full amount of all Base Rental
payments, and any adjustments thereof, due in accordance with the rental
schedule set forth in Exhibit B-1 hereof (the "Base Rental"), the full amount
of all payments of Additional Base Rental due in accordance with Exhibit B-2
hereof and the full amount of all parking charges, if any, due in accordance
with this Lease (the "Additional Base Rental") and all such other sums of money
as shall become due under this Lease (including, without limitation, any
charges for replacement of electric lamps and ballasts that are above Building
Standard and any other services, goods or materials furnished by Landlord at
Tenant's request), all of which hereinafter may be collectively called "Rent."
Except as otherwise provided herein, the Base Rental and Additional Base Rental
for each calendar year or portion thereof during the Lease Term, shall be due
and payable in advance in equal monthly installments on the first day of each
calendar month during the Lease Term and any extensions or renewals hereof, and
Tenant hereby agrees to pay such Base Rental and Additional Base Rental to
Landlord without demand. If the Lease Term commences on a day other than the
first day of a month or terminates on a day other than the last day of a month,
then the installments of Base Rental and Additional Base Rental for such month
or months shall be prorated, based on the number of days in such month. All
such payments shall be by a good and sufficient check. No payment by Tenant or
receipt or acceptance by Landlord of a lesser amount than the correct amount of
Rent due under this Lease shall be deemed to be other than a payment on account
of the earliest Rent due hereunder, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment be deemed an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance or pursue any other
available remedy. The acceptance by Landlord of any Rent on a date after the
due date of such payment shall not be construed to be a waiver of Landlord's
right to declare a default for any other late payment. Tenant's covenant to
pay Rent shall be independent of every other covenant set forth in this Lease.
B. All Rent not paid when due and payable shall bear interest from the
date due until paid (provided Tenant shall be entitled to a grace period of
five (5) days with respect to the first late payment in any calendar year) at
the lesser of: 1. eighteen percent (18%) per annum; or 2. the Maximum Rate.
In addition, if Tenant falls to pay any installment of Base Rental, Additional
Base Rental or any other item of Rent when due and payable hereunder, a service
fee equal to five percent (5%) of such unpaid amount will be due and payable
immediately by Tenant to Landlord.
VI. SECURITY DEPOSIT. INTENTIONALLY OMITTED.
VII. SERVICES TO BE FURNISHED BY LANDLORD.
A. Subject to the provisions of Article XI below, Landlord, as part of
Basic Costs, agrees to furnish Tenant the following services:
89
<PAGE> 7
1. Cold water at those points of supply provided for general use of
tenants in the Building, central heat and air conditioning in season, at
such temperatures and in such amounts as are considered by Landlord to be
standard for buildings of similar class, size, age and location, or as
required by governmental authority; provided, however, heating and air
conditioning service at times other than for Normal Business Hours for the
Building shall be furnished only upon the written request of Tenant
delivered to Landlord at the office of the Building prior to 3:00 p.m. at
least one Business Day in advance of the date for which such usage is
requested. Tenant shall pay Landlord, upon demand as additional rent, the
entire cost of additional service as such costs are determined by Landlord
from time to time. As of the date hereof, Landlord's charge for after
hours heating and air conditioning service is $40.00 per hour. The
minimum period of time for which Tenant may request additional service is
two (2) hours.
2. Routine maintenance and electric lighting service for all Common
Areas of the Building in the manner and to the extent deemed by Landlord
to be standard for buildings of similar class, size, age and location.
3. Janitor service on Business Days; provided, however, if Tenant's
use, floor covering or other improvements require special services, Tenant
shall, at Landlord's option, either (I) retain its own contractors (which
contractor shall be subject to Landlord's reasonable approval) to do such
work or, (ii) pay the additional cost reasonably attributable thereto as
additional Rent upon presentation of statements therefor by Landlord.
4. Elevator service in common with other tenants of the Building for
ingress and egress to and from the floor of the Premises during Normal
Business Hours.
B. Except as otherwise expressly provided herein, the failure by Landlord
to any extent to furnish, or the interruption or termination of these services
in whole or in part, resulting from adherence to laws, regulations and
administrative orders, wear, use, repairs, improvements, alterations, Force
Majeure (as hereinafter defined) or any causes beyond the reasonable control of
Landlord shall not render Landlord liable in any respect nor be construed as an
eviction of Tenant, nor give rise to an abatement of Rent, nor relieve Tenant
from the obligation to fulfill any covenant or agreement hereof. Should any of
the equipment or machinery used in the provision of such services for any cause
cease to function properly, Landlord shall use reasonable diligence to repair
such equipment or machinery, but except as otherwise expressly provided herein,
Tenant shall have no claim for offset or abatement of Rent or damages on
account of an interruption in service or resulting therefrom. Landlord's
entire obligation with respect to the repair and maintenance of the Premises
are set forth above.
C. Tenant expressly acknowledges that if Landlord, from time to time,
elects to provide or make available security services, Landlord shall not be
deemed to have warranted the efficiency of such security personnel, service,
procedures or equipment, including without limitation, the security monitoring
system referred to in Section 3 of Exhibit E and Landlord shall not be liable
in any manner for the failure. of any such security personnel, services,
procedures or equipment to prevent or control, or apprehend any one suspected
of personal injury or property damage in, on or around the Property.
VIII. LEASEHOLD IMPROVEMENTS.
A. Except as otherwise specifically provided elsewhere in this Lease or
in the Work Letter Agreement, if any, attached hereto as Exhibit C and
incorporated herein, all installations and improvements now or hereafter placed
on or in the Premises shall be for Tenant's account and at Tenant's cost, which
cost shall be payable by Tenant to Landlord upon demand as additional Rent.
B. Except for any items set forth on Exhibit G hereto, any and all
alterations, additions and improvements to the Premises, all attached
furniture, equipment and non-trade fixtures (collectively, "Leasehold
Improvements") shall be owned and insured by Landlord and shall remain upon the
Premises, all without compensation, allowance or credit to Tenant. The items
set forth on Exhibit G hereto and any unattached and movable equipment or
furniture, trade fixtures or other personalty of Tenant ("Tenant's Property")
shall be owned and insured by Tenant. Landlord may, nonetheless, require
Tenant to remove any Leasehold Improvements performed by or for the benefit of
Tenant and all electronic, phone and data cabling as are designated by Landlord
(the "Required Removables") at Tenant's sole cost. In the event that Landlord
so elects, Tenant shall remove such Required Removables on or before the
expiration or earlier termination of this Lease and repair any damage caused by
such removal. If Tenant, on or before ten (10) days after the expiration or
earlier termination of the Lease or Tenant's right to possession, fails to
remove any Required Removables specified by Landlord or fails to
90
<PAGE> 8
remove any of Tenant's Property, Landlord may remove, store or dispose of the
Required Removables and Tenant's Property at Tenant's cost and repair any
damage caused by such removal and Tenant shall pay Landlord as additional Rent
hereunder, on demand, all such costs.
C. Landlord acknowledges that Tenant is required to install an ATM
machine in the Premises or Building in connection with the operation of its
business. Landlord and Tenant agree to work together in good faith to
determine a location within the Premises or Building that is mutually
acceptable to Landlord and Tenant, taking into account any relevant
considerations such as traffic flow, aesthetics and ease of installation and
maintenance. In the event Landlord and Tenant are unable to agree upon a
location, the reasonable determination of Landlord shall prevail. Tenant
acknowledges that such ATM machine shall be considered to be Tenant's Property
and shall be removed by Tenant in accordance with Section VIII.B. above upon
the expiration or earlier termination of this Lease or Tenant's right to
possession.
IX. GRAPHICS. Landlord shall provide and install, at Tenant's cost, all
letters or numerals on the exterior of the Premises; all such letters and
numerals shall be in the standard graphics for the Building and no others shall
be used or permitted on the Premises without Landlord's prior written consent.
X. REPAIRS AND ALTERATIONS BY TENANT.
A. Tenant shall, at Tenant's own cost and expense, keep the Premises in
good condition and repair. Such repairs shall restore the Premises to as good
a condition as it was in prior to such damage and shall be effected in
compliance with the reasonable directions of Landlord. If Tenant falls to
make such repairs to the Premises promptly, Landlord may, at its option, make
such repairs, and Tenant shall pay the cost thereof to the Landlord on demand
as additional Rent.
B. Tenant shall not make or allow to be made any alterations, additions
or improvements to the Premises, nor install any vending machines, safes or
other heavy property or equipment within the Premises, nor place signs or
window coverings on the Premises which are visible from outside the Premises,
without first obtaining the written consent of Landlord in each such instance.
Prior to commencing any such work, Tenant must furnish Landlord with plans and
specifications; names and addresses of contractors; copies of contracts;
necessary permits; evidence of contractor's and subcontractor's insurance in
accordance with section XVI.B. hereof; and indemnification in form and amount
satisfactory to Landlord. All such improvements, alterations or additions
shall be installed in a good workmanlike manner using new materials. Upon
completion, Tenant shall furnish "as-built" plans, contractor's affidavits and
full and final waivers of lien and receipted bills covering all labor and
materials. All improvements, alterations and additions shall comply with all
insurance requirements, codes, ordinances, laws and regulations, including
without limitation, the Americans with Disabilities Act. Tenant shall
reimburse Landlord upon demand as additional Rent for all sums expended by
Landlord for examination of the architectural, mechanical, electric and
plumbing plans for any alterations, additions or improvements and for the costs
of repairing any damage done to the Building caused by Tenant or Tenant's
agents, servants, employees, customers, licensees, or invitees. For
improvements other than the Initial Improvements, if Landlord so requests,
Tenant may permit Landlord to supervise construction operations, but no such
supervision shall impose any liability upon Landlord. In the event Landlord
supervises such construction, Landlord shall be entitled to a supervisory fee
in the amount of fifteen percent (15%) of the cost of such construction.
Landlord's approval of Tenant's plans and specifications or supervision of any
work performed for or on behalf of Tenant shall not be deemed to be a
representation by Landlord that such plans and specifications comply with
applicable insurance requirements, building codes, ordinances, laws or
regulations.
XI. USE OF ELECTRICAL AND HVAC SERVICES BY TENANT.
A. All electricity used by Tenant in the Premises shall, at Landlord's
option, be paid for by Tenant either (1) through inclusion in Base Rental or
Basic Costs, or (2) by a separate charge billed directly to Tenant by Landlord
and payable by Tenant as additional Rent, or (3) by a separate charge billed by
the utility company supplying electricity and payable by Tenant directly to
such utility company. Tenant's use of electrical and heating, ventilating and
air conditioning ("HVAC") services furnished by Landlord shall not exceed,
either in voltage, rated capacity, use or overall load, that which Landlord
deems to be standard for the Building. Landlord acknowledges, that as of the
date of this Lease, (i) Tenant's use of electricity services does not exceed
the standard for electrical usage for the Building and (ii) no additional Base
Rental as due and owing as a result of said usage. In the event Tenant shall
request that it be allowed to consume electrical or HVAC services in excess of
that deemed by Landlord to be
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standard for the Building, Landlord may refuse to consent to such usage or may
consent upon such conditions as Landlord elects (including the installation of
utility service upgrades, submeters, air handlers or cooling units), and all
such additional usage (to the extent permitted by law), installation and
maintenance thereof shall be paid for by Tenant as additional Rent. Landlord
shall have the right to separately meter electrical usage for the Premises at
any time during the Lease Term or to use any other method of measuring
electrical usage that Landlord, in its reasonable judgment, deems to be
appropriate.
B. If Landlord generates or distributes electric current for the
Building, Tenant shall obtain all current from Landlord and pay as additional
Rent Landlord's charges therefor, provided, however, that if the cost of
providing electricity IS not included in Base Rental or Basic Costs, the
charges to Tenant shall not exceed the rate that would be charged Tenant if
billed directly by the local utility for the same services. Landlord may cease
to furnish electricity upon 30 days prior written notice, provided within the
30 days Landlord connects with another source of electric supply.
XII. ENTRY BY LANDLORD. Landlord and its agents or representatives shall
have the right to enter the Premises to inspect the same, or to show the
Premises to prospective purchasers, mortgagees, tenants or insurers, or to
clean or make repairs, alterations or additions thereto, including any work
that Landlord deems necessary for the safety, protection or preservation of the
Building or any occupants thereof, or to facilitate repairs, alterations or
additions to the Building or any other tenants premises. If reasonably
necessary for the protection and safety of Tenant and its employees, Landlord
shall have the right to temporarily close the Premises to perform repairs,
alterations or additions in the Premises, provided that such closure does not
violate federal law and provided that Landlord shall use reasonable efforts to
perform all such work on weekends and after Normal Business Hours. Entry by
Landlord hereunder shall not constitute a constructive eviction or entitle
Tenant to any abatement or reduction of Rent by reason thereof.
XIII. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not assign, sublease, transfer or encumber this Lease or
any interest therein or grant any license, concession or other right of
occupancy of the Premises or any portion thereof or otherwise permit the use of
the Premises or any portion thereof by any party other than Tenant (any of
which events is hereinafter called a "Transfer") without the prior written
consent of Landlord, which consent shall not be unreasonably withheld with
respect to any proposed assignment or subletting. Landlord's consent shall not
be considered unreasonably withheld if: 1. the proposed transferee's financial
responsibility does not meet the same criteria Landlord uses to select Building
tenants; 2. the proposed transferee's business is not suitable for the Building
considering the business of the other tenants and the Building's prestige or
would result in a violation of an exclusive right granted to another tenant in
the Building; 3. the proposed use is different than the Permitted Use; 4. the
proposed transferee is a government agency or occupant of the Building; or 5.
Tenant is in default. Tenant acknowledges that the foregoing is not intended
to be an exclusive list of the reasons for which Landlord may reasonably
withhold its consent to a proposed Transfer. Any attempted Transfer in
violation of the terms of this Article shall, at Landlord's option, be void.
Consent by Landlord to one or more Transfers shall not operate as a waiver of
Landlord's rights as to any subsequent Transfers. In addition, Tenant shall
not, without Landlord's consent, publicly offer or advertise the Lease for
Transfer in any media. In the event Tenant or anyone acting on behalf of
Tenant or with Tenant's knowledge violates the provisions of the foregoing
sentence, Landlord, in addition to its other remedies, shall be entitled to
seek injunctive relief preventing such action, and Tenant shall be responsible
for all costs incurred by Landlord in connection therewith.
B. If Tenant requests Landlord's consent to a Transfer, Tenant shall
notify Landlord in writing at least 45 days prior to the effective date of the
proposed Transfer of the name of the proposed transferee and the nature of the
business of the proposed transferee, the term, use, rental rate and all other
material terms and conditions of the proposed Transfer, including, without
limitation, evidence satisfactory to Landlord that the proposed transferee is
financially responsible. Notwithstanding the provisions of Section XIII.A.
above, Landlord may, during said 45-day period, 1. consent to or refuse to
consent to such Transfer in writing; or 2. negotiate directly with the proposed
transferee and (in the event Landlord is able to reach agreement with such
proposed transferee) upon execution of a lease with such transferee, terminate
this Lease (in part or in whole, as appropriate) upon thirty (30) days' notice;
or 3. cancel and terminate this Lease, in whole or in part as appropriate, upon
30 days notice. In the event Landlord consents to any such Transfer, the
Transfer shall be in a form approved by Landlord, and Tenant shall bear all
costs and expenses incurred by Landlord in connection with the review and
approval of such documentation, which costs and expenses shall be deemed to be
at least Seven Hundred Fifty Dollars ($750.00).
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Notwithstanding anything to the contrary contained herein or in Section
XIII.D., Tenant may assign its entire interest under this Lease or sublet the
Premises to a wholly owned corporation or controlled subsidiary or parent of
Tenant or to any successor to Tenant by purchase, merger, consolidation or
reorganization (hereinafter collectively referred to as "Corporate Transfer")
without the consent of Landlord, provided: (i) Tenant is not in default under
this Lease; (ii) if such proposed transferee is a successor to Tenant by
purchase, said proposed transferee shall acquire all or substantially all of
the stock or assets of Tenant's business or, if such proposed transferee is a
successor to Tenant by merger, consolidation or reorganization, the continuing
or surviving corporation shall own all or substantially all of the assets of
Tenant; (iii) such proposed transferee shall have a net worth which is at least
equal to the greater of Tenant's net worth at the date of this Lease or
Tenant's net worth at the date of the Transfer; (iv) such proposed transferee
operates the business in the Premises for the Permitted Use and no other
purpose; and (v) in no event shall any Transfer release or relieve Tenant from
any of its obligations under this Lease. Tenant shall give Landlord written
notice at least thirty (30) days prior to the effective date of such Corporate
Transfer. As used herein, the terms "controlled" or "subsidiary" shall mean a
corporate entity wholly owned by Tenant or at least fifty-one percent (51%) of
whose voting stock is owned by Tenant.
C. All cash or other proceeds (the "Transfer Consideration") of any
Transfer of Tenant's interest in this Lease and/or the Premises, whether
consented to by Landlord or not, shall be paid to Landlord and Tenant hereby
assigns all rights it might have or ever acquire in any such proceeds to
Landlord. In addition to the Rent hereunder, Tenant hereby covenants and
agrees to pay to Landlord all rent and other consideration which it receives
which is in excess of the Rent payable hereunder within ten (10) days following
receipt thereof by Tenant. In addition to any other rights Landlord may have,
Landlord shall have the right to contact any transferee and require that all
payments made pursuant to the Transfer shall be made directly to Landlord.
D. If Tenant is a corporation and if at any time during the Lease Term
the person or persons who own the voting shares at the time of the execution of
this Lease cease for any reason, including but not limited to merger,
consolidation or other reorganization involving another corporation, to own a
majority of such shares, or if Tenant is a partnership and if at any time
during the Lease Term the general partner or partners who own the general
partnership interests in the partnership at the time of the execution of this
Lease, cease for any reason to own a majority of such interests (except as the
result of transfers by gift, bequest or inheritance to or for the benefit of
members of the immediate family of such original shareholder(s) or partner(s)),
such an event shall be deemed to be a Transfer. The preceding sentence shall
not apply whenever Tenant is a corporation the outstanding stock of which is
listed on a recognized security exchange, or if at least eighty per cent (80%)
of its voting stock is owned by another corporation, the voting stock of which
is so listed.
E. Any Transfer consented to by Landlord in accordance with this Article
XIII shall be only for the Permitted Use and for no other purpose, and in no
event shall any Transfer release or relieve Tenant or any Guarantors from any
obligations under this Lease.
XIV. LIENS. Tenant will not permit any mechanic's liens or other liens to
be placed upon the Premises or Tenant's leasehold interest therein, the
Building, or the real estate associated therewith. Landlord's title to the
Building and Property is and always shall be paramount to the interest of
Tenant, and nothing herein contained shall empower Tenant to do any act that
can, shall or may encumber Landlord's title. In the event any such lien does
attach, Tenant shall, within 5 days of notice of the filing of said lien,
either discharge or bond over such lien to the satisfaction of Landlord and
Landlord's Mortgagee (as hereinafter defined), and in such a manner as to stay
the enforcement or foreclosure of such lien. If Tenant shall fail to so
discharge or bond over such lien, then, in addition to any other right or
remedy of Landlord, Landlord may, but shall not be obligated to, discharge the
same. Any amount paid by Landlord for any of the aforesaid purposes, including
reasonable attorneys fees (if and to the extent permitted by law) shall be paid
by Tenant to Landlord on demand as additional Rent.
XV. INDEMNITY AND WAIVER OF CLAIMS.
A. Tenant shall indemnify, defend and hold Landlord, its principals,
beneficiaries, partners, officers, directors, agents, employees and any
Mortgagee(s) (collectively the "Landlord Related Parties") harmless against and
from all liabilities, obligations, damages, penalties, claims, costs, charges
and expenses, including, without limitation, reasonable architects' and
attorneys' fees (if and to the extent permitted by law), which may be imposed
upon, incurred by, or asserted against Landlord or any of the Landlord Related
Parties and arising, directly or indirectly, out of or in connection with the
use, occupancy or maintenance of the Premises by, through or under Tenant, and
(without limiting the generality of the foregoing) any of the following: 1.
any work or thing done in, on or about the Premises or any part thereof by
Tenant
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or any of its transferees, agents, servants, contractors, employees, customers,
licensees or invitees; 2. any use, non-use, possession, occupation, condition,
operation or maintenance of the Premises or any part thereof; 3. any act or
omission of Tenant or any of its transferees, agents, servants, contractors,
employees, customers, licensees or invitees, regardless of whether such act or
omission occurred within the Premises; 4. any injury or damage to any person or
property occurring in, on or about the Premises or any part thereof; or 5. any
failure on the part of Tenant to perform or comply with any of the covenants,
agreements, terms or conditions contained in this Lease with which Tenant must
comply or perform. In case any action or proceeding is brought against
Landlord or any of the Landlord Related Parties by reason of any of the
foregoing, Tenant shall, at Tenant's sole cost and expense, resist and defend
such action or proceeding with counsel approved by Landlord or, at Landlord's
option, reimburse Landlord for the cost of any counsel retained directly by
Landlord to defend and resist such action or proceeding.
B. Landlord and the Landlord Related Parties shall not be liable for, and
Tenant waives, all claims for loss or damage to Tenant's business or damage to
person or property sustained by Tenant or any person claiming by, through or
under Tenant (including Tenant's employees) resulting from any accident or
occurrence in, on or about the Premises, the Building or the Property,
including, without limitation, claims for loss, theft or damage resulting from:
1. the Premises, Building, or Property, or any equipment or appurtenances
becoming out of repair; 2. wind or weather; 3. any defect in or failure to
operate, for whatever reason, any sprinkler, heating or air-conditioning
equipment, electric wiring, gas, water or steam pipes; 4. broken glass; 5. the
backing up of any sewer pipe or downspout; 6. the bursting, leaking or running
of any tank, water closet, drain or other pipe; 7. the escape of steam or
water; 8. water, snow or ice being upon or coming through the roof, skylight,
stairs, doorways, windows, walks or any other place upon or near the Building;
9. the falling of any fixture, plaster, tile or other material; 10. any act,
omission or negligence of other tenants, licensees or any other persons or
occupants of the Building or of adjoining or contiguous buildings, of owners of
adjacent or contiguous property or the public, or by construction of any
private, public or quasi-public work; or 11. any other cause of any nature
except, as to items 1. - 9., where such loss or damage is due to Landlord's
willful failure to make repairs required to be made pursuant to other
provisions of this Lease, after the expiration of a reasonable time after
written notice to Landlord of the need for such repairs. To the maximum extent
permitted by law, Tenant agrees to use and occupy the Premises, and to use such
other portions of the Building as Tenant is herein given the right to use, at
Tenant's own risk.
C. Except for losses, liabilities, obligations, damages, penalties,
claims, costs, charges and expenses resulting from the negligence of Tenant
and/or its agents, employees or contractors, and subject to the provisions of
Article XVII hereof, Landlord shall indemnify, defend and hold Tenant, its
principals, agents and employees (collectively the "Tenant Related Parties")
harmless from and against all liabilities, obligations, damages (other than
consequential damages), penalties, claims, costs, charges and expenses,
including, without limitation, reasonable attorneys' fees, which may be imposed
upon, incurred by, or asserted against Tenant or any of the Tenant Related
Parties and arising, directly or indirectly, out of or in connection with any
of the following: (i) any work or thing done in, on or about the Common Areas or
any part thereof by Landlord or any of its agents, contractors or employees;
(ii) any use, non-use, possession, occupation, condition, operation,
maintenance or management of the Common Areas or any part thereof by Landlord
or any of its agents, contractors or employees (iii) any act or omission of
Landlord or any of its agents, contractors or employees; and (iv) any injury or
damage to any person or property occurring in, on or about the Common Areas or
any part thereof; provided, however, that in each case such liability,
obligation, damage, penalty, claim, cost, charge or expense results from the
negligence of Landlord and/or its agents, employees or contractors.
XVI. TENANT'S INSURANCE.
A. At all times commencing on and after the earlier of the Commencement
Date and the date Tenant or its agents, employees or contractors enters the
Premises for any purpose, Tenant shall carry and maintain, at its sole cost and
expense:
1. Commercial General Liability Insurance with a Broad Form General
Liability Endorsement applicable to the Premises and its appurtenances
providing, on an occurrence basis, a minimum combined single limit of One
Million Dollars ($1,000,000).
2. All Risks of Physical Loss Insurance written at replacement cost
value and with a replacement cost endorsement covering all of Tenant's
Property in the Premises.
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3. Workers Compensation Insurance as required by the state in
which the Premises is located and in amounts as may be required by
applicable statute, and Employers Liability Coverage of One Hundred
Thousand (1 00,000.00) per occurrence.
4. Whenever good business practice, in Landlord's reasonable
judgment, indicates the need of additional insurance coverage or
different types of insurance in connection with the Premises or
Tenant's use and occupancy thereof, Tenant shall, upon request,
obtain such insurance at Tenant's expense and provide Landlord with
evidence thereof.
B. Except for items for which Landlord is responsible under the Work
Letter Agreement, before any repairs, alterations, additions, improvements, or
construction are undertaken by or on behalf of Tenant, Tenant shall carry and
maintain, at its expense, or Tenant shall require any contractor performing
work on the Premises to carry and maintain, at no expense to Landlord, in
addition to worker's compensation insurance as required by the jurisdiction in
which the Building is located, All Risk Builder's Risk Insurance in the amount
of the replacement cost of any alterations, additions or improvements (or such
other amount reasonably required by Landlord) and Commercial General Liability
Insurance (including, without limitation, Contractor's Liability coverage,
Contractual Liability coverage, Completed Operations coverage, a Broad Form
Property Damage coverage and Contractor's Protective liability) written on an
occurrence basis with a minimum combined single limit of One Million Dollars
($1,000,000); such limit may be accomplished by means of an umbrella policy.
C. Any company writing any insurance which Tenant is required to maintain
or cause to be maintained pursuant to the terms of this Lease (all such
insurance as well as any other insurance pertaining to the Premises or the
operation of Tenant's business therein being referred to as "Tenant's
Insurance"), as well as the form of such insurance, shall at all times be
subject to Landlord's reasonable approval, and each such insurance company
shall have an A.M. Best rating of "A7" or better and shall be licensed and
qualified to do business in the state in which the Premises are located. All
policies evidencing Tenant's Insurance (except for Workers Compensation) shall
specify Tenant and the "owner[s] of the Building and its (or their) respective
principals, beneficiaries, partners, officers, directors, employees, agents and
mortgagee[s]" (and any other designees of Landlord as the interest of such
designees shall appear) as additional insureds. Provided that the coverage
afforded Landlord and any designees of Landlord shall not be reduced or
otherwise adversely affected, all of Tenant's Insurance may be carried under a
blanket policy covering the Premises and any other of Tenant's locations. All
policies of Tenant's Insurance shall contain endorsements that the insurer(s)
will give to Landlord and its designees at least thirty (30) days' advance
written notice of any change, cancellation, termination or lapse of said
insurance. Tenant shall be solely responsible for payment of premiums for all
of Tenant's Insurance. Tenant shall deliver to Landlord at least fifteen (15)
days prior to the time Tenant's Insurance is first required to be carried by
Tenant, and upon renewals at least fifteen (15) days prior to the expiration of
any such insurance coverage, a certificate of insurance of all policies
procured by Tenant in compliance with its obligations under this Lease. The
limits of Tenant's Insurance shall in no event limit Tenant's liability under
this Lease.
D. Tenant shall not do or fail to do anything in, upon or about the
Premises which will: 1. violate the terms of any of Landlord's insurance
policies; 2. prevent Landlord from obtaining policies of insurance acceptable
to Landlord or any Mortgagees; or 3. result in an increase in the rate of any
insurance on the Premises, the Building, any other property of Landlord or of
others within the Building. In the event of the occurrence of any of the
events set forth in this Section, Tenant shall pay Landlord upon demand, as
additional Rent, the cost of the amount of any increase in any such insurance
premium. If Tenant fails to obtain the insurance coverage required by this
Lease, Landlord may, at its option, obtain such insurance for Tenant, and
Tenant shall pay, as additional Rent, the cost of all premiums thereon and all
of Landlord's costs associated therewith.
XVII. SUBROGATION. Notwithstanding anything set forth in this Lease to
the contrary, Landlord and Tenant do hereby waive any and all right of
recovery, claim, action or cause of action against the other, their respective
principals, beneficiaries, partners, officers, directors, agents, and
employees, and, with respect to Landlord, its Mortgagee[s], for any loss or
damage that may occur to Landlord or Tenant or any party claiming by, through
or under Landlord or Tenant, as the case may be, with respect to their
respective property, the Building, the Property or the Premises or any addition
or improvements thereto, or any contents therein, by reason of fire, the
elements or any other cause, regardless of cause or origin, including the
negligence of Landlord or Tenant, or their respective principals,
beneficiaries, partners, officers, directors, agents and employees and, with
respect to Landlord, its Mortgagee[s], which loss or damage is (or would have
been, had the insurance required by this Lease been carried) covered by
insurance. Since this mutual waiver will preclude the assignment of any such
claim by
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subrogation (or otherwise) to an insurance company (or any other person),
Landlord and Tenant each agree to give each insurance company which has issued,
or in the future may issue, its policies of fire, extended coverage or material
damage insurance, written notice of the terms of this mutual waiver, and to
have such insurance policies properly endorsed, if necessary, to prevent the
invalidation of any of the coverage provided by such insurance policies by
reason of such mutual waiver. For the purpose of the foregoing waiver, the
amount of any deductible applicable to any loss or damage shall be deemed
covered by, and recoverable by the insured under the insurance policy to which
such deductible relates. In the event that Tenant is permitted to and
self-insures any risk which would have been covered by the insurance required
to be carried by Tenant pursuant to Article XVI of the Lease, or if Tenant
fails to carry any insurance required to be carried by Tenant pursuant to
Article XVI of this Lease, then all loss or damage to Tenant, its leasehold
interest, its business, its property, the Premises or any additions or
improvements thereto or contents thereof shall be deemed covered by and
recoverable by Tenant under valid and collectible policies of insurance.
XVIII. LANDLORD'S INSURANCE. Landlord shall maintain property insurance
on the Building in such amounts as Landlord reasonably elects. The cost of
such insurance shall be included as a part of the Basic Costs, and payments for
losses thereunder shall be made solely to Landlord or the Mortgagees of
Landlord as their interests shall appear.
XIX. CASUALTY DAMAGE. If the Premises or any part thereof shall be
damaged by fire or other casualty, Tenant shall give prompt written notice
thereof to Landlord. In case the Building shall be so damaged that substantial
alteration or reconstruction of the Building shall, in Landlord's sole opinion,
be required (whether or not the Premises shall have been damaged by such
casualty) or in the event the Premises have been damaged and there is less than
one (1) year of the Lease Term remaining on the date of such casualty or in the
event any Mortgagee should require that the insurance proceeds payable as a
result of a casualty be applied to the payment of the mortgage debt or in the
event of any material uninsured loss to the Building, Landlord may, at its
option, terminate this Lease by notifying Tenant in writing of such termination
within ninety (90) days after the date of such casualty. Such termination
shall be effective as of the date of fire or casualty, with respect to any
portion of the Premises that was rendered untenantable, and the date specified
in Landlord's notice, with respect to any portion of the Premises that remained
tenantable. In addition to Landlord's rights to terminate as provided herein,
Tenant shall have the right to terminate this Lease if (1) a substantial
portion of the Premises has been damaged by fire or other casualty; (2) there
is less than one (1) year of the Lease Term remaining on the date of such
casualty; (3) the casualty was not caused by the negligence or willful
misconduct of Tenant or its agents, employees or contractors, and (4) Tenant
provides Landlord with written notice of its intent to terminate within thirty
(30) days after the date of the fire or other casualty. If neither Landlord
nor Tenant elect to terminate this Lease, Landlord shall commence and proceed
with reasonable diligence to restore the Building (provided that Landlord shall
not be required to restore any unleased premises in the Building) and the
Leasehold Improvements (but excluding any improvements, alterations or
additions made by Tenant in violation of this Lease) located within the
Premises, if any, which Landlord has insured to substantially the same
condition they were in immediately prior to the happening of the casualty.
Notwithstanding the foregoing, Landlord's obligation to restore the Building,
and the Leasehold Improvements, if any, shall not require Landlord to expend
for such repair and restoration work more than the insurance proceeds actually
received by the Landlord as a result of the casualty. When repairs to the
Premises have been completed by Landlord, Tenant shall complete the restoration
or replacement of all Tenant's Property necessary to permit Tenant's
reoccupancy of the Premises, and Tenant shall present Landlord with evidence
satisfactory to Landlord of Tenant's ability to pay such costs prior to
Landlord's commencement of repair and restoration of the Premises. Landlord
shall not be liable for any inconvenience or annoyance to Tenant or injury to
the business of Tenant resulting in any way from such damage or the repair
thereof, except that, subject to the provisions of the next sentence, Landlord
shall allow Tenant a fair diminution of Rent on a per them basis during the
time and to the extent the Premises are untenantable. If the Premises or any
other portion of the Building is damaged by fire or other casualty resulting
from the fault or negligence of Tenant or any of Tenant's agents, employees, or
contractors, the Rent hereunder shall not be diminished during any period
during which the Premises, or any portion thereof, is untenantable, and Tenant
shall be liable to Landlord for the cost of the repair and restoration of the
Building caused thereby to the extent such cost and expense is not covered by
insurance proceeds. Landlord and Tenant hereby waive the provisions of any law
from time to time in effect during the Lease Term relating to the effect upon
leases of partial or total destruction of leased property. Landlord and Tenant
agree that their respective rights in the event of any damage to or destruction
of the Premises shall be those specifically set forth herein.
XX. DEMOLITION. INTENTIONALLY OMITTED.
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XXI. CONDEMNATION. If 1. the whole or any substantial part of the
Premises or 2. any portion of the Building or Property which would leave the
remainder of the Building unsuitable for use as an office building comparable
to its use on the Commencement Date, shall be taken or condemned for any public
or quasi-public use under governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, then Landlord
may, at its option, terminate this Lease effective as of the date the physical
taking of said Premises or said portion of the Building or Property shall
occur. In the event this Lease is not terminated, the Rentable Area of the
Building, the Rentable Area of the Premises and Tenant's Pro Rate Share shall
be appropriately adjusted. In addition, Rent for any portion of the Premises
so taken or condemned shall be abated during the unexpired term of this Lease
effective when the physical taking of said portion of the Premises shall occur.
All compensation awarded for any such taking or condemnation, or sale proceeds
in lieu thereof, shall be the property of Landlord, and Tenant shall have no
claim thereto, the same being hereby expressly waived by Tenant, except for any
portions of such award or proceeds which are specifically allocated by the
condemning or purchasing party for the taking of or damage to trade fixtures of
Tenant, which Tenant specifically reserves to itself provided, however, Tenant
may file a claim at its sole cost and expense and receive an award for the
Tenant's Property and Tenant's reasonable relocation expenses, provided the
filing of such claim does not adversely affect or diminish the award which
would otherwise have been received by Landlord had Tenant not filed such a
claim and received such award.
XXII. EVENTS OF DEFAULT. The following events shall be deemed to be
events of default under this Lease:
A. Tenant shall fall to pay when due any Base Rental,
Additional Base Rental or other Rent under this Lease and such failure
shall continue for five (5) days after delivery of notice to Tenant
(hereinafter sometimes referred to as a "Monetary Default").
B. Any failure by Tenant (other than a Monetary Default) to
comply with any term, provision or covenant of this Lease, which
failure is not cured within ten (10) days after delivery to Tenant of
notice of the occurrence of such failure, provided that if any such
failure creates a hazardous condition, such failure must be cured
immediately.
C. Tenant or any Guarantor shall become insolvent, or shall
make a transfer in fraud of creditors, or shall commit an act of
bankruptcy or shall make an assignment for the benefit of creditors,
or Tenant or any Guarantor shall admit in writing its inability to pay
its debts as they become due.
D. Tenant or any Guarantor shall file a petition under any
section or chapter of the United States Bankruptcy Code, as amended,
pertaining to bankruptcy, or under any similar law or statute of the
United States or any State thereof, or Tenant or any Guarantor shall
be adjudged bankrupt or insolvent in proceedings filed against Tenant
or any Guarantor thereunder; or a petition or answer proposing the
adjudication of Tenant or any Guarantor as a debtor or its
reorganization under any present or future federal or state bankruptcy
or similar law shall be filed in any court and such petition or answer
shall not be discharged or denied within sixty (60) days after the
filing thereof.
E. A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant or any Guarantor or of the
Premises or of any of Tenant's property located thereon in any
proceeding brought by Tenant or any Guarantor, or any such receiver or
trustee shall be appointed in any proceeding brought against Tenant or
any Guarantor and shall not be discharged within sixty (60) days after
such appointment or Tenant or such Guarantor shall consent to or
acquiesce in such appointment.
F. The leasehold estate hereunder shall be taken on execution
or other process of law or equity in any action against Tenant.
G. Tenant shall abandon or vacate any substantial portion of
the Premises without the prior written permission of Landlord.
H. Tenant shall fail to take possession of and occupy the
Premises within thirty (30) days following the Commencement Date and
thereafter continuously conduct its operations in the Premises for the
Permitted Use as set forth in Paragraph IV hereof.
I. The liquidation, termination, dissolution, forfeiture of
right to do business or death of Tenant or any Guarantor.
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J. Tenant shall be in default beyond any notice and cure
period under any other lease with Landlord.
XXIII. REMEDIES.
A. Upon the occurrence of any event or events of default under this
Lease, whether enumerated in Article XXII or not, Landlord shall have the
option to pursue any one or more of the following remedies without any notice
(except as expressly prescribed herein) or demand whatsoever (and without
limiting the generality of the foregoing, Tenant hereby specifically waives
notice and demand for payment of Rent or other obligations due and waives any
and all other notices or demand requirements imposed by applicable law):
1. Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord. If Tenant fails to surrender the
Premises upon termination of the Lease hereunder, Landlord may without
prejudice to any other remedy which it may have, enter upon and take
possession of the Premises and expel or remove Tenant and any other
person who may be occupying said Premises, or any part thereof, by force,
if necessary, without being liable for prosecution or any claim of
damages therefor, and Tenant hereby agrees to pay to Landlord on demand
the amount of all loss and damage which Landlord may suffer by reason of
such termination, whether through inability to relet the Premises on
satisfactory terms or otherwise, specifically including but not limited
to all Costs of Reletting (hereinafter defined) and any deficiency that
may arise by reason of any reletting or failure to relet.
2. Enter upon and take possession of the Premises and expel or
remove Tenant or any other person who may be occupying said Premises, or
any part thereof, by force, if necessary, without having any civil or
criminal liability therefor and without terminating this Lease. Landlord
may (but shall be under no obligation to) relet the Premises or any part
thereof for the account of Tenant, in the name of Tenant or Landlord or
otherwise, without notice to Tenant for such term or terms which may be
greater or less than the period which would otherwise have constituted
the balance of the Lease Term and on such conditions (which may include
concessions, free rent and alterations of the Premises) and for such uses
as Landlord in its absolute discretion may determine, and Landlord may
collect and receive any rents payable by reason of such reletting.
Tenant agrees to pay Landlord on demand all Costs of Reletting and any
deficiency that may arise by reason of such reletting or failure to
relet. Landlord shall not be responsible or liable for any failure to
relet the Premises or any part thereof or for any failure to collect any
Rent due upon any such reletting. No such re-entry or taking of
possession of the Premises by Landlord shall be construed as an election
on Landlord's part to terminate this Lease unless a written notice of
such termination is given to Tenant.
Landlord agrees to use reasonable efforts to mitigate damages,
provided that such reasonable efforts shall not require Landlord to relet
the Premises in preference to any other space in the Building or to relet
the Premises to any party that Landlord could reasonably reject as a
transferee pursuant to Article XIII hereof.
3. Enter upon the Premises by force if necessary without having any
civil or criminal liability therefor, and do whatever Tenant is
obligated to do under the terms of this Lease, and Tenant agrees to
reimburse Landlord on demand for any expense which Landlord may incur in
thus affecting compliance with Tenant's obligations under this Lease
together with interest at the lesser of a per annum rate equal to: a.
the Maximum Rate, or b. the Prime Rate plus five percent (5%), and
Tenant further agrees that Landlord shall not be liable for any damages
resulting to Tenant from such action, whether caused by the negligence
of Landlord or otherwise.
4. In order to regain possession of the Premises and to deny Tenant
access thereto in any instance in which Landlord has terminated this
Lease or Tenant's right to possession, or to limit access to the Premises
in accordance with local law in the event of a default by Tenant,
Landlord or its agent may, at the expense and liability of the Tenant,
alter or change any or all locks or other security devices controlling
access to the Premises without posting or giving notice of any kind to
Tenant. Landlord shall have no obligation to provide Tenant a key or
grant Tenant access to the Premises so long as Tenant is in default under
this Lease. Tenant shall not be entitled to recover possession of the
Premises, terminate this Lease, or recover any actual, incidental,
consequential, punitive, statutory or other damages or award of
attorneys' fees, by reason of Landlord's alteration or change of any lock
or other security device and the resulting exclusion from the Premises of
the Tenant or Tenant's agents, servants, employees, customers, licensees,
invitees or any other persons from the Premises. Landlord may, without
notice, remove and either dispose of or store, at
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Tenant's expense, any property belonging to Tenant that remains in the
Premises after Landlord has regained possession thereof.
5. Terminate this Lease, in which event, Tenant shall immediately
surrender the Premises to Landlord and pay to Landlord the sum of: a. all
Rent accrued hereunder through the date of termination, and, upon
Landlord's determination thereof, b. an amount equal to (i) the total
Rent that Tenant would have been required to pay for the remainder of the
Lease Term discounted to present value at the prime rate then in effect,
minus (ii) the then present fair rental value of the Premises for the
remainder of the Lease Term, similarly discounted, after deducting all
anticipated Costs of Reletting. Landlord's determination of such amount
shall be conclusive and binding on Tenant, and shall be deemed to have
been made in good faith, subject only to manifest error.
B. For purposes of this Lease, the term "Costs of Reletting" shall mean
all costs and expenses incurred by Landlord in connection with the reletting of
the Premises, including without limitation, Rent loss during the period the
Premises are vacant prior to reletting, the cost of cleaning, renovation,
repairs, decoration and alteration of the Premises for a new tenant or tenants,
advertisement, marketing, brokerage and legal fees (if and to the extent
permitted by law), the cost of protecting or caring for the Premises while
vacant, the cost of removing and storing any property located on the Premises,
any increase in insurance premiums caused by the vacancy of the Premises and
any other out-of-pocket expenses incurred by Landlord including tenant
inducements such as the cost of moving the new tenant or tenants and the cost
of assuming any portion of the existing lease(s) of the new tenant(s).
C. Except as otherwise herein provided, no repossession or re-entering on
the Premises or any part thereof pursuant to Article XXIII hereof or otherwise
shall relieve Tenant or any Guarantor of its liabilities and obligations
hereunder, all of which shall survive such repossession or re-entering.
Notwithstanding any such repossession or re-entering by reason of the
occurrence of an event of default, Tenant will pay to Landlord the Rent
required to be paid by Tenant pursuant to this Lease.
D. No right or remedy herein conferred upon or reserved to Landlord is
intended to be exclusive of any other right or remedy, and each and every right
and remedy shall be cumulative and in addition to any other right or remedy
given hereunder or now or hereafter existing by agreement, applicable law or in
equity. In addition to other remedies provided in this Lease, Landlord shall
be entitled, to the extent permitted by applicable law, to injunctive relief,
or to a decree compelling performance of any of the covenants, agreements,
conditions or provisions of this Lease, or to any other remedy allowed to
Landlord at law or in equity. Forbearance by Landlord to enforce one or more
of the remedies herein provided upon an event of default shall not be deemed or
construed to constitute a waiver of such default.
E. This Article XXIII shall be enforceable to the maximum extent such
enforcement is not prohibited by applicable law, and the unenforceability of
any portion thereof shall not thereby render unenforceable any other portion.
XXIV. LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS LEASE, THE LIABILITY OF LANDLORD (AND OF ANY SUCCESSOR
LANDLORD HEREUNDER) TO TENANT SHALL BE LIMITED TO THE INTEREST OF LANDLORD IN
THE BUILDING, AND TENANT AGREES TO LOOK SOLELY TO LANDLORD'S INTEREST IN THE
BUILDING FOR THE RECOVERY OF ANY JUDGMENT OR AWARD AGAINST THE LANDLORD, IT
BEING INTENDED THAT LANDLORD SHALL NOT BE PERSONALLY LIABLE FOR ANY JUDGMENT OR
DEFICIENCY. TENANT HEREBY COVENANTS THAT, PRIOR TO THE FILING OF ANY SUIT FOR
AN ALLEGED DEFAULT BY LANDLORD HEREUNDER, IT SHALL GIVE LANDLORD AND ALL
MORTGAGEES WHOM TENANT HAS BEEN NOTIFIED HOLD MORTGAGES OR DEED OF TRUST LIENS
ON THE PROPERTY, BUILDING OR PREMISES NOTICE AND REASONABLE TIME TO CURE SUCH
ALLEGED DEFAULT BY LANDLORD. IN ADDITION, TENANT ACKNOWLEDGES THAT EQUITY
OFFICE PROPERTIES, INC. IS ACTING SOLELY IN ITS CAPACITY AS AGENT FOR LANDLORD
AND SHALL NOT BE LIABLE FOR ANY OBLIGATIONS, LIABILITIES, LOSSES OR DAMAGES
ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, ALL OF WHICH ARE EXPRESSLY
WAIVED BY TENANT.
XXV. NO WAIVER. Failure of Landlord to declare any default immediately
upon its occurrence, or delay in taking any action in connection with an event
of default shall not constitute a waiver of such default, nor shall it
constitute an estoppel against Landlord, but Landlord shall have the right to
declare the default at any time and take such action as is lawful or authorized
under this Lease. Failure by Landlord to enforce its rights with respect to
any one default shall not constitute a waiver of its rights with respect to any
subsequent default. Receipt
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by Landlord of Tenant's keys to the Premises shall not constitute an
acceptance or surrender of the Premises.
XXVI. EVENT OF BANKRUPTCY. In addition to, and in no way limiting the
other remedies set forth herein, Landlord and Tenant agree that if Tenant ever
becomes the subject of a voluntary or involuntary bankruptcy, reorganization,
composition, or other similar type proceeding under the federal bankruptcy
laws, as now enacted or hereinafter amended, then:
A. "Adequate protection" of Landlord's interest in the Premises pursuant
to the provisions of Section 361 and 363 (or their successor sections) of the
Bankruptcy Code, 11 U.S.C. Section 101 et seq., (such Bankruptcy Code as
amended from time to time being herein referred to as the "Bankruptcy Code"),
prior to assumption and/or assignment of the Lease by Tenant shall include, but
not be limited to all (or any part) of the following:
1. the continued payment by Tenant of the Base Rental and all other
Rent due and owing hereunder and the performance of all other covenants
and obligations hereunder by Tenant;
2. the hiring of security guards to protect the Premises if Tenant
abandons and/or ceases operations; such obligation of Tenant only to be
effective so long as Tenant remains in possession and control of the
Premises to the exclusion of Landlord;
3. the furnishing of an additional/new security deposit by Tenant
in the amount of three (3) times the then-current monthly Base Rental.
B. "Adequate assurance of future performance" by Tenant and/or any
assignee of Tenant pursuant to Bankruptcy Code Section 365 will include (but
not be limited to) payment of an additional/new Security Deposit in the amount
of three (3) times the then-current Base Rental payable hereunder.
C. Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code, shall be deemed without further act or deed
to have assumed all of the obligations of Tenant arising under this Lease on
and after the effective date of such assignment. Any such assignee shall, upon
demand by Landlord, execute and deliver to Landlord an instrument confirming
such assumption of liability.
D. Notwithstanding anything in this Lease to the contrary, all amounts
payable by Tenant to or on behalf of the Landlord under this Lease, whether or
not expressly denominated as "Rent", shall constitute "rent" for the purposes
of Section 502(b) (6) of the Bankruptcy Code.
E. If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, any and all monies or other considerations
payable or otherwise to be delivered to Landlord (including Base Rentals and
other Rent hereunder), shall be and remain the exclusive property of Landlord
and shall not constitute property of Tenant or of the bankruptcy estate of
Tenant. Any and all monies or other considerations constituting Landlord's
property under the preceding sentence not paid or delivered to Landlord shall
be held in trust by Tenant or Tenant's bankruptcy estate for the benefit of
Landlord and shall be promptly paid to or turned over to Landlord.
F. If Tenant assumes this Lease and proposes to assign the same pursuant
to the provisions of the Bankruptcy Code to any person or entity who shall have
made a bona fide offer to accept an assignment of this Lease on terms
acceptable to the Tenant, then notice of such proposed offer/assignment,
setting forth 1. the name and address of such person or entity, 2. all of the
terms and conditions of such offer, and 3. the adequate assurance to be
provided Landlord to assure such person's or entity's future performance under
the Lease, shall be given to Landlord by Tenant no later than twenty (20) days
after receipt by Tenant, but in any event no later than ten (10) days prior to
the date that Tenant shall make application to a court of competent
jurisdiction for authority and approval to enter into such assumption and
assignment, and Landlord shall thereupon have the prior right and option, to be
exercised by notice to Tenant given at any time prior to the effective date of
such proposed assignment, to accept an assignment of this Lease upon the same
terms and conditions and for the same consideration, if any, as the bona fide
offer made by such persons or entity, less any brokerage commission which may
be payable out of the consideration to be paid by such person for the
assignment of this Lease.
G. To the extent permitted by law, Landlord and Tenant agree that this
Lease is a contract under which applicable law excuses Landlord from accepting
performance from (or
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rendering performance to) any person or entity other than Tenant within
(c) and 365(e) (2) of the Bankruptcy Code.
XXVII. QUIET ENJOYMENT. Tenant shall, and may peacefully have, hold, and
enjoy the Premises, subject to the other terms of this Lease (including,
without limitation, Article XXX hereof, provided that Tenant pays the Rent
herein recited to be paid by Tenant and performs all of Tenant's covenants and
agreements herein contained. This covenant and any and all other covenants of
Landlord shall be binding upon Landlord and its successors only during its or
their respective periods of ownership of the Landlord's interest hereunder.
XXVIII. RELOCATION. Landlord, at its expense, shall be entitled to cause
Tenant to relocate from the Premises to space containing approximately the same
Rentable Area as the Premises (the "Relocation Space") within the Building or
adjacent buildings within the same project at any time upon one hundred twenty
(120) days prior written notice to Tenant provided that the Relocation Space
shall be located on the first floor of such building. Such a relocation shall
not affect this Lease except that from and after the date of such relocation,
"Premises" shall refer to the Relocation Space into which Tenant has been
moved, rather than the original Premises as herein defined, and the Base Rental
shall be adjusted so that immediately following such relocation the Base Rental
for the Relocation Space per annum on a per square foot of Rentable Area basis
shall be the same as the Base Rental per annum immediately prior to such
relocation for the original Premises on a per square foot of Rentable Area
basis.
XXIX. HOLDING OVER. In the event of holding over by Tenant after
expiration or other termination of this Lease or in the event Tenant continues
to occupy the Premises after the termination of Tenant's right of possession
pursuant to Articles XXII and XXIII hereof, occupancy of the Premises
subsequent to such termination or expiration shall be that of a tenancy at
sufferance and in no event for month-to-month or year-to-year, but Tenant
shall, throughout the entire holdover period, pay rent (on a per month basis
without reduction for any partial months during any such holdover) equal to
twice the sum of the Base Rental and Additional Base Rental due for the period
immediately preceding such holding over, provided that in no event shall Base
Rental and Additional Base Rental during the holdover period be less than the
fair market rental for the Premises. No holding over by Tenant or payments of
money by Tenant to Landlord after the expiration of the term of this Lease
shall be construed to extend the Lease Term or prevent Landlord from recovery
of immediate possession of the Premises by summary proceedings or otherwise.
Tenant shall be liable to Landlord for all damage, including any consequential
damage, which Landlord may suffer by reason of any holding over by Tenant, and
Tenant shall indemnity Landlord against any and all claims made by any other
tenant or prospective tenant against Landlord for delay by Landlord in
delivering possession of the Premises to such other tenant or prospective
tenant.
XXX. SUBORDINATION TO MORTGAGES. Tenant accepts this Lease subject and
subordinate to any mortgage, deed of trust, ground lease or other lien
presently existing or hereafter arising upon the Premises, or upon the Building
and/or the Property and to any renewals, modifications, refinancings and
extensions thereof (any such mortgage, deed of trust, lease or other lien being
hereinafter referred to as a "Mortgage", and the person or entity having the
benefit of same being referred to hereinafter as a "Mortgagee"), but Tenant
agrees that any such Mortgagee shall have the right at any time to subordinate
such Mortgage to this Lease on such terms and subject to such conditions as
such Mortgagee may deem appropriate in its discretion. This clause shall be
self-operative and no further instrument of subordination shall be required.
However, Landlord is hereby irrevocably vested with full power and authority to
subordinate this Lease to any Mortgage, and Tenant agrees upon demand to
execute such further instruments subordinating this Lease, acknowledging the
subordination of this Lease or attorning to the holder of any such Mortgage as
Landlord may request. The terms of this Lease are subject to approval by the
Landlord's existing lender(s) and any lender(s) who, at the time of the
execution of this Lease, have committed or are considering committing to
Landlord to make a loan secured by all or any portion of the Property, and such
approval is a condition precedent to Landlord's obligations hereunder. In the
event that Tenant should fail to execute any subordination or other agreement
required by this Article promptly as requested, Tenant hereby irrevocably
constitutes Landlord as its attorney-in-fact to execute such instrument in
Tenant's name, place and stead, it being agreed that such power is one coupled
with an interest in Landlord and is accordingly irrevocable. If any person
shall succeed to all or part of Landlord's interests in the Premises whether by
purchase, foreclosure, deed in lieu of foreclosure, power of sale, termination
of lease or otherwise, and if and as so requested or required by such
successor-in-interest, Tenant shall, without charge, attorn to such
successor-in-interest. Tenant agrees that it will from time to time upon
request by Landlord and, within live (5) days of the date of such request,
execute and deliver to such persons as Landlord shall request an estoppel
certificate or other similar statement in recordable form certifying that this
Lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in
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full force and effect as so modified), stating the dates to which Rent and
other charges payable under this Lease have been paid, stating that Landlord is
not in default hereunder (or if Tenant alleges a default stating the nature of
such alleged default) and further stating such other matters as Landlord shall
reasonably require.
Upon written request by Tenant, Landlord will use reasonable efforts to
obtain a nondisturbance, subordination and attornment agreement from Landlord's
then current mortgagee on such mortgagee's then current standard form of
agreement. "Reasonable efforts" of Landlord shall not require Landlord to
incur any cost, expense or liability to obtain such agreement, it being agreed
that Tenant shall be responsible for any fee or review costs charged by the
mortgagee. Upon request of Landlord, Tenant will execute the mortgagees form
of nondisturbance, subordination and attornment agreement and return the same
to Landlord for execution by the mortgagee. Landlord's failure to obtain a
non-disturbance, subordination and adornment agreement for Tenant shall have no
effect on the rights, obligations and liabilities of Landlord and Tenant or be
considered to be a default by Landlord hereunder.
XXXI. ATTORNEY'S FEES. In the event that Landlord should retain counsel
and/or institute any suit against Tenant for violation of or to enforce any of
the covenants or conditions of this Lease, or should Tenant institute any suit
against Landlord for violation of any of the covenants or conditions of this
Lease, or should either party intervene in any suit in which the other is a
party to enforce or protect its interest or rights hereunder, the prevailing
party in any such suit shall be entitled to all of its costs, reasonable
expenses and reasonable fees of its attorney(s) (if and to the extent permitted
by law) in connection therewith.
XXXII. NOTICE. Whenever any demand, request, approval, consent or notice
("Notice") shall or may be given to either of the parties by the other, each
such Notice shall be in writing and shall be sent by registered or certified
mail with return receipt requested, or sent by overnight courier service (such
as Federal Express) at the respective addresses of the parties for notices as
set forth in Section I.A.6. of this Lease, provided that if Tenant has vacated
the Premises or is in default of this Lease Landlord may serve Notice by any
manner permitted by Law. Any Notice under this Lease delivered by registered
or certified mail shall be deemed to have been given and effective on the
earlier of (a) the third day following the day on which the same shall have
been mailed with sufficient postage prepaid or (b) the delivery date indicated
on the return receipt. Notice sent by overnight courier service shall be
deemed given and effective upon the day after such notice is delivered to or
picked up by the overnight courier service. Either party may, at any time,
change its Notice Address by giving the other party Notice stating the change
and setting forth the new address.
XXXIII. LANDLORD'S LIEN. INTENTIONALLY OMITTED.
XXIV. EXCEPTED RIGHTS. This Lease does not grant any rights to light or
air over or about the Building. Landlord specifically excepts and reserves to
itself the use of any roofs, the exterior portions of the. Premises, all
rights to and the land and improvements below the improved floor level of the
Premises, the improvements and air rights above the Premises and the
improvements and air rights located outside the demising walls of the Premises,
and such areas within the Promises as are required for installation of utility
lines and other installations required to serve any occupants of the Building
and the right to maintain and repair the same, and no rights with respect
thereto are conferred upon Tenant unless otherwise specifically provided
herein. Landlord further reserves to itself the right from time to time: A. to
change the Building's name or street address; B. to install, fix and maintain
signs on the exterior and interior of the Building; C. to designate and approve
window coverings; D. to make any decorations, alterations, additions,
improvements to the Building, or any part thereof (including the Premises)
which Landlord shall desire, or deem necessary for the safety, protection,
preservation or improvement of the Building, or as Landlord may be required to
do by law; E. to have access to the Premises to perform its duties and
obligations and to exercise its rights under this Lease; F. to retain at all
times and to use pass-keys to all locks within and into the Premises; G. to
approve the weight, size, or location of heavy equipment, articles in and about
the Premises; H. to close or restrict access to the Building at all times other
than Normal Business Hours subject to Tenant's right to admittance at all times
under such regulations as Landlord may prescribe from time to time, or to close
(temporarily or permanently) any of the entrances to the Building; 1. to change
the arrangement and/or location of entrances of passageways, doors and
doorways, corridors, elevators, stairs, toilets and public parts of the
Building; and J. to grant to anyone the exclusive right to conduct any business
or undertaking in the Building. Landlord, in accordance with Article XII
hereof, shall have the right to enter the Premises in connection with the
exercise of any of the rights set forth herein and such entry into the Premises
and the performance of any work therein shall not constitute a constructive
eviction or entitle Tenant to any abatement or reduction of Rent by reason
thereof.
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XXXV. SURRENDER OF PREMISES. At the expiration or earlier termination of
this Lease or Tenant's right of possession hereunder, Tenant shall quit and
surrender the Premises to Landlord, broom clean, and in good order, condition
and repair, ordinary wear and tear excepted. If Tenant fails to remove any of
Tenant's Property within three (3) days after the termination of this Lease or
Tenant's right to possession hereunder, such Tenant's Property, or any portion
thereof designated by Landlord, shall at Landlord's option, and without notice
to Tenant, (a) be conclusively presumed to have been abandoned by Tenant and
title to such items shall pass to Landlord, and/or (b) be removed and/or stored
by Landlord at the risk, cost and expense of Tenant and Landlord shall in no
event be responsible for the value, preservation or safekeeping thereof.
Tenant shall pay Landlord, upon demand, any and all expenses caused by such
removal and all storage charges against such property so long as the same shall
be in the possession of Landlord or under the control of Landlord.
Notwithstanding the foregoing, if, prior to the termination of the Lease or
Tenant's right to possession, Tenant provides Landlord with written notice of
its new mailing address, Landlord shall provide Tenant with three (3) days
notice prior to exercising its right to take title to Tenant's property.
XXXVI. MISCELLANEOUS.
A. If any term or provision of this Lease, or the application thereof
to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Lease shall be valid and enforced to the fullest extent
permitted by law.
B. Tenant agrees not to record this Lease or any memorandum hereof
without Landlord's prior written consent.
C. This Lease and the rights and obligations of the parties hereto
shall be interpreted, construed, and enforced in accordance with the laws of the
state in which the Building is located.
D. Events of "Force Majeure" shall include strikes, riots, acts of God,
shortages of labor or materials, war, governmental law, regulations or
restrictions and any other cause whatsoever that is beyond the control of
Landlord. Whenever a period of time is herein prescribed for the taking of any
action by Landlord, Landlord shall not be liable or responsible for, and there
shall be excluded from the computation of such period of time, any delays due
to events of Force Majeure.
E. Landlord shall have the right to transfer and assign, in whole or in
part, all of its rights and obligations hereunder and in the Building and
Property referred to herein, and in such event and upon such transfer Landlord
shall be released from any further obligations hereunder, and Tenant agrees to
look solely to such successor in interest of Landlord for the performance of
such obligations.
F. Tenant hereby represents to Landlord that it has dealt directly with
and only with the Broker as a broker in connection with this Lease. Tenant
agrees to indemnify and hold Landlord and the Landlord Related Parties harmless
from all claims of any brokers claiming to have represented Tenant in
connection with this Lease. Notwithstanding anything contained in this Lease
to the contrary, Tenant shall not be liable for any real estate commissions
arising out of or in connection with that certain Lease dated April 23, 1987 by
and between Landlord (as successor-in-interest to Paces West Associates and
Metropolitan Life Insurance Company) and Tenant (successor-in-interest to VBT
Company, Inc. and Vinings Bank & Trust, National Association).
G. If there is more than one Tenant, or if the Tenant is comprised of
more than one person or entity, the obligations hereunder imposed upon Tenant
shall be joint and severe obligations of all such parties. All notices,
payments, and agreements given or made by, with or to any one of such persons
or entities shall be deemed to have been given or made by, with or to all of
them.
H. In the event Tenant is a corporation (including any form of
professional association), partnership (general or limited), or other form of
organization other than an individual, then each individual executing or
attesting this Lease on behalf of Tenant hereby covenants, warrants and
represents: 1. that such individual is duly authorized to execute or attest and
deliver this Lease on behalf of Tenant in accordance with the organizational
documents of Tenant; 2. that this Lease is binding upon Tenant; 3. that Tenant
is duly organized and legally existing in the state of its organization, and is
qualified to do business in the state in which the Premises is located; 4.
that upon request, Tenant will provide Landlord with true and correct copies of
all
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<PAGE> 21
organizational documents of Tenant, and any amendments thereto; and that the
execution and delivery of this Lease by Tenant will not result in any breach
of, or constitute a default under any mortgage, deed of trust, lease, loan,
credit agreement, partnership agreement or other contract or instrument to
which Tenant is a party or by which Tenant may be bound. If Tenant is a
corporation, Tenant will, prior to the Commencement Date, deliver to Landlord a
copy of a resolution of Tenant's board of directors authorizing or ratifying
the execution and delivery of this Lease, which resolution will be duly
certified to Landlord's satisfaction by the secretary or assistant secretary of
Tenant.
I. Tenant acknowledges that the financial capability of Tenant to perform
its obligations hereunder is material to Landlord and that Landlord would not
enter into this Lease but for its belief, based on its review of Tenant's
financial statements, that Tenant is capable of performing such financial
obligations. Tenant hereby represents, warrants and certifies to Landlord that
its financial statements previously furnished to Landlord were at the time
given true and correct in all material respects and that there have been no
material subsequent changes thereto as of the date of this Lease. At any time
during the Lease Term, Tenant shall provide Landlord, upon ten (10) days'
prior written notice from Landlord, with a current financial statement and
financial statements of the two (2) years prior to the current financial
statement year. Such statement shall be prepared in accordance with generally
accepted accounting principles and, if such is the normal practice of Tenant,
shall be audited by an independent certified public accountant.
J. Except as expressly otherwise herein provided, with respect to all
required acts of Tenant, time is of the essence of this Lease. This Lease
shall create the relationship of Landlord and Tenant between the parties
hereto, and no estate shall pass out of Landlord. Tenant has only a usufruct,
not subject to purchase or sale, which may not be assigned by Tenant except as
expressly provided in this Lease.
K. This Lease and the covenants and conditions herein contained shall
inure to the benefit of and be binding upon Landlord and Tenant and their
respective permitted successors and assigns.
L. Notwithstanding anything to the contrary contained in this Lease, the
expiration of the Lease Term, whether by lapse of time or otherwise, shall not
relieve Tenant from Tenant's obligations accruing prior to the expiration of
the Lease Term.
M. The headings and titles to the paragraphs of this Lease are for
convenience only and shall have no effect upon the construction or
interpretation of any part hereof.
N. LANDLORD HAS DELIVERED A COPY OF THIS LEASE TO TENANT FOR TENANT'S
REVIEW ONLY, AND THE DELIVERY HEREOF DOES NOT CONSTITUTE AN OFFER TO TENANT OR
OPTION. THIS LEASE SHALL NOT BE EFFECTIVE UNTIL AN ORIGINAL OF THIS LEASE
EXECUTED BY BOTH LANDLORD AND TENANT AND AN ORIGINAL GUARANTY, IF ANY, EXECUTED
BY EACH GUARANTOR IS DELIVERED TO AND ACCEPTED BY LANDLORD, AND THIS LEASE HAS
BEEN APPROVED BY LANDLORD'S MORTGAGEES, IF REQUIRED.
XXXVII. ENTIRE AGREEMENT. This Lease Agreement, including the following
Exhibits:
<TABLE>
<S> <C>
Exhibit A - Outline and Location of Premises
Exhibit A-1 - Banking Driveway
Exhibit B-1 - Schedule of Base Rental
Exhibit B-2 - Payment of Basic Costs
Exhibit C - Work Letter Agreement (if required)
Exhibit D - Rules and Regulations
Exhibit E - Additional Terms and Conditions
Exhibit F - Legal Description of the Building
Exhibit G - Partial list of Tenant's Property
</TABLE>
constitutes the entire agreement between the parties hereto with respect to the
subject matter of this Lease. TENANT EXPRESSLY ACKNOWLEDGES AND AGREES THAT
LANDLORD HAS NOT MADE AND IS NOT MAKING, AND TENANT, IN EXECUTING AND
DELIVERING THIS LEASE, IS NOT RELYING UPON, ANY WARRANTIES, REPRESENTATIONS,
PROMISES OR
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<PAGE> 22
STATEMENTS, EXCEPT TO THE EXTENT THAT THE SAME ARE EXPRESSLY SET FORTH IN
IN THIS LEASE. ALL UNDERSTANDINGS AND AGREEMENTS HERETOFORE MADE
BETWEEN THE PARTIES ARE MERGED IN THIS LEASE WHICH ALONE FULLY AND COMPLETELY
EXPRESSES THE AGREEMENT OF THE PARTIES, NEITHER PARTY RELYING UPON ANY
STATEMENT OR REPRESENTATION NOT EMBODIED IN THIS LEASE. THIS LEASE MAY BE
MODIFIED ONLY BY A WRITTEN AGREEMENT SIGNED BY LANDLORD AND TENANT. LANDLORD
AND TENANT EXPRESSLY AGREE THAT THERE ARE AND SHALL BE NO IMPLIED WARRANTIES OF
MERCHANTABILITY, HABITABILITY, SUITABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
OF ANY OTHER KIND ARISING OUT OF THIS LEASE, ALL OF WHICH ARE HEREBY WAIVED BY
TENANT, AND THAT THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE EXPRESSLY
SET FORTH IN THIS LEASE.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease in
multiple original counterparts as of the day and year first above written.
ATTEST: LANDLORD: ZML-Paces Limited
Parnership, a Delaware
limited partnership
/S/ Kelly M. Harris
- -----------------------------------
Name (print): Kelly M. Harris
--------------------- BY: EQUITY OFFICE PROPERTIES
INC. as agent
/S/ S. Seawell
- ----------------------------------- By: /S/ Arvid Povilaitis
--------------------------------
Name (print): Suzanne Seawell
-------------------- Name: Arvid Povilaitis
Title: Vice President
ATTEST:
/S/ Suzanne Long By: /S/ Gary McClung
- ----------------------------------- ---------------------------------
Name (print): Suzanne Long Name: Gary McClung
---------------------- ----------------------------
/S/ Kathy Gilchrist Title: Exec. Vice President
- ----------------------------------- -----------------------
Name (print): Kathy Gilchrist
----------------------
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<PAGE> 23
EXHIBIT A
OUTLINE AND LOCATION OF PREMISES
[MAP]
106
<PAGE> 24
EXHIBIT A-1
BANKING DRIVEWAY
[MAP]
107
<PAGE> 25
EXHIBIT B-1
SCHEDULE OF BASE RENTAL
This Exhibit is attached to and made a part of the Lease dated June 16, 1995
by and between ZML-Paces Limited Partnership, a Delaware limited partnership
(Landlord'), by its agent Equity Office Properties, Inc., and The Summit
National Bank, a national banking association (Tenant) for space in the
Building located at 2727 Paces Ferry Road, N.W., Atlanta, Georgia 30339.
Tenant shall pay Landlord the sum of Seven Hundred Forty-Six Thousand Four
Hundred Fifty-Five and 68/100 Dollars ($746,455.68) as Base Rental for the
Lease Term in eighty-four (84) monthly installments as follows:
A. Twelve (12) equal installments of $7,569.88 each payable on or before
the first day of each month during the period beginning July 1, 1995 and ending
June 30, 1996.
B. Twelve (12) equal installments of $8,008.71 each payable on or before
the first day of each month during the period beginning July 1, 1996 and ending
June 30, 1997.
C. Twelve (12) equal installments of $8,447.54 each payable on or before
the first day of each month during the period beginning July 1, 1997 and ending
June 30, 1998.
D. Twelve (12) equal installments of $8.886.38 each payable on or before
the first day of each month during the period beginning July 1, 1998 and ending
June 30, 1999.
E. Twelve (12) equal installments of $9,325.21 each payable on or before
the first day of each month during the period beginning July 1, 1999 and ending
June 30, 2000.
F. Twelve (1 2) equal installments of $9,764.04 each payable on or before
the first day of each month during the period beginning July 1, 2000 and ending
June 30, 2001.
G. Twelve (12) equal installments of $10,202.88 each payable on or before
the first day of each month during the period beginning July 1, 2001 and ending
June 30, 2002.
All such Base Rental shall be payable by Tenant in accordance with the
terms of Article V of the Lease.
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<PAGE> 26
IN WITNESS WHEREOF, Landlord and Tenant have entered into this Exhibit to
Lease as of the date first written above.
LANDLORD: ZML-Paces Limited Partnership,
a Delaware limited partnership
ATTEST: BY: EQUITY OFFICE PROPERTIES INC.
as agent
/S/ Kelly M. Harris By: /S/ Arvid Povilaitis
- ----------------------------------- ------------------------------------
Name (print): Kelly M. Harris Name: Arvid Povilaitis
----------------------
/S/ S. Seawell Title: Vice President
- -----------------------------------
Name (print): Suzanne Seawell
----------------------
TENANT: The Summit National Bank,
a national banking association
ATTEST:
/S/ Suzanne Long By: /S/ Gary McClung
- ----------------------------------- ------------------------------------
Name (print): Suzanne Long Name: Gary McClung
---------------------- -------------------------------
/S/ Kathy Gilchrist Title: Exec. Vice President
- ----------------------------------- ------------------------------
Name (print): Kathy Gilchrist
----------------------
109
<PAGE> 27
EXHIBIT B-2
PAYMENT OF BASIC COSTS
This Exhibit is attached to and made a part of the Lease dated June 16,
1995 by and between ZML-Paces Limited Partnership, a Delaware limited
partnership ("Landlord"), by its agent Equity Office Properties, Inc., and The
Summit National Bank, a national banking association ("Tenant") for space in
the Building located at 2727 Paces Ferry Road, N.W., Atlanta, Georgia 30339.
BASIC COST ADJUSTMENT. During each calendar year, or portion thereof,
beginning with the 1996 calendar year falling within the Lease Term, Tenant
shall pay to Landlord as Additional Base Rental hereunder the sum of (1)
Tenant's Pro Rata Share of the amount, if any, by which Taxes (hereinafter
defined) for the applicable calendar year exceed Taxes for the Base Year
(hereinafter defined) plus (2) Tenant's Pro Rata Share of the amount, if any,
by which Expenses (hereinafter defined) for the applicable calendar year exceed
Expenses for the Base Year. For purposes hereof, the "Base Year" shall mean
the calendar year 1995. Tenant's Pro Rata Share of increases in Taxes and
Tenant's Pro Rata Share of increases in Expenses shall be computed separate and
independent of each other prior to being added together to determine the
"Excess." In the event that Taxes and/or Expenses, as the case may be, in any
calendar year decrease below the amount of Taxes or Expenses for the Base Year,
Tenant's Pro Rata Share of Taxes and/or Expenses, as the case may be, for such
calendar year shall be deemed to be $0, it being understood that Tenant shall
not be entitled to any credit or offset if Taxes and/or Expenses decrease below
the corresponding amount for The Base Year. Prior to the Commencement Date and
prior to January 1 of each calendar year during the Lease Term, or as soon
thereafter as practical, Landlord shall make a good faith estimate of the
Excess for the applicable calendar year. On or before the first day of each
month during such calendar year, Tenant shall pay Landlord, as Additional Base
Rental, a monthly installment equal to one-twelfth of Tenant's Pro Rata Share
of Landlord's estimate of the Excess. Landlord shall have the right from time
to time during any such calendar year to revise the estimate of the Excess for
such year and provide Tenant with a revised statement therefor, and thereafter
the amount Tenant shall pay each month shall be based upon such revised
estimate. If Landlord does not provide Tenant with an estimate of the Excess
by January 1 of any calendar year, Tenant shall continue to pay a monthly
installment based on the previous year's estimate until such time as Landlord
provides Tenant with an estimate of the Excess for the current year. Upon
receipt of such current year's estimate, an adjustment shall be made for any
month during the current year with respect to which Tenant paid monthly
installments of Additional Base Rental based on the previous years estimate of
the Excess. Tenant shall pay Landlord for any underpayment upon demand. Any
overpayment shall, at Landlord's option, be refunded to Tenant or credited
against the installment of Additional Base Rental due for the month immediately
following the furnishing of such estimate. Any amounts paid by Tenant based on
any estimate shall be subject to adjustment pursuant to Paragraph A below, when
actual Basic Costs are determined for such calendar year.
A. Basic Costs Reconciliation. As soon as is practical following the end
of each calendar year during the Lease Term, Landlord shall furnish to Tenant a
statement of Landlord's actual Basic Costs and the actual Excess for the
previous calendar year. If for any calendar year the Additional Base Rental
collected for the prior year, as a result of Landlord's estimate of Basic
Costs, is in excess of Tenant's actual Pro Rata Share of the Excess for such
prior year, then Landlord shall refund to Tenant any overpayment (or at
Landlord's option, apply such amount against Additional Base Rental due or to
become due hereunder). Likewise, Tenant shall pay to Landlord, on demand, any
underpayment with respect to the prior year, whether or not the Lease has
terminated prior to receipt by Tenant of a statement for such underpayment, it
being understood that this clause shall survive the expiration of the Lease.
B. Definitions.
1. "Basic Costs" for any calendar year shall mean the
total, computed in accordance herewith, of Taxes for such
calendar year and Expenses for such calendar year.
2. "Expenses" shall mean all direct and indirect costs and
expenses paid or incurred in each calendar year in connection
with operating, maintaining, repairing, managing and owning the
Building and the Property (inclusive of the Exterior Common Areas),
including, without limitation, the following:
(i) All labor costs for all persons performing services required or
utilized in connection with the operation, repair and maintenance of and
control of access to the Building and the Property, including but not
limited to amounts incurred for wages, salaries and other compensation for
services, payroll, social security, unemployment and other similar taxes,
workmen's compensation insurance, uniforms, disability benefits, pensions,
hospitalization,
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<PAGE> 28
retirement plans, group insurance or any other similar or like expenses
incurred under the provisions of any collective bargaining agreement.
(ii) All management fees, the cost of maintaining a management
office at the Building, and all fees for legal and accounting services
relating to the Building and the Property.
(iii) All rental and/or purchase costs of materials, supplies,
hand tools and equipment used in the operation, repair, replacement and
maintenance and the control of access to the Building and the Property.
(iv) All amounts charged to Landlord by contractors and/or suppliers
for services, materials, equipment and supplies furnished in connection
with the repair, maintenance, replacement of and control of access to any
part of the Building, or the Property generally, including the heating,
air conditioning, ventilating, plumbing, electrical, elevator and other
systems.
(v) All premiums and deductibles paid by Landlord for fire and
extended coverage insurance, earthquake and extended coverage insurance,
liability and extended coverage insurance, rental loss insurance, elevator
insurance, boiler insurance and other insurance customarily carried from
time to time by lessors of comparable office buildings or required to be
carried by Landlord's Mortgagee.
(vi) Charges for all utilities, including but not limited to water,
electricity, gas and sewer, but excluding those charges for which tenants
are individually responsible.
(vii) All landscape expenses and costs of repairing, resurfacing
and striping of the parking areas of the Property, if any.
(viii) Cost of all maintenance service agreements, including those
for equipment, alarm service, window cleaning, drapery or venetian blind
cleaning, janitorial services, pest control, uniform supply, landscaping,
and any parking equipment.
(ix) Cost of all other repairs, replacements and general maintenance
of the Property and Building neither specified above nor directly billed
to tenants.
(x) The amortized cost of capital improvements made to the Building
or the Property which are primarily for the purpose of reducing operating
expense costs or otherwise improving the operating efficiency of the
Property or Building or which are required to comply with any laws, rules
or regulations of any governmental authority, the cost of such items to
be amortized over a period of at least five (5) years. Such amortization
shall be in accordance with generally accepted accounting principles and
shall include interest at the rate of fifteen percent (15%) per annum
compounded monthly.
3. "Taxes", shall mean (i) all real estate taxes and assessments
on the Property, the Building or the Premises, and taxes and
assessments levied in substitution or supplementation in whole or in
part of such taxes, (ii) all personal property taxes for the
Building's personal property, including license expenses, (iii) all
franchise fees, (iv) all taxes imposed on services of Landlord's
agents and employees, (v) all sales, use or other tax, excluding state
and/or federal income tax, now or hereafter imposed by any
governmental authority upon Rent received by Landlord, (vi) all other
taxes, fees or assessments now or hereafter levied by any governmental
authority on the Property, the Building or its contents or on the
operation and use thereof (except as relate to specific tenants), and
(vii) all costs and fees incurred in connection with seeking
reductions in or refunds in Taxes including, without limitation, any
costs incurred by Landlord to challenge the tax valuation of the
Building, but excluding income taxes.
4. "Exterior Common Areas" shall mean those areas of the
Property which are not located within the Building and which are
provided and maintained for the use and benefit of Landlord and
tenants of the Building generally and the employees, invitees and
licensees of Landlord and such tenants, including, without limitation,
any parking garage, plaza, roads, sidewalks and landscapes.
C. Exclusions From Basic Costs. Basic Costs shall not include the cost
of capital improvements (except as above set forth), depreciation, interest
(except as provided above with respect to the amortization of capital
improvements) lease commissions, and principal payments on mortgage and other
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<PAGE> 29
D. Occupancy. Notwithstanding any language in the Lease seemingly to the
contrary, if the Building is not fully occupied during any calendar year of the
Lease Term, actual Basic Costs for purposes of this Exhibit B-2 shall, at
Landlord's option, be determined as if the Building had been fully occupied
during such year.
IN WITNESS WHEREOF, Landlord and Tenant have entered into this Exhibit to
Lease as of the date first written above.
ATTEST: BY: EQUITY OFFICE PROPERTIES INC.,
as agent
/S/ Kelly M. Harris By: /S/ Arvid Povilaitis
- ----------------------------------- ------------------------------------
Name (print): Kelly M. Harris Name: Arvid Povilaitis
----------------------
/S/ S. Seawell Title: Vice President
- -----------------------------------
Name (print): Suzanne Seawell
----------------------
TENANT: The Summit National Bank,
a national banking association
ATTEST:
/S/ Suzanne Long By: /S/ Gary McClung
- ----------------------------------- ------------------------------------
Name (print): Suzanne Long Name: Gary McClung
---------------------- -------------------------------
/S/ Kathy Gilchrist Title: Exec. Vice President
- ----------------------------------- ------------------------------
Name (print): Kathy Gilchrist
----------------------
112
<PAGE> 30
Exhibit C
WORK LETTER
This Exhibit is attached to and made a part of the Lease dated June 16,
1995 by and between ZML-Paces Limited Partnership, a Delaware limited
partnership ("Landlord"), by its agent Equity Office Properties, Inc., and The
Summit National Bank, a national banking association ("Tenant") for space in the
Building located at 2727 Paces Ferry Road, N.W., Atlanta, Georgia 30339.
[INTENTIONALLY OMITTED]
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<PAGE> 31
EXHIBIT D
BUILDING RULES AND REGULATIONS
This Exhibit is attached to and made a part of the Lease dated June 16,
1995 by and between ZML-Paces Limited Partnership, a Delaware limited
partnership ("Landlord"), by its agent Equity Office Properties, Inc., and The
Summit National Bank, a national banking association ("Tenant") for space in the
Building located at 2727 Paces Ferry Road, N.W., Atlanta, Georgia 30339.
The following rules and regulations shall apply, where applicable, to the
Premises, the Building, the parking garage associated therewith (if any), the
Property and the appurtenances thereto:
1. Sidewalks, doorways, vestibules, halls, stairways and other similar
areas shall not be obstructed by Tenant or used by Tenant for any purpose other
than ingress and egress to and from the Premises. No rubbish, litter, trash,
or material of any nature shall be placed, emptied, or thrown in those areas.
At no time shall Tenant permit Tenant's employees to loiter in common areas or
elsewhere in or about the Building or Property.
2. Plumbing fixtures and appliances shall be used only for the purposes
for which designed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or placed therein. Damage resulting to any such
fixtures or appliances from misuse by Tenant or its agents, employees or
invitees, shall be paid for by Tenant, and Landlord shall not in any case be
responsible therefor.
3. No signs, advertisements or notices shall be painted or affixed on or
to any windows, doors or other parts of the Building, except those of such
color, size, style and in such places as shall be first approved in writing by
Landlord. No nails, hooks or screws shall be driven or inserted into any part
of the Premises or Building except by the Building maintenance personnel, nor
shall any part of the Building be defaced by Tenant.
4. Landlord may provide and maintain in the first floor (main lobby) of
the Building an alphabetical directory board listing all Tenants, and no other
directory shall be permitted unless previously consented to by Landlord in
writing.
5. Tenant shall not place any additional lock or locks on any door in the
Premises or Building without Landlord's prior written consent. A reasonable
number of keys to the locks on the doors in the Premises shall be furnished by
Landlord to Tenant at the cost of Tenant, and Tenant shall not have any
duplicate keys made. All keys shall be returned to Landlord at the expiration
or earlier termination of this Lease.
6. Tenant will refer to Landlord for Landlord's supervision, approval, and
control all contractors, contractor's representatives, and installation
technicians rendering any service to Tenant, before performance of any
contractual service. Such supervisory action by Landlord shall not render
Landlord responsible for any work performed for Tenant. This provision shall
apply to all work performed in the Building, including but not limited to the
installation of telephones, computer wiring, cabling, equipment, electrical
devices, attachments and installations of any nature. Tenant shall be solely
responsible for complying with all applicable laws, codes and ordinances
pursuant to which said work shall be performed.
7. Movement in or out of the Building of furniture or office equipment, or
dispatch or receipt by Tenant of any merchandise or materials which require the
use of elevators, stairways, lobby areas, or loading dock areas, shall be
restricted to hours designated by Landlord. Tenant must seek Landlord's prior
approval by providing in writing a detailed listing of any such activity. If
approved by Landlord, such activity shall be under the supervision of Landlord
and performed in the manner stated by Landlord. Landlord may prohibit any
article, equipment or any other item from being brought into the Building.
Tenant is to assume all risk for damage to articles moved and injury to any
persons resulting from such activity. If any equipment, property, and/or
personnel of Landlord or any of any other tenant is damaged or injured as a
result of or in connection with such activity, Tenant shall be solely liable
for any and all damage or loss resulting therefrom.
8. Landlord shall have the power to prescribe the weight and position of
safes and other heavy equipment or items, which in all cases shall not in the
opinion of Landlord exceed acceptable floor loading and weight distribution
requirements. All damage done to the Building by the installation or removal
of any property of Tenant, or done by Tenant's property while in the Building,
shall be repaired at the expense of Tenant.
9. Corridor doors, when not in use, shall be kept closed.
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<PAGE> 32
10. Tenant shall not: (i) make or permit any improper, objectionable or
unpleasant noises or odors in the Building, or otherwise interfere in any way
with other tenants or persons having business with them; (ii) solicit business
or distribute, or cause to be distributed, in any portion of the Building any
handbills, promotional materials or other advertising; or (iii) conduct or
permit any other activities in the Building that might constitute a nuisance.
11. No animals, except seeing eye dogs, shall be brought into or kept in,
on or about the Premises.
12. No inflammable, explosive or dangerous fluid or substance shall be
used or kept by Tenant in the Premises or Building. Tenant shall not, without
Landlord's prior written consent, use, store, install, spill, remove, release
or dispose of within or about the Premises or any other portion of the
Property, any asbestos-containing materials or any solid, liquid or gaseous
material now or hereafter considered toxic or hazardous under the provisions of
42 U.S.C. Section 9601 et seq. or any other applicable environmental law which
may now or hereafter be in effect. If Landlord does give written consent to
Tenant pursuant to the foregoing sentence, Tenant shall comply with all
applicable laws, rules and regulations pertaining to and governing such use by
Tenant, and shall remain liable for all costs of cleanup or removal in
connection therewith.
13. Tenant shall not use or occupy the Premises in any manner or for any
purpose which would injure the reputation or impair the present or future value
of the Premises or the Building; without limiting the foregoing, Tenant shall
not use or permit the Premises or any portion thereof to be used for lodging,
sleeping or for any illegal purpose.
14. Tenant shall not take any action which would violate Landlord's labor
contracts affecting the Building or which would cause any work stoppage,
picketing, labor disruption or dispute, or any interference with the business
of Landlord or any other tenant or occupant of the Building or with the rights
and privileges of any person lawfully in the Building. Tenant shall take any
actions necessary to resolve any such work stoppage picketing, labor
disruption, dispute or interference and shall have pickets removed and, at the
request of Landlord, immediately terminate at any time any construction work
being performed in the Premises giving rise to such labor problems, until such
time as Landlord shall have given its written consent for the resumption of
such work. Tenant shall have no claim for damages of any nature against
Landlord or any of the Landlord Related Parties in connection therewith, nor
shall the date of the commencement of the Term be extended as a result thereof.
15. Tenant shall utilize the termite and pest extermination service
designated by Landlord to control termites and pests in the Premises. Tenant
shall bear the cost and expense of such extermination services, provided that
Tenant shall not be obligated to pay more for its participation in such termite
and pest extermination services than the prevailing competitive rates charged
by reputable independent termite and pest control exterminators for the same
service on a direct and individual basis.
16. Tenant shall not install, operate or maintain in the Premises or in
any other area of the Building, any electrical equipment which does not bear
the U/L (Underwriters Laboratories) seal of approval, or which would overload
the electrical system or any part thereof beyond its capacity for proper,
efficient and safe operation as determined by Landlord, taking into
consideration the overall electrical system and the present and future
requirements therefor in the Building. Tenant shall not furnish any cooling or
heating to the Premises, including, without limitation the use of any
electronic or gas heating devices, without Landlord's prior written consent.
17. Tenant shall not operate or permit to be operated on the Premises any
coin or token operated vending machine or similar device (including, without
limitation, telephones, lockers, toilets, scales, amusement devices and
machines for sale of beverages, foods, candy, cigarettes or other goods),
except for those vending machines or similar devices which are for the sole and
exclusive use of Tenant's employees, and then only if such operation does not
violate the lease of any other tenant of the Building.
18. Bicycles and other vehicles are not permitted inside or on the
walkways outside the Building, except in those areas specifically designated by
Landlord for such purposes.
19. Landlord may from time to time adopt appropriate systems and
procedures for the security or safety of the Building, its occupants, entry and
use, or its contents. Tenant, Tenant's agents, employees, contractors, guests
and invitees shall comply with Landlord's reasonable requirements
relative thereto.
20. Landlord shall have the right to prohibit the use of the name of the
Building or any other publicity by Tenant that in Landlord's opinion may tend
to impair the reputation of the Building or its desirability for Landlord or
other tenants. Upon written notice from Landlord, Tenant will refrain from
and/or discontinue such publicity immediately.
21. Tenant shall carry out Tenant's permitted repair, maintenance,
alterations, and improvements in the Premises only during times agreed to in
advance by Landlord and in a manner which will not interfere with the rights of
other tenants in the Building.
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<PAGE> 33
22. Canvassing, soliciting, and peddling in or about the Building is
prohibited. Tenant shall cooperate and use its best efforts to prevent the
same.
23. At no time shall Tenant permit or shall Tenant's agents, employees,
contractors, guests, or invitees smoke in any common area of the Building,
unless such common area has been declared a designated smoking area by
Landlord.
24. Tenant shall observe Landlord's rules with respect to maintaining
standard window coverings at all windows in the Premises so that the Building
presents a uniform exterior appearance. Tenant shall ensure that to the extent
reasonably practicable, window coverings are closed on all windows in the
Premises while they are exposed to the direct rays of the sun.
25. All deliveries to or from the Premises shall be made only at such
times, in the areas and through the entrances and exits designated for such
purposes by Landlord. Tenant shall not permit the process of receiving
deliveries to or from the Premises outside of said areas or in a manner which
may interfere with the use by any other tenant of its premises or of any common
areas, any pedestrian use of such area, or any use which is inconsistent with
good business practice.
26. The work of cleaning personnel shall not be hindered by Tenant after
5:30 p.m., and such cleaning work may be done at any time when the offices are
vacant. Windows, doors and fixtures may be cleaned at any time. Tenant shall
provide adequate waste and rubbish receptacles necessary to prevent
unreasonable hardship to Landlord regarding cleaning service.
IN WITNESS WHEREOF, Landlord and Tenant have entered into this exhibit to
Lease as of the date first written above.
LANDLORD: ZML-Paces Limited Partnership,
a Delaware limited partnership
ATTEST: BY: EQUITY OFFICE PROPERTIES
INC. as agent
/S/ Kelly M. Harris By: /S/ Arvid Povilaitis
- ----------------------------------- ------------------------------------
Name (print): Kelly M. Harris Name: Arvid Povilaitis
----------------------
/S/ S. Seawell Title: Vice President
- -----------------------------------
Name (print): Suzanne Seawell
----------------------
TENANT: The Summit National Bank,
a national banking association
ATTEST:
/S/ Suzanne Long By: /S/ Gary McClung
- ----------------------------------- ------------------------------------
Name (print): Suzanne Long Name: Gary McClung
---------------------- -------------------------------
/S/ Kathy Gilchrist Title: Exec. Vice President
- ----------------------------------- ------------------------------
Name (print): Kathy Gilchrist
----------------------
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<PAGE> 34
EXHIBIT E
ADDITIONAL TERMS AND CONDITIONS
This Exhibit is attached to and made a part of the Lease dated June 16,
1995 by and between ZML-Paces Limited Partnership, a Delaware limited
partnership ("Landlord"), by its agent Equity Office Properties, Inc., and The
Summit National Bank, a national banking association ("Tenant") for space in
the Building located at 2727 Paces Ferry Road, N.W., Atlanta, Georgia 30339.
1. PARKING.
A. During the Lease Term. Tenant agrees to lease from Landlord and
Landlord agrees to lease to Tenant a total of twenty-three (23) parking
spaces in the building parking areas designated by Landlord (the "Spaces")
consisting of fifteen (15) parking spaces (the "Non Reserved Spaces") for
the use of Tenant and its employees and eight (8) parking spaces (the
"Reserved Spaces") which shall be located on the Plaza Level deck and
shall be assigned and reserved for the use of Tenant's customers during
the hours that Tenant is open for business. No deductions or allowances
shall be made for days when Tenant or any of its employees does not
utilize the parking facilities or for Tenant utilizing less than all of
the Non Reserved Spaces. Tenant shall not have the right to lease or
otherwise use more than the number of set forth above.
B. Tenant shall pay Landlord rent for the Reserved Spaces ("the
Parking Rent") in monthly installments at the initial rate of $50.00 per
reserved space per month. Tenant shall not be required to pay any
Parking Rent for the Non-Reserved Spaces during the initial term of this
Lease. Tenant, in the case of a renewal or extension of this Lease,
shall pay Parking Rent for the Non-Reserved Spaces at the rate then being
charged by Landlord. Landlord shall have the right to increase the
Parking Rent from time to time to reflect the rate then being charged by
Landlord for spaces in the Parking Area. The Parking Rent shall be
considered Additional Base Rent in accordance with the terms of Article V
of the Lease.
C. The location of the unreserved Spaces shall be designated by
Landlord from time to time. Except for the Reserved Spaces and other
specific spaces and areas designated by Landlord for reserved parking,
all parking in the Building Parking Area shall be on an unreserved,
first-come, first-served basis.
D. Landlord agrees to mark and post the Reserved Spaces for use only
by the customers of Tenant's banking business, but such exclusive use of
the "Reserved" Spaces by the customers of Tenant's banking business
shall be applicable only during the hours Tenant is open for business to
the public. Landlord shall police and enforce the posted limitations and
rules regarding the use of such Reserved Spaces, including, without
limitation, towing of vehicles illegally parked therein. Tenant
authorizes Landlord to cause any such illegally parked car to be towed
from the building parking areas.
The Landlord agrees to cooperate and work closely with the Tenant
concerning the removal of illegally parked vehicles in reserved spaces,
for which a monthly rent is paid.
E. Landlord shall not be responsible for money, jewelry,
automobiles or other personal property lost in or stolen from the
Parking Area regardless of whether such loss or theft occurs when the
Parking Area or other areas therein are locked or otherwise secured
against entry. Except as caused by the negligence or willful misconduct
of Landlord, Landlord shall not be liable for any loss, injury or damage
to persons using the Parking Area or automobiles or other property
therein, it being agreed that, to the fullest extent permitted by law,
the use of the Parking Area and the Spaces shall be at the sole risk
of Tenant, its employees and customers.
F. Landlord shall have the right from time to time to promulgate
reasonable rules and regulations regarding the Parking Area, the Spaces
and the use thereof, including, but not limited to, rules and
regulations controlling the flow of traffic to and from various parking
areas, the angle and direction of parking and the like. Tenant shall
comply with and cause its employees to comply with all such rules and
regulations as well as all reasonable additions and amendments thereto.
G. Tenant shall not store or permit its employees to store any
automobiles in the Parking Area without the prior written consent of
Landlord. Except for emergency repairs, Tenant and its employees shall
not perform any work on any automobiles while located in he Parking Area
or on the Property. If it is necessary for Tenant or its employees to
leave an automobile in the Parking Area overnight, Tenant shall provide
Landlord with prior notice thereof designating the license plate number
and model of such automobile.
H. Landlord shall have the right to temporarily close the Parking
Area or certain areas therein in order to perform necessary repairs,
maintenance and improvements to the Parking Area.
I. Tenant shall not assign or sublease any of the Spaces without the
consent of Landlord. Landlord shall have the right to terminate this
Parking Agreement with respect to any Spaces that Tenant desires to
sublet or assign.
J. Landlord may elect to provide parking cards or keys to control
access to the Parking Area. In such event, Landlord shall provide Tenant
with one card or key for each Space that Tenant is leasing hereunder,
provided that Landlord shall have the right to require Tenant or its
employees
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<PAGE> 35
to place a deposit on such access cards or keys and to pay a fee for any
lost or damaged cards or keys.
2. WORK ALLOWANCE. Landlord agrees to contribute an amount not to exceed
Twenty-Four Thousand and 00/100 Dollars ($24,000.00) (the "Work Allowance")
toward the cost of installing an ATM machine and performing improvements to the
Premises including but not limited to painting, carpeting, wallcoverings,
monument signage and directional signage during the period beginning on the
date hereof and ending on March 1, 1996 (the "Initial Improvements"). Such
improvements shall, at a minimum, include the construction of a demising wall
separating the Premises from the Surrender Space (hereinafter defined). All
such Improvements shall be performed in compliance with the terms and
conditions of the Lease, including, without limitation, the prior approval of
Landlord with respect to the Improvements to be performed and the contractors
to be retained to perform such Improvements. The Work Allowance shall be paid
to Tenant following receipt of the following documentation: full and final
waivers of liens from the general contractor and the subcontractors retained by
Tenant in an amount equal to the portion of the Work Allowance to be disbursed,
completion certificates from Tenant, the general contractor and Tenant's
architect, a sworn contractor's affidavit from the general contractor and a
request to disburse from Tenant containing an approval by Tenant of the work
done, receipted bills covering all labor and materials expended and used in
connection with the Improvements. If Tenant has not previously paid the
general contractor for the cost of the Improvements, Landlord, at its option,
may pay the Work Allowance directly to the order of the general contractor that
performed the Improvements or to the joint order of the general contractor and
all included subcontractors. Notwithstanding anything herein to the contrary,
Landlord shall not be obligated to disburse any portion of the Work Allowance
during the continuance of an uncured default under the Lease, and Landlord's
obligation to disburse shall only resume when and if such default is cured.
The Work Allowance may only be used for the cost of labor, material and
contractors fees for the Improvements to the Premises and the cost of preparing
plans and drawings in connection therewith. In no event shall the Work
Allowance be used for the purchase of equipment, furniture and other items of
personal property of Tenant. Landlord shall be entitled to deduct from the
Work Allowance an amount sufficient to reimburse Landlord for its actual
out-of-pocket costs in connection with the construction of the Initial
Expansion Improvements, including any costs of additional security, freight
elevator usage, electricity and other incidental Building charges during
Tenant's construction and move-in. In the event Tenant does not use the entire
Work Allowance by May 1, 1996, any unused amount shall accrue to the sole
benefit of Landlord, it being understood that Tenant shall not be entitled to
any credit, abatement or other concession in connection therewith.
3. SECURITY SYSTEM. Tenant acknowledges that Landlord, at Tenant's
request, has installed a security monitoring system for Tenant's use in
addition to the base building Security System and that such monitoring system
has been installed solely for the benefit of Tenant.
4. OTHER BANKS IN BUILDING.
A. To the extent Landlord is not prohibited by any existing or future Law,
and provided Tenant is not in default under this Lease, Landlord covenants not
to enter into a lease agreement for space in the Building (hereinafter defined)
with a Competitor (as hereinafter defined) for a term scheduled to commence
during the Term of this Lease. If Landlord enters into a lease for space
within the Building with a Competitor for a term that commences during the Term
of this Lease, and Tenant is not in default under this Lease, then, in lieu of
the Base Rent provided in Exhibit B, of this Lease, commencing on the date of
the opening for business of such Competitor, Tenant shall pay to Landlord
substitute rent ("Substitute Rent") equal to fifty percent (50%) of the Base
Rent due under this Lease until the earlier to occur of (i) the Competitor
closes its business; (ii) the Competitor's lease terminates; (iii) the
Competitor's primary use is no longer the Subject Primary Use (as hereinafter
defined); or (iv) Tenant's primary use is no longer the Subject Primary Use, at
which time the Substitute Rent Period shall end and Tenant shall again pay to
Landlord Base Rent as provided in Exhibit B, of this Lease. Any period in
which Tenant shall pay Substitute Rent shall be deemed a Substitute Rent
Period. Notwithstanding anything to the contrary contained herein, in the
event that Landlord exercises its relocation right pursuant to Article XXVIII,
then the provisions of this Section 4 shall: (i) apply to the building in which
the Relocation Space is located as of the effective date of such relocation;
and (ii) cease to apply to the Building (as defined in this Section 4).
B. For purposes of this Section 4, a "Competitor", shall mean any tenant
in the Building (i) whose lease or other agreement with Landlord (collectively,
an "Occupancy Agreement") is dated on or after the date of this Lease and (ii)
whose primary use is the operation of a commercial bank, savings bank, savings
and loan association, credit union or similar banking facility if such
commercial bank, savings bank, savings and loan association, credit union or
similar banking facility will have banking counters or teller windows for
accepting deposits and loan payments and cashing checks for retail banking
customers on a walk-in basis or whose primary use is a federally or state
chartered commercial bank, savings bank, savings and loan association or credit
union for the purpose of providing specialized consumer banking services
similar to those offered by commercial retail banks in Atlanta, Georgia area as
"private" or "professional" banking (the "Subject Primary Use"). Competitor
shall not in any event include: (a) a tenant open for business on the date of
this Lease or any assignee or sublessee of any such tenant or any renewal or
extension of the Occupancy Agreement of such tenant, or (b) a tenant whose
Occupancy Agreement is dated prior to the date of this Lease or any assignee or
sublessee of any such tenant or any renewal or extension of the Occupancy
Agreement of such tenant, or (c) a tenant who has been permitted to assume an
Occupancy Agreement or otherwise operate its business in the
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Building based upon or as a result of a bankruptcy, insolvency or similar
action or (d) any tenant operating any freestanding ATM machine installed
within their leased premises in the Building or (e) any credit union
operations which are ancillary to other business operations in the Building
within their leased premises of a tenant in the Building of such tenants. For
purposes of this Section, "Building" shall mean the building commonly known as
One Paces West which is more particularly described on the legal description
attached hereto as Exhibit F but shall not include any other buildings in the
complex commonly known as Paces West.
C. Tenant shall indemnify, defend and hold Landlord harmless against and
from all liabilities, obligations, damages, penalties, claims, costs, charges
and expenses, including without limitation, reasonable attorney's fees, which
may be imposed upon, incurred by, or asserted against Landlord arising,
directly or indirectly, out of or in connection with the terms of this Section
4. In case any action or proceeding is brought against Landlord by reason of
the foregoing, Tenant shall, at Tenant's sole cost and expense, resist or
defend such action or proceeding with counsel approved by Landlord.
5. EXISTING LEASE. Landlord and Tenant are currently landlord and tenant
under that certain lease dated April 23, 1987 (the "Prior Lease") for
approximately 8,280 rentable square feet on the first floor of the Building
(the "Prior Premises") which Prior Lease is currently scheduled to expire June
30, 1995. The Prior Premises include the entire Premises leased hereunder and
approximately 3,014 rentable square feet of space on the 1st floor of the
Building that is not included within the Premises (the portion that is not
included is referred to herein as the "Surrender Space"). Tenant, at its
sole cost and expense (subject to the Work Allowance) shall be responsible for
constructing a demising wall to separate the Premises from the Surrender Space.
Such work shall be performed in accordance with Section X.B. of the Lease and
Section 2 of this Exhibit E and shall be subject to be completed by Tenant on
or before July 1, 1995. Tenant shall be required to vacate the Surrender Space
on or before July 1, 1995 and return the same to Landlord in compliance with
Section 14(c) of the Prior Lease.
6. MONUMENT SIGN PANEL. So long as Tenant is not in default hereunder,
Tenant shall be permitted to install and maintain a panel on Landlord's
monument sign. Such panel shall be fabricated at Tenant's sole cost and
expense to Landlord's specifications. Tenant shall be responsible for
installing said panel and repairs or replacements of the panel. Tenant shall
commence all repairs to the panel within five (5) days after the occurrence of
said damage.
7. BANKING DRIVEWAY. Landlord and Tenant acknowledge the existence of a
banking driveway for the purpose of permitting vehicular access by Tenant's
banking customers to the exterior banking teller window along the westerly
exterior facade of the building together with a canopy over the teller window
area. Tenant shall have the right of Tenant's sole cost and expense to install
new directional signage for the banking driveway provided that any such signage
shall be subject to the review and approval of Landlord and local governing
authority. The costs of maintaining and repairing the Banking Driveway and the
landscaping adjoining same shall be included in Basic Costs under this Lease
except that Tenant shall be responsible for the cost of any seal coating
applied to the banking driveway. Any electric current consumed in connection
with the lighting of the Banking Driveway and the operation of any ATM or other
such equipment shall, for purposes of the reimbursement provisions of this
Lease, be deemed to be consumed by Tenant in the Premises. Tenant shall be
solely responsible for the costs of maintaining and repairing the canopy. The
Banking Driveway shall, for purposes of Sections XVA, XVB, XVIA through XVID,
and XVII of this Lease, be deemed a part of the Demised Premises.
IN WITNESS WHEREOF, Landlord and Tenant have entered into this exhibit to
Lease as of the date first written above.
LANDLORD: ZML-Paces Limited Partnership, a
Delaware limited partnership
ATTEST: BY: EQUITY OFFICE PROPERTIES
INC. as agent
/S/ Kelly M. Harris By: /S/ Arvid Povilaitis
- ----------------------------------- ------------------------------------
Name (print): Kelly M. Harris Name: Arvid Povilaitis
---------------------
/S/ S. Seawell Title: Vice President
- -----------------------------------
Name (print): Suzanne Seawell
---------------------
TENANT: The Summit National Bank,
a national banking association
ATTEST:
/S/ Suzanne Long By: /S/ Gary McClung
- ----------------------------------- ------------------------------------
Name (print): Suzanne Long Name: Gary McClung
--------------------- ------------------------------
/S/ Kathy Gilchrist Title: Exec. Vice President
- ----------------------------------- ------------------------------
Name (print): Kathy Gilchrist
---------------------
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EXHIBIT F
LEGAL DESCRIPTION OF THE BUILDING
This Exhibit is attached to and made a part of the Lease dated June 16, 1995
by and between ZML-Paces Limited Partnership, a Delaware limited partnership
("Landlord"), by its agent Equity Office Properties, Inc., and The Summit
National Bank, a national banking association ("Tenant") for space in the
Building located at 2727 Paces Ferry Road, N.W., Atlanta, Georgia 30339.
LEGAL DESCRIPTION
PHASE I
All that tract or parcel of land lying and being in Land Lot 885, 17th
District, 2nd Section, Cobb County, Georgia and being more particularly
described as follows:
Beginning at an iron pin marking the point where the West Line of Land Lot 885
intersects the Northerly Right of Way of Paces Ferry Road, running thence N
03-35-05 E 785.04 feet along the West line of Land Lot 885 to an iron pin;
thence running S 36-40-00 E 39.02 feet to a point; thence S 00-23-55 E 194.18
feet to a point; thence N 89-35-05 E 263.36 feet to a point; thence S 00-23-54
E 273.22 feet to a point; thence running N 89-36-06 E 10-00 feet to a point;
thence S 00-23-54 E 62.50 feet to a point; thence S 16-10-26 E 36.34 feet to an
iron pin/ thence S 12-49-43 E 58.48 feet to an iron pin; thence running S
01-39-16 E 173.56 feet to an iron pin located on the Northerly Right of Way of
Paces Ferry Road; running thence Northwesterly along the Northerly Right of Way
of Paces Ferry Road (80' R/W) and following the curvature thereof an arc
distance of 294.04 feet (said arc having a radius of 1517.58 feet and being
subtended by a chord of N 85-01-07 W 293.58 feet) to a point; thence N
79-32-51 W 86.50 feet to an iron pin and the Point of Beginning. Said Parcel
containing 4.678 acres of land as shown on a plat prepared by Melvin H. Pair &
Assoc. dated 5/17/84 last revised 9/3/85.
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EXHIBIT G
PARTIAL LIST OF TENANT'S PROPERTY
In addition to any Required Removables specified by Landlord and any other
items of Tenant's Property, the following personal property, fixtures and
equipment shall be removed by Tenant at the expiration or earlier termination
of the Lease or Tenant's right to possession and any damage caused by such
removal shall be repaired to the reasonable satisfaction of Landlord:
a. All furniture, art, movable equipment (proof machines, copiers,
computer equipment, teller machines, phone equipment, mail machines, file
cabinets, appliances, etc.), plants and supplies;
b. Drive-through window and bay equipment;
c. Vault and vault door;
d. Safe deposit boxes;
e. Security equipment;
f. Undercounter teller drawers; banking counters, and teller windows;
g. After hour depository; and
h. ATM machine and attachments.
IN WITNESS WHEREOF, Landlord and Tenant have entered into this exhibit to
Lease as of the date first written above.
LANDLORD: ZML-Paces Limited Partnership,
a Delaware limited partnership
ATTEST: BY: EQUITY OFFICE PROPERTIES
INC. as agent
/S/ Kelly M. Harris By: /S/ Arvid Povilaitis
- ----------------------------------- ------------------------------------
Name (print): Kelly M. Harris Name: Arvid Povilaitis
----------------------
/S/ S. Seawell Title: Vice President
- -----------------------------------
Name (print): Suzanne Seawell
----------------------
TENANT: The Summit National Bank,
a national banking association
ATTEST:
/S/ Suzanne Long By: /S/ Gary McClung
- ----------------------------------- ------------------------------------
Name (print): Suzanne Long Name: Gary McClung
---------------------- -------------------------------
/S/ Kathy Gilchrist Title: Exec. Vice President
- ----------------------------------- ------------------------------
Name (print): Kathy Gilchrist
----------------------
121
<PAGE> 1
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, made as of the 25th day of August, 1995, by, and between
SUMMIT BANK CORPORATION, a Georgia corporation ("Summit"), the SUMMIT NATIONAL
BANK, a national banking association ("the Bank') (Summit and the Bank being
collectively hereinafter referred to as the "Corporation") and PIN PIN CHAU, an
individual resident of Georgia ("the Executive") for the purpose of
establishing a severance arrangement between the Corporation and the Executive
in the event of a Change in Control (as hereinafter defined) of the
Corporation.
W I T N E S S E T H:
WHEREAS, the board of directors of the Corporation (the "Board")
recognizes that the Executive's contribution to the growth and success of the
Corporation has been substantial; and
WHEREAS, the Executive has rendered valuable service to the Corporation in
various executive capacities; and
WHEREAS, the Corporation desires to induce the Executive to remain in
his/her current employment by providing the Executive a measure of security;
and
WHEREAS, the Corporation desires to continue to have the benefits of the
Executive's full time and attention to the affairs of the Corporation without
diversion due to concerns about a possible Change in Control, (as hereinafter
defined) of the Corporation;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows;
1. DEFINITIONS. All the terms defined in this section shall have the
meanings given below throughout this Agreement.
(a) "Base Annual Salary" shall mean the greater of the Executive's
annual base salary (i) at the rate in effect on the Termination Date or (ii) at
the highest rate in effect at any time during the ninety day period prior to a
Change in Control, and shall include an amounts of his/her base salary that are
deferred under any qualified or non-qualified employee benefit plans of the
Corporation or any other agreement or arrangement, but shall not include
amounts paid or payable as bonuses.
(b) "Board" shall mean the Board of Directors of Summit.
(c) "Cause"shall mean the termination of the Executive's employment as
a result of:
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<PAGE> 2
(i) any act that (A) constitutes, on the part of the Executive, fraud,
dishonesty, gross malfeasance of duty, or conduct grossly inappropriate
to the Executive's office, and (B) is demonstrably likely to lead to a
material injury to the Corporation or resulted in or was intended to
result in direct or indirect gain to or personal enrichment of the
Executive; or
(ii) the conviction (from which no appeal may be or is timely taken) of
the Executive of a felony; or
(iii) the suspension or removal of the Executive by federal or state
banking regulatory authorities acting under lawful authority pursuant to
provisions of federal or state law or regulation which may be in effect
from time to time;
provided, however, that in the case of clause (i) above, such conduct
shall not constitute Cause;
(x) unless (A) there shall have been delivered to the Executive
a written notice setting forth with specificity the reasons that
the Board believes that the Executive's conduct constitutes the
criteria set forth in clause (i), (B) the Executive shall have
been provided the opportunity to be heard in person by the Board
(with the assistance of the Executive's counsel if the Executive
so desires) and (C) after such hearing, the termination is
evidenced by a resolution adopted in good faith by two-thirds of
the members of the Board (other than the Executive); or
(y) if such conduct (A) was believed by the Executive in good
faith to have been in or not opposed to the interests of the
Corporation, and (B) was not intended to and did not result in
the direct or indirect gain to or personal enrichment of the
Executive.
(d) "Change in Control" shall mean the occurrence of any of the
following events:
(i) an acquisition (other than directly from the Corporation) of any
voting securities of the Corporation ("Voting Securities") by
any "Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934 (the "1934 Act"))
immediately after which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of 25% or more
of the combined voting power of the Corporation's then outstanding Voting
Securities; provided, however, that in determining whether a Change in
Control has occurred, Voting Securities which are acquired in an
acquisition by (1) an employee benefit plan (or a trust forming a part
thereof) main by (x) the Corporation or (y) any corporation or other
person of which a majority of its voting power or its equity securities
or equity interest is owned directly or indirectly by the Corporation (a
"Subsidiary"'), (2) the Corporation or any Subsidiary, or (3) any Person
in connection with a "Non-
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<PAGE> 3
Control Transaction" (as hereinafter defined) shall not constitute an
acquisition for purposes for this clause (i).
(ii) The individuals who, as of the date of this Agreement, are members
of the Board (the "Incumbent Board") cease for any reason to constitute
at least 80% of the Board; provided, however, that if the election, or
nomination for election by the Corporation's shareholders, of any new
director was approved by a vote of at least 80% of the Incumbent Board,
such new director shall for purposes of this Agreement, be considered as
a member of the Incumbent Board; provided, however, that no individual
shall be considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under the
1934 Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intending to avoid or
settle any Election Contest or Proxy Contest; or
(iii) Approval by the shareholders of the Corporation of:
(a) a merger, consolidation or reorganization involving the
Corporation, unless:
(1) the shareholders of the Corporation, immediately before
such merger, consolidation or reorganization, own, directly or
indirectly, immediately following such a merger, consolidation
or reorganization, at least two-thirds of the combined voting
power of the outstanding voting securities of the corporation
resulting from such merger, consolidation or reorganization
(the "Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or
reorganization, and
(2) the individuals who were members of the Incumbent Board
immediately prior to the execution of the Agreement providing
for such merger, consolidation or reorganization constitute at
least 80% members of the board of directors of the Surviving
Corporation.
(A transaction described in clauses (1) and (2) above shall
hereinafter be referred to as "Non-Control Transaction.") .
(b) A complete liquidation or dissolution of the Corporation; or
(c) An agreement for the sale or other disposition of all or
substantially all of the assets of the Corporation to any Person
(other than a transfer to a Subsidiary).
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<PAGE> 4
(iv) Notwithstanding anything contained in this Agreement to
the contrary, if the Executive's employment is terminated prior
to a Change in Control and the Executive reasonably demonstrates
that such termination (A) was at the request of a third party who
has indicated an intention or taken steps reasonably calculated
to effect a Change in Control (a "Third Party") or (B) otherwise
occurred in connection with, or in anticipation of, a Change in
Control, then for all purposes of this Agreement, the date of a
Change in Control with respect to the Executive shall mean the
date immediately prior to the date of such termination of the
Executive's employment.
(e) "Good Reason" shall mean the occurrence after a Change in Control of
any of the events or provisions as described in subsections (i) through (viii)
hereof:
(i) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, represents an adverse change from his/her
status, title, position or responsibilities as in effect at any time
within ninety days preceding the date of a Change in Control or at any
time thereafter; the assignment to the Executive of any duties or
responsibilities which, in the Executive's reasonable judgment, are
inconsistent with his/her status, title, position or responsibilities as
in effect at any time within ninety days preceding the date of a Change in
Control or at any time thereafter; any removal of the Executive from or
failure to reappoint or reelect him/her to any of such offices or
positions, except in connection with the termination of his/her
employment for Cause, as a result of his/her death or by the Executive
other than for Good Reason, or any other change in condition or
circumstances that in the Executive's reasonable judgment makes it
materially more difficult for the Executive to carry out the duties and
responsibilities of his/her office that existed at any time within ninety
days preceding the date of the Change in Control or at any time
thereafter;
(ii) a reduction in the Executive's base salary or any failure to pay
the Executive any compensation or benefits to which he/she is entitled
within five days of the date due;
(iii) the Corporation's requiring the Executive to be based at any
place outside a 50 mile radius from the offices occupied by the Executive
immediately prior to the Change in Control, except for reasonably required
travel on the Corporation's business which is not materially greater than
such travel requirements prior to the Change in Control;
(iv) the failure by the Corporation to (A) continue in effect
(without reduction in benefit level and/or reward opportunities) any
material compensation or employee benefit plan in which the Executive was
participating at any time within ninety days preceding the date of a
Change in Control or at any time thereafter, unless such plan is replaced
with a plan that provides substantially equivalent compensation or
benefits to the Executive or (B) provide the Executive with compensation
and benefits, in the aggregate, at least equal (in terms of benefits
levels and/or reward opportunities) to those provided for under each other
employee benefit plan, program or practice in which the Executive
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<PAGE> 5
was participating at any time within ninety days preceding the date of a
Change of Control or at any time thereafter;
(v) the insolvency or the filing (by any party, including the
Corporation) of a petition for bankruptcy of the Corporation which
petition is not dismissed within sixty days;
(vi) any material breach by the Corporation of any provision of
this Agreement;
(vii) any purported termination of the Executive's employment for Cause
by the Corporation which does not comply with the terms of this
Agreement;
(viii) the failure of the Corporation to obtain an agreement,
satisfactory to the Executive, from any Successors and Assigns to assume
and agree to perform this Agreement.
Any event or condition described in clause (i) through (viii) above
which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (A) was at the request of a Third-Party, or (B)
otherwise arose in connection with, or in anticipation of, a Change in
Control which actually occurs, shall constitute Good Reason for purposes
of this Agreement, notwithstanding that it occurred prior to the Change
in Control. The Executive's right to terminate his/her employment for
Good Reason shall not be effected by his/her incapacity due to physical
or mental illness.
(f) "Involuntary Termination" shall mean any termination of the
Executive's employment with the Corporation or any Subsidiary, Successor or
Assign of the Corporation following a Change in Control, Provided, however,
that the term Involuntary Termination shall not include a termination resulting
from a resignation by the Executive or a termination by the Corporation for
Cause.
(g) "Long-Term Stock Option Incentive Plan" shall mean that certain pool
of 20,000 options to purchase Summit common stock at ten dollars ($10.00) per
share established at the August 22, 1994, meeting of the Board for grant to Pin
Pin Chau, David Yu, Gary McClung or Alec Dudley as a reward for truly
outstanding performance during fiscal years 1994, 1995 and 1996 and shall
include any additions, modifications, and supplements thereto.
(h) "Notice of Termination" shall mean a written notice of termination
from the Corporation or the Executive which specifies an effective date of
termination, indicates the specific termination provision in this Agreement
relied upon and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(i) "Severance Amount" shall mean an amount equal to 100% of the
Executive's Base Annual Salary.
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<PAGE> 6
(j) "Successors and Assigns" shall mean a corporation or other entity
acquiring all or substantially all of the assets and business of the
Corporation (including this Agreement), whether by operation of law or
otherwise.
(k) "Termination Date" shall mean the date specified in the
Notice of Termination.
2. PAYMENT OF SEVERANCE AMOUNT.
(a) If the Executive's employment by the Corporation or any Subsidiary, or
Successor or Assign of the Corporation shall be subject to an Involuntary
Termination, then the Corporation shall pay the Executive an amount equal to
the Severance Amount, payable within fifteen days after the Termination Date.
If the Executive terminates his/her employment for Good Reason, then the
Corporation shall pay to the Executive an amount equal to the Severance Amount,
payable within fifteen days after the Termination Date.
(b) In the event of either an Involuntary Termination or the Executive's
resignation for Good Reason, any stock options previously granted to the
Executive shall immediately become fully vested, and all such options shall be
exercisable by the Executive at any time within six months from the Termination
Date. In addition, 40% of any options under the Long Term Stock Option
Incentive Plan not granted as of the Termination Date shall immediately be
deemed granted to the Executive and shall be fully vested, and all such options
shall be exercisable by the Executive at any time within six months of the
Termination Date.
3. INDEMNIFICATION OF EXECUTIVE. In the event of either an Involuntary
Termination or the Executive's resignation for Good Reason, the Executive shall
be entitled to the indemnity provided to officers and directors of the
Corporation immediately prior to the Change in Control. Any changes to the
Corporation's bylaws or Articles of Incorporation or otherwise which reduce any
indemnity granted to the officers or directors of the Corporation shall not
effect the rights granted hereunder. The Corporation shall not reduce any of
the Executive's indemnity benefits without the prior written consent of the
Executive. Any references to Georgia law in the Corporation's bylaws or other
documents granting indemnity to the Executive shall be deemed to be references
as of the date of this Agreement, and any amendments to Georgia laws, including
a revocation thereof, shall not reduce the indemnification benefits granted
hereunder.
4. TERM. Unless terminated as provided below, this Agreement shall be
effective as of the date first above written and shall remain in effect for a
continuing term of three (3) years which shall be extended automatically
(without further action by the Executive, Summit or the Bank) each day for an
additional day so that the remaining term is always three years; provided, that
the Executive, Summit or the Bank may, by the giving of written notice to all
the other parties to this Agreement, fix the term to a finite term of three
years, without further automatic extension, commencing with the date of such
notice.
5. NOTICES. Notices and all other communications under this Agreement
shall be in writing and shall be deemed given when personally delivered or
mailed by United States registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
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<PAGE> 7
If to the Corporation, to:
Summit Bank Corporation
4630 Chamblee-Dunwoody Road
Atlanta, Georgia 30349
Attn: Secretary of Summit Bank Corporation, or its Successor
or Assign, with copies to the President of Summit Bank
Corporation or its Successor or Assign and the President of
the Summit National Bank or its Successor or Assign.
If to the Executive, to:
Summit Bank Corporation
4630 Chamblee-Dunwoody Road
Atlanta, Georgia 30349
Attn: Pin Pin Chau
or to such other address as either party may furnish to the other in writing,
except that any notice of changes of address shall be effective only upon
receipt.
6. APPLICABLE LAW. This contract is entered into under, and shall be
governed by the laws of the State of Georgia.
7. SEVERABILITY If a court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then the invalidity or
unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement and all other
provisions shall remain in full force and effect.
8. NOT AN EMPLOYMENT AGREEMENT; MITIGATION. Nothing in this Agreement
shall give the Executive any rights (or impose any obligations) to continue
employment by the Corporation or any Subsidiary or Successor or Assign of the
Corporation, nor shall it give the Corporation any rights (or impose any
obligations) for the continued performance of duties by the Executive for the
Corporation or any Subsidiary, Successor or Assign of the Corporation. The
Executive's right to receive benefits under this Agreement shall not be reduced
by the Executive's employment with any other employer after terminating
employment with the Corporation in accordance with this Agreement. Any
compensation for services rendered or consulting fees earned after the
Termination Date shall not diminish the Executive's right to receive all
amounts due hereunder.
9. NO ASSIGNMENT. The Executive's right to receive payment or benefits
under this Agreement shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than the transfer
by will or by the laws of descent and distribution. In the event of an
attempted assignment or transfer contrary to this paragraph, the Corporation
shall have no liability to pay any amount so attempted to be assigned or
transferred. This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
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<PAGE> 8
10. COST OF ENFORCEMENT; INTEREST. If the Executive collects any part of
the Severance Amount or other benefits hereunder or otherwise enforces the
terms of this Agreement through a lawyer or lawyers, the Corporation shall pay
all cost of such collection or enforcement, including reasonable legal fees
incurred by the Executive. In addition the Corporation shall pay the Executive
interest on all or any part of the Severance Amount or other benefits hereunder
that is not paid when due at a rate equal to the Prime Rate as announced by the
Wall Street Journal in its Money Rates column from time to time.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the date and year first above written.
SUMMIT BANK CORPORATION
By: /S/ W. Clayton Sparrow, Jr.
-------------------------------
Its: Chairman
SUMMIT NATIONAL BANK
By: /S/ P. Carl Unger
-------------------------------
Its: Vice Chairman
EXECUTIVE
/S/ Pin Pin Chau
-------------------------------
Pin Pin Chau
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<PAGE> 1
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, made as of the 25th day of August, 1995, by, and between
SUMMIT BANK CORPORATION, a Georgia corporation ("Summit"), the SUMMIT NATIONAL
BANK, a national banking association ("the Bank") (Summit and the Bank being
collectively hereinafter referred to as the 'Corporation') and DAVID YU, an
individual resident of Georgia ("the Executive") for the purpose of
establishing a severance arrangement between the Corporation and the Executive
in. the event of a Change in Control (as hereinafter defined) of the
Corporation.
W I T N E S S E T H:
WHEREAS, the board of directors of the Corporation (the "Board")
recognizes that the Executive's contribution to the growth and success of the
Corporation has been substantial; and
WHEREAS, the Executive has rendered valuable service to the Corporation in
various executive capacities; and
WHEREAS, the Corporation desires to induce the Executive to remain in
his/her current employment by providing the Executive a measure of security;
and
WHEREAS, the Corporation desires to continue to have the benefits of the
Executive's full time and attention to the affairs of the Corporation without
diversion due to concerns about a possible Change in Control, (as hereinafter
defined) of the Corporation;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows;
1. DEFINITIONS. All the terms defined in this section shall have the
meanings given below throughout this Agreement.
(a) "Base Annual Salary" shall mean the greater of the Executive's
annual base salary (i) at the rate in effect on the Termination Date or (ii)
at the highest rate in effect at any time during the ninety day period prior to
a Change in Control, and shall include an amounts of his/her base salary that
are deferred under any qualified or non-qualified employee benefit plans of the
Corporation or any other agreement or arrangement, but shall not include
amounts paid or payable as bonuses.
(b) "Board" shall mean the Board of Directors of Summit.
(c) "Cause" shall mean the termination of the Executive's employment as
a result of:
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<PAGE> 2
(i) any act that (A) constitutes, on the part of the Executive, fraud,
dishonesty, gross malfeasance of duty, or conduct grossly inappropriate to the
Executive's office, and (B) is demonstrably likely to lead to a material injury
to the Corporation or resulted in or was intended to result in direct or
indirect gain to or personal enrichment of the Executive; or
(ii) the conviction (from which no appeal may be or is timely taken) of the
Executive of a felony; or
(iii) the suspension or removal of the Executive by federal or state
banking regulatory authorities acting under lawful authority pursuant to
provisions of federal or state law or regulation which may be in effect from
time to time;
provided, however, that in the case of clause (i) above, such conduct shall not
constitute Cause;
(x) unless (A) there shall have been delivered to the Executive a written
notice setting forth with specificity the reasons that the Board believes that
the Executive's conduct constitutes the criteria set forth in clause (i), (B)
the Executive shall have been provided the opportunity to be heard in person by
the Board (with the assistance of the Executive's counsel if the Executive so
desires) and (C) after such hearing, the termination is evidenced by a
resolution adopted in good faith by two-thirds of the members of the Board
(other than the Executive); or
(y) if such conduct (A) was believed by the Executive in good faith to
have been in or not opposed to the interests of the Corporation, and (B) was
not intended to and did not result in the direct or indirect gain to or
personal enrichment of the Executive.
(d) "Change in Control" shall mean the occurrence of any of the following
events:
(i) an acquisition (other than directly from the Corporation) of any
voting securities of the Corporation ("Voting Securities") by any "Person"
(as the term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934 (the "1934 Act")) immediately after which
such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of 25% or more of the combined voting power
of the Corporation's then outstanding Voting Securities; provided, however,
that in determining whether a Change in Control has occurred, Voting
Securities which are acquired in an acquisition by (1) an employee benefit
plan (or a trust forming a part thereof) main by (x) the Corporation or (y)
any corporation or other person of which a majority of its voting power or
its equity securities or equity interest is owned directly or indirectly by
the Corporation (a "Subsidiary"), (2) the Corporation or any Subsidiary, or
(3) any Person in connection with a "Non-
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<PAGE> 3
Control Transaction" (as hereinafter defined) shall not constitute an
acquisition for purposes for this clause (i).
(ii) The individuals who, as of the date of this Agreement, are members
of the Board (the "Incumbent Board") cease for any reason to constitute
at least 80% of the Board; provided, however, that if the election, or
nomination for election by the Corporation's shareholders, of any new
director was approved by a vote of at least 80% of the Incumbent Board,
such new director shall for purposes of this Agreement, be considered as
a member of the Incumbent Board; provided, however, that no individual
shall be considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under the
1934 Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intending to avoid or
settle any Election Contest or Proxy Contest; or
(iii) Approval by the shareholders of the Corporation of:
(a) a merger, consolidation or reorganization involving the
Corporation, unless:
(1) the shareholders of the Corporation, immediately before
such merger, consolidation or reorganization, own, directly or
indirectly, immediately following such a merger, consolidation
or reorganization, at least two-thirds of the combined voting
power of the outstanding voting securities of the corporation
resulting from such merger, consolidation or reorganization
(the "Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or
reorganization, and
(2) the individuals who were members of the Incumbent Board
immediately prior to the execution of the Agreement providing
for such merger, consolidation or reorganization constitute at
least 80% members of the board of directors of the Surviving
Corporation.
(A transaction described in clauses (1) and (2) above shall
hereinafter be referred to as "Non-Control Transaction.")
(b) A complete liquidation or dissolution of the Corporation; or
(c) An agreement for the sale or other disposition of all or
substantially all of the assets of the Corporation to any Person
(other than a transfer to a Subsidiary).
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<PAGE> 4
(iv) Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior to a
Change in Control and the Executive reasonably demonstrates that
such termination (A) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated to
effect a Change in Control (a "Third Party") or (B) otherwise
occurred in connection with, or in anticipation of, a Change in
Control, then for all purposes of this Agreement, the date of a
Change in Control with respect to the Executive shall mean the date
immediately prior to the date of such termination of the Executive's
employment.
(e) "Good Reason" shall mean the occurrence after a Change in Control of
any of the events or provisions as described in subsections (i) through (viii)
hereof:
(i) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, represents an adverse change from his/her
status, title, position or responsibilities as in effect at any time within
ninety days preceding the date of a Change in Control or at any time
thereafter; the assignment to the Executive of any duties or responsibilities
which, in the Executive's reasonable judgment, are inconsistent with his/her
status, title, position or responsibilities as in effect at any time within
ninety days preceding the date of a Change in Control or at any time
thereafter; any removal of the Executive from or failure to reappoint or
reelect him/her to any of such offices or positions, except in connection with
the termination of his/her employment for Cause, as a result of his/her death
or by the Executive other than for Good Reason, or any other change in
condition or circumstances that in the Executive's reasonable judgment makes it
materially more difficult for the Executive to carry out the duties and
responsibilities of his/her office that existed at any time within ninety days
preceding the date of the Change in Control or at any time thereafter;
(ii) a reduction in the Executive's base salary or any failure to pay the
Executive any compensation or benefits to which he/she is entitled within five
days of the date due;
(iii) the Corporation's requiring the Executive to be based at any place
outside a 50 mile radius from the offices occupied by the Executive immediately
prior to the Change in Control, except for reasonably required travel on the
Corporation's business which is not materially greater than such travel
requirements prior to the Change in Control;
(iv) the failure by the Corporation to (A) continue in effect (without
reduction in benefit level and/or reward opportunities) any material
compensation or employee benefit plan in which the Executive was participating
at any time within ninety days preceding the date of a Change in Control or at
any time thereafter, unless such plan is replaced with a plan that provides
substantially equivalent compensation or benefits to the Executive or (B)
provide the Executive with compensation and benefits, in the aggregate, at
least equal (in terms of benefits levels and/or reward opportunities) to those
provided for under each other employee benefit plan, program or practice in
which the Executive
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<PAGE> 5
was participating at any time withinninety days preceding the date of a
Change of Control or at any time thereafter;
(v) the insolvency or the filing (by any party, including the
Corporation) of a petition for bankruptcy of the Corporation which
petition is not dismissed within sixty days;
(vi) any material breach by the Corporation of any provision of
this Agreement;
(vii) any purported termination of the Executive's employment for
Cause by the Corporation which does not comply with the terms of this
Agreement;
(viii) the failure of the Corporation to obtain an agreement,
satisfactory to the Executive, from any Successors and Assigns to assume
and agree to perform this Agreement.
Any event or condition described in clause (i) through (viii) above
which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (A) was at the request of a Third-Party, or (B)
otherwise arose in connection with, or in anticipation of, a Change in
Control which actually occurs, shall constitute Good Reason for purposes
of this Agreement, notwithstanding that it occurred prior to the Change
in Control. The Executive's right to terminate his/her employment for
Good Reason shall not be effected by his/her incapacity due to physical
or mental illness.
(f) "Involuntary Termination" shall mean any termination of the
Executive's employment with the Corporation or any Subsidiary, Successor or
Assign of the Corporation following a Change in Control, Provided, however,
that the term Involuntary Termination shall not include a termination resulting
from a resignation by the Executive or a termination by the Corporation for
Cause.
(g) "Long-Term Stock Option Incentive Plan" shall mean that certain pool
of 20,000 options to purchase Summit common stock at ten dollars ($10.00) per
share established at the August 22, 1994, meeting of the Board for grant to Pin
Pin Chau, David Yu, Gary McClung or Alec Dudley as a reward for truly
outstanding performance during fiscal years 1994, 1995 and 1996 and shall
include any additions, modifications, and supplements thereto.
(h) "Notice of Termination" shall mean a written notice of termination
from the Corporation or the Executive which specifies an effective date of
termination, indicates the specific termination provision in this Agreement
relied upon and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(i) "Severance Amount" shall mean an amount equal to 100% of the
Executive's Base Annual Salary.
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(j) "Successors and Assigns" shall mean a corporation or other entity
acquiring all or substantially all of the assets and business of the
Corporation (including this Agreement), whether by operation of law or
otherwise.
(k) "Termination Date" shall mean the date specified in the
Notice of Termination.
2. PAYMENT OF SEVERANCE AMOUNT.
(a) If the Executive's employment by the Corporation or any Subsidiary, or
Successor or Assign of the Corporation shall be subject to an Involuntary
Termination, then the Corporation shall pay the Executive an amount equal to
the Severance Amount, payable within fifteen days after the Termination Date.
If the Executive terminates his/her employment for Good Reason, then the
Corporation shall pay to the Executive an amount equal to the Severance Amount,
payable within fifteen days after the Termination Date.
(b) In the event of either an Involuntary Termination or the Executive's
resignation for Good Reason, any stock options previously granted to the
Executive shall immediately become fully vested, and all such options shall be
exercisable by the Executive at any time within six months from the Termination
Date. In addition, 40% of any options under the Long Term Stock Option
Incentive Plan not granted as of the Termination Date shall immediately be
deemed granted to the Executive and shall be fully vested, and all such options
shall be exercisable by the Executive at any time within six months of the
Termination Date.
3. INDEMNIFICATION OF EXECUTIVE. In the event of either an Involuntary
Termination or the Executive's resignation for Good Reason, the Executive shall
be entitled to the indemnity provided to officers and directors of the
Corporation immediately prior to the Change in Control. Any changes to the
Corporation's bylaws or Articles of Incorporation or otherwise which reduce any
indemnity granted to the officers or directors of the Corporation shall not
effect the rights granted hereunder. The Corporation shall not reduce any of
the Executive's indemnity benefits without the prior written consent of the
Executive. Any references to Georgia law in the Corporation's bylaws or other
documents granting indemnity to the Executive shall be deemed to be references
as of the date of this Agreement, and any amendments to Georgia laws, including
a revocation thereof, shall not reduce the indemnification benefits granted
hereunder.
4. TERM. Unless terminated as provided below, this Agreement shall be
effective as of the date first above written and shall remain in effect for a
continuing term of three (3) years which shall be extended automatically
(without further action by the Executive, Summit or the Bank) each day for an
additional day so that the remaining term is always three years; provided, that
the Executive, Summit or the Bank may, by the giving of written notice to all
the other parties to this Agreement, fix the term to a finite term of three
years, without further automatic extension, commencing with the date of such
notice.
5. NOTICES. Notices and all other communications under this
Agreement shall be in writing and shall be deemed given when personally
delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
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<PAGE> 7
If to the Corporation, to:
Summit Bank Corporation
4630 Chamblee-Dunwoody Road
Atlanta, Georgia 30349
Attn: Secretary of Summit Bank Corporation, or its Successor
or Assign, with copies to the President of Summit Bank
Corporation or its Successor or Assign and the President of
the Summit National Bank or its Successor or Assign.
If to the Executive, to:
Summit Bank Corporation
4630 Chamblee-Dunwoody Road
Atlanta, Georgia 30349
Attn: David Yu
or to such other address as either party may furnish to the other in writing,
except that any notice of changes of address shall be effective only upon
receipt.
6. APPLICABLE LAW. This contract is entered into under, and shall be
governed by the laws of the State of Georgia.
7. SEVERABILITY If a court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then the invalidity or
unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement and all other
provisions shall remain in full force and effect.
8. NOT AN EMPLOYMENT AGREEMENT; MITIGATION. Nothing in this Agreement
shall give the Executive any rights (or impose any obligations) to continue
employment by the Corporation or any Subsidiary or Successor or Assign of the
Corporation, nor shall it give the Corporation any rights (or impose any
obligations) for the continued performance of duties by the Executive for the
Corporation or any Subsidiary, Successor or Assign of the Corporation. The
Executive's right to receive benefits under this Agreement shall not be reduced
by the Executive's employment with any other employer after terminating
employment with the Corporation in accordance with this Agreement. Any
compensation for services rendered or consulting fees earned after the
Termination Date shall not diminish the Executive's right to receive all
amounts due hereunder.
9. NO ASSIGNMENT. The Executive's right to receive payment or benefits
under this Agreement shall not be assignable or transferrable, whether by
pledge, creation of a security interest or otherwise, other than the transfer
by will or by the laws of descent and distribution. In the event of an
attempted assignment or transfer contrary to this paragraph, the Corporation
shall have no liability to pay any amount so attempted to be assigned or
transferred. This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
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<PAGE> 8
10. COST OF ENFORCEMENT; INTEREST. If the Executive collects any part of
the Severance Amount or other benefits hereunder or otherwise enforces the
terms of this Agreement through a lawyer or lawyers, the Corporation shall pay
all cost of such collection or enforcement, including reasonable legal fees
incurred by the Executive. In addition the Corporation shall pay the Executive
interest on all or any part of the Severance Amount or other benefits hereunder
that is not paid when due at a rate equal to the Prime Rate as announced by the
Wall Street Journal in its Money Rates column from time to time.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the date and year first above written.
SUMMIT BANK CORPORATION
By: /S/ W. Clayton Sparrow, Jr.
--------------------------------
Its: Chairman
SUMMIT NATIONAL BANK
By: /S/ P. Carl Unger
--------------------------------
Its: Vice Chairman
EXECUTIVE
/S/ David Yu
--------------------------------
David Yu
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<PAGE> 1
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, made as of the 25th day of August, 1995, by, and between
SUMMIT BANK CORPORATION, a Georgia corporation ("Summit"), the SUMMIT NATIONAL
BANK, a national banking association ("the Bank") (Summit and the Bank being
collectively hereinafter referred to as the "Corporation") and ALEC DUDLEY, an
individual resident of Georgia ("the Executive") for the purpose of
establishing a severance arrangement between the Corporation and the Executive
in. the event of a Change in Control (as hereinafter defined) of the
Corporation.
W I T N E S S E T H:
WHEREAS, the board of directors of the Corporation (the "Board")
recognizes that the Executive's contribution to the growth and success of the
Corporation has been substantial; and
WHEREAS, the Executive has rendered valuable service to the Corporation in
various executive capacities; and
WHEREAS, the Corporation desires to induce the Executive to remain in
his/her current employment by providing the Executive a measure of security;
and
WHEREAS, the Corporation desires to continue to have the benefits of the
Executive's full time and attention to the affairs of the Corporation without.
diversion due to concerns about a possible Change in Control, (as hereinafter
defined) of the Corporation;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows;
1. DEFINITIONS. All the terms defined in this section shall have the
meanings given below throughout this Agreement.
(a) "Base Annual Salary" shall mean the greater of the Executive's
annual base salary (i) at the rate in effect on the Termination Date or (ii)
at the highest rate in effect at any time during the ninety day period prior
to a Change in Control, and shall include an amounts of his/her base salary
that are deferred under any qualified or non-qualified employee benefit plans
of the Corporation or any other agreement or arrangement, but shall not
include amounts paid or payable as bonuses.
(b) "Board" shall mean the Board of Directors of Summit.
(c) "Cause" shall mean the termination of the Executive's employment as
a result of:
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<PAGE> 2
(i) any act that (A) constitutes, on the part of the
Executive, fraud, dishonesty, gross malfeasance of duty, or conduct
grossly inappropriate to the Executive's office, and (B) is
demonstrably likely to lead to a material injury to the Corporation or
resulted in or was intended to result in direct or indirect gain to or
personal enrichment of the Executive; or
(ii) the conviction (from which no appeal may be or is
timely taken) of the Executive of a felony; or
(iii) the suspension or removal of the Executive by federal
or state banking regulatory authorities acting under lawful authority
pursuant to provisions of federal or state law or regulation which may
be in effect from time to time;
provided, however, that in the case of clause (i) above, suc conduct
shall not constitute Cause;
(x) unless (A) there shall have been delivered to the
Executive a written notice setting forth with specificity the
reasons that the Board believes that the Executive's conduct
constitutes the criteria set forth in clause (i), (B) the
Executive shall have been provided the opportunity to be heard
in person by the Board (with the assistance of the Executive's
counsel if the Executive so desires) and (C) after such hearing,
the termination is evidenced by a resolution adopted in good
faith by two-thirds of the members of the Board (other than the
Executive); or
(y) if such conduct (A) was believed by the Executive in
good faith to have been in or not opposed to the interests of the
Corporation, and (B) was not intended to and did not result in
the direct or indirect gain to or personal enrichment of the
Executive.
(d) "Change in Control" shall mean the occurrence of any of the
following events:
(i) an acquisition (other than directly from the Corporation)
of any voting securities of the Corporation ("Voting Securities") by
any "Person" (as the term person is used for purposes of Section 13(d)
or 14(d) of the Securities Exchange Act of 1934 (the "1934 Act"))
immediately after which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of 25% or
more of the combined voting power of the Corporation's then
outstanding Voting Securities; provided, however, that in determining
whether a Change in Control has occurred, Voting Securities which are
acquired in an acquisition by (1) an employee benefit plan (or a trust
forming a part thereof) main by (x) the Corporation or (y) any
corporation or other person of which a majority of its voting power or
its equity securities or equity interest is owned directly or
indirectly by the Corporation (a "Subsidiary"), (2) the Corporation or
any Subsidiary, or (3) any Person in connection with a "Non-
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Control Transaction" (as hereinafter defined) shall not constitute an
acquisition for purposes for this clause (i).
(ii) The individuals who, as of the date of this Agreement, are members
of the Board (the "Incumbent Board") cease for any reason to constitute
at least 80% of the Board; provided, however, that if the election, or
nomination for election by the Corporation's shareholders, of any new
director was approved by a vote of at least 80% of the Incumbent Board,
such new director shall for purposes of this Agreement, be considered as
a member of the Incumbent Board; provided, however, that no individual
shall be considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under the
1934 Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intending to avoid or
settle any Election Contest or Proxy Contest; or
(iii) Approval by the shareholders of the Corporation of.
(a) a merger, consolidation or reorganization involving the
Corporation, unless:
(1) the shareholders of the Corporation, immediately before
such merger, consolidation or reorganization, own, directly or
indirectly, immediately following such a merger, consolidation
or reorganization, at least two-thirds of the combined voting
power of the outstanding voting securities of the corporation
resulting from such merger, consolidation or reorganization
(the "Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or
reorganization, and
(2) the individuals who were members of the Incumbent Board
immediately prior to the execution of the Agreement providing
for such merger, consolidation or reorganization constitute at
least 80% members of the board of directors of the Surviving
Corporation.
(A transaction described in clauses (1) and (2) above shall
hereinafter be referred to as "Non-Control Transaction.")
(b) A complete liquidation or dissolution of the
Corporation; or
(c) An agreement for the sale or other disposition of all or
substantially all of the assets of the Corporation to any Person
(other than a transfer to a Subsidiary).
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(iv) Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior to
a Change in Control and the Executive reasonably demonstrates
that such termination (A) was at the request of a third party
who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control (a "Third Party") or
(B) otherwise occurred in connection with, or in anticipation
of, a Change in Control, then for all purposes of this
Agreement, the date of a Change in Control with respect to the
Executive shall mean the date immediately prior to the date of
such termination of the Executive's employment.
(e) "Good Reason" shall mean the occurrence after a Change in
Control of any of the events or provisions as described in subsections (i)
through (viii) hereof:
(i) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, represents an adverse change from his/her
status, title, position or responsibilities as in effect at any time within
ninety days preceding the date of a Change in Control or at any time
thereafter; the assignment to the Executive of any duties or
responsibilities which, in the Executive's reasonable judgment, are
inconsistent with his/her status, title, position or responsibilities as
in effect at any time within ninety days preceding the date of a Change
in Control or at any time thereafter; any removal of the Executive from or
failure to reappoint or reelect him/her to any of such offices or
positions, except in connection with the termination of his/her employment
for Cause, as a result of his/her death or by the Executive other than for
Good Reason, or any other change in condition or circumstances that in the
Executive's reasonable judgment makes it materially more difficult for the
Executive to carry out the duties and responsibilities of his/her office
that existed at any time within ninety days preceding the date of the
Change in Control or at any time thereafter;
(ii) a reduction in the Executive's base salary or any failure to pay
the Executive any compensation or benefits to which he/she is entitled
within five days of the date due;
(iii) the Corporation's requiring the Executive to be based at any
place outside a 50 mile radius from the offices occupied by the Executive
immediately prior to the Change in Control, except for reasonably required
travel on the Corporation's business which is not materially greater than
such travel requirements prior to the Change in Control;
(iv) the failure by the Corporation to (A) continue in effect (without
reduction in benefit level and/or reward opportunities) any material
compensation or employee benefit plan in which the Executive was
participating at any time within ninety days preceding the date of a
Change in Control or at any time thereafter, unless such plan is replaced
with a plan that provides substantially equivalent compensation or
benefits to the Executive or (B) provide the Executive with compensation
and benefits, in the aggregate, at least equal (in terms of benefits
levels and/or reward opportunities) to those provided for under each other
employee benefit plan, program or practice in which the Executive
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was participating at any time within ninety days preceding the date of a
Change of Control or at any time thereafter;
(v) the insolvency or the filing (by any party, including the
Corporation) of a petition for bankruptcy of the Corporation which
petition is not dismissed within sixty days;
(vi) any material breach by the Corporation of any provision of
this Agreement;
(vii) any purported termination of the Executive's employment for
Cause by the Corporation which does not comply with the terms of this
Agreement;
(viii) the failure of the Corporation to obtain an agreement,
satisfactory to the Executive, from any Successors and Assigns to assume
and agree to perform this Agreement.
Any event or condition described in clause (i) through (viii)
above which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (A) was at the request of a Third-Party, or (B)
otherwise arose in connection with, or in anticipation of, a Change in
Control which actually occurs, shall constitute Good Reason for purposes
of this Agreement, notwithstanding that it occurred prior to the Change
in Control. The Executive's right to terminate his/her employment for
Good Reason shall not be effected by his/her incapacity due to physical
or mental illness.
(f) "Involuntary Termination" shall mean any termination of the
Executive's employment with the Corporation or any Subsidiary, Successor or
Assign of the Corporation following a Change in Control, Provided, however,
that the term Involuntary Termination shall not include a termination resulting
from a resignation by the Executive or a termination by the Corporation for
Cause.
(g) "Long-Term Stock Option Incentive Plan" shall mean that certain pool
of 20,000 options to purchase Summit common stock at ten dollars ($10.00) per
share established at the August 22, 1994, meeting of the Board for grant to Pin
Pin Chau, David Yu, Gary McClung or Alec Dudley as a reward for truly
outstanding performance during fiscal years 1994, 1995 and 1996 and shall
include any additions, modifications, and supplements thereto.
(h) "Notice of Termination" shall mean a written notice of termination
from the Corporation or the Executive which specifies an effective date of
termination, indicates the specific termination provision in this Agreement
relied upon and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(i) "Severance Amount" shall mean an amount equal to 100% of the
Executive's Base Annual Salary.
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(j) "Successors and Assigns" shall mean a corporation or other entity
acquiring all or substantially all of the assets and business of the
Corporation (including this Agreement), whether by operation of law or
otherwise.
(k) "Termination Date" shall mean the date specified in the
Notice of Termination.
2. PAYMENT OF SEVERANCE AMOUNT.
(a) If the Executive's employment by the Corporation or any Subsidiary, or
Successor or Assign of the Corporation shall be subject to an Involuntary
Termination, then the Corporation shall pay the Executive an amount equal to
the Severance Amount, payable within fifteen days after the Termination Date.
If the Executive terminates his/her employment for Good Reason, then the
Corporation shall pay to the Executive an amount equal to the Severance Amount,
payable within fifteen days after the Termination Date.
(b) In the event of either an Involuntary Termination or the Executive's
resignation for Good Reason, any stock options previously granted to the
Executive shall immediately become fully vested, and all such options shall be
exercisable by the Executive at any time within six months from the Termination
Date. In addition, 40% of any options under the Long Term Stock Option
Incentive Plan not granted as of the Termination Date shall immediately be
deemed granted to the Executive and shall be fully vested, and all such options
shall be exercisable by the Executive at any time within six months of the
Termination Date.
3. INDEMNIFICATION OF EXECUTIVE. In the event of either an Involuntary
Termination or the Executive's resignation for Good Reason, the Executive
shall be entitled to the indemnity provided to officers and directors of the
Corporation immediately prior to the Change in Control. Any changes to the
Corporation's bylaws or Articles of Incorporation or otherwise which reduce any
indemnity granted to the officers or directors of the Corporation shall not
effect the rights granted hereunder. The Corporation shall not reduce any of
the Executive's indemnity benefits without the prior written consent of the
Executive. Any references to Georgia law in the Corporation's bylaws or other
documents granting indemnity to the Executive shall be deemed to be references
as of the date of this Agreement, and any amendments to Georgia laws, including
a revocation thereof, shall not reduce the indemnification benefits granted
hereunder.
4. TERM. Unless terminated as provided below, this Agreement shall be
effective as of the date first above written and shall remain in effect for a
continuing term of three (3) years which shall be extended automatically
(without further action by the Executive, Summit or the Bank) each day for an
additional day so that the remaining term is always three years; provided, that
the Executive, Summit or the Bank may, by the giving of written notice to all
the other parties to this Agreement, fix the term to a finite term of three
years, without further automatic extension, commencing with the date of such
notice.
5. NOTICES. Notices and all other communications under this
Agreement shall be in writing and shall be deemed given when personally
delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
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If to the Corporation, to:
Summit Bank Corporation
4630 Chamblee-Dunwoody Road
Atlanta, Georgia 30349
Attn: Secretary of Summit Bank Corporation, or its Successor
or Assign, with copies to the President of Summit Bank
Corporation or its Successor or Assign and the President of
the Summit National Bank or its Successor or Assign.
If to the Executive, to:
Summit Bank Corporation
4630 Chamblee-Dunwoody Road
Atlanta, Georgia 30349
Attn: Alec Dudley
or to such other address as either party may furnish to the other in writing,
except that any notice of changes of address shall be effective only upon
receipt.
6. APPLICABLE LAW. This contract is entered into under, and shall be
governed by the laws of the State of Georgia.
7. SEVERABILITY If a court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then the invalidity or
unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement and all other
provisions shall remain in full force and effect.
8. NOT AN EMPLOYMENT AGREEMENT; MITIGATION. Nothing in this Agreement
shall give the Executive any rights (or impose any obligations) to continue
employment by the Corporation or any Subsidiary or Successor or Assign of the
Corporation, nor shall it give the Corporation any rights (or impose any
obligations) for the continued performance of duties by the Executive for the
Corporation or any Subsidiary, Successor or Assign of the Corporation. The
Executive's right to receive benefits under this Agreement shall not be reduced
by the Executive's employment with any other employer after terminating
employment with the Corporation in accordance with this Agreement. Any
compensation for services rendered or consulting fees earned after the
Termination Date shall not diminish the Executive's right to receive all
amounts due hereunder.
9. NO ASSIGNMENT. The Executive's right to receive payment or benefits
under this Agreement shall not be assignable or transferrable, whether by
pledge, creation of a security interest or otherwise, other than the transfer
by will or by the laws of descent and distribution. In the event of an
attempted assignment or transfer contrary to this paragraph, the Corporation
shall have no liability to pay any amount so attempted to be assigned or
transferred. This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
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10. COST OF ENFORCEMENT; INTEREST. If the Executive collects any part of
the Severance Amount or other benefits hereunder or otherwise enforces the
terms of this Agreement through a lawyer or lawyers, the Corporation shall pay
all cost of such collection or enforcement, including reasonable legal fees
incurred by the Executive. In addition the Corporation shall pay the Executive
interest on all or any part of the Severance Amount or other benefits hereunder
that is not paid when due at a rate equal to the Prime Rate as announced by the
Wall Street Journal in its Money Rates column from time to time.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the date and year first above written.
SUMMIT BANK CORPORATION
By: /S/ W. Clayton Sparrow, Jr.
--------------------------------
Its: Chairman
SUMMIT NATIONAL BANK
By: /S/ P. Carl Unger
--------------------------------
Its: Vice Chairman
EXECUTIVE
/S/ H. Alec Dudley
--------------------------------
Alec Dudley
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CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, made as of the 25th day of August, 1995, by, and between
SUMMIT BANK CORPORATION, a Georgia corporation ("Summit"), the SUMMIT NATIONAL
BANK, a national banking association ("the Bank") (Summit and the Bank being
collectively hereinafter referred to as the "Corporation") and GARY MCCLUNG, an
individual resident of Georgia ("the Executive") for the purpose of
establishing a severance arrangement between the Corporation and the Executive
in the event of a Change in Control (as hereinafter defined) of the
Corporation.
W I T N E S S E T H:
WHEREAS, the board of directors of the Corporation (the "Board")
recognizes that the Executive's contribution to the growth and success of the
Corporation has been substantial; and
WHEREAS, the Executive has rendered valuable service to the Corporation in
various executive capacities; and
WHEREAS, the Corporation desires to induce the Executive to remain in
his/her current employment by providing the Executive a measure of security;
and
WHEREAS, the Corporation desires to continue to have the benefits of the
Executive's full time and attention to the affairs of the Corporation without
diversion due to concerns about a possible Change in Control, (as hereinafter
defined) of the Corporation;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows;
1. DEFINITIONS. All the terms defined in this section shall have the
meanings given below throughout this Agreement.
(a) "Base Annual Salary" shall mean the greater of the
Executive's annual base salary (i) at the rate in effect on the Termination
Date or (ii) at the highest rate in effect at any time during the ninety day
period prior to a Change in Control, and shall include an amounts of his/her
base salary that are deferred under any qualified or non-qualified employee
benefit plans of the Corporation or any other agreement or arrangement, but
shall not include amounts paid or payable as bonuses.
(b) "Board" shall mean the Board of Directors of Summit.
(c) "Cause" shall mean the termination of the Executive's employment
as a result of:
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(i) any act that (A) constitutes, on the part of the Executive, fraud,
dishonesty, gross malfeasance of duty, or conduct grossly inappropriate
to the Executive's office, and (B) is demonstrably likely to lead to a
material injury to the Corporation or resulted in or was intended to
result in direct or indirect gain to or personal enrichment of the
Executive; or
(ii) the conviction (from which no appeal may be or is timely taken) of
the Executive of a felony; or
(iii) the suspension or removal of the Executive by federal or state
banking regulatory authorities acting under lawful authority pursuant to
provisions of federal or state law or regulation which may be in effect
from time to time;
provided, however, that in the case of clause (i) above, such conduct
shall not constitute Cause;
(x) unless (A) there shall have been delivered to the
Executive a written notice setting forth with specificity the
reasons that the Board believes that the Executive's conduct
constitutes the criteria set forth in clause (i), (B) the Executive
shall have been provided the opportunity to be heard in person by
the Board (with the assistance of the Executive's counsel if the
Executive so desires) and (C) after such hearing, the termination
is evidenced by a resolution adopted in good faith by two-thirds
of the members of the Board (other than the Executive); or
(y) if such conduct (A) was believed by the Executive in good
faith to have been in or not opposed to the interests of the
Corporation, and (B) was not intended to and did not result in the
direct or indirect gain to or personal enrichment of the Executive.
(d) "Change in Control" shall mean the occurrence of any of the
following events:
(i) an acquisition (other than directly from the Corporation) of any
voting securities of the Corporation ("Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or 14
(d) of the Securities Exchange Act of 1934 (the "1934 Act")) immediately
after which such Person has "Beneficial Ownership" (within the meaning of
Rule 13d-3 promulgated under the 1934 Act) of 25% or more of the combined
voting power of the Corporation's then outstanding Voting Securities;
provided, however, that in determining whether a Change in Control has
occurred, Voting Securities which are acquired in an acquisition by (1)
an employee benefit plan (or a trust forming a part thereof) main by (x)
the Corporation or (y) any corporation or other person of which a
majority of its voting power or its equity securities or equity interest
is owned directly or indirectly by the Corporation (a "Subsidiary"), (2)
the Corporation or any Subsidiary, or (3) any Person in connection with a
"Non-
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Control Transaction" (as hereinafter defined) shall not constitute an
acquisition for purposes for this clause (i).
(ii) The individuals who, as of the date of this Agreement, are members
of the Board (the "Incumbent Board") cease for any reason to constitute
at least 80% of the Board; provided, however, that if the election, or
nomination for election by the Corporation's shareholders, of any new
director was approved by a vote of at least 80% of the Incumbent Board,
such new director shall for purposes of this Agreement, be considered as
a member of the Incumbent Board; provided, however, that no individual
shall be considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under the
1934 Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intending to avoid or
settle any Election Contest or Proxy Contest; or
(iii) Approval by the shareholders of the Corporation of.
(a) a merger, consolidation or reorganization involving the
Corporation, unless:
(1) the shareholders of the Corporation, immediately before
such merger, consolidation or reorganization, own, directly or
indirectly, immediately following such a merger, consolidation
or reorganization, at least two-thirds of the combined voting
power of the outstanding voting securities of the corporation
resulting from such merger, consolidation or reorganization
(the "Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or
reorganization, and
(2) the individuals who were members of the Incumbent Board
immediately prior to the execution of the Agreement providing
for such merger, consolidation or reorganization constitute at
least 80% members of the board of directors of the Surviving
Corporation.
(A transaction described in clauses (1) and (2) above shall
hereinafter be referred to as "Non-Control Transaction.")
(b) A complete liquidation or dissolution of the
Corporation; or
(c) An agreement for the sale or other disposition of all or
substantially all of the assets of the Corporation to any Person
(other than a transfer to a Subsidiary).
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(iv) Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior to a
Change in Control and the Executive reasonably demonstrates that
such termination (A) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated to
effect a Change in Control (a "Third Party") or (B) otherwise
occurred in connection with, or in anticipation of, a Change in
Control, then for all purposes of this Agreement, the date of a
Change in Control with respect to the Executive shall mean the date
immediately prior to the date of such termination of the
Executive's employment.
(e) "Good Reason" shall mean the occurrence after a Change in Control of
any of the events or provisions as described in subsections (i) through (viii)
hereof:
(i) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, represents an adverse change from his/her
status, title, position or responsibilities as in effect at any time within
ninety days preceding the date of a Change in Control or at any time
thereafter; the assignment to the Executive of any duties or
responsibilities which, in the Executive's reasonable judgment, are
inconsistent with his/her status, title, position or responsibilities as
in effect at any time within ninety days preceding the date of a Change in
Control or at any time thereafter; any removal of the Executive from or
failure to reappoint or reelect him/her to any of such offices or
positions, except in connection with the termination of his/her employment
for Cause, as a result of his/her death or by the Executive other than for
Good Reason, or any other change in condition or circumstances that in the
Executive's reasonable judgment makes it materially more difficult for the
Executive to carry out the duties and responsibilities of his/her office
that existed at any time within ninety days preceding the date of the
Change in Control or at any time thereafter;
(ii) a reduction in the Executive's base salary or any failure to pay the
Executive any compensation or benefits to which he/she is entitled within
five days of the date due;
(iii) the Corporation's requiring the Executive to be based at any place
outside a 50 mile radius from the offices occupied by the Executive
immediately prior to the Change in Control, except for reasonably required
travel on the Corporation's business which is not materially greater than
such travel requirements prior to the Change in Control;
(iv) the failure by the Corporation to (A) continue in effect (without
reduction in benefit level and/or reward opportunities) any material
compensation or employee benefit plan in which the Executive was
participating at any time within ninety days preceding the date of a
Change in Control or at any time thereafter, unless such plan is replaced
with a plan that provides substantially equivalent compensation or
benefits to the Executive or (B) provide the Executive with compensation
and benefits, in the aggregate, at least equal (in terms of benefits
levels and/or reward opportunities) to those provided for under each other
employee benefit plan, program or practice in which the Executive
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was participating at any time within ninety days preceding the date of a
Change of Control or at any time thereafter;
(v) the insolvency or the filing (by any party, including the
Corporation) of a petition for bankruptcy of the Corporation which
petition is not dismissed within sixty days;
(vi) any material breach by the Corporation of any provision of
this Agreement;
(vii) any purported termination of the Executive's employment for
Cause by the Corporation which does not comply with the terms of this
Agreement;
(viii) the failure of the Corporation to obtain an agreement,
satisfactory to the Executive, from any Successors and Assigns to assume
and agree to perform this Agreement.
Any event or condition described in clause (i) through (viii) above
which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (A) was at the request of a Third-Party, or (B)
otherwise arose in connection with, or in anticipation of, a Change in
Control which actually occurs, shall constitute Good Reason for purposes
of this Agreement, notwithstanding that it occurred prior to the Change
in Control. The Executive's right to terminate his/her employment for
Good Reason shall not be effected by his/her incapacity due to physical
or mental illness.
(f) "Involuntary Termination" shall mean any termination of the
Executive's employment with the Corporation or any Subsidiary, Successor or
Assign of the Corporation following a Change in Control, Provided, however,
that the term Involuntary Termination shall not include a termination resulting
from a resignation by the Executive or a termination by the Corporation for
Cause.
(g) "Long-Term Stock Option Incentive Plan" shall mean that certain pool
of 20,000 options to purchase Summit common stock at ten dollars ($10.00) per
share established at the August 22, 1994, meeting of the Board for grant to Pin
Pin Chau, David Yu, Gary McClung or Alec Dudley as a reward for truly
outstanding performance during fiscal years 1994, 1995 and 1996 and shall
include any additions, modifications, and supplements thereto.
(h) "Notice of Termination" shall mean a written notice of termination
from the Corporation or the Executive which specifies an effective date of
termination, indicates the specific termination provision in this Agreement
relied upon and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(i) "Severance Amount" shall mean an amount equal to 100% of the
Executive's Base Annual Salary.
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(j) "Successors and Assigns" shall mean a corporation or other entity
acquiring all or substantially all of the assets and business of the
Corporation (including this Agreement), whether by operation of law or
otherwise.
(k) "Termination Date" shall mean the date specified in the
Notice of Termination.
2. PAYMENT OF SEVERANCE AMOUNT.
(a) If the Executive's employment by the Corporation or any Subsidiary, or
Successor or Assign of the Corporation shall be subject to an Involuntary
Termination, then the Corporation shall pay the Executive an amount equal to
the Severance Amount, payable within fifteen days after the Termination Date.
If the Executive terminates his/her employment for Good Reason, then the
Corporation shall pay to the Executive an amount equal to the Severance Amount,
payable within fifteen days after the Termination Date.
(b) In the event of either an Involuntary Termination or the Executive's
resignation for Good Reason, any stock options previously granted to the
Executive shall immediately become fully vested, and all such options shall be
exercisable by the Executive at any time within six months from the Termination
Date. In addition, 40% of any options under the Long Term Stock Option
Incentive Plan not granted as of the Termination Date shall immediately be
deemed granted to the Executive and shall be fully vested, and all such options
shall be exercisable by the Executive at any time within six months of the
Termination Date.
3. INDEMNIFICATION OF EXECUTIVE. In the event of either an Involuntary
Termination or the Executive's resignation for Good Reason, the Executive shall
be entitled to the indemnity provided to officers and directors of the
Corporation immediately prior to the Change in Control. Any changes to the
Corporation's bylaws or Articles of Incorporation or otherwise which reduce any
indemnity granted to the officers or directors of the Corporation shall not
effect the rights granted hereunder. The Corporation shall not reduce any of
the Executive's indemnity benefits without the prior written consent of the
Executive. Any references to Georgia law in the Corporation's bylaws or other
documents granting indemnity to the Executive shall be deemed to be references
as of the date of this Agreement, and any amendments to Georgia laws, including
a revocation thereof, shall not reduce the indemnification benefits granted
hereunder.
4. TERM. Unless terminated as provided below, this Agreement shall be
effective as of the date first above written and shall remain in effect for a
continuing term of three (3) years which shall be extended automatically
(without further action by the Executive, Summit or the Bank) each day for an
additional day so that the remaining term is always three years; provided, that
the Executive, Summit or the Bank may, by the giving of written notice to all
the other parties to this Agreement, fix the term to a finite term of three
years, without further automatic extension, commencing with the date of such
notice.
5. NOTICES. Notices and all other communications under this
Agreement shall be in writing and shall be deemed given when personally
delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
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If to the Corporation, to:
Summit Bank Corporation
4630 Chamblee-Dunwoody Road
Atlanta, Georgia 30349
Attn: Secretary of Summit Bank Corporation, or its Successor
or Assign, with copies to the President of Summit Bank
Corporation or its Successor or Assign and the President of
the Summit National Bank or its Successor or Assign.
If to the Executive, to:
Summit Bank Corporation
4630 Chamblee-Dunwoody Road
Atlanta, Georgia 30349
Attn: Gary McClung
or to such other address as either party may furnish to the other in writing,
except that any notice of changes of address shall be effective only upon
receipt.
6. APPLICABLE LAW. This contract is entered into under, and shall be
governed by the laws of the State of Georgia.
7. SEVERABILITY If a court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then the invalidity or
unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement and all other
provisions shall remain in full force and effect.
8. NOT AN EMPLOYMENT AGREEMENT; MITIGATION. Nothing in this Agreement
shall give the Executive any rights (or impose any obligations) to continue
employment by the Corporation or any Subsidiary or Successor or Assign of the
Corporation, nor shall it give the Corporation any rights (or impose any
obligations) for the continued performance of duties by the Executive for the
Corporation or any Subsidiary, Successor or Assign of the Corporation. The
Executive's right to receive benefits under this Agreement shall not be reduced
by the Executive's employment with any other employer after terminating
employment with the Corporation in accordance with this Agreement. Any
compensation for services rendered or consulting fees earned after the
Termination Date shall not diminish the Executive's right to receive all
amounts due hereunder.
9. NO ASSIGNMENT. The Executive's right to receive payment or benefits
under this Agreement shall not be assignable or transferrable, whether by
pledge, creation of a security interest or otherwise, other than the transfer
by will or by the laws of descent and distribution. In the event of an
attempted assignment or transfer contrary to this paragraph, the Corporation
shall have no liability to pay any amount so attempted to be assigned or
transferred. This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
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<PAGE> 8
10. COST OF ENFORCEMENT; INTEREST. If the Executive collects any part of
the Severance Amount or other benefits hereunder or otherwise enforces the
terms of this Agreement through a lawyer or lawyers, the Corporation shall pay
all cost of such collection or enforcement, including reasonable legal fees
incurred by the Executive. In addition the Corporation shall pay the Executive
interest on all or any part of the Severance Amount or other benefits hereunder
that is not paid when due at a rate equal to the Prime Rate as announced by the
Wall Street Journal in its Money Rates column from time to time.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the date and year first above written.
SUMMIT BANK CORPORATION
By: /s/ W. Clayton Sparrow, Jr.
---------------------------
Its: Chairman
---------------------------
SUMMIT NATIONAL BANK
By: /s/ P. Carl Unger
---------------------------
Its: Vice Chairman
---------------------------
EXECUTIVE
/s/ Gary McClung
-------------------------------
Gary McClung
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<PAGE> 1
THIS AGREEMENT FOR THE SALE AND PURCHASE OF REAL ESTATE
THIS AGREEMENT FOR THE SALE AND PURCHASE OF REAL ESTATE (this
"AGREEMENT"), made and entered into this 18th day of December, 1995 (the
"EFFECTIVE DATE"), by and among SUNTRUST BANK, ATLANTA, a Georgia banking
corporation (the "SELLER"); SBC PROPERTIES, LLC (the "PURCHASER"); BELL,
JACKSON & COMPANY (the "BROKER"); BAKER - DENNARD COMPANY (the "CO-BROKER");
and BELL, JACKSON COMPANY (the "ESCROW AGENT").
W I T N E S S E T H: That;
For and in consideration of the mutual covenants and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
1. PURCHASE AND SALE. Upon the terms and provisions hereinafter set
forth, Seller agrees to sell and Purchaser agrees to purchase all of that
certain tract or parcel of land lying and being in COBB COUNTY, Georgia,
containing approximately 1.2 ACRES as more particularly described on Exhibit
"A", attached hereto and by this reference made a part hereof, together with
any and all plants, trees, timber, shrubbery, improvements, and fixtures
located thereon or attached thereto, and all rights, easements, licenses, and
benefits appurtenant thereto (with said tract or parcel of land being
hereinafter collectively referred to as the "PROPERTY").
2. PURCHASE PRICE. The purchase price (the "PURCHASE PRICE") for the
Property shall be FIVE HUNDRED-THOUSAND DOLLARS ($500,000.00). The Purchase
Price shall be paid by Purchaser to Seller in cash, certified check or other
good funds approved by Seller, at "Closing" (as hereinafter defined), as
adjusted to reflect a credit in the amount of the Earnest Money paid hereunder
and the probations between Purchaser and Seller described in Paragraph 9 hereof.
3. EARNEST MONEY. Upon Purchaser's execution and delivery of this
Agreement, Purchaser shall deliver to Escrow Agent the sum of
TWENTY-FIVE-THOUSAND-DOLLARS ($25,000.00), which sum shall be held by Escrow
Agent as earnest money. Such money, together with accrued interest, shall be
collectively referred to as the "EARNEST MONEY." The Earnest Money shall be
deposited in an interest bearing account in a financial institution mutually
agreed upon by Purchaser and Seller, and shall be credited against the Purchase
Price of the Property at Closing. For the avoidance of doubt, any and all
interest earned shall accrue to the benefit of Purchaser. Unless Purchaser has
terminated this Agreement pursuant to Paragraph 4 hereof, the Earnest Money
shall become nonrefundable on the day after the Examination Period (as
hereinafter defined) ends.
4. EXAMINATION PERIOD.
a. Entering Property. Purchaser shall have twenty-five (25)
days after the Effective Date hereof (the "EXAMINATION PERIOD") to enter upon
the Property with Purchaser's authorized agents and employees and make such
surveying, environmental, architectural, engineering, topographical, geological,
soil and other tests, borings, studies and measurements as Purchaser deems
necessary or desirable to review and examine the Property. Purchaser shall
indemnify and hold Seller harmless from any claims, losses, damages,
liabilities and expenses (including attorneys' fees) resulting from the
activities of Purchaser or Purchaser's agents or employees on the Property
prior to Closing. The indemnity contained in this Paragraph shall survive the
Closing and any termination of the Agreement.
b. Survey; Reports. Upon its receipt thereof, Purchaser shall
immediately make available to Seller copies of all surveys and reports made in
connection with the activities of Seller and Seller's authorized agents and
employees pursuant to subparagraph 4.a. above, at no cost to Seller. Such
copies shall become the personal property of Seller regardless of whether the
sale and purchase of the Property is consummated as described herein.
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<PAGE> 2
c. Termination Right. Purchaser shall have the right to
terminate this Agreement at any time on or before the last day of the
Examination Period if Purchaser in its sole judgment determines not to buy the
Property. Purchaser shall make its election to terminate by giving Seller
written notice of such election, in which event Escrow Agent shall pay Seller
ONE HUNDRED DOLLARS ($100.00) of the Earnest Money as consideration for Seller's
having removed the Property from the market and shall refund the balance of the
Earnest Money to Purchaser, whereupon this Agreement shall terminate and the
parties hereto shall have no further rights or obligations hereunder except for
any right or obligation under any Paragraph hereof which by its terms survives
any termination hereof.
5. REAL ESTATE BROKER.
a. Representation and Warranty. Seller and Purchaser each
represent and warrant to the other that, except for Broker, neither has
employed, retained or consulted any broker, agent, or finder in carrying on the
negotiations in connection with this Agreement or the purchase and sale referred
to herein.
b. Indemnity. Seller and Purchaser each hereby indemnifies
and agrees to hold the other harmless from and against any and all
claims, demands, causes of action, debts, liabilities, judgments and damages
(including costs and attorneys' fees incurred in connection with the enforcement
of this indemnity) which may be asserted or recovered against the indemnified
party on account of any brokerage fee, commission or other compensation arising
by reason of the indemnitor's breach of the foregoing representation and
warranty. This subparagraph 5.b. shall survive Closing or any termination of
this Agreement.
c. Brokers Commission. Purchaser, Seller and Broker
acknowledge that Broker is representing Seller in this transaction and
Baker - Denard Company is representing Purchaser in this transaction, and at
Closing, upon the consummation of the transaction described herein, Seller shall
pay a commission equal to SEVEN PERCENT (7%) of the Purchase Price to be divided
evenly between Broker and Co-Broker.
d. Broker's Release. Broker and Co-Broker agree to deliver
at closing a release and waiver of lien (i) acknowledging payment in full of
all commissions due or to become due with respect to the Property and this
Agreement and (ii) releasing and-discharging Seller, Purchaser and the Property
from any and all commissions, fees and other compensation due or to become due
with respect to this Agreement and the Property.
6. TITLE. At Closing, Seller shall convey the Property to Purchaser
subject only to the matters shown on Exhibit "B" attached hereto and by this
reference made a part hereof and any other title matters waived by Purchaser as
provided in this Paragraph (the "PERMITTED EXCEPTIONS"). Purchaser shall have
until the thirtieth (30th) day after the Effective Date hereof to examine
title to the Property and to give written notice to Seller of any objections
which Purchaser may have, other than the Permitted Exceptions. if Purchaser
fails to give notice to Seller by such date, Purchaser shall be deemed to have
waived its right to object to such other title exceptions or defects. If
Purchaser gives timely notice to Seller of objection to any title exceptions or
defend other than the Permitted Exceptions: Seller shall have the right but not
the obligation, until Closing to cure or satisfy all valid objections of which
it was timely notified by Purchaser, and in addition, upon notice to , Seller
may postpone the Closing by thirty (30) days in order that such objections
might be cured. If any material title objection, of which Seller was timely
notified, is not so satisfied by Seller by the date of Closing, then Purchaser
shall have the right to terminate this Agreement by written notice to Seller,
in which event Escrow Agent shall pay Seller ONE HUNDRED DOLLARS ($100.00) of
the Earnest Money as consideration for Seller's having removed the the market
and shall refund the balance of the Earnest Money to Purchaser, whereupon this
Agreement shall and the parties hereto shall have no further rights or
obligations hereunder except for any right or obligation under any Paragraph
hereof which by its term survives any hereof If Seller does so cure or satisfy
the objection, then this Agreement shall continue in effect. Purchaser shall
have the right at any time to waive any objections that it may have made and
thereby to preserve this Agreement in effect. For purposes of this Agreement
a "material title objection" is one which materially impairs Purchasees ability
to utilize the Property for Purchaser's intended purposes.
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<PAGE> 3
7. CLOSING.
a. Date, Time and Place. Consummation of the sale and
purchase of the Property (the "CLOSING") shall be held at 10:00 a.m. on
JANUARY 15, 1996, or such earlier date as may be designated by notice from
Purchaser to Seller delivered not less than five (5) business days prior to the
selected date.
b. Location. Closing shall be held in the offices of King &
Spalding, 191 Peachtree Street, Atlanta, Georgia, or at such other place
in Atlanta, Georgia as designated by Seller.
c. Possession. Seller agrees to deliver possession of the
Property to Purchaser at Closing.
8. CLOSING DOCUMENTS. Seller agrees to deliver the following documents to
Purchaser at Closing;
a. a limited warranty deed in the form attached hereto as
Exhibit "C" describing the Property in accordance with Exhibit "A" hereto.
Should the legal description of the Property taken from the Survey differ from
Exhibit A", then upon the request of Purchaser, Seller shall execute a
quitclaim deed conveying the Property based on the legal description taken
from the Survey;
b. a sellers affidavit in the form attached hereto as
Exhibit "D";
c. a certificate and affidavit of non-foreign status in the
form attached hereto as Exhibit "E", pursuant to the provisions of Section
1445 of the United States Internal Revenue Code of 1954, as amended, and
an affidavit of sources residence in the form attached hereto as Exhibit "F",
pursuant to the provisions of Section 48-7-128 of the Official Code of Georgia
Annotated; and
d. a Form 1099-S Information Sheet, a Form W-9 and such
other documents and cuts to effect the transaction described herein as may be
reasonably required by counsel to Purchaser or Title Company.
9. TAX PRORATIONS. Real property ad valorem taxes for the current year
shall be prorated as of the day of Closing on the basis of the most recently
available tax bills. In the event that the actual taxes for the year differ
from the basis for the proration, the parties shall promptly make the
appropriate adjustment.
10. CLOSING COSTS. At Closing, Seller and Purchaser shall pay the
following respective costs and expenses:
a. Seller's Expenses. Seller shall pay (i) the Georgia
transfer tax, (ii) the Broker's Commission, (iii) the fees and expenses
of Seller's attorney, and (iv) any other costs and expenses actually incurred by
Seller; and
b. Purchaser's Expenses. Purchaser shall pay (i) the cost of
Purchaser's title examination, commitment and title insurance premium, (ii) all
recording and filing fees for all recordable instruments executed and delivered
by Seller at Closing pursuant to the terms hereof (iii) the cost of the Survey
and reports, (iv) the fees and expenses of Purchaser's attorney, (v) the fees
and of complying any all subdivisions ordinances and regulations in the event
the conveyance contemplated hereunder Constitutes a subdivision, and (vi) any
other costs and expenses actually incurred by Purchaser.
11. EMINENT DOMAIN. Prior to Closing, if all or any material part of the
Property is taken by eminent domain or if condemnation proceedings are
commenced, Seller shall notify Purchaser, and Purchaser may elect by written
notice to Seller and Escrow Agent (i) to terminate this Agreement and receive a
retired of the Earnest Money, whereupon this Agreement shall terminate, and the
parties hereto shall have no further rights or obligations hereunder, except
for any right or obligation under any Paragraph hereof which by its terms
survives any termination hereof, or (ii) to keep the Agreement in full force
and effect, whereupon no reduction in the Purchase Price shall be made;
however, Seller shall assign, transfer, and set over to Purchaser at Closing
all of Seller's right, title, and interest in any awards that may be made for
such taking.
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<PAGE> 4
12. RISK OF FIRE/CASUALTY LOSS. Risk of loss or damage by fire or other
casualty through the date of Closing shall remain with Seller. If all or a
material portion of the Property is damaged by fire or other casualty prior to
Closing, Purchaser may elect by written notice to Seller and Escrow Agent (i)
to terminate this Agreement and receive a refund of the Earnest Money.
whereupon this Agreement shall terminate, and the parties hereto shall have no
further rights or obligations hereunder, except for any right or obligation
under any Paragraph hereof which by its terms survives any termination hereof,
or (ii) to keep the Agreement in full force and effect, whereupon the Purchase
Price shall be reduced at Closing by all insurance proceeds actually awarded to
Seller and not expended for restoration of the Property.
13. COVENANT NOT TO COMMIT WASTE OR SALVAGE OR REMOVE TREES. Seller
agrees not to commit or permit waste upon the Property, salvage or remove
anything from the Property including trees, without Purchaser's written
approval. Seller covenants that the Property shall remain in the same
condition at Closing as it is at the time this Agreement is made, excepting
natural wear and tear and as provided for in Paragraphs 11 and 12 hereof.
14. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants the following to Purchaser:
a. Seller has entered into no agreement oral or written, not
referred to herein, with reference to the Property and to Seller's actual
knowledge neither Seller nor the Property are subject to any claim, demand,
suit unfiled lien, proceeding or litigation of any kind, pending or
outstanding, or threatened or likely to be made or instituted which would in any
way be binding upon Purchaser or its successors or assigns, or affect or limit
Purchasers or its successors or assigns', full use and enjoyment of the Property
or which would limit or restrict Seller's right or ability to enter into this
Agreement and consummate the sale and purchase contemplated hereby;
b. While this Agreement is in full force and effect Seller
shall not (i) enter into any other option or sales contract for the
Property (or any portion thereof) that is not expressly contingent on the
termination of this Agreement (ii) execute any deeds, restrictive covenants or
right of way agreements, or apply for or consent to any zoning change affecting
the Property or take any other action that would materially adversely affect the
Property or Purchaser's rights under this Agreement; or (iii) grant any
casement, license or right to use the Property or portion thereof without
Purchaser's written approval which shall not be unreasonably withheld or
delayed;
c. To Seller's actual knowledge, there are no taxes, charges,
or assessments of any nature or description, arising out of the conduct
of Seller's business or the operation of the Property, which would constitute a
lien against the Property that will be unpaid or not bonded at the date of the
Closing, except for the lien of the applicable year's ad valorem property taxes;
d. The Property has not been used by Seller for the
generation, treatment storage or disposal of any hazardous waste or
other hazardous or toxic substances. To Sellers actual knowledge, (i) there are
no toxic wastes, hazardous chemicals or nuclear wastes or similar materials
(removal of which is required by or the maintenance of which is restricted,
prohibited or penalized by an federal. state or local agency, authority or
governmental unit) in, attributable to or affecting the Property; (ii) there are
no landfills or dumping grounds containing decomposable materials located on the
Property; and (iii) there are no underground storage tanks or pumps on,
connected to or related to, in any way, the Property. Seller will not, after
the Effective Date of this Agreement and up through Closing, place or allow to
be placed on, installed on, or under the Property, any such toxic or hazardous
wastes or materials, decomposable materials or underground facilities; and
e. That all representations, warranties and agreements of
Seller contained in this Agreement are true and correct as of the date hereof
and will be true and correct as of the date of Closing.
As used in this Paragraph 14, "ACTUAL KNOWLEDGE" shall mean and refer to the
actual knowledge of H. Ted Watts, without any duty of obligation to inquire as
to such matters, and the knowledge of any other former or current employees,
officers, directors or agents of Seller or any subsidiaries or affiliate of
Seller shall not be imputed to Seller. Seller acknowledges that H. Ted Watts is
the current employee of Seller directly responsible for the Property. Except
for the express representations and warranties of Seller set forth in this
Agreement Purchaser acknowledges and agrees that the Property is being sold,
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conveyed and assigned to Purchaser hereunder "AS IS, WHERE IS, AND WITH ALL
FAULTS," without any other representation or warranty by Seller, and Seller has
not made and is not making any other express or implied representations or
warranties with respect to the Property, including, without limitation, any
other representation regarding condition, merchantability or fitness for any
particular purpose, zoning, subdivision requirements, the presence or existence
of hazardous substances, hazardous materials, and hazardous wastes, any other
environmental matters, suitability of sod or geology, and any past, present or
future operating results, including expenses; and except for the
representations and warranties expressly set forth in this Agreement, Purchaser
acknowledges that Purchaser accepts the Property, without relying upon any such
representation or warranty by Seller or by any other person and based solely
upon Purchaser's own inspections, investigations, and analysis of the Property,
and Purchaser hereby expressly renounces and waives any claim or cause of
action it may have against Seller under an existing or future theory of law for
any such matters.
15. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents and warrants the following to Seller:
a. The execution and delivery and performance under this
Agreement by Purchaser does not and will not result in any violation of,
or be in conflict with or constitute a default under any agreement mortgage,
deed to secure debt, deed of trust, indenture, license, security agreement, or
any other instrument or any judgment, decree, order, statute, rule or
governmental regulation;
b. No consent approval or authorization of or registration,
qualification, designation, declaration, or filing with any governmental
authority is required in connection with the execution and delivery of and
performance of this Agreement by Purchaser, and
c. That all representations, warranties and agreements of
Purchaser contained in this Agreement are true and correct as of the
date hereof and will be true and correct as of the date of Closing.
16. LIKE-KIND EXCHANGE. Subject to the provisions of subparagraphs 16.a.
and 16.b. below, Purchaser agrees to cooperate with Seller in the event that
Seller desires to effect an exchange of the Property for "like-kind" property
in accordance with Section 1031 of the Internal Revenue Code.
a. Purchaser shall incur no additional expenses whatsoever in
connection with Seller's consummation of the "like-kind" exchange and all such
additional costs shall be paid by Seller, including any additional attorney's
fees actually incurred and paid as a direct result of Seller's consummation of
the "like-kind" exchange.
b. Anything in this Agreement to the contrary notwithstanding,
should Seller for any reason be unable to make arrangements for the
disposition of the Property in a "like-kind" exchange, including a deferred
"like-kind" exchange arrangement (other than by reason of Purchaser's failure
or refusal to perform), then, in such event, the purchase of the Property shall
be consummated in accordance with the terms and conditions of this Agreement
just as though the provisions of this Paragraph had been omitted herefrom.
18. DISPUTES BETWEEN SELLER AND PURCHASER, Notwithstanding anything in
this Agreement to the contrary, in the event of a dispute between Seller and
Purchaser sufficient in the sole discretion of Escrow Agent to justify its
doing so, Escrow Agent shall be entitled to tender into the registry or
custody of any court of competent jurisdiction the Earnest Money, together
with such pleadings as it may deem appropriate, and thereupon on be discharged
from all further
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duties and liabilities for the Earnest Money.
19. DEFAULT AND REMEDIES.
a. Seller's Default. In the event Seller defaults or fails
to perform any of the covenants and conditions of the Seller in this
Agreement, Purchaser's sole and exclusive remedy at law or in equity shall be to
give written notice to Seller and Escrow Agent and for Seller to pay Purchaser
an amount equal to the amount of the Earnest Money, as full liquidated damages.
The parties acknowledge that Purchaser's actual damages in the event of a
default by Seller under this Agreement will be difficult to ascertain, that such
liquidated damages represent the parties' best estimate of such damages and that
the parties believe such liquidated damages are a reasonable estimate of such
damages. The parties expressly acknowledge that the foregoing liquidated
damages are intended not as a penalty, but as full liquidated damages, as
permitted by O.C.G.A. Section 13-6-7, in the event of Seller's default and as
compensation for Purchaser's entering into this Agreement and performing due
diligence with respect to the Property. Such receipt of an amount equal to the
amount of the Earnest Money shall be the sole and exclusive remedy of Purchaser
by reason of a default by Seller under this Agreement, and Purchaser hereby
waives and releases any right to sue Seller, and hereby covenants not to sue
Seller, for specific performance of this Agreement or to prove that Purchaser's
actual damages exceed the amount which is herein provided Purchaser as full
liquidated damages. Upon termination of this Agreement on account of Seller's
default, Escrow Agent shall refund the Earnest Money to Purchaser.
b. Purchaser's Default. In the event Purchaser defaults or
fails to perform any of the covenants and conditions of the Purchaser of
this Agreement, Seller's sole and exclusive remedy at law or in equity shall be
to give written notice to Purchaser and Escrow Agent and for Escrow Agent to pay
to Seller the Earnest Money, as full liquidated damages. The parties
acknowledge that Seller's actual damages in the event of a default by Purchaser
under this Agreement will be difficult to ascertain, that such liquidated
damages represent the parties' best estimate of such damages and that the
parties believe such liquidated damages are a reasonable estimate of such
damages. The parties expressly acknowledge that the foregoing liquidated
damages arc intended not as a penalty, but as full liquidated damages, as
permitted by O.C.G.A. Section 13-6-7, in the event of Purchaser's default and as
compensation for Sellers taking the Property off the market during the term of
this Agreement. Such retention of the Earnest Money shall be the sole and
exclusive remedy of Seller by reason of a default by Purchaser under this
Agreement, and Seller hereby waives and releases any right to sue Purchaser, and
hereby covenants not to sue Purchaser, for specific performance of this
Agreement or to prove that Seller's actual damages exceed the Earnest Money
which is herein provided Seller as full liquidated damages.
20. COMPLETE AGREEMENT. This Agreement represents the complete
understanding and agreement between the parties hereto and supersedes all prior
negotiations, representations or agreements, written or oral as to the matters
contained herein. This Agreement may be amended only by written instrument
signed by Purchaser and Seller. No requirement, provision, obligation or remedy
of this Agreement shall be deemed waived unless done so expressly, in writing.
A waiver, however, once given, is not continuous, and the granting of a waiver,
shall not limit the right to enforce such provision thereafter.
21. SURVIVAL. Except for Paragraph 9 and the indemnities contained in
subparagraphs 4.a. and 5.b. hereof, no terms, conditions, representations and
provisions contained herein shall survive the Closing or termination hereof.
22. NOTICES. Notices, elections and communications required hereunder
shall be in writing and considered given when tendered to a nationally
recognized overnight courier service, or deposited as U.S. Postal Service
registered or certified mail return receipt requested and postage prepaid,
using the addresses set forth below; provided, however, that a party's time
period for responding to any such notice deemed to have been duly given shall
not commence until such notice has been actually received at the other party's
address.
SELLER: SunTrust Bank, Atlanta
H.T. Watts - 052
P.O. Box 4418
Atlanta, GA 30303
With Copy to: Bell, Jackson & Company
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<PAGE> 7
446 East Paces Ferry Road
Atlanta, GA 30305
PURCHASER: Arron I. Alembik
3033 Maple Drive, N.W.
Atlanta, GA 30305
Any party may, from time to time, by notice as herein provided, designate a
different address or contact person to which notices shall be sent.
23. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
24. BINDING EFFECT. This Agreement shall be binding upon and shall inure
to the benefit of all parties hereto and their respective permitted successors
and assigns.
25. CAPTIONS AND HEADINGS. Captions and headings throughout this
Agreement are for convenience and reference only and the words contained
therein shall in no way be held to define or add to the interpretation,
construction, or meaning of any provision.
26. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and when attached
hereto shall constitute a single instrument.
27. SEVERABILITY. Should any portion of this Agreement or the application
thereof to any person or circumstance be invalid or unenforceable to any extent
by law, the remainder of this Agreement and the application of such provisions
to other persons or circumstances shall not be affected thereby, and shall be
enforced to the greatest extent permitted by law.
28. PERFORMANCE DEADLINES. Notwithstanding anything herein to the
contrary, in event the final date of performance by either party to this
Agreement of any condition or obligation hereunder falls upon a non-business
day (i.e., Saturday, Sunday, national holiday or local holiday recognized by
major Atlanta, Georgia banks), the final date for performance of such condition
or obligation shall be extended automatically and without notice until the next
succeeding business day.
29. ASSIGNMENT. Purchaser shall not assign this Agreement without prior
written consent of Seller, which consent shall not be unreasonably withheld.
30. OFFER AND ACCEPTANCE DEADLINE. This Agreement and the obligations of
Purchaser herein are conditioned upon this Agreement being fully executed by
Seller and returned to Purchaser on or before DECEMBER 18, 1995. At 5:00 P.M.
If this Agreement is not so executed and delivered it will be deemed null and
void and of no legal effect.
31. TIME OF ESSENCE. Time is of the essence in this Agreement.
32. The Property is restricted against the use as a financial institution
until after January 16, 1996.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date set forth on the first page hereof.
SIGNATURES ON FOLLOWING PAGE
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SELLER:
SUNTRUST BANK, ATLANTA
By: /s/ H. T. Watts
----------------------------
H. T. Watts, RPA
First Vice President
By: /s/ Diane H. Clark
----------------------------
Diane H. Clark
Assistant Vice President
[BANK SEAL]
PURCHASER:
SBC PROPERTIES, LLC, A GEORGIA LIMITED LIABILITY COMPANY
IN FORMATION
By: /s/ Arron I. Alembik
----------------------------
Arron I. Alembik
Manager
BROKER:
BELL, JACKSON & COMPANY
By: /s/ James P. Jackson
----------------------------
James P. Jackson
Partner
CO-BROKER:
BAKER - DENNARD COMPANY
By:
-----------------------------
John K. Baker
ESCROW AGENT:
BELL, JACKSON & COMPANY
By: /s/ James P. Jackson
-----------------------------
James P. Jackson
Partner
161
<PAGE> 9
EXHIBIT A
14. 8
ALL THAT TRACT or parcel of land lying and being in Land Lot 578 and 579
of the 17th District, Second Section, Cobb County, Georgia, and being more
particularly described as follows:
BEGIN at an iron pin set on the northeasterly right-of-way line of Franklin
Road (with a width as shown on the below survey), which pin is located 657.40
feet in a southeasterly direction from the point formed by the intersection of
said right-of-way line with the southerly right-of-way line of the Marietta
Parkway-State Road 120 Loop; running thence North 34 degrees 00 minutes 00
seconds East, a distance of 248.33 feet to an iron pin set; running thence
South 54 degrees 12 minutes 01 second East, a distance of 209.95 feet to an
iron pin set on the northwesterly right-of-way line of a proposed road (having
an 80'-wide right-of-way); running thence in a southwesterly direction along
said right-of-way line and along the arc of a curve having a radius of 660'
(said arc being subtended by a chord with a bearing of South 33 degrees 50
minutes 23 seconds West with a length of 3.69 feet) a distance of 3.69 feet to
a point; running thence along said right-of-way line South 34 degrees 00
minutes 00 seconds West a distance of 244.64 feet to an iron pin set on the
northeasterly right-of-way line of Franklin Road; running thence along said
right-of-way line of Franklin Road North 54 degrees 42 minutes 00-seconds West,
a distance of 156.71 feet to a point; thence continuing along said right-of-way
line and along the arc of a curve having a radius of 764.51 feet (said arc
being subtended by a chord on a bearing of North 52 degrees 43 minutes 41
seconds West with a length of 53.28 feet) a distance of 53.29 feet to the POINT
OF BEGINNING; said tract or parcel of land containing 1.200 acres, all
according to a Plat of Survey by Jack R. Busby, Georgia Registered Land
Surveyor No. 1875, dated September 2, 1983, and last revised April 3, 1984.
162
<PAGE> 10
EXHIBIT "B"
(Permitted Exceptions)
1. Zoning Ordinances Affecting the Property.
2. General Utility Easements serving the Property.
3. Ad valorem real property taxes for the current year, not yet due and
payable.
4. Reciprocal easement agreement by and between Parkway 75 Shopping Center
Associates, LTD, and SUNTRUST BANK, ATLANTA of Cobb County, NA, dated
April 9, 1984, Recorded in Deed Book 3096, Page 192, Cobb County, Georgia.
5. Easement from SUNTRUST BANK, ATLANTA of Cobb County, NA, to LaSalle Fund
III, dated February 28, 1990, Recorded in Deed Book 5660, Page 437, Cobb
County, Georgia.
6. Restrictions contained in Warranty Deed by and between Parkway
Associates, LTD and SUNTRUST BANK, ATLANTA of Cobb County, NA, dated
April 9, 1984, Recorded in Book 3093, Page 449-503, Cobb County, Georgia.
163
<PAGE> 11
EXHIBIT "C"
After recording, return to:
___________________________
___________________________
___________________________
___________________________
LIMITED WARRANTY DEED
THIS INDENTURE, made as of the __ day of _______, ____, between SUNTRUST
BANK, ATLANTA, a Georgia banking corporation (hereinafter referred to
"Grantor") and _______________________, a __________________ (hereinafter
referred to as "Grantee") (the words "Grantor" and "Grantee" to include
their respective heirs, legal representatives, successors, and assigns where
the context requires or permits);
W I T N E S S E T H: THAT
Grantor, for and in consideration of the sum of TEN AND NO/1OO DOLLARS
($10.00) and other good and valuable consideration in hand paid at and before
the sealing and delivery of these presents, the receipt and sufficiency whereof
are hereby acknowledged, has granted, bargained, sold, aliened, conveyed, and
confirmed, and by these presents does grant, bargain, sell, alien, convey, and
confirm unto Grantee, all those tracts or parcels of land lying and being in
Land Lot ____ of the ____ District of _______ County, Georgia, being more
particularly described in Exhibit "A", attached hereto and incorporated herein
by this reference (hereinafter referred to as the "Land");
TOGETHER WITH all buildings, structures, and improvements thereon and all
rights, members, easements, and appurtenances appertaining to the Land and all
right, title, and interest of Grantor in and to alleys, streets, and
rights-of-way adjacent to or abutting the Land (the Land, together with the
foregoing, is hereinafter referred to as the "Property");
TO HAVE AND TO HOLD the Property, without warranty as to the matters set
forth in Exhibit "B" hereto, with all and singular the rights, members, and
appurtenances thereof, to the same being, belonging, or in anywise appertaining
to the only proper use, benefit, and behoof of Grantee forever in FEE SIMPLE;
AND Grantor will warrant and forever defend the right and title to the
Property unto Grantee against the claims of all persons whomsoever claiming by,
through or under Grantor, except as to claims arising under those matters set
forth in Exhibit "B" hereto.
IN WITNESS WHEREOF, Grantor has signed and sealed this deed, the day and
year first above written.
GRANTOR:
Signed, sealed, and deliv-
ered in the presence of: SUNTRUST BANK, ATLANTA,
a Georgia banking corporation
_______________________________
Witness By: __________________________________
Name: H. Ted Watts
Title: First Vice Pres.
_______________________________
Notary Public
By: __________________________________
My Commission Expires: Name: ______________________
Title:______________________
_______________________________ [BANK SEAL]
[NOTARIAL SEAL]
164
<PAGE> 12
EXHIBIT "D"
SELLER'S AFFIDAVIT
Personally appeared before me __________ ("Deponent"), who, being
duly sworn according to law deposes and says to the best of his knowledge and
belief, as follows:
1. That Deponent is _____________ of SUNTRUST BANK, ATLANTA, a
Georgia banking corporation ("Seller"),and as such is familiar with the
matters set forth herein, which are stated to the best of both knowledge;
2. That TCB owns the fee simple interest in and to that certain
tract or parcel of land described Exhibit "A", attached hereto and
incorporated herein by this reference (the "Property");
3. That the lines and corners of the Property are clearly marked, and
there is no pending litigation dispute regarding such lines and corners;
4. That all improvements on the Property are within the boundary
lines of the Property and do not encroach on any other land;
5. That there has been no violation of any restriction that may have
been imposed on the Property any predecessor in title to the Property,
governmental authority, or any other person or entity whatsoever;
6. That no improvements or repairs have been made upon the Property
by Seller during the ninety-five (95) days immediately preceeding the
date hereof or, in the event such improvements or repairs have been made,
that they are completed and that all costs incurred in connection
therewith have been fully paid or will be paid in the ordinary course of
business; that there are no outstanding bills incurred by Seller for
labor, services and/or materials used in making improvements or repairs
on the Property, or for services of architects, surveyors or engineers in
connection therewith
7. That all assessments and bills payable by Seller for
utilities used in connection with the Property including, but not limited
to, sidewalk or other street improvements and water and sewer assessments
and/or service, paid through the date hereof;
8. That there are no pending suits, proceedings, judgments,
bankruptcies, executions, liens (other than the lien for ad valorem taxes
not yet due and payable as of the date hereof), claims of lien, taxes,
special assessments sewerage or street improvements, deeds to secure debt,
mortgages, or other encumbrances, or tenancies, assessment restrictions
encroachments, leases, subleases, occupancies, easements, prescriptive
easements or rights-of-way or use. Authorization ordinances for streets,
sewerage, or other public improvements that could in any way either
affect the to or possession of the Property or constitute a lien
thereon, except as described in Exhibit "B", attached hereto as
incorporated herein by this reference;
9. That there is no outstanding indebtedness of Seller for
equipment, appliances, or other fixtures attached to the Property;
10. That Seller knows of no persons or parties in possession of the
Property other than SUNTRUST BANK, ATLANTA or anyone claiming under it;
11. That, except ____________________ ("Broker"), Seller has not
engaged any "Broker" services (as defined in O.C.G.A. Section 44-14-601)
with regard to the purchase, sale, management, lease, option, or other
conveyance of any interest in the Property; as to Broker, the closing
statement executed in connection with the sale Property to
________________ ("Purchaser") reflects payment in full satisfaction of
all amounts owed to Broker with respect to the Property; and as of the
date hereof, Seller has not received any notice of lien from Broker any
other real estate broker, salesman, agent or similar person relating to
the Property;
165
<PAGE> 13
12. That this Affidavit is made with the knowledge that it will be
relied upon by Purchaser in acquiring the Property and by
_______________ Title Insurance Company in issuing an owner's title
insurance policy in favor of Purchaser.
Sworn to and subscribed _____________________
before me this ____ day H. Ted Watts
of _________________;
_____________________________
Notary Public
My Commission Expires:
_____________________________
[NOTARIAL SEAL]
166
<PAGE> 14
EXHIBIT "E"
CERTIFICATION OF NON-FOREIGN STATUS
Section 1445 of the Internal Revenue Code provides that a transferee of a
U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform ("Purchaser"), that withholding of tax is not required upon
my disposition of a U.S. real property interest to Purchaser, the undersigned,
hereby certifies the following:
1. SUNTRUST BANK, ATLANTA ("Seller") is not a nonresident alien
for purposes of U.S. income taxation;
2. Seller's taxpayer identification number is
58-0466330; and
3. Seller's address is:
25 Park Place
Atlanta, Georgia 30303
Attn: Real Estate Planning and Construction
I understand that this certification may be disclosed to the Internal Revenue
Service by Purchaser and that any false statement contained herein may be
punished by fine, imprisonment, or both. Under penalties of perjury, I declare
that I have examined this Certification and to the best of my knowledge and
belief it is true, correct, and complete.
Date: ______________
____________________________
H. Ted Watts
THIS CERTIFICATION MUST BE RETAINED UNTIL THE END OF THE FIFTH TAXABLE YEAR
FOLLOWING THE TAXABLE YEAR IN WHICH THE TRANSFER TAKES PLACE.
167
<PAGE> 15
EXHIBIT "F"
AFFIDAVIT OF SELLER'S RESIDENCE
<TABLE>
<S> <C>
SUNTRUST BANK, ATLANTA 58-0466330
Seller's Name
Seller's Identification Number (SSN or FEI)
25 Park Place
Atlanta, Georgia 30303 N/A
Attn: Real Estate Planning and Construction Spouse's Identification Number
Street Address (if jointly owned)
</TABLE>
INSTRUCTIONS
This form is provided to be executed by the seller and furnished to the buyer
to establish Georgia residency, such that withholding from the proceeds of the
sale of property are not subject to the withholding laws of this state. (S
O.C.G.A. Section 48-7-128.)
Sellers are not subject to withholding from the proceeds of sale if either
they reside in Georgia, or they are deemed to be Georgia resident by virtue of
the fact that they have filed Georgia tax returns in the preceding two years,
do business or own property in Georgia, intend to file a Georgia Tax return for
the current year, and, if a corporation or limited partnership, a registered
to do business in this State.
Buyer is not required to withhold if this affidavit (or one in substantially
the same form) is submitted to the Department in lieu of a withholding tax
return.
The seller is to execute this affidavit by placing an initial in the blanket
preceding statements which apply.
Seller is exempt from withholding on the sale of property because:
XX
________________ Seller, is a resident of Georgia
Seller is not a resident of Georgia, but is deemed a resident for purposes of
withholding by virtue of the following:
________________ Seller is a nonresident who has filed Georgia tax returns for
the preceding two years; and
________________ Seller is an established business in Georgia and will
continue substantially the same business in Georgia at
the sale OR the seller has real property in the State at the
time of closing of equal or greater value than withholding
tax liability as measured by the 100% property tax assessment
of such remaining property, and
________________ If seller is a corporation or limited partnership, seller is
registered to do business in Georgia; and
________________ Seller will report the sale on a Georgia Income Tax Return
for the current year and file by its due date.
Under penalty of perjury, I swear that the above information is, to the best
of my knowledge and belief, true, correct, and complete.
_________________________________________ _____________________________
H. Ted Watts, First Vice President Date
Seller's signature (and Title, if applicable)
Sworn to and subscribed before me
this ___ day of __________________.
_____________________________________
Notary Public
My commission expires:
_____________________________________
168
<PAGE> 1
Exhibit 11.1
STATEMENT REGARDING COMPUTATION
OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three months ended December 31, Year ended December 31,
------------------------------- ------------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income per share:
Weighted-average shares outstanding 1,407,688 1,407,688 1,407,688 1,407,688
========== ========== ========== ==========
Net income per share $.64 $.52 $1.49 $1.37
========== ========== ========== ==========
Primary earnings per share: 1,407,688 1,407,688 1,407,688 1,407,688
Weighted-average shares outstanding 463,235 -- 463,235 --
Dilutive warrants 41,225 -- 41,225 --
Dilutive stock options (281,538) -- (281,538) --
---------- ---------- ---------- ----------
Repurchased under treasury stock method(1) 1,630,610 1,407,688 1,630,610 1,407,688
========== ========== ========== ==========
Net income $ 894,000 $456,000 $2,101,000 $1,928,000
Imputed interest income under the
treasury stock method (net of tax) 16,259 -- 68,211 --
---------- ---------- ---------- ----------
Imputed net income $ 910,259 $ -- $2,169,211 $ --
========== ========== ========== ==========
Net income per share $.56 $.32 $1.33 $1.37
========== ========== ========== ==========
</TABLE>
(1) Dilutive warrants and options calculated up to 20% of total shares
outstanding in the applicable periods.
81
<PAGE> 1
Exhibit 21.1
Subsidiaries of Summit Bank Corporation
a) The Summit National Bank
b) Summit Merchant Banking Corporation
82
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 7,220
<INT-BEARING-DEPOSITS> 60
<FED-FUNDS-SOLD> 3,525
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 32,110
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 78,177
<ALLOWANCE> (1,686)
<TOTAL-ASSETS> 130,076
<DEPOSITS> 109,816
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,788
<LONG-TERM> 0
0
0
<COMMON> 14
<OTHER-SE> 15,399
<TOTAL-LIABILITIES-AND-EQUITY> 130,076
<INTEREST-LOAN> 8,142
<INTEREST-INVEST> 2,394
<INTEREST-OTHER> 3
<INTEREST-TOTAL> 10,539
<INTEREST-DEPOSIT> 4,050
<INTEREST-EXPENSE> 4,070
<INTEREST-INCOME-NET> 6,469
<LOAN-LOSSES> 397
<SECURITIES-GAINS> (2)
<EXPENSE-OTHER> 5,802
<INCOME-PRETAX> 3,143
<INCOME-PRE-EXTRAORDINARY> 3,143
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,101
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
<YIELD-ACTUAL> 5.90
<LOANS-NON> 111
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,603
<CHARGE-OFFS> 896
<RECOVERIES> 582
<ALLOWANCE-CLOSE> 1,686
<ALLOWANCE-DOMESTIC> 1,686
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
